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

SECOND DIVISION [CA-G.R. SP No. 47607. July 6, 1999.] ATLAS CONSOLIDATED MINING AND DEVELOPMENT CORPORATION , petitioner , vs . COURT OF TAX APPEALS and COMMISSIONER OF INTERNAL REVENUE , respondents . D E C I S I O N LUNA , J p : This is a petition for review of the decision of the Court of Tax Appeals, dated November 24, 1997, in CTA Case 5102, denying petitioner's claims for tax refund/issuance of tax credit certificate of input value-added taxes ("VAT"), covering the first quarter of 1992, in the amount of P26,030,460.00, which it paid on effectively zero-rated sale of goods and purchase of capital goods, pursuant to Section 106-(b), and -(c), of the Tax Code. dctai Petitioner, a corporation organized and existing under the laws of the Philippines, is engaged in the business of mining, production and sale of various mineral products, such as gold, pyrite and copper concentrates. It is registered as a VAT entity with the Bureau of Internal Revenue, and a zero-rated VAT person under Section 100 of the Tax Code (exh. C). On April 20, 1992, the firm filed a VAT return covering the 1st quarter of 1992, and on an unspecified date, and allegedly filed an Application for Tax Credit/Refund of VAT Paid (BIR Form No. 2552). In view of the BIR's failure to act on its claims, and because the 2-year prescriptive period within which to file a judicial action was about to expire, under Section 230 of the Tax Code, petitioner appealed to the Court of Tax Appeals on April 20, 1994. On November 24, 1997 the Tax Court rendered the decision, dismissing the claim for refund ". . . on the ground of prescription, insufficiency of evidence and failure to comply with Section 230 of the Tax Code, as amended." Petitioner's motion for reconsideration of the decision having been denied on April 15, 1998, it filed this petition, and contends that the CTA erred: I. IN UPHOLDING THE VALIDITY OF REVENUE REGULATIONS 2-88, WHICH APPLIES TO ZERO-RATING ON SALES TO BOI-REGISTERED ENTERPRISES, AT LEAST 70% OF THE SALES WHICH MUST CONSIST OF EXPORTS. II. IN REQUIRING THE SUBMISSION OF COMPLETE DOCUMENTARY REQUIREMENTS CONCERNING ITS SALES AND DELIVERIES IN VIEW OF THE UNCONTROVERTED EVIDENCE THAT ITS SALES ARE 100% ACTUAL OR CONSTRUCTIVE EXPORTS. III. IN NOT ALLOWING THE PRESENTATION OF ADDITIONAL EVIDENCE WHICH MAY BE DEEMED NECESSARY TO RULE ON ITS CLAIMS ON THEIR MERITS. IV. IN FINDING THAT THE AUDITOR'S (SGV'S) CERTIFICATION AS "SELF-DESTRUCTIVE", WHEN THE CERTIFICATION IS IN ACCORDANCE WITH THE APPLICABLE PROCEDURES SET BY THE CTA. V. IN HOLDING THAT JUDICIAL ACTIONS FOR INPUT VAT REFUND IS BARRED BY PRESCRIPTION. VI. IN NOT GRANTING NEW TRIAL BECAUSE OF ABSENCE OF AN AFFIDAVIT OF MERITS. Petitioner argues that the CTA erred in upholding Revenue Regulation No. 2-88, which requires that for zero-rating to apply on sales of BOI (Board of Investment)-registered enterprise, at least 70% of the sales of the BOI registered firm must consist of exports, and cites the Omnibus Investments Code (EO No. 226); and that sales to EPZA (Economic Processing Zone Authority) registered companies, such as PASAR and Philphos, should be deemed as "constructive exports", and, therefore, there is no need to further comply with the 70% requirement concerning export sales. The arguments are not meritorious. Paragraphs (1), and (2), of Article 23, and Article 77-(2), of EO 226, provide: "ARTICLE 23. "Export sales" shall mean . . . 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 : . . ." "ARTICLE 77. Tax Treatment of Merchandise in the Zone . . . . (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 ." It is clear under the aforequoted Articles of EO 226, that sales to EPZA-registered entities ". . . shall be considered (as) constructively exported", without any requirement that those entities must export at least 70% of their sales. The term " shall " in Article 23, supra , is a word of command, one which must be given a compulsory meaning, is generally imperative or mandatory, and has the invariable significance of operating to impose a duty which should be obeyed (Lacson vs. Lacson, 24 SCRA 848). Under Section 100, of the NIRC, the 70% requirement is not even mentioned, and thus sales to entities under special laws "effectively subject such sales to zero rate". Thus: "SECTION 100. Value-added tax on sales 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). The resolution of the question of validity of Revenue Regulation No. 2-88 does not require any further evidence. The regulation can be read and examined by the CTA, in conjunction with EO 226. And Revenue Regulation No. 2-88, being an administrative regulation pertaining to taxation and revenue, can be taken judicial cognizance of by the courts (cf. Avelino vs. The Collector of Internal Revenue, 8 SCRA 572). The petition should likewise be dismissed, because the judicial action of petitioner has prescribed. Section 106-(b) of the NIRC, provides: "(b) Zero-rated or effectively zero-rated sales . Any person , except those covered by paragraph (a) above, whose sales are zero-rated or are effectively zero-rated may, within two years after the close of the quarter when such sales were made apply for the issuance of a tax credit certificate or refund of the input taxes attributable to such sales to the extent that such input tax has not been applied against output tax." (Emphasis supplied) In this case, petitioner filed its claim for refund on April 20, 1994, or late by (twenty) 20 days. Courts are refrained from giving premium to litigants who have slept on their rights (Koppel [Phil.], Inc. vs. CIR, 3 SCRA 17). In actions involving claims for refund of taxes assessed and collected, the burden of proof rests on the taxpayer. As clearly discussed in the CTA's decision, petitioner failed to substantiate its claim for tax refunds. Thus: "We note, however, that in the cases at bar, petitioner has relied totally on Revenue Regulations No. 2-88 in determining compliance with documentary requirements for a successful refund or issuance of tax credit. Unmentioned is the applicable and more specific amendment later introduced by Revenue Regulations No. 3-88 dated April 7, 1988 (issued barely after two months from the promulgation of Revenue Regulations No. 2-88 on February 15, 1988), which amended Section 16 of Revenue Regulations No. 5-87 on refunds or tax credits of input tax. Thus: 'SECTION 2. Section 16 of Revenue Regulations 5-87 is hereby amended to read as follows: 'SECTION 16. Refunds or tax credits of input tax. xxx xxx xxx '(c) Claims for tax credits/refunds . Application For Tax Credit/Refund of Value-Added Tax Paid (BIR Form No . 2552) shall be filed with the Revenue District Office of the city or municipality where the principal place of business of the applicant is located or directly with the Commissioner. Attention: VAT Division. ' A photocopy of the purchase invoice or receipt evidencing the value added tax paid shall be submitted together with the application . The original copy of the invoice/receipt, however, shall be presented for cancellation prior to the issuance of the Tax Credit Certificate or refund. In addition, the following documents shall be attached whenever applicable. xxx xxx xxx '3. Effectively zero-rated sale of goods and services. 'i) photo copy of approved application for zero-rate if filing for the first time. 'ii) sales invoice or receipt showing the name of the person or entity whom the sale of goods or services were delivered, date of delivery, amount of consideration, and description of goods or services delivered . 'iii) evidence of actual receipt of goods or services . '4. Purchase of capital goods. 'i) original copy of invoice or receipt showing the date of purchase, purchase price, amount of value-added tax paid and description of the capital equipment locally purchased. 'ii) with respect to capital equipment imported, the photocopy of import entry document for internal revenue tax purposes and the confirmation receipt issued by the Bureau of Customs for the payment of the value-added tax . '5. In applicable cases, where the applicant's zero-rated transactions are regulated by certain government agencies, a statement therefrom showing the amount and description of sale of goods and services, name of persons or entities (except in case of exports) to whom the goods or services were sold, and date of transaction shall also be submitted . 'In all cases, the amount of refund or tax credit that may be granted shall be limited to the amount of the value-added tax (VAT) paid directly and entirely attributable to the zero-rated transaction during the period covered by the application for credit or refund. LLjur xxx xxx xxx '(Emphasis and underscoring supplied)' "A thorough examination of the evidence submitted by the petitioner before this court reveals outright the failure to satisfy documentary requirements laid down under the abovecited regulations . Specifically, petitioner was not able to present the following documents , to wit: "a) sales invoices or receipts; "b) purchase invoices or receipts; "c) evidence of actual receipt of goods; "d) BOI statement showing the amount and description of sale of goods, etc. "e) original or attested copies of invoice or receipt on capital equipment locally purchased; and "f) photocopy of import entry document and confirmation receipt on imported capital equipment. " There is the need to examine the sales invoices or receipts in order to ascertain the actual amount or quantity of goods sold and their selling price . Without them, this Court cannot verify the correctness of petitioner's claim inasmuch as the regulations require that the input taxes being sought for refund should be limited to the portion that is directly and entirely attributable to the particular zero-rated transaction. In this instance, the best evidence of such transaction are the said sales invoices or receipts. "Also, even if sales invoices are produced, there is the further need to submit evidence that such goods were actually received by the buyer , in this case, by CBP, Philpos and PASAR. xxx xxx xxx "Lastly, this Court cannot determine whether there were actual local and imported purchase of capital goods as well as domestic purchase of non-capital goods without the required purchase invoice or receipt , as the case may be, and confirmation receipts . "There is, thus, the imperative need to submit before this Court the original or attested photocopies of petitioner's invoices or receipts, confirmation receipts and import entry documents in order that a full ascertainment of the claimed amount may be achieved. " Petitioner should have taken the foresight to introduce in evidence all of the missing documents abovementioned. Cases filed before this Court are litigated de novo . This means that party litigants should endeavor to prove at the first instance every minute aspect of their cases strictly in accordance with the Rules of Court, most especially on documentary evidence." (pp. 37-42, Rollo) Tax refunds are in the nature of tax exemptions. It is regarded as in derogation of the sovereign authority, and should be construed in strictissimi juris against the person or entity claiming the exemption. The taxpayer who claims for exemption must justify his claim by the clearest grant of organic or statute law and should not be permitted to stand on vague implications (Asiatic Petroleum Co. v. Llanes, 49 Phil. 466: Northern Phil. Tobacco Corp. v. Mun. of Agoo, La Union, 31 SCRA 304; Reagan v. Commissioner, 30 SCRA 968; Asturias Sugar Central, Inc. v. Commissioner of Customs, 29 SCRA 617; Davao Light and Power Co., Inc. v. Commissioner of Customs, 44 SCRA 122). There is no cogent reason to fault the CTA's conclusion that the SGV's certificate is "self-destructive", as it finds comfort in the very SGV's stand, as follows: "It is our understanding that the above procedure are sufficient for the purpose of the Company. We make no presentation regarding the sufficiency of these procedures for such purpose. We did not compare the total of the input tax claimed each quarter against the pertinent VAT returns and books of accounts. The above procedures do not constitute an audit made in accordance with generally accepted auditing standards. Accordingly, we do not express an opinion on the company's claim for input VAT refund or credit. Had we performed additional procedures, or had we made an audit in accordance with generally accepted auditing standards, other matters might have come to our attention that we would have accordingly reported on." The SGV's "disclaimer of opinion" carries much weight as it is petitioner's independent auditor. Indeed, SGV expressed that it "did not compare the total of the input tax claimed each quarter against the VAT returns and books of accounts. A reopening of the case is impermissible after a decision has been promulgated. A motion for new trial is not likewise entertainable, because petitioner has not even moved for new trial. There is even no affidavit of merits attached to petitioner's motion for reconsideration, as required under Section 2-(a), Rule 37, Revised Rules on Civil Procedure. WHEREFORE, the petition for review is hereby DISMISSED. Finding no reversible error in the decision dated November 24, 1997, the same is AFFIRMED. With costs against petitioner. SO ORDERED. Morales and Abesamis, JJ . , concur.