BSM CREW SERVICE CENTRE PHILIPPINES, INC. v. COMMISSIONER OF INTERNAL REVENUE

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY SPECIAL THIRD DIVISION BSM CREW SERVICE CENTRE CTA CASE NO. 10135 PHILIPPINES, INC., Members: Petitioner, RINGPIS-LIBAN, Chairperson, and MODESTO-SAN PEDRO, JJ. - versus - COMMISSIONER OF INTERNAL Promulgated: REVENUE, ~~--~~-"'--'--------------x X--------------------------------- -----------R-e--s-p--o-n--d-e--n-t-------- - RESOLUTION RINGPIS-LIBAN,J.: Before this Court is petitio ner's Motion for Reconsideration (of the D ecision dated March 29, 2023) filed on May 11 , 2023, with respondent's Opposition (Re: Motion for Reconsideration of the Decision dated 29 March 2023) flled on June 14,2023. On March 29, 2023, the Court promulgated a Decision denying petitioner's claim for refund of input value-added tax 0/AT) attributable to its zero-rated sales of service in the total amount of P4,788,3 17.31 for failing to satisfactorily establish that the said sales of service were performed in the Philippines, the dispositive portion of which states as follows: "WHEREFORE, in light of the foregoing considerations, the instant Petition for Review is DENIED for lack of merit. SO ORDERED." In its Motion, petitioner insists that its sales of service were zero-rated or effectively zero-rated. Petitioner claims that perusal of the record of the case would readily show that a Memorandum and Articles of Association of BERNHARD SCHULTE SHIPI\IGT HONG KONG LTD PTE, duly mark/

RESOLUTION CTA Case No. 10135 as Exhibits "ICPA-P3-35" to "ICPA-P3-60", were offered to and admitted as evidence by the Court. Likewise, the Securities and Exchange Commission (SEC) Certification of Non-Registration and Memorandum and Articles of Association of BERNI-L\RD SCHULTE SI IIP.l\lGT CYPRUS LTD (HAM:tv10NI.A), marked as Exhibit "ICPA-P3-3" and Exhibits "ICPA-P3-13" to "ICPA-P3-24", respectively, were also offered and admitted as evidence in the course of the proceedings. Moreover, petitioner asserts that Annex H of the Independent Certified Public Accountant (ICPA) Report states that petitioner's clients are non-resident foreign corporations (NRFCs) for purpose of VAT zero-rating. Thus, petitioner posits that the above pieces of evidence indicate that petitioner's clients are NRPCs. Petitioner also assails the Court's ruling that the Service Agreements between petitioner and its NRFC clients do not bear any indication that the subject services were to be performed in the Philippines, nor does it categorically state that the contracted services thereof shall be performed in the Philippines. Petitioner avers that the Court may have overlooked the report and annexes submitted and identified by the duly commissioned ICPA. Petitioner points out that Exhibits "ICPA-P8-2", "ICPi\-PS-3", "ICPA-PS-17", "ICPA-PS-18", "ICP1\-PS-21 ", "ICPi\-PS-22", "ICPA-PS-40" and "ICPA-PS-41 ", enumerates the services that petitioner will implement as agent which specify that the said services will be performed in the Philippines. Petitioner stresses that Exhibit "ICPI\-PS-12" clearly states that, as agent, it shall supply Philippine crcwmcmbcrs through the National Seamen Board when requested by the principal; and that Exhibit "ICP.\ -PS-31" specifically indicates that the principal appoints its agent, petitioner, as the manning agency responsible for the deployment of Filipino seafarcr(s) on board ocean-going liquefied petroleum gas (LPG) 'fankcrs. Lastly, petitioner maintains that its sales of services, the consideration of which were paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas, are indeed subject to zero percent (0%) vxr as these were all duly supported by billing invoices, official receipts, bank credit memos, settlement advice and certificates or inward remittances. On the other hand, in its Opposition, respondent disagrees with petitioner's contention that it has complied with the requisites for its sales to qualify for VAT %ero-rating. Respondent asseverates that the claimant has the burden of proof to establish the factual basis of its claim for tax credit or refund. After all, tax refunds, like tax exemptions, arc construed strictly against the taxpayer. The Court finds petitioner's Motion for Reconsideration bereft of merit. /

RESOLUTION CTA Case No. 10135 Petitioner reiterates that it o ffered as evidence a Memorandum and Articles o f 1\ ssociatio n of BERNHARD SCHULTE SHIPMGT HONGKONG LTD PTE, marked as Exhibits " ICPA-P3-35" to " ICPA-P3- 60", and the SE C Certification of No n-Registration and Memorandum and "\rticles of Association o f BE RN I L\RD SCH ULTE SHIPMGT CYVRUS LTD (HAMl\lONIA), marked as E xhibit " ICPA-P3-3" and Exhibits "ICPA-P3-13" to " ICPA-P 3-24", respectively. Petitioner assumes that the Court may have overlooked the report and annexes submitted and identified by the duly commissioned ICPA. I Iowever, Section 3, Rule 13 o f the Revised Rules o f the Court o f Tax 1\ ppeals provides: "SE C. 3. Findings ofindependent CPA. - The s ubmission by the indep endent CPA of pre-marked documentary exhibits sh all b e subject to verific ation and comparison with the original documents, the availability o f which shall be the primary responsibility o f the party possessing such documents and, second arily, by the independent CPA. The findings and conclusion s of the independent CPA m ay be challen ged by the p arties and shall not be conclusive upon the Court, w hich m ay, in wh ole or in p art, adopt such findings and conclusions s ubject to verification." (Emphasis supplied) From the above provision, this Co urt is not bound by the findings o f the ICPA. T he report submitted by the ICP1\ is but a tool or guide to aid the Court in the resolution of the case. T he determination of the merit or the probative value of such report is still within the province o f the Court. In addition, the Court is free to adapt or disregard, comp letely or partially, the findings o f the ICP1\ . It can even make its own audit and evaluation o f the documents pertinent to the case presented during th e trial in order to intelligently resolve the conflict bro ught before it. 1 Simply stated, the Court will still examine and verify the documents audited or examined by the ICP1\ - and the Court, in its sound discretion, may render judgment without considering the ICP ,\ report. Herein, the Co urt did no t overlook the report and annexes submitted and identified by the duly commissioned ICP1\ . Unfortunately, Exhibits "ICPA-P3- 35" to "ICPA-P3-60", cited by the ICPA as the Memorandum and Articles o f Association o f BERNHARD SCI IULTE SHIPMGT HONGK ONG LTD PTE, were no t adopted by the Court since the said company name does not match with the company name indicated on the said exhibits, i.e., "BERNH1\ RD SCI IULTE S l-IIPJ\ IAN~ \G El\I ENT (I lONGKONG) LIMITE~ 1 First Lepanto Taisho Insurance Corporation v. Commissioner of I nternal Revenue, CTA EB Case No. 563, March 1, 2011.

RESOLUTION CfA Case No. 10135 PARTNERSHIP" (Exhibits "ICP.r\-P3-35") and "BERNHARD SCHULTE SHIPf\L\ N1\GEi\IENT (L) LIMITED" (situated in the Federal Territory of Labuan Malaysia) [Exhibits "ICPJ\ -P3-36" to "ICPA-P3-60"]. Furthermore, Exhibit " ICP.r\-P3-3" and Exhibits "ICPA-P3-13" to "ICPI\ -P3-24", cited by the ICPA as the SEC Certification of Non-Registration and f\,1emorandum and 1\rticles of Association of BERNHARD SCHULTE SHIPMGT CYPRUS LTD (HAMMONIA), respectively, were likewise no t adopted by the Courr since the said company name does not match with the company name indicated on the said exhibits, i.e., "Bernhard Schulte Shipmanagement (Cyprus) Limited" and "BERNHARD SCHULTE SHIPf\IAN J\G Ei\1ENTT (CY1)RUS) LIMITED". As to the provisions claimed by petitioner in the Service Agreements (Exhibits "ICP1\ -P8-2", "ICPA-P S-3", "ICPJ\ -PS-17", " ICPA-PS-18", "ICPA- PS-21", " ICPA-PS-22", "ICPI\ -PS-40" and " ICPA-P S-41") that serves as proof that the services will be performed in the Philippines, the Court is still no t co nvinced. Verily, the above provisions declating that the principals will be provided with the "POEA Standard Employment Contract"; that " the AGENT shall make, sign seal and execute employment contracts/documents in connection with the hiring of Filipino SEAFi\RER(s) supplied by the AGENTS"; that " the 1\ GENT is to maintain constant liaiso n with the Philippine Government agencies and update the PRJN ICIPALS on government regulations pertaining to sea-based employment industry"; that " the AGENT shall supply Philippine crewmembers through the Na tio nal Seamen Board"; and that "as the Manning .\ gency responsible for the deployment [o~ Filipino SEAFARER(s) on board ocean-going LPG 'L\NKERS", do not clearly state, or categorically resemble, that the services shall indeed be performed in the Philippines. Accordingly, the Court maintains its ruling in the assailed Decision that the Service Agreements2 between petitioner and its NRFC clients do no t bear any indication that the subject services were to be performed by petitioner in the Philippines. Perforce, the one who alleges a fact has the burden o f proving it and the proof should be clear, positive and convincing. f\,1ere allegation is not evidence.3 It is worthy to no te that a judgment has to be based on facts. Conjectures and surmises cannot substitute for the facts. "A conjecture is always a conjecture; it can never be admitted as evidence."4 In the present case, no evidence was offered by petitioner that would show that the subject services were performed in the Philippines. N' 2 Exhibits "ICPA-P8-1" to "ICPA-P8- 100". 3 Dionarto Q. Noblejas v. Italian Maritime Academy Phil., Inc., eta!., G.R. No. 207888, June 9, 2014. 4 Spouses William Guidangen and Mary Guidangen v. Devota B. Wooden, G. R. No. 174445, February 15, 2012.

RESOLUTION CTA Case No. 10135 To stress, the burden is on the taxpayer to show that it has strictly complied with the conditions for the grant of the tax refund or credit since actions for tax refund or credit, as in the present case, are in the nature of tax exemptions. As such, they arc regarded as derogation of sovereign authority and to be construed strictissimijuris against the person or entity claiming the refund. 5 The pieces of evidence presented entitling a taxpayer to an exemption are also strittissimi scrutinized and must be duly proven.6 Hence, an applicant for a claim for tax refund or tax credit must not only prove entitlement to the claim but also compliance with all the documentary and evidentiary requirements.7 In view of the foregoing disquisitions, there being no new matter or substantial issue raised by petitioner in its Motion for Reconsideration, the Court finds no compelling reason to reverse, amend, or modify the Decision promulgated on l\�Iarch 29, 2023. WHEREFORE, in light of the foregoing considerations, petitioner's l\Iotion for Reconsideration (of the Decision dated March 29, 2023) is DENIED for lack of merit. SO ORDERED. ~ ~ ---1.- (.___ MA. BELEN M. RINGPIS-LIBAN Associate Justice I Conmr: MARIARO 5 Commissioner ofInternal Revenue v. S.C Johnson and Son, Inc., G.R. No. 127105, June 25, 1999. 2011 , 6 Kepco Philippines Corporation v. Commissioner ofInternal Revenue, G.R. No. 179961, January 31, citing Atlas Consolidated Mming and Development Corporation v. Commissioner ofInternal Revenue, G.R. No. 159490, February 18, 2008. 7 Eastern Telecommunications Philippines, Inc. v. Commissioner ofInternal Revenue, G.R. No. 183531, March 25, 2015, citing J.R.A. Philippines, Inc. v. Commissioner ofInternal Revenue, G.R. No. 171307, August 28, 2013.