Tokumi Electronics Philippines, Inc. v. Commissioner of Internal Revenue

[C.T.A. CASE NO. 5558. March 3, 2000.] TOKUMI ELECTRONICS PHILIPPINES, INC. , petitioner , vs . COMMISSIONER OF INTERNAL REVENUE , respondent . D E C I S I O N Before Us for consideration is a Petition for Review filed by the Petitioner on October 20, 1997, seeking for a refund of the amount of TWO MILLION FOUR HUNDRED THIRTY SEVEN THOUSAND EIGHT HUNDRED SIX AND 16/100 PESOS (PhP 2,437,806.16) representing alleged unutilized input taxes paid by the Petitioner on its local purchases of goods and services directly attributable to its zero-rated sales for the period July 1, 1995 to December 31, 1995. cdll The antecedent facts of the case giving rise to the controversy at bar are as follows: LibLex Petitioner is a domestic corporation organized and existing under and by virtue of the laws of the Republic of the Philippines. It is a VAT-registered; entity (Exhs. A & C) engaged primarily in the business of manufacturing, exporting, buying and selling at wholesale of speakers, assemblies, microphones, headphones and other electronic goods of similar nature. Petitioner is also registered with the Export Processing Zone Authority ("EPZA") having been issued EPZA Certificate of Registration No. 92-024. Records reveal that on October 20, 1995 and January 22, 1996. Petitioner filed with the Bureau of Internal Revenue its VAT returns for the third and fourth quarters of 1995, respectively, reporting a total amount of zero-rated export sales of P379,350,941.94 and total input tax payments of P2,437,806.16 on local purchases directly attributable to said sales broken down as follows: Input VAT Carried over Carried over Zero-rated From previous On purchases to subsequent 1995 Exh. Sales quarter this quarter Quarter 3rd qtr D P200,268,423.02 P1,812,194.28 P1,120,518.09 P2,932,712.37 4th qtr E 179,082,518.92 2,932,712.37 1,317,288.07 4,250,000.44 Total P379,350,941.94 P2,437,806.16 ============= ============= As a VAT-registered entity and with export sales that were paid for in acceptable foreign currency inwardly remitted to the Philippines and accounted for in accordance with existing regulations of the Bangko Sentral ng Pilipinas (BSP). Petitioner contends that the said export sales are not subject to 10% value added tax but are subject to 0% pursuant to Section 100(a)(2)(A) of the 1995 National Internal Revenue Code. cdll For having erroneously paid the aforesaid VAT input taxes, and having no VAT output tax liability during the period July 1, 1995 to December 31, 1995 and in any succeeding quarter, Petitioner claims that it is entitled to refund pursuant to Section 4.102-2 of Revenue Regulations No. 7-95 and Section 106(b) of the NIRC which reads, thus: " Section 4.100-2. Zero-rated sales. A zero-rated sale by a VAT registered person, which is a taxable transaction for VAT purposes, shall not result in any output tax. However, the input tax on his purchases of goods, properties or services related to such zero-rated sale shall be available as a tax credit or refund in accordance with these regulations." (Rev. Reg. 7-95) LibLex "S ection 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 the 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 (BSP): Provided, further , That where the taxpayer is engaged in zero-rated or effectively zero-rated sale and also in taxable or exempt sale of goods or properties or services, and the amount of creditable input tax due or paid cannot be directly and entirely attributed to any one of the transactions, it shall be allocated proportionately on the basis of the volume of sales." cdll Consequently, on October 17, 1997, Petitioner filed with the Bureau of Internal Revenue an administrative claim for refund of its unutilized input VAT payments attributable to its zero-rated sales for the period July 1 to December 31, 1995 amounting to P2,437,806.16 (Exhibit "J"). prcd There being no affirmative response from the Respondent, and the two-year prescriptive period about to lapse, Petitioner elevated its grievance to this Court on October 20, 1997. LibLex In his Answer to the Petition for Review, Respondent interposed the following Special and Affirmative Defenses, to wit: cdll 3. Petitioner's right to claim refund has partially, if not totally, prescribed; 4. Petitioner's claim for refund is still pending administrative investigation and evaluation; cdll 5. Taxes paid and collected are presumed to have been in accordance with law and regulations and hence, not refundable; cdlex 6. In an action for tax refund, the burden of proof is on the taxpayer to establish its right to refund and failure to sustain the burden is fatal to the corresponding action; 7. Claims for refund are strictly construed against claimants since they partake of the nature of an exemption from taxation. cdll The issue in this case is whether or not Petitioner was able to substantially prove its entitlement to a refund. The Court, after a thorough evaluation and painstaking scrutiny of the records of this case, conformably with existing laws and jurisprudence on the matter, is of the position, that the claim for refund must be granted. A perusal of all the evidence presented reveals that petitioner has complied with all the requirements for zero rating of its sales set forth under Section 100(a)(2) of the Tax Code which provides, thus: llcd 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. prcd (2) The following sales by VAT-registered persons shall be subject to 0%: cdlex (A) Export sales . The term 'export sales' means: LibLex (i) 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 and 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). llcd In the course of the proceeding, Petitioner was able to prove that it is a VAT-registered entity having been issued Value-Added Tax Registration Certificate No. 001-504-637-V (Exh. C). As shown by its Summary Export Sales, export invoices, airway bills, bills of lading and RCBC credit memos (Exhs. P, Q, S to S-1775, inclusive) covering the period July 1 to December 31, 1995, the period covered by this petition, there is no squabble that the Petitioner actually made export sales in the amount of P378,802,543.04 which were paid for in acceptable foreign currency inwardly remitted and accounted for in accordance with Bangko Sentral ng Pilipinas regulations. Although Petitioner's total reported zero-rated export sales of P379,350,941.94 in its 1995 third and fourth quarterly VAT returns was over by P548,398.90 as against its actual export sales of P378,802,543.04, it does not alter the fact that its sales are zero-rated. LibLex However, Petitioner was only able to overcome the burden of proof of excess input VAT in the amount of P1,676,017.24 as this is the amount ascertained and verified by the Court to be the correct refundable amount to the petitioner, properly substantiated and supported by documents in accordance with the existing VAT law. cdlex After verification and examination of the accuracy of Petitioner's claim for refund, Punongbayan and Araullo certified in its report that the total amount of P682,198.26 was not supported by Petitioner's supplier's invoices/official receipts, thus must be disallowed: cdll Reason for the Disallowance Exh. Amount a.) Purchases not in the account of Tokumi Electronics Philippines, Inc. O-1 P3,095.86 b.) Purchases prior to the period covered in the application O-17 403,741.64 c.) Invoices/Official Receipts were not on file and could no longer be located O-18 14,390.10 d.) Invoices/Official Receipts do not indicate the VAT registration number of the supplier or the VAT registration number was only stamped O-23 225,414.46 e.) Invoices/Official Receipts do not show the BIR permit number of the printer O-24 3,427.53 f.) Payment of services for which Tokumi Electronics Phils. Inc received provisional receipts or acknowledgment receipts only O-25 22,234.30 g.) No machine validation on billing statements for services availed by Tokumi Electronics Phils. Inc. The machine validation is required for the billing statements to serve as official receipts. O-28 9,894.37 Total: P682,198.26 ========= Likewise, in addition to the aforementioned disallowance, this Court finds the amount of P79,590.66 as not properly substantiated for not complying with the invoicing requirements and the prescriptive period, broken down as follows: Reason for the Disallowance Amount 1.) Reported twice P629.00 2.) Not in the name Tokumi Electronics Philippines, Inc. 439.35 3.) Not within the period of claim 5,259.69 4.) Overstatement of reported invoice amount 103.72 5.) Without Invoice/Official Receipt but only supported by a statement of account 17,052.33 6.) Without supporting documents 3,475.44 7.) Invoice/Official Receipt without TIN 43.18 8.) Discrepancy between amount of input taxes per vat Return & amount of input taxes per summary 52,587.95 Total: P79,590.66 ========= As earlier adverted to, We are persuaded to extend the relief sought by Petitioner but only up to the amount of P1,676,017.24 after considering the above findings and the fact that the said excess input tax was never applied against any output tax liability of the Petitioner for the third and fourth quarters of 1995 and even in the succeeding quarters as evidenced by its quarterly VAT returns (Exhs. D, E & T to W, inclusive), computed as follows: Amount of Claim (Exhs. D, E & J) P2,437,806.16 Less: Disallowances a.) Per Punongbayan & Araullo's Findings (Exh. L) 1.) Purchases not in the account of Tokumi Electronics Philippines, Inc. (Exh. O-1) P3,095.86 2.) Purchases prior to the period covered in the application (Exh. O-17) 403,741.64 3.) Invoices/Official Receipts were not on file and could no longer be located (Exh. O-18) 14,390.10 4.) Invoices/Official Receipts do not indicate the VAT Registration number of the supplier or the VAT registration number was only stamped (Exh. O-23) 225,414.46 5.) Invoices/Official Receipts do not show the BIR Permit number of the printer (Exh. O-24) 3,427.53 6.) Payment of services for which Tokumi Electronics Phils. Inc. received provisional receipts or or acknowledgment receipts only (Exh. O-25) 22,234.30 7.) No machine validation on billing statements for services availed by Tokumi Electronics Phils. Inc. The machine validation is required for the Billing statements to serve as official receipts (Exh. O-28) 9,894.37 P682,198.26 b.) Per Court's Further Verification (Annex A) 1.) Reported twice P629.00 2.) Not in the name Tokumi Electronics Philippines, Inc. 439.35 3.) Not within the period of claim 5,259.69 4.) Overstatement of reported invoice amount 103.72 5.) Without Invoice/Official Receipt but only supported by a statement of account 17,052.33 6.) Without supporting documents 3,475.44 7.) Invoice/Official Receipt without TIN 43.18 8.) Discrepancy between amount of input taxes per vat Return & amount of input taxes per summary 52,587.95 79,590.66 761,788.92 Amount Refundable P1,676,017 24 ============ WHEREFORE, in the light of all the foregoing, the petition is PARTIALLY GRANTED. Respondent is hereby ORDERED to REFUND or ISSUE a TAX CREDIT CERTIFICATE to herein Petitioner in the amount of ONE MILLION SIX HUNDRED SEVENTY SIX THOUSAND SEVENTEEN PESOS and 24/100 (P1,676,017.24), representing the latter's input VAT for the period July 1 to December 31, 1995. SO ORDERED. (SGD.) ERNESTO D. ACOSTA Presiding Judge WE CONCUR: (SGD.) RAMON O. DE VEYRA Associate Judge (SGD.) AMANCIO Q. SAGA Associate Judge ANNEX A SCHEDULE OF COURTS DISALLOWANCES ON CLAIMED INPUT TAXES 3rd & 4th QUARTERS 1995 Invoice O.R. Invoice Disallowed Input Taxes Claimed-1995 Supplier Month Exh. Number Number Amount 3rd Quarter 4th Quarter Total 1.) Not in the name of Tokumi Electronics Phils. Inc. Cargohaus Sep-95 R-982 239691 142964 P188.98 P17.18 P P17.18 Cargohaus Nov-95 R-1475 239625 142967 376.20 Cargohaus Nov-95 R-1618 254780 153802 1,010.58 Cargohaus Nov-95 R-1620 253541 152748 341.64 Cargohaus Nov-95 R-1624 254778 153803 266.51 Cargohaus Nov-95 R-1626 254781 153801 618.69 qa Cargohaus Nov-95 R-1628 256115 154916 2,030.28 P4,643.90 422.17 422.17 subtotal P17.18 P422.17 P439.35 Invoice O.R. Invoice Disallowed Input Taxes Claimed-1995 Supplier Month Exh. Number Number Amount 3rd Quarter 4th Quarter Total 2.) Not within the period of claim Cargohaus Jul-95 R-296 216297 127013 P362.05 Cargohaus Jul-95 R-297 210720 123221 1,018.49 Cargohaus Jul-95 R-298 210721 123222 663.05 Cargohaus Jul-95 R-299 215005 125962 228.33 Cargohaus Jul-95 R-300 208067 121847 597.99 Cargohaus Jul-95 R-301 208066 121846 166.56 Cargohaus Jul-95 R-302 210718 123219 594.28 Cargohaus Jul-95 R-303 208068 121848 540.90 Cargohaus Jul-95 R-304 215007 125964 1,184.81 Cargohaus Jul-95 R-305 215006 125963 817.45 Cargohaus Jul-95 R-306 217049 127526 1,505.95 Cargohaus Jul-95 R-307 217050 127527 282.20 Cargohaus Jul-95 R-308 217048 127525 3,691.78 K Line Air Service Phils.,Inc. Jul-95 R-309 10821 10821 500.00 K Line Air Service Phils., Inc. Jul-95 R-310 10993 10993 500.00 K Line Air Service Phils., Inc Jul-95 R-311 10545 10545 500.00 K Line Air Service Phils., Inc. Jul-95 R-312 10457 10457 500.00 PAC-Atlantic Lines Jul-95 R-149, R-150 0015428 29744 1,183.60 Pair Cargo & Warehousing Jul-95 R-313 429579 429579 246.95 Pair Cargo & Warehousing Jul-95 R-314 429403 429403 1,331.22 Pair Cargo & Warehousing Jul-95 R-315 432944 432944 144.43 Pair Cargo & Warehousing Jul-95 R-316 428992 428992 1,053.80 Pair Cargo & Warehousing Jul-95 R-317 436343 436343 228.47 Pair Cargo & Warehousing Jul-95 R-318 436342 436342 614.35 Pair Cargo & Warehousing Jul-95 R-319 437749 437749 145.20 Pair Cargo & Warehousing Jul-95 R-320 436341 436341 302.39 Phil. Skylanders, Inc. Jul-95 R-321 068513 068513 353.87 Phil. Skylanders, Inc. Jul-95 R-322 075489 075489 640.42 Phil. Skylanders, Inc. Jul-95 R-323 075001 075001 662.64 Phil. Skylanders, Inc. Jul-95 R-324 071701 Q71701 1,365.54 Phil. Skylanders, Inc. Jul-95 R-325 075496 075496 1,429.89 Philcopy Corporation Jul-95 R-186 to R-188 16641 97617 34,500.00 P57,856.61 P5,259.69 P P5,259.69 subtotal P5,259.69 P P5,259.69 3.) Overstatement of reported invoice amount OOCL Phils. Inc. Dec-95 R-1992, R-1993 8060595 7969 Reported Amount P10,610.45 Actual Amount 9,645.50 Overstatement P964.95 Overseas Agency Services Dec-95 R-2146 57209 Reported Amount P1,936.00 Actual Amount 1,760.00 Overstatement P176.00 P1,140.95 P 103.72 P103.72 subtotal P P103.72 P103.72 4.) Without invoice/official receipt but supported only by a statement of account KC Business Management Dec-95 R-2279 0519 0379 P187,575.62 P 17,052.33 P17,052.33 subtotal P 17,052.33 17,052.33 5) Without supporting documents Cargohaus Aug-95 223551 131621 P460.79 AHK Awards Aug-95 0792 0792 8,641.60 National Bookstore Sep-95 430.50 9,532.89 866.83 866.63 A.N Villaluz Construction Oct-95 3099 870.00 A.N. Villaluz Construction Oct-95 3095 643.00 Archetype Computer Service Oct-95 13858 3207 400.00 Columbia Computer Center Oct-95 005125 150.00 Dee Hwa Liong Electronics Oct-95 29995 8,120.00 Espaa Photo Express Oct-95 0090 126.00 ICTSI Oct-95 351751 351751 165.99 ICTSI Oct-95 R-1167 353621 353621 24.25 Lucy Salazar Hardware Oct-95 0842 75.00 Minda's Commercial Center, Inc. Oct-95 1586 3,280.00 Motor Express Oct-95 468 3,500.00 MR-2 Music & Gen. Merchandise Oct-95 0996 778.00 MR-2 Music & Gen. Merchandise Oct-95 0995 5,957.50 National Bookstore Oct-95 351905 110.50 National Bookstore Oct-95 733196 167.50 Photo City Manila Oct-95 5388 454.60 S. Serafico Hardware & Elect. Supp. Oct-95 63465 200.00 Tatoland Hardware & Const. Supp. Oct-95 8127 792.00 Toyota Bel-Air Oct-95 237396 193907 2,882.60 ICTSI Oct-95 R-1144 1093715 1093715 P2,998.60 ICTSI Oct-95 R-1145 1092900 1092900 1,306.80 ICTSI Oct-95 R-1163 1080438 1080438 1,306.80 ICTSI Oct-95 R-1169 1085468 1085468 1,306.80 P35,615.94 3,237.81 3,237.81 subtotal 866.63 P3,237.81 P4,104.44 6.) Invoice/Official Receipt without TIN Airlift Asia Jul-95 R-457 8716 8716 P475.00 P43.18 P P43.18 subtotal P43.18 P P43.18 7.) Discrepancy between amount of input taxes reported per vat return and amount of input taxes per summary Per Vat Return Per Summary (Exhs. M,D,E) (Exhs. M, N) Overstatement July 358,085.29 308,136.69 49,948.60 P49,948.60 P P49,948.60 Aug. 495,184.87 495,067.10 117.77 117.77 117.77 Nov. 441,540.69 439,019.11 2,521.58 2,521.58 2,521.58 subtotal P50,066.37 P2,521.58 P52,587.95 Total P56,253.05 P23,337.62 P79,590.66 =================================