Manila Mining Corp. v. Commissioner of Internal Revenue

SPECIAL FIFTH DIVISION [CA-G.R. SP No. 38287. June 5, 1997.] MANILA MINING CORPORATION , petitioner , vs . COMMISSIONER OF INTERNAL REVENUE , respondent . D E C I S I O N MONTENEGRO , J p : This is a petition for review of the a) February 20, 1995 decision of the Court of Tax Appeals in C.T.A. Case No. 4860, entitled "Manila Mining Corporation vs. Commissioner of Internal Revenue", denying petitioner's claim for refund in the amount of P4,795,135.85 representing excess input taxes or value added tax paid for the third and fourth taxable quarters of the year 1990; and b) the August 8, 1995 resolution denying petitioner's motion for reconsideration. The antecedent facts: On April 8, 1988, petitioner filed with the BIR an application for zero-rating of its sale of gold to the Central Bank which elicited a favorable response from the then Deputy Commissioner Victor Deoferio, Jr. (Rollo, p. 67). On October 22, 1990, petitioner filed its VAT return for the third quarter of 1990 indicating a total creditable input tax balance of P2,520,394.64. Subsequently on January 21, 1991, petitioner filed its VAT return for the fourth quarter of 1990 with a total creditable input tax balance of P2,397,643.11 (Rollo, pp. 67-68). On September 1, 1992, petitioner filed an application for tax credit/refund for value-added tax with the VAT division of the BIR submitting therewith the necessary documents to support its claim (Rollo, p. 68). The claim of petitioner for tax credit/refund was denied by the Bureau of Internal Revenue. On top of the denial petitioner was assessed deficiency tax in the total amount of P8,012,213.47 for the whole taxable year of 1990 (Rollo, p. 69). From the aforesaid denial of the application for tax credit/refund, petitioner filed a petition for review with the Court of Tax Appeals (Rollo, p. 51). On February 20, 1995, the Court of Tax Appeals promulgated the assailed decision, denying petitioner's claim for refund, the dispositive portion of which reads: "WHEREFORE, in view of the foregoing, the petition is hereby DENIED for lack of merit. "SO ORDERED". ( Rollo, p. 78) Petitioner filed a motion for reconsideration (Annex C; Rollo, pp. 100-111) which was denied by the Court of Tax Appeals in a resolution promulgated August 8, 1995 ( Annex A; Rollo, pp. 63-65). Hence, this petition for review. Concisely and pointedly stated by the Office of the Solicitor General in its comment, the issue is whether the denial of petitioner's claim for tax credit/refund premised on the retroactive application of VAT Ruling No. 008-92, issued on January 23, 1992 is valid (Comment, p. 6; Rollo, p. 137). We resolve to reverse the decision. The Court of Tax Appeals, giving retroactive application to VAT Ruling 008-92 issued on January 23, 1992 and Revenue Memorandum Order No. 22-92 which classify the sale of gold to the Central Bank as local sale subject to 10% VAT, denied petitioner's claim for tax credit/refund. The applicable law is Section 246 of the National Internal Revenue Code which provides: "Sec. 246. Non-retroactivity of rulings . Any revocation, modification, or reversal of any rules and regulations promulgated in accordance with the preceding section or any of the rulings or circulars promulgated by the Commissioner of Internal Revenue 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." The law is clear. VAT Ruling 008-92 issued on January 23, 1992 and Revenue Memorandum Order No. 22-92 cannot be applied retroactively to petitioner's sales to the Central Bank from July 1, 1990 to December 31, 1990. In the recent case of Commissioner of Internal Revenue vs . Court of Appeals , et al ., G.R. No. 117982, February 6, 1997, the Supreme Court citing the cases of Commissioner of Internal Revenue v. Telefunken Semiconductor Philippines, Inc., G.R. No. 103915, 23 October 1995, 249 SCRA 401; Bank of America v. CA, G.R. No. 103092, 21 July 1994, 234 SCRA 302; Commissioner of Internal Revenue v. CTA, No. L-44007, 20 March 1991, 195 SCRA 444; Commissioner of Internal Revenue v. Mega General Merchandising Corp., G.R. No. 69136, 30 September 1988, 166 SCRA 166; Commissioner of Internal Revenue v. Burroughs, G.R. No. 66653, 19 June 1986, 142 SCRA 324; ABS-CBN v. CTA G.R. No. 52306, 12 October 1981, 108 SCRA 142, in no uncertain terms, pronounced, ". . . well-entrenched is the rule that 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 the taxpayers ." Revenue Memorandum Circular No. 59-88, dated December 14, 1988, and BIR Ruling No. 036-90, dated February 14, 1990 considered sales of gold by a VAT registered firm to the Central Bank as export sales subject to zero rate pursuant to E.O. 581 and Section 1690 of CB Circular No. 960. The retroactive application of VAT Ruling No. 008-92 deprived petitioner not only of its claim for refund but worse, made petitioner liable for deficiency VAT in the amount of P8,012,213.47. As explained by Presiding Judge Ernesto D. Acosta in his dissenting opinion: "The conclusion is irresistible that prejudice will be suffered by petitioner with the retroactive application of VAT Ruling No. 008-92. One has only to compare the petitioner's original claim for refund/tax credit amounting to P4,795,135.85 which was denied by the respondent and in addition, has assessed petitioner the total amount of P8,012,213.47 as deficiency VAT for the taxable year 1990, the year in question to get a clear picture of the damage which petitioner will suffer as a consequence of the retroactive application of the revocation. Considered in the context of the total denial of the claim and the issuance of a deficiency tax assessment there is a hollow ring to respondent's assertion that there is no prejudice to petitioner's interest. There is therefore utter dearth of merit in respondent's insistence that retroactive application of the revocation will not be prejudicial to petitioner in the face of the obvious implications of said ruling." (Rollo, pp. 98-99) In the abovementioned case of Commissioner of Internal Revenue vs . Court of Appeals , et al ., supra , promulgated two (2) years after the assailed decision of the Court of Tax Appeals, the Supreme Court ruled: "Without doubt, private respondent would be prejudiced by the retroactive application of the revocation as it would be assessed deficiency excise tax." WHEREFORE, premises considered, the petition is GIVEN DUE COURSE and GRANTED. The decision of the Court of Tax Appeals promulgated February 20, 1995 and resolution promulgated August 8, 1995 denying the motion for reconsideration are REVERSED and SET ASIDE. New judgment is entered ordering respondent Commissioner of Internal Revenue to refund or issue a tax credit certificate in favor of petitioner in the amount of P4,795,135.85 representing excess input taxes paid by petitioner for the third and fourth VAT taxable quarters of 1990. LexLib SO ORDERED. Ramirez and Asuncion, JJ . , concur. Lipana-Reyes, J . , is on leave.