CTA Case No. 4362 (Decision)

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUE ZON Cl'l'Y CHEMFIELDS, INC., C.T.A. CASE NO. 4362 Petitioner, - - - - - - - - - - - - ~X - versus - COMMISSIONER OF INTERNAL REVENU E, Respondent. X- - - - - DEc I s I 0 N The instant case arose o ut of the claim for issuance of ta x credit filed by petitioner with respect to the unapplied advance sales t axes paid by it on various importations of pharmaceutical products and raw mat erials used in the manuf acture of antibiotics for the year 1987. Petitioner, Chemfields, Inc., is a domestic corpo ration duly orgattized and existing under the laws of the Philippiues. It is mainly engaged in the manufacture and sale of antibiotics duly licensed and registered to operate as a HOI Registered Pioneer Enterprise under Republi c Act No. 5186. From May 14, 1987 to December 28, 1987, petition.er imported various c hemi ca ls and raw mat erials from different suppliers of pharmaceutical products abroad to be used in the manufacture of antibiotics such as Ampicillin and Amoxycillin. The corresponding c u sto ms d u t i e s, adv a n c e sales ta xes and import pro ce ssing fees

DECISION - C . T . A. CASE NO. 4362 - 2- were paid on t h ese importation. With the adve nt of t he Value Added Tax (VAT) in 1988 , petitioner was not able to apply as tax credit from its sales tax the sum of P14,658 , 216.00, re pr esenting advance sal es taxes paid for 1987 to the succeeding year 1988. An analysis of the unappli ed advance sales tax for 1987 was presented by peti tioner as fo llows: 1985 1986 1987 L. SALES TAX DUE: 127,123,454.00 111,038,005 .29 170,592,491.42 NET SALES SALES TAl THEREON 6,356, 172.70 11,103,800.53 17,059,249 .1 5 Less: BOI Exem pti on p,705,924.9 1) ~971,9 05.93) p, 110, 380.05) MET SALES TAX DUE 15 ,353,324 .24 5,384,266 .77 9,993,420.48 II. CREDITABLE TAX CREDITABLE TAX ON CURRENT YEAR PURCHASES Lo cal 340,418.61 613 ,096.12 1,191,383.35 Importe d 9,160,378.0 0 10,301,754.00 21,602, 174.00 10,914,850.12 22,793, 551.85 TOTAL 9,500,796 .61 6,296,553.36 7,217,982 .90 . BALANCE OF UNAPPLIED TAX 17,211, 403.48 30,0 11,540.75 TAX CREDIT OF PRIOR YEAR 1,766,506.46 TOT AL GREDITABLE .TAX 11,267,303 .01 III. PAYMEN TS MADE 413,517.06 0.00 0.00 DURI NGl'HE YEAR 1st QTR 1985 (6,296,553.36) . �~ CR t 864113054 p ,217 ,9 82.90) (14,658,216.51) IV. BALANCE OF UNAPPLIED TAX CREDIT On June 29, 1988, petitioner requested the re spondent to issue a tax credit for the un�pplied D �err e d Sa les Tax Credit for 1987 in the amount of Pl 4 ,65 8 ,2 1 6 . 1. Up to Lhis date, res po ndent has not

DECISION - C.T.A. CASE NO. 4362 - 3- acted on that r e quest exce pt for a letter requiring p et ition er to submit do ~ umentary evidence showing payment of the t ax sought to be cred ited . Thus, on May 12, 1989, petitioner filed this petition for review praying that judgment b e issued in its favor. Respondent in answer to the petit' on alleged that the p etition fai l ed to state the dates when the alleged advance sa l es taxes sought to be credited were paid. She added that taxes paid prior to May 1 2, 1987 have prescribe d for it was filed beyond the two-year prescrip tive period to file a suit fo~ th e recovery of an erroneously or excess ively collected tax, considering that the petition was filed on May 12, 1989. In claims for refund or tax credit of taxes , the burden of proof is on the taxpayer to show that it is entitled thereto for claims for refund/credit are strict l y co nstrued against the cl ai mant it being in the nature of an ex~ mption. The sole issue to be resolved is whet h er or not petitioner is entitled to a tax credit of P14 ,65 8,216 . 00, representing the unapp l ied advance sale~ tax for t h e y.e..a. r 1987. Section 162(c) of the National Interna l Revenue Code provides : " Sec. 16 2 . Ret u r n s and pa ym e n t of sa l es and other taxes.

- -- ---- DECISION - C.T.A. CASE NO. 4362 - 4- ( c) Imported articles. When the articl es are imported, the percentage taxes esta bli s h ed in Sections 163, 164 and 165(A) of this Code shall be paid in advance by t h e importer prior to the release of ~uch artic l e f ro m c ustom s custody , bas e d on the tot al value used by the Bureau of Custo ms in determi ning tariff and customs duties, includi ng custo ms duties and ot her c harges o n th e original sa le, barter , exchange or transfer of s uch imported arti c l es by importer him se lf, there shall be l ev ied, assessed and co llected a sal es ax at the same rate on the gross valu in mo ney of the artic l es so so ld, bartered, exchanged and transferred : Provided, that t he tax paid i n a dv ance by the impor ter sha ll credited against the sales tax due on original sa l e. The tax required -o paid h ere in shall not apply to articl es to b used by the importer him self in t h e ma nuf act u re or preparat i o n of articl s s ubje ct to excise tax unde r Ti tle IV of this Code : Provided, however, That wher the National Economic and De velop ment Authority certifies to the availability of lo cal raw ma ter ials of suffici e nt q u antity , comparable quality and p rice to meet the n ee ds of manufact~rers subje c t to exc is e tax , the importation of suc h raw material s shall be s ubj ec t t o t he tax herein imposed. (as ame nded �by PD 1358, 1705 , 1773, 19 59 , 1991, 1994, 2006 and 203 1)" [Emphasis Ours.] The advan ce sales tax i s a percentage tax imposed ��- u pon art i c l es imported from ab ro ad for th e purpose of sale or for use in the man�ufact u re of articles for sale a nd are subj ec "t to the sales tax. It is in li eu of th e sales tax on imported art icl es . The main purpose of said tax is to co lle ct the sales tax in advance of the sale, that is, before t h e withdrawal of the goods from the

- -~--- DECISION - C . T.A. CASE NO. 4 362 - 5- c ust o mhous e, to prevent l eakage a nd simplify c ollection with the le ast expens e . ( UMALI, Reviewer in Taxation, 1980 ed: , p.383.) Hence, the a d vance sal es tax being a sa l es tax paid in advance upon withdrawal from the c u sto mhouse is there fore cre dit e d or d e du c e d fr o m the sa l ~s ta x on manufa ct u red item s sold. In th is c as e, petit ioner, no h avi n g been bl to app l y t h e re ma inin g tax credit of a dvance sa l es axes paid from its sa l es tax li ability for the year 1987, seeks for the 'ssuance of a Tax C dit Certificate in the amount of Pl4 ,658,21 6.00. While it was tru -h at the un applied tax cre dit of P14,658,216.51 wa s ini ially inc lud ed (in Line No. 9) as part of the Input VAT of petitioner's Value Added Tax (VAT) Return for January 1 - March 31, 1988, p a~ticul ar ly described as " Carried - Over From Previous Qu ar te r (1987 DSTC & 8% Presump t iv e Tax on Supplies) - a mounting to P14,845,094.66" still the same amount of Pl 4,658,216 . 51 was d edu cted (in Line No. 15) t h ereof indica ted as "T ax Credit Certif i ca t e Appli~d For". Therefore ~ the amount of P14 ,65 8,216.51 was n'o�-�t actua ll y app l ie d as a c redi t in th e In pu t VAT for the First Quarter of 1988. Petiti o n er inst ead opted to apply for a Tax Cr dit ertific a te. Petit io ner p res en te d a s evi denc e Bure a u of Cu sto ms Official, Rece ipls , Pu rchas e l nvo i ce s, Ce nt ra l Ban k

- ~---- DECISION - C.T.A. CASE NO. 4362 - 6- Releas e Cert ificates, Imparl Ent ry and Internal Revenue Dec lar ation Consumption Entry, Manufacturer's Quarterly Sales Tax Returns for the years 1985, 1986 and 1987, Corporate Quarterly Income Tax Return s fo the years 1987 and 1988 together wi h th e Payment Orders and Confirmation Receipts for e ach quarters of 1987 and 1988 and the Va lue Add e d Tax ( VAT) Returns for ea ch quarters of 1988. For her part, respond nt mere ly submitt ed the case for de cis ion waiving her r i g ht to p re sent any ev 'dence to rebut the evi dence of pe i ione . The weig ht � , vidence off e r e d by petitioner bolst e r its position. tH -h respec t to responde nt's contention that taxes paid prio to May 12, - 1987 h ave prescribed, it would appear from the evidence presented by petitioner t hat payments made prior to May 12, 1987 refers to the import dutie s paid in a dv ance f rom April 15 to May 8, 1987 (Exhs . A, B, C- 1, J- .1 ' K-1, T- 1, FF-1 and GG-:-1) a nd n ot to th e paym ent of advance sa les tax which were all covered within the two- year prescriptive period for judicially claiming for ... .a refund or tax credit . Whil~ th e petition did not allege the dates when the advance sales taxes wer e paid st ill during the hearing of this case petitioner was able to prese nt t he of ficial receipts showing the date s when the same were p a i d. Th e Co urt ca n very well _de termine from

DECISION - C.T.A . CAS E NO. 4362 - 7- the evide nce p resen te d b y pe t it ioner th e date s o f payment of the t a x so ugh t to be cred it e d. After a c a refu l e xa mi n at ion o f t h e ev id e nc e pres e nt e d by peti i o n e � , the e c ords will s ho w hat i nd eed " t i s entitl ed to a t ax c re dit . How e v r , w - a re in c lin e d to g rant o nl y t h e s um f P14,6 2 ,7 3 2.00 which w re duly s up por ted b y v id e n �e as s hown in t h e Bu rea u of Gu st m Of f icial R c ipt s "n dica ting h e am o un t of Adv n c Sa l Ls Taxes Pa id on it s v ar ' o u s i mp or t t io na (s ee Ann x A- Sc h e d u l e o f Ad v an c e Sal s Tax es Paid). WH EREFORE, in vi ew of th e forego ing, th e p e tition is gr n t e d on l y insofar as th e a mou nt of Pl4,621 , 732.00 is c o nc e ne d it being fo und to be duly s upport e d by ev ide n ce . Respondent Commi s sio n e r o f Inte rnal Revenue is o r d e red t o issue the corre s pond ing Tax Credit Ce r tificate i n f a v o r of peti t ioner Ch e mfi e ld s , Inc ., in th e a mount of P14,6 21 ,7 3 2.00, represent i n g e rroneously and exces s ively pa id a d vance sales taxes f or the year 1987 . Wi th o ut pronoun c ement as to co sts . SO ORDERED. . .... ~--<Q- ~ ERNESTO D. ACOST A P re sid i ng Judge

.., DECISION - - 8- C . T.A . CASE NO. 4362 WE CONCUR : . GRUBA Associate Judge ~~ ~E . ~_( , RAroN o. Associate J : ~A c E R. T I F CA T 0N I h er eby certify that the decisio n wa s reached a f ter due consu lt atio n a mo n g the me mbers of t h e Court of Tax Appeal s in accordance with Se cti on 1 3 , Article VIII o f the Co n stitution . ~\SL.~ ERNESTO D. AC OS TA Presiding Judge Court of Tax Appeals . �~

DECISI!IIf - C.T.A. CASE WO. 436Z (AH�EJ A- page 1} ' Chufields, Inc. S(bedule of Adv ance Sales Taxes Paid and Tax Credit Due for the period Hay 14, 1987 to December 28, 1987 In ternal Revenue Advance E,,xh. BGOR Wo. Date [ 1I [ 2I [1 + 21 Exh. Declaratio n No. Sales Tax Amount Exh. BCOR No. Date Aaount Total A-4 0727818 p 152,110 -A go96H 4/24/8 7 p 107 ,851 A� 1 943616 6/15/87 p 208,838 p 316, 689 B-4 0135508 223 '469 B 904902 4/15}87 120,424 B-1 937622 6/30/87 212,8.21 333, 245 758,481 737 ,663 C-1 904916 4/22 /87 393,196 1,130,8 59 C�4 073 5501 c 970456 l/20/g] 2,981 D-4 0725947 22 ,605 n 9J1508 51 14[81 I, 375 D-1 937618 6/29/87 267 1'642 22,605 E- 4 0733514 22,605 E 937610 6/24/~7 22,8 55 E-1 9375 47 6/04/87 10,947 33,802 22,605 F-4 0733512 24,851 F 973b23 6124/87 22,855 F-1 94 3434 6/05/87 10,947 33 ,802 188,687 G- 4 0733513 44,778 G 9J7609 6/24IS7 22,855 G-1 927546 6/04/87 10,947 33, 80 2 22,591 H-4 0733515 22,591 H 973624 6/24/87 22,855 H- 1 943435 6/05/87 10,947 33,80 2 22,59 1 I-4 0135108 22,591 I 970417 7/14/8 7 24,922 I-1 937512 5/14/87 12,21.9 37 '141 22,591 J-4 0735110 22,591 J 98 59 19 7/15/87 182,349 J-1 942527 4/2 7/87 99,044 281,393 11,710 K-4 0735109 73,612 K 9858 47 1/!4 /Bi 44,269 K-1 909621 4/20/87 21,730 65 ,9 99 62,337 L-4 0133 507 757, 508 L 931613 6130187 22,840 L-1 937582 6/09/ 87 10,942 33,782 H-4 0733519 R 97H25 6/30 137 22,840 H-1 943597 6/10/87 10,942 33,782 N-4 072 5954 ti 910418 11 Hj81 22,840 N-1 937599 6/11/87 10,942 33, 782 0-4 0733520 0 937624 6/10/87 22,840 0-1 937583 6/10 /87 10,942 33, 782 P-4 0133508 p 973124 6[3 0/81 22' 840 P-l 943653 6/10/87 10,942 33,7 82 Q- 4 0733526 Q 985848 7114/87 22,840 Q-1 943658 6/11/87 10,942 33, 782 R- 4 0734933 R 9859 78 7/15/87 11,788 R-1 943220 6/01/87 5,797 17,585 71,645 S-1 937507 5/14/87 36,287 107,932 S-4 074 2966 s 97046~ 7/27/87 r-4 07~3 5 18 T 985849 7/14/8 7 62,628 T-1 942657 5/08/87 30,409 93,037 U- 4 0741286 u 9704 19 7/14/87 757,812 U-1 97035 5 6/17/~ 7 371,615 1,1 29,427 ~ Q~

DECISION - j C.r.A. CASE NO . 4362 (ANNEX A- page 2) V- 4 0741299 751,498 v 986)21. 7129{81 Mi2, 181 V-1 943224 6/02/87 457 ,685 1,120, 467 qsmn 1J]OJS7 968,411 W-1 937587 6/10/8 1 445,580 IH 0741279 90 8' 177 w 1 ,r.~. OS1 I-4 07H287 ] ,219 X qa&4~2 11 28/8 1 3,469 X-1 973540 6/18/87 1,390 4,859 Y-4 0741288 41 ,605 y 'ml1.474 7 /J0/87 41,852 Y-1 970364 6/19/87 20.277 62,129 273,077 280,6 69 Z-1 970356 6/18/87 126,531 407,200 Z-4 0734141 z 91't7.7l2 8/12/87 AA - 4 0734142 228 ' 712 AA 94llH 5/25/8 7 106,021 AA-1 986846 8/10/87 235,040 11. 1 n ~1 .J,! ) v u .&. BB-4 0760196 18,297 BB/HHH-i 931)84 6} 10/87 17,11 9 BB -1/HHH 982766 8/20/87 18,701 35, 820 747,29,6 8[31/87 760 ,284 CC-1 . 973876 6/30/87 353,919 1,114 ,203 CC-4 0749448 cc 1014,857 DD -4 0756127 167,476 DD HH45 6/03}87 80,230 DD -1 982767 8/20/87 164,532 244, 762 EE - 4 075612~ 33. 460 EE B1'ii86 6/!0187 15,615 EE-l 982721 8/12/87 33 >750 49,365 FF - 4 0764568 19 ,90 7 FF 101~924 9/0)/87 19 >700 FF-1 942659 5/08/87 10,090 29 ,790 ~ GG-4 0756129 . 374,759 GG 982187 8/24/87 381,831 GG-1 937 600 4/16/87 176,9~9 )58 ,7 90 19,466 aH-1 982800 8/31/87 71, 694 HH -4 0763506 49,257 HH 931 58) 6j!0/87 277 ,635 II-1 973796 6/29/87 52,228 38 5,154 107,519 II -4 0763508 259, 357 II 1015363 9/16/87 JJ -4 07613 56 9, lOS JJ 1029026 8]11/87 9,26 3 JJ-1 9704 45 7/15/87 8,217 17 ,480 KK-4 077 0400 27,942 RK l01546l 9/21187 27,952 KK-1 � 98 576 2 7/0) /8 7 25,438 53 ,390 '~ Order of Payment No. 0418452 1,261,1 38 LL 98267& 1}23/87 567,269 LL-1 10 29045 9/09/87 1,266,544 1 833 ,813 HH-4 0764593 75,183 HH 986468 7/2118 7 20 >920 HH-1 101 5259 9/11/87 88,46-9 lV 1,J01 NN - 4 0762053 58,454 NN 1029034 9/03/87 59,296 HN-1 982695 7/30/87 25,800 85,096 ~� 00-4 0175749 1,203 >8'il 00 970388 7/0 1/87 519,894 00 -1 1029105 9/25/8 7 1,230,625 1,750, 519 PP -4 0768816 55, 619 pp lOH!Ol 9]23/87 60 >833 PP-1 982746 8/17/87 20,140 80 >973 QQ-4 0773848 321 ,545 QQ 986268 7/16/87 121 > 522 QQ-1 1043906 9/28/87 346 >099 467, 621 RR - 4 0768815 320,999 RR 1043806 9/23/ 87 323, 591 RR -1 986274 7/17/87 143,253 466, 844 162,319 SS -1 1044186 10/06/87 304,725 467 ,044 SS -4 0718461 321,137 ss 10111603 8119/87 TT -4 0773849 478 ,043 iT JOJ0852 10/07/81 465,619 rr-1 982782 8/21/87 229,550 69 5,169 UU-4 0173850 43,548 uu 10~~344 !0/12/87 41 >493 OU-1 1014545 8/18/87 21,90 9 v3,402 VV-4 0778604 3,854 vv 1014544 8/18/87 15,320 ~V- 1 1044413 10/14/87 250 15,570 WIH 0790348 20 >499 WI! 982745 8/17/87 19 ,168 1111-1 !030941 10/27/87 20,038 39 ,206 XX - 4 077,8453 611, 505 XX 1060609 10/12/87 613,411 XH 10!0507 8/21/87 275,837 88 9,248 YY - 4 0773851 304,159 yy 1029020 9/04/87 133,932 YY-1 1030872 10/14/87 308,413 1142 >345 ZZ-4 07738 53 354,803 zz 1029071 9/14/87 159,632 ZZ -1 1030948 10/29/87 356,345 515,977 AAA - 4 0800658 61 >07i J..AA 982783 8/21/87 29,067 AAA-1 1063417 a.. 10/23/87 59,806 88,8)3 ~

DECISIOW - C.T .A. CASE ~0 . 4362 . (ANNEI A- page 3) BBB-4 tlfCH!l29 HlO ,ll4 BBB 1om �s5 9/09 /a 7 99, 41!0 SR H 106H58 11/06/97 91,62 5 191, 11 5 731 ,683 CGC-l lOJ08 48 9/30/8 1 413166 2 1,151,3 45 CCC-4 oso ms 791, 769 CCC 10 6~411 !21MJ97 DDD -4 0773854 22 ,13 8 DDll 1084HP5 ll/10/ 87 21,408 DDD-1 1a440l7 9/29/87 26,580- 47,988 EEE-4 07 96136 35,264 &Ell 1063401 Ill Hi/81 30,131 EEE-1 1029011 9/0 2/87 37, 245 67 ,376 FFF f4 0113 855 15,224 nfi' 1084340 11/17 /?.1 14,519 FFF-1 104401 5 9/29/87 7, 728 22,247 GGG-4 07 55958 11 ,687 GGG lOl 50lQ 9/0 1/87 12, 480 GGG-1 1119021 12/28/87 9,906 22, 386 HHH - 4 030065 9 80,313 .BR~ l0l08Hl 9/ 27/87 41,331 HHH -1 1063425 11 /27/ 87 75,539 116,876 I II -4 OS01 568 963,014 920,632 III-1 1030920 10/18/ 87 479 ,7 50 1,400,38 2 m J06341! 11/26/ 87 JJJ - 4 0807&13 m,986 JJI 10&4904 llHH/87 360,717 JJJ -1 10 44704 10123/87 15 1,1 08 511,885 KKK - 4 0807814 286,~0 1 UK 1044575 l0/2H87 119, 15 1 KKK-1 1084922 11./09/87 297, 375 416 ,526 LLL-4 0809076 28 '5 34 LLL 1081666 12/21/87 3l '0~ 1 LLL- l 1030922 10/29/87 .23, 478 54,5 25 Pl 4,621,732 Pli ,665,486 Pl0, 05 1,318 P21,71 6, 804 f ~-~ '\