Manila Mining Corp. v. Commissioner of Internal Revenue

ELEVENTH DIVISION [CA-G.R. SP No. 45322. October 19, 1998.] MANILA MINING CORPORATION , petitioner , vs . THE COMMISSIONER OF INTERNAL REVENUE AND COURT OF TAX APPEALS , respondents . D E C I S I O N ADEFUIN-DELA CRUZ , B. , J p : This is a petition for review of the May 30, 1997 decision of the Court of Tax Appeals, in CTA Case No. 5111, entitled "Manila Mining Corporation, petitioner vs. Commissioner of Internal Revenue, respondent", denying petitioner's claim for refund in the amount of P16,566,740.93 representing the value added input tax paid by petitioner on its export sales during the quarterly periods covering January 1, 1992 to December 31, 1992; and the August 29, 1997 CTA resolution which denied the petitioner's motion for reconsideration. The dispositive portion of the said CTA Decision, reads: LLphil "WHEREFORE, in view of all the foregoing the petition is hereby DENIED for lack of merit. SO ORDERED." ( Rollo , p. 35) The antecedent facts as summarized by the Court of Tax Appeals are as follows: "This is a judicial claim for refund of value-added Input taxes allegedly paid by petitioner on its export sales during the quarterly periods covering January 1, 1992 to December 31, 1992 in the total amount of P16,566,740.93. Petitioner is a domestic corporation organized and existing under the laws of the Republic of the Philippines. It is engaged in the mining business and as such, is a duly registered Value-Added Tax (VAT) taxpayer with respondent's Bureau, pursuant to the requirements of Section 107 of the National Internal Revenue Code, as shown by its VAT Registration No. 32-6-000632 (Exh. "C"). It is likewise a Board of Investment (BOI) Registered enterprise with Certificate of Registration Nos. 79-833 (Exh. "J"), DP 88-259 (Exh. "J-1"), DP 88-359 (Exh. "J-2"). DP 90-507 (Exh. "J-3") and EP93-212 (Exh. "J-4"). On various dates, petitioner filed its corresponding quarterly VAT returns for the calendar year 1992, as follows: Net Creditable Quarterly Date Filed Input Tax Exhibits 1st April 20, 1992 P3,204,763.03 F & F-1 2nd July 17, 1992 3,246,636.04 G & G-1 3rd October 20, 1992 5,077,453.21 H & H-1 4th January 20, 1993 4,610,499.62 I & I-1 TOTAL P16,139,351.90 ============ On May 28, 1993, petitioner filed with respondent's Bureau an application for tax credit/refund of VAT paid for the period of January 1, 1992 in the amount of P6,815,448.22 (Exh. "D"), and on July 20, 1993 another similar application was filed by it for the period July 1, 1992 to December 31, 1992 in the amount of P9,751,292.71 (Exh. "E"), for a total amount of P16,566,740.93 for the year 1992. To date, respondent allegedly has not acted on petitioner's application for tax credit/refund for VAT. Hence, this appeal filed on May 24, 1994 in accordance with Section 230 of the Tax Code and the rule established in the case of Commissioner of Internal Revenue vs. Victorias Milling Co., Inc. (22 SCRA 12) which states that: The claim for refund with the Bureau of Internal Revenue and the subsequent appeal to the Court of Tax Appeals must be filed within the two year period. If, however, the Commissioner takes time in deciding the claim, and the period of two years is about to end, the suit or proceeding must be started in the Court of Tax Appeals before the end of the two year is about to end, the suit or proceeding must be started in the Court of Tax Appeals before the end of the two year period without awaiting the decision of said Commissioner." Records show that on December 23, 1993, respondent issued an Authority to Issue VAT Credit/Refund in the total amount of P7,537,139.79, broken down as follows: Bureau of Internal Revenue P5,482,734.79 Bureau of Customs 2,054,405.00 Total 7,537,139.79 ========== Hence, on September 28, 1994, respondent issued Tax Credit Certificate No. SN 002637 in the amount of P5,482,734.79 representing creditable input VAT on local purchase in the name of the petitioner for the period January to December 1992 which the latter accepted (Exh. "4", p. 66, BIR Records). Respondent has sent a letter addressed to the Commissioner of the Bureau of Customs authorizing the issuance of a tax credit certificate for input VAT paid on importation for the same period in the amount of P2,054,405.00 in favor of petitioner (Exh. "3", p. 64, BIR recs.). The above amounts of tax credit were arrived at by respondent's revenue officers on petitioner's subject application for tax credit/refund, the details of which are as follows: (Exh. "2-A", p. 36, BIR rec.). On Local Purchase On Importation (BIR) (BOC) TOTAL Amount claimed P14,512,335.95 P2,054,405.00 P16,566,740.93 Less: Disallowed Input Taxes 39,977.59 39,977.59 Overstatement 440,228.41 440,228.41 Allowable Input Taxes P14,032,129.93 P2,054,405.00 P16,086,534.93 Less: Output Tax on sale to CB 8,549,395.14 8,549,395.14 Amount Creditable P5,482,734.79 P2,054,405.00 P7,537,139.79 It can be gleaned from the preceding computation that out of petitioner's entire claim for refund, only the amount of P7,537,139.79 (P5,482,734.79 + P2,054,405.00) was granted. The amount of P8,549,395.14 representing petitioner's sales of gold and silver to the Central Bank of the Philippines was subjected to a 10% output VAT." (Court of Tax Appeals Decision, Rollo p. 27-30) On July 3, 1997 petitioner, Manila Mining Corporation, filed a Motion for reconsideration of the assailed decision of May 30, 1997 earlier adverted to, based on the following grounds: "1. That the Honorable Court erred in construing petitioner's sale of gold to the Central Bank as local sale subject to 10% VAT; and "2. That the Honorable Court erred in sustaining the validity of VAT Ruling Nos. 008-92 and 59-92 on the ground that there is no prejudice caused to the Petitioner." ( Rollo p. 52) However, said motion was denied in a Resolution dated August 29, 1997 issued by the Court of Tax Appeals (Rollo p. 64-65). Hence, this petition for review. The petitioner raised a single assignment of error, to wit: "WHETHER OR NOT VAT RULING NO. 8-92 DATED JANUARY 23, 1992 AND RMO NO. 22-92 DATED MAY 14, 1992, WHICH CONSIDER SALES OF GOLD TO CENTRAL BANK AS DOMESTIC SALES, CAN BE GIVEN RETROACTIVE EFFECT TO PETITIONER'S SALE OF GOLD TO CENTRAL BANK FOR THE PERIOD JANUARY 1, 1992 TO DECEMBER 31, 1992." (Petition for Review, p. 5; Rollo p. 2) The issues to be resolved are: (1) whether or not VAT Ruling No. 008-92 dated January 23, 1992 was applied retroactively in this case; and, (2) whether or not the sales of gold by petitioner to the Central Bank of the Philippines should be considered as local sales subject to 10% VAT. Petitioner contends that Vat Ruling No. 008-92 cannot be given retroactive application because it's effect is prejudicial to the petitioner. Petitioner uses as its legal basis Section 246 of the National Internal Revenue Code, which provides that: " Non-retroactively 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 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." In this present case petitioner filed their claim for tax credit/refund of VAT paid for the period January 1, 1992 to December 1992 after the issuance VAT Ruling 008-92 on January 23, 1992: liblex "On May 28, 1993 , petitioner filed with respondent's Bureau an application for tax credit/refund of VAT paid for the period January 1, 1992 to June 30, 1992 in the amount of P6,815,448.22 (Exh. "D"), and on July 20, 1993 , another similar application was filed by it for the period of July 1, 1992 to December 31, 1992 in the amount of P9,751,292.71 (Exh. "E"), for the total amount of P16,566,740.93 for the year 1992 (Emphasis supplied)." (Court of Tax Appeals Decision, Rollo p. 28). citing the ruling laid down in the Case of Manila Mining Corporation vs. the Commissioner of Internal Revenue, CA GR. SP No. 38287 promulgated on June 5, 1997, wherein this Court ruled that the retroactive application of VAT Ruling No. 008-92 is prejudicial to the interest of the petitioner. In said case, it was held that: "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 vs. Telefunken Semiconductor Philippines, Inc., G.R. No. 103915, 23 October 1995, 249 SCRA 401; Bank of America vs. 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 vs. Mega General Merchandising Corporation, GR No. 69136, 30 September 1988, 166 SCRA 166; Commissioner of Internal Revenue vs. Burroughs, G.R. No. 66653, 19 June 1986, 142 SCRA 324; ABS-CBN vs. 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 sale 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." It is to be observed, that when petitioner filed on May 28, 1993 July 20, 1993 its' tax credit/refund of VAT covering the period from January 1 to December 31, 1992. VAT Ruling No. 008-92 (which was issued on January 23, 1992) was already made applicable and was being implemented. Thus, it can not be argued that VAT Ruling No . 008-92 is still being applied retroactively in the instant case . Further, the ruling of this court in the above cited case of Manila Mining Corporation has no bearing on the instant case for the sales to the Central Bank in the said case covered the period from July 1, 1990 to December 31, 1990 which apparently, took place prior to the issuance of VAT Ruling No . 008-92 on January 23, 1982 . However, on the second issue as to whether or not sales of gold to the Central Bank of the Philippines ( now Bangko Sentral ng Pilipinas ) should be considered as local sales subject to 10% VAT, We rule in the negative. In Republic Act No. 7716 or the New Expanded Value Added Tax Law, which amended the pertinent provisions of the National Internal Revenue Code, provides: "Section 2. Section 100 of the National Internal Revenue Code, as amended, is hereby further amended to read as follows: llcd Section 100. Value-added tax on sale of goods or properties. (a) Rate and Base of tax . There shall be levied, assessed and collected on every sale, barter or exchange of goods or properties, a value added tax equivalent to 10% of the gross selling price or gross value of the goods or properties sold, bartered or exchange, such tax to be paid by the seller or transferor. xxx xxx xxx (2) The following sales by VAT-registered persons shall be subject to 0% . (A) Export sales the term export sales means: xxx xxx xxx (iv) Sale of gold to the Bangko Sentral ng Pilipinas (BSP) ; xxx xxx xxx." Prior to the issuance of VAT Ruling No. 008-92 on January 23, 1992, sales of gold to the Central Bank of the Philippines were deemed export sales subject to a 0% rate of VAT. However, upon the issuance of VAT Ruling No. 008-92 said sales of gold to the Central Bank were deemed local sales and subject to a 10% VAT rate. Later on, Vat Ruling No. 059-92 was issued on April 20, 1992, providing for the retroactive application of VAT Ruling No. 008-92 to January 1, 1988 (date of effectivity of the VAT Law). The New Expanded VAT Law (R.A. No. 7716), now expressly provides that "sale of gold to the Bangko Sentral ng Pilipinas (BSP)" is an export sale subject to 0% VAT rate. The repealing clause provided for the application of said law in this present case. "Section 20. Repealing Clause . The provisions of any special law relative to the rate of franchise taxes are hereby expressly repealed. Section 113, 114 and 116 of the National Internal Revenue Code are hereby repealed. xxx xxx xxx All other laws, orders, issuances, rules and regulations or parts thereof inconsistent with this Act are hereby repealed, amended or modified accordingly (ibid. p. 20). Well settled is the rule that administrative regulations must be in harmony with the provisions of the law. In case of discrepancy between the basic law and an implementing rule or regulation, the former prevails (Philippine Petroleum Corp., vs. Municipality of Pililla, Rizal, 198 SCRA 82, 88). cdll The law is clear. Sale of gold to the "Bangko Sentral ng Pilipinas" is subject to 0% VAT rate. As held in Benguet Corporation vs. Commissioner of Internal Revenue, (CA GR. SP Nos. 37205, 38958 and 39435, p. 14) promulgated July 10, 1998, this Court held: "Pertinently, it may be observed that the amendment of the VAT Law entitled "The New Expanded VAT Law" (Republic Act No. 7716) is revealing. Section 2 thereof amends Section 100 of the NIRC. The amended version of Section 100 of the NIRC, specifically Section 100 (a) (2) (A) (iv), expressly provides that Sale of gold to the Bangko Sentral ng Pilipinas (BSP) is an export sale subject to the 0% VAT rate." Thus, even if it is so provided in the VAT Ruling No. 008-92 that value-added input taxes shall be paid on export sales from January 1, 1992, petitioner is entitled to tax credit refund of VAT paid for the period January 1992 to December 31, 1992 based on Section 100 (2) (A) (iv), of Republic Act No. 7716. In view of the above disquisition, We find and so hold that the sale of gold to the Bangko Sentral ng Pilipinas is deemed as export sale subject to 0% VAT rate. Considering, however, that petitioner herein had been previously granted tax claim/refund in Tax Credit Certificate No. SN 002637 dated September 28, 1994 in the amount of P5,482,734.79 and VAT Tax Credit on importation in the amount of P2,054,405.00 covering the period of January to December 1992 (Rollo pp. 29, 76), We find that the petitioner is entitled to the issuance of Tax Credit Certificate and/or Tax Credit/Refund of VAT only with respect to the remaining balance representing petitioner's sales of gold to the "Bangko Sentral ng Pilipinas" in the amount of P8,549,395.14. WHEREFORE, premises considered, the petition for review is GIVEN DUE COURSE and is GRANTED. The decision of the Court of Tax Appeals in C.T.A. Case No. 5111 promulgated on May 30, 1997 and the Resolution promulgated on August 29, 1997 denying the motion for reconsideration are REVERSED and SET ASIDE. A new judgment is hereby entered ordering respondent Commissioner of Internal Revenue to refund or issue a tax credit certificate in favor of petitioner in the amount of P8,549,734.79 representing petitioners' 10% input vat collected from petitioner on the sale of gold to the Bangko Sentral ng Pilipinas covering the period from January 1, 1992 to December 31, 1992. SO ORDERED. Yares-Santiago and Velasco, Jr . JJ . , concur.