Commissioner of Internal Revenue v. Carmen Copper Corp.

EN BANC [C.T.A. EB CASE NO. 2528. October 12, 2023.] (C.T.A. Case No. 9592) COMMISSIONER OF INTERNAL REVENUE , petitioner , vs. CARMEN COPPER CORPORATION , respondent . RESOLUTION REYES-FAJARDO , J p : On April 20, 2023, the Court rendered a Decision (assailed Decision), 1 the fallo of which reads: WHEREFORE , the Petition for Review filed on October 29, 2021, by the Commissioner of Internal Revenue is DENIED , for lack of merit. The Decision dated October 1, 2020, and the Resolution dated July 8, 2021 in CTA Case No. 9592 are AFFIRMED with MODIFICATION . Accordingly, the Commissioner of Internal Revenue is DIRECTED to refund Carmen Copper Corporation, the amount of P8,125,468.19 , representing the latter's excess and unutilized input VAT from importation of goods and from services rendered by non-residents attributable to its zero-rated sales for the 4th quarter of taxable year 2014. aDSIHc SO ORDERED. In the assailed Decision, the Court held that in determining petitioner's entitlement to its claim for refund, it may consider all evidence formally offered and admitted in this case, even if some of it has not been submitted at the administrative level. The Court found that the Court in Division did not err in partially granting respondent's VAT refund claim. It ruled that Section 112 (A) does not require direct attributability for input taxes to be creditable or refundable as pronounced in the case of Republic of the Philippines, represented by the Commissioner of Internal Revenue v. Taganito HPAL Nickel Corporation . 2 In his Motion for Reconsideration (re: Decision promulgated 20 April 2023) , 3 filed on April 28, 2023, petitioner posits that the Court erred in granting respondent's claim for refund in the amount of P8,125,468.19, representing the latter's excess and unutilized input VAT from importation of goods and from services rendered by non-residents attributable to its zero-rated sales for the 4th quarter of taxable year (TY) 2014. Petitioner argues that since he rendered a decision partly granting respondent's administrative claim for input VAT refund, the Court's jurisdiction becomes strictly appellate in nature. Hence, it may only review whether the decision is proper, solely considering respondent's evidence submitted at the administrative level. Additionally, petitioner contends that respondent failed to demonstrate that there was direct attributability between the input tax on purchases and the zero-rated sales covering the 4th quarter of TY 2014. Through its Comment (To Motion for Reconsideration) [Re: Decision promulgated 20 April 2023] 4 filed via LBC on July 4, 2023, respondent reiterates the findings in the assailed Decision citing Philippine Airlines, Inc. v. Commissioner of Internal Revenue 5 that the Court of Tax Appeals, as a court of record and in the exercise of its appellate jurisdiction is not precluded from considering evidence formally offered and admitted, even if the same has not been submitted in the administrative claim before the Bureau of Internal Revenue. The Motion lacks merit. After a careful evaluation of petitioner's Motion , it is clear that the grounds raised therein are mere reiterations of matters which have already been exhaustively considered and passed upon by the Court in the assailed Decision. As such, the Court finds no compelling reason to reconsider, modify or even reverse the assailed Decision. The pronouncement in Social Justice Society (SJS) Officers, et al. v. Lim, 6 is instructive: The grounds relied on being mere reiterations of the issues already passed upon by the Court, there is no need to "cut and paste" pertinent portions of the Decision or re-write the ponencia in accordance with the outline of the instant motion. As succinctly put by then Chief Justice Andres R. Narvasa in Ortigas and Co. Ltd. Partnership v. Judge Velasco on the effect and disposition of a motion for reconsideration: The filing of a motion for reconsideration, authorized by Rule 52 of the Rules of Court, does not impose on the Court the obligation to deal individually and specifically with the grounds relied upon therefor, in much the same way that the Court does in its judgment or final order as regards the issues raised and submitted for decision. This would be a useless formality or ritual invariably involving merely a reiteration of the reasons already set forth in the judgment or final order for rejecting the arguments advanced by the movant; and it would be a needless act, too, with respect to issues raised for the first time, these being, as above stated, deemed waived because not asserted at the first opportunity. It suffices for the Court to deal generally and summarily with the motion for reconsideration, and merely state a legal ground for its denial (Sec. 14, Art. VIII, Constitution); i.e. , the motion contains merely a reiteration or rehash of arguments already submitted to and pronounced without merit by the Court in its judgment, or the basic issues have already been passed upon, or the motion discloses no substantial argument or cogent reason to warrant reconsideration or modification of the judgment or final order; or the arguments in the motion are too unsubstantial to require consideration, etc. WHEREFORE , petitioner's Motion for Reconsideration (Re: Decision promulgated 20 April 2023) , filed on April 28, 2023 is DENIED , for lack of merit. SO ORDERED. (SGD.) MARIAN IVY F. REYES-FAJARDO Associate Justice Roman G. del Rosario, P.J., Ma. Belen M. Ringpis-Liban, Catherine T. Manahan, Maria Rowena A. Modesto-San Pedro, Lanee S. Cui-David and Corazon G. Ferrer-Flores, JJ. , concur. Jean Marie A. Bacorro-Villena, J ., with due respect, please see Dissenting Opinion. Henry Sumaway Angeles, J. , is on leave. Separate Opinions BACORRO-VILLENA , J., dissenting opinion: With all due respect to my esteemed colleague, Associate Justice Marian Ivy F. Reyes-Fajardo, it is my humble opinion that respondent Carmen Copper Corporation (respondent/CCC) is no longer entitled to any additional amount of refund for its alleged unutilized input value-added tax (VAT) attributable to zero-rated sales for the fourth (4th) quarter of the taxable year (TY) 2014. The records of the case reveal that out of respondent's Total Available Input Tax of P60,328,369.59, 1 petitioner Commissioner of Internal Revenue (petitioner/CIR) disallowed P21,962,748.77, which is the subject of respondent's prior Petition for Review before the Third Division. Conversely, petitioner deemed the input VAT amounting to P38,365,620.82 2 as valid and properly substantiated. As such, petitioner ruled that a Tax Credit Certificate (TCC) may be issued in favor of respondent in the amount of P38,195,441.97 3 (after deducting output VAT of P170,178.85). ATICcS On the other hand, during trial, the Third Division found that out of the disallowance of P21,962,748.77, P18,233,684.33 was validly supported by proper documents. Based on the foregoing, the total valid and substantiated input VAT for the entire 4th quarter of TY 2014 should be P56,599,305.15, computed as follows: Input VAT found by petitioner as valid and substantiated P38,365,620.82 Input VAT additionally found by the Third Division as valid and substantiated 18,233,684.33 Total valid and substantiated input VAT P56,599,305.15 However, it is observable from the Court En Banc' s Decision promulgated on 20 April 2023 (assailed Decision) that the ratio of valid zero-rated sales to total reported sales was only applied to the input VAT additionally found by the Third Division as valid and substantiated ( i.e. , P18,233,684.33), thereby disregarding the amount of input VAT found by petitioner as valid and substantiated at the administrative level ( i.e. , P38,365,620.82) and already recommended for the issuance of a TCC ( i.e. , P38,195,441.97, after deducting output VAT of P170,178.85). With due respect, I submit that the said computation is inaccurate. It must be noted that the amounts and the ratio of valid zero-rated sales to total reported sales pertains to the entirety of respondent's claim for the 4th quarter of TY 2014 and not just to the denied or disallowed amount of P21,962,748.77. Thus, to apply the said ratio only to the input VAT (which the Third Division additionally found to be valid and substantiated without considering the initial amount of input VAT that petitioner already approved) would resultantly overstate the total amount to be refunded to respondent. This is further bolstered by the language employed in Section 110 of the National Internal Revenue Code (NIRC) of 1997, as amended, but prior to the amendments introduced by Republic Act (RA) No. 10963, 4 otherwise known as Tax Reform for Acceleration and Inclusion (TRAIN) , to wit: xxx xxx xxx SEC. 110. Tax Credits . xxx xxx xxx (B) Excess Output or Input Tax . If at the end of any taxable quarter the output tax exceeds the input tax, the excess shall be paid by the VAT-registered person. If the input tax exceeds the output tax, the excess shall be . . . Provided, however , That any input tax attributable to zero-rated sales by a VAT-registered person may at his option be refunded or credited against other internal revenue taxes . . . 5 xxx xxx xxx Consequently, I am of the humble opinion that the proper computation is to apply the ratio of valid zero-rated sales of P1,686,163,697.85 to total declared sales of P3,593,834,209.78 to the total valid and substantiated input VAT of P56,599,305.15 (which includes the amount of P38,195,441.97 already recommended for TCC). As such, the total amount refundable to respondent (prior to any deduction of input VAT attributable to zero-rated sales effectively applied to output VAT) should only be P26,555,396.85, computed as follows: Valid zero-rated sales P1,686,163,697.85 Total declared sales P3,593,834,209.78 Total valid and substantiated input VAT P56,599,305.15 Amount of valid and substantiated input VAT attributable to valid zero-rated sales P26,555,396.85 As regards the computation of the refundable amount, I hereby outline what I deem to be the correct steps in computing the refundable amount of excess and unutilized input VAT attributable to zero-rated sales when the taxpayer-claimant is engaged in mixed transactions based on the recent Supreme Court decision in Chevron Holdings, Inc. (formerly Caltex Asia Limited) v. Commissioner of Internal Revenue 6 (Chevron) : 1. Determine the amount of substantiated or valid input VAT; 2. Deduct from the substantiated or valid input VAT any input VAT directly attributable to a specific activity to arrive at the substantiated or valid input VAT not attributable to any activity; 3. Multiply the substantiated or valid input VAT not attributable to any activity by the ratio of Valid Zero-Rated Sales over Total Sales to determine the amount of substantiated or valid input VAT attributable to valid zero-rated sales; ETHIDa 4. Add to the amount computed in no. 3 any substantiated or valid input VAT directly attributable to zero-rated sales to arrive at the total substantiated or valid input VAT attributable to zero-rated sales; 5. Determine the output VAT still due; 6. Deduct from the output VAT still due any input VAT carried over from previous period to arrive at the amount that may be deemed applied against substantiated or valid input VAT directly attributable to zero-rated sales; 7. Determine the amount of input VAT carried-over instead; and, 8. Deduct from the total substantiated or valid input VAT attributable to zero-rated sales the amount computed in nos. 6 and 7. Applying the foregoing steps to this case, the amount of excess and unutilized input VAT attributable to valid zero-rated sales (or the refundable amount before deducting the amount already authorized for issuance of a TCC) should be P26,407,552.56 , as computed below: Step 1. As earlier noted, the total valid and substantiated input VAT for the entire 4th quarter of TY 2014 should be P56,599,305.15 (inclusive of the P38,365,620.82 input VAT found by petitioner as valid and substantiated at the administrative level). Step 2. No input VAT is directly attributable to a specific activity. Step 3. The amount of substantiated or valid input VAT attributable to valid zero-rated sales is computed as follows: Total Valid Zero-Rated Sales P1,686,163,697.85 Divided by Total Sales for the 4th Quarter of TY 2014 3,593,834,209.78 Multiplied by Total Valid Input VAT 56,599,305.15 Valid Input VAT Allocated to Total Valid Zero-Rated Sales P26,555,396.85 Step 4. No input VAT is directly attributable to a specific activity. Step 5. Output VAT still due is: Output VAT P170,178.85 Total VATable Sales P1,418,157.04 Divided by Total Sales 3,593,834,209.78 Multiplied by Total Valid Input VAT 56,599,305.15 Less: Valid Input VAT Allocated to VATable sales 22,334.56 Output VAT Still Due P147,844.29 Step 6. The output VAT still due of P147,844.29 may be deemed applied against substantiated or valid input VAT directly attributable to zero-rated sales since there is no input VAT carried over from previous period that can cover the same, as shown below: Output VAT Still Due P147,844.29 Less: Input VAT Carried Over from Previous Period 7 - Valid Input VAT attributable to Valid Zero-Rated Sales Effectively Applied Against Output VAT P147,844.29 Step 7. No input VAT deemed carried-over. Step 8. The excess input VAT attributable to valid zero-rated sales (or the refundable amount before deducting the amount already authorized for issuance of a TCC) is: Valid Input VAT allocated to Total Valid Zero-Rated Sales P26,555,396.85 Less: Valid Input VAT attributable to Valid Zero-Rated Sales Effectively Applied Against Output VAT 147,844.29 Less: Input VAT Deemed Carried-Over - Excess Input VAT attributable to Valid Zero-Rated Sales P26,407,552.56 Considering that the valid and substantiated input VAT found to be unutilized in the amount of P26,407,552.56 for the 4th Quarter of TY 2014 is less than P38,195,441.97 or the amount recommended by petitioner to be issued TCC in favor of respondent at the administrative level, I submit that there is no longer any additional amount to be refunded to respondent. In contrast, the Court En Banc computed the refundable input VAT attributable to valid zero-rated sales of P8,125,468.19 in the following manner: Total Valid Zero-Rated Sales P1,686,163,697.85 Divided by Total Reported Sales 3,593,834,209.78 Multiplied by Total Valid Input VAT Not Directly Attributable to Any Activity 18,233,684.33 Refundable Input Tax attributable to Zero-Rated Sales P8,554,923.46 Less: TCC already issued in respondent's favor 429,455.27 Balance of Refundable Input Tax P8,125,468.19 The differences between the foregoing computations are: (1) As earlier noted, the ratio of valid zero-rated sales to total reported sales was only applied to the input VAT additionally found by the Third Division as valid and substantiated ( i.e. , P18,233,684.33), thereby disregarding the amount of input VAT found by petitioner as valid and substantiated at the administrative level ( i.e. , P38,365,620.82) and already recommended for the issuance of a TCC ( i.e. , P38,195,441.97, after deducting output VAT of P170,178.85); and, (2) The input VAT paid to the Bureau of Customs (BOC) already recommended for TCC amounting to P37,765,986.70 was not considered in determining the balance of refundable input VAT. It is clear from the ruling in Chevron 8 that for the input VAT to be refunded or issued a TCC, the same should not have been applied to output VAT, to wit: xxx xxx xxx Thus, to be refunded or issued a tax credit certificate, the following must be complied with: (1) the input tax is a creditable input tax due or paid; (2) the input tax is attributable to the zero-rated sales; (3) the input tax is not transitional; (4) the input tax was not applied against the output tax ; and (5) in case the taxpayer is engaged in mixed transactions, i.e. , VAT-able, exempt, and zero-rated sales and the input taxes cannot be directly and entirely attributable to any of these transactions, only the input taxes proportionately allocated to zero-rated sales based on sales volume may be refunded or issued a tax credit certificate. xxx xxx xxx First , Section 112 (A) of the Tax Code merely requires that the input tax claimed for refund or the issuance of tax credit certificate " has not been applied against [the] output tax [.]" Section 4.112-1 (a) of RR No. 16-2005 states that " [t]he input tax that may be subject of the claim shall exclude the portion of input tax that has been applied against the output tax ." . . . xxx xxx xxx Here, the output VAT per 4th Quarter return for TY 2014 amounted to P170,178.85. However, the valid input VAT allocated to sales subject to 12% VAT is found to be only P7,195.16 9 per the Court En Banc' s computation and P22,334.56, 10 as herein recomputed. Thus, it can be concluded that the remaining output VAT of P147,844.29 (P170,178.85 less P22,334.56) was taken from the input VAT allocated to zero-rated sales and should therefore be further deducted from the refundable amount recomputed above of P26,555,396.85, as the same was effectively applied and charged against the remaining output VAT. It must be highlighted that this deduction is not determinative of the "excess" input VAT (which, according to Chevron , has no basis in law and jurisprudence) but only because the same was already utilized and applied to output VAT. Accordingly, the resulting refundable amount of P26,555,396.85 computed above should further be reduced by input VAT effectively applied against the output VAT in the amount of P147,844.29, resulting in the final refundable amount of P26,407,552.56, computed as follows: TIADCc Amount of valid and substantiated input VAT attributable to valid zero-rated sales P26,555,396.85 Input VAT attributable to zero-rated sales that was effectively applied against the output VAT 147,844.29 Valid and Substantiated Input VAT found to be Unutilized and Should Be Refundable P26,407,552.56 Again, since the valid and substantiated input VAT found to be unutilized in the amount of P26,407,552.56 for the 4th Quarter of TY 2014 is less than P38,195,441.97 or the amount that petitioner recommended to be issued TCC in respondent's favor at the administrative level, there is no longer any additional amount to be refunded to respondent. Even if we follow the majority opinion's logic in computing the refundable amount, that is, completely disregarding the input tax paid to the BOC of P37,765,986.70 11 that was already recommended for TCC (since the subject of respondent's refund claim pertains only the portion that petitioner disallowed), the balance of refundable input VAT, as determined in the assailed Decision, would nonetheless be inaccurate given that the TCC already issued in respondent's favor amounting to P429,455.27 pertains to the allowed portion. Thus, for purposes of logical consistency, in computing for the additional amount to be refunded to respondent, the amount already subject of a TCC should no longer be offset against the refundable input VAT of P8,554,923.46, as found by the Court En Banc . I note further that should the computation of refundable input VAT attributable to valid zero-rated sales in the assailed Decision be sustained, the sum adjudged by petitioner and this Court as refundable (to respondent) for the 4th quarter of TY 2014 would then be P46,320,910.16, which is considerably more than what respondent is entitled to, as shown below: 4th Quarter of TY 2014 Per assailed Decision Per Recomputation Total Amount Recommended by Petitioner for TCC P38,195,441.97 P38,195,441.97 Additional Amount to be Refunded 8,125,468.19 - Refundable Amount P46,320,910.16 P26,407,552.56 All told, I vote to GRANT petitioner's Motion for Reconsideration and thereby reverse and set aside the assailed Decision and render a new one denying respondent's entire claim for refund based on the foregoing disquisitions. Footnotes 1. Rollo , pp. 107 to 119. 2. G.R. No. 259024, September 28, 2022. 3. Id . at pp. 120-135. 4. Id . at pp. 151 to 156. 5. G.R. Nos. 206079-80, January 17, 2018. 6. G.R. Nos. 187836 & 187916, March 10, 2015. BACORRO-VILLENA, J., dissenting opinion: 1. Exhibit "P-40", ICPA Report, p. 2. 2. Computed as follows: Total Available Input VAT (P60,328,369.59) less Disallowed Input VAT (P21,962,748.77) = P38,365,620.82. 3. Supra at note 1: Petitioner issued TCC No. 121-17-00021 (Exhibit "P-9") for the refund of P429,455.27 while the P37,765,986.70 representing input tax paid to the Bureau of Customs (BOC) but without TCC yet. 4. AN ACT AMENDING SECTIONS 5, 6, 24, 25, 27, 31, 32, 33, 34, 51, 52, 56, 57, 58, 74, 79, 84, 86, 90, 91, 97, 99, 100, 101, 106, 107, 108, 109, 110, 112, 114, 116, 127, 128, 129, 145, 148, 149, 151, 155, 171, 174, 175, 177, 178, 179, 180, 181, 182, 183, 186, 188, 189, 190, 191, 192, 193, 194, 195, 196, 197, 232, 236, 237, 249, 254, 264, 269, AND 288; CREATING NEW SECTIONS 51-A, 148-A, 150-A, 150-B, 237-A, 264-A, 264-B, AND 265-A; AND REPEALING SECTIONS 35, 62, AND 89; ALL UNDER REPUBLIC ACT NO. 8424, OTHERWISE KNOWN AS THE NATIONAL INTERNAL REVENUE CODE OF 1997, AS AMENDED, AND FOR OTHER PURPOSES. 5. Emphasis and underscoring supplied. 6. G.R. No. 215159, 05 July 2022. 7. No Input VAT Carried Over from Previous Period per 2nd to 4th Quarter VAT Returns for the Fiscal Year (FY) 2015 (Line Item 20A), Exhibits "P-5", "P-6" and "P-7", Division Docket, Volume I, pp. 399, 400 and 401, respectively. 8. Supra at note 6; Citations omitted, emphasis and italics in the original text and underscoring supplied. 9. Computed in the assailed Decision, as follows: Total VATable Sales per VAT Returns P1,418,157.04 Divided by the sum of Reported Sales per VAT Returns 3,593,834,209.78 Multiplied by Total Valid Input VAT 18,233,684.33 Valid input VAT allocated to sales subject to 12% VAT P7,195.16 10. Valid Input VAT Allocated to VATable sales, as recomputed, supra at p. 5. 11. Supra at note 1.