Case Digest: COMMISSIONER OF INTERNAL REVENUE v. MANILA MINING CORPORATION 468 SCRA 571 (2005)

COMMISSIONER OF INTERNAL REVENUE v. MANILA MINING CORPORATION 468 SCRA 571 (2005)

For a judicial claim for refund to prosper, the party must not only prove that it is a VAT registered entity, it must substantiate the input VAT paid by purchase invoices or official receipts.

Respondent Manila Mining Corporation (MMC), a VAT-registered enterprise, filed its VAT Returns for the year of 1991 with the BIR. MMC, relying on Sec. 2 of Executive Order (E.O.) 581 as amended which provides that gold sold to the Central Bank is considered an export sale which under Section 100(a)(1) of the NIRC, as amended by E.O. 273, is subject to zero-rated if such sale is made by a VAT-registered person, filed an application for tax refund/credit of the input VAT it paid from such year. The Commissioner of Internal Revenue (CIR) failed to act upon MMC’s application within sixty (60) days from the dates of filing. MMC was then filed a Petition for Review against the CIR before the Court of Tax Appeals (CTA) seeking the issuance of tax credit certificate or refund. The CIR specifically denied the veracity of the amounts stated in MMC’s VAT returns and application for credit/refund as the same continued to be under investigation. However, such was not verified prompting MMC to file a “SUPPLEMENT (To Annotation of Admission)” alleging that as the reply was not under oath, “an implied admission of its requests arose” as a consequence thereof. The CTA granted MMC’s Request for Admissions and denied the CIR’s Motion to Admit Reply. The CTA denied MMC’s claim for refund of input VAT for failure to prove that it paid the amounts claimed as such for the year 1991, no sales invoices, receipts or other documents as required having been presented. Upon appeal of MMC to the Court of Appeals (CA), it reversed the decision of the CTA and granted MMC’s claim for refund or issuance of tax credit certificates on the ground that there was no need for MMC to present the photocopies of the purchase invoices or receipts evidencing the VAT paid and the best evidence rule is misplaced since this rule does not apply to matters which have been judicially admitted. 

ISSUE:

Whether or not MMC adduced sufficient evidence to prove its claim for refund of its input VAT for taxable year 1991.

HELD:

As export sales, the sale of gold to the Central Bank is zero-rated, hence, no tax is chargeable to it as purchaser. Zero rating is primarily intended to be enjoyed by the seller – MMC, which charges no output VAT but can claim a refund of or a tax credit certificate for the input VAT previously charged to it by suppliers. For a judicial claim for refund to prosper, however, MMC must not only prove that it is a VAT registered entity and that it filed its claims within the prescriptive period. It must substantiate the input VAT paid by purchase invoices or official receipts. It is required that a photocopy of the purchase invoice or receipt evidencing the value added tax paid shall be submitted together with the application. This MMC failed to do.