Nichimen Corp. (Manila Branch) v. Commissioner of Internal Revenue

SPECIAL SIXTEENTH DIVISION [CA-G.R. SP No. 78805. May 27, 2005.] NICHIMEN CORPORATION (MANILA BRANCH) , petitioner , vs . COMMISSIONER OF INTERNAL REVENUE , respondent(s) . D E C I S I O N ABDULWAHID , J p : Before this Court is a petition for review under Rule 43 of the 1997 Rules of Civil Procedure of the Decision 1 of the Court of Tax Appeals (CTA) dated February 17, 2003 in CTA Case No. 6016 which denied petitioner's claim for refund or issuance of a Tax Credit Certificate (TCC) in the aggregate amount of P1,393,888.72, representing petitioner's excess unutilized input Value Added Tax (VAT) on domestic purchases of goods and services for the taxable year 1998. The facts of the case as found by the court a quo in the assailed decision 2 are, as follows: Petitioner Nichimen Corporation (Manila Branch) is a resident foreign corporation organized and existing under and by virtue of the laws of Japan but is licensed to do business in the Philippines through its Manila branch with office at the 20/F, Pacific Star Bldg., Sen. Gil Puyat Avenue, Makati City. . . . It is engaged in the business of indenting, wholesaling, buying and selling of lumber, abaca, sugar, mineral ores, machinery, steel products, cement and sundry goods in the Philippines, manufacturing and engineering activities; in the business of buy and sell of industrial materials, textiles, foodstuff to include oilseed, feeds, canned goods, etc., chemicals, steel products of ferrous and non-ferrous metal products and products allied to those mentioned above . . . . On June 17, 1994, it was registered with the Bureau of Internal Revenue as a VAT taxpayer with Certificate of Registration bearing RDO Control No. 94-490-000394 . . . . For the year 1998, petitioner filed its quarterly Value-Added Tax Returns reflecting, among others, the following domestic purchases of goods and services with their corresponding payments of VAT input tax, to wit: Quarter Date Filed Exhibit Amount of Input Vat Purchases Paid 1st 04-08-98 A P3,987,779.11 398,777.96 2nd 07-14-98 B 2,432,791.89 243,279.21 3rd 10-09-98 C 2,487,370.60 248,737.06 4th 06-09-99 D 5,030,945.02 503,094.49 Total P13,938,886.62 P1,393,888.72 The aforesaid returns were simultaneously amended on April 17, 2001, in order to reflect its sales of services for the year 1998 in the total amount of P49,116,868.39, detailed as follows: Quarter Date Filed Exhibit Sales for the Quarter Input Vat Paid 1st 04-17-01 DD to DD-2 P12,868,869.13 398,777.96 2nd 04-17-01 EE to EE-2 14,961,432.88 243,279.21 3rd 04-17-01 FF to FF-2 12,651,068.30 248,737.06 4th 04-17-01 GG to GG-2 8,635,498.08 503,094.49 Total P49,116,868.39 P1,393,888.72 Petitioner alleged that the consideration for the above-listed sales were paid for in acceptable foreign currency and duly accounted for in accordance with the [R]ules and [R]egulations of the Bangko Sentral ng Pilipinas . . . . Hence, they are subject to output VAT of 0% pursuant to Section 108 (B)(2) of the Tax Code . Petitioner further avers that the input taxes incurred during the year 1998 were all attributable to its zero-rated sales. IaAScD On October 27, 1999, petitioner filed with Revenue District Office No. 49, North Makati, Revenue Region No. 8, Bureau of Internal Revenue, an administrative claim for refund or issuance of tax credit certificate in the amount of P1,393,888.72 representing excess input VAT for the year 1998 (Exhibits CC and CC-1). On February 16, 2000, petitioner filed the instant Petition for Review in order to toll the running of the two-year prescriptive period under Section 229 of the Tax Code, as amended. xxx xxx xxx On August 13, 2002, this case was submitted for decision sans the evidence and memorandum of the respondent. On February 17, 2003, the CTA rendered its decision 3 denying petitioner's claim for refund. Unsatisfied, petitioner filed with this Court this instant petition for review under Rule 43 of the 1997 Rules of Civil Procedure, raising the lone issue: 4 I. WHETHER OR NOT PETITIONER HAS SUFFICIENTLY AND ADEQUATELY ESTABLISHED THAT FOR TAXABLE YEAR 1998 IT GENERATED ZERO-RATED SALES AMOUNTING TO P49,116,868.39 THROUGH THE PRESENTATION OF THE EVIDENCE OF THE QUARTERLY VALUE ADDED TAX RETURNS AND RIZAL COMMERCIAL BANKING CORPORATION'S CREDIT ADVANCES AND TRANSFER FORMS. The petition is devoid of merit. The sole issue for resolution of this Court is whether the evidence presented by petitioner, consisting of its quarterly amended value added tax return and the RCBC's credit advices and transfer form are sufficient compliance with the requirements of the law to justify the claim for refund of input taxes. Revenue Regulation 5-87 Sec. 16, as amended by Revenue Regulation 3-88, provides: Section 16. Refunds or Tax Credits of Input Tax. (a.) Zero-rated sales of goods and services. . . . (b.) Capital Goods. . . . (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. EcHAaS A photo copy 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 xxx xxx xxx 2. Zero-rated sale of services. i.) Authenticated copy of the contract showing the person for whom the 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 bank that the consideration in acceptable foreign currency has been inwardly remitted and accounted for in accordance with applicable banking regulations. xxx xxx xxx 3. Effectively zero-rated sale of goods and services. i.) Photo copy of approved application for zero rate if filing for the first time. ii.) Sales invoice or receipt showing name of the person or entity to whom the sale of goods or services were delivered, date of delivery, amount of consideration, and description of goods or services delivered . iii.) Evidence of actual receipt of goods or services. xxx xxx xxx (Emphasis supplied) In the case at bar, petitioner's evidence consists merely of its quarterly amended value added tax return and the RCBC's credit advices and transfer form. Thus, considered in the light of the afore-quoted provision of the Revenue Regulation 5-87, as amended, petitioner's evidence are not sufficient to support its claim for refund. As correctly pointed out by CTA: 5 The requirement provided under Revenue Regulations 3-88 is not a mere procedural, pro forma requirement. The requirement is based on legal considerations. Absence of these VAT invoices, public respondent was prevented from confirming the veracity of the claims for refund by petitioner. The amount claimed by petitioner as excess VAT payments cannot be verified by public respondent. The requirement affects the very substance of the validity of the claims of petitioner." ( Atlas Consolidated Mining and Development Corporation v. Court of Tax Appeals and Commissioner of Internal Revenue , CA GR SP No. 46717, May 1, 2000) Taxes are the lifeblood of the government. Tax refunds are in the nature of tax exemptions, and as such they are regarded as in derogation of sovereign authority and to be construed strictissimi juris against the person or entity claiming the exemption. 6 Petitioner argues 7 that in the previous decisions of the CTA involving the same parties, nature and subject matter, it had been held that petitioner's evidence consisting of its quarterly amended value added tax return, RCBC's credit advices and transfer form are sufficient evidence to warrant a claim for refund. And as a consequence, the previous decisions rendered by the CTA involving the same parties, issues and subject matter had the effect of stare decisis , which gained added weight by its virtual reiteration. We are not persuaded. The doctrine of adherence to judicial precedents or stare decisis was enunciated by the Supreme Court, thus: The doctrine of stare decisis enjoins adherence to judicial precedents. It requires courts in a country to follow the rule established in a decision of the Supreme Court thereof. That decision becomes a judicial precedent to be followed in subsequent cases by all courts in the land. The doctrine of stare decisis is based on the principle that once a question of law has been examined and decided, it should be deemed settled and closed to further argument. (Emphasis supplied). 8 But the principle of stare decisis , is not absolute, as it can be abandoned when it is in conflict with the law. Thus, the Supreme Court ruled: The principle of stare decisis does not mean blind adherence to precedents. The doctrine or rule laid down, which has been followed for years, no matter how sound it may be, if found contrary to law, must be abandoned. The principle of stare decisis does not and should not apply when there is a conflict between the precedent and the law. The duty of the court is to forsake and abandon any doctrine or rule found to be in violation of law in force. 9 Moreover, the CTA decisions invoked by petitioner do not constitute the doctrine of stare decisis , as only the decisions of the Supreme Court can be considered as such. WHEREFORE, the instant petition is DISMISSED for lack of merit. The assailed decision of the Court of Tax Appeals dated February 17, 2003 is AFFIRMED. SO ORDERED. Asuncion and Santiago-Lagman * , JJ., concur. Footnotes * Vice J. E.M. Perlas-Bernabe who is on leave, per Office Order No. 99-05 RB dated May 6, 2005. 1. Annex "A"; Rollo pp. 44-52. 2. Ibid , pp. 44-45; See also Respondent's Comment, pp. 2-4. 3. Ibid , p. 52. 4. Rollo , p. 17. 5. Rollo p. 76-77. 6. Commissioner of Internal Revenue v. S.C. Johnson and Son, Inc. , 309 SCRA 87, 91 (1999). 7. Rollo p. 22. 8. Castillo v. Sandiganbayan , 377 SCRA 509, 515 (2002). 9. Tan Chong v. Secretary of Labor , 79 Phil 249, 257 (1947).