Professional Documents
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SECOND DIVISION
DECISION
UY, d_.:
In this Petition for Review 1 filed pursuant to Rule 8, Section 4(a) of the
Revised Rules of the Court of Tax Appeals , petitioner seeks the reversal and
setting aside of the Decision dated June 8, 2007 and the Order dated July 9,
2007, both rendered by Branch 16 ,of the Regional Trial Court of Davao City,
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Denominated as "APPEAL", filed by registered mail on July 25 , 2007 and received by this Court on
August 2, 2007, Docket, pp. 1-15 .
DECISION
C.T.A. AC NO. 39
Page 2 of 17
SO ORDERED ."
SO ORDERED."
THE FACTS
As culled from the records , these are the facts of the case.
corporation duly organized and existing under the laws of the Republic of the
as such. He holds office at the Office of the City Treasurer of Davao, Ground
Floor, Davao City Hall Building , City Hall Drive , Davao City.
2
3
Penned by Presiding Judge Emmanuel C. Carpio, Docket, pp. 16-20 .
Ibid., Docket, p. 2 1.
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DECISION
C.I.A. AC NO. 39
Page 3 of 17
(R.A.) No. 7160, otherwise known as the Local Government Code of 1991 ,
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rate provided in Article 143 (c ).
inclusive of surcharge i.n the amount of Php142,501 .77 and interest in the
amount of Php59,850.74, for its sales for the period covering taxable year
2004, based on the premise that petitioner's sales were local and not export
sales , and using the rate provided under Section 143(a) of R.A. No. 7160 as
tax base.
November 30, 2005 6 which was denied with finality in the Letter dated
mentioned in paragraphs (a) and (c) Article 5, Chapter Ill of the Davao City
January 9, 2006. However, on the same day, respondent issued a Tax Order
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5
6
7
8
An nex "E", Appeal, Docket, pp. 26-31.
An nex "F", Appea l, Docket, pp. 32-33.
Annex "G", Appeal, Docket, pp. 34-37.
t
Annex "A", Decision, Civil Case No . 31,350-2006, June 8, 2007, Docket, pp. 16-20.
Ibid.
DECISION
C.T.A. AC NO. 39
Page 4 of 17
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of Payment assessing petitioner for the total amount of Php798,959.90,
taxable year 2004. In a Letter dated January 12, 2006, petitioner's Motion for
Branch 16 of the Regional Trial Court of Davao City, raising the following
In the assailed Oecision ,15 the lower court dismissed the Petition
and/or Appeal based on the finding that what herein petitioner sells, are inputs
for export products and not the export products itself. And being mere inputs,
9
Annex "H.", Appeal, Docket, p. 38.
10
Annex "M", Appeal, Docket, pp. 44-45 .
11
Annexes "J", "1", and "K", Appeal, Docket, pp. 39-40, 41 , and 42, respecti vely.
12
Annex "J", Appea l, Docket, p. 41.
13
Annex "K", Appeal, Docket, p. 42.
14
Annex "N", Appeal, Docket, pp. 46-61.
15
Supra.
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DECISION
C.T.A. AC NO. 39
Page 5 of 17
it ruled that petitioner is not an exporter, nor its sales considered as export
sales.
2007, praying for the reversal and setting aside of the lower court's Decision
and Order dated June 8, 2007 and July 9, 2007, respectively, on the ground
that its sales of packaging materials to its clients are covered under Section
143(c), and not under Section 143(a), of R.A. No. 7160. Petitioner further
"export sales" under R.A. No. 9377 is misplaced . Such definition refers only
to taxable transactions for value-added tax (VAT) purposes and not to local
sales and local taxation , which are two distinct species of tax governed by two
an "exporter" within the definition provided under R.A. 7160, nor its sales to
the reduced rate under Section 143(c). Petitioner's products are allegedly
sold locally; ergo, should be treated as local sales under Section 143(a) of
Minister of Finance, further argues that "a company which does not export its
16
Supra.
17
Treated as a Petition for Review in a Resolutio n promulgated on August 9, 2007, Docket, p. 65.
18
Docket, pp. 66-72.
DECISION
C.T.A . AC NO. 39
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Page 6 of 17
products, but sells it to local companies which in turn utilize said products, as
taxable as manufacturer under Sec. 19(A) of PD No. 231 [now Section 143(a)
of the new Code], and not under Section 19(A-2) [now Section 143(c)
thereof]". 19
file their simultaneous Memoranda within thirty (30) days from notice. Both
THE ISSUE
R.A. No. 7160, otherwise known as the Local Government Code, and which
imposes a tax rate not exceeding one half (%) of thirty seven and a half
percent (37% %) of one percent (1%), instead of being made liable to pay
"manufacturer" which is taxed at the rate of thirty seven and a half percent
(37% %) of one percent (1 %); and whether or not petitioner is entitled to its
subject claim for refund or issuance of tax credit certificate pertaining to the
19
Mini ster of Fi nance letter dated February 22, 1986 to Revenue Officer Marzan of Makati , Metro
Mani la.
20
Docket, pp. 76-93 .
21
Docket, pp. 95 - 101.
22
Resolution dated January 2, 2008, Docket, p. 104.
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DECISION
C.T.A. AC NO. 39
Page 7 of 17
taxes it paid under protest in the total amount of Php798,959.90 for the
Petitioner's Position
Petitioner alleges that during the year 2004, its sales to export oriented
for their exports , are considered as "export sales" and should be treated as
such , pursuant to Section 143(c) of the R.A. No. 7160 , which provides:
(a) xxx at a rate not exceeding thirty seven and a half percent
(37 Y2 %) of one percent (1 %)
(b) XXX
(c) On exporters , and on manufacturers, millers, producers ,
wholesalers , distributors, dealers or retailers of essential
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DECISION
C.I.A. AC NO. 39
Page 8 of 17
business tax and not the person. The classification of the person depends on
definition, but such taxpayer may make export sales and such export sales
Section 143(c) of R.A. No. 7160, if it makes sales transactions which are
considered as export sales, then it is not covered by paragraph (a) but rather
Additionally, petitioner argues that R.A. No. 7160 does not define the
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term "export sales"; as such, similar laws may be used to fill in the
deficiencies of the Local Government Code. In this case , the term "export
23
Implementing Rules of the New VAT La"* or Republic Act No. 933 7.
DECISION
C.T.A. AC NO. 39
Page 9 of 17
From the foregoing , petitioner submits that its packaging materials sold
as R.A. No. 7160 does not contain any provision on "indirect exporters", and
exporter". The only thing that Section 143 of R.A. No. 7160 mentions is the
tax rate on "exporters", without any distinction whether the exporter is "direct"
or "indirect". It posits that if it was the intent of the Local Government Code to
provide such classification, then it s~ould have done so from the beginning .
Respondent's Position
"export sales" under Section 4.1 o6-5( a)(3) of R. R. No. 16-200524 is clearly
for VAT purposes. While export sales for purposes of imposing tax on the
of services and the lease of properties is governed by R.A. No. 9377 (now by
the National Internal Revenue Code of 1997), the local business tax imposed
under Section 143(c) of R.A. No. 7160 is separately governed by the latter
likewise partakes the nature of a s~les tax. However, the tax contemplated
under Section 143(c) of R.A. No. 7160 is a tax imposed. upon the performance
24
Referring to Consolidated Value Added Tax Regul atio ns of2005
DECISION
C.T.A. AC NO. 39
Page 10 of 17
Instead , the meaning of "export sales" can .be deduced from the
as used in R.A. No. 7160 refers to those principally engaged in the business
whose goods or products are sold abroad . This must be so, otherwise, the
Section 143 of R.A. No. 7160 would be rendered useless by the simplest
products both domestically and abroad . What makes this apparent is the
Verily, manufacturers and producers are obl iged to declare their export
sales and local sales separately for the imposition of the different tax rates
under subsections (a) and (c) of Section 143 of R.A. No. 7160. Stated
differently, the mere fact that a manufacturer or producer sells its goods and
products domestically or abroad does not automatically qualify all its sales as
declare all its sales separately, whether sold abroad or sold locally, so that
provided under Article Ill , Section 151 of the same Code which provides thus :
ARTICLE Ill
Cities
The rates of taxes that the city may levy may exceed the
maximum rates allowed for the province or municipality by not more
than fifty percent (50%) except the rates of professional and
amusement taxes.
25
Petron v. Tiangco, G.R. No. 15888 1, April 16, 2008
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DECISION
C.T.A. AC NO . 39
Page 12 of 17
cartons and boxes , to different clients , some of whom use the same for local
own products for exportation , it becomes necessary for Us to look into the
as provided under Section 143(a) and (c) of R.A. No. 7160 , to wit:
(b) xxxxxxx
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DECISION
C.T.A. AC NO. 39
Page 13 of 17
for purposes of imposing local business tax, shall refer to "those principally
Rules and Regulations of the R.A. 7160, or the Local Government Code.
the business entity is engaged, either in the exportation of its goods and
which are sold to different clients both for local consumption and export. In
other words , petitioner does not "export" its packaging materials but sells
product, to wit:
the export products. In spite of this provision however, it does not necessarily
materials used by export oriented enterprises form part of the export product
26
Section I U), Rule l .
DECISION
C.I.A. AC NO. 39
Page 15 ofl7
mention of local taxes thereby making said provision not applicable in the
instant case.
The subject business tax is imposed upon petitioner for its privilege of
imposition of business tax is provided for under Section 143 of the Local
Government Code of 1991. As the said Code does not make a manufacturer
who sells its manufactured product to an exporter who utilizes the same to
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produce its export product, an exporter, petitioner therefore, cannot be
A company that does not export its products, but sells it to local
under Section 143(a), and not under Section 143(c), of R.A. No. 7160.27
manufactured corrugated containers , cartons, and boxes cannot fall under the
term "export sales" because Section 143(c) of R.A. No. 7160 only applies to
Section 143(c) of R.A. No. 7160, petitioner's sales during taxable year 2004
27
Letter of the Minister of Finance to Revenue ·Officer Marzan of Makati dated February 22, 1986 as
quoted in the Decision of the lower court, Annex "A", Appeal , Docket, pp. 16-20 .
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DECISION
C.T.A. AC NO. 39
Page 16 of 17
are all considered local sales subject to the tax rate provided under Section
In the light of the foregoing discussions, the Court finds that the court
manufacturer under Section 143(a), and not under Section 143(c), of R.A. No.
7160. Thus , petitioner is not entitled to its subject claim for refund or issuance
hereby DISMISSED for lack of merit. Accordingly, the appealed Decision and
Order dated June 8, 2007 and July 9, 2007, respectively, are AFFIRMED .
SO ORDERED.
~.UY
~ustice
WE CONCUR:
aJ (u,c . a~ Q
<JU.A.Nifo-c. CASfANEDA;.fk~· EZ
Associate Justice Associate Justice
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DECIS ION
C.T.A. AC NO. 39
Page 17 of 17
ATTESTATION
consultation before the case was assigned to the writer of the opinion of the
Court's Division.
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Jf{ANJTOC. CASTANEDA, JFf. . '
Associate Justice
Chairperson
CERTIFICATION
above Decision were reached in consultation before the case was assigned to
~t ~ ts.-· C>~
ERNESTO D. ACOSTA
Presiding Justice
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