VAT CASES:

TOSHIBA INFORMATION EQUIPMENT (PHILS.), INC. vs

COMMISSIONER OF INTERNAL REVENUE
G.R. No. 157594
March 9, 2010
In this Petition for Review on Certiorari under Rule 45 of the Rules of Court,
petitioner Toshiba Information Equipment (Philippines), Inc. (Toshiba) seeks the
reversal and setting aside of (1) the Decision dated August 29, 2002 of the Court
of Appeals in CA-G.R. SP No. 63047, which found that Toshiba was not entitled
to the credit/refund of its unutilized input Value-Added Tax (VAT) payments
attributable to its export sales, because it was a tax-exempt entity and its export
sales were VAT-exempt transactions; and (2) the Resolution dated February 19,
2003 of the appellate court in the same case, which denied the Motion for
Reconsideration of Toshiba. The herein assailed judgment of the Court of
Appeals reversed and set aside the Decision dated October 16, 2000 of the
Court of Tax Appeals (CTA) in CTA Case No. 5762 granting the claim for
credit/refund of Toshiba in the amount of P1,385,282.08. Toshiba is a domestic
corporation principally engaged in the business of manufacturing and exporting
of electric machinery, equipment systems, accessories, parts, components,
materials and goods of all kinds, including those relating to office automation and
information technology and all types of computer hardware and software, such as
but not limited to HDD-CD-ROM and personal computer printed circuit board. It is
registered with the Philippine Economic Zone Authority (PEZA) as an Economic
Zone (ECOZONE) export enterprise in the Laguna Technopark, Inc. In its VAT
returns for the first and second quarters of 1997, filed on April 14, 1997 and July
21, 1997, respectively, Toshiba declared input VAT payments on its domestic
purchases of taxable goods and services in the aggregate sum of P3,875,139.65,
with no zero-rated sales. Toshiba subsequently submitted to the BIR on July 23,
1997 its amended VAT returns for the first and second quarters of 1997, reporting
the same amount of input VAT payments but, this time, with zero-rated sales
totalingP7,494,677,000.00.
The CIR contended that under Section 24 of Republic Act No. 7916, a special
law, all businesses and establishments within the ECOZONE were to remit to the
government five percent (5%) of their gross income earned within the zone, in
lieu of all taxes, including VAT. This placed Toshiba within the ambit of Section
103(q) of the Tax Code of 1977, as amended, which exempted from VAT the
transactions that were exempted under special laws. Following Section 4.1031(A) of Revenue Regulations No. 7-95, the VAT-exemption of Toshiba meant that
its sale of goods was not subject to output VAT and Toshiba as seller was not
allowed any tax credit on the input VAT it had previously paid. Toshiba filed a
Motion for Reconsideration of the aforementioned Decision, anchored on the
following arguments: (a) the CIR never raised as an issue before the CTA that
Toshiba was tax-exempt under Section 24 of Republic Act No. 7916; (b) Section

24 of Republic Act No. 7916, subjecting the gross income earned by a PEZAregistered enterprise within the ECOZONE to a preferential rate of five percent
(5%), in lieu of all taxes, did not apply to Toshiba, which availed itself of the
income tax holiday under Section 23 of the same statute; (c) the conclusion of
the CTA that the export sales of Toshiba were zero-rated was supported by
substantial evidence, other than the admission of the CIR in the Joint Stipulation
of Facts and Issues; and (d) the judgment of the CTA granting the refund of the
input VAT payments was supported by substantial evidence and should not have
been set aside by the Court of Appeals.
In a Resolution dated February 19, 2003, the Court of Appeals denied the Motion
for Reconsideration of Toshiba since the arguments presented therein were mere
reiterations of those already passed upon and found to be without merit by the
appellate court in its earlier Decision. The Court of Appeals, however, mentioned
that it was incorrect for Toshiba to say that the issue of the applicability of Section
24 of Republic Act No. 7916 was only raised for the first time on appeal before
the appellate court. The said issue was adequately raised by the CIR in his
Motion for Reconsideration before the CTA, and was even ruled upon by the tax
court.
ISSUE:
Whether the CA erred when it failed to dismiss outright and gave due course to
CIRs petition notwithstanding CIRs failure to adequately raise in issue
during the trial in the Court of Tax Appeals the applicability os section 24 of R.A.
7916 to Toshibas claim for refund.
HELD:
It is axiomatic in pleadings and practice that no new issue in a case can be
raised in a pleading which by due diligence could have been raised in previous
pleadings. The Court cannot simply grant the plea of the CIR that the procedural
rules be relaxed based on the general averment of the interest of substantive
justice. It should not be forgotten that the first and fundamental concern of the
rules of procedure is to secure a just determination of every action. Procedural
rules are designed to facilitate the adjudication of cases. Courts and litigants
alike are enjoined to abide strictly by the rules. While in certain instances, the
Court allows a relaxation in the application of the rules, it never intends to forge a
weapon for erring litigants to violate the rules with impunity. The liberal
interpretation and application of rules apply only in proper cases of demonstrable
merit and under justifiable causes and circumstances.
Pre-trial is an answer to the clarion call for the speedy disposition of cases.
Although it was discretionary under the 1940 Rules of Court, it was made
mandatory under the 1964 Rules and the subsequent amendments in 1997. It
has been hailed as the most important procedural innovation in Anglo-Saxon
justice in the nineteenth century. The admission having been made in a
stipulation of facts at pre-trial by the parties, it must be treated as a judicial

admission. Under Section 4, Rule 129 of the Rules of Court, a judicial admission
requires no proof. The admission may be contradicted only by a showing that it
was made through palpable mistake or that no such admission was made. The
Court cannot lightly set aside a judicial admission especially when the opposing
party relied upon the same and accordingly dispensed with further proof of the
fact already admitted. An admission made by a party in the course of the
proceedings does not require proof. In the instant case, among the facts
expressly admitted by the CIR and Toshiba in their CTA- approved Joint
Stipulation are that Toshiba is a duly registered value- added tax entity in
accordance with Section 107 of the Tax Code, as amended[,] that 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. The CIR was bound by
these admissions, which he could not eventually contradict in his Motion for
Reconsideration of the CTA Decision dated October 16, 2000, by arguing that
Toshiba was actually a VAT-exempt entity and its export sales were VAT-exempt
transactions. Obviously, Toshiba could not have been subject to VAT and exempt
from VAT at the same time. Similarly, the export sales of Toshiba could not have
been subject to zero percent (0%) VAT and exempt from VAT as well.
G.R. No. 178090
PANASONIC COMMUNICATIONS IMAGING CORPORATION OF THE
PHILIPPINES (formerly MATSUSHITA BUSINESS MACHINE
CORPORATION OF THE PHILIPPINES) vs. COMMISSIONER OF
INTERNAL REVENUE
Facts:
Issue:
Ruling:
GR No. 181858 November 24, 2010
GR No. 7495 October 20, 2009
CTA No. 7012 March 12, 2009
CTA No. 7230 and 7299 November 20, 2009
G.R. No. 151135 July 2, 2004
CONTEX CORPORATION, petitioner,
vs.
HON. COMMISSIONER OF INTERNAL REVENUE, respondent.
As an SBMA-registered firm, Contex is exempt from all local and national internal
revenue taxes except for the preferential tax provided for in Section 12 (c) of

Rep. Act No. 7227. Cpntex also registered with the Bureau of Internal Revenue
( BIR) as a non-VAT taxpayer under a Certificate of Registration Contex
purchased various supplies and materials necessary in the conduct of its
manufacturing business. The suppliers of these goods shifted unto Contex the
10% VAT on the purchased items, which led the Contex to pay input taxes in the
amounts of P539,411.88 and P504,057.49 for 1997 and 1998, respectively Acting
on the belief that it was exempt from all national and local taxes, including VAT,
Contex filed two applications with RDO for tax refund or tax credit of the VAT it
paid. Revenue District Officer DENIED. Regional Director NO RESPONSE.
CTA PARTIAL GRANT. CTA ruled that Contex misread Sections 106(A)(2)(a)
and 112(A) of the Tax Code. These provisions apply only to those entities
registered as VAT taxpayers whose sales are zero-rated .Contex does not fall
under this category, since it is a non-VAT taxpayer as evidenced by the
Certificate of Registration. Nonetheless, the CTA held that the Contex is exempt
from the imposition of input VAT on its purchases of supplies and materials. It
pointed out that under Bases Conversion and Development Act of 1992 (RA
7227), all that Contex is required to pay as a SBFZ-registered enterprise is a 5%
preferential tax. The CTA also disallowed all refunds of input VAT paid prior to
June 29, 1997 for being barred by the two- year prescriptive period under Section
229 of the Tax Code. The tax court also limited the refund only to the input VAT
paid on the supplies and materials directly used in manufacture of its goods. It
struck down all claims for input VAT paid on maintenance, office supplies, freight
charges, and all materials and supplies shipped or delivered to the Contexs
Makati and Pasay City offices. CA REVERSED. CIR maintained that the
exemption of Contex under Rep. Act No. 7227 was limited only to direct taxes
and not to indirect taxes such as the input component of the VAT. The
Commissioner pointed out that from its very nature, the value-added tax is a
burden passed on by a VAT registered person to the end users; hence, the direct
liability for the tax lies with the suppliers and not Contex. Court of Appeals held
that the exemption from duties and taxes on the importation of raw materials,
capital, and equipment of SBFZ-registered enterprises under Rep. Act No. 7227
and its implementing rules covers only "the VAT imposable under Section 107 of
the [Tax Code], which is a direct liability of the importer, and in no way includes
the value-added tax of the seller-exporter the burden of which was passed on to
the importer as an additional costs of the goods." SC DENIED VAT is an
indirect tax. As such, the amount of tax paid on the goods, properties or services
bought, transferred, or leased may be shifted or passed on by the seller,
transferor, or lessor to the buyer, transferee or lessee. Unlike a direct tax, such
as the income tax, which primarily taxes an individuals ability to pay based on
his income or net wealth, an indirect tax, such as the VAT, is a tax on
consumption of goods, services, or certain transactions involving the same. The
VAT, thus, forms a substantial portion of consumer expenditures. Further, in
indirect taxation, there is a need to distinguish between the liability for the tax and
the burden of the tax. As earlier pointed out, the amount of tax paid may be
shifted or passed on by the seller to the buyer. What is transferred in such
instances is not the liability for the tax, but the tax burden. In adding or including

the VAT due to the selling price, the seller remains the person primarily and
legally liable for the payment of the tax. What is shifted only to the intermediate
buyer and ultimately to the final purchaser is the burden of the tax. Stated
differently, a seller who is directly and legally liable for payment of an indirect tax,
such as the VAT on goods or services is not necessarily the person who
ultimately bears the burden of the same tax. It is the final purchaser or consumer
of such goods or services who, although not directly and legally liable for the
payment thereof, ultimately bears the burden of the tax Exemptions from VAT are
granted by express provision of the Tax Code or special laws. Under VAT, the
transaction can have preferential treatment in the following ways: (a) VAT
Exemption. 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.T his is a
case wherein the VAT is removed at the exempt stage (i.e., at the point of the
sale, barter or exchange of the goods or properties). 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 (b) Zero-rated Sales. These are sales by
VAT-registered persons which are subject to 0% rate, meaning the tax burden is
not passed on to the purchaser. 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. Under Zero-rating, all VAT is removed from
the zero-rated goods, activity or firm. In contrast, exemption only removes the
VAT at the exempt stage, and it will actually increase, rather than reduce the total
taxes paid by the exempt firms business or non-retail customers. It is for this
reason that a sharp distinction must be made between zero-rating and exemption
in designating a value-added tax. Apropos, the Contexs claim to VAT exemption
in the instant case for its purchases of supplies and raw materials is founded
mainly on Section 12 (b) and (c) of Rep. Act No. 7227, which basically exempts
them from all national and local internal revenue taxes, including VAT and
Section 4 (A)(a) of BIR Revenue Regulations No. 1-95. On this point, Contex
rightly claims that it is indeed VAT-Exempt and this fact is not controverted by the
respondent. In fact, Contex is registered as a NON-VAT taxpayer per Certificate
of Registration issued by the BIR. As such, it is exempt from VAT on all its sales
and importations of goods and services. While it is true that the Contex should
not have been liable for the VAT inadvertently passed on to it by its supplier since
such is a zero-rated sale on the part of the supplier, the Contex is not the proper
party to claim such VAT refund. Since the transaction is deemed a zero-rated
sale, Contexs supplier may claim an Input VAT credit with no corresponding
Output VAT liability. Congruently, no Output VAT may be passed on to the
petitioner. Contex is registered as a NON-VAT taxpayer and thus, is exempt from
VAT. As an exempt VAT taxpayer, it is not allowed any tax credit on VAT (input

tax) previously paid. In fine, even if we are to assume that exemption from the
burden of VAT on petitioners purchases did exist, petitioner is still not entitled to
any tax credit or refund on the input tax previously paid as petitioner is an exempt
VAT taxpayer. Rather, it is the Contexs suppliers who are the proper parties to
claim the tax credit and accordingly refund the Contex of the VAT erroneously
passed on to the latter. Accordingly, we find that the Court of Appeals did not
commit any reversible error of law in holding that petitioners VAT exemption
under Rep. Act No. 7227 is limited to the VAT on which it is directly liable as a
seller and hence, it cannot claim any refund or exemption for any input VAT it
paid, if any, on its purchases of raw materials and supplies.
SILICON PHILIPPINES, INC. (formerly INTEL PHILIPPINES
MANUFACTURING, INC.) vs. COMMISSIONER OF INTERNAL REVENUE
Facts:
Division, petitioners claim for refund of unutilized input VAT on capital goods was granted.
Issues:
1.
2.
Ruling:
1.
correctly.
2.
of RR No. 7-95
SAN ROQUE POWER CORPORATION vs. COMMISSIONER OF
INTERNAL REVENUE
Facts:
power and energy for the Luzon Power Grid, by developing and operating the
San
responsible for the design, construction, installation, and completion and testing
and commissioning of the Power Station and it shall operate and maintain the
same, subject to the instructions of the NPC. During the cooperation period of 25
years commencing from the completion date of the Power Station, the NPC shall
purchase
exclusive nature of the PPA between petitioner and the NPC, the former applied
for and was granted five Certificates of Zero Rate by the BIR. For January to
December 2002, petitioner filed with the
Revenue
showing excess input VAT payments on account of its importation and domestic
purchases
administrative claims for refund of Unutilized Input VAT. Respondent failed to act
on the request for tax refund or credit of petitioner, which prompted the latter to
file with the CTA in Division, a Petition for Review. After a hearing on the merits,
the CTA Second Division denied petitioner's claim for tax refund or credit.
Issue:
Ruling:

To claim refund or tax credit petitioner must comply with the following criteria: (1)
the
rated or zero-rated sales; (3) the input taxes are due or paid; (4) the input taxes
are not transitional input taxes; (5) the input taxes have not been applied against
output taxes during and in the succeeding quarters; (6) the input taxes claimed
are attributable to zero-rated or effectively zero-rated sales; (7) for zero-rated
sales under Section 106 (A) (2) (1) and (2); 106 (B); and 108 (B) (1) and (2), the
acceptable foreign currency exchange proceeds have been duly accounted for in
accordance with BSP rules and regulations; (8) where there are both zero-rated
or effectively zero-rated sales and taxable or exempt sales, and the input taxes
cannot be directly and entirely attributable to any of these sales, the input taxes
shall be proportionately allocated on the basis of sales volume; and (9) the claim
is filed within two years after the close of the taxable quarter when such sales
were made.
San
bears
certain exempt entities, such as the NPC, from the burden of indirect tax so as to
encourage the development of particular industries.
CIR vs. Ironcon Builders and Development Corp.
G.R. No. 180042 , February 8, 2010
Facts:
by the Bureau of Internal Revenue (BIR) of its income tax overpayment and excess creditable
VAT. The Commissioner continued not to act on its claims which made Ironcon to bring it up to
CTA for review. CTA 2
nd
Division held that taxpayers have the option to either carry over the
excess credit or ask for a refund, as regards with the overpayment. Apparently, the respondent
filed two income tax returns for the year 2000, an original and an amended one. Although
Ironcons amended return indicated a preference for refund of the overpaid tax, the CTA ruled
that respondents original choice is regarded as irrevocable, pursuant to Sec.76 of R.A. No. 8424,
and moreover found out that Ironcon actually carried over the credit from the overpayment and
applied it to the tax due for 2001, and hence, denied Ironcons claim for the refund.
As to the claim for VAT refund, CTA found that by the end of 2000, respondent had
excess tax credit carried over from 1999, an allowable input tax and a 6% creditable VAT,
withheld and remitted by its clients, which are deductible from Ironcons total output VAT
liability of P20+M. The CTA ruled that respondent had no more output VAT against which the
excess creditable VAT withheld may be applied or credited, the VAT withheld had been
excessively paid. Because Ironcon did not present its VAT returns for the succeeding quarters of
2001, 2
nd
Division denied the refund. Upon MfR of respondent, now attaching the required VAT
returns, CTA then granted the application having found that Ironcon sufficiently proved that its
excess creditable VAT withheld was not carried over or applied to any input VAT for 2001. CIR
filed its own MfR for the amended decision, which CTA denied, and CTA en banc denied.
Petitioner CIRs main contention is that, since these amounts were withheld in
accordance with what the law provides, they cannot be regarded as erroneously or illegally
collected as contemplated in Sections 204(C) and 229 of the NIRC.Petitioner CIR also points out
that since the NIRC does not specifically grant taxpayers the option to refund excess creditable
VAT withheld, it follows that such refund cannot be allowed. Excess creditable VAT withheld is
much unlike excess income taxes withheld.
Issue:
Whether or not creditable VAT withheld from a taxpayer in excess of its output VAT
liability may be the subject of a tax refund in place of a tax credit.
Held:
In the latter case, Sections 76 and 58(D) of the NIRC specifically make the option to

seek a refund available to the taxpayer. The CIR submits thus that the only option available to
taxpayers in case of excess creditable VAT withheld is to apply the excess credits to succeeding
quarters. But the amounts involved in this case are creditable withholding taxes, not final taxes
subject to withholding. As the CTA correctly points out, taxes withheld on certain payments under
the creditable withholding tax system are but intended to approximate the tax due from the payee.
The withheld taxes remitted to the BIR are treated as deposits or advances on the actual tax
liability of the taxpayer, subject to adjustment at the proper time when the actual tax liability can
be fully and finally determined.
Even if the law does not expressly state that Ironcons excess creditable VAT withheld
is refundable, it may be the subject of a claim for refund as an erroneously collected tax under
Sections 204(C) and 229. Even if the law does not expressly state that Ironcons excess
creditable
VAT withheld is refundable, it may be the subject of a claim for refund as an erroneously
collected tax under Sections 204(C) and 229. The rule is that before a refund may be granted,
respondent Ironcon must show that it had not used the creditable amount or carried it over to
succeeding taxable quarters.
Substantial justice dictates that the government should not keep money that does not
belong to it at the expense of citizens. Since he ought to know the tax records of all taxpayers,
petitioner CIR could have easily disproved the claimants allegations.That he chose not to
amounts to a waiver of that right. Also, the CIR failed in this case to make a timely objection to or
comment on respondent Ironcons offer of the documents in question despite an opportunity to do
so.
11
Taking all these circumstances together, it was sufficiently proved that Ironcons excess
creditable VAT withheld was not carried over to succeeding taxable quarters.

AT&T COMMUNICATIONS SERVICES PHILIPPINES, INC. v. CIRG.R. No.

182364 August 3, 2010Carpio Morales, J.
Doctrine:
Section 113 of the Tax Code does not create a distinction between a sales
invoice and an official receipt.
Facts:
Petitioner filed with the respondent an application for tax refund and/or tax credit
of its excess/unutilized input VAT from zero-rated sales. To prevent the running of
the prescriptive period, petitioner subsequently filed a petition for review with the
CTA.
The CTA held that since petitioner is engaged in sale of services, VAT Official
Receipts should have been presented in order to substantiate its claim of zerorated sales, not VAT invoices which pertain to sale of goods or properties.
Issue:
Whether or not a Sales Invoice would suffice as a proof for entitlement to a
refund of unutilized input VAT from zero-rated sales, even for seller of services
Held:
Yes. Section 113 of the Tax Code does not create a distinction between a sales
invoice and an official receipt. Parenthetically, to determine the validity of
petitioners claim as to unutilized input VAT, an invoice would suffice provided the
requirements under Sections 113 and 237 of the Tax Code are met.
Sales invoices are recognized commercial documents to facilitate trade or credit
transactions. They are proofs that a business transaction has been concluded,
hence, should not be considered bereft of probative value (Seaoil Petroleum

Corporation v. Autocorp Group, G.R. No. 164326, October 17, 2008). Only the
preponderance of evidence threshold as applied in ordinary civil cases is needed
to substantiate a claim for tax refund proper (Commissioner of Internal Revenue
v. Mirant Pagbilao Corporation, G.R. No. 172129, September 12, 2008).
A taxpayer engaged in zero-rated transactions may apply for tax refund or
issuance of tax credit certificate for unutilized input VAT, subject to the following
requirements: (1) the taxpayer is engaged in sales which are zero-rated (i.e.,
export sales) or effectively zero-rated; (2) the taxpayer is VAT-registered; (3) the
claim must be filed within two years after the close of the taxable quarter when
such sales were made; (4) the creditable input tax due or paid must be
attributable to such sales, except the transitional input tax, to the extent that such
input tax has not been applied against the output tax; and (5) in case of zerorated sales, the acceptable foreign currency exchange proceeds thereof have
been duly accounted for in accordance with BSP rules and regulations.a.