CTA Case No. 5304 (Decision)

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY AMI PHILIPPINES, INC., Petitioner , - versus - C.T.A. CASE NO. 5304 COMMISSIONER OF INTERNAL Promulgated: � REVENUE, _ J_AN_2_0_19_98_�r Respondent. X- - - - - ---------------X DECISION This case involves a claim for refund of allegedly excess input value-added taxes paid by the petitioner for the period January 1, 1994 to December 31, 1994 amounting to P4,653,402.87. The facts of the case are simple. Petitioner is a corporation duly organized and existing by virtue of the laws of the Philippines and is engaged in the business of exporting semi-conductor devices. It is a VAT-registered entity with VAT Registration No. 34-8-000-333 and as an exporter and a preferred pioneer enterprise, it is also registered with the Board of Investments wit h BOI Certificate of Registration No. 85-1032. For the year 1994, petitioner paid VAT input taxes on its domestic purchases of taxable goods and services amounting to P-4,653,402.87 which are directly attri buta b le to its zero-rated export sales and filed the

DECISIO N - C. T .A. CASE NO. 5304 - 2- corresponding VAT returns with the respondent ' s Revenue District Office, co mputed as follo ws: Exh. Quarter Domestic Purchases of VAT Input Taxes Covered Taxable Goods & Services "K" First ?12,239,487.70 P1,223,948 . 77 14,587,223.80 1,458,722.38 "L" Second 8,518,839.20 851,883.92 11,341,985.00 1,134,198.50 "M" Third ?46,687,535.70 P4,668,753.57 "N" Fourth Subsequently, petitioner filed its application for tax credit/refund of value-added tax paid for the year 1994 pursuant to Section 106(a) of the Tax Code (Exhibit "P") in the amount of P-4,653,402.87. Inaction of the respondent on the aforementioned application for refund prompted the petitioner to file the instant petition for review on December 18, 1995 lest it be barred by the mandatory two-year prescriptive period under Section 230 of the Tax Code. Respondent, in her Answer to the Petitions for Review maintained the following Special and Affirmative defenses: SPECIAL AND AFFIRMATIVE DEFENSES 6) The petition states no cause of action as it does not allege the date/s when the taxes sought to be refunded were actually paid. ( Manufacturer's Bank & T r ust Company as T ru s t e e of Gen. T r ust Plan v s . Commissioner of

DECISIO N - C.T.A. CASE NO. 5304 - 3- Internal Revenue. CTA Ca se No . 1 0 53 . No v. 2 9. 1965 ); 7) Petitioner failed to comply with the substantiation requirement under Revenue Memorandum Order No. 40-94 dated May 6, 1994; and Section 16(c)(3) of Revenue Regulations No. 5-87 as amended by Revenue Regulations No. 3- 88; 8) Petitioner has not shown proof that it has not applied the VAT input tax of ~4,653,402.87 to any of its output tax liability for the period covered in its claim or any succeeding period; 9) In an actio n for tax refund/credit the burden of proof is on the taxpayer to establish its right to the refund and failure to sustain the burden is fatal to the action for tax refund; 10) Taxes paid and collected are presumed to have been made in accordance with law and regulations, hence, not refundable; 11) Well-settled is the rule that claims for refund are construed against the claimants since it partakes of the nature of an exemption from taxation. During the course of the trial, petitioner presented as evidence the testimonies of its financial officers who identified the documentary evidence it submitted before Us and that of the representative of Punongbayan & Araullo Accounting Firm who testified that petitioner's claim for refund/credit are properly supported by documents covering value-added tax paid by the petitioner in 1994. To bolster its claim, petitioner formally offered the following documentary evidence:

DECISION - C.T.A. CASE NO. 5304 - 4- 1) Certification of Punongbayan & Araullo Accounting Firm dated March 11, 1996 (Exh. A II II ) ; 2) Schedule of VAT Invoices Paid for the period January 1 � 1994 to December 3 1 ' 1994 (Exh. B II II ) ; 3) Summary of Input Taxes Paid for the period January 1 � 1994 to December 31, 1994 (Exh. C II II ) ; 4) Photocopy of Supplier's Invoices and Official Receipts for the period January 1, 1994 to December 31, 1994 (Exhs. D 11 11 to 11 D-2527 11 ) ; 5) Sales Register Report for the period January 1, 1994 to December 31, 1994 (Exh. E 11 11 ); 6) Photocopy of Sales Invoice s and Airway Bills for the period January 1, 1994 to December 31, 1994 (Exhs. F 11 11 to 11 F-3599 11 ); 7) Photocopy of Bank Credit Memos for the period January 1, 1994 to December 31, 1994 (Exhs. G 11 11 to G - 3 2 11 11 ); 8) Schedule of Dollar Remittances for the period January 1, 1994 to December 31, 1994 (Exh. H II II ) ; 9) Summary of Zero-rated Revenues for the period January 1, 1994 to December 31, 1994 (EX h. III II ) ; 10) Value Added Tax Registration Certificate No . 34-8-000333 (Exh. J11 11 ); 11) VAT Returns for the first, second, third and fourth quarters of 1994 (Exhs. K 11 11 L 11 11 liM II , , and N 11 11 ); 12) Letter Claim for Refund dated July 2 1 � 1995 ( E X h � 0 II II ) ; 13) Applications for Tax Credit/Refund of VAT paid for the first, second, third and fourth

DECISION - C.T.A. CASE NO. 5304 - 5- quarters of 1994 filed on July 21, 1995 (Exh. "P"); and 14) BOI Certificate of Registration No. 85 - 1032 (Exh. "Q"). Respondent, on the other hand, not only failed to present any evidence to support her special and affirmative defenses, but she also opted not to file a memorandum to defend her case. The sole issue to be resolved in this case is whether or not petitioner is entitled to a refund of the amount of ~4,653,402.87 allegedly representing excess input value-added taxes paid by the petitioner for the period January 1, 1994 to December 31, 1994. Quoted hereunder are the following provisions of the Tax Code and Revenue Regulations involved in the case at bar, to wit: a) Section 106(a) of the Tax Code "SECTION 1 06. Rerunds o r t:a x c red.i t:s or .inp ut: t:ax. (a) Export: Sales. - An exporter who is a VAT-registered person may within two years from the date of exportation, apply for the issuance of a tax credit certificate or refund of the input tax attributable to the goods exported, to the extent that such input tax has not been applied to output tax and upon presentation of proof that the foreign exchange proceeds has been accounted for in accordance with the regulations of the Central Bank of the Philippines." (Underscoring supplied)

DECISION - C.T.A. CASE NO. 5304 - 6- b) Section 16(c)(1) of Revenue Regulations No. 5- 87 as amended by Revenue Regulations No. 3-88 "Sec ti on 16. Refunds or Ta x Cr ed its of Input Ta x . x x x. 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 added tax paid shall pe 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 requirements shall be attached whenever applicable: 1. Export Sales i) photocopy of export document showing the amount export, and the date and destination of the goods exported. With respect to foreign currency denominated sale, the photocopy of the invoice or receipt evidencing 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 8as been inwardly remitted and accounted for in accordance with applicable banking regulations." (Underscoring supplied)

DECISION - C.T.A. CASE NO. 5304 - 7- In summary, for VAT-registered taxpayers engaged in export sales, the following documents must be attached with their application for a tax credit/refund of excess input VAT: (1) photocopy of purchase invoice or receipt evidencing the value added tax paid; ( 2) photocopy of export document showing the amount of export, and the date and destination of the goods exported; and (3) for foreign currency denominated sale, photocopy of the invoice or receipt evidencing the sale of the goods as well as the name of person to whom the goods were delivered; and (4) 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. A thorough and careful examination of all the documentary evidence presented by the petitioner revealed that it substantially complied with all the foregoing requirements, however, this Court is nevertheless inclined to join the respondent in her meritorious defense that petitioner's failure to show proof that it has not applied the VAT input tax of ~4,653,402.87 to any of its output tax liability for the period covered in its c 1 a i m ..;;.o-'-r-""a-'-n...Y._ _..;;.s...;u..;;.c;;..;;.;.c...;e...;e'-d;;;..;;:;i..;;.n'-'g"--.l:.p-'e-'r-'-.l.::..;:.o..:d'-"-, would be a sufficient

DECISION - C.T.A. CASE NO. 53 0 4 - 8- ground to rule on the denial of petitioner's claim for refund/credit. Take note that in the fourth quarter VAT return it opted to carry over the refundable amount to subsequent quarter. In a recently decided case involving the same parties entitled AMI Philipp i nes, Inc. vs. Commissioner of Internal Revenue, CTA Case Nos. 5187 and 5199, October 2 , 1 997, this Court had the occasion to apply the same ruling that not only must the petitioner present as evidence the VAT Returns for the period involved in the claim but also petitioner's VAT Return for the immediately succeeding quarter to accurately prove that the excess input VAT sought to be refunded by the petitioner had not been forwarded to the succeeding quarter. Portions of the said case is quoted hereunder for emphasis: "As regards the last issue, this Court finds that petitioner failed to convincingly show that its input taxes have not been applied to its output tax liabilities. We note that petitioner's excess VAT credits (input taxes) beginning from the last quarter of 1992 up to the last quarter of 1993 have been cumulatively added and forwarded to succeeding quarters as shown under box no, 16 of the respective VAT return for each quarter involved (Exhibits "B" to "B-4"). Thus, the input taxes being claimed by the petitioner have been forwarded to the succeeding first quarter of 1994. At this point, We cannot ascertain whether or not said input taxes have been applied to petitioner's output tax liability for the first quarter of

DECISION - C.T.A. CASE NO. 5304 - 9- 1994 and other succeeding quarters thenceforth. Petitioner has not introduced any evidence to prove this point. It could have submitted one of its succeeding VAT returns right after it decided to file an application for refund and reflecting under box 15 thereof that it had deducted the amount being claimed for refund. Unless shown, there is really nothing to refund because the input taxes being claimed have actually been elected by the petitioner to be forwarded as excess VAT credits to the succeeding first quarter of 1994. To grant petitioner's claims for refund, without proof of deduction of the corresponding amount, would be dangerous and tantamount to granting twice the refund herein sought to be refunded, to the prejudice of t h e Government." (Underscoring supplied) WHEREFORE , in the light of all the foregoing, petitioner ' s claim for issuance of tax credit certificate or refund of excess input VAT payments for the period January 1, 1994 to December 31, 1994 is hereby DENIED for failure of the petitioner to substantiate the fact that its input taxes have not been applied to any output tax liability. SO ORDERED. C(Q~~ ERNESTO D. ACOS TA Presiding Judge WE

DECISION - C.T.A. CASE NO. 5304 - 10 - CERTIFICATION I hereby certify that the above decision was reached after due con s ultation with the member s of the Court of Tax Appeals in accordance with Section 13, Article VIII of the Con s titution. ~ LQ .~ ERNESTO D. ACOSTA Presiding Judge Court of Tax Appeals