Benguet Corp. v. Commissioner of Internal Revenue

[C.T.A. CASE NO. 5532. October 12, 1999.] BENGUET CORPORATION , petitioner , vs . COMMISSIONER OF INTERNAL REVENUE , respondent . D E C I S I O N This is a Petition for Review seeking for the issuance of tax credit certificates in the amounts of P3,218,832.41 and P20,658,606.21 or an aggregate amount of P23,877,438.62, representing the alleged excess input VAT payments for the third and fourth quarters of calendar year ended 1995. Petitioner is a domestic corporation principally engaged in the mining business. It is registered with the Bureau of Internal Revenue (BIR) as a Value-Added Tax (VAT) taxpayer with VAT Registration No. 31-9-000027. Likewise, on May 4, 1988, it obtained from the BIR an approval of its application for zero-rate on its sales of mine products, pursuant to Section 100(2)(A) of the Tax Code (Exhibit B). For the third quarter ended September 30, 1995, Petitioner filed its VAT return with the BIR on October 20, 1995 reflecting a total VAT output tax of P5,182,424.50 and a total VAT input tax of P19,276,004.40, resulting in excess input taxes in the amount of P14,093,579.90 (Exhibit C), computed as follows: Output tax Less: Input tax P 5,182,424.50 Domestic Purchases of Goods and Services P16,195,374.13 Importation goods 3,080,630.27 19,276,004.40 Excess Input Tax P14,093,579.90 =========== In the same manner, for the 4th quarter ended December 31, 1995, Petitioner filed with the BIR its VAT return on January 22, 1996 reflecting a total Excess Input Tax of P22,108,193.14 (Exh. D-1). However said Excess Input Tax of P22,108,193.14 was reduced to P20,658,606.21 upon the filing of its amended VAT return (Exhibit D), computed as follows: Output tax Less: Input tax P3,233,638.58 Domestic Purchases of Goods and Services P19,437,753.06 Importation of Goods 4,454,491.73 23,892,244.79 Excess Input Tax P20,658,606.21 =========== Accordingly, Petitioner filed with the One-Stop Shop Inter-Agency Tax Credit and Duty Drawback Center of the Department of Finance (DOF) separate applications for VAT tax credits (Exh. E and F) of its excess input taxes paid for the third and fourth quarters of calendar year ended 1995 in the amounts of P14,455,504.32 (Exh. E-1 and P20,658,606.21 (Exh. F-1), respectively. Both applications for VAT tax credits were not acted upon by the. DOF within the sixty (60) day period counting from the date of their filing as mandated by Section 106(e) of the Tax Code. Thus, on June 18, 1997, Petitioner filed the instant Petition for Review to forestall the running of the prescriptive period for tax refunds or credits. In answer to the petition, Respondent raised the following Special and Affirmative Defenses: 3. Taxes paid and collected are deemed to have been made in accordance with law and pertinent existing BIR regulations 4. Claims for tax credit/refund are construed strictly against the claimants thereof as they are in the nature of exemption from payment of tax. Hence, it is incumbent upon herein Petitioner to prove that it is entitled thereto. 5 Lastly, Petitioner must prove that it has complied with the requirements of Section 230 of the Tax Code. Upon the recommendation of the Tax Revenue Group of the Department of Finance, herein Respondent issued a tax credit certificate in the amount of P11,236,671.91 granting a portion of Petitioner's claim which pertains to the third quarter ended September 30, 1995. (Exhibit G). This reduced the amount being claimed to P3,218,832.40 for the said period. Thus, the Petitioner in its Memorandum, dated February 8, 1999, prayed for the remaining balance of its claim in the amount of P23,877,438.62. llcd Respondent, on the other hand, posits that Petitioner is not entitled to the refund sought, since it failed to submit photocopies of export documents, and invoices or receipts evidencing the sale of the goods. Furthermore, Respondent avers that Petitioner failed to show proof that it has not applied its VAT input taxes to any tax liabilities for the succeeding period. (Respondent's Memo, docket p. 91) The sole issue to be resolved in the case at bar is whether or not Petitioner is entitled to a tax credit in the total amount of P23,877,438.62 representing its excess input tax payments for the third and fourth quarters of calendar year ended 1995. Quoted hereunder are the following provisions of the Tax Code particularly Section 100, 106(a) and 106(b) from which Petitioner basically anchors its claim, to wit "Section 100. Value-added tax on sale of goods or properties . (a) Rate and base of tax . There shall be levied, assessed and collected on every sale, barter or exchange of goods or properties, a value-added tax equivalent to 10% of the gross selling price or gross value in money of the goods or properties sold, bartered or exchanged, such tax to be paid by the seller or transferor. xxx xxx xxx (2) The following sales by VAT-registered persons shall be subjected to 0%: a) Export sales . . . ." "Section 106. Refunds or tax credits of creditable input tax . (a) Any VAT-registered person, whose sales are zero-rated or effectively zero-rated may, within two (2) years after the close of the taxable quarter when the sales were made, apply for the issuance of a tax credit certificate or refund of creditable input tax due or paid attributable to such sales , except transitional input tax, to the extent that such input tax has not been applied against output tax; Provided, however, that in case of zero-rated sales under Section 100 (a) (2) (A) (i), (ii) and (b) and section 102 (b) (1) and (2), the acceptable foreign currency exchange proceeds thereof had been duly accounted for in accordance with the regulations of the Bangko Sentral ng Pilipinas;" xxx xxx xxx "(b) Capital goods . A VAT-registered may apply for the issuance of a tax credit certificate or refund of input taxes paid on capital goods imported or locally purchased , to the extent that such input taxes have not been applied against output taxes . The application may be made only within two (2) years after the close of the taxable quarter when the importation or purchase was made." (Emphasis supplied) In sum, these aforequoted provisions grant a privilege to a VAT-registered person whose sales or importations are zero-rated to apply for the issuance of a tax credit certificate of its excess input tax payments. Thus, the following basic requirements must be satisfied in order for refunds or tax credits of input tax may be granted: 1. That there be a sale of goods; 2. That the sale was made by a VAT-registered person; 3. That the sale qualifies as export sale as defined by law; 4. That the application of a tax credit or refund be made within two (2) years from the filing of the VAT quarterly return; 5. That the foreign exchange proceeds of said export sales are properly accounted for in accordance with the regulations of the BSP; and LibLex 6. That the input taxes have not been applied against output taxes. A thorough and careful examination of all the documentary evidence presented by the Petitioner reveal that it substantially complied with all the foregoing requirements, thus, this Court is inclined to disagree with the ratiocination raised by Respondent why the refund should be denied. First and foremost, prescription has not yet set in the case at bar since the Petition for Review was filed within the two-year period as prescribed under Section 230 in relation to Sections 106(a) & (b) and 110 of the Tax Code. It could be recalled that Petitioner filed its quarterly VAT returns for the third and fourth quarters of 1995 on October 20, 1995 and January 22, 1996, respectively (Exh. C and D-1). The application for tax credit/refund of the VAT paid for the third and fourth quarters were filed on September 4, 1996 and November 6, 1996 (Exh E-1 & F-1) in the administrative level, and the Petition for Review on June 18, 1997. Clearly, the claim for refund was filed well within the two-year mandatory period prescribed by law. As regards the issue that Petitioner failed to show proof that it has not applied its VAT-input taxes to any tax liabilities for the succeeding period, We answer in the negative. On the basis of the VAT return submitted, it is clear that Petitioner did not intend to apply and to forward the input taxes to its output tax liabilities for the succeeding quarter (Exh. C & D). On the contrary, Petitioner really intended to seek the refund of all the excess input VAT as evidenced by the blank space under box 20 of the VAT return as well as the filing of the instant action for refund. It should likewise be noted that Petitioner engaged the services of an independent accounting firm to handle the investigation and examination of its input taxes for the period covered in the VAT claim. This Court finds its report adequate. A review of the SGV report (Exh. R) and the supporting documents such as summary of export sales remittances (Exhs. K, O) and bank remittance advices (Exhs. K-1 to K-44, 0-1 to O-35, inclusive), disclose that the inward remittances of the foreign currency proceeds of Petitioner's export sales of P524,954,512.40 for the 3rd quarter and P429,954,236.38 for the fourth quarter of 1995 were accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas. It was likewise certified by SGV and Co. that Petitioner's summary of Input Taxes Paid for the 3rd and 4th quarters of 1995 amounting to P19,276,004.40 and P23,892,244.79, respectively, (Exhs. P, P-1 to P-186, Q, Q-1 to Q-104 inclusive) were properly supported by documents such as VAT invoices and official receipts, in the case of local purchases and import entry declarations and customs official receipts, in the case of importations (Exh. H, I, J, L, M, N, all inclusive). However, SGV and Co. disallowed the amount of P698,489.14 for the following reason as contained in their report (Exhibit R, p. 2-3): FINDINGS 3rd Quarter 4th Quarter Total 1. Input taxes on local purchases of goods and services without supporting documents P103,357.99 P133,241.69 P236,599.68 2. Input taxes on local purchases of goods and services supported only by photocopies of the suppliers invoices and/or ORs 87,594.13 46,219.70 133,813.83 3. Input taxes on local purchases of goods and services with supporting documents other other than invoice and/or ORs 40,600.15 1,040.49 41,640.64 4. Input taxes claimed on purchases of goods and services supported by non-VAT invoices and/or ORs 92,694.38 65,474.87 158,169.25 5. Input taxes claimed on purchases of goods and services supported by invoices and/or ORs with typewritten hand written TIN V 726.17 - NIL - 726.17 6. Input taxes claimed on purchases of goods and services supported by invoices and/or ORs issued not in the name of the company 82,832.45 44,707.12 127,539.57 T O T A L P407,805.27 P290,683.87 P698,489.14 ========= ========= ========= Moreover, a careful perusal of the documents submitted such as Petitioner's Summary of Input Taxes Paid for the last quarters of 1995, Petitioner's supplier's invoices/official receipts, import entry declarations and BOC official receipts reveal that an additional amount of P1,269,848.17 for the third quarter of 1995 and P1,889,302.28 for the 4th quarter of 1995 should be disallowed. Verification of the invoices and receipts submitted by Petitioner would reveal some inherent defects that caused the disallowance of the amount claimed. The total amount of P743,186.41 for the third quarter of 1995 and the total amount of P1,200,007.51 for the fourth quarter of 1995 were disallowed because the invoice and official receipt supporting said amount had only a handwritten "V" in the TIN number which is clearly not in accordance with the requirement specified in Revenue Memorandum Circular No. 63-91, thus: "Section 5(3)(b). All receipts/invoices to be printed subsequently shall contain the TIN, with the letter(s) "V" (for VAT registered) or "NV" (for non-VAT registered) placed after the last digit of the TIN. This shall facilitate the determination of whether the taxpayer is VAT registered or not." Non-compliance with the printing requirement as provided in the aforequoted provision is detrimental to the claim for refund since a mere handwritten "V" added to the TIN number creates a serious doubt as to the veracity and truthfulness of the invoices and receipts submitted. Since the invoices/receipts were issued after 1991, Revenue Memorandum Circular No. 63-91 is applicable (see BIR Ruling UN-323-9-6-95). The rest of the amount claimed for refund were likewise disallowed for the following reasons: 3rd Quarter 4th Quarter of 1995 of 1995 1. Invoice and OR was issued under a different company name P275,608.93 - 2. Amount is unsupported by pertinent documents 28,339.48 P657,203.20 3. The reported amount in the income is overstated 193.58 - 4. The invoice or the receipt is printed without BIR permit to print (in violation of Section 239 of the Tax Code) 350.00 - 5. The invoice or the receipt has no TIN number printed on it (in violation of Section 5(3)(a) of Rev. Memo. Circular No. 63-91) 126,953.58 - 6. The invoice or receipt is. without VAT number (in violation of Section 108 of the Tax Code) 95,216.19 32,091.57 (See attached Annex A and B) Hence We are inclined only to grant Petitioner's claim for refund of allowable input VAT tax credit in the reduced amount of P19,657,874.61 computed as follows: Excess Input Tax Credits Claimed by Petitioner per VAT return: 3rd quarter-1995 (Exh. C) P14,093,579.90 4th quarter-1995 (Exh. D) 20,658,606.21 P34,752,186.11 Less: Tax Credit Certificate issued by DOF (Exh. G) P11,236,671.91 Disallowances per SGV report (Exh. R) 698 489.14 Add'l. disallowances found by the Court 3rd quarter-1995 (Annex A) P1,269,848.17 4th quarter-1995 (Annex B) 1,889,302.28 3,159,150.45 15,094,311.50 Allowable Input Tax Credit P19,657,874.61 ============ WHEREFORE, in the light of all the foregoing, the instant Petition for review is hereby GRANTED, and Respondent is ORDERED to REFUND or to ISSUE a tax credit certificate in the reduced amount of P19,657,874.61 representing the excess input VAT payments for the third and fourth quarters of calendar year ended 1995. SO ORDERED. (SGD.) RAMON O. DE VEYRA Associate Judge WE CONCUR: (SGD.) ERNESTO D. ACOSTA Presiding Judge (SGD.) AMANCIO Q. SAGA Associate Judge