Harte-Hanks Philippines, Inc. v. Commissioner of Internal Revenue

SECOND DIVISION [C.T.A. CASE NO. 7975. October 5, 2012.] For: Refund or Issuance of a Tax Credit Certificate HARTE-HANKS PHILIPPINES, INC. , petitioner , vs .COMMISSIONER OF INTERNAL REVENUE , respondent . [C.T.A. CASE NO. 7998. October 5, 2012.] For: Refund or Issuance of a Tax Credit Certificate HARTE-HANKS PHILIPPINES, INC. , petitioner , vs .COMMISSIONER OF INTERNAL REVENUE , respondent . RESOLUTION MINDARO-GRULLA , J p : Submitted for resolution is petitioner's "Motion for Reconsideration" filed through registered mail on July 20, 2012 and received by this Court on July 26, 2012, without respondent's comment thereto despite notice. ACETSa The instant Motion seeks reconsideration of the Court's Decision dated July 2, 2012 (assailed Decision) ,the dispositive portion thereof reads: " WHEREFORE ,premises considered, CTA Case No. 7975, which refers to the instant Petition for Review with respect to the judicial claim covering the third quarter of the taxable year 2007, is hereby DISMISSED for lack of jurisdiction; while CTA Case No. 7998 covering the fourth quarter of the taxable year 2007 is hereby DENIED for insufficiency of evidence. SO ORDERED ." In support of its Motion for Reconsideration, petitioner raised the following points for this Court's consideration: "3.1. Petitioner was able to substantiate its zero-rated sales with the proper documents contrary to the ruling of this Court; 3.2 Sections 112 and 229, TaxCode should stand together, as they are not irreconcilable; 3.3 As held by this Court in Deutsche Knowledge Services Pte. Ltd. v.Commissioner of Internal Revenue 1 and CE Casecnan Water and Energy Company, Inc. v.Commissioner of Internal Revenue 2 as well as by the Court of Tax Appeals (CTA) En Banc in the case of UCPB Properties, Inc. v. Commissioner of Internal Revenue, 3 the premature filing of the judicial claim for refund is not jurisdictional but merely constitutes a failure to state a cause of action; 3.4. The Ai ch i case did not overturn the ruling of the Supreme Court in A tl as Consolidated Mining and Development Corporation v.Commissioner of Internal Revenue, 4 where the Supreme Court stated that Section 229, 1997 TaxCode applies to claims for refunds of value-added tax (VAT); and 3.5. Assuming arguendo that Aichi is applicable, the same should be applied prospectively." CDScaT The instant Motion for Reconsideration is bereft of merit. A perusal of the arguments raised by petitioner in its Motion for Reconsideration shows that the same were already considered and passed upon in the assailed Decision. In fact, petitioner's arguments on the supposed non-applicability of the ruling of the Supreme Court in the case of Commissioner of Internal Revenue vs. Aichi Forging Company of Asia, Inc. 5 (Aichi case) are essentially identical to the arguments it raised in its Memorandum filed on October 17, 2011, which are likewise duly passed upon in the assailed Decision. This Court will however discuss some points in order for petitioner to fully comprehend its case. Petitioner's theory that the Aichi case did not overturn the ruling in the Atlas case had already been put to rest in the case of Harte-Hanks Philippines, Inc. vs. Commissioner of Internal Revenues, 6 when the Court of Tax Appeals En Banc ruled in this wise: "Petitioner's assertion that the Ai ch i ruling could not have validly overturned the A tl as doctrine without violating Article VIII, Section 4(3) of the Co nstit ution, is devoid of merit. Note that for Article VIII, Section 4 (3) of the 1987 Co nstit ution to apply, there must be an existing doctrine or principle of law laid down by the Supreme Court in a decision rendered en banc or in division which the Supreme Court sitting en banc, modifies or reverses. Prior to the promulgation of the Ai ch i case, there was no Supreme Court decision construing or interpreting Section 112 of the N I RC of 1997, as amended. The invoked ruling in the A tl as case that the aggrieved taxpayer may seek refuge with CTA via a petition for review before the lapse of the two (2) year prescriptive period pursuant to Section 229 of the N I RC of 1997, as amended, is an interpretation of the 1977 N I RC, and not of the N I RC of 1997, as amended . Further, Section 112 (C) of the N I RC of 1997, as amended, regarding the 30-day period to appeal with the CTA the denial of the administrative claim for refund or credit or respondent's inaction during the 120-day period given her to act on her level "has been effective and existing as early as January 1, 1998 when R.A.8424 took effect. The Ai ch i case, therefore, did not overturn any existing doctrine or principle previously laid down by the Supreme Court. THcEaS Clearly, the different interpretation and application of the N I RC in the A tl as case and the Aichi case, was not brought about by the reversal of doctrines but due to the amendatory provisions introduced in the old N I RC (1977) ." (Emphasis supplied) Clearly, while the Aichi case did not overturn the Atlas case, the ruling in the Atlas case cannot be applied to the instant case in view of the fact that said case was decided based on the old NIRC. The different interpretation and application in the Atlas case and Aichi case was not brought about by the reversal of doctrines but due to the amendatory provisions introduced in the old NIRC. It is worthy to emphasize that in applying the Aichi case in the assailed Decision, this Court has adhered to the doctrine of stare decisis. The doctrine of stare decisis et non quieta movere (to adhere to precedents and not to unsettle things which are established) is embodied in Article 8 of the Civil Code of the Philippines which provides, thus: ART. 8. Judicial decisions applying or interpreting the laws or the Constitution shall form a part of the legal system of the Philippines. 7 The doctrine enjoins adherence to judicial precedents. It requires courts in a country to follow the rule established in a decision of the Supreme Court thereof. That decision becomes a judicial precedent to be followed in subsequent cases by all courts in the land. The doctrine of stare decisis is based on the principle that once a question of law has been examined and decided, it should be deemed settled and closed to further argument. 8 Following the Aichi ruling, Section 229 of the NIRC of 1997, as amended, is not applicable to claims of input VAT attributable to zero-rated sales, and the governing provision is Section 112 (D) [now 112 (C)] of the same law. While it is true that petitioner's claim for refund was filed before the Aichi case was promulgated, this does not mean, however, that the ruling laid down in Aichi case should only be applied prospectively. It bears stressing that the interpretation placed upon Section 112 (D) [now 112 (C)] of the 1997 NIRC, as amended, in the Aichi case retroacts to the date of the enactment of the said NIRC on January 1, 1998, following the well-settled rule that judicial interpretation of a statute constitutes part of the law as of the date it was originally passed, since the Court's construction merely establishes the contemporaneous legislative intent that the interpreted law carried into effect. 9 This Court, therefore, sees no reason to depart from the judicial pronouncement by the Supreme Court in the Aichi case, which provides the outright application of the provision of Section 112 (D) [now 112 (C)] of the NIRC of 1997, as amended. ESIcaC Finally, petitioner's claim that it was able to substantiate its zero-rated sales with the proper documents has no factual basis. As noted in the assailed Decision, petitioner's zero-rated sales amount to P59,999,700.00 as reflected in its VAT Return for the fourth quarter of 2007, while the official receipts issued to its client had an aggregate amount of $4,512,281.46 with peso equivalent of P199,826,905.49. Apparently, there exists a discrepancy in the amounts reflected in the VAT Return from that of the supporting documents, which petitioner was not able to reconcile. In the instant Motion, petitioner submits that its amended Quarterly VAT Return for the 4th quarter of 2007 may have given this Court the wrong impression that the amount of P59,999,700.00 pertained to zero-rated sales for the same period. Petitioner claims that the said amount did not arise from the sale of services during the fourth quarter of 2007 but represents remittances of Harte-Hanks, Inc. erroneously taken up as collections from HH Austin Merger, Inc. or HAMI (formerly HHRM),as allegedly explained in the Report of the Independent CPA. Petitioner also argues that as between the figures reported in the VAT Return and the amount actually supported by evidence, it is the latter that should prevail. According to petitioner, the figures reported in the Return are mere allegations and it is actually the supporting evidence submitted to this Court that determines the existence of zero-rated sales. The foregoing contentions are untenable. Foremost, petitioner cannot fault this Court in finding that the amount of P59,999,700.00 pertains to its zero-rated sales for the 4th quarter of 2007. The said amount was reflected and declared as zero-rated sales in petitioner's amended VAT Return for the 4th quarter of 2007, which document was submitted by petitioner to support its claim. What this Court looks for is for petitioner to substantiate the said amount with proper supporting documents, which unfortunately was not done by petitioner. On petitioner's allegation that the zero-rated sales reflected in the amended VAT Return did not arise from the sale of services during the fourth quarter of 2007 but represents remittances of Harte-Hanks, Inc. erroneously taken up as collections from HAMI, suffice it to say that petitioner failed to expound on why there were remittances made if not for the sales it rendered to its client during the quarter, or for what period it pertains if not for the 4th quarter of 2007. ISDCHA Even assuming that the said amount does not pertain to its zero-rated sales for the 4th quarter of 2007, then, it is with more reason to deny petitioner's claim for refund. It must be noted that petitioner's claim is anchored on Section 112 (A) of the NIRC of 1997 which requires, among others, that there must be zero-rated sales or effectively zero-rated sales to which the input VAT sought to be refunded are attributable. Considering that the zero-rated sales declared in its VAT return does not pertain to the 4th quarter of 2007; thus, there are no zero-rated sales to speak of during the same period upon which the claimed input VAT can be attributed to. Finally, petitioner's insistence that "what determines the existence of zero-rated sales is actually the evidence submitted to this Court and that between the figures reported in the VAT Return and the amount actually supported by evidence, it is the latter that should prevail" is mislaid. Relatively, what is to be substantiated must have been declared or reported in the information returns, i.e., Quarterly VAT Returns, which is required to be submitted to the BIR. In view of the foregoing, there is no cogent reason or overriding justification to disturb the assailed Decision. WHEREFORE ,premises considered, petitioner's Motion for Reconsideration is hereby DENIED for lack of merit. SO ORDERED . (SGD.) CIELITO N. MINDARO-GRULLA Associate Justice Juanito C. Castaeda, Jr. and Caesar A. Casanova, JJ., concur. Footnotes 1. CTA Case No. 7695, March 7, 2011. 2. CTA Case No. 7891, May 19, 2011. 3. CTA EB Case No. 568, Resolution dated April 20, 2011. 4. G.R. Nos. 141104 & 148763, June 8, 2007. 5. G.R. No. 184823, October 6, 2010. 6. CTA EB No. 748, September 7, 2012. 7. Lazatin vs. Desierto, G.R. No. 147097, June 5, 2009. 8. Id. quoting Fermin vs. People, G.R. No. 157643, March 28, 2008, 550 SCRA 132. 9. Eagle Realty Corporation vs. Republic of the Philippines, G.R. No. 151424, July 31, 2009.