Marcelo Steel Corp. v. Commissioner of Internal Revenue

THIRD DIVISION [CA-G.R. SP No. 31049. November 16, 1993.] (C.T.A. Case No. 4311) MARCELO STEEL CORPORATION , petitioner , vs . COMMISSIONER OF INTERNAL REVENUE AND COURT OF TAX APPEALS , respondents . D E C I S I O N PURISIMA , J p : Brought on May 27, 1993, the instant Petition For Review seeks to reverse and set aside the Decision of the Court of Tax Appeals in CTA Case No. 4311, entitled: "Marcelo Steel Corporation versus Commissioner of Internal Revenue" ordering petitioner to pay the Commissioner of Internal Revenue', ordering petitioner to pay the Commissioner of Internal Revenue the sum of P2,714,636.04, representing 1982 deficiency sales tax inclusive of deficiency surcharge and interest, plus 25% surcharge for late payment and 20% annual interest from October 5, 1988 until full payment thereof; and CTA's Resolution of March 22, 1992, denying the motion for reconsideration of the said Decision under challenge. On June 7, 1993, the respondents we required to comment to the petition: and on August 3, 1993, was mailed in the Comment of the Solicitor General for respondent Commissioner of Internal Revenue. Counsel for respondents contends, that: "I. NO REVERSIBLE ERROR WAS COMMITTED BY RESPONDENT CTA IN THE IMPUGNED DECISION II. RESPONDENT CTA HAS DECIDED A QUESTION OF SUBSTANCE IN ACCORDANCE WITH LAW AND JURISPRUDENCE ON THE MATTER A. SECTION 199 PROVIDES THE LIMITATION B. PETITIONER FAILED TO SUBSTANTIALLY PROVE THE CASE C. THE DECISION IS SUPPORTED BY WELL SETTLED JURISPRUDENCE ON THE MATTER OF THIS NATURE III. PRESUMPTIONS IN FAVOR OR CORRECTNESS OF THE ASSESSMENT" The fate of the present petition hinges on the following provision of Section 199 of the National Internal Revenue Code, as amended by P.D. 1358, to cite: "Sec. 199 Percentage tax on sales of other articles . There shall be levied, assessed and collected once only on every original sale, barter, exchange and similar transaction either for nominal or valuable consideration, intended to transfer ownership of, or title to, the articles not covered in Sections 194, 195, 196, 197, 198 and 201, a tax equivalent to ten (10%) per centum of the gross selling price or gross value in money of the articles so sold, bartered, exchanged, or transferred such tax to be paid by the manufacturer of producer: Provided, that any percentage, specific or mining tax paid under this title. Title IV of Title VII, respectively, on domestically manufactured, processed or produced, or imported raw material, part, accessory or other article forming part of the finished product shall be credited against the sales tax due on the finished product: Provided, however, That in case the total tax paid on the raw material, part, accessory or other article exceeds the amount of the sales tax due on the finished product, the excess shall be credited against the sales tax liabilities of the manufacturer for the succeeding taxable quarter: And Provided, further, That the amount of the tax on the raw material, part, accessory, or other article shall be indicated as a separate item in the sales invoice.' Also to the fore is the unnumbered ruling of the Bureau of Internal Revenue of August 30, 1968, as quoted by counsel for respondents, to wit: "August 30, 1968 Mr. Lincoln T. Yabut Suite 309-3rd Floor Manhattan Building 413 Nueva St., Manila Sir: This refers to your letter dated August 23, 1968 stating that your client is a manufacturer of steel products; that in the manufacture of steelwashers the subject taxpayer use steel plates, G.I. sheets and scrap iron as raw materials which it procures from certain suppliers, like the Rheem of the Philippines, Inc. and other factories having similar business of steel manufacturing. Under the foregoing facts, you now meant to be informed whether or not the cost of the raw materials which have been previously subject to the sales tax is deductible by your client for purposes of determining his sales tax. In reply thereto, I have the honor to inform you that under Section 186 of the Tax Code, where the articles subject to the tax under said section are manufactured out of materials likewise subject to tax under same section, the total cost of such materials, as duly established, is deductible from the gross selling price of the manufactured articles. Accordingly, the cost of steel plates, G.I. sheets and scrap iron used in the manufacture of steel washers is deductible from the gross selling price for sales tax purposes provided that the cost is supported by the corresponding invoices and that the invoices indicate the rate of tax to which the raw materials have been subjected pursuant to Revenue Regulation No. 5-65. Very truly yours, (SGD.) MISAEL P. VERA Commissioner of Internal Revenue" In the light of the aforecited provision of law and BIR ruling in point, We cannot help but uphold and affirm the judgment under review. As aptly pointed out by the Solicitor General, the provision of Section 199 aforecited requires that the amount of the tax on raw materials, parts, accessories and other articles used must be indicated as a separate item in the sales invoice; and that, as cited in the ruling of the BIR above-mentioned; Under Tax the Code, the cost of raw materials and other items used in the manufacture of subject goods is deductible from the gross price of the finished products, for sales tax purposes; '1. . . . Provided that the cost is supported by the corresponding invoices and that the invoice indicate the rate of tax to which the raw materials have been subjected pursuant to Revenue Regulation No. 5-65." And to repeat; under Section 199, supra : The sales tax paid on raw materials must be indicated as a separate item in the sales invoice, and support by corresponding invoice indicating the rate of tax to which such raw materials have been subjected to. Here, petitioner having failed to meet and comply with the said conditions and requirements, the denial of its claim for tax credit is in order. The respondents cannot be faulted therefore. We quote with approval the following disquisition below: "There is no question that petitioner can claim as a deduction from its sales tax liability sales taxes paid on raw materials forming part of the finished product. Subject only to the limitation provided under Section 199 and the above-cited rulings that the sales tax paid on the raw material purchases must be indicated as a separate item in the sales invoice. The burden lies on the petitioner to show proof that sales taxes paid on its purchases of scrap irons were separately indicated in the invoices. Petitioner failed to present any evidence to support its claim. It is an elementary rule in procedural law that "each party must prove his own affirmative allegations" (Wigmore on Evidence, 3rd Ed., Sec 2485, p 271.) Equally, in point is the maxim ei incumbent probatio qui dicit, non qui negat the burden of proof is on him who avers, not on him who denies. (U.S. v. De la Torre, 42 Phil. 65) The best that petitioner could have done was to present as evidence the invoices of its purchases of scrap irons and other raw materials with sales taxes paid thereon. At this juncture, it may also be stated that petitioner's claim for tax credit of P1,929,151.76 should have substantiated by proof. As computed by respondent only the amount of P742,045.88 was allowed as a tax credit deduction. The least that petitioner could have done was to prove the remaining the credit of P1,187,105.88 disallowed by respondent representing the tax credit on purchases of scrap irons used." Indeed, it can be unerringly gleaned from the pleadings on hand that the disallowance of petitioner's deduction is question, which brought about the deficiency tax assessment under challenge, accords with law and jurisprudence. It was petitioner's burden to show lack of liability for any deficiency tax for 1982 and to prove that the deficiency tax assessment under attack is devoid of any legal and factual basis. Having failed to do so, there is in favor of the deficiency tax assessment in question a presumption of validity. The burden was on petitioner to disprove or overcome such presumption but again, it has not done so. Under Rule 131 Section 3(m) of the Revised Rules of Court, there is a presumption of regularity of performance of official duties on the part of the BIR Examiner who went over the pertinent records of petitioner. As succinctly held in Esso Standard Eastern, Inc. v. The Commissioner of Internal Revenue, 175 SCRA 149; petitioner had the duty to justify its claimed tax deductions. Also against petitioner's stance is the following deduction by the Solicitor General: "Where the taxpayer is appealing to the tax court on the ground that the Collector's assessment is erroneous, it is incumbent upon him to prove there what is the correct and fair liability by a full and fair disclosure of all pertinent data in his possession. Otherwise, if the taxpayer confines himself to proving that the assessment is wrong, the tax court proceedings would settle nothing, and the way would be left open for subsequent assessments and appeals in terminable succession. (Bonifacia Sy Po v. Court of Tax Appeals and Commissioner of Internal Revenue, G.R. No. L-81446, August 18, 1988)." All things studiedly considered, a ruling against petitioner cannot be avoided. To be sure, petitioner has not overcome the presumption of correctness of subject deficiency tax assessment by respondent Commissioner of Internal Revenue, which was sustained by the Court of Tax Appeals, with respect to petitioner's 1982 sales tax, inclusive of surcharges and interest. It bears repeating that it was petitioner's burden to clearly show that the assailed deficiency tax assessment is not correct but petitioner has not effectively discharged its onus probandi . WHEREFORE, the petition fore review under consideration is hereby dismissed for lack of merit. No pronouncement as to costs. SO ORDERED. Torres, Jr . and Pardo JJ., concur.