Manila Mining Corp. v. Commissioner of Internal Revenue

SEVENTEENTH DIVISION [CA-G.R. SP No. 51569. April 12, 2002.] MANILA MINING CORPORATION , petitioner , vs . COMMISSIONER OF INTERNAL REVENUE and THE COURT OF TAX APPEALS , respondents . D E C I S I O N AQUINO , J p : In Atlas Consolidated Mining and Development Corporation vs. Court of Tax Appeals and Commissioner of Internal Revenue, CA-G.R. SP No. 34152, February 6, 1998; Manila Mining Corporation, vs. Commissioner of Internal Revenue, CA-G.R. SP No. 38287, June 5, 1997; and Benguet Corporation vs. Commissioner of Internal Revenue, CA-G.R. SP Nos. 37205, 38958 and 39435, July 10, 1998 , this Court had consistently ruled that the sale of gold to the Central Bank (now Bangko Sentral ng Pilipinas) is not subject to the imposition of a 10% VAT. This Court gave the rationale of this legal determination: "In equipose with the Central Bank's policy of conserving gold (Section 162, CB Circular No. 960), certain gold producers are required to sell their entire gold production to the Central Bank (Section 171, CB Circular 960). Moreover, no person shall export or bring out, or attempt to export or bring out of the Philippines, gold and/or gold-bearing materials, in any shape, form and quantity without prior approval from the CB Export Department (Section 107, CB Circular No. 1318). Prescinding from the aforesaid policy, gold producers are given incentives, such as considering their sales to the Central Bank as 'exports'. According to settled jurisprudence, circulars of the Central Bank are neither statute nor law, but being issued for the implementation of the law authorizing its issuance, it has the force and effect of law ( People v. Que Po Lay, 94 Phil. 640 ). All that is required is that the regulation should be germane to the objects and purposes of the law: that the regulation be not in contradiction with it, but conform to the standards that the law prescribes ( United States vs. Tupasi Molina, 29 Phil. 119 ). A su converso , should the regulation conflict with the law, the validity of the regulation cannot be sustained ( Director of Forestry v. Muoz, 29 SCRA 1183; Hijo Plantation, Inc. v. Central Bank, 164 SCRA )." A taxpayer who paid unjust value-added tax on sale of gold to the Bangko Sentral ng Pilipinas may claim a refund. Section 2(c)(1) of Revenue Regulations No. 3-88 specifically 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 sale of goods for export, thus: "(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 said invoice/receipt, however, shall be presented for cancellation prior to the issuance of the Tax Credit Certificate or refund . . . (emphasis supplied)." In its appealed Decision, the Court of Tax Appeals presented the facts of the cases as well as the clashing contentions of the parties as follows: "The cases at bar seek the issuance of tax credit certificates in the amounts of P5,683,035.04 (CTA Case No. 4968) and P8,173,789.60 (CTA Case No. 4991) or a total amount of P13,856,724.64, allegedly representing petitioner's excess input value added taxes for the four quarters of 1991. As represented, petitioner is a mining corporation duly organized and existing under and by virtue of the laws of the Philippines. It is registered with the BIR as a VAT-registered enterprise under VAT Registration Certificate No. 32-6-00632. Reproduced below are the pertinent facts of each case: CTA CASE NO. 4968 On April 22, 1991 and July 23, 1991, petitioner filed with respondent its Value Added Tax (VAT) Returns for the first and second quarters of 1991. On March 5, 1993, petitioner filed an application for tax refund/Credit of the amount of P5,683,035.04 with the VAT Division of the respondent's Bureau, allegedly representing its excess input VAT for the first and second quarters of 1991. The same was not acted upon by respondent, hence, on March 22, 1993, petitioner filed with this Court the instant petition for review. ICacDE CTA CASE NO. 4991 On October 21, 1991 and January 20, 1992, petitioner filed with respondent its Value Added Tax (VAT) Returns for the third and fourth quarters of 1991. On April 7, 1992, petitioner filed an application for tax refund/credit of the amount of P8,173,789.60 with the VAT Division of the respondent's Bureau, allegedly representing its excess input VAT for the third and fourth quarters of 1991. The same was not acted upon by respondent, hence, on May 24, 1993, petitioner filed with this Court the instant petition for review. Inasmuch as these two (2) cases involve the same parties and substantially the same factual and legal issues, they are consolidated in this decision. Petitioner argued that its sales of gold to the Central Bank (now Bangko Sentral ng Pilipinas) are considered export sales, thus the same should be classified as zero rated sales, not subject to any output tax, hence, it is entitled to the refund of the input taxes it paid during the year 1991. On the other hand, respondent in her answers raised the following special and affirmative defenses: CTA CASE NO. 4968 8. The tax in question was collected in accordance with law; 9. In an action for refund, the burden of proof is upon the taxpayer to establish its right to refund and failure to sustain the burden is fatal to the action for refund; 10. The claim for refund is still under investigation; 11. The allegations regarding the refundability does not ipso facto merit the refund claimed; and 12. Claims for refund of taxes are construed strictly against the claimant, the same being in the nature of an exemption from taxes. CTA CASE NO. 4991 5. Petitioner has no valid and sufficient cause of action against her; 6. Sales of gold to the Central Bank may not be legally considered export sales for purposes of Section 100(a) of the Tax Code, as amended, and therefore such sales are subject to the 10% value added tax and herein petitioner is not entitled to any input tax refund pursuant to Section 100(a)(1) in relation to Section 106(a) of the Tax Code, as amended (VAT Ruling No. 059-92, dated April 28, 1992); 7. Moreover, in VAT Ruling No. 202-90, dated October 12, 1990, it was explicitly and clearly held that under the provisions of the Tax Code, as amended, only direct export sales are zero rated and only where the export sales are paid in foreign currency in accordance with the Central Bank rules and regulations; 8. Claims for refund of taxes are strictly construed against the claimants, the same being in the nature or category of exemptions from taxation, and therefore, in an action for tax refund, the claimant must clearly and indubitably establish his right to such refund; 9. Even in those cases where refund of taxes are proper, and the present petition or controversy is not one among them, it is incumbent upon the claimants or petitioner to show that they have complied with the provisions of Section 204(3) in relation with Section 230 of the Tax Code, as amended; and 10. The tax in question was collected and paid pursuant to and in accordance with law, rules and regulations. The legal issue which is presented for our consideration in the two (2) cases is whether or not petitioner's sale of gold to the Central Bank (now Bangko Sentral ng Pilipinas) during the four (4) quarters of 1991 are subject to 10% value added tax (VAT) under Section 100 of the Tax Code or should it be considered as effectively zero-rated under paragraph (a)(2) of said Section 100, ibid ." On the basis of said undisputed facts, the Court of Tax Appeals after due proceeding rendered a Decision (Annex A, Petition) on November 24, 1998 denying the petitioner's claim for refund. The verdict was with the concurrence of two of the three Judges, namely Associate Judges Ramon O. De Veyra and Amancio Q. Saga. Presiding Judge Ernesto D. Acosta filed a Concurring and Dissenting Opinion. In his Dissenting Opinion Presiding Judge Ernesto D. Acosta opined that petitioner is entitled to a refund of the input value-added taxes because the respondent has admitted facts constituting entitlement of such a refund. A Motion for Reconsideration was filed by the petitioner but the same was denied by the same two (2) judges. Consistently, the Presiding Judge dissented. Hence, this Petition for Review. There is no reason at all for this Court to depart from its ruling in Atlas Consolidated Mining and Development Corporation and the other cases cited, supra . Consequently, the only issue submitted for determination in this appeal is whether there was still a need for the petitioner to support its applications for a tax refund with "photocopies of the purchase invoices or receipts evidencing the value-added tax paid" and to present them "for cancellation prior to the issuance of the Tax Credit Certificate or refund." On the sole issue stated above, this Court finds merit in the appeal. In CTA Case No. 4991, the petitioner filed a "Request for Admission" asking the respondent Commissioner of Internal Revenue to admit the following: 1. That petitioner did in fact file its VAT Returns for the period in question; 2. That petitioner did in fact file a claim for VAT refund/issuance of a tax credit certificate for the last two quarters of the taxable year 1991, in the amount of P8,173,789.60; 3. That the total net "claimable" input VAT for the period in question amounts to P8,173,789.60; 4. That the computation of the total net "claimable" input VAT is based on the original copies of official receipts and sales invoices issued to petitioner showing the amount of input VAT which it had paid during the period in question, which official receipts and invoices were submitted to the Office of Respondent CIR . Petitioner made a similar request for admission in CTA Case No. 4968 except for the figures noted therein. For failure of the respondent Commissioner of Internal Revenue to respond to said requests for admission within the fixed periods, the Court of Tax Appeals in CTA Case No. 4991 on February 22, 1994 and in CTA No. 4968 on February 28, 1994 issued Resolutions respectively granting the requests for admission and decreeing that all matters contained in the requests for admission were deemed admitted. In denying the petitioner's claim for a tax refund or a Certificate of Tax Credit, the Court of Tax Appeals in its Decision said: "Aside from the fact that non-compliance by the petitioner with the provision of Section 2(c)(1) of Revenue Regulations No. 3-88 is fatal to its claim for tax credit/refund, we also find that the unavailability of the said documentary evidence prevented us from confirming the veracity of the amount claimed by the petitioner as excess input VAT payments. Mere listing of VAT invoices and receipts, even if certified to have been previously examined by an independent certified public accountant, would not suffice to establish the truthfulness and accuracy of the contents thereof unless offered and actually verified by this Court. CTA Circular No. 1-95, as amended by CTA Circular No. 10-97, requires that the photocopies of invoices, receipts and other documents covering said accounts or payments must be pre-marked by the party concerned and submitted to this Court. DTAESI We recognize the fact that there are statements made by petitioner which were deemed admitted by Respondent by virtue of two resolutions promulgated by this Court on February 28, 1994 (CTA Case No. 4968) and on February 22, 1994 (CTA Case No. 4991), however these admissions do not have the effect of supplanting the requirement of submitting to this Court the aforementioned invoices and receipts. It is to be noted that the `admitted' statements speak of presentation of invoices and receipts, schedules of purchases of domestic goods and services, etc., in the administrative level (BIR). Section 8 of Republic Act 1125 (An Act Creating the Court of Tax Appeals) provides categorically that the Court of Tax Appeals shall be a court of record and as such it is required to conduct a formal trial ( trial de novo ) where the parties must present their evidence accordingly if they desire the Court to take such evidence into consideration." In its Resolution denying petitioner's Motion for Reconsideration, the Court of Tax Appeals added one more reason why it could not grant petitioner's claim: "In his Opposition to petitioner's motion, respondent counters, inter alia , that while there was an implied admission on the part of the Respondent on account of the failure to object to the Certification made by the independent CPA, such failure does not supplant the weight duly accorded by the Court on that particular evidence, and while it is true that judicial admissions require no proof as the same are conclusive, yet, such kind of evidence does not ipso facto have probative value considering that the veracity of the claim cannot be verified without compliance with the Best Evidence Rule." This Court does not agree with the rationalization of the Court of Tax Appeals. The respondent Commissioner of Internal Revenue, not only by force of Sec. 2, Rule 26, of the Rules of Civil Procedure but also by the Resolutions of the Court of Tax Appeals, is deemed to have admitted all the matters requested to be admitted in petitioner's Requests of Admission. Sec. 2 Rule 129 of the Revised Rules of Court states: "Sec. 2. Judicial admissions . Admissions made by the parties in the pleadings, or in the course of the trial or other proceedings do not require proof and cannot be contradicted unless previously shown to have been made through palpable mistakes." It is not only judicially settled but also self-evident that an admission made by a party in the course of the proceeding does not require proof. Said admissions may be contradicted only by a showing that it was made through palpable mistake. ( Philippine Bank of Communications v. Court of Appeals, 195 SCRA 567 ) The invocation by the Court of Tax Appeals as well as the respondent Commissioner of Internal Revenue of the Best Evidence Rule to escape the effects of the latter's judicial admission is utterly misplaced. The Best Evidence Rule applies only when there is a need to prove a certain matter. In such a situation, no secondary evidence is generally acceptable; only the best evidence is admissible in evidence. Example: When the matter in issue is the marriage of two persons, the party wanting to establish the fact of marriage is not allowed to present testimonial evidence to prove it. The Best Evidence which is the marriage contract should be presented, unless its presentation is excused pursuant to Sec. 3, Rule 130 to the Revised Rules of Court. However, if marriage between said persons is a judicially admitted matter, there is no need for any evidence, whether best or secondary to prove the same. In view of the foregoing, this Court rules that the Court of Tax Appeals committed a reversible error in dismissing petitioner's Petition for Review. WHEREFORE, finding merit in the appeal, the Court REVERSES the appealed Decision and enters one GRANTING petitioner's claim for refund or issuance of Tax Credit Certificates in the amounts of P5,683,035.04 in CTA Case No. 4968 and P8,173,789.60 in CTA Case No. 4991 representing excess input Value-Added Taxes (VAT) in the four quarters of taxable year 1991. SO ORDERED. Cruz and Tolentino, JJ . , concur.