TAX CASES – VAT  It is incorrect to conclude that there is no clash between two opposing

forces with regard to the no pass-on provision for VAT on the sale of
petroleum products merely because such provision exists in the House
ABAKADA GURO PARTY LIST VS EXECUTIVE SECRETARY version while it is absent in the Senate version. It is precisely the
absence of such provision in the Senate bill and the presence thereof in
Motion for Reconsideration by petitioners Association of Pilipinas Shell Dealers, the House bills that causes the conflict. The absence of the provision in
Inc. in G.R. No. 168461, on the grounds that: the Senate bill shows the Senate’s disagreement to the intention of the
I. This Honorable Court erred in upholding the constitutionality of Section House of Representatives make the sellers of petroleum bear the
110(A)(2) and Section 110(B) of the NIRC, as amended by the EVAT Law, imposing burden of the VAT. Thus, there are indeed two opposing forces: on one
limitations on the amount of input VAT that may be claimed as a credit against side, the House of Representatives which wants petroleum dealers to
output VAT, as well as Section 114(C) of the NIRC, as amended by the EVAT Law, be saddled with the burden of paying VAT and on the other, the Senate
requiring the government or any of its instrumentalities to withhold a 5% final which does not see it proper to make that particular industry bear said
withholding VAT on their gross payments on purchases of goods and services, and burden. Clearly, such conflicts and differences between the no pass-
finding that the questioned provisions: on provisions in the Senate and House bills had to be acted upon by the
bicameral conference committee as mandated by the rules of both
A. are not arbitrary, oppressive and consfiscatory as to amount to a deprivation houses of Congress.
of property without due process of law in violation of Article III, Section 1 of the  Moreover, the deletion of the no pass-on provision made the present
1987 Philippine Constitution; VAT law more in consonance with the very nature of VAT which, as
B. do not violate the equal protection clause prescribed under Article III, Section stated in the Decision promulgated on September 1, 2005, is a tax on
1 of the 1987 Philippine Constitution; and spending or consumption, thus, the burden thereof is ultimately borne
by the end-consumer.
C. apply uniformly to all those belonging to the same class and do not violate
Article VI, Section 28(1) of the 1987 Philippine Constitution. OTHER TAX RELATED ISSUES IN THE CASE

II. This Honorable Court erred in upholding the constitutionality of Section 110(B)  As to the other National Internal Revenue Code (NIRC) provisions found
of the NIRC, as amended by the EVAT Law, imposing a limitation on the amount in Senate Bill No. 1950, i.e., percentage taxes, franchise taxes,
of input VAT that may be claimed as a credit against output VAT notwithstanding amusement and excise taxes, these provisions are needed so as to
the finding that the tax is not progressive as exhorted by Article VI, Section 28(1) cushion the effects of VAT on consumers. As we said in our decision,
of the 1987 Philippine Constitution. certain goods and services which were subject to percentage tax and
excise tax would no longer be VAT exempt, thus, the consumer would
Petitioner Garcia reply: be burdened more as they would be paying the VAT in addition to these
 the no pass-on provision for the sale of service for power generation taxes. Thus, there is a need to amend these sections to soften the
because both the Senate and the House were in agreement that the impact of VAT. The Court finds no reason to reverse the earlier ruling
VAT burden for the sale of such service shall not be passed on to the that the Senate introduced amendments that are germane to the
end-consumer. As to the no pass-on provision for sale of petroleum subject matter and purposes of the house bills
products, petitioners argue that the fact that the presence of such a no  Petitioners also reiterate their argument that the input tax is a property
pass-on provision in the House version and the absence thereof in the or a property right. In the same breath, the Court reiterates its finding
Senate Bill means there is no conflict because "a House provision that it is not a property or a property right, and a VAT-registered
cannot be in conflict with something that does not exist.
person’s entitlement to the creditable input tax is a mere statutory
Court’s Ruling: privilege.
 The right to credit input tax as against the output tax is clearly a paid input VAT was if it were to cease operations at the end of
privilege created by law, a privilege that also the law can limit. It should every quarter.
be stressed that a person has no vested right in statutory privileges. o It is not true then that the input VAT prepaid for the first quarter can be
 But, as the state is free to distribute the burden of a tax without regard recovered in the second, third or fourth quarter of that year, or at any
to the particular purpose for which it is to be used, there is no warrant time in the next year for that matter since the amount of prepaid input
in the Constitution for setting the tax aside because a court thinks that VAT accumulates with every succeeding prepayment of input VAT.
it could have distributed the burden more wisely. Those are functions Moreover, the accumulation of the prepaid input VAT diminishes the
reserved for the legislature actual value of the refundable amounts, considering the established
principle of "time-value of money", as explained in my Dissenting
DISSENTING OPINIONS: Opinion.
 Justice Tinga: The majority again dismisses the arguments of the COMMISSIONER OF INTERNAL REVENUE vs. SEAGATE TECHNOLOGY
petitioners as "theoretical", "conjectural" or merely "anticipatory," (PHILIPPINES)
notwithstanding that the injury to the taxpayers resulting from Section
8 and 12 of the E-VAT Law is ascertainable with mathematical  Business companies registered in and operating from the Special
certainty. Economic Zone in Naga, Cebu — like herein respondent —
o As I maintained in my Dissenting Opinion, a tax measure may be are entities exempt from all internal revenue taxes and the
validly challenged and stricken down even before its implementing rules relevant thereto, including the value-added taxes
implementation if it poses a clear and present danger to the or VAT. Although export sales are not deemed exempt transactions,
deprivation of life, liberty or property of the taxpayer without due they are nonetheless zero-rated. Hence, in the present case, the
process of law. This is the expectation of every citizen who wishes distinction between exempt entities and exempt transactions has
to maintain trust in all the branches of government. In the little significance, because the net result is that the taxpayer is not
enforcement of the constitutional rights of all persons, the liable for the VAT. Respondent, a VAT-registered enterprise, has
commonsense expectation is that the Court, as guardian of these complied with all requisites for claiming a tax refund of or credit for
rights, is empowered to step in even before the prospective the input VAT it paid on capital goods it purchased. Thus, the Court of
violation takes place. Hence, the evolution of the "clear and Tax Appeals and the Court of Appeals did not err in ruling that it is
present danger" doctrine and other analogous principles, without entitled to such refund or credit.
which, the Court would be seen as inutile in the face of  [Respondent] is a resident foreign corporation duly registered with
constitutional violation. the Securities and Exchange Commission to do business in the
o The majority fails to realize that even under the new E-VAT Law, Philippines, with principal office address at the new Cebu Township
the State recognizes that the persons who pre-pay that input VAT, One, Special Economic Zone, Barangay Cantao-an, Naga, Cebu;
usually the dealers or retailers, are not the persons who are liable
to pay for the tax. The VAT system, as implemented through the  2. [Petitioner] is sued in his official capacity, having been duly
previous VAT law and the new E-VAT Law, squarely holds the end appointed and empowered to perform the duties of his office,
consumer as the taxpayer liable to shoulder the input VAT. including, among others, the duty to act and approve claims for
Nonetheless, under the mechanism foisted in the new E-VAT Law, refund or tax credit;
the dealer or retailer who pre-pays the input VAT is virtually
precluded from recovering the pre-paid input VAT, since the law  3. [Respondent] is registered with the Philippine Export Zone
only allows such recovery upon the cessation of the business. Authority (PEZA) and has been issued PEZA Certificate No. 97-044
Indeed, the only way said class of taxpayers can recover this pre- pursuant to Presidential Decree No. 66, as amended, to engage in the
 manufacture of recording components primarily used in computers  Having paid the input VAT on the capital goods it purchased,
for export. Such registration was made on 6 June 1997; EADSIa respondent correctly filed the administrative and judicial claims
for its refund within the two-year prescriptive period. Such
 4. [Respondent] is VAT [(Value Added Tax)]-registered entity as payments were — to the extent of the refundable value — duly
evidenced by VAT Registration Certification No. 97-083-000600-V supported by VAT invoices or official receipts, and were not yet
issued on 2 April 1997; offset against any output VAT liability.

 5. VAT returns for the period 1 April 1998 to 30 June 1999 have been
filed by [respondent];

 6. 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 with Revenue District Office No. 83,
Talisay Cebu;

 7. No final action has been received by [respondent] from [petitioner]

on [respondent's] claim for VAT refund.

 Claims for tax refund/tax credit are construed in 'strictissimi juris'

against the taxpayer. This is due to the fact that claims for
refund/credit [partake of] the nature of an exemption from tax. Thus,
it is incumbent upon the [respondent] to prove that it is indeed
entitled to the refund/credit sought. Failure on the part of the
[respondent] to prove the same is fatal to its claim for tax credit. He
who claims exemption must be able to justify his claim by the clearest
grant of organic or statutory law. An exemption from the common
burden cannot be permitted to exist upon vague implications

COURT OF TAX APPEALS RULING

 The CA affirmed the Decision of the CTA granting the claim for
refund or issuance of a tax credit certificate (TCC) in favor of
respondent in the reduced amount of P12,122,922.66
 Respondent was, therefore, considered exempt only from the
payment of income tax when it opted for the income tax holiday
in lieu of the 5 percent preferential tax on gross income earned.
As a VAT-registered entity, though, it was still subject to the
payment of other national internal revenue taxes, like the VAT