CTA Case No. 5585 (Decision)

�y REPUBLIC OFTHE PHILIPPINES COURT OFTAX APPEALS QUEZON CITY PHILIPPINE BOBBIN CORPORATION, Petitioner, -versus- C. T.A. CASE NO. 5585 COMMISSIONER OF INTERNAL P:�omulgated: REVENUE, Respondent. J"EB 0 8 200 x ---------------------------------------- ------------------X DECISION This case involves a judicial claim for refund/tax credit in the amount of P1,588,515.92 representing unutilized input value-added taxes ..1llegedly paid by the Petitioner in its local purchases of goods and services for the per: od 1anuary 1, 1996 to February 28, 1997. Petitioner is a domestic corporation which manufactures and sells tobacco wrapper and bobbin (TSN, Nov. 11, 1998, p. 6). It is registered with the Bureau of Internal Revenue (BIR) as a valued-added tax (VAT) taxpayer (Exh. A). Petitioner is also duly registered with the Export Processing Zone Authority (EPZA) as an export enterprise (Exh. B) and later with the Philippine Economic Zone Authority (PEZA) when the latter took over the management of the former (Exh. EE). For the period January 1, 1996 to March 31, 1996, Petitioner filed its First Quarterly VAT Return with the BIR (Exh. E). For the second, third and fourth� quarters of 1996, Pel itioner also filed the respective quarterly VAT returns (Exhs. I, M & Q).

DECISION C.T.A. CASE NO. 5585 -2- On February 25, 1997, Petitioner filed its monthly VAT rdurn for January (Exh. T). For the month of February, 1997, petitioner filed its monthly VAT return on March 25, 1997 (Exh. U). On March 26, 1998, Petitioner amended all the abovemen1 ioned returns (Exhs. F, J, N, R, T & V, respectively) allegedly to reflect the correct amounts previously reported and/or paid. Petitioner declared an aggregate amount of zero-n ted export sales of P43,125,658.64 for 1996 and total input tax payments in the sum ofP1,588,515.92 for the period January 1, 1996 to February 28, 1997, detailed as follows: 1995 Exh. Zero-rated Carried over Inp ut VAl Carried over Sales Fromprevious to subsequent Onpurchases quarter this quarter Quarter p 428,4 10.23 1st qtr F p 6,477, 157.77 p p 428,4 10.2.1 2nd qtr J 6,539,887. 14 428,4 10.23 407,39 1.% 835,802. 19 300,760.8() 1, 136,563.05 3rd qtr N 9,652,352.46 835,802. 19 269,982.3:2 I ,406,545.37 4th qtr R 20,456,26 1.27 1, 136,563.05 p 1,564,347.8 1 1,588,5 15.92 Total p 43, 125,658.64 p 1,406,545.r 1997 Jan. T p 1,406,545.37 p 157,802.4�; I ,564,347.8 1 24,168.1 Feb. v p 181,970Si Subtotal p 1,588,5 15.2:: Total e 43,125,658.64 Petitioner asserts that the total input VAT of P 1,588,515. n remained unutilized inasmuch as its sales were purely export sales and were zero rated. In other words, it had no output tax liability within which to offset or deduct the said inp-..It VAT (TSN, June 24, 1998, p. 13). Consequently, Petitioner filed on October 28, 1997 with th.: One-Stop-Shop Inter Agency and Duty-Drawback Center of the Department of Finane ; a claim for refund of

DECISION C.T.A. CASE NO. 5585 -3- said input taxes allegedly paid for the period involved in this case (Exhs. X to BB, inclusive). Although it is noted that Petitioner failed to present th- original copies of the Application for Tax Credit/Refund for Value-Added Tax Paid (BIR Form 2552) (Exh. X) and the Claimant Information Sheet (Exh. Y) for comparison wi1 h the marked exhibits, Petitioner nevertheless proved the fact of actual filing of the claim by means of the claim stub (Exh. Z) and official receipts issued by the Department of Fin mce dated October 28, 1997 (Exh. AA) and November 14, 1997 (Exh. BB) for the pay1 nent of filing fees and processing fees, respectively. Further, Respondent confirmed this �n his memorandum. Considering that the two-year prescriptive period was about to expire and Petitioner's claim remained unresolved, the instant petition was fild on March 27, 1998. Respondent, in his Special and Affirmative Defenses, alleges, that: 1) Assuming but not admitting that Petitioner filed an application for tax credit/refund of unapplied input value -added tax, the same is subject to administrative investigation and resolution; 2) Taxes are presumed to have been collecteci in accordance with law. Hence, the Petitioner must prove that the taxEs sought to be refunded were erroneously or illegally collected; 3) Petitioner must show that it has comr lied with the provisions of Section 106 of the Tax Code, as implemente(: by Section 16 of Revenue Regulations No. 5-87, as amended; and 4) Claims for refund of taxes are construed strictly against claimants, the same being in the nature of an exemption frou. taxation. Petitioner presented witnesses and voluminous documenls to support its case. Respondent, on the other hand, waived his right to present any evidence (CTA rec., p. 88). But in his memorandum, Respondent argues that since Petitic1ner's claim for refund is under investigation, the instant petition is premature and the C01 :rt of Tax Appeals has no jurisdiction to resolve the petition.

DECISION C.T.A. CASE NO. 5585 -4- Section230 and Section 106 of the 1977 Tax Code, as amended by Republic Act No. 7716, and implemented by Sec.4.106-2 of BIR Revenue Regulations No. 7- 95 require that claims for input VAT must be filed within two yea �s after the close of the taxable quarter when the sales were made. It is so provided thm the aggrieved taxpayer may appeal the decision or unacted claim with the Comi of Tax Appeals. Clearly therefore, it is the Tax Code itself which confers the Court of Tax Appeals jurisdiction to resolve an unacted claim. Considering that the last day for the fij ing of the first quarterly VAT return was on April20, 1996, Petitioner filed this petition .or review on March27, 1998. It is illogical and impractical on the part of the Responder. t to require Petitioner to wait for the resolution of the said claim even if the same or a part thereof is about to lapse. The filing with the One Stop Shop Center of the Department of Finance is countenanced by the Bureau itself under Section 4.106-2 of Re\' ;:!nue Regulations No. 7- 95 which provides that: SEC. 4.106-2. Procedures for claiming refunds or tax credits of input tax-(a) Where to file the claim for refund or tax credit. - Claims for refunds or tax credit shall be filed wit!�. the appropriate Revenue District Office (RDO) having jurisdiction over fle principal place of business of the taxpayer. However, direct exporters nay also file their claim for tax credit with the One Stop Shop Center of f1e Department of Finance. (Emphasis Supplied.) Furthermore, the Supreme Court held m Commissioner of Internal Revenue vs. Victorias Milling Co., Inc. (22 SCRA 12), thus: The claim for refund with the Bureau of Internaj Revenue and the subsequent appeal to the Court of Tax Appeals must b filed within the two year period. If, however, the Commissioner takes time in deciding the claim, and the period of two years is about to end, the :mit or proceeding

DECISION C.T.A. CASE NO. 5585 -5- must be started in the Court of Tax Appeals before the end of the two year period without awaiting the decision of said Collector. Having determined that this Court has jurisdiction to reso've the instant petition, We now go to the main issues submitted for Our consideration, namely: (a) Whether or not Petitioner is entitled to the tax refund/credit of P1,588,515.92 allegedly representing input VAT payments for lo:al purchases of goods and services for the period January 1, 1996 to February 28, 1997; c.nd (b) Whether or not Petitioner has fully substantiated its claim. After a careful review of the facts, arguments, evidence, la,vs and jurisprudence in point, We rule against the Petitioner. The legal bases for Petitioner's claim are Section 1 00(a)(2)(A) and Section 106(a) of the Tax Code, as amended, to wit: (2) The following sales by VAT-registered p rsons shall be subject to 0%: (A) Export sales.- The term "export sales" means: (i) The sale and actual shipment of goods from the Philippines to a foreign country, irrespective of any shipping arrangerr::nt that may be agreed upon which may influence or determine the transfr of ownership of the goods so exported and paid for in acceptable foreigr currency or its equivalent in goods or services, and accounted for in a2-cordance with rules and regulations of the Bangko Senlral ng Pilipinas (B SP). �SEC. 106. Refunds or tax credits of creditable ii1put tax. - Any VAT-registered person, whose sales are zero-rated or e(Jectively zero rated, may, within two (2) years after the close of the taxal:: le quruier when p the sales refund of wcreerdeitmabaldeei,npapupt ltyaxfodruethoer" issuance of a tax ere( it certificate or aid attributable to such sales, except transitional input tax, to the extent that such input tax has LOt been applied against output tax: Provided, however, That in the case of zero-rated sales under Section 1OO(a)(2)(A)(i),(ii) c,md (b) and Section 1W(b)(1) and (2), the acceptable foreign currency exchange proceeds thereo,� had been duly accounted for in accordance with the regulations of the Ba. zgko Sentral ng Pilipinas (BSP). t.:3G

DECISION C.T.A. CASE NO. 5585 -6- Relative thereto, Sections 4.106-1(a) and 4.106-2(c) of B .R Revenue Regulations No. 7-95 provide, viz: Refunds or tax credits of input tax. - (a) ZcrG-rated sales of � goods and properties or services. - Only a VAT-regist red person may be given a tax credit certificate or refund of VAT paid corresponding to the zero-rated sales of goods, properties or service, excluding the presumptive input tax and to the extent that such input cax has not been applied against the output tax. The application should be made within two (2) years after the close of the taxable quarter when the sa' es were made. � (c) Period within which to refund or tax credit of input taxes shall be made. - In proper cases, the Commissioner shall grant a tax credit/refund for creditable input taxes within sixty (60) days from the date of submission of complete documents in support of the a} plication filed in accordance with subparagraphs (a) and (b) above. In case of full or partial denial of the claim for ta) credit/refund as decided by the Commissioner of Internal Revenue, tr e taxpayer may appeal to the Court of Tax Appeals within thitiy (30) day from the receipt of said denial, otherwise the decision will become final. However, if no action on the claim for tax credit/refund has bee1 taken by the Commissioner of Internal Revenue after the sixty (60) da; � period from the date of submission of the application but before the lap e of the two (2) year period from the date of filing of the VAT return for the taxable quarter, the taxpayer may appeal to the Court of Tax Appeals. Thus, under the law, it appears that as a VAT and EJ'ZA exporter registered taxpayer, Petitioner's export sales are subject to zero percent VAT. And considering that the input taxes it paid from January 1, 1996 to February 28, 1997 remained unutilized, seemingly, Petitioner is entitled to a refund or issuance of 1 tax credit certificate. Moreover, as earlier discussed, the claim was filed within the period required by law. However, Petitioner failed to fully substantiate its claim for refund. As can be culled from the records in this case, Petitioner failed to satisfactorily prove that indeed its sales were zero-rated. Revenue Regulations No. 3-88 requi:es in export sales the

DECISION C.T.A. CASE NO. 5585 -7- submission of the following documents in addition to the applica� ion for tax credit/refund filed: i) photocopy of export document showing the ;anount of export document, and the date and destination of the goods ;xported. With respect to foreign currency denominated sale, the photoco )y of the invoice or receipt evidencing the sale of the goods, as well as tht name of person to whom the goods were delivered. ii) statement from the Central Bank or any ( f its accredited agent banks that the proceeds of the sale in acceptable 'Dreign currency has been inwardly remitted and accounted for in <.ccordance with applicable banking regulations. To prove the zero-rating of its sales, Petitioner presented t: 1e following evidence: a) VAT, EPZA & PEZA registration certificates (Ecb>Jes A, BB & EE); b) testimonies of Ms. Daisy delay Rica, (TSN, No-'. 11, 1998 & Jan. 27, 1999) and Ms. Leoner Rivera-Dalisay (TSN, Feb. 22, 1999); c) export sales invoices (Exhs. OT-10001 to OT-112c 6, inclusive); d) Solidbank credit advices (Exhs. FF-1 to FF-5, i1.clusive and BPI credit memos (Exhs. FF-6 to FF-14, LL to NN, inclusive); and e) CPA certification (Exhs. 00 & PP). But herein Petitioner failed to submit expmi documents such .s airway bills, bills of lading, export declarations/permits to prove actual shipment/exp.Jrtation of its products. Section 102(a)(2)(A) of the Code provides that zero rated export ales means the sale and actual shipment of goods from the Philippines to a foreign c,mntry. Without these documents the fact of sale and actual shipment cmmot be fai dy established. More importantly, Petitioner failed to prove that the foreign remittanc,;s indicated in its bank credit memos correspond to its export sales for the period involved in this case. 38

DECISION C.T.A. CASE NO. 5585 8 - - Petitioner should have properly identified for which export sa� es invoices the foreign remittances pertained to. Settled is the rule that tax refunds, being in the nature of t.tx exemptions, are to be strictly construed against the taxpayer (Commissioner of Interllal Revenue vs. Tokyo Shipping Co. Ltd.; 244 SCRA 332). WHEREFORE, in view of all the foregoing, the petititll1 for review is hereby DENIED for insufficiency of evidence. SO ORDERED. ;'A'"; sociate /;tJ;fA WE CONCUR: ��tsl� ESTO D. ACOSTA Presiding Judge t RAMON O. E YRA Associate Ju ge CERTIFICATION I hereby certify that the above decision was reached after due consultation with ' the members of the Court of Tax Appeals in accordance with Se1 ti on 13, Article VIII of the Constitution. lQ ERNESTO ll. ACOSTA Presidin,; Judge 'I J v� (\ v i-