Benguet Corp. v. Commissioner of Internal Revenue

SPECIAL FIFTEENTH DIVISION [CA-G.R. SP No. 50919. March 25, 2002.] BENGUET CORPORATION , petitioner , vs . COMMISSIONER OF INTERNAL REVENUE , respondent . D E C I S I O N BRAWNER , J p : This is a petition for review under Rule 43 of the Rules of Court assailing the decision of the Court of Tax Appeals which denied the claim of the petitioner Benguet Corporation for a tax credit certificate in the sum of P25,311,256.61. The denial was based on insufficiency of evidence mainly because the petitioner failed to file its formal offer of documentary evidence on time. Benguet Corporation, a domestic corporation engaged in the mining business, is Value Added Tax (VAT) registered with the Bureau of Internal Revenue (BIR). On August 31, 1995 and October 12, 1995, it filed with the Department of Finance separate applications for VAT tax credits for the excess input tax paid during the third and fourth quarters of the calendar year of 1994 in the amounts of P10,363,810.53 and P14,947,446.08, respectively. 1 The Department of Finance, however, failed to act on the applications, prompting the petitioner to file a petition for review with the Court of Tax Appeals (CTA) against the Commissioner of Internal Revenue (Commissioner, for short) in order to suspend the running of the two-year prescriptive period within which to claim the tax credit. 2 During the trial, petitioner presented various documents (certificate of registration, applications for tax credit, VAT returns, including pre-marked VAT returns and invoices) for identification and comparison by its witnesses. Then, in open court, the CTA granted petitioner thirty (30) days from February 24, 1997, to file its formal offer of evidence, and fifteen (15) days from receipt thereof for respondent Commissioner to comment on the formal offer. 3 On April 7, 1997, petitioner moved for additional time to file the formal offer. This was granted by the Court, thereby giving the petitioner a total of ninety (90) days or until May 26, 1997. 4 The period expired with no formal offer filed. Hence, the CTA per resolution dated June 24, 1997, 5 declared such right of petitioner waived and set the case for reception of the respondent Commissioner's evidence. On the date of hearing, however, instead of presenting evidence, counsel for the Commissioner moved to dismiss the case for the failure of the petitioner to file its formal offer of evidence. He argued that the petitioner which had the burden to prove its claim failed to prosecute its case. 6 The CTA denied the motion and set another date for reception of respondent's evidence. On the scheduled hearing, the counsel for respondent Commissioner moved for postponement, informed the CTA that petitioner's claim for VAT credit could not be processed by the One-Stop Shop Inter-Agency Tax Credit and Duty Drawback Center of the Department of Finance since the petitioner had not yet submitted the required or requested documents. 7 The CTA expressed its observation that the counsels of both parties have been remiss in handling the case because of numerous postponements and suggested that the case be deemed submitted for resolution. The counsel for respondent Commissioner did not object and was granted thirty (30) days to file memorandum brief. The petitioner's counsel was not present but was likewise granted fifteen (15) days to file memorandum brief. On January 27, 1998, the CTA resolved to consider the case submitted for decision since the parties failed to file their respective memoranda. 8 Nine (9) months later, on September 9, 1998, the petitioner filed its formal offer of evidence which was supposed to be due more than a year before or on May 26, 1997. 9 At that time the decision had not yet been rendered by the CTA. On September 28, 1997, petitioner filed an urgent motion to admit the formal offer of evidence it filed on September 9, 1998, 10 on the ground that some of the exhibits were "inadvertently misplaced and . . . were only recently recovered," which delayed the filing of the formal offer of evidence. 11 A hearing was scheduled on the urgent motion 12 and the respondent was given ten (10) days to comment. 13 Again, on October 15, 1998, the petitioner filed a manifestation and supplemental motion to admit the formal offer of evidence on the additional ground that the counsel who handled the case withdrew and when its new lawyers took over, it was only then that they realized that some of the marked exhibits were misplaced which delayed the filing of the formal offer of evidence. 14 On the same day, the petitioner filed the entry of appearance of its new counsels in substitution of the former counsel. 15 Apparently the CTA did not act favorably on the belated formal offer of documentary evidence, because on October 30, 1998 the CTA rendered its decision denying for insufficiency of evidence the petition. The court said: "Records show that petitioner presented exhibits for marking and identification by its witnesses. Sadly, however, it has failed to formally offer the same before this Court or even include them in the docket of this case as required under Section 34, Rule 132 of the Rules of Court. IaESCH "Even the exception to the above rule as enunciated in the case of Vda. de Oate vs. Court of Appeals, 250 SCRA 283, is not applicable herein where evidence not formally offered may be admitted and considered by the trial court provided the following requisites are present, viz : first, the same must have been duly identified by testimonial duly recorded and, second, the same must have been incorporated in the records of the case. As stated earlier, no invoices or receipts evidencing input VAT payments were incorporated in the records of this case. "In view of this situation, this Court is constrained to deny petitioner's claim on the ground of insufficiency of evidence, there being no convincing documents, most especially invoices or receipts, supporting said claim." 16 Likewise, the CTA denied the motion for reconsideration filed by the petitioner for lack of merit. 17 Hence, this petition for review under Rule 43 of the 1997 Rules of Civil Procedure. The petitioner assigned the following as errors of the CTA: "I. "The Honorable CTA committed an error in denying Petitioner's claim for tax credit in the amount of P25,311,256.61 representing its excess input VAT credits for the quarters ended September and December, 1994 solely on the ground of insufficiency of evidence. "II. "The Honorable CTA failed to consider that Petitioner has presented more than enough testimonial and documentary evidence necessary to establish the validity of its claim for tax credit. "III. "The Honorable CTA erred in not considering the exception provided in the case of Vda. De Oate vs. Court of Appeals despite the fact that Petitioner's documentary exhibits were duly identified and incorporated in the records of this case. "IV. "The Honorable CTA erred in not relaxing the technical rules of evidence in the appreciation of Petitioner's testimonial and documentary evidence despite the gross negligence committed by its previous counsel." 18 The petitioner believes that the CTA should have applied the principle enunciated by the Supreme Court in the case of Vda. De. Oate v. Court of Appeals (250 SCRA 283). It argued that in said case, "the Supreme Court relaxed the rules on Offer of Evidence and instead, provided two (2) conditions for allowing evidence not formally offered to be admitted and considered in the determination of the case, [to wit]: first, the same must have been identified by testimony duly recorded; and second, the same must have been incorporated in the records of the case." 19 While it admitted that its previous counsel may have failed to file the offer of evidence on time. It insists that the conditions under the exception have been met. In its supplemental memorandum, 20 petitioner further argued that "Section 8 of Republic Act No. 1125, otherwise known as 'The Act Creating the Court of Tax Appeals' provides that the proceedings before the Court shall not be governed strictly by the technical rules of evidence; [t]hus, [the Court of Tax Appeals] is not bound to apply strictly the rules on Offer of Evidence as required under the Rules of Court as amended." 21 On the other hand, the Solicitor General argues that reliance by the petitioner on the ruling of the Supreme Court in Vda. De Oate , supra , is misplaced because in that case, the "witness presented by the plaintiff, and examined by the plaintiff's counsel, to prove the fact of full payment of the purchase price for the land of the defendants, had explained the purpose behind the offer of the receipts evidencing the full payments of the purchase price by plaintiff . . . in the course of the marking and identification of such documents, as part of the testimony of the plaintiff's witness." 22 Also, "the purpose for which a formal offer of evidence is made . . . had already been accomplished during the presentation and marking stage of plaintiff's evidence in Vda. De Oate , warranting a relaxation of then Section 35 (now Section 34) of Rule 132 of the Rules of Court in favor of the plaintiff in said case [and] the defendant in Vda. De Oate had admitted the fact of payment evidence by the receipts, during pre-trial . . . thereby downplaying the significance of those receipts as documentary evidence." 23 In this case, however, the Solicitor General points out, the "respondent Commissioner made no admission at the pre-trial conference that petitioner paid creditable VAT input taxes; [that] petitioner's witnesses merely identified and marked its documentary evidence during their examinations; [and that] counsel for respondent Commissioner never cross-examined them" regarding such documents presented by the petitioner. Hence, "petitioner's documentary evidence had thus been submitted to the Court of Tax Appeals, not for the consideration and study of said court for the purpose of resolving the issues joined . . .; but for the perusal of the adverse party (respondent Commissioner) for a limited purpose akin to discovery." 24 The Solicitor General also points out that the general rule under Section 34 Rule 132 of the Rules of Court that "a court shall not consider evidence which has not been formally offered . . . is applicable to the proceedings of the Court of Tax Appeals, as it is not inconsistent with Republic Act No. 1125. (Rule 16, Rules of the Court of Tax Appeals)" 25 The whole problem stems from the failure of the petitioner to file on time its formal offer of evidence. This was the reason for the CTA not considering as evidence the exhibits presented by the petitioner during the trial. Hence, the CTA dismissed petitioner's claim for insufficiency of evidence. Republic Act No. 1125 creating the Court of Tax Appeals, 26 provides that the CTA "shall have the power to promulgate rules and regulations for the conduct of the business of the Court, and as may be needful for the uniformity of decisions within its jurisdiction as conferred by law, but such proceedings shall not be governed by technical rules of evidence." 27 And, under the Rules of the Court of Tax Appeals, 28 as amended, it is provided that the "provisions of the Rules of Court applicable to proceedings before the Courts of First Instance (now the Regional Trial Courts) shall, insofar as they may not be inconsistent with the provisions of Republic Act 1125 and of these rules, be applicable to cases pending before this Court, except that, in any case pending before it, the Court may, in the exercise of its jurisdiction, fix a shorter period for the filing of pleadings and other papers." 29 As the Solicitor General correctly observed, there being no inconsistency between the Rules of the Court of Tax Appeals and the Rules of Court regarding the proceedings before the Court of Tax Appeals, the Rules of Court shall apply. 30 We now then turn to the Rules of Court for the rule on formal offer of evidence, to wit: "Sec. 34. Offer of evidence . The court shall consider no evidence which has not been formally offered. The purpose for which the evidence is offered must be specified. "Sec. 35. When to make offer . . . . "Documentary and object evidence shall be offered after the presentation of a party's testimonial evidence . . ." 31 The exception to the general rules is found in the cases of People v. Napat-a (179 SCRA 403 [1989]), People v. Mate (103 SCRA 484 [1981]) and Vda. De Oate v. Court of Appeals (250 SCRA 283 [1995]). In these cases, the Supreme Court "relaxed the foregoing rule and allowed evidence not formally offered to be admitted and considered by the trial court provided the following requirements are present, viz. first, the same must have been duly identified by testimony duly recorded and, second, the same must have been incorporated in the records of the case." 32 The petitioner insists that this exception applies in its case since there was sufficient documentary evidence in the form of invoices, VAT returns, as well as summaries, reports, and results of the procedures performed by its external auditor, presented during trial which were identified by the witnesses and incorporated in the records of the case. We agree. It cannot be denied that the petitioner indeed failed to timely file its formal offer of evidence. Hence, it would seem that the exhibits presented during the trial should not be considered in the resolution of the case by the CTA. However, a careful perusal of the record shows that the petitioner's evidence meets the requisites of the exception enunciated in the case of Vda. De Oate, supra . The exhibits presented by the petitioner during the trial had been duly identified, marked, and incorporated into the records of the case as testified to by the witnesses. The first requisite, that is, the evidence must have been duly identified by testimony duly recorded, is amply satisfied as shown in the following testimony: "Q Miss Witness, I am showing to you know (sic) an original document which appears to be a letter dated October 9, 1995 consisting of 2 pages. Will you please identify this document for the court? "A This is our letter claim for refund filed and sent through the Department of Finance for our fourth quarter claim. "ATTY. SALVADOR "May I request that the photocopy of the October 9, 1995 letter just identified by the witness be marked as Exhibit "G". "JUDGE ACOSTA "Mark it. "(Executive Clerk so marks.) "ATTY. SALVADOR "May I request the Executive Clerk to compare the original with the photocopy marked as exhibit G. "EXECUTIVE CLERK "Faithful reproduction of the original, Your Honors. "ATTY. SALVADOR "Q Miss Witness, based on the original letter which you have just identified, where was the same filed? "A This was filed at the DOF on October 12, 1995. "ATTY. SALVADOR "May I request that the rubber stamp indicating receipt of the Department of Finance One Stop Shop and Duty Drawback Center indicating the date October 12, 1995 be submarked as Exhibit G-1, Your Honors. "JUDGE ACOSTA "Mark it. "(Executive Clerk so marks.) "ATTY. SALVADOR "Q Miss Witness, I am showing to you now an original application for tax refund/credit of value added tax paid or BIR form 2552. Can you please identify this document? "A This is the original copy of our application for tax credit/refund of value added tax paid for the period October to December 1994. "Q Miss de los Santos, based on this application for tax credit/refund, how much was claimed by way of refund by Benguet Corporation? "A We are claiming for P14,947,446.08. "Q And again for the record Miss Witness, for what period is the claim being made? "A This is for the period October to December 1994. "ATTY. SALVADOR May I request that the application for tax credit/refund or BIR form No. 2552 which has just been identified by my witness be compared with the photocopy by the Executive Clerk of Court. "EXECUTIVE CLERK OF COURT "Faithful reproduction of the original, Your Honors. "ATTY. SALVADOR "May I request thaat (sic) the photocopy be marked as Exhibit "H" for the petitioner, Your Honors. "JUDGE ACOSTA "Mark it. (Executive Clerk so marks.)" 33 The second requisite, that is, the exhibits must have been incorporated in the records of the case, has also been met when the witnesses described the contents of the documents presented in summarized form because the documents contained in six (6) boxes were too voluminous to go through. So, not only were the documentary exhibits physically attached to the record of the case but the same had been testified on by the witnesses as may be shown in the following testimony. "ATTY. SALVADOR "May I also offer as evidence for the petitioner, the folders identified by my witness and premarked as Exhibit J-12 to J-17. "Q. Mr. Rubio, can you please identify the contents of Box No. 6? "A. Box No. 6 contains folders which contains the photocopies of VAT official receipts, invoices and proof of payments, indexes (sic) J-18 to J-28. It also contains the summary of inward remittance, index as L-1. "ATTY. SALVADOR "May I also offer, Your Honors, the contents of Box No. 6 premarked and identified by my witness as folders J-18 to J-28 as well as folder L-1. "Q Mr. Witness, after examining the original documents and summaries that you have just identified, what are the results of your examination? "A We issued a report addressed to Mr. Grino containing the results of our verification. "Q Mr. Rubio, I am showing to you now a document which I would like to have marked as Exhibit "M". Will you please identify this document for the Court? "A This is the report we have prepared. "ATTY. SALVADOR May I have the report marked as Exhibit "M", Your Honor. "JUDGE ACOSTA "All right, mark it. "(Executive Clerk so marks.) xxx xxx xxx "ATTY. SALVADOR "Q Mr. Rubio, can you share to the Court the results of your report? "A The report contains a summary of the procedures that we have performed, essentially what I have discussed earlier. "We verified the claim for refund, the supporting claim for refund of Benguet Corporation for the third quarter ended September 30, 1994 amounting to P10,363,810.53. And for the fourth quarter of 1994, that is ended December 31, 1994 amounting to P14,947,446.08. For a total claim of P25,311,256.61. "Now, out of the total claim of this amount, we have certain exemptions. And a summary of these exemptions is contained on page 2 of the report. Out of the total claim P10,363,810.53 for the third quarter of 1994, we have exemptions amounting to P265,673.37 consisting of P100,764.97, representing input taxes on purchases of goods and services without the supporting documents. The details of these are contained in Exhibit A of the report. xxx xxx xxx "Q Mr. Rubio, there appears a signature above what appears to be your name in the report. Is this your customary signature? "A Yes. "Q Before that, Mr. Rubio, did you also verify the accuracy on the gross remittance of the export sales proceed? "A That is correct. "Q Could you share to the Court the results of your findings? "A In part 2 of the verification we did, we have no exemptions. "Q No exemptions? "A That is correct? "Q Again, Mr. Rubio, going back to what I was referring to a while ago, there appears to be a signature above of what appears to be your name on the report. Is this your customary signature? "A That is correct, that is my signature. "Q By signing this report, do you standby the correctness of the said report? "A Yes." 34 Assuming arguendo that the documentary evidence may not be considered because they had not been formally offered, we cannot ignore the other form of evidence which the court could have considered to resolve the case, that is, the testimonial evidence of the petitioner's witnesses, 35 the veracity of which has not been tested through cross-examination, nor has it been controverted by contrary evidence. In this case, the petitioner was able to make out its prima facie case that it is entitled to its claim through the testimony of one of its witnesses, to wit: "Q This third quarterly VAT return, were you able to determine the amount of input taxes which your company is claiming by way of refund? "A Benguet Corporation is claiming for the excess input VAT over the output VAT which amounts to P10,328,382.70. "Q Per this return, Miss Witness, how much was the creditable input tax of Benguet Corporation for the third quarter of 1994? "A. For the third quarter of 1994 Benguet Corporation creditable input tax amount to P20,019,397.37. "Q And as a result of the P20,019,397.37, how much was the excess input tax credited against the VAT output tax? "A. After the VAT output tax, the net input tax amounts to P10,328,832.70. xxx xxx xxx "Q Based on the same return Miss Witness, can you determine how much value added tax, input tax was paid by Benguet Corporation? "A The value added tax, input tax paid by Benguet Corporation amounts to P20,712,063.19. "Q Based on these two figures that you mentioned Miss Witness, was there an excess input value added tax for the fourth quarter of 1994? "A. The excess input value added tax amounts to P15,025,183.97." 36 Section 1 of Rule 133 of the Rules of Evidence, provides that preponderance of evidence is sufficient to establish one's case in civil cases, to wit: "Section 1. Preponderance of evidence, how determined . In civil cases, the party having the burden of proof must establish his case by a preponderance of evidence. In determining where the preponderance or superior weight of evidence on the issues involved lies, the court may consider all the facts and circumstances of the case, the witnesses' manner of testifying, their intelligence, their means and opportunity of knowing the facts to which they are testifying, the nature of the facts to which they testify, the probability or improbability of their testimony , their interest or want of interest, and also their personal credibility so far as the same may legitimately appear upon the trial. The court may also consider the number of witnesses, though the preponderance of evidence is not necessarily with the greater number." By the preponderance of evidence established through the testimonies of its witnesses, the petitioner has made out its prima facie case in its favor, and the burden to controvert the evidence of the petitioner shifted on the respondent Commissioner. In the case of Jison v. Court of Appeals (286 SCRA 495 [1998]) , the Supreme Court explained as follows: "Simply put, he who alleges the affirmative of the issue has the burden of proof, and upon the plaintiff in a civil case, the burden of proof never parts. However, in the court of trial in a civil, once plaintiff makes out a prima facie case in his favor, the duty or the burden of evidence shifts to defendant to controvert plaintiff's prima facie case, otherwise, a verdict must be returned in favor of plaintiff. Moreover, in civil cases, the party having the burden of proof must produce a preponderance of evidence thereon, with plaintiff having to rely on the strength of his own evidence and not upon the weakness of the defendant's . . ." (citing Vicente J. Francisco. The Revised Rules of Court in the Philippines. Evidence (Part II, Rules 131-134, at 2-4, 542-543 [1973])) But, the respondent chose not to present evidence to overturn the claim of the petitioner. Nor did it cross-examine the petitioner's witnesses to verify the correctness of the reports and summaries it had presented to the CTA. Worse, the court itself did not even make an effort to at least clarify the validity of the claim for tax credit. Instead, following the path of least resistance (what with the six boxes of documents to go through one by one), the Court suggested that the case be deemed submitted for resolution. When the witnesses testified that the petitioner made excess payments of VAT for the third and fourth quarters of the calendar year of 1994, 37 that it filed applications for tax credits before the One-Stop Shop Inter-Agency Tax Credit and Duty Drawback Center of the Department of Finance, 38 and that its external auditor explained the basis of the claim for tax credit through a summarized report, 39 we cannot deny the existence of such testimonial evidence which had not been excluded in any way under the Rules of Court. It is our impression, therefore, that the court a quo hastily dismissed the case just because the petitioner had not been able to formally offer on time its documentary evidence. it was wrong for the court a quo to merely rely on documentary evidence and disregard all other forms of evidence. In fine, petitioner has made out its prima facie case based on both testimonial and documentary evidence, the latter having been admitted by this Court on the strength of the Vda. De Oate decision. But as we had earlier opined, even if the documentary evidence is deemed inadmissible because petitioner goofed in filing its formal offer, still petitioner's testimonial evidence can stand alone to spell out a prima facie case for petitioner which must prevail for not having been disproved. WHEREFORE, the petition is GRANTED. The Decision of the Court of Tax Appeals in CTA Case No. 5392, is hereby SET ASIDE. The respondent Commissioner of Internal Revenue is directed to grant and issue the VAT tax credits claimed by petitioner Benguet Corporation in the amount of P25,311,256.61. SO ORDERED. CAcEaS Reyes * and De Los Santos, ** JJ . , concur. Footnotes 1. Petition, Rollo , p. 17. 2. Ibid . 3. Records, p. 50. 4. Records, p. 56 and 59. 5. Records, p. 60. 6. Records, p. 66. 7. Records, p. 70. 8. Records, p. 75. 9. See Footnote No. 4. 10. Records, pp. 76-A to 76-SS. 11. Records, pp. 77-78. 12. Records, p. 79. 13. Records, p. 80. 14. Records, p. 84. 15. Records, pp. 86-87, Note: No motion to withdraw as counsel was filed but the entry of appearance and substitution of counsel had conformity signatures of the former counsels of the petitioner. 16. Decision, CTA Case No. 5392. Rollo , p. 30. 17. Resolution dated January 19, 1999. Rollo , p. 33. 18. Petition, Rollo , p. 18-19. 19. Petition, Rollo , p. 23. 20. Filed on December 28, 1998, Rollo , pp. 51-57. 21. Ibid., rollo , p. 56. 22. Comment, Rollo , pp. 73-74. 23. Ibid . 24. Ibid . Rollo , p. 76. 25. Ibid . Rollo , p. 77. 26. Enacted on June 16, 1954. 27. Republic Act No. 1125, Section 8. 28. Adopted on September 10, 1955, pursuant to Section 8 of R.A. 1125 29. Rules of the Court of Tax Appeals, Rules 16 Section 1. 30. Comment, Rollo , p. 77. 31. Rule 132, Revised Rules on Evidence. 32. Vda. De Oate v. Court of Appeals , supra , p. 287. 33. Direct Examination of Sylvia De Los Santos, TSN, October 14, 1996, pp. 31-34. 34. Direct Examination of Ruben R. Rubio, TSN dated February 24, 1997, pp. 23-33. 35. "The Rules classify evidence, according to form, into (a) object (real) evidence (Sec. 1, Rule 130); (b) documentary evidence (Secs. 2-19, Rule 130) and (c) testimonial evidence (Secs. 20-51, Rule 130)." ( Remedial Law: Compendium . Florenz D. Regalado, 7th Rev. ed., 1998, p. 543.) 36. Direct Examination of Sylvia de los Santos. TSN, October 14, 1996, pp. 15 and 21. 37. Ibid ., pp. 15-21. 38. Ibid ., pp. 24-31. 39. See Footnote No. 32. * Vice J. Sabio, Jr., who is on leave, per Office Order No. 72-02-AM dated March 19, 2002. ** Vice J. Pestao who is on leave, per Office Order No. 77-02-AM, dated March 21, 2002.