EHS Lens Philippines, Inc. v. Commissioner of Internal Revenue

THIRD DIVISION [C.T.A. CASE NO. 9014. August 31, 2017.] EHS LENS PHILIPPINES, INC. (formerly HOYA LENS MANUFACTURING PHILIPPINES, INC.) , petitioner , vs. COMMISSIONER OF INTERNAL REVENUE , respondent . AMENDED DECISION BAUTISTA , J p : For resolution is petitioner's Motion for Reconsideration filed on May 22, 2017; with respondent's Opposition (To Petitioner's Motion for Reconsideration dated 22 May 2017) filed on June 21, 2017. HTcADC On April 19, 2017, the Court rendered a Decision, the dispositive portion of which reads as follows: WHEREFORE , premises considered, the instant Petition for Review is hereby DENIED for lack of merit. SO ORDERED. 1 In the assailed Decision, the Court found that the administrative claim filed on March 18, 2015, as supplemented on March 19, 2015, and the Petition for Review filed on March 20, 2015, were both timely filed. However, it pointed out that petitioner has no personality to file the claims for refund. Applying the doctrine in Contex Corporation v. Commissioner of Internal Revenue , 2 the Court found that in both cases, (1) the taxpayer was charged by its suppliers for input VAT in its purchases, (2) the taxpayer's suppliers remitted the VAT to the BIR, (3) the taxpayer is claiming exemption from VAT, and (4) consequently, the taxpayer sought the refund of the VAT paid under Section 229 of the 1997 NIRC . Thereafter, the Court declared that petitioner is not the proper entity to file the refund; and that it should be PEOI-PEOCI and EPPI who should have filed the same and from whom petitioner should have claimed reimbursement for the VAT erroneously paid. Accordingly, the Petition for Review was denied. In petitioner's Motion for Reconsideration, it avers that it is the proper party to file the case. It claims that the sale and purchase transactions between PEOI-PEOCI and EPPI, the sellers and petitioner as buyer are considered VAT-exempt since both sellers and buyer are PEZA-registered enterprises; and that no VAT should have been imposed and paid. It argues that, as a general rule, it is the statutory taxpayer that has legal personality to claim for refund indirect taxes; that VAT is an indirect tax; and that, however, the general rule admits of an exception, that is, when the party who carries the burden of the tax is exempt from both indirect and direct taxes. On May 25, 2017, the Court ordered respondent to file his comment on petitioner's Motion for Reconsideration within fifteen (15) days from notice. Records reveal that respondent received the Resolution on May 29, 2017. Hence, he had until June 13, 2017 to file his comment. CAIHTE On June 16, 2017, the Judicial Records Division issued a Records Verification Report stating that respondent failed to submit its comment. On June 21, 2017, respondent filed its Opposition (To Petitioner's Motion for Reconsideration dated 22 May 2017) dated June 13, 2017. In the interest of substantial justice, the Court admits the same. Respondent counters that the Court correctly ruled that petitioner is not the proper party to file the refund claims; and that petitioner did not present any compelling ground to justify the reversal of the Decision. The Court finds reasonable grounds to reverse its Decision dated April 19, 2017. Accordingly, petitioner's Motion for Reconsideration is hereby PARTIALLY GRANTED , as to the reconsideration and setting aside of the Court's Decision dated April 19, 2017. Petitioner cites the Supreme Court case of Philippine Airlines, Inc. v. Commissioner of Internal Revenue , 3 wherein the Highest Tribunal stated that, as a general rule, it is the statutory taxpayer which has the legal personality to file a claim for refund as provided under Section 204 (c) of the 1997 NIRC ; that the proper party to seek a refund of an indirect tax is the statutory taxpayer; and that the statutory taxpayer is the person on whom the tax is imposed by law and who paid the same even if he shifts the burden thereof to another. However, the Supreme Court declared that the general rule should not apply to instances wherein the law clearly grants the party, to which the economic burden of the tax is shifted, an exemption from both direct and indirect taxes; and that, in which case, the latter must be allowed to claim a tax refund even if it is not considered as the statutory taxpayer under the law. Looking into the records, the Court finds that petitioner EHS Lens Philippines, Inc., formerly Hoya Lens Manufacturing Philippines, Inc. is registered with the Philippine Economic Zone Authority ("PEZA") as an Ecozone Export Enterprise ("EEE") and an Ecozone IT Enterprise ("EITE") as of January 17, 2013, with Certificate of Registration No. 13-06. 4 Petitioner took over the projects and all the rights and obligations of PEOI-PEOCI under its Registration Agreement with PEZA dated March 14, 2005, and its Supplemental Agreements dated July 15, 2009, January 26, 2010, March 18, 2011, and December 9, 2011. The Court agrees with petitioner's claim that entities registered with PEZA are VAT-exempt. In the case of Commissioner of Internal Revenue v. Toshiba Information Equipment (Phils.), Inc. , 5 the Supreme Court declared that PEZA-registered enterprises, which would necessarily be located within ECOZONES, are VAT-exempt entities, not because of Section 24 of RA No. 7916 , which imposes the five percent (5%) preferential tax rate on gross income of PEZA-registered enterprises, in lieu of all taxes; but, rather, because of Section 8 of RA No. 7916 which establishes the fiction that ECOZONES are foreign territory. Likewise, the Highest Tribunal stated that Toshiba is basing its claim for tax credit or refund on Sec. 4.106-1 (b) of RR No. 7-95 , which allows a VAT-registered person to apply for tax credit or refund of the input VAT on its capital goods. In which case, the one entitled to the tax credit or refund is the purchaser of the capital goods. aScITE As provided in the assailed Decision, petitioner entered into an Asset Purchase Agreement 6 with PEOI-PEOCI on February 1, 2013 wherein petitioner undertook to pay the amount of USD20,559,732.18, exclusive of VAT, which shall be borne by petitioner and paid to PEOI 7 in exchange of all of PEOI's rights, title and interest in and to the following: 8 DESCRIPTION NET BOOK VALUE Inventory (Finished Goods, Work in Process, Raw Materials) USD5,916,039.31 Other Inventory 1,765,128.08 Prepaid Expenses 45,122.00 Other Current Assets 146,315.78 Tangible Fixed Assets 12,052,017.05 Intangible Fixed Assets 338,450.83 Other Investment 296,659.13 PURCHASE PRICE (GRAND TOTAL) USD20,559,732.18 Likewise on February 1, 2013, petitioner entered into a Deed of Sale and Assignment 9 with EPPI, wherein petitioner agreed to pay the purchase price of USD4,123,216.07, exclusive of VAT to be borne by petitioner and paid to EPPI, for EPPI real properties and leasehold rights, 10 as follows: 11 DESCRIPTION NET BOOK VALUE Fixed Assets (Building & Structure) USD1,880,439.59 Prepaid Expenses (Land Rights) 2,242,776.48 PURCHASE PRICE (GRAND TOTAL) USD4,123,216.07 It is undisputed that the BIR received the amounts of Php8,287,503.18 12 from EPPI and Php60,492,742.46 13 from PEOI-PEOCI on March 21, 2013 for the tax transaction in February 2013; and that EPPI and PEOI-PEOCI filed the following Monthly VAT Declarations for February 2013: TAXPAYER'S NAME VATABLE SALES/RECEIPT OUTPUT VAT DUE TOTAL ALLOWABLE INPUT VAT VAT PAYABLE EXHIBIT EPPI Php70,089,110.70 Php8,410,693.28 Php123,190.10 Php8,287,503.18 P-25 14 PEOI-PEOCI 504,106,187.19 60,492,742.46 - 60,492,742.46 P-26 15 TOTAL PHP68,780,245.65 The details of the purchased assets and its corresponding VAT amounting to Php68,903,435.74, 16 the subject claim of the amended petition, are presented in Annex "A." On January 14, 2015, PEOI-PEOCI and EPPI respectively issued the following Billing Invoice 17 and Sales Invoice: 18 DETACa DETAILS AMOUNT Tangible and Intangible Fixed Assets from PEOI-PEOCI Total VATable Sale USD12,390,467.88 Add: VAT 1,486,856.15 TOTAL SELLING PRICE USD13,877,324.03 Building & Structure from EPPI Total VATable Sale USD1,722,726.08 Add: VAT 206,727.13 TOTAL SELLING PRICE USD1,929,453.21 The VAT that was remitted to the BIR by PEOI-PEOCI and EPPI can be converted to Philippine Pesos, as follows: VAT in USD (PEOI-PEOCI) USD1,486,856.15 BSP closing forex rate as of Feb. 1, 2013 Php40,685 VAT REMITTED BY PEOI-PEOCI TO BIR PHP 60,492,742.46 VAT in USD (EPPI) USD206,727.13 BSP closing forex rate as of Feb. 1, 2013 Php40.685 VAT REMITTED BY EPPI TO BIR PHP8,410,693.28 Section 113 (A) (1) of the 1997 National Internal Revenue Code, as amended ("1997 NIRC") and Section 4.113-1 (A) (1) of Revenue Regulations ("RR") No. 16-05 , are quoted hereunder for easy reference: SEC. 113. Invoicing and Accounting Requirements for VAT-registered Persons . (A) Invoicing Requirements . A VAT-registered person shall issue: (1) A VAT invoice for every sale, barter or exchange of goods or properties; and SEC. 4.113-1. Invoicing Requirements . (A) A VAT-registered person shall issue: (1) A VAT invoice for every sale, barter or exchange of goods or properties; and xxx xxx xxx Only VAT-registered persons are required to print their TIN followed by the word 'VAT' in their invoice or official receipts. Said documents shall be considered as a 'VAT Invoice' or VAT official receipt. All purchases covered by invoices/receipts other than VAT Invoice/VAT Official Receipt shall not give rise to any input tax. HEITAD Pursuant to Section 113 (A) (1) of the 1997 NIRC , a VAT invoice should be issued for every sale, barter or exchange of goods or properties, thus, the Billing Invoice issued by PEOI-PEOCI to the petitioner is not proof that the asset purchase transaction between the parties was consummated. Therefore, the VAT that was remitted by PEOI-PEOCI to the BIR amounting to Php60,492,742.46 cannot be the proper subject for a refund claim. In this regard, only petitioner's transaction with EPPI may qualify for refund amounting to Php8,287,503.18. Petitioner incurred output VAT in the total amount of Php31,305,974.24 from March 31, 2013 to March 31, 2015, summarized as follows: PERIOD FISCAL QUARTER ENDED OUTPUT VAT EXHIBIT March 31, 2013 Php7,465.86 P-58-1, Line 15B June 30, 2013 266.40 P-58-2, Line 15B September 30, 2013 99.90 P-58-3, Line 15B December 31, 2013 20,674.20* P-58-4, Line 15B March 31, 2014 18,860.78* P-58-5, Line 15B June 30, 2014 19,464.80* P-58-6, Line 15B September 30, 2014 17,504.65* P-58-7, Line 15B December 31, 2014 20,035.76* P-58-8, Line 15B March 31, 2015 31,201,601.89** P-58-9, Line 15B TOTAL PHP 31,305,974.24 * This pertains to VAT paid by the petitioner to the Bureau of Customs in favor of its local customer Hoya Lens Philippines, Inc. As represented by management, this should not be recognized as part of the input VAT per VAT returns and is expected to be reimbursed from the local customer. ** This pertains to adjustments in input tax over the acquisition of assets from EPPI and PEOI-PEOCI after final selling price was agreed for the quarter ended March 31, 2015. From the above summary of output VAT, only the amount of Php31,201,601.89 is related to the Asset Purchase Agreement between petitioner and PEOI-PEOCI and the Deed of Sale and Assignment between petitioner and EPPI. The Court finds it proper to adopt the ICPA's notation that from this amount, only Php31,182,293.19 is actually related to the said transactions, the difference of Php19,308.70 were local sales, computed as follows: Sales Invoices issued by petitioner to EPPI: VAT per Sales Invoice No. 0294 19 USD463,355.45 VAT per Sales Invoice No. 0295 20 239,848.52 Total VAT per Invoice (USD) USD703,203.97 BSP closing rate as of March 31, 2015 Php44.34317 Total VAT per Invoice (Php) Php31,182,293.19 Per BIR Form No. 2550-Q 31,201,601.89 DIFFERENCE PHP(19,308.70) The difference can be attributed to the following: VAT per invoice no. 0281 21 Php7,075.35* VAT per invoice no. 0290 22 5,747.86* VAT per invoice no. 0298 23 6,483.08* Total Php19,306.29 Rounding off difference 2.41 TOTAL PHP19,308.70 * These are local sales in which VAT were recognized in March 2015 On the basis of the foregoing, petitioner is not entitled to the claimed refund because the amount of valid "erroneous VAT payment" of Php8,410,693.28 is not sufficient to cover its output VAT liability of Php31,182,293.19 involving the Asset Purchase Agreement and Deed of Sale and Assignment between petitioner and PEOI-PEOCI, and petitioner and EPPI, respectively. WHEREFORE , premises considered, the Petition for Review filed by petitioner EHS Lens Philippines, Inc. is hereby DENIED for lack of merit. SO ORDERED. (SGD.) LOVELL R. BAUTISTA Associate Justice Esperanza R. Fabon-Victorino and Ma. Belen M. Ringpis-Liban, JJ. , concur. ANNEX A Purchased Assets Footnotes 1. Emphases retained. 2. G.R. No. 151135, July 2, 2004, 433 SCRA 376. 3. G.R. No. 198759, July 1, 2013, 700 SCRA 322. 4. Petitioner's Evidence Folder, Exhibit "P-12," PEZA Amended Certificate of Registration , p. 1; BIR Records, PEZA Certificate of Registration, PEZA Amended Certificate of Registration , pp. 68-69. 5. G.R. No. 150154, August 9, 2005, 466 SCRA 211. 6. Petitioner's Evidence Folder, Exhibit "P-3," PEOI-PEOCI Asset Purchase Agreement, pp. 1-6; BIR Records, PEOI-PEOCI Asset Purchase Agreement , pp. 15-20. 7. Petitioner's Evidence Folder, Exhibit "P-3," PEOI Asset Purchase Agreement , pp. 1-2; BIR Records, PEOI-PEOCI Asset Purchase Agreement , pp. 19-20. 8. Petitioner's Evidence Folder, Exhibit "P-3," PEOI Asset Purchase Agreement, Grand Summary for Annex , p. 1; BIR Records, PEOI Asset Purchase Agreement, Grand Summary for Annex , p. 14. 9. Petitioner's Evidence Folder, Exhibit "P-4," EPPI Deed of Sale and Assignment , pp. 1-9; BIR Records, EPPI Deed of Sale and Assignment , pp. 8-13. 10. Petitioner's Evidence Folder, Exhibit "P-4-a," EPPI Deed of Sale and Assignment , pp. 1-2. 11. Petitioner's Evidence Folder, Exhibit "P-4-f," EPPI Deed of Sale and Assignment, Grand Summary for Annex , p. 1; BIR Records, EPPI Deed of Sale and Assignment, Grand Summary for Annex , p. 7. 12. Petitioner's Evidence Folder, Exhibit "P-23," EPPI BIR eFPS Payment Details , p. 1. BIR Records, EPPI eFPS Payment Details , p. 1. 13. Petitioner's Evidence Folder, Exhibit "P-24," PEOI-PEOCI BIR eFPS Payment Details , p. 1; BIR Records, PEOI-PEOCI BIR eFPS Payment Details , p. 4. 14. Petitioner's Evidence Folder, Exhibit "P-25," EPPI BIR Form No. 2550-M , p. 1; BIR Records, EPPI BIR Form No. 2550-M , p. 3. 15. Petitioner's Evidence Folder, Exhibit "P-26," PEOI-PEOCI BIR Form No. 2550-M , p. 1; BIR Records, PEOI-PEOCI BIR Form No. 2550-M , p. 6. 16. Rounding off difference of .24. 17. Petitioner's Evidence Folder, Exhibit "P-22," PEOI-PEOCI Billing Invoice , p. 1; BIR Records, PEOI-PEOCI Billing Invoice , p. 93, with annex. 18. Petitioner's Evidence Folder, Exhibit "P-21," EPPI Sales Invoice , p. 1; BIR Records, EPPI Sales Invoice , p. 91, with annexes. 19. Exhibit "P-63-468." 20. Exhibit "P-63-469." 21. Exhibit "P-63-455." 22. Exhibit "P-63-464." 23. Exhibit "P-63-472."