CTA Case No. 5114 (Decision)

zu; .... - REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY TAGANITO MINING CORPORATION, Petitioner, - versus - C.T.A. CASE NO. 5114 COMMISSIONER OF INTERNAL rfjr PromN!i~ttz: 1a9P: REVENUE, Respondent. X- - - - - - - ------------X DECISION This case involves a claim for refund in the amount of P1,130,589.66, representing input value added tax <VAT> paid on domestic purchases of taxable goods and services for the period June 1, 1992 to December 31, 1993. Petitioner is a domestic corporation, primarily engaged in the business of exploring, producing and exporting beneficiated nickel si I icate ores and chromite ores found in Parce I One of the Surigao Minerai Reservation Area in the Muniqipai ity of Ciaver, Surigao, del Norte. On January 1, 1988, it registered with the BIR as a VAT entity and was issued VAT Registration No. 32-A-0- 003939 <Exh. "1", Pet.; p. 128, CTA rec.).

-0 DECISION C.T.A. CASE NO. 5114 - 2- It also registered with the Board of Investments (BOI) as a non-pioneer enterprise and was given a BOI Certificate of Registration No. EP 88-306 <Exh. "G", Pet.; p. 121, CTA reo.>. For the period June 1, 1992 to December 31, 1993, ,.. petitioner rea I i zed zero-rated sales amounting to P103,740,717.36, which were paid in acceptable foreign currency inwardly remitted to the Phi I ippines and accounted for in accordance with the regulations of the Central Bank of the Phi I ippines. For the same period, June 1, 1992 to December 31, 1993, petitioner accumulated VAT input taxes in the total amount of P1,130,589.66 paid on its purchases of taxable goods and services. As these Input taxes were directly attributable to petitioner's zero-rated sales, and were not used for any VAT output tax, petitioner alleged that they are available as tax credit. Hence, on May 27, 1994,�petitioner filed with the BIR a written claim for refund of the amount of P1,130,589.66 <Exh. "L", Pet.; pp. 141-142, CTA reo.). To tol I the running of the two-year prescriptive period, on May 30, 1994, petitioner filed with this Court the Instant petition. Respondent filed her Answer on July 27, 1994, alleging the following special and affirmative defenses:

-- DECISION C.T.A. CASE NO. 5114 - 3- 1 . The petition did not indicate the dates of payment of the taxes sought to be refunded, hence, no cause of action; 2. The claim for refund is st iII pending investigation by respondent; ,. 3. Petitioner did not comply with the provisions of Section 16(c)(3) of Revenue Regulations No. 5-87, as amended by Revenue Regulations 3-88; 4. The inpu~ taxes paid are not supported by invoices as required by Section 108 of the Tax Code; and 5. Claims for refund are in the nature of exemption from taxes and should be construed strictly against the taxpayer. The sole issue needing ventilation in this case is whether or not petitioner is entitled to the refund of the amount of P1,130,589.66 as input value added tax paid on domestic purchases of taxable goods and services for the period June 1, 1992 to December 31, 1993. On account of the voluminous sales invoices and official receipts which petitioner had to present during the trial to support its claim, the services of Punongbayan and Araullo, an independent Certified Public Accountant (CPA), were availed of in accordance with CTA Circular 1-95. Their findings as contained in their l~OL'

DECISION C.T.A. CASE NO. 5114 - 4- Certification, marked as Exhibit "A" for petitioner (pp. 52-54, CTA reo.), are as follows: 1. The VAT paid per summaries prepared by petitioner for the period June 1, 1992 to December 31, 1993 are proper I y recorded in the ,.. books; 2. The date of the invoices and/or official receipts is within the period covered in the application for refund; 3. The suppliers' VAT numbers are indicated on the invoices; 4. The supp I i ers' invoices on file represent original copies; 5. The VAT paid are correctly and properly computed; and 6. The export sales indicated in the summary are also recorded in the books. 7. However, tax credits being applied for in the amount of P93,000.07 are not supported by suppliers' invoices and/or official receipts. After a careful review of alI the exhibits presented by petitioner, the Court agrees with the independent CPA's finding <Exh. "A", Pet.; p. 53, CTA reo.) that the amount of P93,000.07, which are not supported by the suppliers' invoices and/or official receipts or where

- DECISION C.T.A. CASE NO. 5114 - 5- there are no original sales invoices <Exh. "B-2", Pet. ; pp. 117-119, CTA reo.), should be disallowed pursuant to Section 108(a) of the Tax Code. Section 108(a) provides as follows: "SEC. 108. Invoicing and accounting requirements for VAT-registered persons. - (a) Invoicing requirements. A VAT-registered person shall, for every sale, Issue an invoice or receipt. In addition to the information required under Section 238, the following information shall be indicated in the invoice or receipt: (1) The VAT registration number. (2) If the seller bi lis the tax as a separate item in the invoice: (A) the amount of gross selling price or gross receipts on which the value-added tax is based; <B> the amount of value-added tax determined by sel I ing price multiplying the amount of gross tax; and or gross receipt by the rate of (C) the sum of (i) the gross se I I i ng price or gross receipts and (ii) the value- added tax which the purchaser pays or is obi igated to pay to the vendor. (3) If the seller elects not to bi II the tax as a separate item in the invoice or receipt, the total amount charged against the buyer." Moreover, Section 15 of Revenue Regulations No. 5- 87, as amended, also known as "VAT Implementing Regulations", issued on September 1, 1987, expressly provided that:

- DECISION C.T.A. CASE NO. 5114 - 6- "Section 15. Substantiation of claims for input tax credit.- <a> In general.- Input taxes shal I be allowed only if the domestic purchase of goods or services is made in the course of his trade or business and supported by an Invoice or receipt showing the information as required in Sections 108(a) and 238. A cash register machine tape issued to a VAT-registered buyer, although it indicates the VAT registration number of the seller, does not ,. constitute valid proof or substantiation of tax credIt." <Underscoring supp I i ed) This Court's findings are in agreement with respondent's vIew that "input taxes sha I I be a I Iowed as tax credit only if supported by invoices or receipts showing, among others, the VAT registration number of the se I Ier and the name of the purchaser, customer or c I i ent" <Memorandum, Resp.; p. 196, CTA rec.). Due to the aforesaid disallowance of Exhibit "B-2" found in pages 117 to 119 of the CTA record, the Court recommends only the refund of the input tax credits which have been duly supported by the suppliers' invoices and/or official receipts. Hence, only the amount of P1,075,766.43 should be refunded to petitioner. Details of the computation are shown hereunder: June 1992 Exh. "B" Ex h. 'B-1' Su11mation Exhs. "L" & 'L-1" July 1992 Head Office Mine Site Per Quarter Clai~~ed w/ BIR Refundable August 1992 Septe11ber 1992 p 77,755.12 p 60,686.69 p 388,986.78 p 388,480.88 p 388,480.88 October 1992 60,018.35 68,023.02 November 1992 58,495.24 64,008.36 296,974.26 279,974.43 279,974.43 Dece11ber 1992 19,613.21 67,393.17 January 1993 80,003.09 71,632.78 22,128.94 36,203.07 4, 141.98 36,531.42 22,492.57 18,201.74

DECISION C.T.A. CASE NO. 5114 -7- February 1993 4,343.75 15,992.27 101,703.73 105,466.42 101,703.73 March 1993 7,769.83 10,106.33 Apr i I 1993 4,032.70 19,233.34 May 1993 837.73 22,309.68 64,289.61 91,453.86 64,289.61 July 1993 6,630.04 22,669.13 August 1993 13,660.07 29,863.31 Septnber 1993 7,698.67 53,361.69 133,882.91 126,209.21 126,209.21 October 1993 12,722.62 46,137.40 Noveaber 1993 7, 732.67 26,568.61 Dece11ber 1993 101396.78 111550.49 1151108.57 1391004.86 1151108.57 ,. T 0 T A L P436 1880.00 P723 1418.38 P1,100 1945.86 P1 1130 1589.66 P1,075 1766.43 The evidence presented by respondent consisting of Exhibits "1" and "2", found in pages 21 and 23 of the BIR records did not in any way controvert the evidence of petitioner. Exhibit "1" of respondent, which is the memorandum signed by the Asst. Revenue District Officer and addressed to Revenue Enforcement Officer, M. Leonida and Group Supervisor, E. Litao, merely directed them to conduct an investigation on the subject claim for refund, and to submit a report thereon. Exhibit "2" is the reply memorandum of said examiners stating that the refund claim is now lodged with this Court, and therefore, the BIR records should now be forwarded to their Legal Division. These exhibits do not have any probative value, neither do they have any prejudicial effect on petitioner's entitlement to the reduced amount of refund. WHEREFORE, in view of a I I the foregoing, respondent is hereby ORDERED to REFUND in favor of petitioner, the amount of P1,075,766.43 as input taxes paid during the period June 1, 1992 to December 31, 1993. 1 .... '�. ! {.,\.)I

DECISION C.T.A. CASE NO. 5114 - 8- SO ORDERED. ~62,~ I CONCUR: ERNESTO D. ACOSTA ~~.P~~ Presiding Judge RAMON 0. DE V~ Associate Jud~ / I I CERTIFICATION hereby certify that this decision was reached after due consultation with the member of the Court of Tax Appeals in accordance with Section 13, Article VI I I of the Constitution. Q~62�~ ERNESTO D. ACOSTA Presiding Judge Court of Tax Appeals 1 (. ... (.~ l} {_}