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G.R. No. 151135 July 2, 2004

CONTEX CORPORATION,petitioner,

vs.

HON. COMMISSIONER OF INTERNAL REVENE,respondent.

As an S!MA"#$%&'($#$)firm, Co*($+is $+$-( #o /ll lo/l /*) */(&o*/l &*($#*/l #$$*u$

(/+$'except for the preferential tax provided for in Section 12 (c)5of Rep. Act No. 7227.

C-*($+ /l'o #$%&'($#$) &(the Brea of !nternal Revene (!IR /' / *o*"VAT (/+-/y$#

nder a "ertificate of Re#istration

Co*($+ -u#/'$) /#&ou' 'u--l&$'and materials necessar$ in the condct of its manfactrin#

%siness. T$ 'u--l&$#' of these #oods '&($) u*(o Co*($+ the 10 VAT o* ($ -u#/'$)

&($', &hich led the Co*($+ (o -/y &*-u( (/+$' in the amonts of ' 5,*11.++ and ' 5*,57.*

for 17 and 1+, respectivel$

Actin# on the 6$l&$ (/( &( /' $+$-(from all national and local taxes, incldin# -A, Co*($+

&l$)t&o applications &ith R/0 o# (/+ #$u*) o# (/+ #$)&(of the -A it paid. Revene

/istrict 0fficer /N!/. Re#ional /irector N0 RS'0NS.

"A 'AR!A3 4RAN. "A rled that "ontex misread S$(&o*' 1078A828/ /*) 1128Aof

the ax "ode. hese provisions /--ly o*ly (o (o'$ $*(&(&$' #$%&'($#$) /' VAT (/+-/y$#'

o'$ '/l$' /#$ 9$#o"#/($). Co*($+ )o$' *o( /llnder this cate#or$, '&*$ &( &' / *o*"VAT

(/+-/y$#as evidenced %$ the "ertificate of Re#istration.

No*$($l$'', ($ CTA $l) (/( ($ Co*($+ &' $+$-( from the imposition of inpt -A on its

prchases of spplies and materials. !t pointed ot (/( u*)$# !/'$' Co*$#'&o* /*):$$lo-$*( A(of 12 (RA 7227), /ll (/(Co*($+ &' #$;u$) (o -/yas a SB6re#istered

enterprise &' / 5 -#$$#$*(&/l(/+.

he "A also disallo&ed all refnds of inpt -A paid prior to 8ne 2, 17 for %ein# %arred %$

the t&o$ear prescriptive period nder Section 22 of the ax "ode. he tax cort also limited

the refnd onl$ to the inpt -A paid on the spplies and materials directl$ sed in manfactre

of its #oods. !t strc9 do&n all claims for inpt -A paid on maintenance, office spplies, frei#ht

char#es, and all materials and spplies shipped or delivered to the "ontex:s ;a9ati and 'asa$

"it$ offices.

"A R-RS/. "!R maintained that the exemption of "ontex nder Rep. Act No. 7227 &as

limited onl$ to direct taxes and not to indirect taxes sch as the inpt component of the -A. he

"ommissioner pointed ot that from its ver$ natre, the valeadded tax is a %rden passed on %$

a -A re#istered person to the end sers< hence, the direct lia%ilit$ for the tax lies &ith the

sppliers and not "ontex.

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"ort of A--$/l' $l) (/( ($ $+$-(&o*from dties and taxes on the importation of ra&

materials, capital, and e=ipment of SB6re#istered enterprises nder Rep. Act No. 7227 and its

implementin# rles o$#' o*ly

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or services #$l/($) (o 'u 9$#o"#/($) '/l$ '/ll 6$ //&l/6l$ /' (/+ #$)&( o# #$u*) in

accordance &ith these re#lations.22

*)$# @$#o"#/(&*%, /ll VAT &' #$o$)#o ($ 9$#o"#/($) %oo)', activit$ or firm. !ncontrast, $+$-(&o* o*ly #$o$' ($ VAT /( ($ $+$-( '(/%$, /*) &( &ll /(u/lly &*#$/'$,

rather than redce the (o(/l (/+$' -/&) 6y ($ $+$-( ' 6u'&*$'' o# *o*"#$(/&l u'(o$#' .!t is for this reason that a sharp distinction mst %e made %et&een Geroratin# and exemption in

desi#natin# a valeadded tax.2

Apropos, the Co*($+' l/& (o VAT $+$-(&o*in the instant case o# &(' -u#/'$'of spplies

and ra& materials &' ou*)$) /&*ly o*Section 12 (%) and (c) of R$-. A( No. =22=, &6/'&/lly $+$-(' ($ #o /ll */(&o*/l /*) lo/l &*($#*/l #$$*u$ (/+$', &*lu)&*% VATand Section * (A)(a) of B!R Revene Re#lations No. 15. 2*

0n this point, Co*($+ #&%(ly l/&' (/( &( &' &*)$$) VAT"E+$-(and this fact is not

controverted %$ the respondent. !n fact, Co*($+ &' #$%&'($#$) /' / NON"VAT (/+-/y$#per

"ertificate of Re#istration

25

issed %$ the B!R. A' 'u, &( &' $+$-( #o VAT o* /ll &(' '/l$'/*) &-o#(/(&o*' of #oods and services.

B&l$ &( &' (#u$ (/( ($ Co*($+ 'oul) *o( /$ 6$$* l&/6l$ o# ($ VAT &*/)$#($*(ly

-/''$)on to it 6y &(' 'u--l&$#'&*$ 'u &' / 9$#o"#/($) '/l$ o* ($ -/#( o ($ 'u--l&$#, the

Co*($+ &' *o( ($ -#o-$# -/#(y (o l/& 'u VAT #$u*).

Since the transaction is deemed a Gerorated sale, Co*($+' 'u--l&$# /y l/& /* I*-u( VAT

#$)&( &( *o o##$'-o*)&*% Ou(-u( VAT l&/6&l&(y. "on#rentl$, no 0tpt -A ma$ %e

passed on to the petitioner.

Co*($+ &' #$%&'($#$) /' / NON"VAT (/+-/y$#and ths, is exempt from -A. As an exempt-A taxpa$er, &( &' *o( /llo$) /*y (/+ #$)&( o* VAT 8&*-u( (/+ -#$&ou'ly -/&). !n fine,even if &e are to assme that exemption from the %rden of -A on petitioner:s prchases did

exist, petitioner is still not entitled to an$ tax credit or refnd on the inpt tax previosl$ paid as

petitioner is an exempt -A taxpa$er.

Rather, &( &' ($ Co*($+' 'u--l&$#' o /#$ ($ -#o-$# -/#(&$' (o l/& ($ (/+ #$)&( /*)

/o#)&*%ly #$u*) ($ Co*($+ o ($ VAT $##o*$ou'ly -/''$)on to the latter.

Accordin#l$, &e find that the "ort of Appeals did not commit an$ reversi%le error of la& in

holdin# that petitioner:s -A exemption nder Rep. Act No. 7227 is limited to the -A on &hich

it is directl$ lia%le as a seller and hence, it cannot claim an$ refnd or exemption for an$ inpt-A it paid, if an$, on its prchases of ra& materials and spplies.

A6/?/)/ Gu#o P/#(y L&'(, $( /l ' E+$. S$. E#&(/

http://coffeeafficionado.blogspot.com/2012/03/abakada-guro-party-list-et-al-vs-exec.htmlhttp://coffeeafficionado.blogspot.com/2012/03/abakada-guro-party-list-et-al-vs-exec.html

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F/(' 0n ;a$ 2*, 25, the 'resident si#ned into la& Rep%lic Act 7 or the -A Reform

Act. Before the la& too9 effect on 8l$ 1, 25, the "ort issed a R0 enEoinin# #overnment

from implementin# the la& in response to a sle& of petitions for certiorari and prohi%ition=estionin# the constittionalit$ of the ne& la&.

he challen#ed section of R.A. No. 7 is the common proviso in Sections *, 5 and HC Ihat the'resident, pon the recommendation of the Secretar$ of inance, shall, effective 8anar$ 1, 2H,

raise the rate of valeadded tax to 12J, after an$ of the follo&in# conditions has %een satisfiedC

(i) -aleadded tax collection as a percenta#e of 4ross /omestic 'rodct (4/') of the previos

$ear exceeds t&o and forfifth percent (2 *D5J)RR?)75, and of inpt taxes on services prsant toSection *.1 of said re#lations.

o Sea#ate mst also sho& that the$ complied &ith provisions on filin# a &ritten

claim for refnd &ithin t&o $ears from the pa$ment of the tax,

CA #ul$) to #rant the claim for refndDissance of tax credit certificate (""). Sch

amont represented the ntiliGed %t s%stantiated inpt -A paid on capital #oods

prchased for the specified period.Reasonin# of the "AC Sea#ate availed itself of ONL ($ &*$*(&$' u*)$# EO 227,

and not of '/ HH and RA 71H."ompan$ is, therefore, o*'&)$#$) $+$-( o*ly #o ($-/y$*( o &*o$ (/+ $* &( o-($) o# ($ &*o$ (/+ ol&)/y &* l&$u o ($ 5

-$#$*( -#$$#$*(&/l (/+ o* %#o'' &*o$ $/#*$). As a -Are#istered entit$, tho#h, it

&as '(&ll 'u6>$( (o ($ -/y$*(of other national internal revene taxes, li9e the VAT.Sea#ate also correctl$ filed its administrative claim for refndD"".

ISSESC

(As s%mitted %$ the petitioner) oN Sea#ate is entitled to the refnd or issance of ax "redit

"ertificate for the alle#ed ntiliGed inpt -A paid on capital #oods prchased for the periodApril 1, 1+ to 8ne , 1.

HEL:C

ES, SEAGATE &' $*(&(l$) (o ($ #$u*)&''u/*$ o T/+ C#$)&( C$#(&&/($.

As a PE@A"#$%&'($#$) $*($#-#&'$&ithin a special economic Gone (a9a "060N, a selectedarea &ith hi#hl$developed or &hich has the potential to %e developed into, a#roindstrial,

indstrial, toristrecreational, commercial, %an9in#, investment and financial centers. RA 71H,

he Special conomic 6one Act of 15.), respondent is entitled to the fiscal incentives and

%enefits provided for %$ !FR P: 77 (la& creatin# the xport 'rocessin# 6one Athorit$'6A) or EO 227(0mni%s !nvestments "ode).

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!t shall also $*>oy /ll the privile#es, %enefits, advanta#es, or exemptions nder RA 7227 (Bases

"onversion and /evelopment Act of 12) and RA 7+** (xport /evelopment Act of 1*).

RATIOC

Preferential Tax Treatment Under Special Laws

!f Sea#ate avails itself ofC

P: 77 Sea#ate shall not %e s%Eect to &*($#*/l #$$*u$ l/'and re#lations for ra& materials,

spplies, articles, e=ipment, machineries, spare parts and &ares, except those prohi%ited %$ la&,%ro#ht into the Gone to %e stored, %ro9en p, repac9ed, assem%led, installed, sorted, cleaned,

#raded or other&ise processed, maniplated, manfactred, mixed or sed directl$ or indirectl$

in sch activities.

!t shall enEo$ a netoperatin# loss carr$ over< accelerated depreciation< forei#n exchan#e and

financial assistance< and $+$-(&o* #o $+-o#( (/+$', lo/l (/+$', /*) l&$*'$'.

EO 227Sea#ate shall %e exempt from same internal revene la&s and re#lations. nder thisla&, Sea#ate shall frther %e entitled to an income tax holida$< additional dedction for la%or

expense< simplification of cstoms procedre< nrestricted se of consi#ned e=ipment< access toa %onded manfactrin# &arehose s$stem< privile#es for forei#n nationals emplo$ed< tax

credits on domestic capital e=ipment, as &ell as for taxes and dties on ra& materials< and

exemption from contractors: taxes, &harfa#e des, taxes and dties on imported capitale=ipment and spare parts, export taxes, dties, imposts and fees,local taxes and licenses, and

real propert$ taxes.

!t can %e seen from the follo&in# la&s that Sea#ate (respondent) enEo$s preferential taxtreatment. !t is not s%Eect to internal revene la&s and re#lations, and is even entitled to tax

credits.

:&/9 . T&6ol

1, 2011

;a$ toll fees collected %$ toll&a$ operators %e s%Eected to vale added tax

FACTS

Renato -. /iaG and Arora ;a. . im%ol filed a petition for declarator$ relief1 assailin# the

validit$ of the impendin# imposition of -A %$ B!R on the collections of toll&a$ operators.

'etitioners claim that, since the -A &old reslt in increased toll fees, the$ have an interestas re#lar sers of toll&a$s in stoppin# the B!R action.

/iaG claims that he sponsored the approval of Rep%lic Act 771H (-A 3a&) and Rep%lic

Act +*2* (the 17 N!R") at the Fose of Representatives. im%olclaims that she served as Assistant Secretar$ of /! and consltant of the RB in the

past administration.

'etitioners alle#e that the B!R attempted drin# the administration of 'resident 4loria

;acapa#al Arro$o to impose -A on toll fees. Bt the imposition &as deferred in vie& of theconsistent opposition of /iaG and other sectors to sch move.

Bt, pon 'resident Beni#no ". A=ino !!!s assmption of office in 21, the B!R revivedthe idea

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local roads. raffic in the re#lar p%lic hi#h&a$s is for this reason slo&movin#. !n

consideration for constrctin#

toll&a$s at their expense, the operators are allo&ed to collect #overnmentapproved fees frommotorists sin# the toll&a$s ntil sch operators cold fll$ recover their expenses and earn

reasona%le retrns from their investments.

hen a toll&a$ operator ta9es a toll fee from a motorist, the fee is in effect for the lattersse of thetoll&a$ facilities over &hich the operator enEo$s private proprietar$ ri#hts12 that its contract and

the la& reco#niGe. !n this sense, the toll&a$ operator is no different from the follo&in# serviceproviders nder Section 1+ &ho allo& others to se their properties or facilities for a feeC

1) 3essors of propert$, &hether personal or realSection 1 (2) (%) of

'./. 1+H?, the term @"orporation@ or operator refers to 'A4"0R. Altho#h the la& does not specificall$mention 'A4"0R:s exemption from indirect taxes, 'A4"0R is ndo%tedl$ exempt from sch taxes %ecase

the la& exempts from taxes persons or entities contractin# &ith 'A4"0R in casino operations

. Altho#h, differentl$ &orded, the provision clearl$ exempts 'A4"0R from indirect taxes. !n fact, it #oesone step frther %$ #rantin# tax exempt stats to persons dealin# &ith 'A4"0R in casino operations . he

nmista9a%le conclsion is that 'A4"0R is not lia%le for the ',152,+2.2 -A and neither is Acesite as the

latter is effectivel$ s%Eect to Gero percent rate nder Sec. 1+ B (). R.A. +*2*. (mphasis spplied.)

2. he manner of char#in# -A does not ma9e 'A4"0R lia%le to said tax

!t is tre that -A can either %e incorporated in the vale of the #oods, properties, or services sold or leased, in

&hich case it is compted as 1D11 of sch vale, or char#ed as an additional 1J to the vale. -eril$, the seller orlessor has the option to follo& either &a$ in char#in# its clients and cstomer. !n the instant case, Acesite

follo&ed the latter method, that is, char#in# an additional 1J of the #ross sales and rentals. Be

that as it ma$, the se of either method, and in particlar, the first method, does not deni#rate the fact that

'A4"0R is exempt from an indirect tax, li9e -A.. Pes. -A exemption extends to Acesite

hs, &hile it &as proper for 'A4"0R not to pa$ the 1J -A char#ed %$ Acesite, the latter is not lia%le for thepa$ment of it as it is exempt in this particlar transaction %$ operation of la& to pa$ the indirect tax. Sch

exemption falls &ithin the former Section 12 (%) () of the 177 ax "ode, as amended (no& Sec. 1+ >%? >? of

R.A. +*2*), &hich providesC Section 12. -aleadded tax on sale of services

(a) Rate and %ase of tax

here shall %e levied, assessed and collected, a valeadded tax e=ivalent to 1J of #ross receipts derived %$ an$person en#a#ed in the sale of services x x x< 'rovided, that the follo&in# services performed in the 'hilippines %$

-Are#istered persons shall %e s%Eect to J ()

Services rendered to persons or entities &hose exemption nder special la&sor international a#reements to &hich the 'hilippines is a si#nator$ effectivel$ s%Eects the sppl$ of sch services

to Gero (J) rate (emphasis spplied).

*. Acesite paid -A %$ mista9e

"onsiderin# the fore#oin# discssion, there are ndo%tedl$ erroneos pa$ments of the -A pertainin# to the

effectivel$ Gerorate transactions %et&een Acesite and 'A4"0R. -eril$, Acesite has clearl$ sho&n that it paid the

s%Eect taxes nder a mista9e of fact, that is, &hen it &as not a&are that the transactions it had &ith 'A4"0R &ereGerorated at the time it made the pa$ments.

S o l t i o i n d e % i t i applies to the 4overnment ax refnds are %ased on the principle of=asicontract or soltio inde%iti and the pertinent la&s #overnin# this principle are fond in Arts. 21*2 and

215* of the "ivil "ode. hen mone$ is paid to another nder the inflence of a mista9e of fact, that is to sa$, on

the mista9en spposition of the existence of a specific fact, &here it &old not have %een 9no&n that the fact &asother&ise, it ma$ %e recovered. Action for refnd strictl$ constred< Acesite dischar#ed the %rden of proof

Since an action for a tax refnd parta9es of the natre of an exemption, &hich cannot %e allo&ed nless #ranted in

the most explicit and cate#orical lan#a#e, it is strictl$ constred a#ainst the claimant &ho mst dischar#e sch

%rden convincin#l$

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5. PAGCOR V. !IR GR NO. 1=20= MARCH 15, 2011

P/%o# . CIR

A"SC

'A4"0R &as created prsant to '/ No. 1H7A2 on 8anar$ 1, 177.

Simltaneos to its creation, './. No. 1H7B &as issed exemptin# 'A4"0R from the

pa$ment of an$ t$pe of tax, except a franchise tax of 5J of the #ross revene.

'./. No. 1 &as later issed expandin# the scope of 'A4"0RMs exemption.

o consolidate the la&s pertainin# to the franchise and po&ers of 'A4"0R, './. No. 1+HH

Sec. 1. xemptions.x x x

(1) "stoms /ties, taxes and other imposts on importations.

(2) !ncome and other taxes.

(a) ranchise FolderC

tax of an$ 9ind or form, income or other&ise, as &ell as fees, char#es, or levies of &hatever

natre

tax or char#e attach in an$ &a$ to the earnin#s of the "orporation, except a ranchise ax of

5Jof the #ross revene or earnin#s derived %$ the "orporation from its operation nder this

ranchise.

(%) 0thersC

earnin#s derived from the operations condcted nder the franchise

char#es, fees or levies, shall inre to the %enefit of and extend to corporation(s),

association(s),

a#enc$(ies), or individal(s) &ith &hom the "orporation or operator has an$ contractal

relationship in connection &ith the operations of the casino(s)Q

he fee or remneration of forei#n entertainers contracted %$ the "orporation or operator in

prsance of this provision

() /ividend !ncome.

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provided that sch dividend income shall %e totall$ exempted from income or other form of

taxes if invested &ithin H months from the date the dividend income is received in the follo&in#C

(a) operation of the casino(s) or investments in an$ affiliate activit$ that &ill ltimatel$ redond

to the %enefit of the "orporation< or an$ other corporation &ith &hom the "orporation has an$

existin# arran#ements in connection &ith or related to the operations of the casino(s)