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CIR v. MANILA MINING CORPORATION

FACTS:

Manila Mining Corporation (respondent) is a mining corporation registered under Philippine laws. It filed VAT returns and applications for tax refund/credit for its input VAT payments in 1991. Respondent relied on a letter from the BIR Deputy Commissioner, stating that gold sold to the Central Bank is considered an export sale and subject to zero-rated VAT. However, the CIR failed to act on respondent's applications within the prescribed period. As a result, respondent filed two separate petitions for review before the Court of Tax Appeals. The CIR filed answers and denied the veracity of the amounts stated in respondent's applications, as they were still under investigation.

Respondent filed a "Request for Admissions" and the CIR replied, denying the veracity and accuracy of the amounts. However, the CIR's reply was not verified, leading respondent to file a "SUPPLEMENT (To Annotation of Admission)" claiming that the reply was not under oath. The CIR subsequently filed a Motion to Admit Reply, stating that the previous reply was incomplete due to an oversight in the verification. The Court of Tax Appeals granted respondent's Request for Admissions and denied the CIR's Motion to Admit Reply.

The petitioner, respondent in the appeal, sold a total of 20,288.676 ounces of gold to the Central Bank of the Philippines in 1991. The petitioner claimed a refund of the value-added tax (VAT) it paid on its domestic purchases of goods and services for the 2nd semester of 1991, as well as the VAT paid for importation. The BIR denied the petitioner's claim, stating that the sales of gold to the Central Bank may not be considered export sales and that the petitioner failed to comply with the requirements under the Tax Code. The petitioner filed a petition for review with the Court of Tax Appeals (CTA).

The CTA admitted the petitioner's request for admission, except for those specifically denied by the BIR. The CTA consolidated the petitioner's case with another case involving the same parties and similar issues. The petitioner presented its evidence, including certification from the Director of the Mint and Refinery Department of the Central Bank and examination reports from its external auditor. The CTA held that the sales of gold to the Central Bank are not subject to VAT but denied the petitioner's claim for refund for failure to submit the required documents. The petitioner filed a motion for reconsideration, but it was denied. The petitioner appealed to the Court of Appeals (CA).

The CA reversed the decision of the CTA and granted the petitioner's claim for refund, stating that the petitioner was relieved of the burden of submitting the purchase invoices and receipts due to the BIR's failure to file a verified reply to the petitioner's request for admission.

In another dispute between the CIR and a taxpayer, the taxpayer failed to file a verified reply to the CIR's claim. The CIR argued that the taxpayer's failure to submit documentary evidence confirmed the veracity of its claims and that the CTA should not be expected to dig into the records of the BIR to supply insufficient evidence. The taxpayer contended that it complied with the relevant regulations by submitting original receipts and invoices to the BIR, which was deemed admitted by the petitioner.

ISSUES:

    • Whether the respondent adduced sufficient evidence to prove its claim for refund of its input VAT
    • Whether the submission of original receipts and invoices to the Bureau of Internal Revenue (BIR) is sufficient to prove entitlement to input tax credit

  3. Whether the purchase invoices or receipts submitted to the BIR have evidentiary value in proving input VAT payments.

  4. Whether the certification of the independent CPA attesting to the correctness of the contents of the summary of suppliers' invoices or receipts is sufficient evidence of input VAT payments.

  5. Whether the Court of Tax Appeals (CTA) has the authority to require pre-marking of invoices, receipts, and other documents.

  6. Whether the CTA's conclusion on the taxpayer's claim for input VAT refund is supported by substantial evidence.

  7. Whether the CTA should admit respondent's Request for Admission as proof of its input VAT payments.

RULING:

  1. The Court ruled in favor of the petitioner. The respondent failed to provide sufficient evidence to substantiate its claim for refund of input VAT. While the respondent submitted original receipts and invoices to the BIR, it failed to present these documents to the Court of Tax Appeals (CTA) to prove its entitlement to input tax credit. It is not enough for the respondent to rely on a certification by an independent CPA; it must present the invoices, receipts, and other supporting documents to show the input VAT paid on its purchases.

  2. The purchase invoices or receipts submitted to the BIR do not have evidentiary value in proving input VAT payments. The rules on documentary evidence require that these documents must be formally offered before the Court of Tax Appeals (CTA). Since the CTA is a court of record and cases are litigated de novo, party litigants should prove every minute aspect of their cases.

  3. The certification of the independent CPA attesting to the correctness of the contents of the summary of suppliers' invoices or receipts is not sufficient evidence of input VAT payments. CTA Circular No. 1-95, as amended by CTA Circular No. 10-97, requires the presentation of summaries containing the total amount/s of the tax account or tax paid and a chronological or numerical list of the invoices or receipts. It also requires a certification of an independent CPA attesting to the correctness of the contents of the summary after an examination and evaluation of the voluminous receipts and invoices. However, the circular does not suggest that summaries and schedules of input VAT payments, even if certified by an independent CPA, suffice as evidence of input VAT payments. The original receipts and invoices should be ready for verification and comparison in case of doubts on their authenticity.

  4. The CTA has the authority to require pre-marking of invoices, receipts, and other documents. The pre-marking of documents is necessary for the CTA to ascertain and verify the truth of the taxpayer's claims.

  5. The CTA's conclusion on the taxpayer's claim for input VAT refund is supported by substantial evidence. Respondent failed to substantiate its claim for the first semester of 1991 by not providing any evidence other than its own summary and schedules of input VAT payments. As for the claim for the second semester of 1991, the certification provided by Joaquin Cunanan & Co. was deemed insufficient as it did not specify that the input tax payments are attributable to the sales of gold to the Central Bank.

  6. The CTA should not admit respondent's Request for Admission as proof of its input VAT payments. The requests for admission were mere reproductions of what has already been alleged in respondent's petitions, and petitioner already denied them in its Answers. Admissions through requests for admission should clarify or shed light on the truth or falsity of the allegations, and not be redundant.

PRINCIPLES:

  • In claiming a judicial refund of input VAT, the taxpayer must prove that it is a VAT-registered entity, filed its claims within the prescriptive period, and substantiate the input VAT paid by purchase invoices or official receipts.

  • The submission of original receipts and invoices to the BIR does not automatically establish entitlement to input tax credit; these documents must also be presented to the CTA as evidence of a claim for refund.

  • The CTA, being a court of record, cannot supply insufficient evidence presented by a party; it can only consider evidence formally presented before it.

  • Judicial claims for refund of input VAT must comply with the requirements set forth in Revenue Regulation No. 3-88, which include the submission of photocopies of the purchase invoices or receipts evidencing the VAT paid.

  • The Court of Tax Appeals (CTA) is a court of record and cases are litigated de novo, requiring party litigants to prove every minute aspect of their cases.

  • Purchase invoices or receipts must be formally offered before the CTA to have evidentiary value.

  • A certification of an independent CPA is not sufficient evidence of input VAT payments. The summaries and schedules of input VAT payments, even if certified by an independent CPA, require the pre-marking of photocopies of receipts and invoices for verification and comparison with the originals.

  • Photocopies of receipts, invoices, or other documents must be pre-marked by the party concerned and submitted to the court in order to be accessible to the adverse party for verification and comparison. The originals should be ready for verification and comparison in case of doubts on their authenticity.

  • The CTA has the authority to require pre-marking of invoices, receipts, and other documents to verify the truth of a taxpayer's claims.

  • A claim for refund should be construed strictly against the taxpayer and liberally in favor of the taxing authority.

  • Admissions through requests for admission should not be redundant and should shed light on the truth or falsity of allegations in a pleading.