CTA Case No. 5652 (Decision)

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY AIR LIQUIDE PHILIPPINES, INC., C. T.A. CASE NO. 5652 Petitioner, - versus- COMl\1ISSIONER OF INTERNAL Promulgated: , REVENUE AND CO.lVIMISSIONER OF CUSTO.lVIS, JUL 0 6 2000 Respondents. I . . X- - - -- - - -- -- -- -- -- - - -- - - - - - - - - - - - - -- -- -- - - -- - - - - - - - - - - - -- - - - :\ DECISION This petition for review is seeking for the refund or Issuance of :1 tax credi t cetiificate in the original amount of P26,666,642.83, .but \Vas later amended to PI 0,966, 711.75, representing unutilizcd input value-added tax (VAT, for brevity) on domestic purchases and impm1ation of capital goods for the calendar quarter ended June 30, 1996. Petitioner is a domestic coqJoration duly organized and existing under a nd by virtue of the laws of the Philippines with principal office located at Lot 37 DBP Avenue, Food Terminal Inc. Complex, Taguig, Metro Marilla. It is registered with lhe Bureau of , , Intemal Revenue as a VAT entity with Cetiificate of Registration RDO Control1To. 95- 044-002738, dated October 9, 1995 (Exh. A-2). On July 22, 1996, Petitioner seasonably filed its 1996 second quarterly VAT retum showing, among others, input VAT in the amounts of P5,S36,58K52 and P5,782,095.67, arising from domestic purchases of goods/services and importation of goods, respectively.� Out of the aforesaid amounts, Petitioner asscrtecT that the sum of

DECISION- CTA CASE NO. 5652 PAGEl P10,966,711.75 pertains to payments of input VAT on domestic purchases artl impot1ation of capital equipment. On June 29, 1998, believing that it is entitled to the refund of input tax on capit a l goods, P etitioner filed with the Revenue Enforcement Gmup of !he One-Stop-Shop lnlcr- Agency Tax Credit and Duty Drawback Center of the D<.:partrm;nt of Fin ance an application for tax credit/refund of value-added tax paid pursuant lo DIR H.evenue i\udit .t'v1emorandum Order No. 2-93 (Exh. E). Without w aiting for an action from the Respondents, Petitioner on the smne d;1y, filed the instant Petition for Review in order to toll the rurming of the two-y.;:r prescriptive period under the law. In their Answers, Respondents raised as Special and Af!i:�mative defenses 1.\;!l: The petition states no cas u e of action as it does not allege the elates vvhen the l:l:'\.cs sou:hl to be refunded were actually paid; the judicial action for the refund of t:1xcs paid bd"llrc June 29, 1996 had ah�eady prescribed; claims for refund are conslru...:d str:,;tly a;:,:linsl the claimant, the same being in the nature of exemption from taxes; it is iil>.l:m)C!'t ::)on pet itioner to show compliance with the provisions of Section 2.30 uf tlJ-.; "L1x Code. ;:s amended; in an action for tax refund, the burden is upon the taxpayer to prove !!1;11 IJL; is entitled to the refund and failure to sustain the same is fatal to the actiou for n:flil l<i; !h.: alleged claim for refund is still subject to administrative roulinary im\.:sligai Oil ;md /or examination by the Respondents' Bureau; and the taxes so claimed ha�Je been p:1ic! :1;1d collected in accordance with law and regulations, hence not refumbldc. In supp011 of its claim for refund, petitioner pre sented �v:1riuus duGumcu!:.1ry exhibits which consist of:

DECISION- CTA CASE NO. 5652 PAGE3 1. Bill. Certificate of Registration (Exh. A-2); 2. The original and amended quarterly value-added tax returns for the second and third quarters of 1996 (Exhs. A, A-1, B, C, D, and D-1 ); 3. Application for Tax Credit/Refund of VAT paid (Exh. E);l 4. Report of the cotmnissioned independent auditor (Exh. F); and 5. Two folders containing photocopies of Petitioner's �v,:\T official receipts and/or invoices, import entry declarations and other documents supporting 11\: claim for refund on input taxes (Exhs. F-1 and F-2) This case was submitted for decision sans the cvic.kncc memoranda of the Respondents. The issues to be resolved in the instant case are as follows: 1. Whether or not Petitioner is entitled to the claim. for refuncl/cn:dit pursu:wt !o Section 106(b) of the Tax Code; and 2. Whether or not Petitioner was able to support with subsl:mti.al .::vidence its entitlement thereto. Petitioner anchors its legal basis on Section 106(b) of the T;;.; Cede \vhi('il provides: ,' SECTION 106. Refunds o1� tax credits of crcdiJab/e iaput fax. -(a) x.xx (b) Capital goods.- A VAT-registered person may ;1ppiy lor the issuance of a tax credit certificate or refund of inpnt 1.1:-:es p:;i,i f.\. 11 capital goods imported or locally purchased, to the extent U1:1t su:h i:1pul taxes have not been applied against output taxes. The applic:1tioil n:::_- be: made only within two (2) years after the close of the taxable q1:;n�t,;r \\'h\'.11 the importation or purchase was made.

DECISION- CTA CASE NO. 5652 PAGE4 Based on the above proviso, Pditioner should prove that: (1) it is a V :\T registered person; (2) the input taxes claimed by Petitioner ':vcre paid on capital good<:: (3) the input taxes have not been applied against output tax liabiliiy; and (-J.) lh.: administrative claim for refund was seasonably filed. After a circumspect study of the evidence presented, it was established tll,!l Petitioner is a VAT-registered person as seen in the Certificate of Registration iss11cd by the Bureau of Internal Revenue, dated October 9, 1 995 (Exh. A-2). The saks invoices, official receipts, import entry declarations .:mel other documents supporting Petitioner's claimed input taxes prove that Petitioner paid input VAT on its purcl1ases and importation of capital equipment. It was also proven that input taxes sought to be rcli.mclccl remained unapplied as shown by Petitioner's 1996 amend ed third quarterly VAT r.;Lum where Petitioner clcducted the sum of P10,966,711.75 Ji�om its total accumlllall.:cl in put taxes (Exhs. D and D-1). Lastly, Petitioner was able to prove thJt the aclminislralive claim for ref�und was seasonably filed. Under Section 106(b) of the Tax Code, an application for n:funcllcn.:dit may be made only within two (2) years after the close of the taxable quarter vvhcn the importation or purchase was made. In the present case, the close of the quarter was on June 30, 1996 ,' and the application for refuncVcredit was filed on June 29, 1998 (Exh. n. lknce, it can he clearly seen that the administrative claim for refund was fikd within lllc rcglcmcnl;lt)' period of two years. WiU1 resp ect to the affinnative d efense of Responden t Connnissioncr of Intcrn:1l Revenue that j udicial action for the refund of taxes paid prior to J unc 29. 1996 h:1d already prescribed, the Court had already mled that the reckoning of I he l\vo-ycar pcrind

DECISION- CTA CASE NO. 5652 PAGES commences from the filing of the quarterly VAT return (Resolution, Atlas Con.solidah:d l\1ining and Development Corporaton vs. Commissioner or Internal Hcn�mrc, C.T.A. Case No. 5296, dated July 20, 1998). Since, Petitioner filed its 1996 second qua1ierly VAT return on July 22, 1996 and the Petition for Review on .June 29, J 9%, the filing of the judicial action is within the two-year period. Although Petitioner appears to be entitled to the refund sought, still it must proYc with substantial evi<.knce the input taxes on capital goods in ill'.! amount or P10,966,711.75 for the period April1, 1996 to June 30, 1.996. A verification of the report submitted by the independent auditor together with VAT official receipts, invoices, import entry declarations and other supporting documents (Exhs. F, F-1 and F-2), discloses that the input taxes dcriv'.d.! from local purchases and importation of capital equipment were properly substantiated for VAT purposes. However, the Court deemed it proper to exclude input taxes on loc al purchasr;s of capital goods which are not within the period of the claim and which the inclcpcnden t auditor failed to consider in arriving at his conclusion, to wit: Date SupJ2lier OJ:\. No. E:-.:h. J7 -1 l11put Tax 07-25-96 Phelps Dodge Phils., Inc. 79300 239-2�l/J03 p 59,356.82 07-01;96 Trigon Mgt & Ind. Corp. 275-276/303 07-09-96 3231 l I, 107.92 07-09-96 Meralco Industrial Engineering 24304 07-11-96 279-200/303 ci3,33S.2-+ 07-03-96 Meralco Industrial Engineering 2 4305 28 1-202/303 05,S(,..J 71 07-03-96 EEl Corporation 07-02-96 MI-JE-Dernag (P) Inc. 167420 203-204/303 l9S,22.so 07-12-96 Datem, Inc. 097 205-20 7/303 15,0 l3.U5 Electrodynamics Const. & 'Dev. 375 2i'J:),2')9/3G.3 32,703 Ol 452 Meralco Industrial Engineering 300-JUl/303 2,767.17 T0ta1 24303 302-303/303 ; __ ..-i9�l57 P�.!.) -.01-:2(2

DECISION- CTA CASE NO. 5652 PAGE6 \VHE REFORE, in view of the foregoing, Petitiom:r' s daim for refund is !1ercby partially GRL\NTED. Respondents are ORDERED to REFUND in favor of Pdiiioacr the amount of P10,515,037.46, representing input VAT on capital goods for the period April! to June 30, 1996. SO ORDE RED. \IVE CONCUR: fl lQc. OD .ACOSTA !!.Mr !\MON 0. DE I A ssoci�ate Judge CERTIFICATION I hereby certif-y that the above decision was reached after due con::;ultation with '' the members ofthe CoUlt of Tax Appeals in accordance with Section 13, Arli.ck '/III of the Constitution. ERNESTO D. 1 ,CO.STA. Presiding Jud;_y.;