CTA Case No. 4622 (Decision)

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY DEL "ONTE PHILIPPINES, INC. Petitioner, -- versus -- C.T.A. Case No. 4622 THE COM"ISSIONER OF INTERNAL rrfJ.M /v REVENUE, Res pondent. X- - - - - - - - - - - - - - - X DECISION This is a claim for refund in the amount of P992, 361. 00 representing allegedly erroneous payment of value added tax on the importation o� 10,976 kgs. of Tilt 250 EC <Fungicide>. Petitioner, is a domestic corporation organized and existing under the laws of the Republic o� the Philippines, and registered with the Bureau of Internal Revenue as a value added tax <VAT) taxpayer pursuant to Section 107 o� National Internal Revenue Code as amended by Executive Order No. 273 with Registration No. 75-0- 000108 <Annex A>. It imported 10, 976 kgs. o� Tilt 250 EC <Fungic i de) under Ent ry No. 282 - 89 <Exh. B> and 1136

DECISION - C.T.A. CASE Ho. 4622 -2- subsequently paid the value added tax on said importation in the amount of P992,361.00 on June 28, 1989 under Customs Official Receipt No. 1119151 <Exh. C-1>. -' On June 4, 1990, Petitioner obtained from the Fertilizer and Pesticide Authority a certification stating that the product Tilt 250 EC is a fungicide <a form of pesticide under the definition of "Pesticide" in Section 3(a) of .P.O. 1144 used to control fungal diseases in crops <see Exh. D, D-1> . Such being the case, petitioner contends that the product Tilt 250 EC <Fungicide> shou ld be exempt from payment of VAT pursuant to Section 9<b ><3> of Revenue Regulations No. 5-87 which states in part, to wit: <b> Exempt transactions. - x x x <3> Fertilizers, ~~t~cid~~. and herbicides, chemicals for the formulation of pesticides; x x x ?re ex~mpt on i~~rtation and sale in all stage s of distribution, x x x . <Emphasis supplied> Thus, Petition r filed i t s applica~ion for tax refund/credit of erroneo u sly paid VAT in the amount of P992,361.00 with the VAT division on February 5, 1990. On March 20, 1990, in order to remove the VAT paid on subject importation fro m available input taxes, and to reflect the same as tax refund/tax credit applied for. Petitioner filed an amended VAT return for the quarter September to November 1989 pursuant to Section 11 of 1 1 �~ �~

DECISION - C.T.A. CASE Ho. 4622 -3- Revenue Regulations No. 5-87 which states: SEC. 11. Determination o~ input tax deductible during a taxable quarter. - All input taxes paid by or available to a VAT-registered person during a taxable quarter plus any input tax carried over �rom the preceding quarter shall be reduced by the applications �or re�und or applications �or the . issuance o� tax credit certi�icate and other adjustments such as those �or purchase returns or allowances in order to arrive at the input tax that can be deducted �rom output tax. " x x x There being no action on the request �or re�und on the part o� the Respondent, Petitioner �iled this instant action on June 26, 1991, well within the two - year prescriptive period. The issues �or resolution are the �allowing: <1 > Whether or not petitioner is entitled to the re�und claimed. <2 > Whether or not petitioner already credited the amount claimed against its output tax. A��irmatively, We resolve the issues. The product, Tilt 250 EC <Fungicide) o� which petitioner erroneously paid the value added tax on its importation has been certi�ied by the Fertilizer and Pesticide Authority as pesticide �inished product pursuant to Section <3><a> o� P.O. 1144 which de�ines, as �allows: a> �Pesticide� - any substance or product, or mixture thereo�, including active ingredients, adjuvants, and pesticide �ormulations, intended to _, control, prevent, destroy, repel or mitigate directly or indirectly, any pest. The term shall be understood to include insecticide, �ungicide,~ . 1 1 .-) . / L-f

DECISION - C.T.A. CASE Ho. 4622 -4- bactericide, nematocide, herbicide, molluscicide, avicide, rodenticide, plant regulator , defoliant, desiccant and the like. (Emphasis supplied). Hence, it falls under transactions exempt from Value Added Tax under Section 9<b><3> of Revenue Regulations No. 5-87, which provides: (b) Exempt transactions. - x x x <3) Fertilizers, P.~!!!t~.QJ_Q_~�_, and herbicides, chemicals for the for mulati on of pesticides; x x x ~.!:..~_...~~�'_".).P.!,_....Q..~..._t _'!IJU>...!:..t.?...tJ..Q.n and sa 1 e in a 11 stages of distribution, x x x. <Emphasis supplied ) Relevant to the determination of the second issue, are the VAT returns, subsidiary purchase journal and ledger of Petitioner, portions of which are reproduced below: lp. 38, BIR Exh. 'II' Exh. 'F'' Exh. 'L' Records) for Pet. for Pet. for Pet. June-Aug. '89 Dec. -Jan. '90 !A ~ended) PERIOD COVERED Sept -Nov. '89 Sept-Nov. '89 Output tax on sales of goods 23,005,262.73 17, 216,727.38 17,216,727.38 25,548,844.60 Output tax on sales of services Total output tax _ _!.?~rl~~JJ ___]9�_,1Q~!. 57 ---~.. 785.~~? _H~~..9.89~..�.9 ~-~!..!.~� 4.~!.:..~-'- :U..r,.!~.~!.~:..~.~ .!?-t~~~~.~!~:.~? ~~Ji~!..~~-~ Input tax carried over fro� previous �onth 9,133,114.70 12,329,247.90 12,329, 247.90 23,077,756.45 Input tax on do~estic purchases 13,049,386.75 10,977,064.75 10,977,064.75 13,064,088.00 Input tax on i�portation 14,604,019.85 16,265,374.93 17,257,735.93 12,631,197. 00 Input tax on purchase of taxable services 1,081,912.42 1,127,775.70 1,095,996.34 1,181,200.00 �' Dee.ed paid 1801 Reg. Pioneer Ent. l ---�~-~...1-~Q.~..�. -����-~Tl~J.~.9..~.-~ ___??lr .!~~�~ Total input tax 38, 707' 073. 80 40,976,623.93 41,937,205.57 49, 954, 151. 45 Less: Refunds applied for 665,537.84 992,361.00 VAT on exe�pt sales ........HQ,.~t-~.~ __J!.~�..~?~!.l? ---'-~.....?..�~!.~~ Met creditable input tax 38,041,535.96 40,536, 139.70 40,501,269.40 49,547,382.20 Less: A�ount applied this quarter ?..~J~r...'-~1.!!1 E.L!~...~n~~1i !?....'-7..~r.~t.7.~.~~ -~~.t.~.%..r..~34�.7.9 Balance carried over to succeeding quarter

DECISION - C.T.A. CASE Ho. 4622 -5- It c a n be noticed that petitioner deduc ted the amount of P'3'32, 361. 00 a s a re fund on the amended VAT return f or the quarter Se pt e mb e r to November, 1 '38'3 <Exh. "F" ) . As a consequence the amount carried over to the succeeding period December to February 1990 was reduced accordingly <Exh. "L" ). Simultaneous to this, petitioner made the necessary adjustme nts on its book, particularly on th e general l e dg er <Exhs. "J" and "J - 1") and subsidi a ry purchase journal <Exhs. ~ K" and "K - 1">, to c orrect the acc ount bala nc e o f its available input tax and to reflect a receiva ble a ris ing therefrom. The opin i o n of t he r e venue e x a miner that what should h a ve been ame n ded was the qu arterly VAT r e t u r n f or June to Au g u st 1989 b ecause t he erroneo u s payme nt occurred in Ju ne 1 98'3 is witho u t basis. Revenue Regu lati o n s No. 5 - 87 d oes not provi de any regulation to that effect. Moreso, the applicable law on said refund was n ot even u nder Sec. 16 of same regulation but under Sec. 230 of the Tax Code. Furthermo e, respondent a d mitted t he VA T r eturn for the qu arter Decemb er to Ja n uary 1990 <Exhs. "L" and "L - 1") wit h o u t q ualification . It fol l ows, the refor e, that he al so a dmi t ted th at the a mount car ri e d ove r was reduced by t h e amount of ? 992, 361 . 00. It will b e u nfair therefore if t h e tax p ayer seeking remedy wi l l be d e prived of t he ref un d a fter i t deducted r 1 1 ,, j

DECISION - C.T.A. CASE No. 4622 -6- the portion <P992, 361. 00 > it should have been used as a tax credit against future output tax. Although the .I revenue examiner reported that the said amount was already used against the output tax �or the period June to August 1989, he, however, failed to examine subsequent entries on petitioner's book . In fact, the total input taxes for that period <June - August 1989 > is more than enough to cover the output tax of petitioner <see p. 38, BIR record s ). basis of investigation was limited only to the subsidiary purchase journal for the quarter June to August 1989 which was not even presented to the Court for proper evaluation. To this d ate said amount is sti ll unutilized as per record of the case. WHEREFORE, We hereby RESOLVE 1'0 GRANT Petitioner's claim for refund in the a mou nt of' ?992 ,361.00 represen i g refund o rroneouely paid value added tax <VAT> on the importation of the pr oduct Tilt 250 EC <Fungicid e) SO ORDERED. Quezon City, Metro M nile, 1141

.. DECISION -- C.T.A. CASE No. 4622 -7- WE CONC UR; ~tl~ RN STO D. ACOSTA / _ �~ w RAHON 0. DE~~ Associate Judg G_~.B.. :J.::..:.!.. E ...........g . A:.T ...~..Q . ~. I hereby certify that this decision was reached after due consultation a mong the members of the Court of Tax Appeals in accordan ce with Secti on 13~ Article VIII of the Const "tut'on. ERNESTO D. ACOSTA Presiding Judge Cour of Tax Appeals 114 2