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SILICON PHILIPPINES v. CIR

FACTS:

FACTS

The petitioner, a corporation engaged in designing, developing, manufacturing, and exporting integrated circuit components, reported zero-rated sales in its 2nd, 3rd, and 4th Quarter VAT Returns for taxable year 2001. It then filed an application for tax credit/refund in order to recover the VAT it paid on imported capital goods for the said quarters.

Because of the respondent's inaction on the administrative claims for tax credit/refund, the petitioner filed separate petitions for review before the CTA. However, the CTA Second Division dismissed the petitions for lack of merit, stating that the petitioner failed to provide evidence to support its zero-rated export sales and capital goods purchases.

The CTA En Banc upheld the decision of the CTA Second Division. It emphasized that in order to prove capital goods purchases, the petitioner needed to present detailed general ledgers, audited financial statements, and income tax returns, which it failed to do. The CTA En Banc also denied the petitioner's motion for reconsideration.

This led to the filing of the present petition before the Supreme Court.

ISSUES:

  1. Whether the Court of Tax Appeals erred in denying petitioner's claim for refund of its excess/unutilized input VAT derived from importation of capital goods due to its failure to prove the existence of zero-rated export sales.

  2. Whether the Court of Tax Appeals erred in finding that petitioner failed to comply with the requirements of a valid claim for refund/tax credit of input VAT paid on its importation of capital goods.

  3. Whether the Court of Tax Appeals erred in ruling that petitioner failed to prove that the goods imported are capital goods.

  4. Whether the input VAT on the alleged non-capital goods are still refundable because they are attributable to the zero-rated sales of petitioner, a 100% export enterprise.

RULING:

  1. The Court of Tax Appeals (CTA) denied petitioner's claim for tax refund or issuance of tax credit certificates corresponding to its excess/unutilized input VAT for the 2nd, 3rd and 4th quarters of 2001. The CTA found that petitioner failed to prove that its reported export sales qualified as zero-rated sales and also failed to prove that its purchases were capital goods. The CTA's rulings were affirmed by the CTA En Banc. Thus, the CTA's denial of petitioner's claim for refund was upheld.

PRINCIPLES:

  • To claim refund/tax credit of unutilized input VAT, it must be shown that the excess input VAT is attributable to zero-rated or effectively zero-rated sales. (Section 112 of the National Internal Revenue Code)

  • A taxpayer claiming refund/tax credit of input VAT on purchased capital goods must prove that it is a VAT-registered entity, paid input VAT on capital goods purchased, input VAT payments were duly supported by VAT invoices or official receipts, did not offset or apply the claimed input VAT against any output VAT liability, and filed the administrative and judicial claims within the two-year prescriptive period. (Section 112 of the National Internal Revenue Code)

  • In order to prove zero-rated export sales, a VAT-registered person must present the sales invoice, export declaration or bill of lading/airway bill, and bank credit advice or certificate of remittance or other documents proving payment.

  • Capital goods are those goods or properties with an estimated useful life of more than one year, treated as depreciable assets under Revenue Regulations No. 7-95, and used directly or indirectly in the production or sale of taxable goods or services. The treatment of goods as capital goods can be determined through the examination of detailed general ledgers, audited financial statements, and income tax returns.