CTA Case No. 5030 (Decision)

REPUBLIC OF THE PHILIPPINE S COURT OF TAX APPEALS QUEZON CITY I TOGON - SUYOC MINES, INC . , C.T.A . CAS E NO. 5030 Petitioner, Promulgated : - versus - JAN 07 1999 COMMIS 3 IONER OF IN TERNAL --- X REVENUE, Respondent. X- - - - - - DECISION This petition for review is seeking for a refund or issuance of tax credit certificate in the total amount of ~5,465,204.94, representing excess input value-added tax (VAT, for brevity) for the period February 1, 1992 to January 31, 1993. Petitioner is a domestic corporation duly organized and existing under the laws of the Philippines. It is engaged in the mining business which includes, a mong others, the exploration, development, operation and production of mining prod ucts, and the subsequent sale thereof. It is a VAT registered taxpayer with its latest VAT Registration No. 350-000-162-935-V (Exh. A-1) . On February 2, 1988, petitio n er filed an Application for Zero Rate of its sales of mine prod u cts with the Bur ea u of Internal Revenue (Exh. B). For the period February 1, 1992 to Jan u ary 31, 1993, petitioner seasonably filed its q u arterly VAT returns �

DECISION C.T.A. CASE NO. 5030. - 2- reflecting, among others, the ze ro-rated sales of mine products, the VAT output tax, and the input taxes on domestic purchases of goods/services and on importations of goods, to wit: Particulars 1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr. (Exh. E) (Exh. F) (Ex h. G) (Ex h. H) Zero-rated Sales P33,329,357.43 P47,034,840.43 P34,149,048.59 P30,550,200.16 VAT Output Tax p 31,196.67 p 18,929.97 p 92,837.45 p 109.33 Less: Input VAT ~ 2,013,159.77 ~ 1,255,219.50 ~ 2,594,363.35 ~ 1,412,075.34 1. Carried from 1,191,583.10 1,027,224.43 166,490.72 1' 279' 982.67 1,229,735.91 previous quarter 256,700.00 209,361.00 289,367.00 2. Domestic purchases p 2,613,293.32 p 3,297,084.20 p 2,594,363.35 p 4,083,707.02 p 2,931,178.25 of goods/services p 3,265,887.53 p 3,990,869.57 p 2,931,068.92 3. Importation of goods ~ 2,594,363.35 2,010,668.03 2,578,794.23 ~ 2,931,068.92 Total ~ 1,255,219.50 ~ 1,412,075.34 Excess Input VAT credits Less: Refund/TCC claimed Excess to be carried forward Petitioner, believing that it is entitled to the refund of excess input VAT attributable to its zero-rated sales of mine products, pursuant to Section 106 of the 1992 Tax Code, filed on two separate occasions Applications for Tax Credit/Refund of Value-Added Tax Paid as follows: Inclusive Dates of Date E xh. Amount Input Tax Payments of Filing P-2,578,794.23 I November 1, 1991 10-30-92 J 2,886,410.71 to July 31, 1992 05-26-93 .P5,465,204.94 May 1, 1992 to January 31, 1993 To t a 1

DECISION C.T.A. CASE NO. 5030 . - 3- Petitioner waited for more than sixty days for the respondent to act on such applications pursuant to Section 106(e) of the Tax Code. Respondent did not act on these applications, hence, petitioner was compelled to file the instant petition for review on Septembe r� 1 4 ' 1993 in order to preserve its right to judicially claim the refund of excessive input VAT pay ments. Respondent, in his Answer, raised the following special a nd affirmative defenses: 5. Local sales of gold to Central Ba n k are not considered "export sales " for purposes of Section 100(a) of the Tax Code, as amended, hence, subject to the 10% value added tax; 6. Revenue Memorandum Order No. 22-92, dated May 14, 1992 (a guideline to clarify i mplementation of Revenue Regulation No. 2-88 and sale of gold to Central Bank) categorically provides that sale of gold to t h e Central Bank by any person, i n cluding mining co mpanies s h all be considered local sales for VAT purposes effective January 1, 1988; 7. The opinion of the Secretary of Justice dated April 14, 1992 and the CB Circular No. 1301 dated Aug u st 7, 1991, which provides that " all sales of gold to the Central Bank are considered constructive exports " have been set aside by the respondent as exhaustively discussed in its VAT Ruling No. 059-92 date April 28, 1992. Hence, previous inconsiste n t rulings are co nsidered s u perseded because the government is not estopped to collect unpaid taxes on account of errors/mistake of its agents/officials and t h ere should be no vested right arising from an erroneous interpretation of the law ( Hilado vs. Collector o f Internal Revenue, 200 Phils. 288 ). 9. Claims for refund of taxes are constr u ed against t h e claimant, t h e same being in the nature of an exemption form taxation.

DECISION C.T.A. CASE NO. 5030. -4 Hence, in actions for refund, the burden of proof is upon the claimant to establish the right to refund; 10. Petitioner failed to show in its petition that it is entitled to t he refund. Mere allegations of refundability does not ipso facto entitle petitioner to refund claimed, thus, petitioner's failure to sustain the burden is fatal to its action for refund; 11. It is incumbent upon the taxpayer to show that it has complied with the provisions of Section 104 and Section 230 of the Code. To bolster its claim for refund, petitioner formally offered the following documentary evidence: 1. VAT registration certificate s (Exhs. A and A-1) ; 2. Application for zero rate (Exh. B); 3 . Central Bank Circular No. 1301, series of 1991 (Exh. C); 4. Opinion of Secretary of Justice dated April 14, 1992 composed of seven (7) pages (Exh. D); 5 . Value-Added Tax Returns tor the period February 1, 1992 to January 31, 1993 together with the attachments of summary lists of sales, importations, and purchases (Exhs. E to H- 5, inclusive); 6 . Applications for credit/refund of VAT paid (Exhs. I and J); 7 . Certified xerox copies of the certificate of filing of Amended Articles of Incorporation issued by the Securities and Exchange Commission (Exhs. K and K-1); and

DECISION C.T.A. CASE NO. 5030. - 5- 8 . CB Circular No. 960' dated October 3 1 ' 1993 (Exh. M). Respondent, on the other hand, elected not to submit controverting evidence but instead submitted his case for decision (see Minutes of the Session, p � 195, CTA records). Both parties submitted their respective memoranda. The issues to be resolved by this Court are as follows: 1 . The validity of VAT Ruling No. 8-92, dated January 23, 1992, which categorizes the sale of gold to Ce n tral Bank as local sale s ubj ect to 10% rate of VAT; and 2 � Petitioner's entitlement to t he refund of excess input VAT pursuant to Section 106 of the 1992 Tax Code. At this juncture it is worthy to mention that this case was originally submitted for decision on September 22' 1995 but was held in abeyance pending resolution of cases involving similar issues by the Court of Appeals or until the appoint me n t of a third member of the Co ur t (see Resolution, dated September 5 ' 1996, p . 253' CTA records). Eventually, on February 6' 1998, the Court of Appeals rendered its decision in the case of Atlas Consolidated Mining & Development Corporation vs. Court

DECISION C.T.A. CASE NO. 5030. - 6- of Tax Appeals and Commi ssi oner of Internal Revenue. CA G.R. SP No. 34152, dated February 6, 1998 , which tackled, among ot h ers, the validity ot VAT Ruling No. 008-92. Hence, it is now proper to decide the case at bar. Pertinent portions of the atorementioned decision read as follows: In equipoise with the Central Bank's policy of conserving gold (Section 162, CB Circular No. 960), certain gold producers are required to sell their entire gold production to the Central Bank (Section 171, CB Circular 960). Moreover, no person shall export or bring out, or attempt to export or bring out of the Philippines, gold and/or gold-bearing materials, in any shape, form and quantity without prior approval from the CB Export Department. (Section 107, CB Circular No. 1318) Prescinding from the aforesaid policy, gold producers are given incentives, such as considering their sales to the Central Bank as "exports". According to settled jurisprudence, circulars of the Central Bank are neither statute no law, but being issued for the implementation of the law authorizing its issuance, it has the force and effect of law (People vs. Que Po Lay, 94 Phil. 640). All that is required is that the regulation should be germane to the objects and purposes of the law; that the regulation be not in contradiction with it, but conform to the standards that the law prescribes (United States vs. Tupasi Molina, 29 Phil. 119). A su co nverso, should the regulation conflict with the law, the validity of the Regulation cannot be sustained (Director of Forestry v. Munoz, 23 SCRA 1183, Hijo Plantation, Inc. v. Central Bank, 164 SCRA 194). The Department of Justice, in Opinion No. 47 S. 1992 (dated April 14, 1992) expressed the view that:

DECISION C.T.A. CASE NO. 5030. - 7- " xxx With regard to sales of gold to the Central Bank, existing jurisprude n ce recognizes that Central bank Circulars issued for the implementation of the law authorizing its issuance ... [have] the force and effect of law (People vs. Que Po Lay, 94 Phil. 640), and therefore C.B. Circulars [sic] Nos. 960 and 1301 can be r ecognized as special laws wit h i n t he ambit of Section 100(a)(2) of the Tax Code. " ( Underscori n g supplied.) (pages 112-113 of the CTA Record) Based o n t h e foregoi n g, the conclusion is in e vita b l e t h at ..V..:......A:..:...T..:.__.......:.R.;~u:....l:::...;l=�.-:n.......g.;;l'--...:N~o...�.:___;0::...;0.:....8.::._--=9:....2:=--___:.C_:d:...:a.:....t.::..:e:....d: Jan u ary 23, 1992) is bereft: of legal basis in removing t h e VAT zero-rating treat ment previo u sly recognized on sale of gold to the Ce n tral Bank, incl u ding co n structive export sales to BOT-registered enterprises. XXX XXX XXX In s um , t h is Court h ereby resolves the issues jointly stip u lated by the parties as follo ws: a. r VAr Ruling No. 008 ...�92,, in imposing VA on sales of copper concentrates to PASAR, pyrite to PHILP HO S a n d gold t:o t:he C'ent:ral Bank lacks legal bases,, hence of no effect:". XXX XXX XXX It is clear fro m the above d ecisio n , that VAT Ruling No. 008-92 lacks legal bases, he n ce of no effect. Therefore, petitio n er ' s sales ot gold to Central Ba n k is still classified a s export sales s ubject to zero percent rate of VAT p u rsuant to Sectio n 100(a)(1) of the 1992 Tax Code, to quote: SEC. 100. Value-added t:ax on sale of goods. ����� (a) Rat:e cmd base of T h ere s h all be levied assessed and collected on every sale, barter or exchange ot goods, a

a DECISION C .T .A. CASE NO . 5030 . - B- value-added tax equivalent to 10% of the gross selling price or gross value in money of the goods sold, bartered or exchanged, such tax to be paid by the seller or transferor: Provided. That the following sales by VAT-registered persons shall be subject to 0%: (1) Export sales; and XXX XXX XXX Having settled the legal issue involved in the instant case, We now determine if petitioner was able to support with substantial evidence, its claim for refund. Section 2 of Revenue Regulations No. 3-88 specifically enumerates the requirements for the issuance of tax credit certificate or tax refund of input taxes paid by a zero-rated taxpayer engaged in sale of goods or services, to quote: SECTION 2 . Section 16 of Revenue Regulations 5-87 is hereby follows: amended to read as "SECTION 16. Refunds of tax credits of input tax. - (a) Zero-rated sales of goods and services. - xxx (c) Claims for tax credits/ refunds - Application For Tax Credit/ Refund of Value Added Tax Paid (BIR Form No. 2552) shall be tiled 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 be

DECISION C. T .A. CASE NO. 5030. - 9- 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 documents shall be attached whenever applicable: "1. Export Sales i) Photo copy of export document showing the amount of export, and the date and destination of the goods exported. With respect to foreign currency denominated sale, the photo copy 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 has been inwardly remitted and accounted for in accordance with applicable banking regulations. " 2 � Zero-rated sale of services. xxx. It is also important to note at this point that petitioner's zero-rated sales are not only composed of sales of gold to Central Bank but also (real) export sales to London, England. After a thorough and careful examination of all the documentary evidence presented, this finds that petitioner failed to comply with the aforementioned It did not present in evidence the

DECISION C.T.A. CASE NO. 5030. - 10 - purchase invoices or receipts evidencing the value-added tax paid and t h e sales invoices which will show the amount of export, and the date and destination of the goods exported. Further, petitioner also failed to submit statements fro m 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. What petitioner submitted in evidence were summary lists of sales, importations and purchases, which although certified to by petitioner's Chief Accountant and Finance Assistant, would not suffice to establish the truthf uln ess and accuracy of the contents thereof unless the source documents were offered and actually verified by the Court itself. The attestations of petitioner's own employees as to the correctness of the summary lists are at best self-serving, hence, of no consequence. The failure of petitioner to submit in evidence the documents req u ired under Section 2 of Revenue Regulations No. 3-88 prevented Us from confirming the veracity of the amount claimed by the petitioner as excess input VAT payments (Atlas Consolidated Mining and Development Corporation vs. Commissioner of Internal Revenue, CTA Case No. 4601, 4632, 4655 and 4701, November 18, 1997) .

DECISION C.T.A. CASE NO. 5030. - 11 - In fact, We have already denied several claims for ref u nd of inp u t VAT for failure of petitioner to co mply wit h the requirements under Revenue Regulations No. 3-88 (Dow Elanco B.V. Philippine Branch vs. The Commissioner of Internal Revenue. CTA Case No. 5255. January 14. 1998; AMI Philippines. Inc. vs. Commissioner of Internal Revenue. CTA Case No. 5304. January 20. 1998; Atlas Consolidated Mining and Development Corporation vs. Commissioner of Internal Revenue. CTA Case Nos. 5130. 5161 and 5190. February 5. 1998; and Benguet Corporation vs. Commissioner of Internal Revenue. CTA Case No. 5306. April 15. 1998), and i t is for the same reaso n t h at We are denying the instant claim for ref un d. WHEREFORE , in view of t h e foregoing, the petition for review is hereby DENIED due to i n s u fficiency of evidence. SO ORDERED. WE CONCUR: STO D. ACOSTA ..:.:~~:; Associate Jud #

DECISION C.T.A. CASE NO. 5030. - 12 - CERTIFICATION I hereby certify that the above decision was reached after due consultation with the members of the Court of Tax Appeals in accordance with Section 13, Article VIII of the Constit u tion. L- t;2. ~ ERNESTO D. ACOSTA Presiding Judge