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CASE 2011-0035: PEOPLE OF THE PHILIPPINES VS. CARLO MAGNO AURE Y ARNALDO AND MELCHOR AUSTRIACO Y AGUILA (G.R. NO. 185163, 17 JANUARY 2011, VELASCO, JR., J.) SUBJECTS: ILLEGAL POSSESSION OF DANGEROUS DRUGS; ILLEGAL SALE OF PROHIBITED DRUGS; ELEMENTS AND HOW PROVEN. (SUBJECT: PEOPLE VS. AURE ET AL)

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February 6, 2011

 CASE 2011-0035: PEOPLE OF THE PHILIPPINES VS. CARLO MAGNO AURE Y ARNALDO AND MELCHOR AUSTRIACO Y AGUILA (G.R. NO. 185163, 17 JANUARY 2011, VELASCO, JR., J.) SUBJECTS: ILLEGAL POSSESSION OF DANGEROUS DRUGS; ILLEGAL SALE OF PROHIBITED DRUGS; ELEMENTS AND HOW PROVEN. (SUBJECT: PEOPLE VS. AURE ET AL)

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D E C I S I O N

 

 

VELASCO, JR., J.:

The Case

This is an appeal from the May 12, 2008 Decision[1][1] of the Court of Appeals (CA) in CA-G.R. CR No. 02600 entitled People of the Philippines v. Carlo Magno Aure and Melchor Austriaco, which affirmed the September 1, 2006 Decision[2][2] in Criminal Case Nos. 03-3296, 03-3297, and 03-4210 of the Regional Trial Court (RTC), Branch 64 in Makati City.  The RTC found accused Carlo Magno Aure (Aure) and Melchor Austriaco (Austriaco) guilty of violating Sections 5, 11, and 15, Article II of Republic Act No. (RA) 9165 or the Comprehensive Dangerous Drugs Act of 2002.

The Facts

The Information in Criminal Case No. 03-3296 charged Aure and Austriaco with violation of Sec. 5, Art. II of RA 9165.  The Information reads:

That on or about the 26th day of August, 2003, in the City of Makati, Metro Manila, Philippines and within the jurisdiction of this Honorable Court, the above-named accused, conspiring and confederating and both of them mutually helping and aiding with one another, without the necessary license or prescription and without being authorized by law, did then and there, willfully, unlawfully and feloniously sell, deliver, and give away P6,000.00 worth of Methylamphetamine Hydrochloride (Shabu) weighing three point ninety-one (3.91) grams, a dangerous drug.

CONTRARY TO LAW.[3][3]

In Criminal Case No. 03-3297, the Information charged Aure with violation of Sec. 11, Art. II of RA 9165, as follows:

That on or about the 26th day of August, 2003, in the City of Makati, Metro Manila, Philippines and within the jurisdiction of this Honorable Court, the above-named accused, not being lawfully authorized to possess and/or use regulated drugs and without any license or proper prescription, did then and there willingly, unlawfully, feloniously have in his possession, custody and control Methylamphetamine Hydrochloride (Shabu) weighing eighty six point twenty-three (86.23) grams, which is a dangerous drug, in violation of the aforesaid law.

CONTRARY TO LAW.[4][4]

And the Information in Criminal Case No. 03-4210 charged Austriaco with violation of Sec. 15, Art. II of RA 9165, as follows:

That on or about the 26th day of August, 2003, in the City of Makati, Metro Manila, Philippines and within the jurisdiction of this Honorable Court, the above-named accused, not being lawfully authorized to use any dangerous drug, and having been arrested and found positive for the use of Methylamphetamine after a confirmatory test, did then and there willfully, unlawfully and feloniously use Methylamphetamine, a dangerous drug, in violation of the said law.

CONTRARY TO LAW.[5][5]

When arraigned in Criminal Case Nos. 03-3296 and 03-3297 on September 9, 2003, Aure and Austriaco entered their negative pleas.[6][6]

Meanwhile, during the arraignment on February 19, 2004, Austriaco pleaded guilty in Criminal Case No. 03-4210.  The promulgation of the decision in this case was deferred pending submission by the defense counsel of a certification that he had not been convicted of the same offense.[7][7]

Thereafter, a consolidated trial of Criminal Case Nos. 03-3296 and 03-3297 ensued.

During trial, the prosecution presented three (3) witnesses, to wit: (1) Makati Anti-Drug Abuse Council (MADAC) operative Norman Bilason (Bilason), the designated poseur-buyer; (2) Police Officer 3 Jay Lagasca (PO3 Lagasca), the buy-bust team leader; and (3) MADAC operative Rogelio Flores (Flores), one of the back-up operatives.  On the other hand, the defense presented Aure and Austriaco as its witnesses.[8][8]

The Prosecution’s Version of Facts

 

At around 4:00 in the afternoon of August 26, 2003, an informant came to the Office of MADAC Cluster 2 and reported that a certain Carlo, later identified as Carlo Magno Aure, was rampantly selling illegal drugs along F. Nazario Street, Barangay Singkamas, Makati City.[9][9] Aure was reportedly armed with a handgun and was using his car in his illegal transactions.[10][10]

Upon being apprised of the ongoing drug peddling, the Chief of the Drug Enforcement Unit of the Makati City Police Station immediately created a group of officers which would conduct a buy-bust operation.[11][11] Composing this team was PO3 Lagasca, as the team leader, with operatives from both the police station’s Anti-Illegal Drug Special Operation Task Force (AIDSOTF) and MADAC’s Clusters 2 and 3 as members.

When a briefing was conducted, MADAC operative Bilason was assigned as the poseur-buyer to be provided with 12 marked five hundred peso (PhP 500) bills, amounting to six thousand pesos (PhP 6,000).

After marking the 12 PhP 500 bills, the team, with the informant, went to the place where Aure was reported to be conducting his trade.  When they reached a point along Primo Rivera Street, about 30 meters away from F. Nazario Street, they alighted from their vehicles.  MADAC operative Bilason and the informant walked towards F. Nazario Street, while the rest of the team members followed them.

Thereafter, when Bilason and the informant saw Aure and a certain “Buboy,” who turned out to be Austriaco, seating inside a car parked along F. Nazario Street, they approached the latter.  In the meantime, the other team members strategically positioned themselves within the area to monitor the transaction.

Bilason was introduced by the informant as a buyer of shabu.  Aure initially expressed his apprehension that Bilason could be an operative. Nevertheless, when the informant assured him that Bilason is his friend from the province, Aure asked Bilason how much he needed.  To this, Bilason replied “Isang bolto, pare,”[12][12] which meant six thousand pesos (PhP 6,000) worth of shabu.  When demanded by Aure, Bilason handed the previously marked money to him. The latter then placed the marked money inside his right front pocket.

Afterwards, Aure secured from Austriaco a small brown bag and a plastic sachet containing white crystalline substance, suspected as shabu, taken from the same bag.  Aure then handed over the same plastic sachet with its contents to Bilason.

After ascertaining that what Aure gave him was shabu, Bilason lighted his cigarette to signal to his team members that the transaction with Aure was already consummated.  Immediately, PO3 Lagasca and MADAC operative Flores closed in.[13][13]  After introducing themselves as AIDSOTF and MADAC operatives, Bilason and his team members placed Aure and Austriaco under arrest, and ordered them to get out of the car.[14][14]

Subsequently, Bilason seized the small brown bag from Aure.  When inspected, said bag yielded another plastic sachet containing substantial amount of suspected shabu wrapped in red wrapping paper, empty plastic sachets, and glass pipe tooter.  Also seized was a .45 caliber pistol with one magazine and five live bullets found inside the car near the place where Aure was seated.  Flores also recovered the marked money from Aure.  The recovered items were marked by Bilason in the presence of Aure and Austriaco.  PO3 Lagasca likewise explained to the two suspects the cause of their arrest and apprised them of their constitutional rights.

Eventually, Aure and Austriaco were brought to the AIDSOTF office.  The examinations conducted by the Philippine National Police Crime Laboratory on the plastic sachets of suspected shabu and the glass pipe tooter yielded positive results for Methylamphetamine Hydrochloride.[15][15]  This was indicated in Chemistry Report No. D-1068-03[16][16] issued by Police Inspector Alejandro C. de Guzman.

 

 

Version of the Defense

 

Aure and Austriaco interposed the defense of denial.

Aure testified that on August 26, 2003, at around 8:00 in the evening, he fetched Austriaco in Pasay City.[17][17]  The latter was referred to him by his compadre[18][18] to repair the cabinet in the house he intended to lease on F. Nazario Street, Barangay Singkamas, Makati City.  They proceeded to the said house in Makati City on board Aure’s Toyota Celica.

At around 8:30 in the evening, while Austriaco was estimating the cost of materials to be used for the repair of the cabinet, Aure heard knocks on the door.  When he opened the door, he saw 10 men in civilian clothes who immediately grabbed him and made him lie face down for about three minutes.

This group of men allegedly began to search the house and seized the money amounting to PhP 200,000 which Aure intended to use for purchasing a taxi cab, among other things.  During this time, Austriaco was standing beside the cabinet near the lavatory when someone ordered, “Kunin niyo na rin yung isa.”[19][19]

Thereafter, Aure was handcuffed and was subsequently brought to the office of the Drug Enforcement Unit.[20][20]  After about five to 10 minutes, he saw Austriaco, who was also handcuffed, being brought inside the said office.[21][21]

Aure further testified that a plastic sachet of shabu was shown to him, and when he denied that the item came from him despite the arresting men’s insistence that this was in his possession, he was punched by a police officer.  He also averred that a certain Rogelio Flores tried to extort money from him.  His wallet and license were allegedly taken from him by the persons who arrested him.

For his part, Austriaco recounted that in the evening of August 26, 2003, he was fetched by a certain Benjamin Zaide from his house in Pasay City to repair the cabinet of Aure.  Together, they proceeded to the house of Benjamin Zaide, also in Pasay City, where Aure was waiting.  Thereafter, they proceeded to Aure’s house in Makati City.

Upon arriving at Aure’s house, Austriaco immediately attended to the cabinet he was supposed to repair.  A few minutes later, he heard some noise coming from the direction of the stairs of the house.  Nonetheless, he went on with his work and just focused his attention on the cabinet he was estimating.[22][22]

Austriaco further narrated that when Aure opened the door, he saw several men wearing civilian clothes enter the house and forcibly grab Aure.  The latter stumbled and fell to the floor with his face down.  The group of men began to search the house.  Eventually, Austriaco saw Aure being brought outside of Aure’s house.  After two to three minutes, he was also taken out of the house and was brought to the Criminal Investigation Division.[23][23]

 

Ruling of the Trial Court

After trial, the RTC convicted Aure and Austriaco.  The dispositive portion of its Decision reads:

WHEREFORE, in view of the foregoing judgment is rendered as follows:

1.      In Criminal Case No. 03-3296, for Violation of Section 5, Article II of Republic Act No. 9165, the accused CARLO MAGNO AURE y ARNALDO and MELCHOR AUSTRIACO y AGUILA are found GUILTY beyond reasonable doubt of the offense charged and both are sentenced to suffer the penalty of LIFE IMPRISONMENT and each one to pay a fine of FIVE HUNDRED THOUSAND (PHP 500,000.00) PESOS.

2.      In Criminal Case No. 03-3297 for Violation of Section 11, Article II Republic Act No. 9165, the accused CARLO MAGNO AURE y ARNALDO is found GUILTY beyond reasonable doubt of the offense charged and considering the quantity of shabu recovered from his possession which is 86.23 grams, is sentenced to suffer the penalty of LIFE IMPRISONMENT and to pay a fine of Five Hundred Thousand (Php 500,000.00) [Pesos].

3.      In Criminal Case No. 03-4210, for Violation of Section 15 Article II, Republic Act No. 9165, the accused MELCHOR AUSTRIACO y AGUILA having pleaded GUILTY to the charge is sentenced to undergo drug rehabilitation for at least six (6) months in a government rehabilitation center under the auspices of the Bureau of Corrections subject to the provisions of Article VIII of Republic Act No. 9165.

The Branch Clerk of Court is directed to transmit to the Philippine Drug Enforcement Agency (PDEA), the two (2) plastic sachets of shabu with a combined weight of 90.14 grams subject matter of Criminal Cases Nos. 03-3296 and 03-3297 for said agency’s appropriate disposition.

SO ORDERED.[24][24]

On appeal to the CA, Aure and Austriaco questioned the trial court’s decision in convicting them despite their claim that the prosecution failed to prove their guilt beyond reasonable doubt.[25][25]

 

Ruling of the Appellate Court

 

On May 12, 2008, the CA affirmed the judgment of the RTC.  It ruled that all the elements necessary to establish the fact of sale or delivery of illegal drugs were aptly established by the prosecution, to wit: 

In the present controversy, the elements of the crimes charged were amply proven not only by the categorical and materially consistent declarations of the poseur-buyer and two other members of the buy-bust team, but also by laboratory examinations of the substance seized, drug test of one of the accused-appellants, affidavits, marked bills, and other reports which were all submitted in court. Taken collectively, these pieces of evidence bear out that the accused-appellants indeed sold a packet of white crystalline substance to MADAC operative and poseur-buyer Norman Bilason in exchange for P6,000 and that the substance seized eventually tested positive for shabu. In the prosecution of the offense of illegal sale of prohibited drugs, what is essential is the proof that the transaction or sale actually took place coupled with the presentation in court of the corpus delicti as evidence.[26][26]  (Citations omitted.)

The CA held also that in the absence of proof to suggest that the arresting officers were moved by improper motives, the presumption of regularity in the performance of official duty, as well as the findings of the trial court on the credibility of witnesses, shall prevail over the self-serving claim of having been framed.[27][27]  Further, the appellate court ruled that the statutory burden of guilt beyond reasonable doubt was ably discharged by the prosecution.  After all, it ratiocinated that “proof beyond reasonable doubt” does not necessarily contemplate “absolute certainty” but that degree of proof which produces conviction in an unprejudiced mind.

The fallo of the CA Decision reads:

WHEREFORE, in the light of the foregoing discussion, the present appeal is hereby DISMISSED. Accordingly, the decision of the court a quo dated 01 September 2006 is perforce affirmed in its entirety.

SO ORDERED.[28][28]

On June 3, 2008, accused-appellants filed their Notice of Appeal.[29][29]

In our Resolution dated January 14, 2009,[30][30] We notified the parties that they may file their respective supplemental briefs if they so desired.  On March 19, 2009, the People of the Philippines manifested that it was no longer filing a supplemental brief, as it believed that the Brief for the Plaintiff-Appellee dated November 6, 2007 had thoroughly refuted and discussed the lone issue raised by accused-appellants in the instant case.[31][31] Similarly, accused-appellants, on April 8, 2009, manifested that they were no longer filing a supplemental brief, as they are adopting all the arguments contained in their Brief for the Accused-Appellants dated June 15, 2007.[32][32]

 

The Issues

Accused-appellants contend in their Brief for the Accused-Appellants dated June 15, 2007[33][33] that:

the court A QUO GRAVELY ERRED IN FINDING THE ACCUSED GUILTY OF THE CRIME CHARGED NOTWITHSTANDING THE FAILURE OF the PROSECUTION TO PROVE their GUILT BEYOND REASONABLE DOUBT.

Our Ruling

 

We sustain accused-appellants’ conviction.

Proof of guilt beyond reasonable doubt adequately established by the prosecution

 

After a careful examination of the records of this case, We are satisfied that the prosecution’s evidence established the guilt of accused-appellants beyond reasonable doubt.

In deciding this appeal, this Court is guided by the legal aphorism that factual findings of the CA, affirming those of the trial court, are binding on this Court, unless there is a clear showing that such findings are tainted with arbitrariness, capriciousness, or palpable error.[34][34]  As this Court held in People v. Lusabio, Jr.:[35][35]

All in all, we find the evidence of the prosecution to be more credible than that adduced by accused-appellant. When it comes to credibility, the trial court’s assessment deserves great weight, and is even conclusive and binding, if not tainted with arbitrariness or oversight of some fact or circumstance of weight and influence. The reason is obvious. Having the full opportunity to observe directly the witnesses’ deportment and manner of testifying, the trial court is in a better position than the appellate court to evaluate testimonial evidence properly.  (Emphasis supplied; citations omitted.)

Here, accused-appellants failed to show any palpable error, arbitrariness, or oversight on the findings of fact of the trial and appellate courts as to warrant a review of such findings.

In the prosecution for the crime of illegal sale of prohibited drugs under Sec. 5, Art. II of RA 9165, the following elements must concur: (1) the identities of the buyer and seller, object, and consideration; and (2) the delivery of the thing sold and the payment for it.[36][36]  What is material to the prosecution for illegal sale of dangerous drugs is the proof that the transaction or sale actually occurred, coupled with the presentation in court of the substance seized as evidence.[37][37]  In the instant case, all these were sufficiently established by the prosecution.

MADAC operative Bilason, the poseur-buyer, testified on the first element, thus:

Q:        On August 26, 2003 at around 9:05 in the evening, where were you Mr. Witness?

A:         I’m at F. Nazario St., Brgy. Singkamas, Makati City, sir.

Q:        What were you doing in the said place?

A:         We were conducting buy bust operation against a certain Carlo, sir.

Q:        What was your participation in that buy bust operation that you were then conducting?

A:         I was the poseur buyer.

            x x x x

Q:        Could you tell us what happened to the buy bust operation that you conducted at F. Nazario St., Brgy. Singkamas, Makati City?

A:         We successfully apprehended Carlo together with his companion Melchor Austriaco.

Q:        If this alias Carlo is present in court, will you be able to identify him?

A:         Yes, sir.

Q:        Will you please point him out to us?

A:         (The witness pointed to a man who identified himself as Carlo Magno Aure y Arnaldo)

Q:        How about Melchor Austriaco Mr. Witness, will you please point him out to us?

A:         (The witness pointed to a man who identified himself as Melchor Austriaco y Aguila)

            x x x x

Q:        What happened Mr. Witness after the operation was coordinated with the PDEA?

A:         PO3 Jay Lagasca prepared the buy bust money, sir.

Q:        And how much were you supposed to buy in the buy bust operation?

A:         Worth P6,000.00 pesos, sir.

Q:        And what were you supposed to buy?

A:         Shabu, sir.

Q:        You said that PO3 Jay Lagasca prepared the buy bust money?

A:         Yes, sir.

Q:        Where were you when it was given to you?

A:         I was present, sir, beside PO3 Jay Lagasca, sir.

Q:        If the buy bust money that was given to you by PO3 Jay Lagasca will be shown to you, will you be able to identify the same?

A:         Yes, sir.

Q:        By the way, how much was given to you by PO3 Jay Lagasca?

A:         Worth P6,000.00 pesos, sir.

Q:        And could you tell us in what denomination were those P6,000.00 pesos are?

A:         Twelve (12) pieces of P500.00 peso bills, sir.

Q:        If this [sic] twelve (12) pieces of P500.00 peso bills given to you by PO3 Jay Lagasca to be used in that operation will be shown to you, will you be able to identify the same?

A:         I am very sure, sir.

Q:        I’m showing to you Mr. Witness twelve (12) pieces of P500.00 peso bills. Will you please go over the same and tell us what relation does that have to the money that was given to you by PO3 Jay Lagasca?

A:         This is the same buy bust money that we used in the buy bust operation.

Q:        x x x Why are you certain Mr. Witness that these are the same buy bust money that were given to you by PO3 Jay Lagasca?

A:         Because of the marking above the serial number C2, sir.

Q:        What does this marking C2 stands for?

A:         Cluster 2, sir.

Q:        Who placed these markings above the serial numbers of the P500.00 peso bills?

A:         Our team leader, PO3 Jay Lagasca, sir.

Q:        Where were you when these markings were placed?

A:         I’m just in front of him, sir.

Q:        x x x Mr. Witness, what did you do next after the P500.00 peso bills were given to you by PO3 Jay Lagasca?

A:         After receiving the money, we proceeded to the area, sir.

Q:        Who was with you when you proceeded to the area?

A:         The confidential informant together with the buy bust team, sir.

            x x x x

Q:        You said that while you were walking at F. Nazario Street, you saw the [sic]?

A:         The informant told me that that is the accused, sir.

Q:        And what was the accused doing when you saw him?

A:         He was seated inside the car and beside him on the driver side is a male person.

            x x x x

Q:        And what was the other male person doing at that time that you saw accused Carlo Magno Aure?

A:         They were talking to each other, sir.

Q:        Where was this other man at that time?

A:         Beside him, sir, at the other side, sir.

Q:        What happened after you saw the two men, Mr. Witness?

A:         The confidential informant introduced me to the subject alias Carlo and told him that I am in need of shabu.

Q:        So Mr. Witness, you said that you were introduced by the informant to accused Carlo Magno Aure?

A:         Yes, sir.

Q:        How were you introduced by the informant?

A:         That I was in need of shabu, sir.

Q:        And what was the reply of accused Carlo Magno Aure?

A:         Carlo Magno Aure said that pare “parang parak yata yan tol?”

Q:        And when he said “parang parak yata yan tol?” to whom was he addressing this statement?

A:         To the informant.

Q:        And what happened after he uttered those words Mr. Witness?

A:         Sumagot yung informant “barkada ko yan, taga probinsya.”[38][38]

The second element¾the delivery of the thing sold and the payment for it¾was satisfied through the testimony of witness Bilason:

Q:        And what happened after that?

A:         “Tinanong ako ni Carlo Magno Aure kung magkano ang kukunin ko, sabi ko sa kanya isang bolto pare.”

Q:        When you said “isang bolto” what exactly do you mean?

A:         According to the informant worth P6,000.00 pesos “isang bolto.”

Q:        And what happened after you said “isang bolto?”

A:         He got the money from me and put it inside his right front pocket, sir.

Q:        And what happened after that?

A:         He ordered his companion alias Buboy to get the brown bag and took out one plastic sachet, sir.

Q:        And what did he do with this plastic sachet?

A:         Alias Buboy handed to Carlo Magno Aure one plastic sachet containing white crystalline substance, the suspected shabu and the brown bag.

Q:        After the plastic sachet and the brown bag were handed to accused Carlo Magno Aure what happened next?

A:         Alias Carlo gave me the one piece of transparent plastic sachet containing crystalline substance, the suspected shabu.

Q:        If the male companion of Carlo Magno is inside the courtroom, will you be able to identify him?

A:         Yes, sir.

Q:        Will you please point him out to us.

A:         (The witness pointed to a man who identified himself as Melchor Austriaco y Aguila)

Q:        So, you are referring to accused Melchor Austriaco y Aguila?

A:         Yes, sir.

Q:        What happened next Mr. Witness after accused Carlo Magno Aure handed to you this plastic sachet?

A:         When I got the plastic sachet and I was convinced that it was shabu then I gave the pre-arranged signal, sir.

Q:        What convinced you that the sachet contained shabu?

A:         Because of [sic] the appearance consist of white crystalline substance, sir.

Q:        What was the pre-arranged signal that you gave?

A:         By lighting my cigarette, sir.

Q:        And what happened after the pre-arranged signal was given?

A:         Our team leader and my back up Rogelio Flores approached us and helped me in arresting the suspect, sir.

Q:        What happened Mr. Witness after you arrested the two accused?

A:         I got hold of Carlo Magno and I introduced myself as MADAC operative and we asked him to go outside the vehicle, sir.

Q:        And what happened after you ordered the two to get off the car?

A:         Narecover ko po yung isang brown bag na naglalaman ng nakabot [sic] na kulay pulang birthday wrapping paper na shabu at glass tooter at saka may lamang mga plastic po.

Q:        Mr. Witness, if the item that you bought from the accused will be shown to you, will you be able to identify the same?

A:         Yes, sir.

Q:        I’m showing to you Mr. Witness several pieces of object evidence. Will you please go over these and identify the item that you bought from the accused?

A:         Sir, ito po mismo yung nabili ko kay Carlo Magno Aure worth P6,000.00 pesos.

Q:        x x x Why are you certain that this is the same item that you bought?

A:         Because of the marking CAA 8/26/03.

Q:        Who placed the markings on the sachet?

A:         I was the one, sir.

Q:        Where were you when you placed this marking?

A:         In front of the accused, in the area where we arrested the accused.

Q:        What does the initial CAA stands for?

A:         Carlo Magno Aure y Arnaldo, sir.

Q:        How did you come to know that the initial of accused Carlo Magno Aure was CAA at the time that you made this marking?

A:         After arresting them and after confiscating all the items PO3 Jay Lagasca asked his name.

            x x x x

Q:        By the way Mr. Witness, earlier you identified these pieces of evidence contained in this brown plastic bag. Why are you certain Mr. Witness that these are the same evidence, which you recovered from the possession of accused Carlo Magno Aure?

A:         I was the one who marked that evidence that we recovered from Carlo Magno Aure, sir.

Q:        What happened to the buy bust money, Mr. Witness?

A:         MADAC Rogelio Flores recovered the buy bust money from the front pocket of his worn pants.

Q:        From whom was it recovered?

A:         From Carlo Magno Aure, sir.

Q:        Where were you when MADAC Flores recovered the money?

A:         I was beside him, sir.

Q:        After you have arrested the two accused where did you go?

A:         We [went] to the Drug Enforcement Unit of the Makati Police Station.

Q:        And what happened at the Drug Enforcement Unit?

A:         To give the evidence to the duty investigator PO1 Alex Inopia and PO1 Alex Inopia made a request for laboratory examination of the specimen recovered from Carlo Magno Aure and drug test as well.

Q:        Who brought the two accused to the PNP Crime Laboratory for drug testing and the shabu for laboratory examination?

A:         I was the one together with my group, sir.

Q:        Did you come to know the result of the drug test conducted from the two accused?

A:         I’m not aware, sir. I have not seen the result.

Q:        How about the drug that were subject of these cases?

A:         It gave positive result for Methlyamphetamine [sic] Hydrochloride, sir.[39][39]

As shown in Bilason’s testimony, a buy-bust operation took place. Being the poseur-buyer, he positively identified accused-appellants as the sellers of a sachet containing a white crystalline substance for a sum of PhP 6,000.  The sachet was confiscated and marked with the initials “CAA” and was subsequently taken to the crime laboratory for examination, where a chemical analysis on its contents confirmed that the substance is indeed Methylamphetamine Hydrochloride or shabu.  Moreover, the testimonies of the other members of the buy-bust team, PO3 Lagasca and MADAC operative Flores, substantially corroborated Bilason’s testimony.

As regards the charge of illegal possession of dangerous drugs under Sec. 11, Art. II of RA 9165 against accused-appellant Aure, We also find that the elements of the offense have been established by the evidence of the prosecution.

The elements necessary for the prosecution of illegal possession of dangerous drugs are: (1) the accused is in possession of an item or object which is identified to be a prohibited drug; (2) such possession is not authorized by law; and (3) the accused freely and consciously possessed the said drug.[40][40]

In the instant case, a brown bag was found inside the car of accused-appellant Aure.  It yielded a plastic sachet of shabu weighing 86.23 grams wrapped in red wrapping paper, small plastic sachets, and an improvised plastic tooter.  Considering that during the sale to Bilason, it was from the same bag that accused-appellant Austriaco took the sachet of shabu, per order of accused-appellant Aure, the owner-possessor of said bag and its contents is no other than accused-appellant Aure, who has not shown any proof that he was duly authorized by law to possess them or any evidence to rebut his animus possidendi of the shabu found in his car during the buy-bust operation.

 

Defense of denial is inherently weak

 

The sachet containing the dangerous drug was positively identified by MADAC operative Bilason during the trial as the very sachet with white crystalline substance sold and delivered to him by accused-appellants. Thus, accused-appellants’ denial is self-serving and has little weight in law. A bare denial is an inherently weak defense,[41][41] and has been invariably viewed by this Court with disfavor, for it can be easily concocted but difficult to prove, and is a common standard line of defense in most prosecutions arising from violations of RA 9165.[42][42]

Time and again, We have held that “denials unsubstantiated by convincing evidence are not enough to engender reasonable doubt particularly where the prosecution presents sufficiently telling proof of guilt.”[43][43]

In the absence of any intent on the part of the police authorities to falsely impute such crime against the accused-appellants, the presumption of regularity in the performance of duty stands.[44][44]  Especially here, where an astute analysis of MADAC operative Bilason’s testimony does not indicate any inconsistency, contradiction, or fabrication.

Considering the foregoing disquisitions, We uphold the presumption of regularity in the performance of official duty and find that the prosecution has discharged its burden of proving the guilt of accused-appellants beyond reasonable doubt.

WHEREFORE, the appeal is DENIED.  The CA Decision in CA-G.R. CR No. 02600 finding accused-appellants Carlo Magno Aure and Melchor Austriaco guilty of the crimes charged is AFFIRMED.

SO ORDERED.

                                                          PRESBITERO J. VELASCO, JR.

                                                                       Associate Justice

WE CONCUR:

RENATO C. CORONA

Chief Justice

Chairperson

TERESITA J. LEONARDO-DE CASTRO        MARIANO C. DEL CASTILLO

  Associate Justice                                             Associate Justice

JOSE PORTUGAL PEREZ

                                       Associate Justice

C E R T I F I C A T I O N

 

 

          Pursuant to Section 13, Article VIII of the Constitution, I certify that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

                                                                   RENATO C. CORONA

                                                                             Chief Justice

 

[1][1] Rollo, pp. 2-12.  Penned by Associate Justice Bienvenido L. Reyes and concurred in by Associate Justices Vicente Q. Roxas and Myrna Dimaranan-Vidal.

[2][2] CA rollo, pp. 19-41.  Penned by Judge Delia H. Panganiban.

[3][3] Records, p. 2.

[4][4] Id. at 4.

[5][5] Rollo, p. 6.

[6][6] Records, p. 29.

[7][7] Rollo, p. 7.

[8][8] CA rollo, p. 23.

[9][9] Id. at 23-24.

[10][10] Rollo, p. 2.

[11][11] Id. at 2-3.

[12][12] TSN, November 23, 2004, p. 20.

[13][13] Rollo, p. 3.

[14][14] Id. at 3-4.

[15][15] Id. at 4.

[16][16] Records, p. 143.

[17][17] CA rollo, p. 28.

[18][18] A name called by men to each other, as when one is a godfather to the other’s child in baptism.

[19][19] “Get the other one, too.”

[20][20] CA rollo, p. 29.

[21][21] Id. at 29-30.

[22][22] Id. at 30.

[23][23] Rollo, p. 5.

[24][24] CA rollo, pp. 39-41.

[25][25] Id. at 57.

[26][26] Rollo, p. 11.

[27][27] Id. at 11-12.

[28][28] Id. at 12.

[29][29] Id. at 13-14.

[30][30] Id. at 19-20.

[31][31] Id. at 21-23.

[32][32] Id. at 25-27.

[33][33] CA rollo, pp. 55-70.

[34][34] People v. Belo, G.R. No. 187075, July 5, 2010; citing Fuentes v. Court of Appeals, G.R. No. 109849, February 26, 1997, 268 SCRA 703, 705.

[35][35] G.R. No. 186119, October 27, 2009, 604 SCRA 565, 590.

[36][36] People v. Alberto, G.R. No. 179717, February 5, 2010, 611 SCRA 706, 713; citing People v. Dumlao, G.R. No. 181599, August 20, 2008, 562 SCRA 762, 770.

[37][37] Id.

[38][38] TSN, November 23, 2004, pp. 4-19.

[39][39] Id. at 20-32.

[40][40] People v. Gutierrez, G.R. No. 177777, December 4, 2009, 607 SCRA 377, 390-391; citing People v. Pringas, G.R. No. 175928, August 31, 2007, 531 SCRA 828, 846.

[41][41] People v. Dulay, G.R. No. 150624, February 24, 2004, 423 SCRA 652, 662; citing People v. Arlee, G.R. No. 113518, January 25, 2000, 323 SCRA 201, 214.

[42][42] People v. Barita, G.R. No. 123541, February 8, 2000, 325 SCRA 22, 38.

[43][43] People v. Eugenio, G.R. No. 146805, January 16, 2003, 395 SCRA 317, 326; citing People v. Del Mundo, G.R. No. 138929, October 2, 2001, 366 SCRA 471.

[44][44] People v. Cruz, G.R. No. 185381, December 16, 2009, 608 SCRA 350, 368.

Comment

CASE 2011-0034: SILICON PHILIPPINES, INC., (FORMERLY INTEL PHILIPPINES MANUFACTURING, INC.) VS. COMMISSIONER OF INTERNAL REVENUE (G.R. NO. 172378, 17 JANUARY 2011, DEL CASTILLO, J.) SUBJECT: CLAIM FOR CREDIT/REFUND OF INPUT VAT ON ZERO-RATED SALES. (BRIEF TITLE: SILICON PHILIPPINES VS. CIR).

Filed under: LATEST SUPREME COURT CASES — Leave a comment
February 5, 2011

CASE 2011-0034: SILICON PHILIPPINES, INC., (FORMERLY INTEL PHILIPPINES MANUFACTURING, INC.) VS. COMMISSIONER OF INTERNAL  REVENUE (G.R. NO. 172378, 17 JANUARY 2011, DEL CASTILLO, J.) SUBJECT: CLAIM FOR CREDIT/REFUND OF INPUT VAT ON ZERO-RATED SALES. (BRIEF TITLE: SILICON PHILIPPINES VS. CIR).

x – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – x

 

 

D E C I S I O N

 

DEL CASTILLO, J.:

The burden of proving entitlement to a refund lies with the claimant.

This Petition for Review on Certiorari under Rule 45 of the Rules of Court seeks to set aside the September 30, 2005 Decision[1][1] and the April 20, 2006 Resolution[2][2] of the Court of Tax Appeals (CTA) En Banc.

Factual Antecedents

Petitioner Silicon Philippines, Inc., a corporation duly organized and existing under and by virtue of the laws of the Republic of the Philippines, is engaged in the business of designing, developing, manufacturing and exporting advance and large-scale integrated circuit components or “IC’s.”[3][3]  Petitioner is registered with the Bureau of Internal Revenue (BIR) as a Value Added Tax (VAT) taxpayer [4][4] and with the Board of Investments (BOI) as a preferred pioneer enterprise.[5][5]

On May 21, 1999, petitioner filed with the respondent Commissioner of Internal Revenue (CIR), through the One-Stop Shop Inter-Agency Tax Credit and Duty Drawback Center of the Department of Finance (DOF), an application for credit/refund of unutilized input VAT for the period October 1, 1998 to December 31, 1998 in the amount of P31,902,507.50, broken down as follows:

                                                                                     Amount

Tax Paid on Imported/Locally Purchased

           Capital Equipment

  

     P  15,170,082.00
Total VAT paid on Purchases per Invoices 

          Received During the Period for which

          this Application is Filed

   

        16,732,425.50
Amount of Tax Credit/Refund Applied For    P  31,902,507.50[6][6]

 

Proceedings before the CTA Division

On December 27, 2000, due to the inaction of the respondent, petitioner filed a Petition for Review with the CTA Division, docketed as CTA Case No. 6212.  Petitioner alleged that for the 4th quarter of 1998, it generated and recorded zero-rated export sales in the amount of P3,027,880,818.42, paid to petitioner in acceptable foreign currency and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas;[7][7] and that for the said period, petitioner paid input VAT in the total amount of P31,902,507.50,[8][8] which have not been applied to any output VAT.[9][9]

To this, respondent filed an Answer[10][10] raising the following special and affirmative defenses, to wit:

8.         The petition states no cause of action as it does not allege the dates when the taxes sought to be refunded/credited were actually paid;

9.         It is incumbent upon herein petitioner to show that it complied with the provisions of Section 229 of the Tax Code as amended;

10.      Claims for refund are construed strictly against the claimant, the same being in the nature of exemption from taxes (Commissioner of Internal Revenue vs. Ledesma, 31 SCRA 95; Manila Electric Co. vs. Commissioner of Internal Revenue, 67 SCRA 35);

11.      One who claims to be exempt from payment of a particular tax must do so under clear and unmistakable terms found in the statute (Asiatic Petroleum vs. Llanes, 49 Phil. 466; Union Garment Co. vs. Court of Tax Appeals, 4 SCRA 304);

12.      In an action for refund, the burden is upon the taxpayer to prove that he is entitled thereto, and failure to sustain the same is fatal to the action for refund.  Furthermore, as pointed out in the case of William Li Yao vs. Collector (L-11875, December 28, 1963), amounts sought to be recovered or credited should be shown to be taxes which are erroneously or illegally collected; that is to say, their payment was an independent single act of voluntary payment of a tax believed to be due and collectible and accepted by the government, which had therefor become part of the State moneys subject to expenditure and perhaps already spent or appropriated; and

13.      Taxes paid and collected are presumed to have been made in accordance with the law and regulations, hence not refundable.[11][11]

On November 18, 2003, the CTA Division rendered a Decision[12][12] partially granting petitioner’s claim for refund of unutilized input VAT on capital goods. Out of the amount of P15,170,082.00, only P9,898,867.00 was allowed to be refunded because training materials, office supplies, posters, banners, T-shirts, books, and other similar items purchased by petitioner were not considered capital goods under Section 4.106-1(b) of Revenue Regulations (RR) No. 7-95 (Consolidated Value-Added Tax Regulations).[13][13] With regard to petitioner’s claim for credit/refund of input VAT attributable to its zero-rated export sales, the CTA Division denied the same because petitioner failed to present an Authority to Print (ATP) from the BIR;[14][14] neither did it print on its export sales invoices the ATP and the word “zero-rated.”[15][15] Thus, the CTA Division disposed of the case in this wise:

WHEREFORE, in view of the foregoing the instant petition for review is hereby PARTIALLY GRANTED. Respondent is ORDERED to ISSUE A TAX CREDIT CERTIFICATE in favor of petitioner in the reduced amount of P9,898,867.00 representing input VAT on importation of capital goods. However, the claim for refund of input VAT attributable to petitioner’s alleged zero-rated sales in the amount of P16,732,425.50 is hereby DENIED for lack of merit.

SO ORDERED.[16][16]    

Not satisfied with the Decision, petitioner moved for reconsideration.[17][17]  It claimed that it is not required to secure an ATP since it has a “Permit to Adopt Computerized Accounting Documents such as Sales Invoice and Official Receipts” from the BIR.[18][18] Petitioner further argued that because all its finished products are exported to its mother company, Intel Corporation, a non-resident corporation and a non-VAT registered entity, the printing of the word “zero-rated” on its export sales invoices is not necessary.[19][19]

On its part, respondent filed a Motion for Partial Reconsideration[20][20] contending that petitioner is not entitled to a credit/refund of unutilized input VAT on capital goods because it failed to show that the goods imported/purchased are indeed capital goods as defined in Section 4.106-1 of RR No. 7-95.[21][21]

The CTA Division denied both motions in a Resolution[22][22] dated August 10, 2004. It noted that:

[P]etitioner’s request for Permit to Adopt Computerized Accounting Documents such as Sales Invoice and Official Receipt was approved on August 31, 2001 while the period involved in this case was October 31, 1998 to December 31, 1998 x x x.  While it appears that petitioner was previously issued a permit by the BIR Makati Branch, such permit was only limited to the use of computerized books of account x x x.  It was only on August 31, 2001 that petitioner was permitted to generate computerized sales invoices and official receipts [provided that the BIR Permit Number is printed] in the header of the document x x x.

                x x x x

Thus, petitioner’s contention that it is not required to show its BIR permit number on the sales invoices runs counter to the requirements under the said “Permit.” This court also wonders why petitioner was issuing computer generated sales invoices during the period involved (October 1998 to December 1998) when it did not have an authority or permit.  Therefore, we are convinced that such documents lack probative value and should be treated as inadmissible, incompetent and immaterial to prove petitioner’s export sales transaction.

x x x x

ACCORDINGLY, the Motion for Reconsideration and the Supplemental Motion for Reconsideration filed by petitioner as well as the Motion for Partial Reconsideration of respondent are hereby DENIED for lack of merit.  The pronouncement in the assailed decision is REITERATED.

 

SO ORDERED [23][23]

Ruling of the CTA En Banc

 

Undaunted, petitioner elevated the case to the CTA En Banc via a Petition for Review,[24][24] docketed as EB Case No. 23.

On September 30, 2005, the CTA En Banc issued the assailed Decision[25][25] denying the petition for lack of merit.  Pertinent portions of the Decision read:

This Court notes that petitioner raised the same issues which have already been thoroughly discussed in the assailed Decision, as well as, in the Resolution denying petitioner’s Motion for Partial Reconsideration.

With regard to the first assigned error, this Court reiterates that, the requirement of [printing] the BIR permit to print on the face of the sales invoices and official receipts is a control mechanism adopted by the Bureau of Internal Revenue to safeguard the interest of the government.

This requirement is clearly mandated under Section 238 of the 1997 National Internal Revenue Code, which provides that:

SEC. 238.  Printing of Receipts or Sales or Commercial Invoice. – All persons who are engaged in business shall secure from the Bureau of Internal Revenue an authority to print receipts or sales or commercial invoices before a printer can print the same.

The above mentioned provision seeks to eliminate the use of unregistered and double or multiple sets of receipts by striking at the very root of the problem — the printer (H. S. de Leon, The National Internal Revenue Code Annotated, 7th Ed., p. 901). And what better way to prove that the required permit to print was secured from the Bureau of Internal Revenue than to show or print the same on the face of the invoices. There can be no other valid proof of compliance with the above provision than to show the Authority to Print Permit number [printed] on the sales invoices and official receipts.

With regard to petitioner’s failure to print the word “zero-rated” on the face of its export sales invoices, it must be emphasized that Section 4.108-1 of Revenue Regulations No. 7-95 specifically requires that all value-added tax registered persons shall, for every sale or lease of goods or properties or services, issue duly registered invoices which must show the word “zero-rated” [printed] on the invoices covering zero-rated sales.

It is not enough that petitioner prove[s] that it is entitled to its claim for refund by way of substantial evidence. Well settled in our jurisprudence [is] that tax refunds are in the nature of tax exemptions and as such, they are regarded as in derogation of sovereign authority (Commissioner of Internal Revenue vs. Ledesma, 31 SCRA 95). Thus, tax refunds are construed in strictissimi juris against the person or entity claiming the same (Commissioner of Internal Revenue vs. Procter & Gamble Philippines Manufacturing Corporation, 204 SCRA 377; Commissioner of Internal Revenue vs. Tokyo Shipping Co., Ltd., 244 SCRA 332).

In this case, not only should petitioner establish that it is entitled to the claim but it must most importantly show proof of compliance with the substantiation requirements as mandated by law or regulations.

The rest of the assigned errors pertain to the alleged errors of the First Division: in finding that the petitioner failed to comply with the substantiation requirements provided by law in proving its claim for refund; in reducing the amount of petitioner’s tax credit for input vat on importation of capital goods; and in denying petitioner’s claim for refund of input vat attributable to petitioner’s zero-rated sales.

It is petitioner’s contention that it has clearly established its right to the tax credit or refund by way of substantial evidence in the form of material and documentary evidence and it would be improper to set aside with haste the claimed input VAT on capital goods expended for training materials, office supplies, posters, banners, t-shirts, books and the like because Revenue Regulations No. 7-95 defines capital goods as to include even those goods which are indirectly used in the production or sale of taxable goods or services.

Capital goods or properties, as defined under Section 4.106-1(b) of Revenue Regulations No. 7-95, refer “to goods or properties with estimated useful life greater than one year and which are treated as depreciable assets under Section 29 (f), used directly or indirectly in the production or sale of taxable goods or services.”

Considering that the items (training materials, office supplies, posters, banners, t-shirts, books and the like) purchased by petitioner as reflected in the summary were not duly proven to have been used, directly or indirectly[,] in the production or sale of taxable goods or services, the same cannot be considered as capital goods as defined above[.  Consequently,] the same may not x x x then [be] claimed as such.

WHEREFORE, in view of the foregoing, this instant Petition for Review is hereby DENIED DUE COURSE and hereby DISMISSED for lack of merit. This Court’s Decision of November 18, 2003 and Resolution of August 10, 2004 are hereby AFFIRMED in all respects.

SO ORDERED.[26][26]

Petitioner sought reconsideration of the assailed Decision but the CTA En Banc denied the Motion[27][27] in a Resolution[28][28] dated April 20, 2006. 

Issues

Hence, the instant Petition raising the following issues for resolution:

(1)       whether the CTA En Banc erred in denying petitioner’s claim for credit/ refund of input VAT attributable to its zero-rated sales in the amount of P16,732,425.00 due to its failure:

(a)       to show that it secured an ATP from the BIR and to indicate the same in its export sales invoices; and

(b)       to print the word “zero-rated” in its export sales invoices.[29][29]

(2)       whether the CTA En Banc erred in ruling that only the amount of P9,898,867.00 can be classified as input VAT paid on capital goods.[30][30]

 

Petitioner’s Arguments

Petitioner posits that the denial by the CTA En Banc of its claim for refund of input VAT attributable to its zero-rated sales has no legal basis because the printing of the ATP and the word “zero-rated” on the export sales invoices are not required under Sections 113 and 237 of the National Internal Revenue Code (NIRC).[31][31]  And since there is no law requiring the ATP and the word “zero-rated” to be indicated on the sales invoices,[32][32] the absence of such information in the sales invoices should not invalidate the petition[33][33] nor result in the outright denial of a claim for tax credit/refund.[34][34] To support its position, petitioner cites Intel Technology Philippines, Inc. v. Commissioner of Internal Revenue,[35][35] where Intel’s failure to print the ATP on the sales invoices or receipts did not result in the outright denial of its claim for tax credit/refund.[36][36] Although the cited case only dealt with the printing of the ATP, petitioner submits that the reasoning in that case should also apply to the printing of the word “zero-rated.”[37][37] Hence, failure to print of the word “zero-rated” on the sales invoices should not result in the denial of a claim.

            As to the claim for refund of input VAT on capital goods, petitioner insists that it has sufficiently proven through testimonial and documentary evidence that all the goods purchased were used in the production and manufacture of its finished products which were sold and exported.[38][38] 

 

Respondent’s Arguments

 

           To refute petitioner’s arguments, respondent asserts that the printing of the ATP on the export sales invoices, which serves as a control mechanism for the BIR, is mandated by Section 238 of the NIRC;[39][39] while the printing of the word “zero-rated” on the export sales invoices, which seeks to prevent purchasers of zero-rated sales or services from claiming non-existent input VAT credit/refund,[40][40] is required under RR No. 7-95, promulgated pursuant to Section 244 of the NIRC.[41][41]  With regard to the unutilized input VAT on capital goods, respondent counters that petitioner failed to show that the goods it purchased/imported are capital goods as defined in Section 4.106-1 of RR No. 7-95. [42][42]

 

Our Ruling

The petition is bereft of merit.

Before us are two types of input VAT credits.  One is a credit/refund of input VAT attributable to zero-rated sales under Section 112 (A) of the NIRC, and the other is a credit/refund of input VAT on capital goods pursuant to Section 112 (B) of the same Code. 

Credit/refund of input VAT on  zero-rated sales

            In a claim for credit/refund of input VAT attributable to zero-rated sales, Section 112 (A)[43][43] of the NIRC lays down four requisites, to wit:

1)    the taxpayer must be VAT-registered; 

2)    the taxpayer must be engaged in sales which are zero-rated or effectively zero-rated; 

3)    the claim must be filed within two years after the close of the taxable quarter when such sales were made;  and

4)    the creditable input tax due or paid must be attributable to such sales, except the transitional input tax,  to the extent that such input tax has not been applied against the output tax. 

To prove that it is engaged in zero-rated sales, petitioner presented export sales invoices, certifications of inward remittance, export declarations, and airway bills of lading for the fourth quarter of 1998.  The CTA Division, however, found the export sales invoices of no probative value in establishing petitioner’s zero-rated sales for the purpose of claiming credit/refund of input VAT because petitioner failed to show that it has an ATP from the BIR and to indicate the ATP and the word “zero-rated” in its export sales invoices.[44][44] The CTA Division cited as basis Sections 113,[45][45] 237[46][46] and 238[47][47] of the NIRC, in relation to Section 4.108-1 of RR No. 7-95.[48][48]

We partly agree with the CTA.

Printing the ATP on the invoices or receipts is not required

 

 

It has been settled in Intel Technology Philippines, Inc. v. Commissioner of Internal Revenue[49][49] that the ATP need not be reflected or indicated in the invoices or receipts because there is no law or regulation requiring it.[50][50]  Thus, in the absence of such law or regulation, failure to print the ATP on the invoices or receipts should not result in the outright denial of a claim or the invalidation of the invoices or receipts for purposes of claiming a refund.[51][51]

ATP must be secured from the BIR

But while there is no law requiring the ATP to be printed on the invoices or receipts, Section 238 of the NIRC expressly requires persons engaged in business to secure an ATP from the BIR prior to printing invoices or receipts.  Failure to do so makes the person liable under Section 264[52][52] of the NIRC. 

This brings us to the question of whether a claimant for unutilized input VAT on zero-rated sales is required to present proof that it has secured an ATP from the BIR prior to the printing of its invoices or receipts.

We rule in the affirmative.

Under Section 112 (A) of the NIRC, a claimant must be engaged in sales which are zero-rated or effectively zero-rated.  To prove this, duly registered invoices or receipts evidencing zero-rated sales must be presented.  However, since the ATP is not indicated in the invoices or receipts, the only way to verify whether the invoices or receipts are duly registered is by requiring the claimant to present its ATP from the BIR.  Without this proof, the invoices or receipts would have no probative value for the purpose of refund.  In the case of Intel, we emphasized that:

                It bears reiterating that while the pertinent provisions of the Tax Code and the rules and regulations implementing them require entities engaged in business to secure a BIR authority to print invoices or receipts and to issue duly registered invoices or receipts, it is not specifically required that the BIR authority to print be reflected or indicated therein. Indeed, what is important with respect to the BIR authority to print is that it has been secured or obtained by the taxpayer, and that invoices or receipts are duly registered.[53][53]  (Emphasis supplied)

Failure to print the word “zero-rated” on the sales invoices is fatal to a claim for refund of input VAT

            Similarly, failure to print the word “zero-rated” on the sales invoices or receipts is fatal to a claim for credit/refund of input VAT on zero-rated sales.

In Panasonic Communications Imaging Corporation of the Philippines (formerly Matsushita Business Machine Corporation of the Philippines) v. Commissioner of Internal Revenue,[54][54] we upheld the denial of Panasonic’s claim for tax credit/refund due to the absence of the word “zero-rated” in its invoices.  We explained that compliance with Section 4.108-1 of RR 7-95, requiring the printing of the word “zero rated” on the invoice covering zero-rated sales, is essential as this regulation proceeds from the rule-making authority of the Secretary of Finance under Section 244[55][55] of the NIRC. 

All told, the non-presentation of the ATP and the failure to indicate the word “zero-rated” in the invoices or receipts are fatal to a claim for credit/refund of input VAT on zero-rated sales. The failure to indicate the ATP in the sales invoices or receipts, on the other hand, is not.  In this case, petitioner failed to present its ATP and to print the word “zero-rated” on its export sales invoices.  Thus, we find no error on the part of the CTA in denying outright petitioner’s claim for credit/refund of input VAT attributable to its zero-rated sales.

Credit/refund of input VAT on capital goods

Capital goods are defined under Section 4.106-1(b) of RR No. 7-95

 

 

            To claim a refund of input VAT on capital goods, Section 112 (B)[56][56] of the NIRC requires that:

1.     the claimant must be a VAT registered person;

2.     the input taxes claimed must have been paid on capital goods;

3.     the input taxes must not have been applied against any output tax liability; and

4.     the administrative claim for refund must have been filed within two (2) years after the close of the taxable quarter when the importation or purchase was made.

            Corollarily, Section 4.106-1 (b) of RR No. 7-95 defines capital goods as follows:

                “Capital goods or properties” refer to goods or properties with estimated useful life greater that one year and which are treated as depreciable assets under Section 29 (f),[57][57] used directly or indirectly in the production or sale of taxable goods or services.

            Based on the foregoing definition, we find no reason to deviate from the findings of the CTA that training materials, office supplies, posters, banners, T-shirts, books, and the other similar items reflected in petitioner’s Summary of Importation of Goods are not capital goods.  A reduction in the refundable input VAT on capital goods from P15,170,082.00 to P9,898,867.00 is therefore in order.

WHEREFORE, the Petition is hereby DENIED.  The assailed Decision dated September 30, 2005 and the Resolution dated April 20, 2006 of the Court of Tax Appeals En Banc are hereby AFFIRMED.

 

            SO ORDERED.

 

 

                                    MARIANO C. DEL CASTILLO

                                    Associate Justice

WE CONCUR:

RENATO C. CORONA

Chief Justice

Chairperson

PRESBITERO J. VELASCO, JR.

Associate Justice

 TERESITA J. LEONARDO-DE CASTRO

Associate Justice

                                   

JOSE PORTUGAL PEREZ

Associate Justice

 

 

 

 

 

 

 

 

 

 

 

 

C E R T I F I C A T I O N

            Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

 

RENATO C. CORONA

Chief Justice

 

[1][1]       Rollo, pp. 15-46; penned by Associate Justice Erlinda P. Uy and concurred in by Associate Justices Juanito C. Castañeda, Jr., Lovell R. Bautista, Caesar A. Casanova, and Olga Palanca-Enriquez; with Concurring and Dissenting Opinion of Presiding Justice Ernesto D. Acosta, and Separate Concurring Opinion of Associate Justice Juanito C. Castañeda, Jr.

[2][2]       Id. at 47-53, with Dissenting Opinion of Presiding Justice Ernesto D. Acosta.

[3][3]   Id. at 187.

[4][4]   Id.

[5][5]   Id.

[6][6]   Id. at 188.

[7][7]   Id. at 163.

[8][8]   Id.

[9][9]   Id. at 166.

[10][10]         Id. at 180-182.

[11][11]         Id. at 181.

[12][12]         Id. at 186-197.

[13][13]         Id. at 195.

[14][14]         Id. at 192.

[15][15]         Id. at 192-193.

[16][16]         Id. at 196.

[17][17]         Id. at 198-215 and 216-222.

[18][18]         Id. at 201-202.

[19][19]         Id. at 207.

[20][20]         CTA Division rollo, pp. 169-172.

[21][21]         Id. at 170.

[22][22]         Rollo, pp. 223-239.

[23][23]         Id. at 226-227; 229.

[24][24]         Id. at 240-268.       

[25][25]         Id. at 15-46.

[26][26]         Id. at 19-22.

[27][27]         Id. at 269-297.

[28][28]         Id. at 47-53.

[29][29]         Id. at 80.

[30][30]         Id. at 98.

[31][31]         Id. at 80-82.

[32][32]         Id. at 80.

[33][33]         Id. at 90.

[34][34]         Id. at 374.

[35][35]         G.R. No. 166732, April 27, 2007, 522 SCRA 657.

[36][36]         Id. at 696.

[37][37]         Rollo, p. 373 (unpaged).

[38][38]         Id. at 98.

[39][39]         Id. at 324.

[40][40]         Id. at 329-330.

[41][41]         Id. at 327.

[42][42]         Id. at 335.

[43][43]         SECTION 112. Refunds or Tax Credits of Input Tax. —

        (A)          Zero-Rated or Effectively Zero-Rated Sales — Any VAT-registered person, whose sales are zero-rated or effectively zero-rated may, within two (2) years after the close of the taxable quarter when the sales were made, apply for the issuance of a tax credit certificate or refund of creditable input tax due or paid attributable to such sales, except transitional input tax, to the extent that such input tax has not been applied against output tax: Provided, however, That in the case of zero-rated sales under Section 106(A)(2)(a)(1), (2) and (B) and Section 108(B)(1) and (2), the acceptable foreign currency exchange proceeds thereof had been duly accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP): Provided, further, That where the taxpayer is engaged in zero-rated or effectively zero-rated sale and also in taxable or exempt sale of goods or properties or services, and the amount of creditable input tax due or paid cannot be directly and entirely attributed to any one of the transactions, it shall be allocated proportionately on the basis of the volume of sales.

[44][44]         Rollo, pp. 192-193.

[45][45]         SECTION 113.  Invoicing and Accounting Requirements for VAT-Registered Persons. —

(A)  Invoicing Requirements. — A VAT-registered person shall, for every sale, issue an invoice or receipt. In addition to the information required under Section 237, the following information shall be indicated in the invoice or receipt:

       (1)    A statement that the seller is a VAT-registered person, followed by his taxpayer’s identification number; and

       (2)    The total amount which the purchaser pays or is obligated to pay to the seller with the indication that such amount includes the value-added tax.  

(B)  Accounting Requirements. — Notwithstanding the provisions of Section 233, all persons subject to the value-added tax under Sections 106 and 108 shall, in addition to the regular accounting records required, maintain a subsidiary sales journal and subsidiary purchase journal on which the daily sales and purchases are recorded. The subsidiary journals shall contain such information as may be required by the Secretary of Finance.

[46][46]         SECTION 237.  Issuance of Receipts or Sales or Commercial Invoices. — All persons subject to an internal revenue tax shall, for each sale or transfer of merchandise or for services rendered valued at Twenty-five pesos (P25.00) or more, issue duly registered receipts or sales or commercial invoices, prepared at least in duplicate, showing the date of transaction, quantity, unit cost and description of merchandise or nature of service: Provided, however, That in the case of sales, receipts or transfers in the amount of One Hundred Pesos (P100.00) or more, or regardless of amount, where the sale or transfer is made by a person liable to value-added tax to another person also liable to value-added tax; or where the receipt is issued to cover payment made as rentals, commissions, compensations or fees, receipts or invoices shall be issued which shall show the name, business style, if any, and address of the purchaser, customer or client; Provided, further, That where the purchaser is a VAT-registered person, in addition to the information herein required, the invoice or receipt shall further show the Taxpayer Identification Number (TIN) of the purchaser. 

The original of each receipt or invoice shall be issued to the purchaser, customer or client at the time the transaction is effected, who, if engaged in business or in the exercise of profession, shall keep and preserve the same in his place of business for a period of three (3) years from the close of the taxable year in which such invoice or receipt was issued, while the duplicate shall be kept and preserved by the issuer, also in his place of business, for a like period.

The Commissioner may, in meritorious cases, exempt any person subject to an internal revenue tax from compliance with the provisions of this Section.

[47][47]         SECTION 238. Printing of Receipts or Sales or Commercial Invoices. — All persons who are engaged in business shall secure from the Bureau of Internal Revenue an authority to print receipts or sales or commercial invoices before a printer can print the same. 

No authority to print receipts or sales or commercial invoices shall be granted unless the receipts or invoices to be printed are serially numbered and shall show, among other things, the name, business style, Taxpayer Identification Number (TIN) and business address of the person or entity to use the same, and such other information that may be required by rules and regulations to be promulgated by the Secretary of Finance, upon recommendation of the Commissioner.

All persons who print receipt or sales or commercial invoices shall maintain a logbook/register of taxpayer who availed of their printing services. The logbook/register shall contain the following information:

(1)   Names, Taxpayer Identification Numbers of the persons or entities for whom the receipts or sales or commercial invoices are printed; and  

(2)   Number of booklets, number of sets per booklet, number of copies per set and the serial numbers of the receipts or invoices in each booklet.

[48][48]     SECTION 4.108-1.    Invoicing Requirements — All VAT-registered persons shall, for every sale or lease of goods or properties or services, issue duly registered receipts or sales or commercial invoices which must show:

1.     the name, TIN and address of seller;

2.     date of transaction;

3.     quantity, unit cost and description of merchandise or nature of service;

4.     the name, TIN, business style, if any, and address of the VAT-registered purchaser, customer or client;

5.     the word “zero rated” [printed] on the invoice covering zero-rated sales; and

6.     the invoice value or consideration.

        In the case of sale of real property subject to VAT and where the zonal or market value is higher than the actual consideration, the VAT shall be separately indicated in the invoice or receipt.

Only VAT-registered persons are required to print their TIN followed by the word “VAT” in their invoice or receipts and this shall be considered as a “VAT Invoice.” All purchases covered by invoices other than “VAT Invoice” shall not give rise to any input tax.

If the taxable person is also engaged in exempt operations, he should issue separate invoices or receipts for the taxable and exempt operations. A “VAT Invoice” shall be issued only for sales of goods, properties or services subject to VAT imposed in Sections 100 and 102 of the Code.

        The invoice or receipt shall be prepared at least in duplicate, the original to be given to the buyer and the duplicate to be retained by the seller as part of his accounting records.

[49][49]         Supra note 35.

[50][50]         Id. at 687 and 693.

[51][51]         Id. at 694.

[52][52]         SECTION 264. Failure or Refusal to Issue Receipts or Sales or Commercial Invoices, Violations Related to the Printing of such Receipts or Invoices and Other Violations. —

                (a)  Any person who, being required under Section 237 to issue receipts or sales or commercial invoices, fails or refuses to issue such receipts or invoices, issues receipts or invoices that do not truly reflect and/or contain all the information required to be shown therein or uses multiple or double receipts or invoices, shall, upon conviction for each act or omission, be punished by a fine of not less than One thousand pesos (P1,000) but not more than Fifty thousand pesos (P50,000) and suffer imprisonment of not less than two (2) years but not more than four (4) years.  

                (b)  Any person who commits any of the acts enumerated hereunder shall be penalized in the same manner and to the same extent as provided for in this Section:

       (1)    Printing of receipts or sales or commercial invoices without authority from the Bureau of Internal Revenue; or

       (2)    Printing of double or multiple sets of invoices or receipts;

       (3)    Printing of unnumbered receipts or sales or commercial invoices, not bearing the name, business style, Taxpayer Identification Number, and business address of the person or entity. 

[53][53]         Supra note 35 at 695-696.

[54][54]         G.R. No. 178090, February 8, 2010, 612 SCRA 28, 36-37.

[55][55]         SECTION 244.  Authority of Secretary of Finance to Promulgate Rules and Regulations. — The Secretary of Finance, upon recommendation of the Commissioner, shall promulgate all needful rules and regulations for the effective enforcement of the provisions of this Code.

[56][56]         SECTION 112.  Refunds or Tax Credits of Input Tax. —

        x x x x

        (B) Capital Goods — A VAT-registered person may apply for the issuance of a tax credit certificate or refund of input taxes paid on capital goods imported or locally purchased, to the extent that such input taxes have not been applied against output taxes. The application may be made only within two (2) years after the close of the taxable quarter when the importation or purchase was made. 

[57][57]         Now Section 34 (f) of the NIRC.

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LEGAL NOTE 0019: WHAT IS A GOVERNMENT-OWNED AND CONTROLLED CORPORATION (GOCC)?

Filed under: LEGAL NOTES — Leave a comment
February 4, 2011

LEGAL NOTE 0019: WHAT IS A GOVERNMENT OWNED AND CONTROLLED CORPORATION?

SOURCE: ANTONIO M. CARANDANG VS. HONORABLE ANIANO A. DESIERTO, OFFICE OF THE OMBUDSMAN (G.R. NO. 148076); ANTONIO M. CARANDANG VS. SANDIGANBAYAN (FIFTH DIVISION) (G.R. NO. 153161) (12 JANUARY 2011, BERSAMIN, J.)

X ————————————————————————————————- X

 

WHAT ARE GOVERNMENT-OWNED AND CONTROLLED CORPORATION?

 Similarly, the law defines what are government-owned or -controlled corporations. For one, Section 2 of Presidential Decree No. 2029 (Defining Government Owned or Controlled Corporations and Identifying Their Role in National Development) states:  

Section 2. A government-owned or controlled corporation is a stock or a non-stock corporation, whether performing governmental or proprietary functions, which is directly chartered by a special law or if organized under the general corporation law is owned or controlled by the government directly, or indirectly through a parent corporation or subsidiary corporation, to the extent of at least a majority of its outstanding capital stock or of its outstanding voting capital stock.

Section 2 (13) of Executive Order No. 292 (Administrative Code of 1987)[1][26] renders a similar definition of government-owned or -controlled corporations:

Section 2. General Terms Defined. – Unless the specific words of the text or the context as a whole or a particular statute, shall require a different meaning:

x x x

(13) government-owned or controlled corporations refer to any agency organized as a stock or non-stock corporation vested with functions relating to public needs whether governmental or proprietary in nature, and owned by the government directly or indirectly through its instrumentalities either wholly, or where applicable as in the case of stock corporations to the extent of at least 51% of its capital stock.

It is clear, therefore, that a corporation is considered a government-owned or -controlled corporation only when the Government directly or indirectly owns or controls at least a majority or 51% share of the capital stock. Applying this statutory criterion, the Court ruled in Leyson, Jr. v. Office of the Ombudsman:[2][27]

But these jurisprudential rules invoked by petitioner in support of his claim that the CIIF companies are government owned and/or controlled corporations are incomplete without resorting to the definition of “government owned or controlled corporation” contained in par. (13), Sec.2, Introductory Provisions of the Administrative Code of 1987, i.e., any agency organized as a stock or non-stock corporation vested with functions relating to public needs whether governmental or proprietary in nature, and owned by the government directly or indirectly through its instrumentalities either wholly, or where applicable as in the case of stock corporations to the extent of at least fifty-one (51) percent of its capital stock. The definition mentions three (3) requisites, namely, first, any agency organized as a stock or non-stock corporation; second, vested with functions relating to public needs whether governmental or proprietary in nature; and, third, owned by the Government directly or through its instrumentalities either wholly, or, where applicable as in the case of stock corporations, to the extent of at least fifty-one (51) of its capital stock.

In the present case, all three (3) corporations comprising the CIIF companies were organized as stock corporations. The UCPB-CIIF owns 44.10% of the shares of LEGASPI OIL, xxx. Obviously, the below 51% shares of stock in LEGASPI OIL removes this firm from the definition of a government owned or controlled corporation. x x x The Court thus concludes that the CIIF are, as found by public respondent, private corporations not within the scope of its jurisdiction.[3][28]

 

APPLIED TO RADIO PHILIPPINE NETWORK,  IS THE LATTER A GOVERNMENT-OWNED OR CONTROLLED CORP?

NO BECAUSE SHARE OF GOVERNMENT IN RPB IS ONLY 32.4%.

Consequently, RPN was neither a government-owned nor a controlled corporation because of the Government’s total share in RPN’s capital stock being only 32.4%.

 

SANDIGANBAYAN ORDERED BENEDICTO TO TRANSFER HIS 72.4%  IN RPN TO RPN. DOES THIS MAKE RPN NOW A GOVERNMENT-OWNED AND CONTROLLED CORP?

NO. BECAUSE BENEDICTO FILED A MOTION FOR RECONSIDERATION WHERE HE CLARIFIED THAT THE SHARES CEDED TO RPN WAS ONLY 32.4%. SUCH MOTION IS NOT YET RESOLVED WITH FINALITY.

Parenthetically, although it is true that the Sandiganbayan (Second Division) ordered the transfer to the PCGG of Benedicto’s shares that represented 72.4% of the total issued and outstanding capital stock of RPN, such quantification of Benedicto’s shareholding cannot be controlling in view of Benedicto’s timely filing of a motion for reconsideration whereby he  clarified and insisted that the shares ceded to the PCGG had accounted for only 32.4%, not 72.4%, of RPN’s outstanding capital stock. With the extent of Benedicto’s holdings in RPN remaining unresolved with finality, concluding that the Government held the majority of RPN’s capital stock as to make RPN a government-owned or -controlled corporation would be bereft of any factual and legal basis.  

[1][26] Enacted on July 25, 1987.

[2][27] G.R. No. 134990, April 27, 2000, 331 SCRA 227, 235-236.

[3][28] Bold underscoring supplied for emphasis.

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