Philippine Associated Smelting and Refining Corp. v. Commissioner of Internal Revenue

SPECIAL FOURTH DIVISION [CA-G.R. SP No. 54909. March 30, 2001.] PHILIPPINE ASSOCIATED SMELTING and REFINING CORPORATION , petitioner , vs . The HONORABLE COMMISSIONER OF INTERNAL REVENUE , respondent . D E C I S I O N ROSARIO , JR. , J p : This is a petition for review assailing the decision of the Court of Tax Appeals dated May 06, 1999, in CTA Case No. 5158, which decision partially denied petitioner's, Philippine Associated Smelting and Refining Corporation (petitioner, for brevity), claim for refund of excise taxes for the period of October 1992 to March 1994, the dispositive portion of which states: 1 "IN THE LIGHT OF THE FOREGOING, the instant petition for review is partially granted. Respondent is hereby ORDERED to REFUND or ISSUE a Tax Credit Certificate to herein petitioner in the amount of P1,498,716.45 representing the latter's excise taxes paid for the period October 1992 to March 1999. No costs." The facts are as follows: 2 Petitioner is a domestic corporation engaged in the business of exporting, processing, smelting, and refining metals. It is registered with the Export Processing Zone Authority (EPZA) as a Zone Export Enterprise and with the Board of Investments (BOI) as an Export Producer with the status of a preferred pioneer enterprise, and whose plant is located at Leyte Industrial Development Estate (LIDE) which is covered by the provisions of Presidential Decree No. 66, as amended, otherwise known as the "EPZA Law". Petitioner's business operations require the indispensable use of petroleum products such as diesel fuel, bunker fuel oil, lubricants and other petroleum products, and as such, petitioner purchased these products from local distributors like Petron Corporation. Petitioner alleges that specific taxes imposed by law on these petroleum products were paid by Petron to the Bureau of Internal Revenue (BIR) and Petron, subsequently, passed on to petitioner the amount of taxes it paid on the fuel oil if it eventually sold to petitioner. Petitioner, believing that it is exempt from paying the said taxes under Section 17 of P.D. No. 66, applied for tax credit of specific taxes paid on purchases of petroleum products from Petron, to wit: DATE AMOUNT PERIOD COVERED June 11, 1993 P135,500.55 October to November, 1992 Feb. 18, 1994 P1,633.755.90 December, 1992 to August, 1993 July 12, 1994 P1,249,814.55 September, 1993 to March, 1994 P3,019,071.00 =========== Petitioner anchors its claim on the tax incentive provided for by Section 17 of P.D. No. 66 creating the Export Processing Zone Authority which states, thus: "SECTION 17. Tax Treatment of Merchandise in the Zone. (1) Except as otherwise provided in this Decree, foreign and domestic merchandise, raw materials, supplies, articles, equipment, machineries, spare parts and wares of every description, except those prohibited by law, brought into the zone, to be sold, stored, broken up, repacked, assembled, installed, sorted, cleaned, graded or otherwise processed, manipulated, manufactured, mixed with foreign or domestic merchandise or used directly or indirectly in such activity, shall not be subject to customs, and internal revenue laws and regulations nor to local tax ordinances, the provisions of the law to the contrary notwithstanding." (Emphasis supplied) Public respondent Commissioner, in a letter dated September 2, 1994, denied petitioner's claim for refund covering the period October 1991 to November 1992 on the ground that the provisions of Section 17 P.D. No. 66 and BIR Ruling No. 126-86 does not state clearly that petroleum products sold and delivered to EPZA registered enterprises are exempt from taxes. Public respondent maintains that it is a settled rule in taxation that tax exemptions cannot be created by implication because exemptions from taxations are highly disfavored in law and one who claims exemption from tax must be able to justify his claim by the clearest grant of organic or statute law. As a result of public respondent's denial of their claim, petitioner filed a judicial action for refund before the Court of Tax Appeals, which in a decision dated February 17, 1998, 3 denied said petition due to insufficiency of evidence. Petitioner filed a "Motion for Reconsideration" 4 dated March 12, 1998, which was granted by the same Court in a Resolution 5 dated May 19, 1998, allowing petitioner a new trial for the reception of additional evidence to support its claim. In due course, the Court of Tax Appeals rendered its assailed decision dated May 06, 1999, partially granting petitioner's claim for a refund, the salient portion of which states: 6 "After a minutiose scrutiny of the evidence adduced by petitioner (Exhibits A to PP-79), the Court finds the same sufficient to grant the desired relief of petitioner but only in the amount of P1,498,716.45, as this was the only amount duly supported by invoices. . . . On May 25, 1999, petitioner seasonably filed a "Motion for New Trial" 7 on the ground of newly discovered evidence, alleging that the invoices which if failed to present during the original trial and during the succeeding new trial were discovered only in the early part of 1999, when petitioner's employees' retirement program was implemented. This occurred when, due to the numerous resignations of their employees, the office of petitioner's different departments were rearranged resulting to the discovery of nineteen (19) invoices issued by Petron during the period covered by the refund claim. On August 17, 1999, the Court of Tax Appeals issued a Resolution denying the "Motion for New Trial", in the following wise, to wit: 8 "After a circumspect study of the above motions of both parties, the Court finds that Respondent's Motion for Reconsideration raises no new matters not yet considered and passed upon by the Court in the assailed Decision and petitioner's Motion for New Trial bereft of merit, as the alleged newly discovered evidence cannot be appropriately called "newly discovered" for they could have been very well presented during the original trial and first new trial, with the exercise of reasonable diligence, which apparently had not been observed by Petitioner's counsel. Thus, the Court sees no compelling justification to disturb or modify its Decision in the above-entitled case promulgated on May 6, 1999." aATHIE Aggrieved by the foregoing, petitioner, via a petition for review under Rule of 43 of the 1997 Rules of Civil Procedure, brings its cause before this court, raising the following issues: 9 "I. WHETHER OR NOT THE COURT OF TAX APPEALS SHOULD HAVE ALLOWED PETITIONER TO PRESENT ADDITIONAL EVIDENCE TO SUPPORT ITS CLAIM FOR REFUND. II. WHETHER OR NOT THE COURT OF TAX APPEALS SHOULD HAVE GRANTED THE REFUND IN FULL EVEN WITHOUT THE PRESENTATION OF THE ADDITIONAL INVOICES." In sum, petitioner questions the propriety of the tax court's decision partially denying its claim for refund in the amount of P3,019,017.00. WE find the petition bereft of merit. Well-settled is the rule that a claim for refund is in the nature of a claim for exemption and should be construed in strictissimi juris against the taxpayer. 10 A claimant, therefore, has the burden of proof to establish the factual basis of his or her claim for tax credit or refund. 11 In the case at bar, petitioner was already given two (2) opportunities to present the necessary invoices to substantiate its claim, but failed to do so . In its February 17, 1998 decision, the Court of Tax Appeals denied petitioner's claim for insufficiency of evidence, as it failed to submit the invoices supporting the schedule of petroleum products delivered by Petron to petitioner. According to the court, it is only through these invoices that a proper verification can be made as to the truthfulness of the amount claimed by the petitioner. At the instance, petitioner was already apprised of the compelling necessity to present the invoices, hence, it filed a "Motion for New Trial" which the court a quo granted. In the new trial, petitioner was given a fair chance but was not able, again, to present all the necessary invoices, prompting the court a quo to partially grant the claimed refund only in the amount that petitioner was able to prove. Petitioner was given two (2)occasions to prove its claim, and yet, it failed to exercise enough diligence to do so. Petitioner insists that a second new trial should have been granted by the tax court on the ground of "newly discovered evidence", in the form of the additional invoices discovered after their receipt of the decision of the Court of Tax Appeals. The COURT agrees with the tax court that the invoices cannot be considered as falling within the purview of the "newly discovered" evidence. Newly discovered evidence to warrant a new trial, (a) must have been discovered after trial, (b) could not have been discovered and produced at the trial despite due diligence , and (c) if presented would probably alter the result of the action. 12 In the instant case, however, We fail to see any due diligence on the part of petitioner to present the additional invoices as such invoices, according to petitioner, were merely misplaced in one of their offices. They could very well have been presented had petitioner exercised reasonable diligence to locate them. It is important to point out that petitioner was aware, through their counsel, that these invoices were crucial to their cause, 13 as it was the absence of these invoices which cause the tax court to initially dismiss its claim and yet, they were satisfied to submit only the available invoices, without searching for the missing ones. Taxes, as the Court have overly emphasized, are the lifeblood of the government, and their prompt and certain availability is an imperious need. 14 Any exemption from the payment thereof, as in a claim for tax credit, is in derogation of sovereign authority and a deduction on expected revenue, hence, entitlement to such exemption must be established by convincing proofs. 15 Petitioner cannot, thus, be allowed to do this piece-meal in the form of a new trial . Finally, We state again that the Court of Tax Appeals is a highly specialized body specifically created for the purpose of reviewing tax cases. 16 Through its expertise, it is undeniably competent to determine the amount of tax credit to which petitioner is entitled to, through the evidence presented before it. Consequently, as matter of principle, this court 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 improvement exercise of authority 17 which We find absent in the case at bar. WHEREFORE, finding no error on the part of the Court of Tax Appeals, the instant petition is hereby DENIED, and the decision of the Court of Tax Appeals partially denying petitioner's claim for tax refund, is AFFIRMED. No pronouncement as to costs. SO ORDERED. Guerrero and Santos, JJ . , concur. Footnotes 1. Decision of the Court of Tax Appeals dated May 06, 1999. p. 10; Rollo , p. 41. 2. Ibid , pp. 2-6; Rollo , pp. 33-37. 3. Decision of the Court of Tax Appeals dated August 17, 1999, p. 11; Rollo , p. 55. 4. Rollo , pp. 57-60. 5. Rollo , pp. 62-63. 6. Decision of the Court of Tax Appeals dated May 06, 1999, p. 10; Rollo , p. 41. 7. Rollo , pp. 64-66. 8. Decision dated August 17, 1999, pp. 2-3; Rollo , pp. 43-44. 9. Petition for Review, p. 7; Rollo , p. 26. 10. Province of Tarlac vs. Alcantara , 216 SCRA 790; Paper Industries Corporation of the Philippines, 250 SCRA 434; Commissioner of Internal Revenue vs. Tokyo Shipping Co., Ltd ., 224 SCRA 332. 11. Citibank, N.A. vs. Court of Appeals, 280 SCRA 459. 12. National shipyards Corp. vs. Asunsion, et al., 103 PHIL 67, cited in the book of Justice Florenz D. Regalado, Compendium in Remedial Law, Volume I, Sixth Revised Edition, p. 382. 13. "Motion for New Trial" dated May 25, 1999, of Petitioner, pp. 1-2; Rollo , pp. 64-65. 14. Commissioner vs. Algue, Inc ., L-28896, February 17, 1988; Province of Tarlac vs. Alcantara, 216 SCRA 790; Commissioner of Internal Revenue vs. Pineda, 21 SCRA 105. 15. Visayan Cebu Terminal Co. Inc., vs. Commissioner, L-19530 and L-194444, February 27, 1965. 16. Commissioner of Internal Revenue vs. Court of Appeals, 271 SCRA 605; Commissioner of Internal Revenue vs. B.F. Goodrich, Phils ., 303 SCRA 546; Commissioner of Internal Revenue vs. Court of Appeals, 242 SCRA 289. 17. Commissioner of Internal Revenue vs. Court of Appeals, ibid; citing Commissioner of Internal Revenue vs. Wander Philippines, et al., 160 SCRA 5773. ** Acting Senior Member in lieu of J. D. G. Demetria, who is on leave. * Acting Junior Member.