Silicon Philippines, Inc. v. Commissioner of Internal Revenue

SEVENTH DIVISION [CA-G.R. SP No. 82862. April 23, 2007.] SILICON PHILIPPINES INC., (formerly INTEL PHILIPPINES MANUFACTURING, INC.) , petitioner , vs . COMMISSIONER OF INTERNAL REVENUE , respondent . D E C I S I O N VILLON , J p : This Petition for Review under Rule 43 of the Rules of Court seeks to set aside the assailed Decision 1 dated October 24, 2003 of the Court of Tax Appeals denying, for insufficiency of evidence, petitioner's claim for refund of input taxes paid on its domestic purchases of goods and services amounting to P25,045,494.18 covering the period from January 1, 1998 to March 31, 1998, as well as the Resolution dated March 1, 2004 2 denying petitioner's motion for reconsideration. The antecedent facts are: Petitioner, a corporation duly organized and existing under the Philippine laws primarily engaged in the business of designing, developing, manufacturing and exporting advance and large-scale integrated circuit components, is registered with the Bureau of Internal Revenue (BIR) as a Value Added Tax (VAT) entity under Certificate of Registration No. 32A-3-002649. It is likewise registered with the Board of Investments (BOI) as an export enterprise under Certificate of Registration No. 85-1010. Petitioner filed its monthly VAT Declarations and Quarterly VAT Return for the first quarter of 1998 declaring zero-rated sales of P1,758,664,751.79 and input taxes from domestic purchases of goods and services in the amount of P25,045,494.18. It alleged that its zero-rated sales were paid for in acceptable foreign currency and were inwardly remitted in accordance with existing applicable banking regulation of the Bangko Sentral ng Pilipinas, pursuant to Section 106 (A) (2) (a) (1) of the Tax Code. On April 29, 1999, petitioner filed with respondent Commissioner of Internal Revenue, through the One-Stop Shop Inter-Agency Tax Credit and Duty Drawback Center of the Department of Finance, an administrative claim for refund of VAT input taxes in the amount of P25,045,494.18, which it paid on its domestic purchases of goods and/or services directly used in its export transactions. The inaction on the part of respondent on the aforesaid application for refund, compelled petitioner to file a petition for review, on March 27, 2000, with the Court of Tax Appeals (CTA) in order to toll the running of the prescriptive period for claiming tax refund. The Commissioner of Internal Revenue, in his answer, specifically averred the following as his Special and Affirmative Defenses: 1. Petitioner failed to show compliance with the substantiation requirements under the provisions of Section 16 (c) (3) of Regulation No. 5-87, as amended by Revenue Regulations No. 3-88; 2. Petitioner has not shown proof that the alleged VAT input taxes were attributable to its export sales and that the same 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; 3. The petition states no cause of action as it does not allege the dates when the taxes sought to be refunded were actually paid; 4. Claims for refund are construed strictly against the claimant, the same being in the nature of exemption from taxes ( Commissioner of Internal Revenue v. Ledesma 31 SCRA 95, Manila Electric co. vs. Commissioner of Internal Revenue 67 SCRA 35); 5. One who claims to be exempt from payment of a particular tax must do so under clear and unmistakable terms found in the statute ( Asiatic Petroleum vs. Llanes 49 PHIL. 466, Union Garment Co. vs. Court of Tax Appeals 4 SCRA 304); 6. In action for refund, the burden is upon the taxpayer to prove that he is entitled thereto, and failure to sustain the same is fatal to the action for tax refund; 7. It is incumbent upon petitioner to show compliance with the provisions of Section 229 of the National Internal Revenue Code; 8. Taxes paid and collected are presumed to have been made in accordance with law and regulations, hence not refundable. On October 24, 2003, the CTA rendered the assailed decision denying petitioner's claim for refund of input VAT or issuance of a tax credit considering that its export sales invoices (included as part of export sales documents) did not have any Bureau of Internal Revenue Permit to Print, nor did most of its sales invoice bear the words "zero rated", as required by law, and accordingly disposed of the case, as follows: " IN VIEW OF ALL THE FOREGOING, petitioner's claim for input taxes paid on its domestic purchases of good and services amounting to P25,045,494.18 covering the period from January 1, 1998 to March 31, 1998 is hereby DENIED for insufficiency of evidence. SO ORDERED. " Petitioners' motion for reconsideration was denied in a resolution dated March 1, 2004. 3 Hence, this petition, anchored on the following grounds: A RESPONDENT COURT OF TAX APPEALS ERRED IN DENYING THE PETITIONER'S CLAIM DUE TO THE ABSENCE OF THE BIR'S PERMIT TO PRINT ON ITS EXPORT INVOICES THAT WERE PRESENTED AND FORMALLY OFFERED. B RESPONDENT COURT OF TAX APPEALS ERRED IN DENYING CERTAIN SALES INVOICES PRESENTED AND FORMALLY OFFERED BY THE PETITIONER DUE TO THE ABSENCE OF THE IMPRINTED WORD "ZERO-RATED" THEREON. C RESPONDENT COURT OF TAX APPEALS ERRED IN FINDING THAT THE PETITIONER FAILED TO COMPLY WITH THE SUBSTANTIATION REQUIREMENTS PROVIDED BY LAW IN PROVING ITS CLAIM FOR REFUND. cIECTH D RESPONDENT COURT OF TAX APPEALS ERRED IN DISMISSING PETITIONER'S CLAIM FOR REFUND FOR UNUTILIZED INPUT VAT FOR THE PERIOD 01 JANUARY 1998 TO 31 MARCH 1998 IN THE AMOUNT OF Php 25,045,494.18. Petitioner contends that the information required by Sections 113 and 238 of the National Internal Revenue Code of 1997 to be printed on its invoice does not include the BIR Authority or Permit to Print. We agree. Sections 113 (A), 237 and 238 of the NIRC of 1997, provide: " Sec. 113. Invoicing and Accounting Requirements for VAT-Registered Persons. (A) Invoicing Requirements. A VAT-registered person shall, for every sale, issue an invoice or receipt. In addition to the information required in Section 237, the following information shall be indicated in the invoice or the receipt. (1) A Statement that the seller is a VAT-registered person followed by his taxpayer's identification number (TIN); and (2) The total amount which the purchaser pays or is obligated to pay to the seller with the indication that such amount includes the value-added tax. "Sec. 237. Issuance of Receipts or Sales or Commercial Invoices. All persons subject to an internal revenue tax shall, for each sale or transfer of merchandise or for services rendered valued at Twenty-five pesos (P25.00) or more, issue duly registered receipts or sales or commercial invoices, prepared at least in duplicate, showing the date of transaction, quantity, unit cost and description of merchandise or nature of services. Provided, however, That in the case of sales, receipts or transfers in the amount of One hundred pesos (P100.00) or more, or regardless of amount, where the sale or transfer is made by a person liable to value-added tax to another person also liable to value-added tax; or where the receipt is issued to cover payment made as rentals, commissions, compensations or fees, receipts or invoices shall be issued which shall show the name, business style, if any, and address of the purchaser, customer or client: Provided, further, That where the purchaser is a VAT-registered person, in addition to the information herein required, the invoice or receipt shall further show the Taxpayer Identification Number (TIN) of the purchaser. The original of each receipt or invoice shall be issued to the purchaser, customer or client at the time the transaction is effected, who, if engaged in business or in the exercise of profession, shall keep and preserve the same in his place of business for a period of three (3) years from the close of the taxable year in which such invoice or receipt was issued, while the duplicate shall be kept and preserved by the issuer, also in his place of business, for a like period. The Commissioner may, in meritorious cases, exempt any person subject to an internal revenue tax from compliance with the provisions of this Section. "SEC. 238. Printing of Receipts or Sales or Commercial Invoices. All persons who are engaged in business shall secure from the Bureau of Internal Revenue an authority to print receipts or sales or commercial invoices before a printer can print the same. No authority to print receipts or sales or commercial invoices shall be granted unless the receipts or invoices to be printed are serially numbered and shall show, among other things, the name, business style, Taxpayer Identification Number (TIN) and business address of the person or entity to use the same, and such other information that may be required by the rules and regulations to be promulgated by the Secretary of Finance, upon recommendation of the Commissioner. All persons who print receipt or sales or commercial invoices shall maintain a logbook/register of taxpayers who availed of their printing services. The logbook/register shall contain the following information: (1.) Names, Taxpayer Identification Numbers of the persons or entities for whom the receipts or sales or commercial invoices are printed; and (2) Number of booklets, number of sets per booklet, number of copies per set and the serial numbers of the receipts or invoices in each booklet." While it is true that the foregoing provisions of law do not require that BIR Authority or Permit to Print be indicated in the export invoice, still, petitioner's claim for refund of its input taxes paid on its domestic purchases of good and services covering the period from January 1, 1998 to March 31, 1998 in the amount of P25,045,494.18 was appropriately denied by the CTA, considering that there was no sufficient evidence adduced to substantiate its claim. In the case of Commissioner of Internal Revenue versus Seagate Technology , 4 the Supreme Court had the occasion to rule in this wise: "Statutes that grant tax exemptions are construed in strictissimi juris against the taxpayer and liberally in favor of the taxing authority. Tax refunds are in the nature of such exemptions. Accordingly, the claimants of those refunds bear the burden of proving the factual basis of their claims. For a judicial claim for refund to prosper, petitioner herein must not only prove that it is a VAT registered entity and that it filed its claims within the prescriptive period. It must substantiate the input VAT paid by purchase invoices or official receipts. 5 It is settled that to a claimant rest the onus to establish the factual basis of its claim for tax credit or refund. 6 Petitioner's failure to sustain or discharge this burden is fatal to its action for tax refund or tax credit. Revenue Regulation No. 3-88, amending Revenue Regulation No. 5-87 provides for the requirements in claiming tax credits/refunds, thus: Section 2. Section 16 of Revenue Regulations No. 5-87 is hereby amended to read as follows: Section 16. Refunds or tax credits of input tax. xxx xxx xxx For export sales, the application should be filed with the Bureau of Internal Revenue within two years from the date of exportation. For other zero-rated sales, the application should be filed within two years after the close of the quarter when the transaction took place. 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 or 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 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 export document showing the amount of export and the date and destination of the good exported. With respect to the foreign currency denominate sale, the photocopy of the invoice or receipt evidence 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. xxx xxx xxx" Section 4.108-1 of Revenue Regulation No. 7-95 further provides: SECTION 4.108-1. Invoicing Requirement. All VAT-registered persons shall, for every sale or lease of goods or properties or services, issue duly registered receipts or sales or commercial invoices which must show: 1. the name, TIN, and address of seller; 2. date of transaction; 3. quantity, unit cost and description of merchandise or nature of service; 4. the name, TIN, business style, if any, and address of the VAT-registered purchaser, customer or client; 5. the word 'zero-rated' imprinted on the invoice covering zero-rated sales, and ; 6. the invoice value or consideration. (underscored, ours) xxx xxx xxx" As correctly observed by the CTA, petitioner's export sales invoices (included as part of export sales documents marked as Exhibits RR- to RR-712) did not bear the imprinted word "zero-rated', as required under Section 4.108-1 of Revenue Regulations 7-95; and that failure to comply with this mandatory and specific requirement of the law is fatal to its claim for tax refund or tax credit. TSIDEa Then too, petitioner claims that the BIR had previously granted it a Permit To Use Computerized Books of Account, but the same was inadvertently misplaced and despite earnest efforts, could no longer be located. Notably, petitioner never raised this argument during the proceedings before the CTA; thus, it cannot be brought before this tribunal. Matters, theories or arguments not brought out in the original proceedings cannot be considered on review or appeal where they are raised for the first time. To consider the alleged facts and arguments raised belatedly would amount to trampling on the basic principles of fair play, justice and due process. 7 Negligence consisting of the unexplained failure to offer the exhibit should not be rewarded with undeserved leniency. Petitioner still bears the burden of proving the amount of its claim for tax refund. After all, tax refunds are in the nature of tax exemptions and are to be construed in strictissimi juris against the taxpayer. 8 Finally, petitioner argues that when the entitlement of a tax payer to a tax refund is undisputed, the State should not invoke technicalities to keep money not belonging to it; and that therefore, its application for tax credit/refund should be granted to serve the higher interest of justice, equity and fairness. However, the liberal interpretation and application of rules apply only in proper cases of demonstrable merit and under justifiable causes and circumstances. It would not be proper to allow petitioner to simply prevail and compel a refund in the amount it claims without affording the government a reasonable opportunity to contest the former's allegations. 9 WHEREFORE, in view of all the foregoing, the assailed decision dated October 24, 2003 of the Court of Tax Appeals in C.T.A. Case No. 6040 is hereby AFFIRMED. SO ORDERED. Dacudao and Tijam, JJ., concur. Footnotes 1. Rollo , pp. 6-16. 2. Rollo , pp. 28-31. 3. Rollo , pp. 28-31. 4. G.R. No. 153866, February 11, 2005. 5. Commissioner of Internal Revenue versus Manila Mining Corporation , G.R. No. 153204, August 31, 2005. 6. CIR v. Tokyo Shipping Co. Ltd. , 244 SCRA 332, 336. 7. De Rama vs. Court of Appeals , G.R. No. 131136, February 28, 2001, 253 SCRA 94. 8. Calamba Steel Center, Inc., v. CIR , G.R. No. 151857, April 28, 2005. 9. Calamba Steel Center, Inc., v. CIR, supra .