Atlas Consolidated Mining and Development Corp. v. Commissioner of Internal Revenue

THIRTEENTH DIVISION [CA-G.R. SP No. 47824. June 29, 2000.] ATLAS CONSOLIDATED MINING and DEVELOPMENT CORP. , petitioner , vs . COMMISSIONER OF INTERNAL REVENUE , respondent . D E C I S I O N VIDALLON-MAGTOLIS , J p : This is a petition for review filed by petitioner Atlas Consolidated Mining and Development Corporation, seeking the review and reversal of the Decision of the Court of Tax Appeals dated February 5, 1998 denying petitioner's claim for issuance of tax credit certificates or refund of excess input VAT payments for the second, third and fourth quarters of 1992 in the following amounts: Second Quarter (CTA Case No. 5130) Php24,031,673.00 Third Quarter (CTA Case No. 5161) 16,597,709.17 Fourth Quarter (CTA Case No. 5190) 29,839,894.82 It appears that petitioner herein is a corporation organized and existing under the laws of the Republic of the Philippines. It is engaged in the business of mining, production and sale of various mineral products, consisting principally of copper concentrates which are all for export. Petitioner filed with the Bureau of Internal Revenue (BIR) Value Added Tax Returns for 1992 reflecting its input tax payments as follows: 2nd Quarter 3rd Quarter 4th Quarter Date Filed 06/20/92 10/20/92 01/20/93 Capital Goods P779.00 Regular: Domestic Purchases P6,909,499.00 P7,636,411.95 P8,565,483.96 Importations 5,900,012.00 3,190,527.00 6,337,197.00 Adjustments: Domestic Purchases 1,482,366.00 1,592,238,22 9,381,582.86 Importations 9,739,796.00 4,177,753.00 5,555,631.00 Total P24,031,673.00 P16,597,709.17 P29,839,894.82 =========== =========== ========= Subsequently, petitioner applied with the BIR for the issuance of tax credit certificates/refund pursuant to Section 106 (b) of the National Internal Revenue Code of 1996 (NIRC), for the value-added taxes paid. As the aforesaid claims for refund/applications for the issuance of tax credit certificates have not been resolved by the respondent, petitioner filed petitions for review with the Court of Tax Appeals. The court a quo dismissed petitioner's claim for input VAT refund on the grounds of (1) prescription: and (2) insufficiency of evidence. Petitioner's motion for reconsideration was likewise denied on February 26, 1998; hence, this petition where the petitioner raises the following issues: THE CTA ERRED IN UPHOLDING THE VALIDITY OF REVENUE REGULATIONS 2-88 WHERE IT REQUIRES THAT FOR ZERO-RATING TO APPLY FOR SALES TO BOI-REGISTERED ENTERPRISES, AT LEAST 70% OF THE SALES OF THE BOI REGISTERED FIRM MUST CONSIST OF EXPORTS, WHERE IT CONSIDERS GOLD SALES TO THE CENTRAL BANK AS SUBJECT TO 10% VAT. THE CTA ERRED IN DISMISSING THE CLAIM FOR CREDIT/REFUND ON THE GROUND OF FAILURE TO COMPLY WITH REVENUE REGULATIONS NO. 3-88 (sic-should be 2-88) IN RELATION TO CTA CIRCULAR 10-97. THE ALLEGED FAILURE OF PETITIONER TO SUBMIT PHOTOCOPIES OF THE VAT INVOICES DOES NOT CONSTITUTE SUFFICIENT BASIS FOR THE DISMISSAL OF THE INSTANT CLAIMS. THE CTA ERRED IN RULING THAT THE INSTANT JUDICIAL ACTIONS FOR INPUT VAT REFUND ARE BARRED BY PRESCRIPTION. CEIHcT Petitioner claims that its sales to PASAR and Philphos which are Export Processing Zone Authority-registered entities are considered constructive exports under Article 23, Title III (should be Title I), Book I and Article 77 (2), Book VI of Executive Order (EO) No. 226, otherwise known as The Omnibus Investments Code of 1987; hence, they should be classified as effectively zero rated transactions pursuant to Section 100 (a) (2) of the Tax Code. Ergo, there is no basis in the court a quo's findings that EPZA entities (in this case PASAR and Philphos) to which the sales are made must export at least 70% of its sales as allegedly required under Revenue Regulations No. 2-88. Petitioner therefore challenges the validity of Revenue Regulation No. 2-88. In any case, granting that the aforesaid VAT Ruling is valid, the sales to PASAR and Philphos should nonetheless be held to be zero-rated and the entire amount of refund/tax credit should be granted as the respondent had earlier approved its application for zero-rating of its sales to these entities. Likewise, previous approval therefor of the respondent having been required petitioner need not prove compliance with the requirement under VAT Ruling No. 2-88. Anent the gold sale to Central Bank, petitioner calls for a clear pronouncement whether or not the same is VAT zero-rated or subject to 10% VAT pursuant to VAT Ruling 8-92. Assailing the petitioner's assertions, respondent avers that the subject sales cannot be considered as exportation of goods from the Philippines to a foreign country or "export sales" within the meaning of the above-quoted provision of law since the same were made within the Philippines. Neither can they be classified as "foreign currency denominated sales" since the goods sold were not assembled or manufactured in the Philippines for delivery to Philippines residents and paid for in convertible foreign currency remitted through the banking system in the Philippines. Moreover, petitioner failed to show that its buyers, PASAR and Philphos are entitled to exemption under Section 100 (a) (2) of the Tax Code and that such exemption effectively subjects the sales to them to zero rate. Articles 23 and 77 (2) of the Omnibus Investments Code provide: "Art. 23. 'Export Sales' shall mean the Philippine port F.O.B. value, determined from invoices, bills of lading, inward letters of credit, landing certificates, and other commercial documents, of export products exported directly by a registered export producer or the net selling price of export products sold by a registered export producer to another export producer, or to an export trader that subsequently exports the same: Provided , That sales of export products to another producer or to an export trader 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 manufactures; (2) sales to export processing zones; . . ." xxx xxx xxx "Art. 77. Tax Treatment of Merchandise in the Zone . "(1) . . . "(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 transactions." On the other hand, Section 100(a) of the National Internal Revenue Code of 1986 provides, viz : "Section 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 of 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. '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.' Preliminary, it is incumbent upon this Court to determine whether or not the sales of copper concentrates to PASAR and pyrite to Philphos may be classified as constructively export sales and therefore may be subject to zero-rate Section 100 (a) of Tax Code. aDSTIC Articles 23 and 77 of the Omnibus Investments should be read in conjunction with Article 100 of the Tax Code. Article 100 (a) (1) limits the scope of "export sales" as those transactions which involve actual exportation of goods from the Philippines to another country and those which fall under the category of foreign currency denominated sales and therefore zero-rated. In the case at bench, the sales of copper concentrates to PASAR and Philphos, as well as gold to CB admittedly do not involve actual exportation of goods from the Philippines to a foreign country; neither are they classified foreign currency denominated sales. Precisely, petitioner is invoking its right to exemption by considering the aforesaid sales as "constructively exported" under Articles 23 and 77 of E.O. 226, in which case the same may be considered as "effectively zero rated" under Section 100 (a) (2) of the Tax Code. Records, however, show and it is undisputed that both PASAR and Philphos are EPZA registered enterprises. Therefore under Articles 23 and 77 of E.O. 226 it would appear that sales of raw materials made to these two entities are classified as zero-rated transactions. If this is so, then the petitioner need not show compliance with Revenue Regulations No. 2 88, the pertinent provision of which states: "Sec. 2. Zero-rating . (a) Sales of raw materials to BOI-registered exporters. Sales of raw materials to export-oriented BOI-registered enterprises whose export sales, under rules and regulations of the Board of Investments, exceed seventy percent (70%) of total annual production, shall be subject to zero-rate under the following conditions: "(1) The seller shall file an application with the BIR, ATTN: VAT Division, applying for zero-rating for each and every separate buyer, in accordance with Section 8 (d) of Revenue Regulations No. 5-87. The application should be accompanied with a favorable recommendation from the Board of Investments. "(2) The materials sold are to be used exclusively by the buyer in the manufacture, processing or repacking of his own registered export product; "(3) The words 'Zero-rated Sales' shall be prominently indicated in the sales invoice. The exporter (buyer) can no longer claim from the Bureau of Internal Revenue or any other government office tax credits on their zero-rated purchases." xxx xxx xxx" Articles 23 end 77 of E.O. 226 do not do away with the fact that in order for an entity to avail of "zero-rating" of input taxes the petitioner has to satisfactorily establish that its sales of "raw materials to BOI-registered enterprises whose export sales . . . exceed seventy percent (70%) of total annual production." In other words, the law does not require a one-hundred percent export sales. Local sales in excess of the 70% requirement may be allowed. Hence, contrary to the contention of the petitioner, Revenue Regulations No. 2 88 does not make additional requirements beyond what the laws require Section 100 of the Tax Code and Articles 23 and 77 of E.O. 226 but that it merely establishes a set of guidelines by which these laws may be satisfied. Revenue Regulations No. 2-88 may therefore be held valid. As regards sales of gold to CB, suffice it to state that the same cannot be classified as effectively zero-rate transactions under Section 100 of the Tax Code of 1986. The aforesaid law does not categorically consider sales of gold to CB as one of that may be classified as such. Neither is it included within the definition of "export sales". It is a settled rule of statutory construction that the express mention of one person, thing, or consequence implies the exclusion of all others. Expressio unius est exclusio alterius . 2 Thus, where a statute, by its terms, expressly limited to certain matters, it may not, by interpretation or construction, be extended to other matters. Sales of gold to CB are therefore subject to 10% E-Vat. At any rate, under the National Internal Revenue Code of 1997, sale of gold to the Bangko Sentral ng Pilipinas (BSP) is included within the definition of export sales and therefore subject to zero percent (0%) rate. 3 Petitioner further argues that it has complied with the procedural requirements under CTA Circular Nos. 1-95 and 10-97 when it submitted through counsel copies of the pre-marked VAT invoices, together with the formal offer of documentary evidence. At any rate, granting that there be an admission on the part of the petitioner, the latter may have been misled into believing that there was due compliance because petitioner's documentary evidence were admitted by the court a quo without any qualification. Petitioner invokes a fair, liberal and reasonable interpretation of the rules of procedure to allow a judgment on the merits, and not a dismissal on mere technicalities. Respondent controverts petitioner's arguments and poses that the unavailability of the documentary evidence required of petitioner to submit under the foregoing circulars is fatal to its claim for refund to check its veracity. HEacDA Revenue Regulations No. 3-88 dated April 7, 1988 enumerates the requirements for the issuance of tax credit certificate or tax refund of input taxes previously paid by a zero-rated taxpayer engaged in the sale of goods, viz : "(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) Photocopy 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 to 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." Records disclose that petitioner submitted the following documentary evidence: "1. Approved Application for zero-rating of petitioner's sales to Philippine Associated Smelting & Refining Corp. (PASAR), Central Bank (CB) and foreign buyers (Exh. 'A'); "2. Approved Application for zero rating of petitioner's sales to Philippine Phosphates, Inc. (Philphos) (Exh. 'B'); "3. VAT Returns for the second, third and fourth quarters of 1992 (exhs. 'C', 'E', 'G', and 'H'); "4 Applications for Tax Credit/Refund of VAT paid for the second, third and fourth quarters of 1989 (Exhs. 'D', D-1', 'F', and 'J'); "5. Listings of VAT documents analyzed by SGV (Exhs. 'V', 'V-23' to 'V-39', 'V-189' to 'V-649'); "6. Letter Certification of SGV & Co. dated March 9, 1995 and August 9, 1995 (Exhs. 'K', 'K-1, 'K-2', 'L', 'L-1' and 'L-2') and "7. VAT Registration Certificate No. 32-0-004622." Apparently, petitioner failed to submit photocopies of VAT invoices required under the aforementioned Revenue Regulations No. 3-88. Petitioner claims however that the same were submitted together with the formal offer of evidence. We are not convinced considering that no proof of receipt thereof by the court a quo was produced in evidence; thus, the same remains a mere allegation. Besides, a claim for refund is in the nature of a claim for exemption and should be construed in strictissimi juris against the taxpayer and liberally in favor of the taxing authority. 4 Finally, petitioner asserts that the instant claims for refund/tax credit were filed within the period required under Section 230 of the Tax Code. Consequently, it is entitled to a refund or tax credit of VAT payments made for the second to the last quarter of 1992. Respondent states otherwise, i . e ., prescription has set it. On the final issue posed, we agree with the petitioner-appellant that the two-year prescriptive period should be reckoned from the date of the filing of the corresponding VAT quarterly returns which is within twenty (20) days after the close of each taxable quarter. Section 106 paragraphs (a) & (b) vis-a-vis paragraph (d) of the National Internal Revenue Code of 1986, as amended (now 112 with further amendments) provides: "Sec. 106. Refunds or tax credits of input tax . (a) Export Sales . An exporter who is a VAT-registered person within two years from the date of exportation, apply for the issuance of a tax credit certificate or refund of the input tax attributable to the goods exported, to the extent that such input tax has not been applied to output tax and upon presentation of proof that the foreign exchange proceeds has been accounted for in accordance with the regulations of the Central Bank of the Philippines. DaHcAS "(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 . xxx xxx xxx "(d) 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. . . ." The aforequoted provision should be read together with Section 110 (a), viz : "Sec. 110. Return and payment of value-added tax . (a) In general. Every person liable to pay the value-added tax imposed under this title shall file a quarterly return of the amount of his gross sales or receipts within twenty (20) days following the close of each taxable quarter prescribed for each taxpayer; . . .' On the other hand, Section 230 of the same Code provides: "Sec. 230. (now 229) Recovery of tax erroneously or illegally collected . No suit or proceeding shall be maintained in any court for the recovery of any national internal revenue tax hereafter alleged to have been erroneously or illegally assessed or collected, or of any penalty claimed to have been collected without authority, or of any sum alleged to have been excessive or in any manner wrongfully collected, until a claim for refund or credit has been duly filed with the Commissioner; but such suit or proceeding may be maintained, whether or not such tax, penalty, or sum has been paid under protest or duress. "In any case, no such suit or proceeding shall be begun after the expiration of two years from the date of payment of the tax or penalty regardless of any supervening cause that may arise after payment : Provided, however , that the Commissioner may, even without a written claim therefor, refund or credit any tax, where on the face of the return upon which payment was made, such payment appears clearly to have been erroneously paid." There is actually no conflict between Section 106 vis-a-vis 110(b) and 230. 5 Considering that they refer to the same subject, they should, accordingly, be read together and harmonized with a view to giving effect to both. This was what the Supreme Court held in the case of Commissioner of Internal Revenue vs. TMX Sales, Inc ., 6 the pertinent portions of which read: "Section 292 (now Section 230) of the National Internal Revenue Code should be interpreted in relation to the other provisions of the Tax Code in order to give effect the legislative intent and to avoid an application of the law which may lead to inconvenience and absurdity. In the case of People vs. Rivera (59 Phil. 236 [1933]), this Court stated that statutes should receive a sensible construction, such as will give effect to the legislative intention and so as to avoid an unjust or an absurd conclusion. INTERPRETATIO TALIS IN AMBIGUIS SEMPER FRIIENDA EST, UT EVITATUR INCONVENIENS ET ABSURDUM. Where there is ambiguity, such interpretation as will avoid inconvenience and absurdity is to be adopted. Furthermore, courts must give effect to the general legislative intent that can be discovered from or is unraveled by the four corners of the statute, and in order to discover said intent, the whole statute, and not only a particular provision thereof, should be considered. (Manila Lodge No. 761, et al. vs. Court of Appeals, et al. 73 SCRA 162 [1976]). Every section, provision or clause of the statute must be expounded by reference to each other in order to arrive at the effect contemplated by the legislature. The intention of the legislator must be ascertained from the whole text of the law and every part of the act is to be taken into view. . . . 7 xxx xxx xxx "Therefore, the filing of a quarterly income tax returns required in Section 85 (now Section 68) and implemented per BIR Form 1702-Q and payment of quarterly income tax should only be considered mere installments of the annual tax due. These quarterly tax payments which are computed based on the cumulative figures of gross receipts and deductions in order to arrive at a net taxable income, should be treated as advances or portions of the annual income tax due, to be adjusted at the end of the calendar or fiscal year. This is reinforced by Section 87 (now Section 69) which provides for the filing of adjustment returns and final payment of income tax. Consequently, the two-year prescriptive period provided in Section 292 (now Section 230) of the Tax Code should be computed from the time of filing the Adjustment Return or Annual Income Tax Return and final payment of income tax. IDESTH "In the case of Collector of Internal Revenue vs . Antonio Prieto (2 SCRA 1007, [1961]), this Court held that when a tax is paid in installments, the prescriptive period of two years provided in Section 306 (Section 292) of the National Internal Revenue Code should be counted from the date of final payment. This ruling is reiterated in Commissioner of Internal Revenue vs. Carlos Palanca (18 SCRA 496 [1996]), wherein this Court stated that where the tax account was paid on installment, the computation of the two-year prescriptive period under Section 306 (Section 292) of the Tax Code, should be from the date of the last installment." 8 In sum, said the Supreme Court, the most reasonable and logical application of the law would be to compute the two-year prescriptive period at the time of filing the Final Adjustment Return or the Annual Income Tax Return, when it can be finally ascertained if the taxpayer has still to pay additional income tax or if he is entitled to a refund of overpaid income tax. In the same manner, it is only after the filing of the quarterly VAT return that the VAT liability or refundability can be determined. Logically, the two-year prescriptive period should be counted from the date of filing of return and payment of tax due which is within twenty (20) days following the end of each quarter as provided for in Section 110(a). 9 In the case at bar, the records show the following: Period Date Returns Close of Date Actions Involved Filed & Paid the Quarter Filed 2nd Quarter 04/01/92 to 6/20/92 06/30/92 07/18/94 06/30/92 3rd Quarter 07/01/92 to 10/20/92 09/30/92 10/20/94 09/30/92 4th Quarter 10/01/92 01/20/93 12/31/92 01/18/95 12/31/92 Thus, it appears that petitioner-appellant's causes of action had not prescribed at the time of the filing of the judicial claim with the Court of Tax Appeals. WHEREFORE, premises considered, the Decision appealed from is hereby AFFIRMED. SO ORDERED. Bello, Jr . and Asuncion 1 , JJ ., concur. Footnotes 1. Acting Third Member. 2. Statutory Construction, Agpalo, 3rd ed., 1995, p. 173, citing the cases of Canlas vs. Republic , 103 Phil. 712; Lao Oh Kim vs. Reyes , 103 Phil. 1139; People vs. Aquino , 83 Phil. 614; Escribano vs. Avila , 85 SCRA 245. 3. Section 106 (A)(2)(a)(4), Ibid . 4. Commissioner of Internal Revenue vs. Tokyo Shipping Co., Ltd ., 244 SCRA 332, 336. 5. Supra . 6. 205 SCRA 184. 7. Id ., at pp. 187-188. 8. Id ., at p. 192. 9. Supra .