ABAKADA Guro Party List vs.
Ermita Thus, it is the ministerial duty of the President to immediately impose the 12% rate
Facts: RA 9337, an act amending certain sections of the National Internal Revenue
Code of 1997, is questioned by petitioners for being unconstitutional. ABAKADA
GURO Party List, et al., filed a petition for prohibition o questioning the
constitutionality of Sections 4, 5 and 6 of said act. amending Sections 106, 107 and
108, respectively, of the NIRC.
-Section 4 imposes a 10% VAT on sale of goods and properties; Section 5 imposes a
10% VAT on importation of goods; and Section 6 imposes a 10% VAT on sale of
services and use or lease of properties.
These provisions contain a provision which authorizing the President, upon
recommendation of the Secretary of Finance, to raise the VAT rate to 12%,
effective January 1, 2006, after specified conditions have been satisfied.
ISSUE:
WON Sections 4, 5 and 6 of R.A. No. 9337, giving the President the stand-by
authority to raise the VAT rate from 10% to 12% when a certain condition is met,
constitutes undue delegation of the legislative power to tax.
HELD:
NO. The case before the Court is not a delegation of legislative power. It is simply a
delegation of ascertainment of facts upon which enforcement and administration
of the increase rate under the law is contingent. The legislature has made the
operation of the 12% rate effective January 1, 2006, contingent upon a specified
fact or condition. It leaves the entire operation or non-operation of the 12% rate
upon factual matters outside of the control of the executive.
No discretion would be exercised by the President. Highlighting the absence of
discretion is the fact that the word shall is used in the common proviso. The use of
the word shall connotes a mandatory order. Its use in a statute denotes an
imperative obligation and is inconsistent with the idea of discretion. Where the law
is clear and unambiguous, it must be taken to mean exactly what it says, and
courts have no choice but to see to it that the mandate is obeyed
upon the existence of any of the conditions specified by Congress. This is a duty
which cannot be evaded by the President. Inasmuch as the law specifically uses the
word shall, the exercise of discretion by the President does not come into play. It is
a clear directive to impose the 12% VAT rate when the specified conditions are
present. The time of taking into effect of the 12% VAT rate is based on the
happening of a certain specified contingency, or upon the ascertainment of certain
facts or conditions by a person or body other than the legislature itself.
The Court finds no merit to the contention of petitioners ABAKADA GURO Party
List, et al. that the law effectively nullified the Presidents power of control over the
Secretary of Finance by mandating the fixing of the tax rate by the President upon
the recommendation of the Secretary of Finance.
Congress did not delegate the power to tax but the mere implementation of the
law. The intent and will to increase the VAT rate to 12% came from Congress and
the task of the President is to simply execute the legislative policy. That Congress
chose to do so in such a manner is not within the province of the Court to inquire
into, its task being to interpret the law
TOLENTINO vs SEC. OF FINANCE
Facts: Petitioners (Tolentino, Kilosbayan, Inc., Philippine Airlines, Roco, and
Chamber of Real Estate and Builders Association) question the constitutionality of
R.A. No. 7716, the Expanded Value-Added Tax Law. Petitioners contend that the
R.A. did not “originate exclusively” in the HoR as required by Article 6, Section 24
of the Constitution. The Senate allegedly did not pass it on second and third
readings, instead passing its own version. Petitioners contend that it should have
amended the House bill by striking out the text of the bill and substituting it with
the text of its own bill, so as to conform with the Constitution.
Issue: W/N RA 7716 is unconstitutional
Held: No. While the aforementioned Constitutional provision states that bills must
“originate exclusively in the HoR,” the Senate may propose or concur with
amendments. The Senate may then propose an entirely new bill as a substitute
measure. The phrase “originate exclusively” refers to the revenue bill and not to
the revenue law. It is sufficient that the House of Representatives initiated the
passage of the bill which may undergo extensive changes in the Senate. Thus,
without the House bill, Senate could not have enacted the Senate bill, as the latter
was a mere amendment of the former, which originated from the HOR.
CIR vs Magsaysay Lines
Facts: Because of a government program of privatization, National Development
Company(NDC) decided to sell its National Marine Corporation(NMC) shares and
five of its ships. In a VAT Ruling, it was held that the sale was subject to VAT since
NDC was a VAT-registered enterprise and the transaction is incident to its normal
VAT-registered activity of leasing out personal property.
Issue:
Whether or not the sale by NDC whose VAT-registered activity is leasing out
personal property is subject to VAT considering that such sale was made pursuant
to a government program of privatization.
Ruling:
No, the sale of the vessels is not subject to VAT since it was not in the ordinary
course of trade or business of NDC. “Course of business” is what is usually done in
the management of trade or business. It connotes regularity. In the case at bar, the
sale was an isolated transaction. The sale which was involuntary and made
pursuant to the declared policy of government for privatization could no longer be
repeated or carried on with regularity. It should be emphasized that the normal
VAT-registered activity of NDC is leasing personal property. Any sale, barter, or
exchange of goods or services not in the course of trade or business is not subject
to tax.
Contex vs. CIR
Facts: Petitioner is a domestic corporation engaged in the business of
manufacturing hospital textiles and garments and other hospital supplies for
export.Petitioners place of business is at the Subic Bay Freeport Zone (SBFZ). It is
duly registered with the Subic Bay Metropolitan Authority (SBMA) as a Subic Bay
Freeport Enterprise, pursuant to the provisions of Republic Act No. 7227. As an
SBMA-registered firm, petitioner is exempt from all local and national internal
revenue taxes except for the preferential tax provided for in Section 12 (c) of Rep.
Act No. 7227. Petitioner also registered with the Bureau of Internal Revenue (BIR)
as a non-VAT taxpayer.
From January 1, 1997 to December 31, 1998, petitioner purchased various supplies
and materials necessary in the conduct of its manufacturing business.The suppliers
of these goods shifted unto petitioner the 10% VAT on the purchased items, which
led the petitioner to pay input taxes in the amounts of P539,411.88 and
P504,057.49 for 1997 and 1998, respectively.
Petitioner filed two applications for tax refund or tax credit of the VAT it paid,
believing that it was exempt from all national and local taxes, including VAT,
pursuant to Rep. Act No. 7227. The application letter was denied. Petitioner again
filed another application for tax refund/credit seeking refund or issuance of a tax
credit certificate in the amount of P1,108,307.72, representing erroneously paid
input VAT for the period January 1, 1997 to November 30, 1998. When no
response was gathered from the BIR, they elevated the case to the CTA. CTA
partially granted in favor of petitioner. The CA reversed the CTA on appeal.
Issue: whether or not the petitioner may claim a refund on the Input VAT
erroneously passed on to it by its suppliers.
Held: While it is true that the petitioner should not have been liable for the VAT
inadvertently passed on to it by its supplier since such is a zero-rated sale on the
part of the supplier, the petitioner is not the proper party to claim such VAT
refund.
Since the transaction is deemed a zero-rated sale, petitioners supplier may claim
an Input VAT credit with no corresponding Output VAT liability. Congruently, no
Output VAT may be passed on to the petitioner.
CIR vs SEAGATE
Facts: Respondent is a resident foreign corporation duly registered with the
Securities and Exchange Commission to do business in the Philippines and is
registered with the Philippine Export Zone Authority (PEZA). The respondent is
Value Added Tax-registered entity and filed for the VAT returns. An administrative
claim for refund of VAT input taxes in the amount of P28,369,226.38 with
supporting documents (inclusive of the P12,267,981.04 VAT input taxes subject of
this Petition for Review), was filed on 4 October 1999, but no final action has been
received by the respondent from the petitioner on the claim for VAT refund. CIR
asserts that by virtue of the PEZA registration alone of respondent, the latter is not
subject to the VAT. Consequently, the capital goods and services respondent has
purchased are not considered used in the VAT business, and no VAT refund or
credit is due.
Issue: W/N Seagate, a VAT-Registered PEZA Enterprise is entitled to tax refund or
credit.
Held: Yes. As a PEZA-registered enterprise within a special economic zone,
respondent is entitled to the fiscal incentives and benefit provided for in either PD
66 or EO 226. It shall, moreover, enjoy all privileges, benefits, advantages or
exemptions under both Republic Act Nos. (RA) 7227 and 7844.
Respondent, which as an entity is exempt, is different from its transactions which
are not exempt. The end result, however, is that it is not subject to the VAT. The
non-taxability of transactions that are otherwise taxable is merely a necessary
incident to the tax exemption conferred by law upon it as an entity, not upon the
transactions themselves.
Seagate has complied with all the requisites for VAT refund or credit. First,
respondent is a VAT-registered entity. Second, the input taxes paid on the capital
goods of respondent are duly supported by VAT invoices and have not been offset
against any output taxes
special laws expressly grant preferential tax treatment to business establishments
registered and operating within an ecozone, which by law is considered as a
separate customs territory. As such, respondent is exempt from all internal
revenue taxes, including the VAT, and regulations pertaining thereto. Its sales
transactions intended for export may not be exempt, but like its purchase
transactions, they are zero-rated. No prior application for the effective zero rating
of its transactions is necessary
FORT BONIFACIO DEVT. Vs CIR
Facts: Petitioner was a real estate developer that bought from the national
government a parcel of land that used to be the Fort Bonifacio military reservation.
At the time of the said sale there was as yet no VAT imposed so Petitioner did not
pay any VAT on its purchase. Subsequently, Petitioner sold two parcels of land to
Metro Pacific Corp. In reporting the said sale for VAT purposes (because the VAT
had already been imposed in the interim), Petitioner claimed transitional input VAT
corresponding to its inventory of land. The BIR disallowed the claim of presumptive
input VAT and thereby assessed Petitioner for deficiency VAT.
ISSUE:
Is Petitioner entitled to claim the transitional input VAT on its sale of real
properties given its nature as a real estate dealer and if so (i) is the transitional
input VAT applied only to the improvements on the real property or is it applied on
the value of the entire real property and (ii) should there have been a previous tax
payment for the transitional input VAT to be creditable?
HELD:
YES. Petitioner is entitled to claim transitional input VAT based on the value of not
only the improvements but on the value of the entire real property and regardless
of whether there was in fact actual payment on the purchase of the real property
or not.
The amendments to the VAT law do not show any intention to make those in the
real estate business subject to a different treatment from those engaged in the
sale of other goods or properties or in any other commercial trade or business. On
the scope of the basis for determining the available transitional input VAT, the CIR
has no power to limit the meaning and coverage of the term "goods" in Section
105 of the Tax Code without statutory authority or basis. The transitional input tax
credit operates to benefit newly VAT-registered persons, whether or not they
previously paid taxes in the acquisition of their beginning inventory of goods,
materials and supplies.