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

ELEVENTH DIVISION [CA-G.R. SP No. 50068. June 19, 2000.] ATLAS CONSOLIDATED MINING AND DEVELOPMENT CORP. , petitioner , vs . COMMISSIONER OF INTERNAL REVENUE , respondent . D E C I S I O N COSICO , J p : This is a petition for review filed under Rule 43 of the 1997 Rules of Civil Procedure seeking the review of the Decision of the Court of Tax Appeals, dated September 11, 1998, in the consolidated cases all entitled "Atlas Consolidated Mining and Development Corporation v. Commissioner of Internal Revenue" and docketed as CTA Cases Nos. 4416, 4457, 4513 and 4573. The said decision is assailed insofar as it denied the petitioner's claim for refund/credit of excess input taxes or value added tax paid for the four quarters in the year 1988. The dispositive portion of the said decision reads: "IN THE LIGHT OF ALL THE FOREGOING, petitioner's claim for refund or issuance of a tax credit certificate is hereby GRANTED, but only up to the amount of P13,451,536.15, because this was clearly admitted by the respondent in her Answer in CTA Case No. 4416 and therefore need not be proven. However, the rest of the claims of petitioner as adverted to is DENIED due to insufficiency of evidence. "SO ORDERED." (p, 55, Rollo ) Also assailed is the CTA's Resolution, dated December 3, 1998, which disposes of the motions for reconsideration filed separately by the respondent and the petitioner, but not to the latter's satisfaction. The dispositive portion of that resolution reads: 'WHEREFORE, in view of the foregoing, Respondent's motion to modify a portion of Our Decision, dated September 11, 1998, is GRANTED. Accordingly, the decretal portion of the said Decision is modified as follows: "IN THE LIGHT OF ALL THE FOREGOING, petitioner's claim for refund or issuance of a tax credit certificate is hereby DENIED, considering that the tax credit previously granted by this Court in the amount of P13,451,536.15 has already been by respondent and the rest of the claim was denied due to insufficiency of evidence. No pronouncement as to costs. "SO ORDERED. "With respect to Petitioner's Motion for Reconsideration/New Trial, We hereby DENY the same for lack of merit. "SO ORDERED." (p. 62, Rollo ) The facts attending the instant petition for review are largely undisputed and may be restated as follows: Petitioner Atlas Consolidated Mining and Development Corporation is a domestic corporation duly organized and existing under the laws of the Philippines, engaged in the business of mining, production and sale of various mineral products consisting principally of copper concentrates and gold. As such, it is duly registered with the Bureau of Internal Revenue (BIR) as a Value Added Tax (VAT) entity with Registration No. 32-A-6-002224. In the year 1988, petitioner filed VAT returns for the periods corresponding to the four quarters of the said year, and submitted corresponding applications for "excess input VAT refunds" resulting from the claimed "zero-VAT" nature of its sales of gold to the Bangko Sentral ng Pilipinas, (Bangko Sentral, for brevity), copper concentrates to Philippine Smelting and Refining Corporation, (PASAR, for brevity) and pyrates to Philippine Phosphate, Inc., (Philphos, for brevity). With no action coming from the BIR, and the foreboding onset of the two-year prescriptive period for the filing of a petition with the Court of Tax Appeals, petitioner instituted four separate petitions with the said court, corresponding to the four quarters/periods in 1988, reiterating its claim for a refund/credit. In due course, respondent commissioner filed her answer, and the four petitions were consolidated under a single proceeding. After, trial, the case was submitted for decision on October 2, 1996. The tax court's decision was held in abeyance, however, while awaiting the final adjudication by the Court of Appeals of other cases with similar issues as the case at bar, particularly: CA-G.R. SP No. 34152, entitled "Atlas Consolidated Mining & Development Corporation v. Commissioner of Internal Revenue"; and CA-G.R SP No. 38287, entitled "Manila Mining Corporation v. Commissioner of Internal Revenue". Eventually, when the decisions in the said cases came out, the Court of Tax Appeals revived the instant cases, and rendered its Decision, dated September 11, 1998, dismissing the consolidated petitions. The issues resolved by the Tax Court below refer to the following: (1) Whether or not petitioner's sale of gold, copper concentrates and pyrite to the Bangko Sentral, PASAR and Philphos, respectively, during the four quarters of 1988 are subject to the 10% value added tax under Section 106 of the National Internal Revenue Code, as amended, or should it be considered as effectively zero-rated under paragraph (a) (2) of said Section 106; and (2) Whether or not VAT Ruling Nos. 008-92 and 59-92 are valid and can be applied retroactively. Ancillary to these, are the issues of the validity of the requirement under VAT Ruling No. 008-92 regarding 70% export sales requirement and the disallowances made by respondent on petitioner's claim for VAT refund/credit. (pp. 33-34, Rollo ) It was essentially ruled that following the rulings of the Court in CA-G.R. SP No. 38287 entitled "Manila Mining Corporation v. Commissioner of Internal Revenue" and CA-G.R. SP No. 34152 entitled "Atlas Consolidated Mining and Development Corporation v. Court of Tax Appeals and Commissioner of Internal Revenue", the above described transactions of the petitioner with the Bangko Sentral, PASAR and Philphos should likewise be considered as zero-rated. Likewise, the application of VAT Rulings Nos. 008-92 and 59-92 to the above described transactions cannot be allowed, in view of the principle that such rulings cannot be retroactively applied if they will result in substantial prejudice to the taxpayer. Notwithstanding, the foregoing findings, the court a quo nevertheless denied the petitioner's claim for tax refund/credit for failure to present adequate evidence showing its entitlement to the same. As held by the tax court: "What is being claimed in the instant petition is the refund of the input taxes paid by the herein petitioner on its purchase of goods and services. Hence, it is necessary for the petitioner to show proof that it had indeed paid the said input taxes during the year 1988. In the case at bar, petitioner failed to discharge this duty. It did not adduce in evidence the sales invoices, receipts or other documents showing the input value added tax on the purchase of goods and services. (p. 53, Rollo) It was also observed that the failure of petitioner to submit the sales invoices or receipts evidencing its payment of input vat collections violates pertinent revenue rules, particularly Section 2(c) (1) of Revenue Regulation No. 3-88, CTA Circular No. 1-95, as amended by CTA Circular No. 10-97. Furthermore, it deprives the Court of Tax Appeals of the means to verify whether or not the petitioner had indeed paid the said input vat dues. Unhappy with the said ruling of the tax court, petitioner is now before us on a petition for review, it is mainly submitted that the failure to submit copies of the VAT invoices and receipts is not a fatal defect in its petition before the tax court, and should not have resulted in the denial of the claim for refund/credit. It is also advanced that the court erred in ruling that the zero-rating of sales to BOI registered exporters should be limited to the extent of actual exportation by such enterprises (PASAR and Philphos) and not the totality of such sales. The fact that the petitioner is an entity that enjoys zero-rated status in the sales of mining products to the Bangko Sentral, PASAR and Philphos is no longer disputed. The Court of Tax Appeals has already confirmed this fact, with the concession of the respondent Commissioner of Internal Revenue. What hinders the petitioner's enjoyment of the refund/credit of the input taxes already deposited by it to the tax bureau, according to the court a quo, is the apparent lack of substantiation of the actual amounts paid by it, which, should have been duly proven by the appropriate invoices and receipts. Since no such receipts and invoices were presented for judicial scrutiny, the required quantum of proof for the allowance of the petitioner's claims was not satisfied. The Court agrees with the tax court's ruling. The Court of Tax Appeals is a court of special jurisdiction, created by virtue of Republic Act No. 1125. It is specially created to take cognizance of appeals from tax assessments, and other matters that may fall under its special jurisdiction, R.A. 1125 expressly provides that the court shall not be governed strictly by technical rules of evidence. (Purakan Plantation Co. v. Domingo, 15 SCRA 151 [1965]) Nevertheless, the judicial nature of the proceedings held before the Court of Tax Appeals requires that the claims for refund/tax credit raised by the petitioner be established by competent, relevant and material evidence which clearly point out with some reasonable measure of certainty that the petitioner is entitled thereto. As it is, the evidence presented before the tax court, to show that the petitioner had made excess payments of input value added tax to the BIR are not concrete evidence of the zero-rated transactions which form the basis of the petitioner's claims. What were presented to establish such transactions are mere listings of alleged VAT documents, the authorship of which is unspecified. (Exhibits "K" thru "5") Such listings allegedly refer to actual receipts and invoices duly compiled and examined by independent examiners. The said documents, however, which are the best evidence of their contents, were not presented in evidence below. Petitioners did not even present copies of the alleged invoices. The listings presented by the petitioner are not reliable evidence of the excess payments claimed by the petitioner. They have not even been sufficiently identified and confirmed by the petitioner's independent auditor in accordance with accepted accounting and auditing standards. Thus, in his letter to Atlas Consolidated Vice President Zoilo Castrillo, Jr., dated July 5, 1995, (submitted as Exhibit "I" for the petitioner), Sycip Gorres Velayo & Co., partner Gemilo J. San Pedro informs the petitioner, and this Court, that the accounting firm's examination of the documents presented by the petitioner for examination were not actually conducted even under the accepted accounting and auditing standards, to wit: "It is our understanding that the above procedures are sufficient for the company (petitioners). We make no representation regarding the sufficiency of these procedures for such purpose. We did not compare the total of the input tax claimed for the 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 to the Company's claim for input VAT refund or credit. Had we performed additional procedures or had we made an audit in accordance with the generally accepted auditing standards, other matters might come to our attention that we could have accordingly reported on." (p. 227, Records for CTA Case No. 4416) Based on the foregoing, it appears that even the listings and report allegedly made by the petitioner's independent auditor, were not made with even the most basic examination of the actual invoices and receipts that should support the petitioner's claims. The said listings are therefore unreliable proof of the petitioner's claims. The same conclusion would likewise apply to the Summary Amount of VAT Listings (submitted by petitioner as Exhibit "J-1" p. 229, CTA Case No. 4416 Records), which were also based on the same examination made by the said accounting firm. Besides the substantial insufficiency of the petitioner's evidence, it also appears that such evidence did not comply with the procedural requirements set by the tax authorities regarding the expeditive measures for presentation of evidence before the bureau and the tax court. As held by the lower court: "With this overall picture, petitioner's contention that the submission of pre-marked documents is no longer necessary, is erroneous and is contrary to the principle that tax refunds are strictly construed against the taxpayer. "Petitioner should have read the provisions of CTA Circular No. 10-97 issued on October 6, 1997, which specifically provides that receipts, invoices, vouchers and other documents must be pre-marked by the party concerned and submitted to this Court. Even the undertaking recited in Court for the commissioning of an independent CPA contains the requirement of submitting the pre-marked photocopies of the original documents mentioned in the summary. "Given this plethora of information, Petitioner cannot use the rationale that its failure to submit pre-marked documents was due to a mistaken notion that it was not required to do so under CTA Circular No. 1-95. Neither can we categorize such an omission as excusable negligence to warrant a new trial." (pp. 61-62, Rollo) As a matter of principle, the appellate courts will not set aside the conclusion reached by the Court of Tax Appeals which is, by the very nature of its function, dedicated exclusively to the study and consideration of tax problems and has necessarily developed an expertise on the subject unless there has been an abuse or improvident exercise of authority. (Commissioner of Internal Revenue v. Court of Appeals, 271 SCRA 605 [1997]) Because of this fatal error of the petitioner in the presentation of the case before the lower court, there is no further need of discussing the rest of the petitioner's argument which was rendered nugatory. WHEREFORE, premises considered, the instant petition for review is hereby DISMISSED. The assailed ruling embodied in the assailed December 3, 1998 Resolution of the Court of Tax Appeals is hereby AFFIRMED in toto . SO ORDERED. Jacinto and Salazar-Fernando, JJ., concur.