Atlas Consolidated Mining & Development Corp. v. Court of Tax Appeals

SECOND DIVISION [CA-G.R. SP No. 34152. February 6, 1998.] ATLAS CONSOLIDATED MINING & DEVELOPMENT CORPORATION , petitioner , vs .COURT OF TAX APPEALS and COMMISSIONER OF INTERNAL REVENUE , respondents . D E C I S I O N MABUTAS , JR. , J p : Before Us is a petition for review assailing the decision of the Court of Tax Appeals (dated November 8, 1993) and its resolution (dated April 5, 1994) denying petitioner's motion for reconsideration in C.T.A. Case No. 4794. The dispositive portion of the assailed decision runs thus: "WHEREFORE, in view of the foregoing, the Court resolves to DENY the petition for lack of merit." (page 357 of the C.T.A. Record). In pari passu ,the dispositive portion of the resolution in question reads: "WHEREFORE, in view of the foregoing, the petition is hereby DENIED for lack of merit. No pronouncement as to costs." (page 411 of the C.T.A. Record). The antecedent facts of the case as agreed to by the parties in the Joint Stipulation of Facts submitted to the Court of Tax Appeals on January 8, 1993, follow: (pages 40-131 of the CTA Records): "1. ... "2. Petitioner is engaged in the business of mining, production and sale of various mineral products, consisting principally of copper concentrates and gold and duly registered with the [Bureau of Internal Revenue] BIR as a [Value-Added Tax] VAT enterprise per its Registration No. 32-A-6-002224 (p. 250, BIR Records). "3. Respondent duly approved petitioner's application for VAT zero-rating of the following sales: "a. Gold to the Central Bank (CB) [now referred to as the Bangko Sentral ng Pilipinas;] "b. Copper concentrates to the Philippines Smelting and Refining Corp. (PASAR);and "c. Pyrite [concentrated] to Philippine Phosphates, Inc. (Philphos). The BIR's approval of sales to [the] CB and PASAR was dated April 21, 1988 (Annex "A") while zero-rating of sales to PHILPHOS was approved effective June 1, 1988 (annex "B"). "4. PASAR and Philphos are both Board of Investments (BOI) and Export Processing Zone Authority (EPZA) registered export-oriented enterprises located in an EPZA zone. "5. On April 20, 1990, petitioner filed a VAT return with the BIR for the first quarter of 1990 whereby it declared its sales described in par. 3 hereof, i.e.,to the CB, PASAR and Philphos, as zero rated sales and therefore not subject to any output VAT ...(Annexes "C" and "C-1";pp. 260-261, BIR Records). "6. On or about July 24, 1990, petitioner filed a claim with respondent for refund/credit of VAT input taxes on its purchase of goods and services for the first quarter of 1990 in the total amount of P40,078,267.81 ...(Annex "D") ... "7. On or about September 2, 1992, petitioner filed an Amended Application for tax credit/refund in the amount of P35,522,056.58 ...(Annex "E",page 265, BIR Records). llcd "8. On September 9, 1992, respondent resolved petitioner's claim for VAT refund/credit by allowing only P2,518,122.32 as refundable/creditable while disallowing P33,003,934.26, to wit: a. Amount claimed P35,522,056.58 LESS: Disallowances b. No O.R./Invoices/Proper Documents 1,384,172.48 c. Invoice without VAT Registration Number 474,606.87 d. Invoice with Sold to "Cash" 31,499.04 e. Invoice without Authority to Print 326,374.23 f. VAT No. stamped/typewritten/ handwritten printed in 1988 -1989 441,195.54 g. Others 71,088.09 h. Erroneous computation 85,382.58 i. 2,814,318.83 j. ALLOWABLE INPUT TAX P32,707,737.75 OTHER DEDUCTIONS: k. Output tax due on miscellaneous taxable sales 972,535.67 l. *Output tax due on sale of gold to the Central Bank (179,314,048.17 :1/11) 16,301.277.11 m. **Input tax attributable to sales to PASAR (submitted BOI certification did not qualify as required under RMO 22-92) (465,095,536.14/ 1,226,381,659.74 x 32,707,737.75) 12,404,150.63 n. ***Input tax attributable to sales to PHILPHOS (No BOI certificate from the BOI) (18,809,519.07/ 1,226,381,659.74 x 32,707,737.75) 501,652.00 o. Penalty for issuance of invoices without authority to use loose leaf sales invoices 10,000.00 30,180,615.43 ALLOWABLE INPUT TAX P2,518,122.32 RECOMMENDED FOR ISSUANCE =========== OF TAX CREDIT CERTIFICATE "9. A supplemental report of investigation was submitted by the BIR examiners on October 15, 1992 recommending the increase in allowable input tax credit from P2,518,122.32 to P12,101,569.11 or an increment of P8,383,116.79 due to petitioner's submission of BOI certifications on the sales to PASAR which brought down the deduction of P12,404,150.65 to P2,518,122.32 (pages 344-367, BIR Records). The parties further stipulated that the issues to be received are: "a. the validity of VAT Ruling No. 008-92 in connection with "i. the applicability of 10% VAT rating with regard to sales of copper concentrates to PASAR and pyrite to PHILPHOS; and "ii. the application of 10% VAT on sales of gold to CB. "b. the validity of VAT Ruling No. 59-92 dated April 20, 1992, which applies retroactively VAT Ruling No. 008-92 dated January 23, 1992; "c. the applicability of Revenue Regulation 2-88 in that it requires the purchaser to export more than 70% of its total sales for the supplier, such as petitioner to be 100% zero-ruled; dctai "d. the validity of the disallowance of input taxes in the amount of P2,814,318.83 on the ground that the petitioner has not complied with Article 108(a) of the NIRC; "e. the validity of BIR Regulations that automatically disallow VAT refund for failure to present the required documents although the purchases can be substantiated by other documents; "f. the propriety of deducting the output tax on miscellaneous taxable sales' from the current input tax instead of against petitioner's presumptive input tax (PIT) which, as per BIR findings, are sufficient to enver the amount assessed; "g. the mandatory nature of Section 106(a) of the NIRC prescribing a specific period of sixty (60) days within which to process and grant applications for input VAT refund and the corresponding right given to channels to supply VAT credits to other tax liabilities as allowed under Section 104(b) of the NIRC as well as interest for the delay in the grant of petitioner's claims for VAT refund/credit. (13-15, joint Stipulation of Facts; pages 52-54, CTA Records) On November 8, 1993, the respondent court rendered a decision (pages 347-363 of the CTA Record),the dispositive portion of which was earlier quoted. The petitioner moved for reconsideration of the decision, which move the respondent court denied (pages 394-357 of the CTA Record). Not satisfied by the decision and feeling aggrieved by the denial of its motion for reconsideration, the petitioner came to this Court, alleging that the respondent court committed the following assigned errors (pages 15-17 of the Petition),scilicet: "A. . . . THE COURT A QUO SHOULD HAVE CONSIDERED THESE TRANSACTIONS AS COVERED UNDER ZERO-RATED TRANSACTIONS AS DEFINED UNDER SECTION 100(a)(2) OF THE NATIONAL INTERNAL REVENUE CODE. "B. THE COURT A QUO ERRED IN HOLDING THAT VAT RULING NOS. 008-92 AND 59-92 MAY BE GIVEN RETROACTIVE EFFECT. IN VIOLATION OF SECTION 246 OF THE TAX CODE, THUS DISREGARDING THE CLEAR AND MATERIAL PREJUDICE THAT HAS RESULTED TO THE PETITIONER FROM SUCH RETROACTIVE APPLICATION. "C. THE COURT A QUO ERRED IN UPHOLDING THE VALIDITY OF THE REQUIREMENT UNDER VAT RULING NO. 008-92 THAT A BOI-REGISTERED ENTERPRISE EXPORT MORE THAN 70% OF TOTAL ANNUAL PRODUCTION FOR ZERO RATING TO APPLY SUCH ZERO-RATING TO BE APPORTIONED TO THE AMOUNT OF EXPORT SALES, AS INSTEAD, IT SHOULD HAVE RULED THAT UNDER THE LAW, THERE IS NO MORE NEED FOR SUCH PROOF OF ACTUAL EXPORTS, THE MERE FACT OF EPZA REGISTRATION BEING SUFFICIENT FOR ZERO-RATING TO APPLY. "D. THE COURT A QUO ERRED IN UPHOLDING RESPONDENTS DISALLOWANCE OF PETITIONERS CLAIM FOR VAT REFUND/CREDIT BASED ON PETITIONER'S FAILURE TO COMPLY WITH CERTAIN DOCUMENTARY REQUIREMENTS IMPOSED BY THE RESPONDENT ALTHOUGH SUCH PENALTY OF DISALLOWANCE IS NOT CONTEMPLATED IN THE LAW. "E. THE COURT A QUO ERRED IN NOT RULING ON PETITIONER'S CLAIM THAT OUTPUT VAT ON MISCELLANEOUS TAXABLE SALES SHOULD BE DEDUCTED FROM ITS PRESUMPTIVE INPUT TAX ("PIT") AND NOT CURRENT INPUT TAX IS NOT CONTEMPLATED IN THE LAW. "F. THE COURT A QUO ERRED IN ITS FINDING THAT RESPONDENT IS NOT REQUIRED BY LAW TO GRANT CLAIMS FOR VAT REFUND WITHIN SIXTY (60) DAYS. "G. THE COURT A QUO ERRED IN DISALLOWING LEGAL COMPENSATION FOR PETITIONER'S CLAIMS FOR REFUND/CREDIT AS AGAINST ITS TAX LIABILITIES." (page 15-17 of the Petition; Rollo, pages 95-97). In the Supplemental Petition for Review (Rollo, pages 340-359) filed by the petitioner on June 6, 1997, it added the following error: "THE COURT A QUO ERRED IN DISREGARDING THE STIPULATION OF THE PARTIES THAT PETITIONER IS VAT-REGISTERED, SUBSTITUTING IN ITS PLACE IT[S] OWN FINDING THAT PETITIONER IS NOT VAT-REGISTERED, AND DISMISSING THE PETITION A QUO WITHOUT AFFORDING PETITIONER ANY OPPORTUNITY TO EXPLAIN THE QUESTIONS PERCEIVED BY THE COURT A QUO ON THE MATTER OF WHETHER OR NOT IT IS VAT-REGISTERED." (page 1 of the Supplemental Petition; Rollo page 340). On the basis of the Joint Stipulation of Facts, particularly in paragraph 2 thereof (page 40 of the CTA Records), and as clearly specified in the VAT Registration Certificate (page 250 of the CTA Records) and the Tax Credit Certificate issued on March 28, 1990 (page 107 of the CTA Records), it is beyond cavil that the petitioner is registered with the BIR as a VAT enterprise "effective August 15, 1990. The parties are thus bound by such stipulations of fact. They cannot controvert the same. Neither can this Court modify such stipulated fact. Besides, findings of fact of the Court of Tax Appeals are entitled to the highest respect and can only be disturbed an appeal if they are not supported by substantial evidence or there is a showing of gross error or abuse on the part of the Tax Court (NASIAD v. Court of Appeals, L-29318, November 29, 1974; Raymundo v. Commissioner of Customs, L-27733, December 3, 1980; Commissioner of Internal Revenue vs. Mitsubishi Metal Corp., et al., 181 SCRA 214; Commissioner of Internal Revenue vs. Court of Appeals, 204 SCRA 182). Let us now resolve the contentions of the petitioners in seriatim. Relative to the first issue, the petitioner contends that VAT rulings No. 008-92 (pages 79-82 of the CTA Record) and 069-92 (pages 99-105 of the CTA Record), insofar as they treat sales of gold to the Central Bank (CB) and sales of copper concentrates and pyrite to PASAR and PHILPHOS, respectively, which are both Export Processing Zone Authority (EPZA)-registered enterprises, as local sales and therefore can be zero-rated only if they meet the requirements of Section 100 (a) (1) and Section 106 of the Tax Code is null and void and therefore of no legal effect. It argues that such sales, which are considered constructive imports under certain special laws may nevertheless be deemed zero-rated under the Section 100 (a) (2) of the Tax Code and as such, are not subject to any further qualifications in order to be zero-rated. Quoted hereunder is Section 100 of the Tax Code: "SEC. 100. Value-added tax on sale of goods . (a) Rate and base of tax. There shall be levied, assessed and collected on every sale, barter or exchange of goods, a value-added tax equivalent to 10% of the gross selling price or gross value in money of the goods sold, bartered or exchanged, such tax to be paid by the seller or transferor; Provided, that the following sales by VAT-registered persons shall be subject to 0%: "(1) export sales, and "(2) sales to persons or entities whose exemption under special laws or international agreements to which the Philippines is a signatory effectively subjects such sales to zero rate. (Emphasis supplied.) "'Export Sales' means the sale and shipment or exportation 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, or foreign currency denominated sales. 'Foreign currency denominated sales' means sales to non-residents of goods assembled or manufactured in the Philippines, for delivery to residents in the Philippines and paid for in convertible foreign currency remitted through the banking system in the Philippines." llcd Evidently, there appears to be two (2) general classes of transactions which are zero-rated. These include: (1) 'export sales',that is direct exports and foreign currency denominated sales; and (2) 'effectively zero-rated sales' as provided under special laws and international agreements. The majority opinion states that: "There is nothing in the said VAT Rulings No. 008-92 and 59-92 which purports to limit the scope of Section 100(a) of the Tax Code only to 'export sales' as this term is defined in said section, or which abolishes the second category of zero-rated transactions, i.e. those which are 'effectively zero-rated' under special laws." (page 7 of the CTA Resolution; page 400 of the CTA Records) In the next turn, however, the majority proceeded to state that: "Any other kind of "export sales," including those considered as "constructive exports" under certain special laws, are not considered as zero-rated sales since these neither involved actual exportation of shipments of goods nor can they be considered foreign currency denominated sales." (id.) Verily, there is neither rhyme nor reason in these assertions. There is a mistaken notion of equating zero-rated sales to actual exports and foreign currency denominated sales only. The truth of the matter is that they also include those effectively zero-rated under special laws and international agreements. Examples of effectively zero-rated sales are aptly illustrated under Section 8 (b) (2) of Revenue Regulation No. 5-87, namely: (1) sales covered by the R.P.-U.S. Military Bases Agreement; and (2) sales to the Asian Development Bank (ADB), as provided under Executive Order No. 161. The following special laws have a bearing on the issue at hand. A. For the sale to PASAR and PHILPOS Executive Order No. 226 The Omnibus Investments Code of 1987. 1) Article 23, Chapter I, Title I, Book I, E.O. 226. "ART. 23. "Export sales" ...:Provided, That sales of export products to another producer or to an export trader shall only be deemed export sales when actually exported by the latter, as evidenced by landing certificates or similar commercial documents; Provided, further, That without actual exportation, the following shall be considered constructively exported for purposes of this provision: (1) sales to bonded manufacturing warehouses of export-oriented manufacturers; (2) sales to export processing zones; (3) sales to registered export traders operating bonded trading warehouse supplying raw materials used in the manufacture of export products under guidelines to be set by the Board in consultation with the Bureau of Internal revenue and Bureau of Customs; (4) sales to foreign military bases, diplomatic missions and other agencies and/or instrumentalities granted tax immunities, of locally manufactured, assembled or repacked products whether paid for in foreign currency or not ..." (Emphasis supplied.) 2) Article 39, Title III, Book I, E.O. No. 226: "Art. 39. Incentives to Registered Enterprises . All registered enterprises shall be granted the following incentives to the extent engaged in a preferred area of investment: xxx xxx xxx" (k) Tax Credit for taxes and Duties on Raw Materials. Every registered enterprise shall enjoy a tax credit equivalent to the national internal revenue taxes and customs duties paid on the supplies, raw materials and semi-manufactured products used in the manufacture, processing or production of its export products and forming part thereof, exported directly or indirectly by the registered enterprise: Provided, however, That the taxes on the supplies, raw materials and semi-manufactured products domestically purchased are indicated as a separate item in the sales invoice. (Emphasis supplied) "xxx xxx xxx" 3) Article 77, Book VI, E.O. No. 226: "ART. 77. Tax Treatment of Merchandise in the Zone . "(1) Except as otherwise provided in this Code, foreign and domestic merchandise, raw materials, supplies, articles, equipment, machineries, spare parts and wares of every description, except those prohibited by law, brought into zone to be sold, stored, broken up, repacked, assembled, installed, sorted, cleaned, graded, or otherwise processed, manipulated, manufactured, mixed with foreign or domestic merchandise whether directly or indirectly related in such activity, shall not be subject to customs and internal revenue laws and regulations nor to local tax ordinances , the provisions of law to the contrary notwithstanding .(Emphasis supplied.) (2) Merchandise purchased by a registered zone enterprise from the customs territory and subsequently brought into the zone shall be considered as export sales and the exporter thereof shall be entitled to the benefits allowed by law for such transaction. (Emphasis supplied.) xxx xxx xxx" The Department of Justice in Opinion No. 47, s. 1992, dated April 14, 1992 (pages 109-114 of the CTA Records) declared that: "It is well to emphasize at this point that the claims for refund of the mining firms are predicated on Section 100(a)(2) of the Tax Code which speaks of 'effectively zero-rated' sales under special laws . That Omnibus Investments Code is one such 'special law'. Thus, it would appear on the basis of Section 100 (a)(2) of the Tax Code, in conjunction with Sections 23 and 77 of the Omnibus Investments Code, the sale by mining companies to PASAR of copper concentrates and other raw materials should be zero-rated." (page 5 of DOJ Opinion No. 47, S. 1992) The statement of the majority to the effect that: "There is nothing in Articles 23, 39 and 77 of Executive Order No. 226 (the Omnibus Investments Code) which grants any form of tax exemption to sellers of goods to export processing zone enterprises" (page 10 of the CTA Resolution; page 403 of the CTA Records) blurs the distinction between zero-rating and exemption from VAT. A U.S. Treasury Report distinguished zero-rating from exemption in this wise: "Under a value-added tax, commodities, transactions, or firms can receive preferential treatment in two different ways, by zero rating or exemption. Under zero-rating, all value-added tax is removed from the zero-rated good, activity or firm. In contrast, exemption only removes the value-added tax at the exempt stage, and it will actually increase, other than reduce, the total taxes paid by the exempt firm's business or non-retail customers. It is for this reason that a sharp distinction must be made between zero-rating and exemption in designing a value-added tax." (The Philippine Revenue Journal, 1 August 1987, page 19; See also Rev. Reg. 5-87) Such distinction is discussed in detail as follows: (1) Under the zero-rating, the transaction is completely free of VAT. On the other hand, exemption only removes the VAT at the exempt stage. (2) A VAT payer who is subject to zero-rate of tax (see Sec. 106[a]) can claim and enjoy a credit or refund for the input tax invoiced to him on his purchases. The same privilege is not given to exempt taxpayers. In view of these differences, the total taxes payable by the exempt taxpayer may increase rather than decrease. The non-creditability of input taxes in exempt transactions may thus result in increased prices and consequently, proportionately increased taxes which are all shouldered by the ultimate consumer. The person making the exempt sale of goods or services shall not separately bill any output tax to his customers because the said transaction is not subject to VAT. On the other hand, a VAT-registered purchaser of goods or services which are exempt from VAT is not entitled to any input tax on such purchases (Sec. 9[a],Rev. Reg. 5-87). (3) Although zero-rated sale are not subject to actual tax charge since the tax is levied at 0%,they are nevertheless 'taxable sales' for the purpose of measuring turnover sales to determine whether VAT registration is required. In contrast, exempt sales are not "taxable sales".Generally, a person who makes only exempt sales is not a "taxable person" and may not register for VAT. It is well nigh apposite to say that words are to be understood in the context of the subject matter. This is congruent with the maxim: 'Verba accipienda sunt secundum subjectam materiam.' Executive Order No. 226 falls within the meaning of "special law" as contemplated by Section 100(a)(2) of the tax Code, as amended by E.O. No. 273. Notwithstanding the absence of actual exportation, sales to PASAR and PHILPHOS being BOI and EPZA registered and export-oriented enterprises are effectively zero-rate pursuant to Articles 23 and 77 of the Omnibus investments Code vis-a-vis Section 100(a)(2) of the NIRC. The following Central Bank Circulars are likewise of the same tenor. B. For sales of gold to the Central Bank the following Central bank Circulars are applicable; 1. Circular No. 960, dated January 30, 1984 (Annex "Q",page 92 of the CTA Record) reads: "Sec. 169. Privilege of Export Oriented Firms . Gold producers shall qualify as export-oriented firms even if their entire output is sold to Central Bank." (Emphasis supplied) 2. Circular No. 1301, Series of 1991, dated August 7, 1991 (Annex "R",page 93 of the CTA Record) states: "With reference to Section 169 of Central Bank Circular No. 960, ..it is hereby stated, for clarification purposes, that all sales of gold to the Central Bank are considered constructive exports ".(Emphasis supplied.) 3. SECTION 107(c),Circular No. 1318, dated January 3, 1992 (Annex "S",page 94 of the CTA Record) provides: "SEC. 107. Export of Gold . "xxx xxx xxx c. All gold sold to the Central Bank by primary and secondary gold producers and small scale miners are considered constructive exports and are entitled to rediscounting when appropriate." (Emphasis supplied.) The aforecited C.B. Circulars were issued pursuant to Section 14, Article II, Chapter I of Republic Act No. 265, otherwise known as the Central Bank Act. This is quoted hereinbelow as follows: "SEC. 14. Exercise of Authority . In order to exercise the authority granted to it under this Act, the Monetary Board shall: "(a) Prepare and issue rules and regulations as it considers necessary for the effective discharge of the responsibilities and exercise of the powers assigned to the Monetary Board and to the Central bank under this Act, and the rules and regulations issued shall be reported to the President and the Batasang Pambansa within fifteen days from the date of their issuance." (Emphasis supplied.) prll Corollarily, Section 72, Article II, Chapter IV of Republic Act No. 265 provides: "SEC. 72. Purchases and Sales of Gold . The Central Bank may buy and sell gold in any form, subject to such regulations as the Monetary board may issue. "The Monetary Board may at any time require that any gold held by any person or entity under the jurisdiction of the Philippines be delivered to the Central Bank or to any banks or other agents contracted or engaged by the Central Bank for the purpose. The Monetary Board may also impose conditions under which gold in any shape or form may be acquired and held, transported, melted, or treated, imported, exported, earmarked or held in custody for foreign or domestic account. . . . (as amended by P.D. No. 72) (Emphasis supplied.) prcd In equipoise with the Central bank's policy of conserving gold (Section 162, CB Circular No. 960),certain gold producers are required to sell their entire gold production to the Central Bank (Section 171, CB Circular 960).Moreover, no person shall export or bring out, or attempt to export or bring out of the Philippines, gold and/or gold-bearing materials, in any shape, form and quantity without prior approval from the CB Export Department. (Section 107, CB Circular No. 1318) Prescinding from the aforesaid policy, gold producers are given incentives, such as considering their sales to the Central Bank as "exports". According to settled jurisprudence, circulars of the Central Bank are neither statute nor law, but being issued for the implementation of the law authorizing its issuance, it has the force and effect of law (People vs. Que Po Lay, 94 Phil. 640).All that is required is that the regulation should be germane to the objects and purposes of the law; that the regulation be not in contradiction with it, but conform to the standards that the law prescribes (United States vs. Tupasi Molina, 29 Phil 119). A su converso , should the regulation conflict with the law, the validity of the regulation cannot be sustained (Director of Forestry v. Muoz, 23 SCRA 1183, Hijo Plantation, Inc. v. Central Bank, 164 SCRA 194). The Department of Justice, in Opinion No. 47, S. 1992 (dated April 14, 1992) expressed the view that: ". . . With regard to sales of gold to the Central Bank, existing jurisprudence recognizes that Central Bank Circulars issued for the implementation of the law authorizing its issuance . . . [have] the force and effect of law (People vs. Que Po Lay, 94 Phil. 640), and therefore C.B. Circulars [sic] Nos. 960 and 1301 can be recognized as special laws within the ambit of Section 100(a)(2) Tax Code." (Emphasis supplied.) (pages 112-113 of the CTA Record) Based on the foregoing, the conclusion is inevitable that VAT Ruling No. 008-92 (dated January 23, 1992) is bereft of legal basis in removing the VAT zero-rating treatment previously recognized on sale of gold to the Central Bank, including constructive export sales to BOI-registered enterprises. Indeed, the BIR has already recognized and admitted that said transactions are zero-rated (paragraph 3, pages 1-2 of the Joint stipulation of Facts; page 40-41 of the CTA Records).Said stance is demonstrated in the following acts of the BIR: a. the grant of petitioner's applications for zero-rating of sales to PASAR AND PHILPHOS (Annexes "A" and "B",Joint Stipulation of Facts; pages 56-57 of the CTA Record); b. Revenue Regulation No. 2-88, wherein it recognized sales to BOI-registered enterprises which export over 70% of its sales as zero-rated, subject to certain conditions (Annex "H",Joint Stipulation of Facts; pages 70-71 of the CTA Record); c. VAT Ruling No. 271-88 (dated June 24, 1988),wherein it was recognized that sales to PHILPHOS are zero-rated (Annex "I",Joint Stipulation of Facts; p 72 of the CTA Record); d. Letter dated April 18, 1988, whereby it recognized that sales of copper concentrates to PASAR are zero-rated (Annex "J",Joint Stipulation of Facts; page 73 of the CTA Record);and e. VAT Ruling No. 008-92, which states that the sale of raw materials to BOI-Registered enterprises can qualify for zero-rating (Annex "N",Joint Stipulation of Facts; pages 79-82 of the CTA Record). Insofar as the sales of gold to the Central Bank is concerned, the following official acts showed that the BIR had consistently considered the same as effectively zero-rated: a. The grant of petitioner's application for zero-rating (Annex "A",Joint Stipulation of Facts; page 56 of the CTA Records); b. VAT Ruling No. 100-000-000-378-88 (dated August 23, 1988) which states that the sale of gold to the Central Bank is considered as an export sale subject to zero-rating (Annex "P",Joint Stipulation of Facts; page 90 of the CTA Records);and c. Revenue Memorandum Circular No. 59-88 (dated December 14, 1988) which states that the sale of gold to the Central Bank if made by a VAT-registered firm (such as petitioner) is zero-rated (Annex "I",Joint Stipulation of Facts; page 96 of the CTA Records). dctai Clearly, the respondent court improperly deviated from its former position notwithstanding its legal bases. Ostensibly, the respondent opted to apply certain provisions of the law which buttressed its present position while being impervious of the salient provisions that would yield a contrary conclusion. Consequently, respondent has applied Section 100 (a) in a manner which negates fealty to the axion " Interpretare et concordare leges legibus, est optimus interpretandi modus " (The best method of interpretation is that which makes laws consistent with other laws.) Prescinding from the foregoing, VAT Ruling No. 008-92 (dated January 23, 1992) is devoid of legal bases in imposing the 10% VAT on petitioner's sales of copper concentrates to PASAR, pyrite to PHILPHOS and gold to the Central Bank. The companion issuance of VAT Ruling No. 008-92 is VAT Ruling No. 059-92 (dated April 20, 1992) which made retroactive to January 1, 1988 (date of effectivity of the VAT law), the revocation of hitherto established precedents and the application of the new position that: a. Sales to Board of Investments (BOI)-registered firms shall be zero rated provided that there is proof of actual exportation and payment in foreign currency (pages 6-7, VAT Ruling No. 059-92; pages 104-105 of the CTA Records);and b. Sales of gold to the CB shall be considered as local sales and therefore subject to 10% VAT (page 7, VAT Ruling No. 059-92; page 105 of the CTA Records). Illustrative of the posture consistently adhered to by the BIR, prior to VAT Ruling No. 059-92, are the following: a. In a letter addressed to the Philippine Associated Smelting and Refining Corporation (dated April 18, 1988),the BIR ruled that the mining companies need not pay the 10% VAT on sales of copper concentrates and calcines to PASAR since their applications for zero-rated status had been approved (pages 73-74 of the CTA Record). b. VAT Ruling No. 271-88 (dated June 20, 1988) provides that sales of merchandise, raw materials, etc. to PHILPHOS, and EPZA-registered enterprise under P.D. No. 66, are zero-rated (page 72 of the CTA Record). c. VAT Ruling No. 378-88 (dated August 23, 1988) provides that sales of gold to the CB is considered an export sales subject to zero-rating (page 90 of the CTA Record). d. Revenue Memorandum Circular No. 59-88 (dated December 14, 1988), pursuant to Section 100(a)(1) of the Tax Code, considers sales of gold by a VAT-registered firm as export sales subject to zero-rate (page 97 of the CTA Record). The pertinent provision of the NIRC on revocation of BIR rulings is quoted hereunder: "SEC. 246. Non-retroactivity of rulings . Any revocation, modification or reversal of any of the rules and regulations promulgated in accordance with the preceding section or any of the rulings or circulars promulgated by the Commissioner shall not be given retroactive application if the revocation, modification, or reversal will be prejudicial to the taxpayers except in the following cases: (a) where the taxpayer deliberately misstates or omits material facts from his return or in any document required of him by the Bureau of Internal Revenue; (b) where the facts subsequently gathered by the Bureau of Internal Revenue are materially different from the facts on which the ruling is based; or (c) where the taxpayer acted in bad faith." From the foregoing, it can be gathered that the question is whether or not the petitioner will be prejudiced by the retroactive application of VAT Ruling Nos. 008-92 and 59-92. The petitioner asseverates that by such revocation, it is now "unnecessarily exposed to a possible assessment for VAT taxes on the sales to CB, PASAR and Philphos" (Rollo, page 124). llcd In the case of ABS-CBN Broadcasting Corporation vs . Court of Appeals (108 SCRA 142), which was cited in Commissioner of Internal Revenue v . Burroughs Ltd . (142 SCRA 324), the Supreme Court held that: "...rulings or circulars promulgated by the Commissioner of Internal Revenue have no retroactive application where to so apply them would be prejudicial to the taxpayers. The prejudice to the petitioner of the retroactive application of Memorandum Circular No. 42-71 is beyond question. It was issued only in 1971, or three years after 1968, the last year that petitioner had withheld taxes under General Circular No. V-334. The assessment and demand on petitioner to pay deficiency withholding income tax as also made three years after 1968 for a period of time commencing in 1965. Petitioner was no longer in a position to withhold taxes due from foreign corporations because it had already remitted all film rentals and no longer had any control over them when the new Circular was issued ..." The Court of Tax Appeals had laid to rest the issue of non-retroactivity of revocations of BIR rulings vis-a-vis Section 246 (formerly Section 338-A) of the Tax Code in Philippine Long Distance and Telephone Company vs . Commissioner of Internal Revenue (C.T.A. Case No. 4056, December 28, 1988).It was ruled therein that: ". . . The doctrine that the government is never estopped from collecting a tax that is legally due it, now stands qualified by Section 338-A (now Section 246) of the National Internal Revenue Code, in the sense that under that section, rulings and circulars rules and regulations, promulgated by the Commissioner of Internal Revenue would have no retroactive application if to so apply them would be prejudicial to taxpayers, except in the three instances enumerated therein. "The ABS-CBN case and the Burroughs case abovecited by petitioner are in point. In both cases, the Supreme Court applied Section 338-A, having found that the prejudice to [the] petitioner therein of the retroactive application of the revocation of the rulings involved, 'is beyond question' and 'in so far as the enumerated exceptions are concerned, admittedly [the] petitioner does not fall under any of them." Thus, in the ABS-CBN case, the Supreme Court observed, in closing: "This Court is not unaware of the well-entrenched principle that the Government is never estopped from collecting taxes because of mistakes or errors on the part of its agents. In fact, utmost caution should be taken in this regard. But, like other principles of law, this also admits of exemptions in the interest of justice and fair play. The insertion of Section 338-A into the National Internal Revenue Code, as held in the case of Tuazon, Jr. vs. Lingad is indicative of legislative intention to support the principle of good faith. In fact, in the United States, from where Section 24(d) was patterned, it has been held that the Commissioner or Collector is precluded from adopting a position inconsistent with one previously taken where injustice would result from these, or where there has been a misrepresentation to the taxpayer." (Emphasis supplied) As aptly put by the petitioner, the issues that ought to be considered are: "a. Will the concerned mining companies be unduly prejudiced by the revocation of the said rulings if the BIR refuses to grant their claims for input tax refunds pertaining to their sales of gold to the CB during the period prior to revocation of the aforesaid rulings? b. Will the said Mining Companies be unduly prejudiced by (sic) the BIR assess them for deficiency 10% vat on their sales of gold to the CB during the period prior to revocation of the aforementioned rulings?" (page 52 of the Petition) Citing the Memorandum (dated May 25, 1992) issued by the Commissioner of Internal Revenue (Annex "U-1",Joint Stipulation of Facts; page 106 of the CTA Record),which is quoted hereunder, the respondent argues that: "...there could be no prejudice to mining companies if Ruling 008-92 is made to retroact as of January 1, 1988 because their claims for refund of input taxes ...would still be allowed in the following cases: "a. on their output taxes on sales of gold to the Central Bank; "b. on their output taxes on sales other than (a) above; and "c. as deductions to income tax under sections 29 of Tax Code." The petitioner submits that it has been prejudiced in the total amount of P29 million representing output VAT which the BIR had assessed by way of deduction from the amount of which petitioner would have been entitled to if the change in respondent's position were not retroactively applied. In effect, petitioner's selling price was reduced by 1/11 by respondent with regard to CB sales and by the amount not attributable to export sales with regard to sales to PASAR and PHILPHOS and it is this extent that actual damages has been suffered (pages 46-47 of the Petition).In support thereof, DOJ Opinion No. 47, S. 1992, (page 6, Annex "W",Joint Stipulation of Facts, page 113 of the CTA Record) was cited, viz: "Evidently, the inconsistent position which the BIR would want to adopt now would work to the prejudice of the mining firms which had relied on the favorable interpretation of the VAT law heretofore given by the Department of Finance (DOF) and the BIR." It should be stressed that the parties have already stipulated that petitioner has been assessed for deficiency output VAT in the amount of P16,301,277.11 as deficiency output VAT on its sale of gold to CB by reason of the retroactive application of VAT Rulings Nos. 008-92 and 059-92 (pars. 12 and 13, Joint Stipulation of Facts; page 46-47 of the CTA Record). A comparison of petitioner's original claim for refund/tax credit amounting to P40,078,267.81 (page 59 of the CTA Record) and the approved refund/tax credit of P2,518,122.32 (pages 63, 69 of the CTA Record) reveals the prejudices wrought by the retroactive application of the revocation. Considered in the context of the deductions totalling P30,189,615.43, there is a hiatus in the view of the majority that "petitioner has not sufficiently shown that it will be prejudiced by the retroactive application of VAT Ruling Nos. 008-92 and 059-92" (page 409 of the CTA Record). In fine, We conclude that the petitioner has sufficiently shown that it would suffer actual and imminent prejudice by the retroactive application of VAT Ruling Nos. 008-92 and 59-92. Accordingly, We rule that the prohibition under Section 246 of the Tax Code applies to the case at bar. With respect to the petitioner's argument that the respondent could not impose the 70% export sales requirement of BOI-registered enterprises in order to apply VAT zero-rating, the majority of the members of the Court of Tax Appeals said: ". . . VAT Ruling No. 008-92 was issued pursuant to Section 245 of the Tax Code, which empowers the Secretary of Finance to 'promulgate all needful rules and regulations for the effective enforcement of the provisions of [the Tax] Code.' Besides, a finding of this Court against the validity of that portion of the questioned ruling will not in any way benefit petitioner. On the contrary, it may even be prejudicial to it . . . it could adversely affect even the tax credit granted to it in respect of its sales to PASAR and Philphos. Finally, this Court is fully cognizant of the overriding governmental policy which prompted respondent Commissioner to relent from his initial position that the strict rule prescribed in Section 100(a)(1) of the Tax Code admits of no exceptions whatsoever." (pages 16-17 of the CTA Resolution; pages 409-410 of the CTA Record). It should be stressed that "it is not the person enjoying tax exemption privilege under special law or international agreement which is given the privilege of enjoying zero-rating under the VAT law, but the sales (by suppliers) to such persons or entities which may be subject to the zero-rate." (BIR Ruling No. 077, March 4, 1988) (Emphasis supplied) Only direct export sales can be zero rated pursuant to Section 100(a)(2). Under Section 2 of Revenue Regulations Nos. 2-88, zero-rating can only be extended to the suppliers of raw materials to BOI-registered export-producer exporting at least 70% of its annual production. (page 360, the National internal revenue Code Annotated, de Leon, Fifth Edition (1994). prcd Whatever ambiguity there may have been in Rev. Reg. No. 2-88 (page 70 of the CTA Record) has been clarified in Rev. Reg. 7-95, Section 4.100.2 thereof provides that zero-rating applies to: "The sale of raw materials or packaging materials to an export-oriented enterprise whose export sales exceed 70% of total annual production; "Any enterprise whose export sales exceed 70% of the total annual production of the preceding taxable year shall be considered an export-oriented enterprise upon accreditation as such under the provisions of the Export Development Act (Republic Act No. 78-14) and its implementing rules and regulations." Further, the following sales by VAT-registered taxpayers are automatically zero-rated: "I. With respect to Goods: "1. 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 and services, and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas; and "2. Sale of raw materials or packaging materials to non-resident buyer for delivery to a resident local export-oriented enterprise to be use in manufacturing, processing, packing or repacking in the Philippines of the said buyer's goods and paid for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas" (Rev. Memorandum Circular No. 17-96, Cited in Jose N. Nolledo, Bar Reviewer in Taxation, 1996, page 1095-1096).(Emphasis supplied) More. The 70% requirement is essential for entitlement to effective zero-rating of transactions under Section 100(2)(a)(3) and Section 102(2)(b)(3) by export-oriented enterprises (Rev. Memo Circular No. 17-96).Regulations partake of administrative interpretations of tax laws. They are entitled to great respect from the courts especially if followed for some considerable period (Molina v. Rafferty, 39 Phil. 169; People v. Hernandez, 59 Phil. 272).Administrative agencies are accorded the presumption of regularity in the performance of official functions. This is congruent with the maxim:" Vocabula artium explicanda sunt secundum definitiones prudentum " (Technical terms are to explained by the definition of those learned in the arts.) The Court of Tax Appeals, in its majority opinion, brushed aside petitioner's position that the respondent cannot disallow VAT credits by reason of its failure to comply with VAT documentary requirements. We quote with approval the majority opinion: "As earlier stated, Section 245 of the Tax Code empowers the Secretary of Finance to issue rules and regulations for the 'effective enforcement' of the provisions of said Code. We cannot subscribe to petitioner's view. That (sic) respondent Commissioner has no discretion to issue rules and regulations that do not strictly comply with the literal text of the law. The rules are promulgated precisely to guide and facilitate, 'effectively rather than delay the processing of claims for tax refund.'" (page 17 of the CTA Resolution; page 410 of the CTA Records) cdll Quoted hereunder is Section 108(a) of the NIRC: "SEC. 108. Invoicing and Accounting Requirements for VAT-Registered Persons . (a) Invoicing requirements . A VAT-registered person, shall, for every sale, issue an invoice or receipt. In addition, to the information required under Section 238, the following information shall be indicated in the invoice or receipt: "(1) The VAT registration number; "(2) If the seller bills the tax as a separate item in the invoice: "(A) The amount of gross selling price or gross receipts on which the value-added tax is based; "(B) The amount of value-added tax determined by multiplying the amount of gross selling price or gross receipts by the rate of tax; and "(C) The sum of (i) the gross selling price or gross receipts and (ii) the value-added tax which the purchaser pays or is obliged to pay to the vendor. "(3) If the seller elects not to bill the tax as a separate item in the invoice or receipt, the total amount charged against the buyer. "xxx xxx xxx" The complementary rule of the foregoing, scilicet ,Section 21 of Rev. Regs. No. 5-87 states: "SEC. 21. Invoicing requirements . Invoices and/or receipts All VAT-registered persons shall, for every sale, issue an invoice or receipt. The invoice should contain the information prescribed in Sections 108(a) and 238. "xxx xxx xxx "Only VAT-registered persons can print the VAT registration number in their invoices or receipts. Any invoice bearing the VAT registration number of the seller shall be considered as a 'VAT INVOICE'.Value-added tax, whether indicated as a separate item or not in the 'VAT Invoice' shall be allowed as input tax credits to those liable to value-added tax. All purchases covered by invoices other than "VAT invoice" shall not be entitled to input taxes. "xxx xxx xxx" Section 238 of the Tax Code referred to in both of the aforesaid provisions reads: "SEC. 238. Issuance of Receipts or Sales or Commercial Invoices . All persons, subject to an internal revenue tax shall for each sale or transfer of merchandise or for services rendered valued at P25.00 or more, issue receipts or sales or commercial invoices, prepared at least in duplicate, showing the date of transaction, quantity, unit cost and description of merchandise or nature of service: Provided, That in the case of sale, receipts or transfers in the amount of P100.00 or more, or, regardless of amount where the sale or transfer is made by persons subject to value-added tax to other persons also subject to value-added tax :or, where the receipt is issued to cover payment made as rentals, commissions, compensations or fees, receipts or invoices shall be issued which shall show the name, business style, if any, and address of the purchaser, customer, or client .The original of each receipt or invoice shall be issued to the purchaser, customer or client at the time the transaction is effected, who, if engaged in business or in the exercise of profession, shall keep and preserve the same in his place of business for a period of three (3) years from the close of the taxable year in which such invoice or receipt was issued, while the duplicate shall be kept and preserved by the issuer, also in his place of business for a like period. (Emphasis supplied) "The Commissioner may, in meritorious cases, exempt any person subject to an internal revenue tax from compliance with the provisions of this Section. (as amended by Exec. Order No. 273)" A VAT invoice can be used only for sales of goods or services subject to VAT. For VAT invoice or receipts issued by VAT registered persons, Section 21 of Rev. Regs. No. 5-87 requires the invoice to contain the information prescribed in Sections 108(a) and 238 of the Tax Code. Only VAT registered persons can print the VAT registration number in their invoice or receipt. Thus, any invoice bearing the VAT registration number of the seller shall be considered as a "VAT invoice" and the tax, whether indicated as a separate item or not in the VAT invoice shall be allowed as input tax credits to those liable to value added tax. However, all purchases covered by invoices other than a "VAT invoice" shall not be entitled to input taxes. prcd Non-compliance with Sections 108 and 238 of the Tax Code is penalized under Section 111 of the Tax Code (Power of the Commissioner to suspend the business operations of a taxpayer). Corollarily, Section 25 of Rev. Regs. No. 5-87 (Administrative and penal provisions) and Section 263 of the Tax Code (Failure or refusal to issue receipts or sales or commercial invoices, violations related to the printing of such receipts or invoices and other violation) are of the same import. The VAT is imposed on the taxable sales of the seller. Accordingly, the output VAT should be based on the gross selling price appearing in the seller's VAT invoice and not on the sales price appearing in the VAT invoice of the customer. (VAT Ruling No. 076, August 7, 1991) Hence, the seller ought to comply with the invoicing and accounting requirements; otherwise, he shall be penalized for violations thereof. Clearly, the VAT system has a built-in self-policing feature which will ensure proper collection of the tax at all stages of distribution. Moreover, VAT is an indirect tax. As such, it can be shifted to the purchasers of goods and services. To be sure, the shifting of the VAT does not make them directly liable for the payment of the VAT; hence, they cannot invoke the exemption privileges granted to avoid the passed-on-VAT. The VAT shifted forms part of the cost of goods and services purchased. A consideration of the disallowed input VAT in the light of the foregoing premises is therefore in order. (a) P1,384,172.48 disallowed for failure to present "VAT Invoice". As previously stated, petitioner/purchaser has only itself to blame for the disallowance. It should have demanded a VAT invoice for its purchases. Otherwise, it would be condoning violations of the VAT law or worse, giving aid to its commission considering the nature of the VAT system (page 5-6 BIR Memorandum; pages 147-148 of the CTA Record); (b) P474,606.87 Disallowed since the VAT Invoices presented did not contain the VAT Registration Number of the seller/supplier although respondent admitted that petitioner submitted the VAT Registration Certificate of the seller/supplier to prove VAT registration (page 6, BIR Memorandum, pages 148 of the CTA Record). (c) P441,195.54 Disallowed because the invoices do not bear "printed" VAT numbers but merely stamped or typewritten although respondent admitted that the matters required under Section 108(a) and 238 of the NIRC were indicated therein and VAT Registration Certificates were presented to confirm correctness thereof (pages 6-7, BIR Memorandum; page 148 of the CTA Record). (d) P326,374.23 Disallowed for the reason that invoices were made without requisite authority to print although respondent admitted that the petitioner has presented proof of authority to print. (page 6, BIR Memorandum; page 148 of the CTA Record) A cursory perusal of Section 108(a) of the Tax Code shows the VAT Registration Number should be "indicated" on the VAT invoice. The petitioner contends that Section 108 of the NIRC does not require the actual printing of the VAT number (page 82 of the Petition). Further, it added that the respondent in disallowing petitioner's claim for refund of input taxes exceeded its rule-making power by "legislating into the law what is not in the law." (page 80 of the Petition) We are not convinced by such ratiocination. Section 263 of the Tax Code and Section 21 of Rev. Regs. No. 5-87 clearly shows that the VAT Registration Number should be "printed" on the VAT Invoice. Section 263 of the Tax Code is quoted hereunder, inter alia . "SEC. 263. Failure or refusal to issue receipts or sales or commercial invoices, violations related to the printing of such receipts or invoices and other violations. "(a) Any person who, being required under Section 238 to issue receipts or sales or commercial invoices, fails or refuses to issue such receipts or invoices, issues receipts or invoices that do not truly reflect and/or contain all the information required to be shown therein or uses multiple or double receipts or invoices, shall, upon conviction, for each act or omission be fined not less than one thousand pesos but not more than fifty-thousand pesos or imprisoned for a term of not less than six months and one day but not more than two years or both. "(b) Any person who commits any of the acts enumerated hereunder shall be penalized in the same manner and to the same extent as provided for in this Section: "1. Prints receipts or sales or commercial invoices without authority from the Bureau of Internal revenue; "2. Prints double or multiple sets of invoices or receipts; "3. Prints unnumbered receipts or sales or commercial invoices, not bearing the name, business style, taxpayer account number, and business address of the person or entity; or "4. Fails to submit the quarterly report required in Section 239." (Emphasis supplied.) Provisions of a statute should be read in its entirety to the end that ostensibly conflicting provisions be harmonized in a manner consistent with the legislative intent. Moreover, the taxability of a party cannot be blandly glossed over on the basis of a supposed broad pragmatic analysis alone without substantial supportive evidence, lest government operations suffer due to diminution of much needed funds (Commissioner of Internal Revenue v. Mitsubishi Metal Corp., et al. 181 SCRA 214). Taxes are the lifeblood of the government and their prompt and certain availability is an imperious need. (Commissioner of Internal Revenue v. Algue, Inc. 158 SCRA 9; Commissioner of Internal Revenue vs. Court of Appeals, 257 SCRA 200). The petitioner claims that output VAT on miscellaneous taxable sales should be deducted from its presumptive input tax ("'PIT'") and not from the current input tax (page 83 of the Petition; Rollo, page 163).The VAT Audit Report showed that the BIR deducted the output tax on transactions deemed sales (pages 295, BIR Records) from the current allowable refund/credit. The P46,980,129.73) corresponding to the PIT is sufficient to cover the amount of output tax. The majority opinion, both in its decision and resolution, did not enlighten us on this point. J. Acosta, in his Concurring and Dissenting Opinion, maintains that: "As to respondent's insistence that the P972,535.67 output tax due on petitioner's miscellaneous taxable sales be deducted from the input tax claimed as refund, I find neither rhyme nor reason for said move since petitioner's presumptive input tax per VAT Return filed for the period January to March 1990 totalled P46,980,129.73 (Annex 'C').There is no question as to petitioner's entitlement thereto and that petitioner has not applied for the refund of that amount[,] choosing instead to credit it against output tax due for it was more than enough to cover the same. To be deprived of [the] aforementioned option would be doing great injustice to petitioner, which under the law has the indubitable right to do so." (Rollo, page 54) The crux of the imbroglio revolves around Section 105 of the NIRC, which provides: "SEC. 105. Transitional Input Tax Credits . A person who becomes liable to value-added tax or any person who elects to be a VAT-registered person shall, subject to the filing of an inventory as prescribed by regulations, be allowed input tax on his beginning inventory of goods, materials and supplies equivalent to 8% of the value of such inventory or the actual value-added tax paid on such goods, materials and supplies, whichever is higher, which shall be creditable against the output tax." The Memorandum for the Commissioner (dated September 8, 1992) submitted by the revenue officers assigned to conduct the verification of documents and the related accounting records of the petitioner is instructive (pages 292, BIR Records).Their findings run thus: "Further verification of records and scrutinized accounts and journal entries disclosed that the reported output tax on miscellaneous taxable sales (deemed sales and sales of disposable items and miscellaneous sales of services) was increased to P972,535.67). "The reported output tax on miscellaneous taxable sales of P719,231.44 was deducted from the presumptive input tax (PIT) per VAT return, which is the unadjusted balance and not the amount of PIT as verified by the VAT Division as per attached file copies of [the] verification report (see pages 279 & 270). . . . In View of the guidelines in the application of VAT rulings on PIT copper mining industries under RMO 49-90 (see pages 271-273, the total output tax due on miscellaneous taxable sales during the period is hereby recommended to be deducted from the available and allowable input tax during the period and not from the PIT since the amount is not yet final and the suspended taxes has not been fully paid .(Emphasis supplied) Revenue Memorandum Order No. 49-90 (pages 272-274, BIR Records),which was cited above, threshed out the inconsistencies between VAT Ruling No. 059-88 (dated March 8, 1988) and VAT Ruling No. 033-89 (dated February 9, 1989).It prescribed the guidelines relative to their opposite application in this light: "xxx xxx xxx "1. Determine if copper mining firms have been required to pay back the direct/indirect taxes on their tax suspended purchase or importation of materials and supplies during the effectivity of LOI 1416. If not, VAT Ruling No. 059-88 should be upheld, hence the 8% presumptive tax shall not be granted. "2. If the suspended taxes on the purchase/importation of materials and supplies were accounted and paid back to the mining firm in full (i.e. applying E.O. 340), then VAT Ruling No. 033-89 should be upheld, hence the 8% presumptive input tax on materials/supply inventory as of December 31, 1987 should be allowed. . . ." Granting arguendo that the presumptive input tax of the zero-rated taxpayer (i.e. petitioner) is in excess of the amount necessary to cover the output tax, the same remains prescribed, Revenue Regulations No. 7-95, which consolidated value-added tax regulations, provides: "SEC. 4.106-1 Refunds or tax credits of input tax . (a) Zero-rated sales of goods or properties or services On a VAT-registered person may be given a tax credit certificate or refund of VAT paid corresponding to the zero-rated sales of goods, properties or services, excluding the presumptive input tax and to the extent that such input tax has not been applied against the output tax. The application should be made within two (2) years after the close of the taxable quarter when the sales were made. ..." Revenue Memorandum Circular No. 17-96 clarified this issue thus; "Q-14. Zero-rated taxpayers will normally have an excess of input taxes over output taxes. Can the excess be offset against the taxpayer's other internal revenue tax liabilities? "A-14. No. Direct offsetting of excess input over taxes against other internal revenue tax liabilities of the zero-rated taxpayer is not allowed." We are also called upon to interpret whether or not under the VAT law the period within which the refund if input taxes may be made by the Commissioner of Internal Revenue is mandatory. Section 106(e) of the Tax Code, as amended by Executive Order No. 273 is quoted below: "SEC. 106. Refunds or tax credits of input tax . "xxx xxx xxx "(e) Period within which refund of input taxes may be made by the Commissioner . The Commissioner shall refund input taxes within 60 days from the date the application for refund was filed with him or his duly authorized representative. No refund of input taxes shall be allowed unless the VAT-registered person files an application for refund within the period prescribed in paragraphs (a),(b) and (c),as the case may be." (Emphasis supplied.) The concurring and dissenting opinion of J. Acosta sheds light on this query. The salient excerpts therefrom are quoted below: "The question whether a statute should be given mandatory or directory effect is, in every case, one of statutory construction with respect to which all the rules and principles of construction are applicable and some special guidelines are recognizable (Sands, Sutherland Statutory Construction, [4th Edition],Volume 1A [,] 825-04, page 301).There is no universal rule by which directory provisions in a statute may, under all circumstances, be distinguished from those which are mandatory. Consideration must be given to the legislative history, the language of the statute, its subject matter, the importance of its provisions, their relation to the general object intended to be accomplished by the act, and finally, whether or not there is a public or private right involved (State ex rel. Laurisch vs. Pohl, 214 Mian. 221, 8 NW 2d 227 [1943]).The important distinction between directory and mandatory statutes is that the violation of the former is attended with no consequences, while the failure to comply with the requirements of the latter either invalidates purported transactions or subjects the non-complier to administrative legal liabilities, (Hester v. Ramykowski, 13 Ill. 2d.,150 NE 2d. 196 [1958]). "The time provision under consideration was an amendment in the Tax Code [and] introduced by Executive Order No. 273 (VAT Law) at a period when the legislative and executive functions of the government were being exercised by the chief executive. The word 'may' and 'shall' were both used in the same provision. The word 'may' is usually only permissive or discretionary and operates to confer discretion[,] while the word 'shall' is imperative [that is] operating to impose a duty which may be enforced (Moreno, Philippine Law Dictionary [Third Edition] page 879[,] citing Citizens Bank and Trust Co. vs. Brillantes, 44306-R, August 15, 1972; 17 C.A.R. [2S] 1 963.). Instead of giving light to the issue[,] the foregoing further muddled the same. "For the reason that individuals or the public should not be made to suffer for the dereliction of public officers[,] provisions regulating the duties of public officers and specifying the time for their performance are in that regard generally directory (Sands, Sutherland Statutory Construction, [4th Edition],Volume 2A, S57-19, page 444[,] citing cases)....Statutory directions to taxing officials may frequently be directory for the common reason that they are merely directions to public officers for the purpose of securing prompt and orderly conduct of business[,] and the failure to strictly follow them can be injurious to no one (Id.,S 57.20, p. 450[,] citing cases).Likewise, where the time, or manner of performing the action directed by the statute is not essential to the purpose of the statute, provisions in regard of time or method are generally interpreted as directory only (Sands, Sutherland Statutory Construction, [4th Edition],Volume 1A. S 25.04, p. 301). " The conclusion is inevitable that Section 106(e) of the NIRC which prescribes a period of sixty (60) days from [the] date of filing of [the] application for refund within which the Commissioner shall refund input taxes is merely directory .[Emphasis supplied.] Petitioner's entitlement to the refund is not lost if the Commissioner failed to act on said claim within the time allotted. Petitioner has to establish without a scintilla of doubt the validity of its claim. On the other hand, respondent must exercise great caution before its grant since a refund is in the nature of an exemption and calls for [a] strict construction of the law." (pages 31-34 of the CTA Resolution) Prescinding from the forgoing, it is well settled that exemptions from taxation are highly disfavored in law; and he who claims an exemption must be able to justify his claim by the clearest grant of organic or statute law. An exemption from the common burden cannot be permitted to exist upon vague implications (Asiatic Petroleum Co. vs. Llanes, 49 Phil. 466, cited in Collector vs. Manila Jockey Club, Inc.,L-8755, March 23, 1956; Davao Light & Power Co.,Inc. vs. Commissioner of Customs, L-28731, 28731, March 29, 1972).To epitomize the principle, it is well-settled that taxation is the rule, tax exception is the exception. And this is justified by the necessity of government funding, immortalized in the maxim that taxes are the lifeblood of the government. Vectigalia nervi sunt rei publicae taxes are the sinews of the State (Ferdinand R. Marcos II vs. Court of Appeals, G.R. No. 102880, June 5, 1997). A claim for tax refund partakes of the nature of an exemption which cannot be allowed unless granted in the most explicit and categorical language. Being in the nature of an exemption from taxation, a claim for refund is strictly construed against the claimant and the failure to discharge said burden is fatal to the claim (Emmanuel and Zenaida Aguilar vs. Commissioner of Internal Revenue, CA-G.R. No. SP. 16432, March 30, 1990). Section 230 of the Tax Code is very emphatic that the claim for refund or tax credit must be filed (or the suit proceedings therefore must be commenced in court) within two (2) years from the date of payment of the tax or penalty, regardless of any supervening cause. Such requirement is, therefore, a condition precedent and non-compliance therewith bars recovery (Philippine Acetylene Co., Inc. vs. Commissioner, CTA Case No. 1331, November 7, 1965). The Supreme Court has ruled in several cases that the taxpayer need not wait for the action of the Commissioner on his claim for refund before taking his refund to court. (Sweeney vs. Collector, L-12178, August 21, 1959; P.J. Kiener Co. v. David L-5163, April 23, 1953; Commissioner vs. Victorias Milling Co.,22 SCRA 12).The rule is stated succinctly in the case of Gibbs vs . Collector ,L-13453, February 29, 1960, as follows: "If, however, the Collector takes time in deciding the claim and the period of two years is about to end, the suit of proceedings must be started in the Court of Tax Appeals before the end of the two-year period without awaiting the decision of the Collector. This is because the positive requirement of Section 306 (now Section 230 of the Tax Code) and the delay of the Collector in rendering a decision does not extend the peremptory period fixed by statute." It is important to note, however, that even if the claim is filed with the BIR on time and the suit for refund in the Court of Tax Appeals is likewise filed within two years from date of payment, if the said court action is commenced beyond the thirty day period for appealing decisions of the Commissioner to the Court of Tax Appeals, the refund will not be given due course. prcd Inasmuch as the time-provision for refund of the input VAT is merely directory, no interest can be due as a result of the failure of the Commissioner to act on the petitioner's claim within sixty (60) days from the date of application therefor. Well entrenched is the rule that in the absence of a statutory provision explicitly directing the payment of interest on the amount to be refunded to the taxpayer, the Government cannot be required to pay the same (Shell Philippines, Inc. vs. Central Bank of the Philippines, L-51353, June 27, 1988, 162 SCRA 628). Moreover, interest may be awarded only when the collection of tax sought to be refunded was tainted with arbitrariness (Atlas Fertilizer Corp. vs. Commissioner of Internal Revenue, 100 SCRA 556). In the case at bar, there is no showing that the collection of the tax was attended by arbitrariness. The petitioner sought to impress upon this Court that it may apply VAT credits to its other tax liabilities by way of legal compensation as provided under Article 1279 of the Civil Code (page 85 of the Petition; page 165 of the Rollo) anchoring its contention on Section 104 of the Tax Code, which reads: "Sec. 104. Tax Credits . (a) Creditable input tax. "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 carried over to the succeeding quarter or quarters . Any input tax attributable to the purchase of capital goods or to zero-rated sales by a VAT-registered person may at his option be refunded or credited against other internal revenue taxes, subject to the provisions of Section 106 ." (Emphasis supplied) In construing Sections 104 and 106 of the Tax Code, the input tax paid which the petitioner may opt to refund or credit against other internal revenue taxes is subject to the following conditions, to wit: "(1) The claimant must be a VAT-registered persons (Section 16, Rev. Regs. No. 5-87); "(2) An application for the issuance of a tax credit certificate or refund has been filed within the reglementary period provided by law (Section 106(e), NIRC); "(3) Such input tax has not been applied against output tax (Section 106(a), (b), (c), NIRC); "(4) The application has been approved by the Commissioner of Internal Revenue; and "(5) A warrant must have been drawn by the Commissioner equivalent to the approved amount sought to be refunded, or a tax credit certificate in favor of the petitioner has been issued to the effect that he is permitted to apply such input taxes against other internal revenue taxes. The petitioner failed to meet all the foregoing conditions. Ergo ,his claim for refund is untenable. Also, in Republic vs . Mambulao Lumber Co . (6 SCRA 622), the Supreme Court enunciated the rule that taxes are not subject to set-off or legal compensation. In the subsequent case of Domingo vs . Garlitos (8 SCRA 443),said tribunal reversed itself when it ruled that where the taxes and the taxpayer's claim are fully liquidated, due and demandable, legal compensation under Article 1279, Civil Code, can take place by operation of law, and both debts are extinguished to the concurrent amount. The decision in Republic vs . Mambulao Lumber Co ., supra ,which was followed in Francia vs . Intermediate Appellate Court (G.R. 76749, June 28, 1988),appears to be the better view for the following reasons, among others: "(1) taxes are of a distinct kind, essence and nature, and these impositions cannot be so classed in merely the same category as ordinary obligations; "(2) the applicable laws and principles governing each are peculiar, not necessarily common, to each; and "(3) public policy is subserved if the integrity and independence of taxes be maintained (Jose C. Vitug, Compendium on Tax Law and Jurisprudence, 3rd Revised Edition (1993),page 40) As a last ditch effort to salvage its beleaguered position, the petitioner in its Supplemental Petition for Review argued in this wise: "Considering that the parties have stipulated that the petitioner was VAT-registered[,] such stipulation could not simply be ignored or overruled by the court a quo. If there was any doubt in its mind, then the proper procedure should have been to allow petitioner to explain or adduce evidence on the matter instead of dismissing outright the petition without affording petitioner the opportunity to rectify any perceived defect in the stipulation." (page 2, Supplemental Petition for Review; Rollo, page 341) llcd The decision of the Court of Tax Appeals place scant regard for such ratiocination. It refuted petitioner's contentions by reasoning that: "The records of the case show that although the parties stipulated that petitioner is a VAT-registered enterprise per its Registration No. 32-A-6-002224, the VAT Registration Certificate of petitioner as appearing in the records is 32-0-004622 and not 32-A-6-002224 (page 250, BIR Records). Section 107(d) of the NIRC states that 'each VAT-registered person shall be assigned only one registration number.' We are therefore at a loss as to where petitioner got its alleged VAT Registration No. 32-A-6-002224 which it used in the VAT return and application for tax credit/refund that it filed. "In addition, the Court likewise notes that the supposed effectivity date of petitioner's VAT Registration (per its Registration Certificate submitted) was August 15, 1990, whereas the input VAT refund it seeks covers the period from January to March 1990. Since liability for VAT commences only on the first day of the month following the registration of the enterprise (Section 23, Revenue Regulations No. 5-87),the reckoning point for petitioner's entitlement to any refund/tax credit should likewise be counted from the same date, i.e. September 1, 1990." (page 8, CTA Decision; page 354 of the CTA Record) Quoted below is the pertinent portion of the resolution of the Court of Tax Appeals, which We quote with approval. It reads: "Petitioner contends that its being a VAT-registered entity has already been stipulated such that proof thereof is not necessary. He also submitted a VAT Registration Certificate issued by Revenue District Officer Renato Manalili (Revenue District No. 32-A[,] West Makati) that as of January 1, 1988 petitioner was already a VAT-registered entity covered by VAT Registration No. 32-A-6-00224. It further explained that the change in its VAT Registration Number from 32-A-6-00224 to 32-0-004622 when it registered anew in compliance with Section 3 of Revenue Memo Circular No. 6-88 after it transferred its principal place of address to another Revenue district. "Although the parties stipulated that petitioner is a VAT registered entity, it is however the duty of the Court to ascertain whether the effectivity of such registration covers the first quarter of 1990[-] the period for which refund is being claimed. On the basis of the parties Joint Stipulation of Facts, particularly in par. 2 Thereof (sic) petitioner is 'registered with the BIR as a VAT enterprise 'effective August 15, 1990' and was clearly specified in the Registration Certificate on page 250, BIR Records which form part of the said Joint Stipulation of Facts. The parties are thus bound by such fact stipulated by them. They cannot controvert nor can this Court modify such stipulated fact that petitioner is VAT registered effective Aug. 15, 1990, which evidently is after the 1990 1st quarter, the period for which refund/credit is claimed." (page 1-2, CTA Resolution, 394-395 of the CTA Record) Under Section 4, Rules 129 of the Rules of Court, as amended, a judicial admission cannot be contradicted previously shown to have been made through palpable mistake or that no such admission was made. An admission in a pleading on which a party goes to trial is conclusive against him unless the court in its reasonable discretion allows the pleader to withdraw, explain or modify it if it appears to have been made by improvidence or mistake (Kanopka vs. Kanopka, 154 A. 144, 113 Conn. 30, 80 A.L.R. 619; 31 C.J.S. 1171) or that no such admission was made, i.e. "not in the sense in which the admission was made to appear" or "the admission was taken out of context" (Sta. Ana vs. Maliwat, 24 SCRA 1018). A party cannot trifle with a court's decision or order which he himself sought with full awareness of his right under the premises, by taking it or leaving it at pleasure. The allegations, statements or admissions contained in a pleading are conclusive as against the pleader. A party cannot subsequently take a position contradictory to, or inconsistent with, his pleadings (McDaniel v. Apacible, 44 Phil. 448).It is a familiar doctrine that an admission made in the pleadings cannot be controverted by the party making such admission and are conclusive as to him, and that all proof submitted by him contrary thereto or inconsistent therewith should be ignored, whether objection is interposed by the party or not (Cunanan vs. Amparo, 80 Phil. 227; Ramirez vs. Orientalist Co.,38 Phil. 634; Joe's Radio & Electrical Supply vs. Alto Electronics Corp. and Alto Surety & Insurance Co.,Inc.,104 Phil. 333). In sum, this Court hereby resolves the issues jointly stipulated by the parties as follows: a. VAT Ruling No. 008-92, in imposing 10% VAT on sales of copper concentrates to PASAR, pyrite to PHILPHOS and gold to the Central Bank lacks legal bases, hence, of no effect. b. VAT Ruling No. 05-92 (dated April 20, 1992) which applies retroactively to January 1, 1988 VAT Ruling No. 008-92 (dated January 23, 1992) is contrary to law. c. Refund of input tax for zero-rated sale of goods to Board of Investment (BOI)-registered exporters shall be allowed only upon presentation of documents of liquidation evidencing the actual utilization of the raw materials in the manufacture of goods at least 70% of which have been actually exported (Revenue Regulations. No. 2-88). d. Revenue Regulations that automatically disallow VAT refund on account of failure to faithfully comply with the documentary requirements enunciated thereunder are valid. e. A VAT-registered person shall, subject to the filing of an inventory as prescribed by regulations, be allowed transitional input tax which shall be credited against output tax. Be that as it may, current input tax, excluding the presumptive input tax, may be credited against output tax on miscellaneous taxable sales if the suspended taxes on purchases and importations has not been fully paid. Further, direct offsetting of excess input over output taxes against other internal revenue tax liabilities of the zero-rated taxpayers is not allowed. f. Section 106(e) of the NIRC prescribing a sixty (60) day period from the date of filing of the VAT refund/tax credit application within which the Commissioner shall refund the input tax is merely directory. Hence, no interest can be due as a result of the failure of the Commissioner to act on the petitioner's claim within sixty (60) days from the date of application therefor. g. Motu propio application of excess tax credits to other tax liabilities is not allowed. WHEREFORE, premises considered, the assailed decision and resolution of the Court of Tax Appeals in C.T.A. Case No. 4794 are hereby REVERSED and SET ASIDE. Let the records of this case be remanded to the court a quo for a proper computation of the refundable amount which should be remitted, without interest, to the petitioner within sixty (60) days from the finality of this decision. No pronouncement as to costs. SO ORDERED. Cui and Aquino, JJ . , concur.