Hitachi Computer Products (Asia) Corp. v. Commissioner of Internal Revenue

TWELFTH DIVISION [CA-G.R. SP No. 54312. November 27, 2001.] HITACHI COMPUTER PRODUCTS (ASIA) CORP. , petitioner , vs . COMMISSIONER OF INTERNAL REVENUE, ET AL. , respondents . D E C I S I O N CALLEJO , SR. , J p : This is a "Petition for Review" , under Rule 43 of the 1997 Rules of Civil Procedure, filed by Hitachi Computer Products (Asia) Corporation, Petitioner for brevity, for the reversal of the Decision of the Court of Tax Appeals in "Hitachi Computer Products (Asia) Corporation vs. Commissioner of Internal Revenue, CTA-Case No. 5570, dated May 14, 1999" (Annex "A" of the Petition) . The factual backdrop and anterior proceedings in the Petition at bench, as found by the Court of Tax Appeals, are not disputed, namely: "Petitioner is a domestic corporation primarily engaged in the business of manufacturing, assembling, processing and exporting of computer products and components. It is a Value-Added tax registered entity with VAT Registration No. 003-877-830-V (Exhibit A). As culled from the records, Petitioner filed its quarterly VAT return with the Respondent on January 22, 1996 covering its taxable quarter ended December 31, 1995 showing, among others, the following details: (Input Tax) Carried over from the previous quarter P8,649,521.98 (Input Tax) On domestic purchases of goods and services 1,743,469.58 Total P10,392,991.56" ============= Believing, as it does, that as an exporter of goods it has the privilege to apply for a refund or tax credit of its excess input VAT payments insofar as they are attributable to its export sales pursuant to Section 106(A)(1) (formerly Section 100[a][1]) in relation to Section 112(A) (formerly Section 106[A]) of the Tax Code, Petitioner filed on December 22, 1997 with the Tax and Revenue Group of the One-Stop-Shop Inter-Agency Tax Credit and Duty Drawback Center of the Department of Finance, an administrative claim for refund of its VAT input taxes amounting to P1,743,469.58, which allegedly pertains to its local purchases of goods and services in connection with and attributable to its export operations. Obtaining no affirmative relief from the Respondent and fearing that it would be barred by the mandatory period of prescription, Petitioner elevated its case to this Court on December 29, 1997, via Petition for Review. In its Answer filed on February 20, 1998, Respondent assailed the validity of Petitioner's claim and interposed the following Special and Affirmative Defenses, to wit: 4. Petitioner failed to show compliance with the substantiation requirement under the provision of Section 16(c)(3) of Revenue Regulations No. 5-87, as amended by Revenue Regulations No. 3-88; 5. Petitioner has not shown proof that the alleged VAT input taxes attributable to its export sales have not yet been applied to the output tax for the period covered in its claim or any succeeding period and that the alleged total foreign exchange proceeds have been accounted for by the Central Bank; 6. The petition states no cause of action as it does not allege the date/s when the taxes sought to be refunded were actually paid; 7. In an action for tax refund/credit, the burden of proof is on the taxpayer to establish its right to the refund and failure to sustain the burden is fatal to the action for tax refund; 8. Taxes paid and collected are presumed to have been made in accordance with law and regulations, hence, not refundable; and 9. Well-settled is the rule that claims for refund are construed against the claimants since it partakes of the nature of an exemption from taxation." (at pages 4244, Rollo) During the hearings before the Court of Tax Appeals, the Petitioner adduced in evidence the computerized summary or schedule of its Input-Value-Added Tax for the fourth quarter of 1995, without adducing in evidence copies of the purchase invoices/receipts of its Input-VAT. On May 14, 1999, the Court of Tax Appeals rendered a Decision dismissing the Petition for insufficiency of evidence. The Petitioner, forthwith, filed its "Petition for Review" for the reversal of the Decision of the Court of Tax Appeals insisting that it adduced the requisite quantum of evidence to prove its claim for refund. The Petition is dismissed for lack of merit. In dismissing the Petition before it, the Court of Tax Appeals found and declared that the Petitioner failed to show that the foreign currency exchange proceeds of its exportations had been duly accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas. The computerized schedule of Petitioner's Input-Value-Added Tax for the fourth quarter of 1995 was inadequate as the Court had no means of verifying the veracity of the facts and figures appearing in said schedule: "In view of the above provisions of law, Petitioner submits that it has no Value-Added output tax liability as it sells all its finished products abroad and thus qualifies as export sales which results in no output tax liability as the same is subject to 0% rate. Such being the case, Petitioner further asseverates, that it is entitled to the refund of its VAT input taxes amounting to P1,743,469.58 which pertains to its local purchases of goods and services in connection with and attributable to its export operations. A meticulous study of the evidence at hand in this case does not sustain the Petitioner's position. Accordingly, for failure to substantiate, the petition must fail. Based on the aforesaid provisions of the Tax Code, Petitioner need not only prove the fact that it is engaged in exportation of goods, thus, making its export sales zero-rated. As a condition sine qua non, Petitioner must also show that the foreign currency exchange proceeds of its exportations have been duly accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP). Records at bar fail to reveal any evidence to this effect. Assuming arguendo that Petitioner's sales qualify as export sales under the Tax Code, still, We are not inclined to grant the claim for refund. This must be so since the Petitioner failed to adduce in evidence the supporting copies of its purchase invoices/receipts of its Input VAT, instead, it merely submitted a computerized summary or schedule of its Input Value-Added Tax for the fourth quarter of 1995. In this regard, this Court has no means of verifying the veracity of the facts and figures appearing on the said schedule. Well-settled is the rule that a mere summary or schedule without accompanying documents proves nothing inasmuch as there is no way by which this Court can ascertain Petitioner's assertions therein. We have repeatedly held that receipts/invoices are important in the sense that it is only through these documents that this Court would be able to determine with particular certainty whether the goods purchased are really attributable to Petitioner's export sales. Moreover, these invoices/receipts presented are the only direct and real evidence of the amount of input VAT being claimed. In the absence of these documents, this Court in deciding a refund case, cannot just rely on sweeping generalizations of the Petitioner for it must be stressed that refund of taxes partakes the nature of a tax exemption and are thus construed in strictissimi juris against the taxpayer and in favor of the taxing authority (Insular Co. vs. CTA, 104 SCRA 710; CIR vs. Rio Tuba Nickel Mining Corp., 207 SCRA 549). " (at pages 4647, Rollo.) In its Petition at bench, the Petitioner insists that it discharged its burden. In point of fact, the Petitioner insists, the Respondent failed to adduce any evidence controverting the evidence of the Petitioner and buttressing Respondents' "Special and Affirmative Defenses" : "Petitioner was also able to prove that it has no Value-Added output tax liability as its sells all its finished products abroad and thus qualifies as export sales subject to zero percent (0%) rate, on the basis of the unrebutted testimony of Ms. Fe Francisco, the General Accounting Analyst of Petitioner. Hence, Petitioner was able to prove that its input taxes incurred in the last quarter 1995 have not been applied against any output tax liability. Thus, complying with the third requisite cited above. In denying Petitioner's claim for refund, the Court simply stated that the Petitioner, having failed to 'show that the foreign currency exchange proceeds of its exportations have been duly accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP)' the claim must be denied. This Honorable Court went further to state that: 'Assuming arguendo that Petitioner's sales qualify as export sales under the Tax Code, still, We are not inclined to grant the claim for refund. This must be so since the Petitioner failed to adduce in evidence the supporting copies of its purchase invoice/receipts of its Input VAT, instead, it merely submitted a computerized summary or schedule of its Input Value-Added Tax for the fourth quarter of 1995.' We submit that the computerized summary or schedule of its Input Value-Added Tax for the fourth quarter of 1995 submitted by the Petitioner should be considered sufficient evidence to support the claim for refund of the Petitioner since the said schedule or summary is the document that supports (and describe in detail the information relative to the) Value-Added Tax inputs of the Petitioner for the period as is thus an attachment of Petitioner's Fourth (4th) Quarterly VAT Return for 1995, which enjoys the presumption of correctness. Thus, although the copies of the purchase invoice/receipts of its input VAT from local purchases of goods and services were not supported, such fact is not fatal to Petitioner's claim. The evidence which was submitted (and admitted by the Respondent Court of Tax Appeals) has described in details the supporting documents in the form of various invoices and official receipts which generated the crediatble ( sic ) Value-Added Tax inputs of Petitioner for the Fourth Quarter of 1995. The amounts of the sales and the corresponding creditable VAT inputs which the Petitioner generated for the said period were indicated in the said schedule. We submit therefore, that the said document is proof enough of the amount of creditable VAT inputs generated by the Petitioner for the Fourth Quarter of 1995. The respondent Court of Tax Appeals has failed to verify the propriety of each and every transactions on whether those comply with the requirements of the Bureau of Internal Revenue pursuant to the applicable revenue regulations as such information and details indicated and thus are available on said schedule. These documents and the information contained thereon are proof of the amount of the creditable VAT inputs of the Petitioner for the Fourth Quarter of 1995 and of such fact that they comply with the regulations required on the matter. The presence of these secondary evidence is proof enough of the fact required by the respondent Court of Tax Appeals in the absence of the primary documents it requires. The respondent Court should have kept an open mind and consider these evidence on hand and should not have denied the aforesaid claim in the absence of invoices and official receipts when the details thereof could be ascertained and verified under the said schedules of Petitioner. Likewise, the accuracy and veracity of the Fourth (4th) Quarterly VAT Return for 1995 (Exhibit 'B)' of the Petitioner was never disputed by the Respondent, as in fact the Respondent did not introduce any evidence to support his Special and Affirmative Defenses in his Answer. Hence, the accuracy and veracity of Petitioner's Fourth (4th) Quarterly VAT Return for 1995 is thus, deemed admitted by the Respondent. Moreover, under existing jurisprudence, tax returns filed by a taxpayer are presumed correct since they are executed under pain of perjury, unless there is evidence to the contrary. Thus, we submit that, having been made an integral part of Exhibit 'B', the said summary or schedule of its Input Value-Added Tax for the fourth quarter of 1995 submitted by the Petitioner should have been considered sufficient by the Honorable to support Petitioner's present claim for refund. As to the finding of the Honorable Court that the Petitioner failed show ( sic ) that the foreign currency exchange proceeds of its exportations have been duly accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP), suffice it to state that Petitioner property proved due compliance with the said requisite during the course of the trial and which remained undisputed by the Respondent, thus, also deemed admitted. The testimony of the witness of Petitioner proved that all of the goods it produced were exported. Logically, the proceeds thereof were remitted to the company. It must be emphasized that after Petitioner submitted its evidence which were all admitted by this Court, Respondent submitted his case on the basis of the records and pleadings, without offering proof as to the truth of his own allegations in his Answer. Respondent failed to present his evidence, oral or otherwise in support of his case. (Warner-Lambert Philippines, Inc. Commissioner of Internal Revenue, CTA Case No. 3925, April 21, 1992). We submit, therefore, that as ruled by the respondent Court of Tax Appeals in Dataprep (Phil.), Inc. v. Commissioner of Internal Revenue, CTA Case No. 3600, March 20, 1984, Respondent may be considered to have no serious objection or opposition to petitioner entitlement to the refund and therefore, the present claim for refund must be granted. Thus, the claim for refund of Petitioner should therefore be granted as Petitioner has complied with all the requisites under the Tax Code and existing pertinent jurisprudence and that the interference of the Respondent Court is clearly erroneous and without basis." (at pages 2225, Rollo.) The Solicitor General hewed to the disquisitions and ratiocinations of the Court of Tax Appeals, in this wise: "The evidence on record does not sustain petitioner's position. Based on the aforequoted provisions of the Tax Code, it is not enough for petitioner to prove that it is engaged in the export of goods, thus, making its export sales zero-rated. As a condition sine qua non, petitioner must also show that the foreign currency exchange proceeds of its exports have been duly accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP). This, however, petitioner failed to do. Moreover, petitioner failed to adduce in evidence the supporting copies of its purchase invoices or receipts of its input VAT. This is fatal to petitioner's cause because such invoices of receipts are the only direct and real evidence of the amount of input VAT being claimed. Furthermore, it is only through these documents that it could be determined with any particular certainty whether the goods purchased by petitioner truly pertain to its export sales. Petitioner, however, avers that its failure to present the purchase invoices or receipts of its input VAT should not have mattered since it was able to submit in evidence a computerized summary of its input VAT for the fourth quarter of 1995. But as petitioner itself concedes, such computerized summary is merely secondary evidence. It is elementary that before secondary evidence can be accorded any appreciable evidentiary weight, the non-production of the originals or duplicate originals should first be explained. No attempt in this direction was ever made by petitioner. More importantly, the computerized schedule, having been prepared by petitioner's employee, is merely self-serving evidence. The schedule not being accompanied by any supporting documents, there simply would be no way of ascertaining the veracity of the facts and figures appearing in it. As held in Bank of Philippine Islands, as Trustee of the PAL Pilots' Retirement Benefit Plan v. Commissioner of Internal Revenue, schedules are mere lists for the better appreciation of the evidence submitted. Where the schedules are not corroborated by any direct evidence, they must of necessity be disregarded outright. Still, petitioner would have the above objections, swept aside because respondent Commissioner did not oppose, while respondent CTA admitted, the aforesaid secondary evidence. Anent this contention, suffice it to state that all documents formally offered as evidence are still subject to the court's final determination as to their materiality, relevance, and probative value. Whether or not the evidence submitted by a party is sufficient to warrant the grant of a refund lies within the sound discretion and judgment of the court. Petitioner must also realize that since claims for tax refund/credit are strictly construed against the taxpayer, it has the bounden duty to show clear and convincing proof of its entitlement thereto, and not merely rely on the perceived weakness of respondent Commissioner's evidence. Consequently, petitioner's secondary evidence, even if unrebutted, is not sufficient for purposes of proving its entitlement to the tax refund/credit sought. As held in the recent case of AMI Philippines, Inc. v. Commissioner of Internal Revenue. 'It is the assertion of petitioner that since respondent did not present any evidence, there was no way that it could lose its case. Such presumption is frowned upon by this Court. In a claim for refund/credit the burden of proof is on the taxpayer to establish its right to the refund/credit. Failure to sustain the burden is fatal to its cause of action. ( Citibank N.A. Phil. Br. Vs. The Commissioner of Internal Revenue, CTA Case No. 4323, October 24, 1994.)' In sum, respondent CTA did not err in denying petitioner's claim for tax refund/credit due to insufficiency of evidence." ( at pages 8284, Rollo. ) We agree with the Court of Tax Appeals and the Solicitor General. The Petitioner itself admits, in its Petition, that the summary it adduced in evidence before the Court of Tax Appeals is merely secondary evidence and that it failed to adduce in evidence the primary evidence, namely, the purchase invoices/receipts of Petitioner's Input VAT. The Court of Tax Appeals thus had no way of verifying whether the data contained in the schedules or summary tallied with the particulars of the purchase receipts/invoices. Unless and until the Petitioner gave a justifiable reason for its failure to adduce in evidence the purchase invoices/receipts, secondary evidence thereof is not admissible in evidence as proof of the contents of the said purchase receipts/invoices. It may be true that the Court of Tax Appeals admitted the summary adduced by the Petitioner in evidence. It may be true, too, that the Respondent did not adduce any evidence to controvert the summary adduced in evidence by the Respondent. But the same is peu de chose. This is so because the admission of secondary evidence for lack of proper objection is still subject to the rules on weight and sufficiency of evidence. (Herrera, Remedial Law, 1999 ed., Vol. V, at page 176) . Petitioner must take heed and pay obeisance to case law that: "We agree with petitioner that a claim for refund is in the nature of a claim for exemption and should be construed in strictissimi juris against the taxpayer. Likewise, there can be no disagreement with petitioner's stance that private respondent has the burden of proof to establish the factual basis of its claim for tax refund." (Commissioner of Internal Revenue vs. Tokyo Shipping Co., Ltd., et al., 244 SCRA 332, at page 336, supra) The Petitioner must rely on the strength of its own evidence and not on the failure of the Respondent to object to its evidence or the weakness of the evidence of the Respondent. The utter insufficiency of the evidence of the Petitioner does not evanesce simply because the Respondent never bothered to adduce any evidence to controvert the anemic evidence of the Petitioner. IN THE LIGHT OF ALL THE FOREGOING, the Petition is DISMISSED. The Decision subject of the Petition is AFFIRMED. SO ORDERED. Salazar-Fernando and Guevara-Salonga, JJ . , concur.