CTA Case No. 5282 (Decision)

RE 1 SLIC OF THE PHILIPPI NES , } �J URT Of TAX APPEALS QUEZON CITY FIRST DIVISIO ~~ ******* * *** * ~� PHILIPPINE PHOSPHA) ' ;: FERTILIZER CORPORATION, Petitioner, C.T.A. CASE NO. 5282 - versus �� Members: ACOSTA, Chai~~n BAUTISTA, and CASANOVA, JJ. COMMISSIONER OF INTEii NAL REV~tNUE, Promulgated: Respc mdent. .JAN 17 2007 i (:~ PM X------------- - --- .. - --------- - ------------ ~ DJECISION BAUTISTA, L., ,h.: Before Us is a case rerr anded by the Supreme Court for the reception of evidence necessary for the proper and immediate detennination of the amount to be refunded to petitioner which f.:Onstitutes excise taxes paid for the period September 1993 to December 1994. Petitioner is a corpo ration duly organized and existing under the laws of the Republic of the Philippir 1es registered with the Export Processing Zone Authority '/I (EPZA). It is engaged �Jn the business of manufacturing fertilizers for domestic and J international distribution and as such, utilizes fuel oil and oil products. I J

DECI SION C.T.A. CASE NO. 5282 Page 2 On the other hand, re!;pondent Commissioner of Internal Revenue is a public officer who heads the Bureau of Internal Revenue (BIR) with office address at the BIR National Office Building, Agham Road, Diliman, Quezon City. In a letter dated August 28, 1995, to then Commissioner Liwayway Chato, petitioner sought for the refund of the excise taxes it paid for fuel supplies purchases covering the months of September 1993 to December 1994 in the amount of Six Hundred Two Thousar 1d and Three Hundred Forty-Nine Pesos (P602,349.00) pursuant to Section 17(a ) of Presidential Decree No. 66. 1 According to peb tioner, it purchased fuel supplies from local distributors, one of which is Petron Corjporation (PETRON). These fuel supplies are brought to the Export Processing Zone for use therein by petitioner. While the fuel supplies do not form part of the finishe:d products, they are indispensable in the manufacturing cycle of petitioner because t hey are used to run the machineries and equipment which transform raw materials into exportable finished product and for other purposes. PETRON, as the importer of the fuel supplies, initially pays the corresponding taxes and custom duties to the BIR but when these supplies are sold to petitioner, the taxes and customs duties are in tum billed to petitioner. Being an EPZA-registered enterprise, petitioner believes that it is not liable for the excise taxes being billed by PETRON upon it for its purchases. ' SEC. 17. Tax Treatment of Merchandise in the Zone. - 1) Except as otherwise provided in this decree, foreign and domestic merchandise, raw materials, suoplies, articles, equipment, machineries, j spare parts and wares of e.~ery description except those prohibited by law, brought into the Zone. to be assembled, installed, sorted, cleaned, manipulated, manufactured, mixed with foreign or domestic merchandise or used whether directly or indirectly in such activity shall not be subject to customs and internal re.~enue laws and regulations nor to the local tax ordinances, the provisions of the law to the J contrary notwithstanding. I J '.J

DECISIO N C.T.A. CASE NO. 5282 Pag e 3 Petitioner then filed a Pet ~ �on for Review before this Court a few days later, or on September 1, 1995, in or'cler to toll the running of the prescriptive period provided for under the Tax Code. After trial on the merits, a I!Jecision was promulgated by this Court on August 11, 1998, denying petitioner's claim due to its failure to submit the invoices supporting the schedules of petrolleum pnoducts sold and delivered to it by PETRON. Pertinent portions of the Dedsion Jre hen~by quoted: "[P]etitioner, as an IEPZA reqistered enterprise is exempted from the payment of excise ta/ �es, and if said taxes were passed on by the supplier t o EPZA registenr:d ente1rprise like the petitioner, tax credit shall be granted to the la'tter. The fact that it was not the petitioner who had paid the taxes directly to the Bureau of Internal Revenue does not have an adverse effect o n petitioner's action for refund. The law granting the exemption makes no distinction as to the circum~tances when the law sh1all apply. Since the law makes no distinction, neither should we. -lfhe exemption is so broad as to cover the present situation. Since an export processing zone is not considen~d to be covered .by P~hilippine customs and internal revenue laws, t he taxes paid by peti.tion.er on the petroleum products should be refunded or credited in its favor. Thus, the only thing left for us to do is to determine whether or �not petitioner is entitled to the amount claimed for refund. xxx XXX XXX XXX [P]etitioner merely p resented a summary of petroleum products sold and delivered by Pet�ron during the period covered by the claim. We cannot, by the surnmary alone, ascertain the veracity of the amount being claimed ne'jther can it prove the existence of the invoices referred to therein. Pf~titioner should have submitted the invoices supporting the schedule�s of petroleum products sold and delivered to it by Petron. These invoices would reveal whether or not the amount claimed for refund by l;>etitioner is correct. xxx'' On September 3, 1998, petitioner moved for reconsideration of the above- quoted Decision but in a Resolution promulgated on January 6, 1999, this Court denied the motion for lack of merit. Thus, on January 29, 1999, petitioner tiled a j ,, II .J

DECISIO N C.T.A. CASE NO. 5282 Page 4 "Motion for Reconsideration and Motion for New Trial" seeking the reronsideration of this Court's Decision of August 11, 1998 and Resolution of January 6, 1999. The said motion was also denied in a Resolution of March 12, 1999. Aggrieved, petitioner elevated the �case to the Court of Appeals by way of a Petition for Review dated Apri14, 1999, thereat docketed as CA-G.R. SP No. 52093. In a Resolution promulgated June 18, 1999, petitioner's petition was denied due rourse outright and was dismissed by the Court of Appeals on the ground that it was petitioner's counsel who executed the "Affidavit of Non-Forum Shopping" and not the petitioner, in violation of Supreme Court Administrative Circular No. 04-94. Petitioner filed a "Motion for Reronsideration" thereof which was denied by the Court of Appeals on August 25, 1999 due to late filing. A Motion for Reconsideration (Re: Resolution of 25 August 1999) was then filed by petitioner. The Court of Appeals, in a Resolution promulgated on February 15, 2000, lifted and set aside its August 25, 1999 Resolution but still denied petitioner's Motion for Reconsideration of the June 18, 1999 Resolution. Not being satisfied, Petitioner went to the Supreme Court by filing a Petition - for Review dated March 20, 2000 and docketed as G.R. No. 141973. On June 28, 2005, the Supreme Court rendered a Decision remanding the case to this Court for the reception of evidence. To quote: J ''The general rule is that claimants of tax refunds bear the burden of proving the factual basis of their claims. This is because tax refunds are in the nature of tax exemptions, the statues of which are I construed strictissimi juris against the taxpayer and liberally in favor of J the taxing authority. xxx J In this case, there is no disoute that oetitioner is entitled to exemption from the payment of excise taxes by virtue of its being an J EPZA registered enterorise. As stated by the CTA, the only thing left to I J I .J

DECISION C.T.A. CASE NO. 5282 Page 5 be determined is w~1ether or not pet itioner is entitled to the amount claimed for refund. Petitioner's e�ntire claim for r~~fund, however, was denied for petitioner's failure to present invoices allegedly in violation of CTA Circular N J . 1-95. But nowhere in s.a!d Circular is it stated that invoices are requimd to be presented in clai1ming refunds. :xxx , The CTA in denying petiti011er's motion for reconsideration, also mentioned for the first time t h;at petitioner's failure to present a "certificatio1n of an independent <. :PA" is another ground that justified the denial o f its claim for refund. Agai11, we find such reason ing to be erroneous. The certification of an indeJJ~ndent CPA is not a11other mandatory requirement under the Circular which petitioner faLied to comply with. It is rather a requirement that must accompa1ny the invoices should one decide to present invot;ces under the CirCl dar. Since petitioner did not present invoices, on the assumption that: such were not necessary in this case, it logically did not present a cenjfication because there was nothing to certify. The CTA also could no t deny that in its previous decisions involvina petitioner's claim for refund. invoices were not deemed necessary to grant such daim.s. It merely said that in said decisions, CTA Circular 1-95 was not ye!t in effect. Since CTA Circular No. 1-95 did not make it mandatory to present invoices, coupled with the previous cases of petitioner where the certifications issued by Petron sufficed, it is understandab.le that petitioner did not think it necessary to present invoices and the accompanying certifications when it filed the present case for refuntd before the CTA. XXX XXX XXX In this case, it t:annot be said that petitioner did not act with ordinary prudence in claiming its refund with the CTA, in light of its previous cases with the CTA which did not require invoices and the non-mandatory nt',ture of CTA Circular No. 1-95. XX XXX XXX Since itL is not disputed that petitioner is entitled to tax exemption. it should not be precluded from presenting evidence to substantiate tche amount of refund it is claiming on mere technicality especially in this case. where the failure to present invoices at the first instance was adequately explained by petitioner. I J

DEOSION C.T.A. CASE NO. 5282 Page 6 XXX XXX WHEREFORE, the petit :.on is GRANTED. The assailed resolution is SET ASIDE and the case h REMANDED to the Court of Tax Appeals for the reception of evideu ce, particularly invoices supporting the schedules of petroleum prOt lucts sold and delivered to petitioner by Petron and the cor .:espondin D certification of an independent Certified Public Accountant, f~Jr the pt�oper and immediate determination of the amount to be refunded to pet tioner." (Underscori ng Supplied) In compliance with the above-quoted Decision, this Court conducted several hearings to receive petitionerJs testirr onial and documentary evidence. Furthermore, upon motion of p-:titioner in open Court, the commissioning of an independent Certified Public Accountant (CPA) was granted by this Court. Thereafter, th~s case was submitted for decislon after considering petitioner's Memorandum med on September 6, 2006 sans r�' 5pondent's Memorandum. Is petition,er entitled to the refund or t.ax credit of excise taxes paid for the period September 1993 to December 1994 in the amount of P602,349.00? As already settled, petitioner is r .xempt from the payment of taxes for supplies brought into the Zone to bf, used, whether directly or indirectly, in its activity. Thus, it is entit led to clai1m for the refund or issuance of a tax credit certificates of th1:~ excise taxes it paid for supplies purchases for the subject period. What is left for tlhis Court to dete!:,mine is the amount which petitioner is entitled. In this connection, it i~s important to verify whether petitioner actually purchased petroleum products from PETRON and whether the corresponding taxes of the petroleum products w ere actually paid by PETRON and subsequently billed upon petitioner. I j I _j j ~

DECISION C.T.A. CASE NO. 5282 Page 7 Petitioner, in support of its clain~, su <Jmitted to this Court "Certification''from PETRON Corporation (Exhibits '!4 '' and � �~4-a'? to show that PETRON paid the specific/excise taxes to the BIR in the 1r ount of P602,349.00 on the petroleum products sold to petitioner for the period S.� ;ptember 1993 to December 1994 (period subject of the claim) and billed the same t ,) petitioner; ''Petroleum Products Sold & Delivered to Phi/phos for the Period Sepb: mber, 1993 to December, 1994" (Exhibit A-1"and '!4 -1-a'jto show the summary of 1(->Urchdses of petitioner from PETRON for the period September 1993 to December j QCJ4; BIR ''Authority to Accept Payment for Excise Taxes" Returns (Exhibit A-2" to ':.4-80'? to establish that excise taxes on the petroleum prooucts sold and delivererj to petitioner during the period September 1993 to December 1994 were paid by P ETRON to the BIR; Invoices ('C-1 to C-59'; ''C-61, "C-63 to C-86'? to establish tha't petroleum products were sold and delivered to petitioner by PETRON for the period September 1993 to December 1994; ''Independent CPA~ Certification" (Exhibit "D'? prepared by Mr. John Aguilar, the duly commissioned Independent CPA, to establish that based on the available invoices and t he corresponding fl 'uthority to Accept Payment Returns issued by the BIR, excise taxes in the amount of P516,618.15 have been paid on the fuel products purchased by petitioner for the period September 1993 to December 1994; and ''Summary" prepared by Mr. John Aguilar (Exhibit "E'? to show that based on the available invoices and the corresponding BIR Authority to Accept Payment Returns issued, petitioner purchas~ ~ petroleum products for the period September 1993 to December 1994 for whic)fl excise taxes in the amount of P516,618.15 were paid. A verification of Exhibits "A" and "A-a" shows that PETRON itself certified that j it sold petroleum products to petitioner for the subject perioo and that the / I _j

DECISION C.T.A. CASE NO. 5282 Page 8 corresponding taxes of the same were 1, turn billed upon petitioner. Furthennore, the "Authority to Accept Payment of Ex,�:Jse Taxes Returns''' (Exhibits �~-2 to A-80") proved that PETRON paid the corr espond'! ng taxes on the p _troleum products sold to petitioner. Likewise, a reading of Exh 1bits "A-1' ' and "A-1-a" shows that PETRON sold and delivered 1,288,116 liters of pet oleum plt\Jduct to petib10ner from September 1993 to December 1994. The excise t:c~xes there of amounted to P602,349.00, computed as follows: p 27, 988.80 11,760 total volume in liters of .AVTURBO X 2. 38 tax rate 1,276,356 total volume irn liters olf DIESEL P574, 360.20 X .45 tax rate --P-6-02-,-3-4-9.-0-0 Total Amount of Excise tax In addition, the invoices subrr.1itted by petitioner to this Court prove that petitioner purchased petroleum prochucts from PErRON. In fine, as can be seen fr eun the aforesaid evidence, petitioner was able to prove its purchases from PETROI'v1for the period September 1993 to December 1994 and that PETRON initially paic J the taxes thereof but subsequently billed it to petitioner. These facts having been verified and settled, We will now determine the amount to be refunded to petdtioner. ) I After a scrutiny of 'the documents submitted, this Court agrees with the J J findings of the commissio,ned independent CPA (Exhibit "D") that petitioner, based J /

DECISION C.T.A. CASE NO. 5282 Page 9 on available invoices and correspond ing Authority to Accept Payment issued by the BIR, was able to substantiate only the amount of P516, 18.15, detailed as follows: A V T U RBO 111' 60 Liters Tax RRte ?;.38 Amount due p 27, 98f,3 . 80 DIESEL 1,0b 5,843 Liters l Tax Rate .45 Amount c!ue P48~ 629 . 35 GRAND TOTAL __P__S_..J_.L. 6__,_6_1_8_.1_5 WHEREFORE, in view o f the forego ing, the instant Petition for Review is hereby PARTIALLY GRANTED. Aca }rdingly, respondent is ORDERED to REFUND or ISSUE a TAX CREDIT CEH.TIFICATE to the petitioner in the reduced amount of P516,61f!�.15 representing excise taxes paid for the period September 1993 to December 1994. SO ORDERED. WE CONCUR: Jl ~~- ~ ERNESTO D. ACOST A Presiding Justice J \ CAESA R A. CAS:ANOVA J Associate Ju stice J J