BIR Ruling

April 17, 1998 MEMORANDUM FOR: The Commissioner This refers to the protest filed by SWISSTIME PHILS., INC. against the assessment issued by this Bureau involving the amount of P3,181,299.48 as alleged deficiency percentage tax for the year 1981, inclusive of increments covered by Assessment No. FAN-B-81-84-00964 dated December 29, 1986. The fundamental issue in this case is whether or not the abovenamed taxpayer is liable to pay percentage tax on sale. After a thorough study of the facts of the case as well as the law and jurisprudence pertinent thereto, this Office finds the above assessment to be legally untenable. Records show that the alleged delinquent taxpayer has been registered with the Board of Investments since February 21, 1975 as an "export producer" on a pioneer status with Certificate of Registration No. 75-499 (p. 23 Docket). It was engaged in the manufacture of waterproof stainless steel precision watch cases. All its finished products were exported abroad. Section 202 of the then Tax Code, as amended, expressly exempts export sales from percentage tax when it provides that: "Section 202. Articles not subject to percentage tax on Sales . . . : (a) . . . (b) . . . (c) . . . (d) Articles shipped or exported by the manufacturer or producer, irrespective of any shipping arrangement that may be agreed upon which may influence or determine the transfer of ownership of the articles so exported." Based on the aforequoted statutory pronouncement corroborated by material facts established during the investigation of this case (p. 30, Docket), we find merit and concur with the recommendation of our examiner Revenue Officer Roberto L. Uy, that this case be closed and terminated. Moreover, it is also noted that the assessment is a clear case of a jeopardy assessment. Nowhere in the docket do we come across a finding that the assessment was the result of an investigation conducted by any examiner from the BIR. It must be emphasized that the government could only validly issue a deficiency percentage tax assessment against a BOI-registered if it could be established by clear and competent evidence that the latter is engaged in domestic sale. Sad to say, our assessment is clearly wanting in this respect. No statement or findings of fact as to the true nature (whether domestic or export sale) of the taxpayer's 1981 net sales of P5,173,014.00, from which this instant assessment was based (p. 1, Docket), was ever made. Thus, making our assessment lacking in factual basis. aisadc In view thereof, it is respectfully recommended that the subject deficiency percentage tax assessment issued against SWISSTIME PHILS., INC. be withdrawn and cancelled and this case be considered closed and terminated. Respectfully submitted: (SGD.) RODULFO L. SALAZAR Chief, Appellate Division I CONCUR: (SGD.) ESTHER R. IBAEZ OIC, Assistant Commissioner Legal Service Recommendation-APPROVED: (SGD.) LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue