Case Digest (G.R. No. 125986)
Facts:
Coral Bay Nickel Corporation, a VAT-registered domestic corporation engaged in nickel/cobalt manufacture, operated within the Rio Tuba Export Processing Zone and obtained PEZA registration on December 27, 2002. It filed an Amended VAT Return on August 5, 2003 and an Application for Tax Credits/Refund (BIR Form 1914) on June 14, 2004 claiming unutilized input tax of P50,124,086.75 for the third and fourth quarters of 2002.
After the CTA Division denied the claim on March 10, 2008 and the CTA En Banc denied reconsideration on May 29, 2009, the petitioner appealed to the Supreme Court.
Issues:
- Was Coral Bay Nickel Corporation entitled to refund or credit of unutilized input taxes incurred before it became a PEZA-registered enterprise?
Ruling:
The petition was given due course despite its early filing under the regime of BIR Ruling No. DA-489-03 and the doctrine recognized in Silicon Philippines Inc., but the Court affirmed the CTA En Banc decision denying the refund claim and ordered the petitioner to pay costs.
Ratio:
The Court held that purchases of goods and services destined for consumption within an ECOZONE are treated as exportations under Section 8 of Republic Act No. 7916, the Cross Border Doctrine, and the Destination Principle, and, following RMC No. 74-99, sales by suppliers from the customs territory to ECOZONE enterprises are zero-rated; therefore no input VAT should have been paid and the petitioner was not entitled to a refund. Any VAT allegedly shifted to the petitioner should be pursued against the suppliers in accordance with RMC No. 42-03, and claims for tax refund are strictly construed against the taxpayer, who bears the burden of proof.
Doctrine:
- Cross Border Doctrine and the Destination Principle treat sales from the customs territory to an ECOZONE as exportations and subject them to zero percent VAT.
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