REPUBLIC OF THE PHILIPPINES

COURT OF TAX APPEALS

QUEZON CITY

PHILIPPINE NATIONAL POLICE

MULTI - PURPOSE COOPERATIVEr
INC. r
Petitioner,

C.T.A. CASE NO. 4845

- versus -

JOSE U. ONGr in his capacity

COMMISSIONER OF INTERNAL
REVENUEr

as

Respondent.
X

DECISION
Beore this
of value-added tax

Court is

petitioner's claim for

<VAT> in the amount o

reund

P75,110.88 or

purchases it had during the last quarter of 1991.

The antecedent facts o this case are as allows:
The
Purpose
solely

petitioner,

Philippine

Cooperative,
o

government

provisions

o Republic

Inc.

is

National
a

employees
Act

Police

cooperative
organized

<R.A.)No.

Multicomposed

under

6938,

the

otherwise

known as The Cooperative Code of the Philippines.

I

- During the period rom October to

petitioner

purchased various

suppliers.

It alleged that the

merchandise rom

dierent

various suppliers included

in their sales price the ten per cent

to P75,110.88 computed as allows:

l8u

December 1991, the

<10/.) VAT amounting

DECISION C.T.A. CASE HO. 4845.

-

Suppliers

VAT Collected

Goldstar Phils. Sales Corp.

Paluwagan Market i ng Inc.
, Automatic Center
Masa Marketing Corp.
CFC Corporation
Century Canning Corp.
Nestle Phils., Inc.
Marina Sales, Inc.
Conrad and Company, Inc.
Pureoods Corporation
Johnson and Johnson
Zuellig Distribu t ors, Inc.
Commonwealth Foods, Inc.
Victorias Milling Corporation
Mac - Van Sales Marketing, Inc.
Caliorn i a Mg. Co., Inc.
Universal Robina Corporation
Philips Food Corporation
Lamoiyan Corporation
T
o
t
a
1

11, 001.49
8,318.45
3,648.10
6,470.91
1,392.22
3,589.12
4,699.55
2,986.11
1, 471. 15
10,690.00
4,322.03
1,079.05
2 , 423. 37
2,257.50
3,724.34
1,607.44
1,800.50
1,709.52
1, 921.01
P75, 111. 86*

*With a dierence o P0.98

On

June

respondent,
application
claiming
under

the

<Annex"C",

25,

Commissioner
or

that it

C.T.A.

denied the

o Internal

reund

is not

internal

Respondent,
1992

pet i tioner

1992~

Records,

claim

p.

Revenue,

amount

subject to

revenue

in his

the

iled

laws

and

other

the

written

P75,110.88

any government
tax

tax
laws

11>.

letter-decision
or

beore

reund.

He

dated July

28,

explained

his

decision as ollows:
"Please be inormed that under Section 99
o the National Internal Revenue Code
<NIRC>,
as amended by Executive Order No.
273,
the
persons liable or the VAT are not the buyers/
purchasers but the sellers/importers o goods
and those
perorming services or a
ee.
However, since the VAT is an indirect tax,
it

DECISION C.T.A. CASE NO. 4845.

-

can be shifted to customers.

Once shifted to
the customer as
addition to the cost
of
goods/services sold, i t
is no longer a tax
but
an additional cost which the customer has to
pay in order to
obtain the goods/services
<Philippine Acetylene Co.
vs. Commissioner of
Internal Revenue,
G.R. No. L- 19707. August
17,
1967, as cited in BIR Ruling No. 297-88 dated
July 6, 1988>. Thus, the shifting of the VAT to
you
by your suppliers does not make you the
person liable thereof."
<Annex
"A",
C.T.A.
Records, p. 9)
Petitioner filed
1992 the instant

Court on September

Petition for Review of the

decision claiming
the petitioner

before this

that the latter

is not

respondent's

erred in holding

entitled to

8,

a refund

of the

that
VAT

paid on its purchases.

Respondent,

in

his Answer,

prays that the

be denied for lac k of merit arguing by way

affirmative defenses that:
state
nature
against

any cause
of tax

exemptions

the taxpayer;

taxpayer has the

erroneously

or

of special and

1) the petition

of action;

2) tax

3) in

has failed to

refunds

which are

are in

construed

an action

paid; and

4>

the

the

strictly

for refund;

burden . to show that the taxes

illegally

petition

the

paid were
claim

for

1993 its Reply

and

refund is still under investigation.

petitioner filed
Motion

p r ayin g

for

allega ti ons in c luding

of Annexe s

on January 29,
the

admission

the genu i neness

"A" a nd "C" as they were not

by the r espondent.

lb~

of

its

and due

factual
execution

denied under oath

DECISION C.T.A. CASE NO. 4845.

- 4 On June 29,

1993,

and Motion that

to the

petitioner

iled its Maniestation

the copies o Request or

respondent be

noted by this

Admission sent

Court together

with

the Exhibits.
During

the

hearing o

maniested that
purely

given

he

memoranda

"is

<C.T.A.

ater

waving

Records,

(30)

thirty

30,

1993,

since the issue involved

legal,

evidence."

June

days

which

p.
to

this

the

respondent

in the case

right

to

present

169).

Both parties

submit

their

case

shall

be

is

were

respective
considered

submitted or decision.
Petitioner iled its
On the

other hand,

Memorandum on August 16,

respondent did

not ile a

1993.

memorandum

to support his case.

There

being

no

objection

on

the

part

the

respondent
Admission o

with regard

to the

actual issues,

petitioner's Request
the only . legal issue

or
let

or this Court's

resolution is whether or not

petitioner

is

the

amount

entitled

to

reund o

P75,110.88 representing input

or the

months o October,

VAT

in

the

taxes or purchases i t

November

and December o

o
had
the

taxable year 1991.

There

is

cooperative under

no

question
the category

that

petitioner

stated in

the Cooperative Code which reads as ollows:

lbb

is

Article 61

DECISION C.T.A. CASE NO. 4845.

- 5 -

"ART 61. Tax Treatment of Cooperative

Duly registered cooperatives under this Code
which do
not transact
any
business
with
nonmembers or the general
public shall not
be
subject to any government taxes or ees imposed
under the internal revenue laws and other tax
laws. xxx"
Sections

100(a)(2)

and

103(u)

the

Tax

Code

provide:

"SEC.
100.
Value-added tax on sale of
goods - Ca> Rate and base of tax.
- There shall
be levied,
assessed and collected on every
sale,
barter, or exchange o goods, a
valueadded
tax equivalent to
lOY.
o the gross
selling price or gross value in money o the
goods s~ld, bartered or exchanged, such tax to
be paid by the seller or transeror:
Provided,
That the allowing sales
by VAT-registered
persons shall be subject to OY..
XXX

XXX

XXX

( 2)
Sales to persons or entities whose
exemption under special laws or international
agreements to
which the Philippines is
a
signatory eectively subjects such sales to
zero rate. xxx"

"SEC.

103.

allowing shall
tax:

Exempt
Transactions
the
be exempt rom the value-added

XXX

XXX

XXX

Cu>
Transactions which are exempt under
special laws or international agreements to
which the Philippines is a signatory; xxx"
The

VAT

Implementing Regulations

distinctions between

provide

zero-rated and exempt

or

transactions,

thus:

"SEC. 8. Zero-rating.
- (a) In general.
A zero-rated sale is a taxable ~ransaction or
value-added tax purposes.
A sale by a
VAT-'
~

1.. : I

J... u /

the

DECISION C.T.A. CASE NO.

4845.

- 6 registered
person o goods
and/or services
taxed at zero rate shall not result in any
output tax.
The input tax on his purchases o
goods or services related to such zero-rated
sale shall
be available as
tax credit or
reundable in accordance with Section 16 o
these Regulations. xxx"
"SEC. 9.
Exemptions.
<a> In general.
An exemption means that the sale o goods or
services is not subject to value-added tax
<output tax>.
The seller is not allowed any
tax credit on VAT (input tax> previously paid.
The person making the exempt sale o goods or
services shall not separately
bill any output
tax
to
his customers
because
the
said
transaction is not subject to VAT. xxx"
Although
transaction,
to a

the

zero-rated transaction

the seller

seller in

o the input

and services.

an exempt transaction is

reund or credit,
goods and

taxable

o goods or services is

reund or tax credit

purchases o goods

is

tax paid on

On the other

hand,

not entitled to

the input VAT paid on his

services merely

entitled

becomes an added

his
the
such

purchases o
cost o

his

operations.
Petitioner would
o

the

amount

Memorandum,

like this Court

P75,110.88 in

its

to order a
avor.

reund
In

petitioner alleged among others that:

"Granting arouendo that

the value-added
taxes sought by the
petitioner to be reunded
to it are in the nature c indirect taxes,
it
is
the
respectul
submission
that
the
petitioner enjoys exemption rom indirect taxes
in accordance with Article 61 o Republic Act
No. 6938.
is

It is hornbook doctrine that

clear that there is no need

l bu

where the law

to resort to

its

DECISION C.T.A. CASE NO. 4845.

- 7 statutory construction.
The
tax
exemption
enjoyed by
the petitioner
is crystal clear
it
"shall not
be subject
to ~..!!Y.. government
taxes
or ees imposed under the
internal revenue laws
and other tax
laws." (Article 61, Republic
Act
No. 6938)
Familiar
is
the
maxim,
"UBI
LEX
NON
DISTINGUIT NEC
NOS DISTINGUERE DEBEMOS, "
where
the law does not distinguish we
should not also
distinguish.
Since
Article 61, Republic
Act
No.
6938, used
the
word
"any" then
the
tax
exemption grant
should include both direct
and
indirect
taxes.
Furthermore,
granting
that
there
is
a
need
to
resort
the
statutory
construction
whether Article 61, Republic
Act
No.
6938
in
fact
includes exemption
from
indirect taxes, like the VAT, then
i t should be
interpreted to include among
the exemptions the
indirect taxes
like VAT.
This
interpretation
is in
consonance with
Article 126 of
Republic
Act No. 6938, which provides that,
"In case o doubt as to the
meaning of any
provision
of
this
Code
or
the
regulations
issued in pursuance
thereo, the same shall
be
resolved liberally in favor
o the cooperatives
and their members." (underlining supplied)
The petitioner
is entitled
to the
prayed
or."
<Memorandum,
pp.
6-7,
Records, pp. 179-180>
Assuming however that
zero-rated

the sale to the petitioner

<Section 100),

refund of input

refund
C. T. A.

this

Court cannot

order

is
the

VAT in favor of the petitioner

under the

tax

goods

circumstances.
VAT

is

services.
of trade o r

It is

the

value

added

a tax on "any person who,

business,

!:ende_r s . s ervices,

on

or

s ells,

par~~~g,

to
in

the course

or exchanges goods,

engaqes in s imilar transactions

ltJJ

or

and

DECISION C.T. A. CASE NO.

4845.
-

any

person who

~..IT!P.P..I_t ..

<Section 99,

goods "

Tax

Code)

<Und e rscoring s upplied>.

Assuming further
<Sec.

103),

which it
from

not

documentary stamp

VAT output tax.

liable

for VAT

members but is

Hence,

liable.

is directly

and even

is limited only

its exemption

income tax,

petitioner is

that the

to those

it will be
tax,

tax

duties

petitioner

on sales

liable for VAT input

for

exempt

c ustoms

In other words,

output

VAT -exe mpt

made

to

is
its

tax passed on to

it

by its suppliers.
The tax exemption from " any government
imposed under

the internal revenue

taxes or fees

laws and other

does not include indirect taxes such as VAT

passed on by the
be . exempt

from indirect

inte nti on on
exe mpt ion.

seller to the buyer.

the part
The

vs.

I nter nal Revenue vs.

36;

law should

for exempti; n

11acaraig,

Jr.

197

Co .

taxpayer to
be a

clear

to gr ant

such

categorically

from indirect

Inc.

vs.

Inc.

or

ta xes.

SCRA 771; Commissioner

John Gotamco and Sons,

Ph ilip p i ne Acetylene

and sales tax

there s hould

of the Legislature

exempting

sp e cifically provide
< 11aceda

taxes ,

Fo r

laws"

of

148 SCRA

Commissioner

of

Internal Revenue 20 SCR A 1056)

Re s pondent
liable for
the selle rs

is correct

the VAT are not

or

importers

in

sayin~

t hat

t he

persons

the buyers or pur c hase rs

of goods

and those

but

performing

DECISION C.T.A. CASE NO.

4845.
-

services

or

Being

or

purchaser,

legal standing to clai m or

t h e reund

ee.

petitioner has no

the

buyer

o the input ta x es it paid on its purchases .

In the case
John

Gotamco

petitioner,
3/.

and

Comm~ss~oner

o Internal Revenue

vs.

Son s ,

<supra>

the

Inc.

the Supreme Court cancelled

contractor's tax

contractor

World

international

by

issued
Health

The

case wa s

by

the assessment o

the B. I. R.

against

the

Organizatio n

<WHO) ,

an

all direct

and

organization " exempt

i nd irect ta x es".

cited

rom

brought not by WHO

but by

its contractor.
This
disputes

Court
in

Commissioner
herein

the
c an

for wh ich
ent :l reJy

Bienvenido

unaware

ruled

be

the

A.

World F ood
still

exemption o

not

implementing

respondent,

alt h ough
hrol<er

is

Tan,

in

the

directly liable.

l e ft to

its

discretion

problems

scheme.

Jr. ,

B.I.R.

Programme

charged

the

VAT

the consignee is only

it i s

is
10/.

Former

predecessor

Ruling

tax-exempt,

whether to

it

is

accept

or

XXX

In an article published in the February issue o

it

was observed

t he
taxes

reject the billing o the 10/. value-added tax."

Ateneo Law Journal,

its

s in ce

limited to the
"H o wever,

o
that

2 89 - 88

VAT

or

th~t:

"The shifting
o
the
10/.
VAT
is
a
c o nt.inuinp point
o dispute between sel le r
and
b\ y e r
o
goods
and
services.
Typical
o

O.E GISJON C.T.A. CASE NO.

4845.
-

10 -

situation where
this
controversy
arises
is
where the sel ler sells goods
or services to
a
buye r which
is exempt from
VAT such as
banks,
insurance co mpanies, educational
institutions,
hospitals and restaurants.
Since the buy~r has
no output
tax, the VAT being
passed on by
the
seller
is of
no use
as an
input tax credit.
Thus, the
buyer refuses
t.o pay
the VAT
being
shift.ed tfJ him.

ln a series of rulings, the BIR held that

the persons directly
liable for the payment
of
the VAT
ls the seller of
goods ~nd
services.
Howe ver, since the VAT is an indirect tax,
it
can be shifted to
the buyer.
Once shifted
to
the
buyer as
an addition
to the cost of the
aoods or services sold, i t is
no longer a
tax
but an
additiona l cost which
the buyer has to
pay in
order to obtain the goods or
services.
The shifting of the VAT does not
make the buyer
the
person directly
liable therefore;
hence,
the
tax-exempt status
and
privilege to
avoid
the
passing
on
or
s hifting
of
the
VAT.
Howe ver, while
the VAT can be shifted, it
is
enlirely
left to
the discretion
of the
buyer
whethe r to accept
or reject the billing of
the
VAT.
If
the
buyer rejects
the
additional
billinq, the
recourse of the
seller is not
to
proceed with the sale of the
goods or services.
Thus, i t becomes
largely a matter of
agreement
bet wee11
seller
and buyer whe ther
or not
to
shift
the VAT."
<The
Philippine Value Added
Ta x System by Cornelio C. Gison, . pp. 138 -13 9).
Tax refund partakes of the nature of
and
most

be allowed

therefore cannot
e~ plicit

and

<Insular

104 SCHA

The grant

be strictly construed against

Lumber Co.

710; Commissioner

Tuba Nickel

granted in

categorical language.

refu nd priviJeqes mu st.

taxpayer.

unless

a t. ax exempt.ion

vs.

Court of

o Internal

Min ing Corporation,

of
the

Tax Appeals ,

Revenue v s.

207 SC RA 549)

the

Rio

DECIS I ON C. T. A. CASE NO . 4 8 4 5.
-

WHEREFORE,
for refund

in

11 -

vie w of all

in the amount of

for lack of merit.

the foregoing ,

t he

claim

DENI ED

P75,110.88 is hereby

No pronouncement as to costs.

S O ORDERED .
Quezon City,

Metro Manila ,

;1M[.
Associ

GRUBA
Judge

WE CO NCUR:

Qu...A:; "2, ~
ERNES TO D.

ACOS TA

f{J_ /

RAHON 0 DE VEYRV
Associate Judge

C:.ERT I .F" IC:A T I O .N

hereby

c ertify that

after due consultation

Tax Appeals

this

decision

was

among the members of t h e

in accordance with

Section 13,

reached
Court of

Article

VIII

of the Constitution.

~Q..G:~
ERN ESTO 0 . ACOSTA
Pr e siding Judge