THIRD
DIVISION
|
ATLAS CONSOLIDATED MINING AND DEVELOPMENT CORPORATION,
Petitioner, - versus- COMMISSIONER
OF INTERNAL REVENUE,
Respondent. |
|
G.R. Nos. 141104 & 148763 Present: YNARES-SANTIAGO, J. Chairperson, AUSTRIA-MARTINEZ, CHICO-NAZARIO, and NACHURA,
JJ. Promulgated: |
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CHICO-NAZARIO, J.:
Before this Court are the
consolidated cases involving the unsuccessful claims of herein petitioner Atlas
Consolidated Mining and Development Corporation (petitioner corporation) for
the refund/credit of the input Value Added Tax (VAT) on its purchases of capital
goods and on its zero-rated sales in the taxable quarters of the years 1990 and
1992, the denial of which by the Court of Tax Appeals (CTA), was affirmed by
the Court of Appeals.
Petitioner
corporation is engaged in the business of mining, production, and sale of
various mineral products, such as gold, pyrite, and copper concentrates. It is a VAT-registered taxpayer. It was initially issued VAT Registration No.
32-A-6-002224, dated
G.R. No. 141104
Petitioner
corporation filed with the BIR its VAT Return for the first quarter of 1992.[2] It alleged that it likewise filed with the
BIR the corresponding application for the refund/credit of its input VAT on its
purchases of capital goods and on its zero-rated sales in the amount of P26,030,460.00.[3] When its application for refund/credit
remained unresolved by the BIR, petitioner corporation filed on P26,030,460.00, representing
the input VAT it had paid for the first quarter of 1992. The respondent Commissioner opposed and
sought the dismissal of the petition for review of petitioner corporation for
failure to state a cause of action.
After due trial, the CTA promulgated its Decision[4]
on
WHEREFORE,
in view of the foregoing, the instant claim for refund is hereby DENIED
on the ground of prescription, insufficiency of evidence and failure to comply
with Section 230 of the Tax Code, as amended.
Accordingly, the petition at bar is hereby DISMISSED for lack of
merit.
The CTA denied the motion
for reconsideration of petitioner corporation in a Resolution[5] dated
When the case was elevated to the Court of Appeals as
CA-G.R. SP No. 47607, the appellate court, in its Decision,[6] dated
Thus, petitioner corporation comes before this Court, via
a Petition for Review on Certiorari under Rule 45 of the Revised Rules
of Court, assigning the following errors committed by the Court of Appeals –
I
THE COURT OF APPEALS ERRED IN AFFIRMING THE
REQUIREMENT OF REVENUE REGULATIONS NO. 2-88 THAT AT LEAST 70% OF THE SALES OF
THE [BOARD OF INVESTMENTS (BOI)]-REGISTERED FIRM MUST CONSIST OF EXPORTS FOR
ZERO-RATING TO APPLY.
II
THE COURT OF APPEALS ERRED IN AFFIRMING THAT PETITIONER
FAILED TO SUBMIT SUFFICIENT EVIDENCE SINCE FAILURE TO SUBMIT PHOTOCOPIES OF VAT
INVOICES AND RECEIPTS IS NOT A FATAL DEFECT.
III
THE COURT OF APPEALS ERRED IN RULING THAT THE JUDICIAL
CLAIM WAS FILED BEYOND THE PRESCRIPTIVE PERIOD SINCE THE JUDICIAL CLAIM WAS
FILED WITHIN TWO (2) YEARS FROM THE FILING OF THE VAT RETURN.
IV
THE COURT OF APPEALS ERRED IN NOT ORDERING CTA TO ALLOW THE RE-OPENING OF THE CASE FOR
PETITIONER TO PRESENT ADDITIONAL EVIDENCE.[8]
G.R. No. 148763
G.R.
No. 148763 involves almost the same set of facts as in G.R. No. 141104
presented above, except that it relates to the claims of petitioner corporation
for refund/credit of input VAT on its purchases of capital goods and on its
zero-rated sales made in the last three taxable quarters of 1990.
Petitioner corporation filed
with the BIR its VAT Returns for the second, third, and fourth quarters of
1990, on
|
Date of Application |
Period Covered |
Amount Applied For |
|
|
2nd Quarter, 1990 |
|
|
|
3rd Quarter, 1990 |
75,304,774.77 |
|
|
4th Quarter, 1990 |
43,829,766.10 |
When the BIR failed to act on its applications for
refund/credit, petitioner corporation filed with the CTA the following
petitions for review –
|
Date Filed |
Period Covered |
CTA Case No. |
|
|
2nd Quarter, 1990 |
4831 |
|
|
3rd Quarter, 1990 |
4859 |
|
|
4th Quarter, 1990 |
4944 |
which were eventually consolidated. The respondent Commissioner contested the
foregoing Petitions and prayed for the dismissal thereof. The CTA ruled in favor of respondent
Commissioner and in its Decision,[9]
dated
Petitioner corporation appealed its case to the Court of
Appeals, where it was docketed as CA-G.R. SP No. 46718. On
Aggrieved, petitioner corporation filed with this Court
another Petition for Review on Certiorari under Rule 45 of the Revised
Rules of Court, docketed as G.R. No. 148763, raising the following issues –
A.
WHETHER OR NOT THE COURT OF APPEALS ERRED IN HOLDING
THAT PETITIONER’S CLAIM IS BARRED UNDER REVENUE REGULATIONS NOS. 2-88 AND 3-88
I.E., FOR FAILURE TO PTOVE [sic] THE 70% THRESHOLD FOR ZERO-RATING TO
APPLY AND FOR FAILURE TO ESTABLISH THE FACTUAL BASIS FOR THE INSTANT CLAIM.
B.
WHETHER OR NOT THE COURT OF APPEALS ERRED IN FINDING
THAT THERE IS NO BASIS TO GRANT PETITIONER’S MOTION FOR NEW TRIAL.
There being similarity of
parties, subject matter, and issues, G.R. Nos. 141104 and 148763 were
consolidated pursuant to a Resolution, dated 4 September 2006, issued by this
Court. The ruling of this Court in these
cases hinges on how it will resolve the following key issues: (1) prescription
of the claims of petitioner corporation for input VAT refund/credit; (2)
validity and applicability of Revenue Regulations No. 2-88 imposing upon
petitioner corporation, as a requirement for the VAT zero-rating of its sales,
the burden of proving that the buyer companies were not just BOI-registered but
also exporting 70% of their total annual production; (3) sufficiency of
evidence presented by petitioner corporation to establish that it is indeed
entitled to input VAT refund/credit; and (4) legal ground for granting the
motion of petitioner corporation for re-opening of its cases or holding of new
trial before the CTA so it could be given the opportunity to present the
required evidence.
Prescription
The
prescriptive period for filing an application for tax refund/credit of input
VAT on zero-rated sales made in 1990 and 1992 was governed by Section 106(b)
and (c) of the Tax Code of 1977, as amended, which provided that –
SEC. 106. Refunds
or tax credits of input tax. – x x x.
(b) Zero-rated or effectively zero-rated sales.
– Any person, except those covered by paragraph (a) above, whose sales are
zero-rated may, within two years after the close of the quarter when such sales
were made, apply for the issuance of a tax credit certificate or refund of the
input taxes attributable to such sales to the extent that such input tax has
not been applied against output tax.
x x x
x
(e) Period
within which refund of input taxes may be made by the Commissioner. – The
Commissioner shall refund input taxes within 60 days from the date the
application for refund was filed with him or his duly authorized
representative. No refund of input taxes
shall be allowed unless the VAT-registered person files an application for
refund within the period prescribed in paragraphs (a), (b) and (c) as the case
may be.
By a plain reading of the foregoing provision, the
two-year prescriptive period for filing the application for refund/credit of
input VAT on zero-rated sales shall be determined from the close of the quarter
when such sales were made.
Petitioner
contends, however, that the said two-year prescriptive period should be
counted, not from the close of the quarter when the zero-rated sales were made,
but from the date of filing of the quarterly VAT return and payment of the tax
due 20 days thereafter, in accordance with Section 110(b) of the Tax Code of
1977, as amended, quoted as follows –
SEC. 110. Return
and payment of value-added tax. – x x x.
(b) Time for
filing of return and payment of tax. – The return shall be filed and the
tax paid within 20 days following the end of each quarter specifically
prescribed for a VAT-registered person under regulations to be promulgated by
the Secretary of Finance: Provided, however, That any person whose
registration is cancelled in accordance with paragraph (e) of Section 107 shall
file a return within 20 days from the cancellation of such registration.
It is already well-settled that the two-year prescriptive
period for instituting a suit or proceeding for recovery of corporate income
tax erroneously or illegally paid under Section 230[13]
of the Tax Code of 1977, as amended, was to be counted from the filing of the
final adjustment return. This Court
already set out in ACCRA Investments Corporation v. Court of Appeals,[14]
the rationale for such a rule, thus –
Clearly, there is
the need to file a return first before a claim for refund can prosper inasmuch
as the respondent Commissioner by his own rules and regulations mandates that
the corporate taxpayer opting to ask for a refund must show in its final
adjustment return the income it received from all sources and the amount of
withholding taxes remitted by its withholding agents to the Bureau of Internal
Revenue. The petitioner corporation filed its final adjustment return for its
1981 taxable year on
Considering
that ACCRAIN filed its claim for refund as early as December 29, 1983 with the
respondent Commissioner who failed to take any action thereon and considering
further that the non-resolution of its claim for refund with the said
Commissioner prompted ACCRAIN to reiterate its claim before the Court of Tax
Appeals through a petition for review on April 13, 1984, the respondent
appellate court manifestly committed a reversible error in affirming the
holding of the tax court that ACCRAIN's claim for
refund was barred by prescription.
It
bears emphasis at this point that the rationale in computing the two-year
prescriptive period with respect to the petitioner corporation's claim for
refund from the time it filed its final adjustment return is the fact that it
was only then that ACCRAIN could ascertain whether it made profits or incurred
losses in its business operations. The "date of payment", therefore,
in ACCRAIN's case was when its tax liability, if any,
fell due upon its filing of its final adjustment return on
In another case, Commissioner
of Internal Revenue v. TMX Sales, Inc.,[15]
this Court further expounded on the same matter –
A re-examination of the aforesaid minute resolution of
the Court in the Pacific Procon case is
warranted under the circumstances to lay down a categorical pronouncement on
the question as to when the two-year prescriptive period in cases of quarterly
corporate income tax commences to run. A full-blown decision in this regard is
rendered more imperative in the light of the reversal by the Court of Tax
Appeals in the instant case of its previous ruling in the Pacific Procon case.
Section 292 (now Section 230) of the National Internal
Revenue Code should be interpreted in relation to the other provisions of the
Tax Code in order to give effect the
legislative intent and to avoid an application
of the law which may lead to inconvenience and absurdity. In the case of
People vs. Rivera (59 Phil. 236 [1933]), this Court stated that statutes
should receive a sensible construction, such as will give effect to the
legislative intention and so as to avoid an unjust or an absurd conclusion. INTERPRETATIO
TALIS IN AMBIGUIS SEMPER FRIENDA EST, UT EVITATUR INCONVENIENS ET ABSURDUM.
Where there is ambiguity, such interpretation as will avoid inconvenience and
absurdity is to be adopted. Furthermore, courts must give effect to the general
legislative intent that can be discovered from or is unraveled by the four
corners of the statute, and in order to discover said intent, the whole
statute, and not only a particular provision thereof, should be considered. (Manila
Lodge No. 761, et al. vs. Court of Appeals, et al. 73 SCRA 162 [1976) Every
section, provision or clause of the statute must be expounded by reference to
each other in order to arrive at the effect contemplated by the legislature.
The intention of the legislator must be ascertained from the whole text of the
law and every part of the act is to be taken into view. (Chartered Bank vs.
Imperial, 48 Phil. 931 [1921]; Lopez vs. El Hoger
Filipino, 47 Phil. 249, cited in Aboitiz
Shipping Corporation vs. City of Cebu, 13 SCRA
449 [1965]).
Thus, in resolving the instant case, it is necessary
that we consider not only Section 292 (now Section 230) of the National
Internal Revenue Code but also the other provisions of the Tax Code,
particularly Sections 84, 85 (now both incorporated as Section 68), Section 86
(now Section 70) and Section 87 (now Section 69) on Quarterly Corporate Income
Tax Payment and Section 321 (now Section 232) on keeping of books of accounts.
All these provisions of the Tax Code should be harmonized with each other.
x x x
x
Therefore, the filing of a quarterly income tax returns
required in Section 85 (now Section 68) and implemented per BIR Form 1702-Q and
payment of quarterly income tax should only be considered mere installments of
the annual tax due. These quarterly tax payments which are computed based on
the cumulative figures of gross receipts and deductions in order to arrive at a
net taxable income, should be treated as advances or portions of the annual
income tax due, to be adjusted at the end of the calendar or fiscal year. This
is reinforced by Section 87 (now Section 69) which provides for the filing of
adjustment returns and final payment of income tax. Consequently, the two-year
prescriptive period provided in Section 292 (now Section 230) of the Tax Code
should be computed from the time of filing the Adjustment Return or Annual
Income Tax Return and final payment of income tax.
In the case of Collector of Internal Revenue vs.
Antonio Prieto (2 SCRA 1007 [1961]), this Court
held that when a tax is paid in installments, the prescriptive period of two
years provided in Section 306 (Section 292) of the National Internal Revenue
Code should be counted from the date of the final payment. This ruling is
reiterated in Commissioner of Internal Revenue vs. Carlos Palanca (18 SCRA 496 [1966]), wherein this Court stated
that where the tax account was paid on installment, the computation of the
two-year prescriptive period under Section 306 (Section 292) of the Tax Code,
should be from the date of the last installment.
In the instant case, TMX Sales, Inc. filed a suit for
a refund on
The very same reasons set forth in the afore-cited
cases concerning the two-year prescriptive period for claims for refund of
illegally or erroneously collected income tax may also apply to the Petitions
at bar involving the same prescriptive period for claims for refund/credit of
input VAT on zero-rated sales.
It is true that unlike
corporate income tax, which is reported and paid on installment every quarter,
but is eventually subjected to a final adjustment at the end of the taxable
year, VAT is computed and paid on a purely quarterly basis without need for a
final adjustment at the end of the taxable year. However, it is also equally true that until
and unless the VAT-registered taxpayer prepares and submits to the BIR its
quarterly VAT return, there is no way of knowing with certainty just how much
input VAT[16] the
taxpayer may apply against its output VAT;[17]
how much output VAT it is due to pay for the quarter or how much excess input
VAT it may carry-over to the following quarter; or how much of its input VAT it
may claim as refund/credit. It should be
recalled that not only may a VAT-registered taxpayer directly apply against his
output VAT due the input VAT it had paid on its importation or local purchases
of goods and services during the quarter; the taxpayer is also given the option
to either (1) carry over any excess input VAT to the succeeding quarters for
application against its future output VAT liabilities, or (2) file an
application for refund or issuance of a tax credit certificate covering the
amount of such input VAT.[18] Hence, even in the absence of a final
adjustment return, the determination of any output VAT payable necessarily
requires that the VAT-registered taxpayer make adjustments in its VAT return
every quarter, taking into consideration the input VAT which are creditable for
the present quarter or had been carried over from the previous quarters.
Moreover, when claiming
refund/credit, the VAT-registered taxpayer must be able to establish that it
does have refundable or creditable input VAT, and the same has not been applied
against its output VAT liabilities – information which are supposed to be
reflected in the taxpayer’s VAT returns.
Thus, an application for refund/credit must be accompanied by copies of
the taxpayer’s VAT return/s for the taxable quarter/s concerned.
Lastly, although the
taxpayer’s refundable or creditable input VAT may not be considered as
illegally or erroneously collected, its refund/credit is a privilege extended
to qualified and registered taxpayers by the very VAT system adopted by the
Legislature. Such input VAT, the same as
any illegally or erroneously collected national internal revenue tax, consists
of monetary amounts which are currently in the hands of the government but must
rightfully be returned to the taxpayer.
Therefore, whether claiming refund/credit of illegally or erroneously
collected national internal revenue tax, or input VAT, the taxpayer must be
given equal opportunity for filing and pursuing its claim.
For the foregoing reasons,
it is more practical and reasonable to count the two-year prescriptive period
for filing a claim for refund/credit of input VAT on zero-rated sales from the
date of filing of the return and payment of the tax due which, according to the
law then existing, should be made within 20 days from the end of each
quarter. Having established thus, the
relevant dates in the instant cases are summarized and reproduced below –
|
Period Covered |
Date of Filing (Return w/ BIR) |
Date of Filing (Application w/ BIR) |
Date of Filing (Case w/ CTA) |
|
2nd Quarter, 1990 |
|
|
|
|
3rd Quarter, 1990 |
|
|
|
|
4th Quarter, 1990 |
|
|
|
|
1st Quarter, 1992 |
|
-- |
|
The
above table readily shows that the administrative and judicial claims of
petitioner corporation for refund of its input VAT on its zero-rated sales for
the last three quarters of 1990 were all filed within the prescriptive
period.
However, the same cannot be
said for the claim of petitioner corporation for refund of its input VAT on its
zero-rated sales for the first quarter of 1992.
Even though it may seem that petitioner corporation filed in time its
judicial claim with the CTA, there is no showing that it had previously filed
an administrative claim with the BIR.
Section 106(e) of the Tax Code of 1977, as amended, explicitly provided
that no refund of input VAT shall be allowed unless the VAT-registered taxpayer
filed an application for refund with respondent Commissioner within the
two-year prescriptive period. The
application of petitioner corporation for refund/credit of its input VAT for
the first quarter of 1992 was not only unsigned by its supposed authorized
representative, Ma. Paz R. Semilla, Manager-Finance
and Treasury, but it was not dated, stamped, and initialed by the BIR official
who purportedly received the same. The
CTA, in its Decision,[19]
dated
This Court, likewise,
rejects any probative value of the Application for Tax Credit/Refund of VAT
Paid (BIR Form No. 2552) [Exhibit “B’] formally offered in evidence by the
petitioner on account of the fact that it does not bear the BIR stamp showing
the date when such application was filed together with the signature or initial
of the receiving officer of respondent’s Bureau. Worse still, it does not show the date of
application and the signature of a certain Ma. Paz R. Semilla
indicated in the form who appears to be petitioner’s authorized filer.
A review of the records
reveal that the original of the aforecited
application was lost during the time petitioner transferred its office (TSN, p.
6, Hearing of December 9, 1994). Attempt
was made to prove that petitioner exerted efforts to recover the original copy,
but to no avail. Despite this, however,
We observe that petitioner completely failed to establish the missing dates and
signatures abovementioned. On this
score, said application has no probative value in demonstrating the fact of its
filing within two years after the [filing of the VAT return for the quarter]
when petitioner’s sales of goods were made as prescribed under Section 106(b)
of the Tax Code. We believe thus that
petitioner failed to file an application for refund in due form and within the
legal period set by law at the administrative level. Hence, the case at bar has failed to satisfy
the requirement on the prior filing of an application for refund with the
respondent before the commencement of a judicial claim for refund, as
prescribed under Section 230 of the Tax Code.
This fact constitutes another one of the many reasons for not granting
petitioner’s judicial claim.
As pointed out by the CTA, in serious doubt is not
only the fact of whether petitioner corporation timely filed its administrative
claim for refund of its input VAT for the first quarter of 1992, but also
whether petitioner corporation actually filed such administrative claim in the
first place. For failing to prove that
it had earlier filed with the BIR an application for refund/credit of its input
VAT for the first quarter of 1992, within the period prescribed by law, then
the case instituted by petitioner corporation with the CTA for the refund/credit
of the very same tax cannot prosper.
Revenue Regulations No. 2-88 and the 70% export
requirement
Under
Section 100(a) of the Tax Code of 1977, as amended, a 10% VAT was imposed on
the gross selling price or gross value in money of goods sold, bartered or
exchanged. Yet, the same provision
subjected the following sales made by VAT-registered persons to 0% VAT –
(1) Export
sales; and
(2) Sales to
persons or entities whose exemption under special laws or international
agreements to which the
“Export Sales” means the sale and shipment or
exportation of goods from the
These are termed zero-rated
sales. A zero-rated sale is still
considered a taxable transaction for VAT purposes, although the VAT rate
applied is 0%. A sale by a
VAT-registered taxpayer of goods and/or services taxed at 0% shall not result
in any output VAT, while the input VAT on its purchases of goods or services
related to such zero-rated sale shall be available as tax credit or refund.[20]
Petitioner
corporation questions the validity of Revenue Regulations No. 2-88 averring
that the said regulations imposed additional requirements, not found in the law
itself, for the zero-rating of its sales to Philippine Smelting and Refining
Corporation (PASAR) and Philippine Phosphate, Inc. (PHILPHOS), both of which
are registered not only with the BOI, but also with the then Export Processing
Zone Authority (EPZA).[21]
The contentious provisions
of Revenue Regulations No. 2-88 read –
SEC. 2. Zero-rating.
– (a) Sales of raw materials to BOI-registered exporters. – Sales of raw
materials to export-oriented BOI-registered enterprises whose export sales,
under rules and regulations of the Board of Investments, exceed seventy percent
(70%) of total annual production, shall be subject to zero-rate under the
following conditions:
“(1) The seller shall file an application with the
BIR, ATTN.: Division, applying for zero-rating for each and every separate
buyer, in accordance with Section 8(d) of Revenue Regulations No. 5-87. The application should be accompanied with a
favorable recommendation from the Board of Investments.”
“(2) The raw materials sold are to be used exclusively
by the buyer in the manufacture, processing or repacking of his own registered
export product;
“(3) The words “Zero-Rated Sales” shall be prominently
indicated in the sales invoice. The
exporter (buyer) can no longer claim from the Bureau of Internal Revenue or any
other government office tax credits on their zero-rated purchases;
(b) Sales of raw materials to foreign buyer. – Sales
of raw materials to a nonresident foreign buyer for delivery to a resident
local export-oriented BOI-registered enterprise to be used in manufacturing,
processing or repacking of the said buyer’s goods and paid for in foreign
currency, inwardly remitted in accordance with Central Bank rules and
regulations shall be subject to zero-rate.
It is the position of the respondent Commissioner,
affirmed by the CTA and the Court of Appeals, that Section 2 of Revenue
Regulations No. 2-88 should be applied in the cases at bar; and to be entitled
to the zero-rating of its sales to PASAR and PHILPHOS, petitioner corporation,
as a VAT-registered seller, must be able to prove not only that PASAR and
PHILPHOS are BOI-registered corporations, but also that more than 70% of the
total annual production of these corporations are actually exported. Revenue Regulations No. 2-88 merely echoed
the requirement imposed by the BOI on export-oriented corporations registered
with it.
While
this Court is not prepared to strike down the validity of Revenue Regulations
No. 2-88, it finds that its application must be limited and placed in the
proper context. Note that Section 2 of
Revenue Regulations No. 2-88 referred only to the zero-rated sales of raw
materials to export-oriented BOI-registered enterprises whose export
sales, under BOI rules and regulations, should exceed seventy percent (70%) of
their total annual production.
Section
2 of Revenue Regulations No. 2-88, should not have been applied to the
zero-rating of the sales made by petitioner corporation to PASAR and
PHILPHOS. At the onset, it must be
emphasized that PASAR and PHILPHOS, in addition to being registered with the
BOI, were also registered with the EPZA and located within an export-processing
zone. Petitioner corporation does not
claim that its sales to PASAR and PHILPHOS are zero-rated on the basis that
said sales were made to export-oriented BOI-registered corporations, but
rather, on the basis that the sales were made to EPZA-registered enterprises
operating within export processing zones. Although sales to export-oriented
BOI-registered enterprises and sales to EPZA-registered enterprises located
within export processing zones were both deemed export sales, which, under
Section 100(a) of the Tax Code of 1977, as amended, shall be subject to 0% VAT
distinction must be made between these two types of sales because each may have
different substantiation requirements.
The Tax Code of 1977, as
amended, gave a limited definition of export sales, to wit: “The sale and
shipment or exportation of goods from the
“ART. 23.
“Export sales” shall mean the Philippine port F.O.B. value, determined
from invoices, bills of lading, inward letters of credit, landing certificates,
and other commercial documents, of export products exported directly by a
registered export producer or the net selling price of export product sold by a
registered export producer or to an export trader that subsequently exports the
same: Provided, That sales of export products to another producer or to an
export trader shall only be deemed export sales when actually exported
by the latter, as evidenced by landing certificates of similar commercial
documents: Provided, further, That without actual exportation the
following shall be considered constructively exported for purposes of
this provision: (1) sales to bonded manufacturing warehouses of export-oriented
manufacturers; (2) sales to export processing zones; (3) sales to
registered export traders operating bonded trading warehouses supplying raw
materials used in the manufacture of export products under guidelines to be set
by the Board in consultation with the Bureau of Internal Revenue and the Bureau
of Customs; (4) sales to foreign military bases, diplomatic missions and other
agencies and/or instrumentalities granted tax immunities, of locally
manufactured, assembled or repacked products whether paid for in foreign
currency or not: Provided, further, That export sales of registered export trader
may include commission income; and Provided, finally, That exportation of goods
on consignment shall not be deemed export sales until the export products
consigned are in fact sold by the consignee.
Sales of locally manufactured or assembled goods for
household and personal use to Filipinos abroad and other non-residents of the
Philippines as well as returning Overseas Filipinos under the Internal Export
Program of the government and paid for in convertible foreign currency inwardly
remitted through the Philippine banking systems shall also be considered export
sales. (Underscoring ours.)
The
afore-cited provision of the Omnibus Investments Code of 1987 recognizes as
export sales the sales of export products to another producer or to an export
trader, provided that the export products are actually exported. For purposes of VAT zero-rating, such
producer or export trader must be registered with the BOI and is required to
actually export more than 70% of its annual production.
Without actual exportation,
Article 23 of the Omnibus Investments Code of 1987 also considers constructive
exportation as export sales. Among other
types of constructive exportation specifically identified by the said provision
are sales to export processing zones.
Sales to export processing zones are subjected to special tax
treatment. Article 77 of the same Code
establishes the tax treatment of goods or merchandise brought into the export
processing zones. Of particular
relevance herein is paragraph 2, which provides that “Merchandise purchased by
a registered zone enterprise from the customs territory and subsequently
brought into the zone, shall be considered as export sales and the exporter
thereof shall be entitled to the benefits allowed by law for such transaction.”
Such tax treatment of goods
brought into the export processing zones are only consistent with the
Destination Principle and Cross Border Doctrine to which the Philippine VAT
system adheres. According to the
Destination Principle,[22] goods and services are taxed
only in the country where these are consumed. In connection with the said principle, the
Cross Border Doctrine[23]
mandates that no VAT shall be imposed to form part of the cost of the goods
destined for consumption outside the territorial border of the taxing
authority. Hence, actual export of goods
and services from the
Plainly, sales to
enterprises operating within the export processing zones are export sales,
which, under the Tax Code of 1977, as amended, were subject to 0% VAT. It is on this ground that petitioner corporation
is claiming refund/credit of the input VAT on its zero-rated sales to PASAR and
PHILPHOS.
The
distinction made by this Court in the preceding paragraphs between the
zero-rated sales to export-oriented BOI-registered enterprises and zero-rated
sales to EPZA-registered enterprises operating within export processing zones
is actually supported by subsequent development in tax laws and regulations. In Revenue Regulations No. 7-95, the
Consolidated VAT Regulations, as amended,[26]
the BIR defined with more precision what are zero-rated export sales –
(1) The sale and
actual shipment of goods from the Philippines to a foreign country,
irrespective of any shipping arrangement that may be agreed upon which may
influence or determine the transfer of ownership of the goods so exported 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 Pilipinas (BSP);
(2) The sale of
raw materials or packaging materials to a non-resident buyer for delivery to a
resident local export-oriented enterprise to be used in manufacturing,
processing, packing or repacking in the Philippines of the said buyer’s goods
and paid for in acceptable foreign currency and accounted for in accordance
with the rules and regulations of the Bangko
Sentral ng Pilipinas (BSP);
(3) The sale of
raw materials or packaging materials to an export-oriented enterprise whose
export sales exceed seventy percent (70%) of total annual production;
Any enterprise whose export sales exceed 70% of the
total annual production of the preceding taxable year shall be considered an
export-oriented enterprise upon accreditation as such under the provisions of
the Export Development Act (R.A. 7844) and its implementing rules and
regulations;
(4)
(5) Those
considered export sales under Articles 23 and 77 of Executive Order No. 226,
otherwise known as the Omnibus Investments Code of 1987, and other special
laws, e.g. Republic Act No. 7227, otherwise known as the Bases Conversion and
Development Act of 1992.
The Tax Code of 1997, as amended,[27]
later adopted the foregoing definition of export sales, which are subject to 0%
VAT.
This
Court then reiterates its conclusion that Section 2 of Revenue Regulations No.
2-88, which applied to zero-rated export sales to export-oriented
BOI-registered enterprises, should not be applied to the applications for
refund/credit of input VAT filed by petitioner corporation since it based its
applications on the zero-rating of export sales to enterprises registered with
the EPZA and located within export processing zones.
Sufficiency of evidence
There can be no dispute that
the taxpayer-claimant has the burden of proving the legal and factual bases of
its claim for tax credit or refund, but once it has submitted all the required
documents, it is the function of the BIR to assess these documents with
purposeful dispatch.[28] It therefore falls upon herein petitioner corporation
to first establish that its sales qualify for VAT zero-rating under the
existing laws (legal basis), and then to present sufficient evidence that said
sales were actually made and resulted in refundable or creditable input VAT in
the amount being claimed (factual basis).
It would initially appear
that the applications for refund/credit filed by petitioner corporation cover
only input VAT on its purportedly zero-rated sales to PASAR and PHILPHOS;
however, a more thorough perusal of its applications, VAT returns, pleadings,
and other records of these cases would reveal that it is also claiming
refund/credit of its input VAT on purchases of capital goods and sales of gold
to the Central Bank of the Philippines (CBP).
This Court finds that the claims
for refund/credit of input VAT of petitioner corporation have sufficient legal
bases.
As has been extensively
discussed herein, Section 106(b)(2), in relation to Section 100(a)(2) of the
Tax Code of 1977, as amended, allowed the refund/credit of input VAT on export
sales to enterprises operating within export processing zones and registered
with the EPZA, since such export sales were deemed to be effectively zero-rated
sales.[29] The fact that PASAR and PHILPHOS, to whom
petitioner corporation sold its products, were operating inside an export
processing zone and duly registered with EPZA, was never raised as an issue
herein. Moreover, the same fact was
already judicially recognized in the case Atlas Consolidated Mining &
Development Corporation v. Commissioner of Internal Revenue.[30] Section 106(c) of the same Code likewise
permitted a VAT-registered taxpayer to apply for refund/credit of the input VAT
paid on capital goods imported or locally purchased to the extent that such
input VAT has not been applied against its output VAT. Meanwhile, the effective zero-rating of sales
of gold to the CBP from 1989 to 1991[31]
was already affirmed by this Court in Commissioner of Internal Revenue v. Benguet Corporation,[32]
wherein it ruled that –
At the time when the subject transactions were consummated, the prevailing BIR regulations relied upon by respondent ordained that gold sales to the Central Bank were zero-rated. The BIR interpreted Sec. 100 of the NIRC in relation to Sec. 2 of E.O. No. 581 s. 1980 which prescribed that gold sold to the Central Bank shall be considered export and therefore shall be subject to the export and premium duties. In coming out with this interpretation, the BIR also considered Sec. 169 of Central Bank Circular No. 960 which states that all sales of gold to the Central Bank are considered constructive exports. x x x.
This Court now comes to the
question of whether petitioner corporation has sufficiently established the
factual bases for its applications for refund/credit of input VAT. It is in this regard that petitioner
corporation has failed, both in the administrative and judicial level.
Applications for
refund/credit of input VAT with the BIR must comply with the appropriate
revenue regulations. As this Court has
already ruled, Revenue Regulations No. 2-88 is not relevant to the applications
for refund/credit of input VAT filed by petitioner corporation; nonetheless,
the said applications must have been in accordance with Revenue Regulations No.
3-88, amending Section 16 of Revenue Regulations No. 5-87, which provided as
follows –
SECTION 16. Refunds or tax credits of input tax. –
x x x
x
(c) Claims
for tax credits/refunds. – Application for Tax Credit/Refund of Value-Added
Tax Paid (BIR Form No. 2552) shall be filed with the Revenue District Office of
the city or municipality where the principal place of business of the applicant
is located or directly with the Commissioner, Attention: VAT Division.
A photocopy of the purchase invoice or receipt
evidencing the value added tax paid shall be submitted together with the
application. The original copy of the
said invoice/receipt, however, shall be presented for cancellation prior to the
issuance of the Tax Credit Certificate or refund. In addition, the following documents shall be
attached whenever applicable:
x x x
x
“3. Effectively
zero-rated sale of goods and services.
“i) photo copy of approved application for zero-rate if filing
for the first time.
“ii) sales
invoice or receipt showing name of the person or entity to whom the sale of
goods or services were delivered, date of delivery, amount of consideration,
and description of goods or services delivered.
“iii) evidence
of actual receipt of goods or services.
“4. Purchase
of capital goods.
“i) original copy of invoice or receipt showing the date of
purchase, purchase price, amount of value-added tax paid and description of the
capital equipment locally purchased.
“ii) with
respect to capital equipment imported, the photo copy of import entry document
for internal revenue tax purposes and the confirmation receipt issued by the
Bureau of Customs for the payment of the value-added tax.
“5. In
applicable cases,
where the applicant’s zero-rated transactions are
regulated by certain government agencies, a statement therefrom
showing the amount and description of sale of goods and services, name of
persons or entities (except in case of exports) to whom the goods or services
were sold, and date of transaction shall also be submitted.
In
all cases, the amount of refund or tax credit that may be granted shall be
limited to the amount of the value-added tax (VAT) paid directly and entirely
attributable to the zero-rated transaction during the period covered by the
application for credit or refund.
Where
the applicant is engaged in zero-rated and other taxable and exempt sales of
goods and services, and the VAT paid (inputs) on purchases of goods and
services cannot be directly attributed to any of the aforementioned
transactions, the following formula shall be used to determine the creditable
or refundable input tax for zero-rated sale:
Amount of Zero-rated
Total Sales
X
Total Amount of Input
Taxes
= Amount
Creditable/Refundable
In case the application for refund/credit of input VAT was
denied or remained unacted upon by the BIR, and
before the lapse of the two-year prescriptive period, the taxpayer-applicant
may already file a Petition for Review before the CTA. If the taxpayer’s claim is supported by
voluminous documents, such as receipts, invoices, vouchers or long accounts,
their presentation before the CTA shall be governed by CTA Circular No. 1-95,
as amended, reproduced in full below –
In the interest of speedy administration of justice,
the Court hereby promulgates the following rules governing the presentation of
voluminous documents and/or long accounts, such as receipts, invoices and
vouchers, as evidence to establish certain facts pursuant to Section 3(c), Rule
130 of the Rules of Court and the doctrine enunciated in Compania
Maritima vs. Allied Free Workers Union (77 SCRA 24),
as well as Section 8 of Republic Act No. 1125:
1. The party
who desires to introduce as evidence such voluminous documents must, after
motion and approval by the Court, present:
(a) a
Summary containing, among others, a chronological listing of the numbers, dates
and amounts covered by the invoices or receipts and the amount/s of tax paid;
and (b) a Certification of an independent Certified Public Accountant attesting
to the correctness of the contents of the summary after making an examination,
evaluation and audit of the voluminous receipts and invoices. The name of the accountant or partner of the
firm in charge must be stated in the motion so that he/she can be commissioned
by the Court to conduct the audit and, thereafter, testify in Court relative to
such summary and certification pursuant to Rule 32 of the Rules of Court.
2.
The method of
individual presentation of each and every receipt, invoice or account for
marking, identification and comparison with the originals thereof need not be
done before the Court or Clerk of Court anymore after the introduction of the
summary and CPA certification. It is
enough that the receipts, invoices, vouchers or other documents covering the
said accounts or payments to be introduced in evidence must be pre-marked by
the party concerned and submitted to the Court in order to be made accessible
to the adverse party who desires to check and verify the correctness of the
summary and CPA certification. Likewise,
the originals of the voluminous receipts, invoices or accounts must be ready
for verification and comparison in case doubt on the authenticity thereof is
raised during the hearing or resolution of the formal offer of evidence.
Since CTA Cases No. 4831,
4859, 4944,[33] and
5102,[34]
were still pending before the CTA when the said Circular was issued, then
petitioner corporation must have complied therewith during the course of the
trial of the said cases.
In Commissioner
of Internal Revenue v. Manila Mining Corporation,[35]
this Court denied the claim of therein respondent, Manila Mining Corporation,
for refund of the input VAT on its supposed zero-rated sales of gold to the CBP
because it was unable to substantiate its claim. In the same case, this Court emphasized the
importance of complying with the substantiation requirements for claiming
refund/credit of input VAT on zero-rated sales, to wit –
For
a judicial claim for refund to prosper, however, respondent must not only prove
that it is a VAT registered entity and that it filed its claims within the
prescriptive period. It must substantiate the input VAT paid by
purchase invoices or official receipts.
This
respondent failed to do.
Revenue
Regulations No. 3-88 amending Revenue Regulations No. 5-87 provides the
requirements in claiming tax credits/refunds.
x x x x
Under
Section 8 of RA1125, the CTA is described as a court of record. As cases filed before it are litigated de
novo, party litigants should prove every minute aspect of their cases. No evidentiary value can be given the purchase
invoices or receipts submitted to the BIR as the rules on documentary evidence
require that these documents must be formally offered before the CTA.
This
Court thus notes with approval the following findings of the CTA:
x x x [S]ale of gold to the Central
Bank should not be subject to the 10% VAT-output tax but this does not ipso
fact mean that [the seller] is entitled to the amount of refund sought as
it is required by law to present evidence showing the input taxes it paid
during the year in question. What is
being claimed in the instant petition is the refund of the input taxes paid by
the herein petitioner on its purchase of goods and services. Hence, it is necessary for the Petitioner
to show proof that it had indeed paid the input taxes during the year
1991. In the case at bar, Petitioner
failed to discharge this duty. It did
not adduce in evidence the sales invoice, receipts or other documents showing
the input value added tax on the purchase of goods and services.
x x x
Section
8 of Republic Act 1125 (An Act Creating the Court of Tax Appeals) provides
categorically that the Court of Tax Appeals shall be a court of record and
as such it is required to conduct a formal trial (trial de novo) where the
parties must present their evidence accordingly if they desire the
Court to take such evidence into consideration. (Emphasis and italics
supplied)
A
“sales or commercial invoice” is a written account of goods sold or services
rendered indicating the prices charged therefor or a
list by whatever name it is known which is used in the ordinary course of
business evidencing sale and transfer or agreement to sell or transfer goods
and services.
A
“receipt” on the other hand is a written acknowledgment of the fact of payment
in money or other settlement between seller and buyer of goods, debtor or
creditor, or person rendering services and client or customer.
These
sales invoices or receipts issued by the supplier are necessary to substantiate
the actual amount or quantity of goods sold and their selling price, and taken
collectively are the best means to prove the input VAT payments.[36]
Although the foregoing decision focused only on the proof
required for the applicant for refund/credit to establish the input VAT
payments it had made on its purchases from suppliers, Revenue
Regulations No. 3-88 also required it to present evidence proving actual
zero-rated VAT sales to qualified buyers, such as (1) photocopy of the approved
application for zero-rate if filing for the first time; (2) sales invoice or
receipt showing the name of the person or entity to whom the goods or services
were delivered, date of delivery, amount of consideration, and description of
goods or services delivered; and (3) the evidence of actual receipt of goods or
services.
Also worth noting in the
same decision is the weight given by this Court to the certification by the
independent certified public accountant (CPA), thus –
Respondent contends, however, that the certification
of the independent CPA attesting to the correctness of the contents of the
summary of suppliers’ invoices or receipts which were examined, evaluated and
audited by said CPA in accordance with CTA Circular No. 1-95 as amended by CTA
Circular No. 10-97 should substantiate its claims.
There is nothing, however, in CTA Circular No. 1-95,
as amended by CTA Circular No. 10-97, which either expressly or impliedly
suggests that summaries and schedules of input VAT payments, even if certified
by an independent CPA, suffice as evidence of input VAT payments.
x x x
x
The circular, in the interest of speedy administration
of justice, was promulgated to avoid the time-consuming procedure of
presenting, identifying and marking of documents before the Court. It does not relieve respondent of its
imperative task of pre-marking photocopies of sales receipts and
invoices and submitting the same to the court after the independent CPA
shall have examined and compared them with the originals. Without presenting these pre-marked documents
as evidence – from which the summary and schedules were based, the court cannot
verify the authenticity and veracity of the independent auditor’s
conclusions.
There is, moreover, a need to subject these invoices
or receipts to examination by the CTA in order to confirm whether they are VAT
invoices. Under Section 21 of Revenue
Regulation, No. 5-87, all purchases covered by invoices other than a VAT
invoice shall not be entitled to a refund of input VAT.
x x x
x
While the CTA is not governed strictly by technical
rules of evidence, as rules of procedure are not ends in themselves but are
primarily intended as tools in the administration of justice, the presentation
of the purchase receipts and/or invoices is not mere procedural technicality
which may be disregarded considering that it is the only means by which the CTA
may ascertain and verify the truth of the respondent’s claims.
The records further show that respondent miserably
failed to substantiate its claims for input VAT refund for the first
semester of 1991. Except for the
summary and schedules of input VAT payments prepared by respondent itself, no
other evidence was adduced in support of its claim.
As for respondent’s claim for input VAT refund for the
second semester of 1991, it employed the services of Joaquin Cunanan & Co. on account of which it (Joaquin Cunanan & Co.) executed a certification that:
We have examined the information shown below
concerning the input tax payments made by the Makati
Office of Manila Mining Corporation for the period from July 1 to
As the certification merely stated that it used
“auditing procedures considered necessary” and not auditing procedures which
are in accordance with generally accepted auditing principles and standards,
and that the examination was made on “input tax payments by the Manila Mining
Corporation,” without specifying that the said input tax payments are
attributable to the sales of gold to the Central Bank, this Court cannot rely
thereon and regard it as sufficient proof of the respondent’s input VAT
payments for the second semester.[37]
As for the Petition in G.R. No. 141104, involving the input
VAT of petitioner corporation on its zero-rated sales in the first quarter of
1992, this Court already found that the petitioner corporation failed to comply
with Section 106(b) of the Tax Code of 1977, as amended, imposing the two-year
prescriptive period for the filing of the application for refund/credit
thereof. This bars the grant of the
application for refund/credit, whether administratively or judicially, by
express mandate of Section 106(e) of the same Code.
Granting arguendo that the
application of petitioner corporation for the refund/credit of the input VAT on
its zero-rated sales in the first quarter of 1992 was actually and timely
filed, petitioner corporation still failed to present together with its
application the required supporting documents, whether before the BIR or the
CTA. As the Court of Appeals ruled –
In actions involving claims for refund of taxes
assessed and collected, the burden of proof rests on the taxpayer. As clearly discussed in the CTA’s decision, petitioner failed to substantiate its claim
for tax refunds. Thus:
“We note, however, that in the cases at bar,
petitioner has relied totally on Revenue Regulations No. 2-88 in determining
compliance with the documentary requirements for a successful refund or
issuance of tax credit. Unmentioned is
the applicable and specific amendment later introduced by Revenue Regulations
No. 3-88 dated April 7, 1988 (issued barely after two months from the
promulgation of Revenue Regulations No. 2-88 on February 15, 1988), which
amended Section 16 of Revenue Regulations No. 5-87 on refunds or tax credits of
input tax. x x x.
x x x
x
“A thorough examination of the evidence submitted
by the petitioner before this court reveals outright the failure to satisfy
documentary requirements laid down under the above-cited regulations. Specifically, petitioner was not able to
present the following documents, to wit:
“a) sales
invoices or receipts;
“b) purchase invoices or receipts;
“c) evidence
of actual receipt of goods;
“d) BOI
statement showing the amount and description of sale of goods, etc.
“e) original
or attested copies of invoice or receipt on capital equipment locally
purchased; and
“f) photocopy
of import entry document and confirmation receipt on imported capital
equipment.
“There is the need to examine the sales invoices or
receipts in order to ascertain the actual amount or quantity of goods
sold and their selling price.
Without them, this Court cannot verify the correctness of petitioner’s
claim inasmuch as the regulations require that the input taxes being sought for
refund should be limited to the portion that is directly and entirely
attributable to the particular zero-rated transaction. In this instance, the best evidence of such
transaction are the said sales invoices or receipts.
“Also, even if sales invoices are produced, there
is the further need to submit evidence that such goods were actually received
by the buyer, in this case, by CBP, Philp[h]os and PASAR.
x x x x
“Lastly, this Court cannot determine whether there
were actual local and imported purchase of capital goods as well as domestic
purchase of non-capital goods without the required purchase invoice or receipt,
as the case may be, and confirmation receipts.
“There is, thus, the imperative need to submit before
this Court the original or attested photocopies of petitioner’s invoices or
receipts, confirmation receipts and import entry documents in order that a full
ascertainment of the claimed amount may be achieved.
“Petitioner should have taken the foresight to introduce
in evidence all of the missing documents abovementioned. Cases filed before this Court are litigated de
novo. This means that party
litigants should endeavor to prove at the first instance every minute aspect of
their cases strictly in accordance with the Rules of Court, most especially on
documentary evidence.” (pp. 37-42, Rollo)
Tax refunds are in the nature of tax exemptions. It is regarded as in derogation of the
sovereign authority, and should be construed in strictissimi
juris against the person or entity claiming
the exemption. The taxpayer who claims
for exemption must justify his claim by the clearest grant of organic or
statute law and should not be permitted to stand on vague implications (Asiatic
Petroleum Co. v. Llanes, 49 Phil. 466; Northern Phil.
Tobacco Corp. v. Mun. of Agoo,
La Union, 31 SCRA 304; Reagan v. Commissioner, 30 SCRA 968; Asturias Sugar
Central, Inc. v. Commissioner of Customs, 29 SCRA 617; Davao
Light and Power Co., Inc. v. Commissioner of Customs, 44 SCRA 122).
There is no cogent reason to fault the CTA’s conclusion that the SGV’s
certificate is “self-destructive”, as it finds comfort in the very SGV’s stand, as follows:
“It is our understanding that the above procedure are
sufficient for the purpose of the Company.
We make no presentation regarding the sufficiency of these procedures
for such purpose. We did not compare the
total of the input tax claimed each quarter against the pertinent VAT returns
and books of accounts. The above
procedures do not constitute an audit made in accordance with generally
accepted auditing standards.
Accordingly, we do not express an opinion on the company’s claim for
input VAT refund or credit. Had we
performed additional procedures, or had we made an audit in accordance with
generally accepted auditing standards, other matters might have come to our
attention that we would have accordingly reported on.”
The SGV’s “disclaimer of
opinion” carries much weight as it is petitioner’s independent auditor. Indeed, SGV expressed that it “did not
compare the total of the input tax claimed each quarter against the VAT returns
and books of accounts.”[38]
Moving on to the Petition in G.R. No. 148763, concerning
the input VAT of petitioner corporation on its zero-rated sales in the second,
third, and fourth quarters of 1990, the appellate court likewise found that
petitioner corporation failed to sufficiently establish its claims. Already disregarding the declarations made by
the Court of Appeals on its erroneous application of Revenue Regulations No.
2-88, quoted hereunder is the rest of the findings of the appellate court after
evaluating the evidence submitted in accordance with the requirements under
Revenue Regulations No. 3-88 –
The Secretary of Finance validly adopted Revenue
Regulations [No.] x x x
3-98 pursuant to Sec. 245 of the National Internal Revenue Code, which
recognized his power to “promulgate all needful rules and regulations for the
effective enforcement of the provisions of this Code.” Thus, it is incumbent upon a taxpayer
intending to file a claim for refund of input VATs or
the issuance of a tax credit certificate with the BIR x x
x to prove sales to such buyers as required by
Revenue Regulations No. 3-98. Logically,
the same evidence should be presented in support of an action to recover taxes
which have been paid.
x x x
Neither has [herein petitioner corporation] presented sales invoices or
receipts showing sales of gold, copper concentrates, and pyrite to the CBP,
[PASAR], and [PHILPHOS], respectively, and the dates and amounts of the same,
nor any evidence of actual receipt by the said buyers of the mineral
products. It merely presented receipts
of purchases from suppliers on which input VATs were
allegedly paid. Thus, the Court of Tax Appeals correctly denied the claims for
refund of input VATs or the issuance of tax credit
certificates of petitioner [corporation].
Significantly, in the resolution, dated
This Court
is, therefore, bound by the foregoing facts, as found by the appellate court,
for well-settled is the general rule that the jurisdiction of this Court in
cases brought before it from the Court of Appeals, by way of a Petition for
Review on Certiorari under Rule 45 of the Revised Rules of Court, is
limited to reviewing or revising errors of law; findings of fact of the latter
are conclusive.[40] This Court is not a trier
of facts. It is not its function to
review, examine and evaluate or weigh the probative value of the evidence
presented.[41]
The
distinction between a question of law and a question of fact is clear-cut. It has been held that "[t]here is a
question of law in a given case when the doubt or difference arises as to what
the law is on a certain state of facts; there is a question of fact when the
doubt or difference arises as to the truth or falsehood of alleged facts."[42]
Whether
petitioner corporation actually made zero-rated sales; whether it paid input
VAT on these sales in the amount it had declared in its returns; whether all
the input VAT subject of its applications for refund/credit can be attributed
to its zero-rated sales; and whether it had not previously applied the input
VAT against its output VAT liabilities, are all questions of fact which could
only be answered after reviewing, examining, evaluating, or weighing the
probative value of the evidence it presented, and which this Court does not
have the jurisdiction to do in the present Petitions for Review on Certiorari
under Rule 45 of the revised Rules of Court.
Granting
that there are exceptions to the general rule, when this Court looked into
questions of fact under particular circumstances,[43]
none of these exist in the instant cases.
The Court of Appeals, in both cases, found a dearth of evidence to
support the claims for refund/credit of the input VAT of petitioner
corporation, and the records bear out this finding. Petitioner corporation itself cannot dispute
its non-compliance with the requirements set forth in Revenue Regulations No.
3-88 and CTA Circular No. 1-95, as amended.
It concentrated its arguments on its assertion that the substantiation
requirements under Revenue Regulations No. 2-88 should not have applied to it,
while being conspicuously silent on the evidentiary requirements mandated by
other relevant regulations.
Re-opening
of cases/holding of new trial before the CTA
This Court now faces the final issue of whether the prayer of
petitioner corporation for the re-opening of its cases or holding of new trial
before the CTA for the reception of additional evidence, may be granted. Petitioner corporation prays that the Court
exercise its discretion on the matter in its favor, consistent with the policy
that rules of procedure be liberally construed in pursuance of substantive
justice.
This Court,
however, cannot grant the prayer of petitioner corporation.
An aggrieved party may file a motion for new trial or reconsideration of a
judgment already rendered in accordance with Section 1, Rule 37 of the revised
Rules of Court, which provides –
SECTION
1. Grounds of and period for filing
motion for new trial or reconsideration. – Within the period for taking an
appeal, the aggrieved party may move the trial court to set aside the judgment
or final order and grant a new trial for one or more of the following causes
materially affecting the substantial rights of said party:
(a) Fraud, accident,
mistake or excusable negligence which ordinary prudence could not have guarded
against and by reason of which such aggrieved party has probably been impaired
in his rights; or
(b) Newly discovered
evidence, which he could not, with reasonable diligence, have discovered and
produced at the trial, and which if presented would probably alter the result.
Within the same period, the aggrieved party may also move fore reconsideration upon the grounds that the damages awarded are excessive, that the evidence is insufficient to justify the decision or final order, or that the decision or final order is contrary to law.
In G.R. No. 148763, petitioner corporation attempts to
justify its motion for the re-opening of its cases and/or holding of new trial
before the CTA by contending that the “[f]ailure of
its counsel to adduce the necessary evidence should be construed as excusable
negligence or mistake which should constitute basis for such re-opening of
trial as for a new trial, as counsel was of the belief that such evidence was
rendered unnecessary by the presentation of unrebutted
evidence indicating that respondent [Commissioner] has acknowledged the sale of
[sic] PASAR and [PHILPHOS] to be zero-rated.” [44] The CTA denied such motion on the ground
that it was not accompanied by an affidavit of merit as required by Section 2,
Rule 37 of the revised Rules of Court.
The Court of Appeals affirmed the denial of the motion, but apart from this
technical defect, it also found that there was no justification to grant the
same.
On the matter of the denial of the motion of the petitioner
corporation for the re-opening of its cases and/or holding of new trial based
on the technicality that said motion was unaccompanied by an affidavit of
merit, this Court rules in favor of the petitioner corporation. The facts which should otherwise be set forth
in a separate affidavit of merit may, with equal effect, be alleged and
incorporated in the motion itself; and this will be deemed a substantial
compliance with the formal requirements of the law, provided, of course, that
the movant, or other individual with personal
knowledge of the facts, take oath as to the truth thereof, in effect converting
the entire motion for new trial into an affidavit.[45] The motion of petitioner corporation was
prepared and verified by its counsel, and since the ground for the motion was
premised on said counsel’s excusable negligence or mistake, then the obvious
conclusion is that he had personal knowledge of the facts relating to such
negligence or mistake. Hence, it can be
said that the motion of petitioner corporation for the re-opening of its cases
and/or holding of new trial was in substantial compliance with the formal
requirements of the revised Rules of Court.
Even so, this Court finds no sufficient ground for granting
the motion of petitioner corporation for the re-opening of its cases and/or
holding of new trial.
In G.R. No. 141104, petitioner corporation invokes the
Resolution,[46]
dated
The rule that the grant or denial of motions for new trial
rests on the discretion of the trial court,[47]
may likewise be extended to the CTA.
When the denial of the motion rests upon the discretion of a lower
court, this Court will not interfere with its exercise, unless there is proof
of grave abuse thereof.[48]
That the CTA granted the motion for re-opening of one case
for the presentation of additional evidence and, yet, deny a similar motion in
another case filed by the same party, does not necessarily demonstrate grave abuse
of discretion or arbitrariness on the part of the CTA. Although the cases involve identical parties,
the causes of action and the evidence to support the same can very well be
different. As can be gleaned from the
Resolution, dated
Moreover, the very same Resolution, dated 20 July 1998, in
CTA Case No. 5296, invoked by petitioner corporation, emphasizes that the
decision of the CTA to allow petitioner corporation to present evidence “is
applicable pro hac vice or in this
occasion only as it is the finding of [the CTA] that petitioner
[corporation] has established a few of the aforementioned material points
regarding the possible existence of the export documents together with the
prior and succeeding returns for the quarters involved, x x
x” [Emphasis
supplied.] Therefore, the CTA, in the present cases, cannot be bound by its
ruling in CTA Case No. 5296, when these cases do not involve the exact same
circumstances that compelled it to grant the motion of petitioner corporation
for re-opening of CTA Case No. 5296.
Finally, assuming for the sake of argument that the
non-presentation of the required documents was due to the fault of the counsel
of petitioner corporation, this Court finds that it does not constitute
excusable negligence or mistake which would warrant the re-opening of the cases
and/or holding of new trial.
Under Section 1, Rule 37 of the
Revised Rules of Court, the “negligence” must be excusable and generally
imputable to the party because if it is imputable to the counsel, it is binding
on the client. To follow a contrary rule
and allow a party to disown his counsel’s conduct would render proceedings
indefinite, tentative, and subject to re-opening by the mere subterfuge of
replacing the counsel. What the
aggrieved litigant should do is seek administrative sanctions against the
erring counsel and not ask for the reversal of the court’s ruling.[49]
As elucidated by this Court in another case,[50]
the general rule is that the client is bound by the action of his counsel in
the conduct of his case and he cannot therefore complain that the result of the
litigation might have been otherwise had his counsel proceeded
differently. It has been held time and
again that blunders and mistakes made in the conduct of the proceedings in the
trial court as a result of the ignorance, inexperience or incompetence of
counsel do not qualify as a ground for new trial. If such were to be admitted as valid reasons
for re-opening cases, there would never be an end to litigation so long as a
new counsel could be employed to allege and show that the prior counsel had not
been sufficiently diligent, experienced or learned.
Moreover,
negligence, to be “excusable,” must be one which ordinary diligence and
prudence could not have guarded against.[51] Revenue Regulations No. 3-88, which was
issued on
Neither is there any merit in the contention of petitioner
corporation that the non-presentation of the required documentary evidence was
due to the excusable mistake of its counsel, a ground under Section 1, Rule 37
of the revised Rules of Court for the grant of a new trial. “Mistake,” as it is referred to in the said
rule, must be a mistake of fact, not of law, which relates to the case.[52] In the present case, the supposed mistake
made by the counsel of petitioner corporation is one of law, for it was
grounded on his interpretation and evaluation that Revenue Regulations No. 3-88
and CTA Circular No. 1-95, as amended, did not apply to his client’s cases and
that there was no need to comply with the documentary requirements set forth
therein. And although the counsel of
petitioner corporation advocated an erroneous legal position, the effects
thereof, which did not amount to a deprivation of his client’s right to be
heard, must bind petitioner corporation.
The question is not whether petitioner corporation succeeded in
establishing its interests, but whether it had the opportunity to present its
side.[53]
Besides,
litigation is a not a “trial and error” proceeding. A party who moves for a new trial on the
ground of mistake must show that ordinary prudence could not have guarded
against it. A new trial is not a refuge
for the obstinate.[54] Ordinary prudence in these cases would have
dictated the presentation of all available evidence that would have supported
the claims for refund/credit of input VAT of petitioner corporation. Without sound legal basis, counsel for
petitioner corporation concluded that Revenue Regulations No. 3-88, and later
on, CTA Circular No. 1-95, as amended, did not apply to its client’s claims. The obstinacy of petitioner corporation and
its counsel is demonstrated in their failure, nay, refusal, to comply with the
appropriate administrative regulations and tax court circular in pursuing the
claims for refund/credit, now subject of G.R. Nos. 141104 and 148763, even
though these were separately instituted in a span of more than two years. It is also evident in the failure of
petitioner corporation to address the issue and to present additional evidence
despite being given the opportunity to do so by the Court of Appeals. As pointed out by the appellate court, in its
Decision, dated
x x
x Significantly, in the resolution, dated
Summary
Hence, although this Court agreed with the petitioner corporation that the
two-year prescriptive period for the filing of claims for refund/credit of
input VAT must be counted from the date of filing of the quarterly VAT return,
and that sales to EPZA-registered enterprises operating within economic
processing zones were effectively zero-rated and were not covered by Revenue
Regulations No. 2-88, it still denies the claims of petitioner corporation for
refund of its input VAT on its purchases of capital goods and effectively
zero-rated sales during the second, third, and fourth quarters of 1990 and the
first quarter of 1992, for not being established and substantiated by
appropriate and sufficient evidence. Petitioner
corporation is also not entitled to the re-opening of its cases and/or holding
of new trial since the non-presentation of the required documentary evidence
before the BIR and the CTA by its counsel does not constitute excusable
negligence or mistake as contemplated in Section 1, Rule 37 of the revised
Rules of Court.
WHEREFORE, premises considered, the instant Petitions for Review are hereby DENIED, and the Decisions, dated
|
|
MINITA V. CHICO-NAZARIO
Associate
Justice |
WE
CONCUR:
CONSUELO YNARES-SANTIAGO
Associate Justice
Chairperson
Associate Justice
Associate Justice
ATTESTATION
I attest that the conclusions in the above
Decision were reached in consultation before the case was assigned to the
writer of the opinion of the Court’s Division.
CONSUELO YNARES-SANTIAGO
Associate Justice
Chairperson, Third Division
CERTIFICATION
Pursuant to Section 13, Article VIII
of the Constitution, and the Division Chairperson’s Attestation, it is hereby
certified that the conclusions in the above Decision were reached in
consultation before the case was assigned to the writer of the opinion of the
Court’s Division.
Acting
Chief Justice
[1] See Atlas Consolidated Mining and Development Corporation v. Commissioner of Internal Revenue, 376 Phil. 495, 508 (1999).
[2] Records
(G.R. No. 141104), p. 4.
[3]
[4] Penned by Presiding Judge Ernesto D. Acosta with Associate Judges Ramon O. De Veyra and Amancio Q. Saga, concurring; rollo (G.R. No. 141104), pp. 67-86.
[5] Penned by Presiding Judge Ernesto D. Acosta with Associate Judges Ramon O. de Veyra and Amancio Q. Saga, concurring; id. at 88-92.
[6] Penned by Associate Justice Artemon D. Luna with Associate Justices Conchita Carpio Morales (now an Associate Justice of the Supreme Court) and Bernardo P. Abesamis, concurring; id. at 32-42.
[7] Penned by Associate Justice Bernardo P. Abesamis with Associate Justices Conchita Carpio Morales (now an Associate Justice of the Supreme Court) and Bernardo Ll. Salas, concurring; id. at 44-45.
[8] Rollo
(G.R. No. 141104), pp. 14-23.
[9] Penned by Presiding Judge Ernesto D. Acosta with Associate Judges Ramon O. de Veyra and Amancio Q. Saga, concurring; CA rollo (G.R. No. 148763), pp. 49-66.
[10]
[11] Penned by Associate Justice Andres B. Reyes, Jr. with Associate Justices Quirino D. Abad-Santos, Jr. and Romeo A. Brawner, concurring; rollo (G.R. No. 148763) , pp. 37-46.
[12] Penned by Associate Justice Andres B. Reyes, Jr. with Associate Justices Buenaventura J. Guerrero and Romeo A. Brawner, concurring; id. at 48.
[13] SEC. 230. Recovery of tax erroneously or illegally collected. – No suit or proceeding shall be maintained in any court for the recovery of any national internal revenue tax hereafter alleged to have been erroneously or illegally assessed or collected, or of any penalty claimed to have been collected without authority, or of any sum alleged to have been excessive or in any manner wrongfully collected, until a claim for refund or credit has been duly filed with the Commissioner; but such suit or proceeding may be maintained whether or not such tax, penalty, or sum has been paid under protest or duress.
In any case, no such suit or proceeding shall be begun after the expiration of two years from the date of payment of the tax or penalty regardless of any supervening cause that may arise after payment; Provided, however, That the Commissioner may, even without a written claim therefor, refund or credit any tax, where on the face of the return upon which payment was made, such payment appears clearly to have been erroneously paid.
Forfeiture of refund. – A refund check or warrant issued in accordance with the pertinent provisions of this Code which shall remain unclaimed or uncashed within five (5) years from the date the said warrant or check was mailed or delivered shall be forfeited in favor of the government and the amount thereof shall revert to the General Fund.
[14] G.R. No. 96322,
[15] G.R. No. 83736,
[16] Input VAT means the value-added tax paid by a VAT-registered person in the course of his trade or business on importation of goods or local purchases of goods or services from a VAT-registered person. (Section 104, Tax Code of 1977, as amended)
[17] Output VAT refers to VAT due on the sale of taxable goods or services by any person registered or required to register under Section 107 of the Tax Code of 1977, as amended (Section 104, Tax Code of 1977, as amended)
[18] See Section 104 of the Tax Code of 1977, as amended, on Tax Credits.
[19] Supra note 4 at 83-84.
[20] Section 8(a), Revenue Regulations No. 5-87; See also Sections 106(a) and (b) of the Tax Code of 1977, as amended.
[21] Now the Philippine Export Processing Zone Authority, under Republic Act No. 7916.
[22] Commissioner of Internal Revenue
v. Seagate Technology (
[23] Victor
A. Deoferio, Jr. and Victorino C. Mamalateo, The Value Added Tax in the
[24] Now 12%, under the Tax Code of 1997, as amended by Republic Act No. 9337.
[25] Republic Act No. 7916, as amended, established what are called special economic zones (ECOZONES), referring to areas with highly developed or which have the potential to be developed into agro-industrial, tourist/recreational, commercial, banking, investment, and financial centers. An ECOZONE may contain any of the following: industrial estates (Ies), export processing zones (EPZs), free trade zones, and tourist/recreational centers. (Section 4)
[26] Section 4.100.2.
[27] Section 106(A)(2)(a). Republic Act No. 9337 amending the Tax Code of 1997 added a sixth paragraph, listing “The sale of goods, supplies, equipment and fuel to persons engaged in international shipping or international air transport operations,” also as export sales.
[28] Philex Mining Corp. v. Commissioner of Internal Revenue, 356 Phil. 189, 201-202 (1998).
[29] Under the Tax Code of 1977, as amended, sales to enterprises located within export processing zones and registered with EPZA were considered export sales by virtue of the Omnibus Investments Code, a special law. Thus, they were subjected to 0% VAT rate under Section 100(a) (2) of the Tax Code of 1977, as amended, and refund/credit of input VAT thereon was allowed under Section 106(b)(2) of the same Code on effectively zero-rated sales. Sales to EPZA enterprises were not yet directly recognized by the Tax Code of 1977, as amended, as export sales, the input VAT on which may be refunded/credited under a separate provision, Section 106(b)(1). However, under the Tax Code of 1997, as amended, sales to enterprises within export processing zones are already explicitly recognized as zero-rated export sales in Section 106(A)(2)(a), the input VAT on which may be refunded/credited under Section 112(A), which now governs the refund/credit of input VAT on all zero-rated and effectively zero-rated sales. The Tax Code of 1997, as amended, already eliminated the separate paragraph on the refund/credit of input VAT on export sales.
[30] Supra note 1.
[31] Petitioner corporation applied for refund/credit of its input VAT on its sales of gold to the Central Bank of the Philippines (CBP) in the second, third, and fourth quarters of 1990, subject of the Petition in G.R. No. 148763.
[32] G.R. Nos. 134587 and 134588,
[33] The Decision in these consolidated
cases was promulgated only on
[34] The Decision in this case was
promulgated only on
[35] G.R. No. 153204,
[36]
[37]
[38] Supra note 6 at 36-41.
[39] Supra note 11 at 43-45.
[40] Sps.
[41] Bautista v. Puyat Vinyl Products, Inc., 416 Phil. 305, 309 (2001).
[42] Commissioner of Internal Revenue v. Court of Appeals, 358 Phil. 562, 575 (1998).
[43] The following have been identified as exceptional circumstances: (1) when the findings are grounded entirely on speculation, surmises, or conjectures; (2) when the interference made is manifestly mistaken, absurd, or impossible; (3) when there is grave abuse of discretion; (4) when the judgment is based on a misapprehension of facts; (5) when the findings of fact are conflicting; (6) when in making its findings, the Court of Appeals went beyond the issues of the case, or its findings are contrary to the admissions of both the appellant and the appellee; (7) when the findings are contrary to those of the trial court; (8) when the findings are conclusions without citation of specific evidence on which they are based; (9) when the facts set forth in the petition as well as in the petitioner’s main and reply briefs are not disputed by the respondent; and (10) when the findings of fact are premised on the supposed absence of evidence and contradicted by the evidence on record. [Sps. Sta. Maria v. Court of Appeals, 349 Phil. 275, 282-283 (1998)].
[44] Rollo
(G.R. No. 148763), p. 26.
[45] Circle Financial Corporation v. Court of Appeals, G.R. No. 77315, 22 April 1991, 196 SCRA 166, 171.
[46] Signed by Presiding Judge Ernesto D. Acosta and Associate Judges Amancio Q. Saga and Ramon O. de Veyra, rollo, 148-160 (G.R. No. 141104).
[47] Baring v. Cabahug, 127 Phil. 84, 86 (1967).
[48] Galvez v. Court of Appeals,149 Phil. 377, 384-385 (1971); Northern Luzon Transportation, Co., Inc. v. Sambrano, 66 Phil. 60, 62-63 (1938).
[49] Que v. Court of Appeals, G.R. No.
150739, 18 August 2005, 467 SCRA 358, 369.
[50] Rivera
v. Court of Appeals, 452
Phil. 1014, 1024-1025 (2003).
[51] Insular
Life Savings and Trust Company v. Runes, Jr., G.R. No. 152530, 12 August 2004, 436 SCRA 317, 324-325.
[52] Supra
note 46.
[53] Baring v. Cabahug,
supra note 47.
[54] Viking Industrial Corporation v. Court of Appeals, G.R. No. 143794, 13 July 2004, 434 SCRA 223, 231.
[55] Supra note 11 at 44-45.