Fil-Cartoons, Inc. v. Commissioner of Internal Revenue

TWELFTH DIVISION [CA-G.R. SP No. 67537. December 30, 2003.] FIL-CARTOONS, INC., petitioner , vs . COMMISSIONER OF INTERNAL REVENUE , respondent . D E C I S I O N DE GUIA-SALVADOR , J p : In this Petition for Review on Certiorari under Rule 43 of the 1997 Rules of Civil Procedure, petitioner seeks the reversal and setting aside of the August 9, 2001 Decision 1 of the Court of Tax Appeals in CTA Case No. 5727, denying, for insufficiency of evidence, its claim for tax credit in the amount of Two Million Two Hundred Eighty Eight Thousand Seven Hundred Twenty Nine Pesos and Forty Six Centavos (P2,288,729.46), and the October 22, 2001 Resolution 2 denying its motion for reconsideration. THE FACTS Petitioner Fil-Cartoons, Inc. (or petitioner ) is a domestic corporation engaged in the business of rendering services to non-resident foreign companies thru the production and exportation of animated film cartoons. As such, it is duly registered with the Board of Investments (BOI) as a preferred non-pioneer enterprise under Certificate of Registration No. EP 87-108 issued on December 17, 1987 3 and with the Bureau of Internal Revenue (BIR) as value added tax (VAT) taxpayer under Registration Certificate No. 94-410-0001978 issued on June 29, 1994. 4 In pursuing its business in the year 1997, it appears that petitioner generated zero-rated export sales amounting to One Hundred Two Million Two Hundred Fifty Thousand Five Hundred Two Pesos and Sixty Six Centavos (P102,250,502.66) and a net creditable input VAT on its purchases of goods and services totaling Two Million Two Hundred Eighty Eight Thousand Seven Hundred Twenty Nine Pesos and Forty Six Centavos (P2,288,729.46), computed as follows: CY 1997 Zero-Rated Sales Gross Taxable VAT output tax Quarter Goods & Services First P928,226.49 P84,384.23 Second P33,599,479.08 1,643,713.30 149,428.49 Third 4,615,267.53 971,572.11 88,324.74 Fourth 64,035,756.05 1,003,907.53 91,264.32 Total P102,250,502.66 P4,547,419.43 P413,401.78 Less: VAT Input Tax First P670,104.07 Second 586,430.55 Third 682,354.59 Fourth 763,242.03 Net Input VAT P2,702,131.24 P2,228,729.46 5 =========== 6 petitioner filed, on October 30, 1998, an application for refund or for issuance of a tax credit certificate with respondent Commissioner of Internal Revenue (or respondent ) through Revenue District Office No. 41, Revenue Region 7. 7 To toll the running of the prescriptive period under Section 229 of the Tax Code, petitioner instituted a Petition for Review on February 1, 1999 with the Court of Tax Appeals (CTA), contending that the aforesaid zero-rated sales were paid for in acceptable foreign currency and inwardly remitted to the Philippines in accordance with the Rules and Regulations of the Bangko Sentral ng Pilipinas , hence, it is entitled to zero percent VAT pursuant to Section 100(a)(2)(A)(I) of the Tax Code, as amended. Petitioner further averred that its accumulated net input VAT totaling P2,288,729.46 were all attributable to its zero-rated export sales. In his Answer, respondent specifically denied the material averments in petitioners complaint and by way of special and affirmative defenses, countered that: petitioner has no cause of action; in an action for refund, the taxpayer has the burden to show that the taxes paid were erroneously or illegally collected and failure to do so is fatal to the action; and that claims for refund are strictly construed against the taxpayer. After due consideration and evaluation of the evidence presented, the CTA, in its assailed August 9, 2001 Decision , denied the petition basically on the ground that petitioner failed to adduce the export documents showing the actual exportation of the goods. In its Motion for Reconsideration with prayer to re-open the case, petitioner insisted that the testimonial evidence and the report of the commissioned independent CPA sufficiently prove that its products were all exported. Justifying its failure to present the export documents, petitioner contended that the same were still in the possession of the independent CPA who failed to return them to petitioner. At any rate, it argued that the export declaration and the airway bill numbers were already enumerated in the commissioner's report. THE ISSUES After the denial of its motion for reconsideration in the CTA Resolution dated October 22, 2001, petitioner found its way to this Court, through the instant Petition for Review on Certiorari, imputing to the Tax Court the twin error, viz : "1. . . . declaring that appellant-petitioner failed to present export documents which will prove actual exportation of the animated films produced and by the former; 2. . . . denying the Petition for Review seeking for the issuance of a tax credit certificate in the amount of P2,288,729.29 representing the excess input VAT incurred on domestic purchases of goods and services on the ground of insufficiency of evidence." THE COURT'S RULING The petition is devoid of merit. In assailing the factual findings of the CTA, petitioner submits that its failure to offer in evidence the export documents will not negate the fact of its actual exportation of the animated films it produced locally. It insists that the testimony of its Accountant Socorro A. Ignacio and the report of the independent CPA Eliseo Aurellado are, nonetheless, sufficient to prove its claim. We do not agree. In applying for tax refund/credit of creditable input tax attributable to zero-rated export sales, the presentation of certain documents is explicitly required by Revenue Regulation No. 5-87, as amended by Revenue Regulation No. 3-88 (otherwise known as The Consolidated VAT Regulations ), to wit: "Section 16. Refunds or Tax Credit of Input Tax . xxx xxx xxx (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 of 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. In addition, the following documents shall be attached whenever applicable: 1. export sales i) photocopy of the export documents showing the amount of export, and the date and destination of the goods exported . With respect to the foreign currency denominated sale, the photocopy of the invoice or receipt evidencing the sale of the goods, as well as the name of person to whom the goods were delivered. ii) Statement from the Central Bank or any of its accredited agent banks that the proceeds of the sale in acceptable foreign currency has been inwardly remitted and accounted for in accordance with applicable banking regulations. 2. Zero-rated sale of services i) Authenticated copy of the contract showing the person from whom services were rendered, the amount of the consideration and description of the services and document evidencing actual payments . ii) Statement from the Central Bank or any of its accredited agent banks that the consideration in acceptable foreign currency has been inwardly remitted and accounted for in accordance with the applicable banking regulations. Under subparagraphs 1(i) and 2(ii), the statement shall show the amount in foreign currency of the export proceeds or consideration and date of inward remittance, conversion rate into Philippine currency and the total peso value thereof.'' Apart from the purchase invoices and receipts, the regulations specifically enjoin the applicant to produce such export documents as would affirm the authenticity of the export sales. Indubitably the best evidence to prove actual exportation of the goods, the required export documents, such as commercial invoices or receipts, bills of ladings, airway bills and export declarations or permits, must be presented if petitioner is to adequately prove its claim that its accumulated net input VAT totaling P2,228,729.46 are all attributable to its zero-rated export sales. Not only this. Documents to show that its products are indeed 100% exportable as well as authenticated copies of contracts showing its agreements with its foreign clients must likewise be submitted in evidence. Admittedly, petitioner failed to adduce the foregoing documentary requirements during the trial of the case before the CTA. Hence, it cannot fault the said court for denying its petition. The settled rule is that any evidence, which a party desires to submit for the consideration of the court, must be formally offered by him. Such a formal offer is necessary because it is the duty of a judge to rest his findings of facts and his judgment only and strictly upon the evidence offered by the parties at the trial. In the absence of the above-cited documents, there is absolutely no basis to grant petitioner's claim. In this regard, we quote with approval the apt observation of the CTA, viz : "Records show that Petitioner failed to submit photocopies of the export documents that will prove the actual exportation of the goods. Petitioner also failed to present the contracts that will establish its agreement with its foreign clients. The records of the case do not also reveal that Petitioner submitted any documents that will prove that its products were indeed 100% exported. No authenticated copies of contracts showing its agreement with the foreign clients for whom its services were rendered were submitted by Petitioner as evidence. xxx xxx xxx Thus, for failure of petitioner to present export documents that will prove its actual exportation of the goods, the relief sought cannot be granted. In line with the substantiation requirements set forth under Revenue Regulation No. 5-87, this Court cannot subscribe to petitioner's contention that it had sufficiently proved its claim thru the testimony of its witness Ignacio and the report of appointed Commissioner Aurellado. Unsubstantiated by clear, competent and independent documentary proof, such testimony is, at best, self-serving and bereft of probative weight. As to the Commissioner's report, while, admittedly, it indicates the export declaration number and the airway bill number of every export sale made by petitioner, it remains unverifiable and, like Ignacio's testimony, uncorroborated by any competent evidence. Moreover, under Section 11, Rule 32 of the 1997 Rules of Civil Procedure, the commissioner's report is neither conclusive nor binding upon the court which is allowed ample discretion to adopt, modify of even reject the same in whole or in part. Justifying its non-presentation of the required export documents, petitioner reiterated the same excuse previously alleged in its motion for reconsideration before the CTA. Claiming excusable negligence, it essentially faults the CTA in denying its prayer to reopen the case. Further invoking the liberal construction of the Rules of Court, it urges the Court to allow it to present additional evidence. Excusable negligence as a ground for new trial or reopening of the case must be of such nature which ordinary prudence could not have guarded against and by reason of which the aggrieved party has probably been impaired in his rights. 8 The factual milieu of the case at bench, however, unerringly shows that petitioner's negligence can hardly be considered as excusable. Beyond the flimsy excuse that the documents were in the possession of the designated Commissioner, petitioner proffered no reason of such weight and cogency as would justify its failure to obtain them and offer them in evidence. Besides, a pointed out in Sea Power Shipping Enterprises, Inc. vs. Court of Appeals , 9 "excusable negligence" and "oversight" have become an all too familiar and ready excuse on the part of counsels remiss in their bounden duty to comply with established rules. The significance of procedural rules in the adjudication of the respective rights and liabilities of litigants can neither be overemphasized nor underestimated. Having failed to observe very elementary rules of procedure which are mandatory, petitioner caused its own predicament. To exculpate it from the compulsory coverage of such rules is to undermine the stability of the judicial process, as the bench and the bar will be confounded by such irritating uncertainties as when to obey and when to ignore the Rules. 10 As to petitioner's plea to be allowed to present additional evidence at this stage of the proceedings, we resolve to deny the same. Section 3 Rule VI of the 2002 Internal Rules of the Court of Appeals 11 empowers this Court to receive evidence only in actions falling within its original jurisdiction, viz : "(1) certiorari , prohibition and mandamus under Rules 46 and 65 of the Rules of Court; (2) action for annulment of judgment or final order under Rule 47 of the Rules of Court; (3) quo warranto under Rule 66 of the Rules of Court; and (4) habeas corpus under Sections 2 and 12, Rule 102 of the Rules of Court." The case at bench does not squarely fall within the contemplation of any of the actions enumerated in the above-quoted rule. WHEREFORE, the petition at bench is DENIED and the challenged decision and re-solution of the Court of Tax Appeals are hereby AFFIRMED. Costs against petitioner. SO ORDERED. Brawner and Reyes, Jr., JJ ., concur. Footnotes 1. Annex "A" of the Petition, pp. 2331, Rollo. 2. Annex "B" of the Petition, pp. 3234, ibid . 3. Annex "C" of the Petition, p. 35, ibid . 4. Stated in the August 9, 2001 CTA Decision, p. 24, ibid . 5. Stated in the CTA Decision, p. 24, ibid . 6. Annexes "E" to "T" of the Petition, pp. 4145, ibid . 7. Annex "J" of the Petition, p. 46, ibid . 8. Section 1(a), Rule 37 of the 1997 Rules of Civil Procedure. 9. 360 SCRA 173, 182. 10. Tan vs. Court of Appeals , 295 SCRA 755, 767, 768. 11. "Sec. 3. Power of the Court to Receive Evidence . In appeals in civil cases where the court grants a new trial on the ground of newly discovered evidence, pursuant to Sec. 3, Rule 53 of the Rules of Court; In appeals in criminal cases where the court grants a new trial on the ground of newly discovered evidence, pursuant to Section 12, Rule 124 of the Rules of Court; and In appeals invoking claims for damages arising from provisional remedies.