CTA Case No. 4231 (Decision)

REPUBLIC OF THE PHILIPPINES COURT OF TRX RPPERLS UUEZON CITY CHEI'HJ--lECHN I Sa-tE C.T.A. CASE NO. 4231 MRNUFRCTUR ING, INC. , - - - - - - - - - - - - - - - - - )( Petitioner~, - versus - THE COMMISSIONER OF INTERNAL REVENUE, Respondent. )( - - - DEC::IS::ION On hand for decision is the claim for refund of CHEMO-TECHNISCHE MANUFACTURING, INC., in the amount of P935,829.00 as alleged erroneously paid �anufacturer's ta>ees for the years 1985, 198& and 1987. The facts of the case are as follows: "Petitioner is engaged in the manufacture of consumer products. As of Decembel~ 31, 1984, petitioner has accumulated a total of P817,480 as unapplied advance sales ta>e credit. Instead of dividing P817,480.00 by four and applying the amount of P204,370 against each of the four quarters of 1985 pur~uant to Revenue Regulations No. 19-84, petitioner merely accumulated the unapplied sales ta>e credits when it filed its quarterly sales ta>e returns for 1985 e>ecept for the third quarter wherein it failed to file its return until October 20, 1986. Accordingly, petitioner filed an amended sales ta>e return for the ta>eable year 1985 on October 20, 1986 to reflect the four installments application of the accumulated ta>e 888

DECISION -� C.T.A. CASE NO. 4231 - 2- credit of P817,480. Li~ewise, petitioner aaended its l98G and up to the thil"'d q\.tarteJ~ of 1987 sales ta~ returns to reflect the applicatidn in four equal installaents of the accumulated ta~ credits. However, considering that petitioner has in fact already paid the amount of P935,829 from first quarter of 1985 to third quarter of 1987, this amount is considered an overpayment and is now the subject of this claia for refund which was filed with the respondent as per letter dated January 14, 1988 of SGV & Co. duly sta�ped "Received" on January 15, 1988." ~~~ ~~~ ~~~ <Pars. 3-7, Petition for Review> The 1 one issue to be resolved in this case is whether or not petitioner is entitled to the refund of the total amount of P935,829.00. Respondent states in her Answer, paragraph 4 thereof, p. 22, CTA records, that "the petition states no cause of action as it does not allege the date when the ta~ sought to be tax credited was paid." This defense does not hold water. Annex "A" to the petition (p. 4, CTA records>, which was mar~ed and offered as Exhibit "A-1" for petitioner, clearly stated the dates of payment of the ta~es being claimed as refundable. Pertinent portion of this e~hibit is quoted hereunder, thus: "~~x Considering the amount of manufacturers sales ta~ payaent made by our client and the aforementioned unapplied ta~ .c.~edits, our client aade the following s : oveJ~payment

DECISION - C.T.A. CASE NO. 4231 -3- Quarter/Year Date of Amo\mt Payment l��'t- Qu,cn~tel~ 1985 P 79,0G3.00 1985 4-22-85 G8,7GG.OO 2"ct Quarter 198G 7-19-85 1 �to 198G 4-21-8G 3G8,G27.00 Qual~ter 1987 7-2l-8G 30,042.00 2"ct Qual~te�~ 1987 7-20-87 2"ct 10-19-87 253,371.00 3..-ct Quart e.~ l35.9GO.OO P935,829.00 Qua�~ter This �atter has already been settled by this Court in the following decision which ruled that: "In the case at bar, the corporate �quarterly and annual income taK return for the fiscal year ending October 31, 1989 as well as the confirmation receipts and payment orders showing the amount of .taKes paid, were all attached to the petition. If eKa�ined closely, the anne~es of the petition clearly shows the date when said taKes in question were paid. The oetition therefore, states a cause of action." <CTA Decision, CTA Case No. 4592, "Armco-Marsteel Alloy Corp. vs. CIR," July 1, 1993, p. 7; Underscoring supplied) Under paragraph 5 of her Answer, respondent alleges that "since the manufacturer's sales taK payments were 111ade in 1985 and the instant petition for review and refund was filed only on February 24, 1988, it is obvious that the 2 year period prescribed for filing the action in court has lapsed, hence, the right to claim the refund is barred by prescription." Respondent's contention is accepted qualifiedly by the Court. Not a 11 of the claims of p~titioner are barred by prescription. As far as the payments made in 198G and 1987 are concerned, prescription has not set in. Ther~efor�e, in r~esolving the H90

DECISION - C.T.A. CASE NO. 4231 - 4- issue involved in this case, the Court will limit the amount only to payments made in 1986 and 1987. Defenses of respondent alleged under paragraph 6 and 7 of her Answer may be tackled simultaneously. The amounts being claimed by petitioner as refundable/tax- ct~ed i table, are adjudged by this Court as excessive payments and not "erroneous" payments, neither were they "illegally collected." Petitioner has amply proven in court, thr'ough oral testimonies of witnesses and documentary evidences, that it had eKcessive payments to the BIR of its manufacturer's sales taK caused by its failure to apply its advance sales taK credit in 1985 as required by EKecutive Or'der No. 990. Documentary evidence presented and offered in court consists among others of the different sales taK returns, original and amended ones, filed for the quarters involved, as well as the confirmation receipts of the sales taKes paid for the different quarters. Witnesses Dominador Ogang and Jose Protacio identified the contents and signatures of aforesaid documents. During the hearing held in October 19, 1992, Mr Ogang even eKplained in court how the "eKcessive" payments came about. Thus: <Petitioner's counsel, Atty. Dario handled the direct eKamination of witness, Mr. Ogang.) 891

DECISION - C.T.A. CASE NO. 4231 5- "xxx XXX Q. Mr. Witness, the petitioner in this petition is claiming their ref1..md of overpaid sales tax amounting to P93S,829.00. Are yo1J aware of that? A. Yes, sil". o. Do you know why the petitioner claimed such a refund? A. The petitioner made an overpayment of an over due account. Q. You said you have an over due account. Would you clarify to the Honorable Court, what particular account is this? A. That pertains to quarterly sales tax return. Q. Do you know why the petitioner made an over payment of sales tax return? A. Yes, sir. Q. Why? A. Because in 1985 the petit i onet~ d;id not apQlv the excess sales t cr~edi in 1984 and four guart et~s of 1985 returns UQ to 2nd guarter of 1986. Q. Do you have an evidence to show that the petitioner accumulated an excess tax credit in 1984? A. Yes, sil'~. Q. 1 am showing you this documents which was previously marked by the Honorable Court as Exhibit "A". Would you kindly take a look at this document and tell us whether or not this is the document you are referring to as yo._n~ evidence?

: DECISION - C.T~A. CASE NO. 4231 -~ - G- ..,��� A. This is the inventory 1 have filed as of December 31, 1985. <T.S.N. of Heal~ing on Oct;ober 19, 1992, pp. SG-87, CTA records; Underscoring supplied) As the CTA records of the case, specifically the minu~es of the hearings, counsel fol~ l~espondent failed to manifest any reasonable effort to rebut or controvert the oral and documentary evidence presented by petitioner's counsel. In open court, respondent's counsel waiv~d his right to cross-exa�ine not only Mr. Ogang <Minutes of Hearing on June 24, 1993, p. 126, CTA records) but also Mr. Protacio <Minutes of Hearing on September 9, 1993, p. 129, Ibid.> After petitioner's counsel rested his case, respondent's counsel, despite proper notice, failed to appear during the hearing on August 18, 1994. Petitioner's counsel moved that respondent's presentation of evidence be declared waived which the Court readily granted <Minutes of Hearing on August 18, 1994, p. 336, Supra; CTA Resolution promulgated on September 5, 1994, p. 338, Supra.) Consequently, respondent's counsel merely filed his Memorandum (pp. 364-370, CTA records> on December 27, 1994. At this juncture, the Court wants to comment on the rem~ining special and affirmative defenses of respondent stating that: ~93

DECISION - C.T.A. CASE NO. 4231 - 7- "8. 1t is incumbent upon petitioner to show that it has complied with the provisions of Sections 243 and 246 of the 1986 Tax Code; 9. Claims for refund of taxes are construed strictly against clai�ants, the same being in the nature of an exemption fro� taxes; 10. Petitioner's claim for tax credit of the amount of P935,829.00 is not supported by evidence; 11. Petitioner's claim is pending investigation." (Respondent's Answer, p. 23, CTA records> Pertinent provisions of Sections 243 and 24G of the 1986 Tax Code are quoted as follows: "Section 243. Recovet~y o f tax et~,~oneousl.Y o,~ i l l e g a l l y collected. No suit or proceeding shall be maintained in any court for the recovery of any national internal revenue tax hereafter alleged to have been erroneously or illegally collected, xxx until a clai� for refund or credit has been duly filed with the Co�missioner; xxx. ln any case, no such suit or proceeding shall be begun after the expiration of two years from the date of payment of the tax or penalty xxx." "Section 246. llutho,~ity oF the Co111111issioner to co111p1~o�i s e, abate, and ,~eftmd/credi t ta.J~es. The Commissioner may - 1~ :; ~XX 2~ xxx 3. Credit or refund taxes erroneously or illegally received, xxx. No credit or refund of taxes or penalties shall be allowed unless the taxpayer files in writing with the Commissioner a claim for credit or refund within two years after the payment of the tax or penalty. (309) (as amended by P. D. 1773> 894

DECISION - C.T.A. CASE NO. 4231 - 8- As hereinbefore mentioned, if we apply the foregoing provisions to the case at bar, the amounts of P79,063.00 and P68,766.00 paid on April 22, 1985 and July 19, 1985, respectively, cannot be refunded or tax credited as �ore than two years have already lapsed when the ad�inistrative and judicial clai�s were filed on January 14, 1988 and February 24, 1988, respectively. As for the rest of the claims in the total amount of P788,000.00, petitioner had fully complied with the requirements of the above mentioned legal provisions of the Tax Code. Hence, said amount did not prescribe and must be refunded or tax credited by the BJR. The Court frowns upon respondent's averment that petitioner's claim is not supported by evidence. The records of the case bear witness to the fact that it was petitioner who presented two witnesses and numerous documents material to its claim. On the contrary, it was respondent's counsel who manifested clear lack of interest to prosecute by waiving on two occasions his right to cross examine petitioner's witnesses, and by not appearing on the scheduled dates of hearing which ultimately prompted this Court upon motion by counsel for petitioner to d~clare respondent's counsel as to have waived his right to present evidence. Consequently, no evidence whatsoever has been presented in court by respondent's counsel. If at all, only a Memorandum has

DECISION - C.T.A. CASE NO. 4231 - 9- been filed to support his case. The Court does not consider this as evidence. Thus, in one of om~ decisions, this Court ruled that: "Admittedly, respondent submitted a memorandum to e~pound its thesis. But a memorandum is not evidence. It is merely a guide to assist the Court to clarify matters already presented before it. It cannot Sl..tbstitute for~ something that is not there." [CTA Decision, CTA Case No 449& "Chartered Bank <now named as Standard Chartered Bank> vs. ClR", December 23, 1994, pp. 16-17; Underscoring supplied) WHEREFORE, finding the petition meritorious and in accot~dance with 1 aw, the �same is hereby GRANTED deducting thereft~om the prescribed amounts of P79,0G3.00 and PG8,76G.OO. Respondent is order�d to refund or issue a TaH Credit Certificate in favor of petitioner the amount of P788,000.00 representing overpaid sales taH. No pronouncement as to costs. SO ORDERED. ~Q.O~ ERNESTO D. ACOSTA Presiding Judge WE CONCUR: R�::� friANtJE~~- GRUBA ~Judg~/e D~~ RAMON 0. Associate Judg

DECISION - C.T.A. CASE NO. 4231 - 10 - CERTIFICATION I hereby certify that this decision was reached after due consultation among the members of the Court of Tax Appeals in accordance with Section 13, Article VIII of the Constitution. C...-~~Q~ ERNESTO D. ACOSTA Presiding Judge Court of Tax Appeals