Honda Trading Philippines Corp. v. Commissioner of Internal Revenue

NINTH DIVISION [CA-G.R. SP No. 81217. October 15, 2004.] HONDA TRADING PHILIPPINES CORPORATION , petitioner , vs . COMMISSIONER OF INTERNAL REVENUE , respondent . D E C I S I O N ENRIQUEZ, JR. , J p : This is a Petition for Review under Rule 43 of the 1997 Rules of Civil Procedure, as amended , which seeks the reversal of the Decision dated August 21, 2003 and the Resolution dated December 17, 2003 issued by the Court of Tax Appeals (hereafter CTA) in C.T.A. CASE NO. 6282 the dispositive portions of which read as follows: "WHEREFORE, the instant Petition for Review is hereby DENIED for lack of merit. SO ORDERED." "WHEREFORE, the instant Motion for Reconsideration is hereby DENIED for lack of merit. SO ORDERED." The facts as found by the CTA are as follows: Honda Trading Philippines Corporation (hereafter petitioner) is a corporation duly organized and existing by virtue of Philippine laws with principal office located at Unit 207 Richville Corporate Center, 1314 Commerce Avenue Extension, Madrigal Business Park, Ayala Alabang, Muntinlupa City. It is a trading company principally engaged in exporting and importing for its customers various products from its suppliers, locally and abroad. Petitioner is registered with Bureau of Internal Revenue (BIR) as a Value Added Tax (VAT) taxpayer with Taxpayer Identification Number (TIN) 047-004-526-159. cTSHaE For calendar years 1999 and 2000, petitioner's Quarterly VAT Returns reflected the following data: TAXABLE SALES TAX BASE TAX DUE 1st Quarter 1999 P3,388,286.35 P338,828.64 2nd Quarter 1999 P10,364,112.69 P1,036,411.28 3rd Quarter 1999 P12,473,264.80 P1,247,326.46 4th Quarter 1999 P10,775,808.25 P1,077,580.82 Subtotal P37,001,472.09 P3,700,147.20 1st Quarter 2000 P27,395,176.13 P2,739,517.62 2nd Quarter 2000 P56,731,756.46 P5,673,175.71 3rd Quarter 2000 P45,575,143.83 P4,557,514.38 4th Quarter 2000 P59,531,237.17 P5,953,123.73 Subtotal P189,233,313.59 P18,923,331.44 EXPORT SALES 1st Quarter 1999 P3,293,817.00 2nd Quarter 1999 P5,449,756.00 3rd Quarter 1999 P4,923,136.00 4th Quarter 1999 P4,031,697.00 Subtotal P17,698,406.00 1st Quarter 2000 P4,302,073.00 2nd Quarter 2000 P7,769,940.43 3rd Quarter 2000 P13,170,143.97 4th Quarter 2000 P39,997,486.11 Subtotal P65,239,643.51 EXEMPT SALES 3rd Quarter 2000 P32,941,635.29 4th Quarter 2000 P32,724,018.63 Subtotal P65,665,653.92 TOTAL SALES P374,838,489.11 TOTAL OUTPUT TAX FOR 1999 & 2000 P22,623,478.64 DOMESTIC PURCHASES 1st Quarter 1999 P2,747,189.09 P274,718.94 2nd Quarter 1999 P4,763,329.08 P476,332.92 3rd Quarter 1999 P3,824,174.88 P382,417.52 4th Quarter 1999 P3,424,981.64 P342,498.20 Subtotal P14,759,674.69 P1,475,967.58 1st Quarter 2000 P3,634,350.92 P363,435.19 2nd Quarter 2000 P5,014,221.36 P501,421.69 3rd Quarter 2000 P6,264,971.29 P626,497.23 4th Quarter 2000 P1,432,364.25 P143,236.38 Subtotal P16,345,907.82 P1,634,590.49 IMPORTATION OF GOODS 1st Quarter 1999 P2,837,310.45 P283,732.00 2nd Quarter 1999 P9,667,656.00 P966,765.00 3rd Quarter 1999 P11,433,024.50 P1,143,304.00 4th Quarter 1999 P9,600,908.12 P960,092.75 Subtotal P33,538,899.07 P3,353,893.75 1st Quarter 2000 P26,162,565.48 P2,616,241.25 2nd Quarter 2000 P53,819,173.88 P5,381,937.00 3rd Quarter 2000 P43,638,454.73 P4,363,843.00 4th Quarter 2000 P59,233,448.41 P5,923,352.00 Subtotal P182,853,642.50 P18,285,373.25 PURCHASES NOT QUALIFIED FOR INPUT TAX 1st Quarter 2000 P342,671.92 2nd Quarter 2000 P1,911,742.28 3rd Quarter 2000 P35,145,714.73 4th Quarter 2000 P64,935,378.58 Subtotal P102,335,507.51 TOTAL PURCHASES P349,833,631.59 TOTAL INPUT TAX FOR 1999 & 2000 P24,749,825.07 On December 8, 2000, petitioner filed an administrative claim for refund of unutilized input VAT for calendar year 1999 with the BIR Revenue District Office (RDO) No. 053. (hereafter BIR-RDO No. 053). On March 30, 2001, petitioner filed a letter reiterating its administrative claim for refund of unutilized input VAT for calendar year 1999 and in addition, claiming a refund of unutilized input VAT for calendar year 2000 with the BIR-RDO No. 053. On April 18, 2001, petitioner elevated the case to the CTA through a Petition for Review invoking Section 106 (A)(2)(a)(1) in relation to Section 112 (A) of the National Internal Revenue Code, as amended (hereafter NIRC), which allows a VAT-registered taxpayer to apply for the issuance of tax credit or refund of excess unutilized creditable input tax attributable to zero-rated or effectively zero-rated sales. Petitioner claims a refund or the issuance of a tax credit certificate in the aggregate amount of P2,126,346.43, allegedly representing petitioner's unutilized input VAT for domestic purchases and importation of goods which are attributable to zero-rated export sales for the taxable years 1999 and 2000 and for the purchase of capital goods for the taxable year 2000. Petitioner computed its claim for refund as follows: Total Input VAT (1999 & 2000) P24,749,825.07 Less: Input VAT (0%/1999) P1,144,788.64 Input VAT (0%/2000) P1,176,403.34 Input VAT (capital goods/2000) P28,248.14 Total Input VAT (10%) P22,400,384.95 Total Output VAT (1999 & 2000) P22,623,478.64 Less: Input VAT (10% 1999 & 2000) P22,400,384.95 Output VAT Payable P223,093.69 Input VAT (0%/1999) P1,144,788.64 Input VAT (0%/2000) P1,176,403.34 Less: Output VAT Payable P223,093.69 Net Input VAT (0%/1999 & 2000) P2,098,098.29 Net Input VAT (0%/1999 & 2000) P2,098,098.29 Add: Input VAT (capital goods/2000) P28,248.14 Excess/Unutilized Input VAT (0% capital goods) P2,126,346.43 On May 30, 2001, the Commissioner of Internal Revenue (hereafter respondent) filed his Answer. In his Answer, respondent contended that petitioner's claim was subject to investigation by the BIR and that the former has the burden of proof to substantiate its claim which it failed to do. After trial on the merits, the CTA rendered the assailed decision on August 21, 2003 denying petitioner's claim for refund. Not satisfied, petitioner moved for the reconsideration of the same which the CTA denied in a Resolution dated December 17, 2003. Hence, this Petition for Review raising the following errors, to wit: A THE CTA ERRED IN RULING THAT IT IS NECESSARY FOR THE PETITIONER TO SUBMIT PROOF OF ITS TAXABLE SALES AND THE INPUT VAT ATTRIBUTABLE THERETO B THE CTA ERRED IN RULING THAT IT CANNOT PROPERLY ALLOCATE THE AMOUNT' OF INPUT TAX PERTAINING TO TAXABLE SALES, ZERO-RATED EXPORT SALES AND FOR THE EXEMPT SALES The petition is without merit. As to the first assigned error, we do not agree with the petitioner that the CTA erred when it ruled that it is necessary for the petitioner to submit proof of its taxable sales and the input VAT attributable thereto. DEICTS Subject to certain requirements, a VAT-registered person may claim an input tax: 1) Primarily to reduce the output tax in determining the VAT payable by him or the taxable period. 2) Alternatively, if it exceeds the output tax, may be carried over to the succeeding taxable periods to offset partially or totally his VAT liability for such taxable periods or claimed as refund or tax credit under certain conditions ( The Value Added Tax in the Philippines by Victor A. Deoferio, Jr. and Victorino C. Mamalateo, First Edition, p. 245 ) The term "input tax" means the value-added tax due from or paid by a VAT-registered person in the course of his trade or business on importation of goods or local purchase of goods or services, including lease or use of property, from a VAT-registered person. It includes the transitional and presumptive input taxes determined in accordance with Section 111 of the NIRC . On the other hand, an "output tax" means the value-added tax due on the sale or lease of taxable goods or properties or services by any person registered or required to register under Section 236 of this Code ( Section 110, National Internal Revenue Code ). In the present case, the petitioner claims for refund or issuance of tax credit certificate in the aggregate amount of P2,126,346.43 which the CTA denied for insufficiency of evidence, specifically for failure to submit invoices pertaining to its taxable sales and the corresponding input VAT. The petitioner contended that it is not necessary for it to submit proof of domestic/local taxable sales and the input VAT attributable thereto because the claim for refund in the instant case was solely for all its export sales. We do not agree. The petitioner is engaged in zero-rated sale, as well as in taxable domestic and exempt sale of goods and services. In short, it is engaged in mixed transactions. This is evidenced by the fact that the petitioner reported in its quarterly VAT Returns taxable sales, zero-rated sales and exempt sales. If a VAT-registered person (or entity) is engaged in VAT-subject and VAT-exempt transactions (and zero-rated transactions), the tax credits allowable will be computed under an apportionment formula ( The National Internal Revenue Code Annotated, by Hector S. de Leon, 2000 Edition, p. 587 ). Section 112(A) of the NIRC provides : " . . . where the taxpayer is engaged in zero-rated or effectively zero-rated sale and also in taxable or exempt sale of goods or properties or services, and the amount of creditable input tax due or paid cannot be directly and entirely attributed to any one of the transactions, it shall be allocated proportionately on the basis of the volume of sales." To support its claim or refund, the petitioner submitted the following documentary evidence: 1. 1999 and 2000 Quarterly VAT Returns 2. 2001 Quarterly VAT Returns (1st & 2nd quarters) 3. Letter-Claim for Refund 4. Schedule of VAT Purchases with Zero Rated Export Sales for 1999 & 2000 5. Schedule of Input Taxes Claimed on Local Purchases of Capital Goods for 2000 6. Sales and Commission Schedule 1999 & 2000 7. Supporting Documents for Input Taxes Claimed 8. Independent CPA Report 9. Schedule of Documents, Certified as True Copies by the Suppliers of Petitioner Moreover, the petitioner submitted supporting documents which include export sales invoices, airway bills, bills of lading and bank credit advices. As held by the CTA, considering that the petitioner reported taxable sales along with its zero-rated and exempt sales, in addition to the abovementioned documents, it is also necessary for the petitioner to submit invoices pertaining to the taxable sales and the corresponding input VAT. Otherwise, the allocated input VAT for taxable sales cannot be determined with accuracy. As to the second assigned error, we also do not agree with the petitioner that the CTA erred when it ruled that it cannot properly allocate the amount of input tax pertaining to taxable sales, zero-rated export sales and for the exempt sales. It is true that the computation made by the petitioner showed that the input VAT with respect to the taxable sales as well as the input VAT for the taxable items were identified. However, the Court cannot determine the veracity of such declaration without the supporting documents. As a consequence, the Court cannot also properly allocate the amount of input tax to the transactions involved. Contrary to the contention of the petitioner, the quarterly VAT returns cannot supply the deficiency because they merely give a summary of the output tax due for the period, the input tax, as well as creditable withholding tax and such other information required. They do not give a detailed statement of the taxable sales nor the input VAT attributed thereto which are necessary to verify if indeed the petitioner incurred any excess input VAT credits. A claim for refund is in the nature of tax exemption. Laws granting exemption from tax are construed strictissimi juris against the taxpayer and liberally in favor of the taxing power. Taxation is the rule and exemption is the exception. The law does not look with favor on tax exemptions and he who would seek to be thus privileged must justify it by words too plain to be mistaken and too categorical to be misinterpreted (S ea-land Service, Inc. vs. Court of Appeals, 337 SCRA 441 ). In view of the foregoing, we see no reason to reverse the decision of the CTA. We will not set aside, lightly the conclusion reached by the CTA which, by the very nature of its function, is dedicated exclusively to the consideration of tax problems and has necessarily developed an expertise on the subject, unless there has been an abuse or improvident exercise of authority ( Sea-land Service, Inc. vs. Court of Appeals, 337 SCRA 441 ). In the present case, there is no such abuse of authority on the part of the CTA. The claim of the petitioner was denied because of insufficiency of evidence. The CTA properly deemed it necessary for petitioner to prove the veracity of the declarations made by it. WHEREFORE, premises considered, the instant petition is hereby DENIED DUE COURSE and DISMISSED for lack of merit. SO ORDERED. Valdez, Jr . and Roxas, JJ ., concur.