[A]fter due hearing, judgment be rendered ordering [herein respondent Commissioner of Internal Revenue (CIR)] to refund or issue to [Toshiba] a tax refund/tax credit certificate in the amount of P3,875,139.65 representing unutilized input taxes paid on its purchase of taxable goods and services for the period January 1 to June 30, 1997.17
5. [Toshiba's] alleged claim for refund/tax credit is subject to administrative routinary investigation/examination by [CIR's] Bureau;
6. [Toshiba] failed miserably to show that the total amount of P3,875,139.65 claimed as VAT input taxes, were erroneously or illegally collected, or that the same are properly documented;
7. Taxes paid and collected are presumed to have been made in accordance with law; hence, not refundable;
8. In an action for tax refund, the burden is on the taxpayer to establish its right to refund, and failure to sustain the burden is fatal to the claim for refund;
9. It is incumbent upon [Toshiba] to show that it has complied with the provisions of Section 204 in relation to Section 229 of the Tax Code;
10. Well-established is the rule that claims for refund/tax credit are construed in strictissimi juris against the taxpayer as it partakes the nature of exemption from tax.19
1. [Toshiba] is a duly registered value-added tax entity in accordance with Section 107 of the Tax Code, as amended.
2. [Toshiba] is subject to zero percent (0%) value-added tax on its export sales in accordance with then Section 100(a)(2)(A) of the Tax Code, as amended.
3. [Toshiba] filed its quarterly VAT returns for the first two quarters of 1997 within the legally prescribed period.
x x x x
7. [Toshiba] is subject to zero percent (0%) value-added tax on its export sales.
8. [Toshiba] has duly filed the instant Petition for Review within the two-year prescriptive period prescribed by then Section 230 of the Tax Code.22
Whether or not [Toshiba] has incurred input taxes in the amount of P3,875,139.65 for the period January 1 to June 30, 1997 which are directly attributable to its export sales[.]
Whether or not the input taxes incurred by [Toshiba] for the period January 1 to June 30, 1997 have not been carried over to the succeeding quarters[.]
Whether or not input taxes incurred by [Toshiba] for the first two quarters of 1997 have not been offset against any output tax[.]
Whether or not input taxes incurred by [Toshiba] for the first two quarters of 1997 are properly substantiated by official receipts and invoices.23
WHEREFORE, [Toshiba's] claim for refund of unutilized input VAT payments is hereby GRANTED but in a reduced amount of P1,385,282.08 computed as follows:
1st Quarter 2nd Quarter Total Amount of claimed input taxes filed with the DOF One Stop Shop Center P3,268,682.34 P416,764.39 P3,685,446.73 Less: 1) Input taxes not properly supported
by VAT invoices and official receipts a. Per SGV's verification (Exh. I) P 242,491.45 P154,391.13 P 396,882.58 b. Per this court's further verification (Annex A) P1,852,437.65 P 35,108.00 P1,887,545.65 2) 1998 4th qtr. Output VAT liability
applied against the cliamed input taxes 15,736.42 15,736.42 Subtotal P2,11,665.52 P189,499.13 P2,300,164.65 Amount Refundable P1,158,016.82 P227,265.26 P1,385,282.08
SECTION 24. Exemption from Taxes Under the National Internal Revenue Code. - Any provision of existing laws, rules and regulations to the contrary notwithstanding, no taxes, local and national, shall be imposed on business establishments operating within the ECOZONE. In lieu of paying taxes, five percent (5%) of the gross income earned by all businesses and enterprises within the ECOZONE shall be remitted to the national government. x x x.
Sec. 103. Exempt transactions. - The following shall be exempt from the value-added tax:
x x x x
(q) Transactions which are exempt under special laws, except those granted under Presidential Decree Nos. 66, 529, 972, 1491, and 1950, and non-electric cooperatives under Republic Act No. 6938, or international agreements to which the Philippines is a signatory.
SEC. 4.103-1. Exemptions. - (A) In general. - An exemption means that the sale of goods or properties and/or services and the use or lease of properties is not subject to VAT (output tax) and the seller is not allowed any tax credit on VAT (input tax) previously paid.
The person making the exempt sale of goods, properties or services shall not bill any output tax to his customers because the said transaction is not subject to VAT. On the other hand, a VAT-registered purchaser of VAT-exempt goods, properties or services which are exempt from VAT is not entitled to any input tax on such purchase despite the issuance of a VAT invoice or receipt.
SECTION 23. Fiscal Incentives. - Business establishments operating within the ECOZONES shall be entitled to the fiscal incentives as provided for under Presidential Decree No. 66, the law creating the Export Processing Zone Authority, or those provided under Book VI of Executive Order No. 226, otherwise known as the Omnibus Investment Code of 1987.
Furthermore, tax credits for exporters using local materials as inputs shall enjoy the benefits provided for in the Export Development Act of 1994.
Art. 39. Incentives to Registered Enterprises. - All registered enterprises shall be granted the following incentives to the extent engaged in a preferred area of investment:
(a) Income Tax Holiday. --
(1) For six (6) years from commercial operation for pioneer firms and four (4) years for non-pioneer firms, new registered firms shall be fully exempt from income taxes levied by the national government. Subject to such guidelines as may be prescribed by the Board, the income tax exemption will be extended for another year in each of the following cases:
(i) The project meets the prescribed ratio of capital equipment to number of workers set by the Board;
(ii) Utilization of indigenous raw materials at rates set by the Board;
(iii) The net foreign exchange savings or earnings amount to at least US$500,000.00 annually during the first three (3) years of operation.
The preceding paragraph notwithstanding, no registered pioneer firm may avail of this incentive for a period exceeding eight (8) years.
(2) For a period of three (3) years from commercial operation, registered expanding firms shall be entitled to an exemption from income taxes levied by the National Government proportionate to their expansion under such terms and conditions as the Board may determine: Provided, however, That during the period within which this incentive is availed of by the expanding firm it shall not be entitled to additional deduction for incremental labor expense.
(3) The provision of Article 7(14) notwithstanding, registered firms shall not be entitled to any extension of this incentive.
WHEREFORE, premises considered, the appealed decision of the Court of Tax Appeals in CTA Case No. 5762, is hereby REVERSED and SET ASIDE, and a new one is hereby rendered finding [Toshiba], being a tax exempt entity under R.A. No. 7916, not entitled to refund the VAT payments made in its domestic purchases of goods and services.30
5.1 THE HONORABLE COURT OF APPEALS ERRED WHEN IT RULED THAT [TOSHIBA], BEING A PEZA-REGISTERED ENTERPRISE, IS EXEMPT FROM VAT UNDER SECTION 24 OF R.A. 7916, AND FURTHER HOLDING THAT [TOSHIBA'S] EXPORT SALES ARE EXEMPT TRANSACTIONS UNDER SECTION 109 OF THE TAX CODE.
5.2 THE HONORABLE COURT OF APPEALS ERRED WHEN IT FAILED TO DISMISS OUTRIGHT AND GAVE DUE COURSE TO [CIR'S] PETITION NOTWITHSTANDING [CIR'S] FAILURE TO ADEQUATELY RAISE IN ISSUE DURING THE TRIAL IN THE COURT OF TAX APPEALS THE APPLICABILITY OF SECTION 24 OF R.A. 7916 TO [TOSHIBA'S] CLAIM FOR REFUND.
5.3 THE HONORABLE COURT OF APPEALS ERRED WHEN [IT] RULED THAT THE COURT OF TAX APPEALS' FINDINGS, WITH REGARD [TOSHIBA'S] EXPORT SALES BEING ZERO RATED SALES FOR VAT PURPOSES, WERE BASED MERELY ON THE ADMISSIONS MADE BY [CIR'S] COUNSEL AND NOT SUPPORTED BY SUBSTANTIAL EVIDENCE.
5.4 THE HONORABLE COURT OF APPEALS ERRED WHEN IT REVERSED THE DECISION OF THE COURT OF TAX APPEALS GRANTING [TOSHIBA'S] CLAIM FOR REFUND[;]32
WHEREFORE, premises considered, Petitioner TOSHIBA INFORMATION EQUIPMENT (PHILS.), INC. most respectfully prays that the decision and resolution of the Honorable Court of Appeals, reversing the decision of the CTA in CTA Case No. 5762, be set aside and further prays that a new one be rendered AFFIRMING AND UPHOLDING the Decision of the CTA promulgated on October 16, 2000 in CTA Case No. 5762.
Other reliefs, which the Honorable Court may deem just and equitable under the circumstances, are likewise prayed for.33
SECTION 1. Defenses and objections not pleaded. - Defenses and objections not pleaded either in a motion to dismiss or in the answer are deemed waived. However, when it appears from the pleadings or the evidence on record that the court has no jurisdiction over the subject matter, that there is another action pending between the same parties for the same cause, or that the action is barred by a prior judgment or by statute of limitations, the court shall dismiss the claim.
SECTION 2. Nature and purpose. - The pre-trial is mandatory. The court shall consider:
(a) The possibility of an amicable settlement or of a submission to alternative modes of dispute resolution;
(b) The simplification of the issues;
(c) The necessity or desirability of amendments to the pleadings;
(d) The possibility of obtaining stipulations or admissions of facts and of documents to avoid unnecessary proof;
(e) The limitation of the number of witnesses;
(f) The advisability of a preliminary reference of issues to a commissioner;
(g) The propriety of rendering judgment on the pleadings, or summary judgment, or of dismissing the action should a valid ground therefor be found to exist;
(h) The advisability or necessity of suspending the proceedings; and
(i) Such other matters as may aid in the prompt disposition of the action. (Emphasis ours.)
Scrutinizing the Answer filed by [the CIR], we rule that the Joint Stipulation of Facts and Issues signed by [the CIR] was made through palpable mistake. Quoting paragraph 4 of its Answer, [the CIR] states:"4. He ADMITS the allegations contained in paragraph 5 of the petition only insofar as the cited provisions of Tax Code is concerned, but SPECIFICALLY DENIES the rest of the allegations therein for being mere opinions, arguments or gratuitous assertions on the part of [Toshiba] and/or because they are mere erroneous conclusions or interpretations of the quoted law involved, the truth of the matter being those stated hereunderAnd paragraph 5 of the petition for review filed by [Toshiba] before the CTA states:
x x x x""5. Petitioner is subject to zero percent (0%) value-added tax on its export sales in accordance with then Section 100(a)(2)(A) of the Tax Code x x x.As we see it, nothing in said Answer did [the CIR] admit that the export sales of [Toshiba] were indeed zero-rated transactions. At the least, what was admitted only by [the CIR] concerning paragraph 4 of his Answer, is the fact that the provisions of the Tax Code, as cited by [Toshiba] in its petition for review filed before the CTA were correct.52
x x x x"
SEC. 106. Refunds or tax credits of creditable input tax. - (a) Any VAT-registered person, whose sales are zero-rated or effectively zero-rated, may, within two (2) years after the close of the taxable quarter when the sales were made, apply for the issuance of a tax credit certificate or refund of creditable input tax due or paid attributable to such sales, except transitional input tax, to the extent that such input tax has not been applied against output tax: Provided, however, That in the case of zero-rated sales under Section 100(a)(2)(A)(i),(ii) and (b) and Section 102(b)(1) and (2), the acceptable foreign currency exchange proceeds thereof has been duly accounted for in accordance with the regulations of the Bangko Sentral ng Pilipinas (BSP): Provided, further, That where the taxpayer is engaged in zero-rated or effectively zero-rated sale and also in taxable or exempt sale of goods or properties of services, and the amount of creditable input tax due or paid cannot be directly and entirely attributed to any one of the transactions, it shall be allocated proportionately on the basis of the volume sales.
SEC. 100. Value-added tax on sale of goods or properties. - (a) Rate and base of tax. - x x x
x x x x
(2) The following sales by VAT-registered persons shall be subject to 0%:
(A) Export sales. - The term "export sales" means:
(i) The sale and actual shipment of goods from the Philippines to a foreign country, irrespective of any shipping arrangement that may be agreed upon which may influence or determine the transfer of ownership of the goods so exported and paid for in acceptable foreign currency or its equivalent in goods or services, and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipnas (BSP).
It would seem that petitioner CIR failed to differentiate between VAT-exempt transactions from VAT-exempt entities. In the case of Commissioner of Internal Revenue v. Seagate Technology (Philippines), this Court already made such distinction -An exempt transaction, on the one hand, involves goods or services which, by their nature, are specifically listed in and expressly exempted from the VAT under the Tax Code, without regard to the tax status - VAT-exempt or not - of the party to the transaction...
An exempt party, on the other hand, is a person or entity granted VAT exemption under the Tax Code, a special law or an international agreement to which the Philippines is a signatory, and by virtue of which its taxable transactions become exempt from VAT x x x.57
PEZA-registered enterprise, which would necessarily be located within ECOZONES, are VAT-exempt entities, not because of Section 24 of Rep. Act No. 7916, as amended, which imposes the five percent (5%) preferential tax rate on gross income of PEZA-registered enterprises, in lieu of all taxes; but, rather, because of Section 8 of the same statute which establishes the fiction that ECOZONES are foreign territory.
x x x x
The Philippine VAT system adheres to the Cross Border Doctrine, according to which, no VAT shall be imposed to form part of the cost of goods destined for consumption outside of the territorial border of the taxing authority. Hence, actual export of goods and services from the Philippines to a foreign country must be free of VAT; while, those destined for use or consumption within the Philippines shall be imposed with ten percent (10%) VAT.
Applying said doctrine to the sale of goods, properties, and services to and from the ECOZONES, the BIR issued Revenue Memorandum Circular (RMC) No. 74-99, on 15 October 1999. Of particular interest to the present Petition is Section 3 thereof, which reads -SECTION 3. Tax Treatment of Sales Made by a VAT Registered Supplier from the Customs Territory, to a PEZA Registered Enterprise. -
(1) If the Buyer is a PEZA registered enterprise which is subject to the 5% special tax regime, in lieu of all taxes, except real property tax, pursuant to R.A. No. 7916, as amended:
(a) Sale of goods (i.e., merchandise). - This shall be treated as indirect export hence, considered subject to zero percent (0%) VAT, pursuant to Sec. 106(A)(2)(a)(5), NIRC and Sec. 23 of R.A. No. 7916, in relation to ART. 77(2) of the Omnibus Investments Code.
(b) Sale of service. - This shall be treated subject to zero percent (0%) VAT under the "cross border doctrine" of the VAT System, pursuant to VAT Ruling No. 032-98 dated Nov. 5, 1998.
(2) If Buyer is a PEZA registered enterprise which is not embraced by the 5% special tax regime, hence, subject to taxes under the NIRC, e.g., Service Establishments which are subject to taxes under the NIRC rather than the 5% special tax regime:
(a) Sale of goods (i.e., merchandise). - This shall be treated as indirect export hence, considered subject to zero percent (0%) VAT, pursuant to Sec. 106(A)(2)(a)(5), NIRC and Sec. 23 of R.A. No. 7916 in relation to ART. 77(2) of the Omnibus Investments Code.
(b) Sale of Service. - This shall be treated subject to zero percent (0%) VAT under the "cross border doctrine" of the VAT System, pursuant to VAT Ruling No. 032-98 dated Nov. 5, 1998.
(3) In the final analysis, any sale of goods, property or services made by a VAT registered supplier from the Customs Territory to any registered enterprise operating in the ecozone, regardless of the class or type of the latter's PEZA registration, is actually qualified and thus legally entitled to the zero percent (0%) VAT. Accordingly, all sales of goods or property to such enterprise made by a VAT registered supplier from the Customs Territory shall be treated subject to 0% VAT, pursuant to Sec. 106(A)(2)(a)(5), NIRC, in relation to ART. 77(2) of the Omnibus Investments Code, while all sales of services to the said enterprises, made by VAT registered suppliers from the Customs Territory, shall be treated effectively subject to the 0% VAT, pursuant to Section 108(B)(3), NIRC, in relation to the provisions of R.A. No. 7916 and the "Cross Border Doctrine" of the VAT system.
This Circular shall serve as a sufficient basis to entitle such supplier of goods, property or services to the benefit of the zero percent (0%) VAT for sales made to the aforementioned ECOZONE enterprises and shall serve as sufficient compliance to the requirement for prior approval of zero-rating imposed by Revenue Regulations No. 7-95 effective as of the date of the issuance of this Circular.
Indubitably, no output VAT may be passed on to an ECOZONE enterprise since it is a VAT-exempt entity.x x x.58
According to the old rule, Section 23 of Rep. Act No. 7916, as amended, gives the PEZA-registered enterprise the option to choose between two sets of fiscal incentives: (a) The five percent (5%) preferential tax rate on its gross income under Rep. Act No. 7916, as amended; and (b) the income tax holiday provided under Executive Order No. 226, otherwise known as the Omnibus Investment Code of 1987, as amended.
The five percent (5%) preferential tax rate on gross income under Rep. Act No. 7916, as amended, is in lieu of all taxes. Except for real property taxes, no other national or local tax may be imposed on a PEZA-registered enterprise availing of this particular fiscal incentive, not even an indirect tax like VAT.
Alternatively, Book VI of Exec. Order No. 226, as amended, grants income tax holiday to registered pioneer and non-pioneer enterprises for six-year and four-year periods, respectively. Those availing of this incentive are exempt only from income tax, but shall be subject to all other taxes, including the ten percent (10%) VAT.
This old rule clearly did not take into consideration the Cross Border Doctrine essential to the VAT system or the fiction of the ECOZONE as a foreign territory. It relied totally on the choice of fiscal incentives of the PEZA-registered enterprise. Again, for emphasis, the old VAT rule for PEZA-registered enterprises was based on their choice of fiscal incentives: (1) If the PEZA-registered enterprise chose the five percent (5%) preferential tax on its gross income, in lieu of all taxes, as provided by Rep. Act No. 7916, as amended, then it would be VAT-exempt; (2) If the PEZA-registered enterprise availed of the income tax holiday under Exec. Order No. 226, as amended, it shall be subject to VAT at ten percent (10%). Such distinction was abolished by RMC No. 74-99, which categorically declared that all sales of goods, properties, and services made by a VAT-registered supplier from the Customs Territory to an ECOZONE enterprise shall be subject to VAT, at zero percent (0%) rate, regardless of the latter's type or class of PEZA registration; and, thus, affirming the nature of a PEZA-registered or an ECOZONE enterprise as a VAT-exempt entity.60
Sec. 4.102-2. Zero-rating. - (a) In general. - A zero-rated sale by a VAT-registered person, which is a taxable transaction for VAT purposes, shall not result in any output tax. However, the input tax on his purchases of goods, properties or services related to such zero-rated sale shall be available as tax credit or refund in accordance with these regulations.
Q-5:Under Revenue Memorandum Circular (RMC) No. 74-99, purchases by PEZA-registered firms automatically qualify as zero-rated without seeking prior approval from the BIR effective October 1999.
1) Will the OSS-DOF Center still accept applications from PEZA-registered claimants who were allegedly billed VAT by their suppliers before and during the effectivity of the RMC by issuing VAT invoices/receipts?
x x x x
A-5(1):If the PEZA-registered enterprise is paying the 5% preferential tax in lieu of all other taxes, the said PEZA-registered taxpayer cannot claim TCC or refund for the VAT paid on purchases. However, if the taxpayer is availing of the income tax holiday, it can claim VAT credit provided:
- The taxpayer-claimant is VAT-registered;
- Purchases are evidenced by VAT invoices or receipts, whichever is applicable, with shifted VAT to the purchaser prior to the implementation of RMC No. 74-99; and
- The supplier issues a sworn statement under penalties of perjury that it shifted the VAT and declared the sales to the PEZA-registered purchaser as taxable sales in its VAT returns.
For invoices/receipts issued upon the effectivity of RMC No. 74-99, the claims for input VAT by PEZA-registered companies, regardless of the type or class of PEZA-registration, should be denied. (Emphases ours.)
Section 103(q) of the Tax Code of 1977, as amended, relied upon by petitioner CIR, relates to VAT-exempt transactions. These are transactions exempted from VAT by special laws or international agreements to which the Philippines is a signatory. Since such transactions are not subject to VAT, the sellers cannot pass on any output VAT to the purchasers of goods, properties, or services, and they may not claim tax credit/refund of the input VAT they had paid thereon.
Section 103(q) of the Tax Code of 1977, as amended, cannot apply to transactions of respondent Toshiba because although the said section recognizes that transactions covered by special laws may be exempt from VAT, the very same section provides that those falling under Presidential Decree No. 66 are not. Presidential Decree No. 66, creating the Export Processing Zone Authority (EPZA), is the precursor of Rep. Act No. 7916, as amended, under which the EPZA evolved into the PEZA. Consequently, the exception of Presidential Decree No. 66 from Section 103(q) of the Tax Code of 1977, as amended, extends likewise to Rep. Act No. 7916, as amended.61 (Emphasis ours.)
Jurisprudence has consistently shown that this Court accords the findings of fact by the CTA with the highest respect. In Sea-Land Service Inc. v. Court of Appeals [G.R. No. 122605, 30 April 2001, 357 SCRA 441, 445-446], this Court recognizes that the Court of Tax Appeals, which by the very nature of its function is dedicated exclusively to the consideration of tax problems, has necessarily developed an expertise on the subject, and its conclusions will not be overturned unless there has been an abuse or improvident exercise of authority. Such findings can only be disturbed on appeal if they are not supported by substantial evidence or there is a showing of gross error or abuse on the part of the Tax Court. In the absence of any clear and convincing proof to the contrary, this Court must presume that the CTA rendered a decision which is valid in every respect.
Endnotes:
1 Rollo, pp. 11-32.
2 Penned by Associate Justice Rodrigo V. Cosico with Associate Justices Buenaventura J. Guerrero and Perlita J. Tria Tirona, concurring; rollo, pp. 35- 52.
3 Id. at 54-55.
4 Penned by Associate Judge Amancio Q. Saga with Presiding Judge Ernesto D. Acosta and Associate Judge Ramon O. De Veyra, concurring; rollo, pp. 83-92.
5 Rollo, p. 12.
6 Exhibit "A," Folder of Exhibits "A-I" of Toshiba.
7 Records, p. 7.
8 Exhibits "B" and "C," Folder of Exhibits "A-I" of Toshiba.
9 Toshiba declared P3,320,034.44 and P555,105.21 of input VAT payments for the first and second quarters or 1997, respectively.
10 Exhibits "B-1" and "C-1," Folder of Exhibits "A-I" of Toshiba.
11 Toshiba reported P2,083,305,000.00 and P5,411,372,000.00 of zero-rated sales for the first and second quarters of 1997, respectively.
12 Records, pp. 10-13.
13 Toshiba claimed in its applications for refund/credit P3,268,682.34 and P416,764.39 of local input VAT for the first and second quarters of 1997, respectively.
14 Records, pp. 1-5.
15 Republic Act No. 8424, otherwise known as the Tax Code of 1997, took effect only on January 1, 1998. Prior to said date, Presidential Decree No. 1158, otherwise known as the Tax Code of 1977, as amended, was in effect. According to Section 230 of the Tax Code of 1977, as amended:Sec. 230. Recovery of tax erroneously or illegally collected. - No suit or proceeding shall be maintained in any court for the recovery of any national internal revenue tax hereafter alleged to have been erroneously or illegally assessed or collected, or of any penalty claimed to have been collected without authority, or of any sum alleged to have been excessive or in any manner wrongfully collected, until a claim for refund or credit has been duly filed with the Commissioner; but such suit or proceeding may be maintained, whether or not such tax, penalty, or sum has been paid under protest or duress.
In any case, no such suit or proceeding shall be begun after the expiration of two years from the date of payment of the tax or penalty regardless of any supervening cause that may arise after payment: Provided, however, That the Commissioner may, even without a written claim therefor, refund or credit any tax, where on the face of the return upon which payment was made, such payment appears clearly to have been erroneously paid. (Emphasis ours.)
16 As amended by Republic Act No. 7716, bearing the title "An Act Restructuring the Value Added Tax (VAT) System, Widening its Tax Base and Enhancing its Administration and for These Purposes Amending and Repealing the Relevant Provisions of the National Internal Revenue Code, As Amended, and For Other Purposes."
17 Records, p. 5.
18 Id. at 20-22.
19 Id. at 21.
20 Id. at 33.
21 Id. at 34-35.
22 Id.
23 Id. at 35.
24 Id. at 91-92.
25 Id. at 99-100.
26 Id. at 89-95.
27 Otherwise known as The Special Economic Zone Act of 1995, as amended by Republic Act No. 8748.
28 Signed by Presiding Judge Ernesto D. Acosta and Associate Judges Amancio Q. Saga and Ramon O. de Veyra. Rollo, pp. 103-106.
29 Rollo, pp. 107-118.
30 Id. at 52.
31 Id. at 147-163.
32 Id. at 17-18.
33 Id. at 30.
34 The RCTA was promulgated on September 10, 1955, following the enactment on June 16, 1954 of Republic Act No. 1125, otherwise known as An Act Creating the Court of Appeals. Republic Act No. 9282, which was enacted on March 30, 2004, amended Republic Act No. 1125 by expanding the jurisdiction of the CTA, elevating the same to the level of a collegiate court with special jurisdiction, and enlarging its membership. Accordingly, the Court approved on November 25, 2005 the Revised Rules of the Court of Tax Appeals (RRCTA). Thereafter, Republic Act No. 9503, which was enacted on June 12, 2008, further amended Republic Act No. 1125 by enlarging the organization structure of the CTA. As a result, the Court approved on September 16, 2008 the amendments to the 2005 RRCTA.
35 Rule 16 of the RCTA is reproduced in full below:RULE 16
APPLICABILITY OF THE RULES OF THE COURT OF FIRST INSTANCE
SECTION 1. The provisions of the Rules of Court applicable to proceedings before the Courts of First Instance shall, insofar as they may not be inconsistent with the provisions of Republic Act No. 1125 and of these rules, be applicable to cases pending before this Court, except that, in any case pending before it, the Court may, in the exercise of its discretion, fix a shorter period for the filing of pleadings and papers.
Under Batas Pambansa Blg. 129, otherwise known as The Judiciary Reorganization Act of 1980, the Court of First Instance became the Regional Trial Court.
36 Records, pp. 29-32.
37 Resolution dated May 10, 2000, signed by Presiding Judge Ernesto D. Acosta and Associate Judges Amancio Q. Saga and Ramon O. de Veyra; id. at 72.
38 Rollo, p. 85.
39 Director of Lands v. Court of Appeals, 363 Phil. 117, 128 (1999).
40 Commissioner of Internal Revenue v. A. Soriano Corporation, 334 Phil. 965, 972 (1997).
41 Land Bank of the Philippines v. Natividad, 497 Phil. 738, 744-745 (2005).
42 Records, p. 33.
43 Signed by Presiding Judge Ernesto D. Acosta and Associate Judges Amancio Q. Saga and Ramon O. De Veyra, id. at 36.
44 Tiu v. Middleton, 369 Phil. 829, 835 (1999).
45 SCC Chemicals Corporation v. Court of Appeals, 405 Phil. 514, 522-523 (2001).
46 Garcia v. Court of Appeals, 327 Phil. 1097, 1113 (1996).
47 Records, p. 34.
48 Id.
49 Rollo, p. 49.
50 Id. at 51.
51 Rule 131, Section 3(m) of the Rules of Court.
52 Rollo, pp. 49-50.
53 Filed by the parties on July 7, 1999.
54 Filed by the CIR on May 11, 1999.
55 G.R. No. 150154, August 9, 2005, 466 SCRA 211, 230-231.
56 SEC. 106. Refunds or tax credits of creditable input tax. -
x x x x
(b) Capital goods. - A VAT-registered person may apply for the issuance of a tax credit certificate or refund of 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.
57 Commissioner of Internal Revenue v. Toshiba Information Equipment (Phils.) Inc., supra note 55 at 222-223, citing Commissioner of Internal Revenue v. Seagate Technology (Philippines), 491 Phil. 317, 335 (2005).
58 Commissioner of Internal Revenue v. Toshiba Information Equipment (Phils.) Inc., id. at 223-226.
59 Id. at 229-230.
60 Id. at 230-231.
61 Id. at 223.
62 SECTION 4.104-5. Substantiation of claims for input tax credit. - (a) Input taxes shall be allowed only if the domestic purchase of goods, properties or services is made in the course of trade or business. The input tax should be supported by an invoice or receipt showing the information as required under Sections 108(a) and 237 of the Code. Input tax on purchases of real property should be supported by a copy of the public instrument, i.e., deed of absolute sale, deed of conditional sale, contract/agreement to sell, etc., together with the VAT receipt issued by the seller.
A cash register machine tape issued to a VAT-registered buyer by a VAT-registered seller from a machine duly registered with the BIR in lieu of the regular sales invoice, shall constitute valid proof of substantiation of tax credit only if the name and TIN of the purchaser is indicated in the receipt and authenticated by a duly authorized representative of the seller.
(b) Input tax on importations shall be supported with the import entry or other equivalent document showing actual payment of VAT on the imported goods.
(c) Presumptive input tax shall be supported by an inventory of goods as shown in a detailed list to be submitted to the BIR.
(d) Input tax on "deemed sale" transactions shall be substantiated with the required invoices.
(e) Input tax from payments made to non-residents shall be supported by a copy of the VAT declaration/return filed by the resident licensee/lessee in behalf of the non-resident licensor/lessor evidencing remittance of the VAT due.
63 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) A statement that the seller is a VAT-registered person, followed by his taxpayer's identification number (TIN); and
(2) The total amount which the purchaser pays or is obligated to pay to the seller with the indication that such amount includes the value-added tax.
(b) Accounting requirements. - Notwithstanding the provision of Section 223, all persons subject to the value-added tax under Sections 100 and 102 shall, in addition to the regular accounting records required, maintain a subsidiary sales journal and subsidiary purchase journal on which the daily sales and purchases are recorded. The subsidiary journals shall contain such information as may be required by the Secretary of Finance.
64 SEC. 238. Issuance of receipts or sales or commercial invoices. - All persons subject to an internal revenue tax shall, for each sale or transfer of merchandise or for services rendered valued at P25.00 or more, issue duly registered receipts or sales or commercial invoices, prepared at least in duplicate, showing the date of transaction, quantity, unit cost and description of merchandise or nature of service: Provided, however, That in the case of sales, receipts or transfers in the amount of P100.00 or more, or, regardless of amount, where the sale or transfer is made by a person liable to value-added tax to another person also liable to value-added tax; or where the receipt is issued to cover payment made as rentals, commissions, compensations or fees, receipts or invoices shall be issued which shall show the name, business style, if any, and address of the purchaser, customer, or client: Provided, further, That where the purchaser is a VAT-registered person, in addition to the information herein required the invoice or receipt shall further show the taxpayer's identification number of the purchaser.
The original of each receipt or invoice shall be issued to the purchaser, customer or client at the time the transaction is effected, who, if engaged in business or in the exercise of profession, shall keep and preserve the same in his place of business for a period of 3 years from the close of the taxable year in which such invoice or receipt was issued while the duplicate shall be kept and preserved by the issuer, also in his place of business for a like period.
The Commissioner may, in meritorious cases exempt any person subject to an internal revenue tax from compliance with the provisions of this section.
65 Commissioner of Internal Revenue v. Cebu Toyo Corporation, 491 Phil. 625, 640 (2005).
66 G.R. No. 150764, August 7, 2006, 498 SCRA 126, 135-136.