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REPUBliC OF THE PHiliPPINES
COURT OF TU APPEAlS
QUEZON CITY
SECOND DIVISION
MSF TIRE AND RUBBER, INC.,
Petitioner, C.T.A. CASE NO. 6804
Members :
CASTANEDA, JR., Chairperson
UY, and
PALANCA-ENRIQUEZ, JJ.
COMMISSIONER OF INTERNAL Promulgated:
REVENUE, Respondent. SEP 1 4 2006 I
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DECISION
CASTANEDA, JR., d.:_ This petition for review seeks the refund of the alleged excess cred itable input value-added tax of petitioner on its purchase of capital goods, pu rsuant to Section 112 ( B) of the 1997 National Internal Revenue Code, in the amount of TWELVE MILLION NINE THOUSAND THREE HUNDRED THIRTY THREE AND 37/100 PESOS (P12,009,333.37). T he facts as culled from the records of the case are briefly summarized as follows : Petitioner, MSF Ti re and Rubber, Inc., is a domestic corporation duly organ iz ed under the laws of the Republic of the Ph ilippines, with principal
DECISI C.T.A. CASEON NO. 6804 Page 2 of 14
office address at KM 21 East Service Road , South Superhighway, Sucat, Muntinlupa City, Metro Manila. It is registered with the Securities and Exchange Commission as an entity engaged in the business of buying , selling at wholesale , and otherwise, dealing in automobile tires, tubes and accessories, including performing automobile and tire repair work and manufacturing rubber goods. Petitioner is likewise registered with the Bureau of Internal Revenue as a value-added tax (VAT) taxpayer with Tax Identification Number (TIN) 053-004-503-. On the other hand , respondent is the duly appointed Commissioner of Internal Revenue, empowered to perform the duties of his office including , among others, the duty to act on and approve claims for refund or tax credit as provided by law, with office address at the BIR National Office Building BIR Road , East Triangle, Diliman , Quezon City. On February 17 , 2000, petitioner entered into a Lease Agreement 1 with EEl Power Corporation (EEl) , a domestic corporation organized under Philippine laws. Under the said Lease Agreement, it was agreed upon that EEl "shall cause and shall be responsible for the purchase, installation (including but not limited to design , short circuit calculation , development, construction , completion , testing and commissioning), operation and maintenance of a Bunker C Fuel Power Station (the "Equipment") able to follow Lessee's requirements ," and that petitioner shall rent the Equipment from EEl for a period of ten (1 0) years from the completion date. It was likewise stipulated that in case of termination or expiration of the contract of
(^1) Exhibit "A" (Power Equipment Project Lease Agreement between EEl Power Corp. and MSF Tire and Rubbe r, I nc. )
C.T.A. CASEDECISION NO. 6804 Page 4 of I added taxpayer6 (a) and (b) of Revenue in compliance Regulations with Section No. 6- 97 in relation to Section 4.107-1 (a) of Revenue Regulations No. 7-95, and Secti on 236 of the Tax Code, as amended ; b. The invoicing and accounting requirements for VAT filing and -registered persons, payment of VAT asin wellcompliance as the with the provisions of Sections 113 and 114 of the Tax Code as amended ; c. Proof of compliance with the prescribed checklist of requirements to be submitted involving claim for VAT refund in pursuance to Revenue Memorandum otherwise there would (^) be Order no sufficient No. 53-98, compliance with the filing of administrative claim for refund which is a condition sine qua non prior to the filing of judicial claim in accordance with the provision of Section 229 of the Tax Code, as amended. It is worthy of emphasis that Section 112 (D) of the Tax Code, as amended , requires the submission of complete documents in support of the application filed with the Bureau of day audit period Internal shall Revenue before the apply, and before the 120- taxpayer could avail of judicial remedies as provided for in the law. Hence, petitioner's failure to submit proof of compliancerequirements warrants immediate with the above-stated dismissal of the petiti on for review; d. That the amount of P12 ,009,333. 37 allegedly paid by the petitioner representing unused or excess creditable input VAT credits arising from the purchase of capital goods (the Equipment) have not been applied against any output tax and were not carried over in the succeeding taxable quarter or quarters; e. That petitioner's administrative and judicial clai ms for tax credit or refund of the unutilized input tax (VAT) was filed within two (2) years after the close of the taxable
DECISION C.T.A. CASE NO. 6804 Page 5 of 14
quarteraccordance when with the Section sales 112 were (A) madeand (D)in and 229 of the Tax Code, as amended; f. That petitioner's domestic purchases of goods and services were made in the course of its trade or business, properly supported receipts and by VATother invoicesdocuments , and/or such official as subsidiary purchase Journal , showing that it actually paid VAT in accordance with Sections 110 (A)(2) and 113 of the Tax CodeSection as 4.104-5amended , (a) and& (b)in pursuanceof Revenue to Regulations No. 7-95 (Re: Substantiation of Claims for Input Credit) ; g. The requirements as enumerated under Section 4.104-2 of Revenue Regulations 7- 95 (Re: Persons who can avail of the Input Tax Credits);
- Furthermore, in an action for refund the burden of andproof is failure^ on^ the taxpayer toto sustain the burden is^ establish fatalits right to refund to the claim for refund/credit. This is so because exemptions from taxation are highly disfavored in law and he who claims exemption must be able to justify his claim by the clearest grant of organic or statutory law. An exemption from common burden cannot be permitted to exist upon vague implications (Asiatic Petroleum Co. {P.I.} vs. Llanes, 49 Phil. 466 cited in Collector of Internal Revenue vs. Manila Jockey Club, Inc. 98 Phil.
- ;
- Claims for refund are construed strictly against the claimantfrom taxation. for the same partake the nature of exemption
After both parties have filed their respective memoranda , this Court ordered the submission of the case for decision via Resolution dated January 24, 2006.
C.T.A .DECISION CASE NO. 6804 Page 7 of 14
The issues can be summarized as follows: Whether or not petitioner is entitled to the refund of input VAT from its purchase of capital goods. At this juncture, the Court deems it proper to quote Section 112 (B) of the National Internal Revenue Code of 1997, in relation to Section 4. 106-1 (b) of Revenue Regulations No. 7- 95 inasmuch as the granting of the claim depends on the satisfaction of its enumerated requirements , to wit: Section 112. Refunds or Tax Credits of Input Tax- (A) X X X (B) Capital Goods .for the issuance of a tax credit certificate or refund of -A VAT-registered person may apply input taxes paid on capital goods imported or locally purchased , to the extent that such input taxes have not been applied against output taxes. The application may be made only within two (2) years , after the close of the taxable quarter when the importation or purchase was made. Section 4.106-1. Refunds or tax credits of input tax. XXX XXX XXX (b) Capital Goods - Only a VAT registered person may apply for issuance of a tax credit certificate or refund of input taxes paid on capital goods imported or locally purchased. The refund shall be allowed to the extent that such input taxes have not been applied against output taxes. The application should be made within two (2) years after the close of the taxable quarter when the importation or purchase was made. Refund of input taxes on capital goods shall be allowed only to the extent that such capital goods are used in VAT taxable business. If it is also used in exempt operations, the input tax refundable shall only be the ratable portion corresponding to the taxable operations. Based on the foregoi ng provision , before petitioner can validly claim fo r
DECISION C.T.A. CASE NO. 6804 Page 8 of 14
a refund on it purchases of capital goods, the following requirements must first be complied with :
- That petitioner is a VAT registered entity;
- That input taxes duly supported claimedby VAT were paid on invoices and/or capital officialgoods receipts ;
- That petitioner did not offset or apply the claimed input VAT payment on capital goods against any output VAT liability; and
- That the claim for refund was filed within the two- year prescriptive period both in the administrative and judicial levels (Telecommunications Technologies Philippines, Inc. vs CIR, CTA Case No. 6018, November 24, 2003). Regarding the first requirement, it has been stipulated by the parties that petitioner is a VAT registered corporation by virtue of the issuance of its Certificate of Value-Added Tax Registration No. 053-004-503-975. As to the second requirement, this Court reckons it appropriate to quote Secti on 4.106-1 (b) of Revenue Regulations No. 7-95, which defines "capital goods or properties" as follows: Section 4.106-1. Refunds or tax credits of input tax. - xxx XXX XXX XXX (c) Capital Goods- xxx "Capital goods or properties" refer to goods or properties with estimated useful life greater than one year and which are treated as depreciable assets under Section 29 (f) , used directly or indirectly in the production or sale of taxable goods or services. Based on the foregoing , for the purchased property to fall under the definiti on of "capital goods ", it must have the following qualities:
DECISIONC.T.A. CASE NO. 6804 Page 10 of 14
generating sets were treated by petitioner as "depreciable assets under Section 29(f) ". The second requirement does not only mean that the "capital goods" is depreciable in nature, as what petitioner has argued , but rather, petitioner must have itself treated the same as its depreciable asset, or as part of its "properties/assets" in its books. How can petitioner treat the same as depreciable assets when in tfle first place, the same does not even form part of its properties and assets? The generating sets and accessories purchased by petitioner that formed part of the Equipment were owned by EEl. The ownership was only transferred to petitioner upon its purchase of the same after its dissolution on March 1, 2001. In fact, the official receipt allegedly evidencing the purchase of two generating sets with accessories and showing the net purchase price was issued on July 17, 2001.^3 Similarly significant is the finding that according to the records of the case , the generating sets were never used by petitioner, either directly or indirectly, in its trade or business. Nowhere· in the documents and allegations presented did it reveal that petitioner even used the generating sets in the production or sale of its taxable goods and services. It is noteworthy that after its purchase of the generating sets from EEl , petitioner sold the same to Orix Leasing through the Sale and Purchase Agreement dated February 20, 2003 (Exhibit "E"). Thus, it cannot be concluded that the generating sets purchased by petitioner may be considered as "capital assets. " In addition , petitioner· failed to show valid invoices evidencing the transaction of its purchase of the generating sets and accessories. What were offered in evidence were a charge slip and two (2) official receipts (^3) Exhibit "C"
DEC ISION C.T.A. CASE NO. 6804 Page 1 I of 14
allegedly evidencing the purchase and payment of the 10% value-added tax. However, the same are not enough to prove that a valid VAT transaction had taken place between petitioner and EEl. Section 113 of the Nl RC of 1997 specifically provides for the necessity of an invoice, as well as , the inv.oicing requirements for VAT-registered entities. To quote: Section 113. 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 additi on to the information requ i red under Section 237, the following information shall be indicated in the invoice or receipt:
- A statement that theregistered person, followed seller is a VAT-by his taxpayer's identification number (TIN); and
- The total amount which the purchaser with pays or is the^ obligated indication^ to pay to the that^ seller such amount includes the value-added tax. xxx (Emphasis supplied) A charge slip is not the same as an invoice and petitioner's presentati on of a mere charge slip fails to comply with the requirements of the above-quoted sections. Secti on 110 (A)(2) of the 1997 NIRC also provides that for purchases of goods, the corresponding input value added tax is creditable to the pu rchaser upon the consummation of sale, that is , upon the issuance of the correspond i ng invoice. And for purchases of services , the correspond i ng input value added taxes is creditable to the purchaser upon payment of the
C.T.A.DECISION CASE NO. 6804 Page 13 of 14 issued an invoice bearing a number preceding that which has been issued to a transaction entered into at a much earlier date. While the Charge Slip, or a statement of bill which is by practice issued before an official receipt is issued , evidencing the alleged full purchase amount of P212,1 02 ,667. 04 is dated January 28, 2003 (Exhibit "8 ''), the Official Receipt supposedly evidencing the net purchase price of P192,820,606. 04 for the generating sets was issued on July 17, 2001 (Exhibit "C'') , or way before the issuance of the charge slip. These discrepancies and failure of petitioner to properly substantiate its claim rule out the granting of the refund. In view of the foregoing , this Court deems it no longer necessary to discuss the other issues raised. WHEREFORE , this instant Petition for Review is DENIED for lack of merit. SO ORDERED.
WE CONCUR :
E~UY ~:~stice
74> G .(].V--~G:{p.. «J uANITO C. CASTANEDA, qR, Associate Justice
~~A~R~Z Associate Justice
C.T.A. CASEDECISION NO. 6804 Page 14 of 14
ATTESTATION attest that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court's Division.
<1.J^ C2C2. UANITO c. CASTANEDA; qR.^ ~.
CERTIFICATION
Associate Justi ce Chairperson
I hereby certify that the decision was reached after due consultation with the members of the Division of the Court of Tax Appeals in accordance with Secti on 13 , Article VIII of the Constitution.
ERNESTO^ ~~-v.~ D. ACOSTA Presiding Justice
