G.R. No. 188146 - Pilipinas Shell Petroleum Corp. vs. Royal Ferry Services, Inc.

Silicon Philippines, Inc. (formerly Intel Philippines Manufacturing, Inc.), the petitioner, is engaged in the business of designing, developing, manufacturing, and exporting integrated circuit components.
The petitioner is recognized as a preferred pioneer enterprise and is duly registered with the Board of Investments and the Bureau of Internal Revenue (BIR) as a VAT taxpayer.
The petitioner is authorized to print its own accounting documents, such as sales invoices and official receipts.

For the 2nd Quarter of 2001, the petitioner filed its VAT Return on 24 July 2001 reporting P765,696,325.68 in zero-rated sales.
For the 3rd Quarter, the VAT Return filed on 23 October 2001 reported zero-rated sales of P571,812,011.26, which was later amended on 29 October 2001 to P678,418,432.83.
For the 4th Quarter of 2001, the VAT Return filed on 15 January 2002 reported zero-rated sales amounting to P1,000,052,659.89, later confirmed by an amended return on 22 May 2002.

The petitioner sought to recover the VAT it paid on imported capital goods by filing an administrative claim for the 2nd Quarter on 16 October 2001 in the amount of P9,038,279.56.
For the 3rd and 4th Quarters of 2001, separate claims were filed on 4 September 2002 for tax credits/refunds amounting to P1,420,813.04 and P14,582,023.62, respectively.
In total, the administrative claims aggregated to P25,041,116.22 based on the alleged excess/unutilized input VAT.

Due to the respondent’s (Commissioner of Internal Revenue) continuous inaction on its administrative claims within the prescribed period, the petitioner filed separate petitions for review before the CTA.
The separate cases (CTA Case Nos. 6741, 6800, and 6841) were eventually consolidated by the CTA Second Division in a Resolution dated 20 February 2004.
Trial on the merits was conducted, and issues regarding the sufficiency of documentary evidence and compliance with procedural requisites were raised.

In the Decision dated 5 February 2007, the CTA Second Division dismissed the refund petitions for lack of merit.
The Division held that under Section 112 of the National Internal Revenue Code (NIRC), a taxpayer may claim a refund/tax credit on excess/unutilized input VAT only if:

The excess input VAT is attributable to zero-rated (or effectively zero-rated) sales, and
The excess input VAT is attributable to purchases of capital goods by a VAT-registered person.

The petitioner failed to provide conclusive evidence to support its claim for zero-rated export sales – it submitted only a certificate of inward remittances rather than a complete set of required documents (sales invoice, export declaration/bill of lading, and bank remittance documents).
With respect to purchases of capital goods, the petitioner did not satisfy all the necessary requisites, particularly failing to show that purchases were indeed of capital goods with an estimated useful life beyond one year, treated as depreciable assets, and used directly or indirectly in production or sale of taxable goods or services.
A motion for reconsideration was subsequently filed by the petitioner but was denied in a Resolution dated 29 June 2007.

On 18 January 2008, the CTA En Banc affirmed the decision of the Second Division, dismissing the petitioner’s claim for a refund or issuance of tax credit certificates.
The En Banc emphasized the necessity for detailed and admissible evidence, such as general ledgers and audited financial statements, to prove that the imported goods were capital goods and to support the classification of export sales as zero-rated.
The petitioner’s administrative claims were further invalidated on the ground that it had filed its subsequent judicial claims beyond the legally prescribed 120-day plus 30-day period after the submission of complete documents, rendering the petitions for review outside the jurisdiction of the CTA.

Whether the Court of Tax Appeals erred in denying the petitioner’s claim for a refund on excess/unutilized input VAT on imported capital goods due to its failure to prove the existence of valid zero-rated export sales.

Whether the Court of Tax Appeals was correct in finding that the petitioner failed to comply with the documentary and procedural requisites required for a valid claim for refund or tax credit on input VAT paid on its imported capital goods.

Whether the Court of Tax Appeals erred in ruling that the petitioner failed to prove that the imported goods were indeed capital goods, as defined under the applicable tax laws and regulations.

Whether the input VAT on the alleged non-capital goods should still be refundable on the ground that they were attributed to the petitioner’s zero-rated export sales, given its status as a 100% export enterprise.