G.R. No. 141973 ; June 28, 2005
Philippine Phosphate Fertilizer Corporation vs. Commissioner of Internal Revenue

FACTS

Petitioner Philippine Phosphate Fertilizer Corporation (Philphos), an enterprise registered with the Export Processing Zone Authority (EPZA), sought a refund of specific taxes paid on petroleum products purchased from Petron Corporation for the period September 1993 to December 1994, totaling ₱602,349.00. Philphos, being exempt from excise taxes under its EPZA registration, claimed that the taxes were initially paid by Petron and subsequently passed on to and reimbursed by Philphos. As the Bureau of Internal Revenue did not act upon its claim, Philphos filed a petition for review before the Court of Tax Appeals (CTA) before the two-year prescriptive period lapsed.
During trial, Philphos presented a certification from Petron, a schedule of deliveries detailing volumes and taxes, photocopies of Petron’s “Authority to Accept Payment for Excise Taxes” issued by the BIR, and testimonial evidence. The Commissioner of Internal Revenue (CIR) did not present any contrary evidence nor oppose Philphos’s formal offer of evidence. The CTA, while recognizing Philphos’s tax exemption, denied the refund claim. It held that Philphos failed to sufficiently prove the exact amount refundable because it did not submit the actual sales invoices to corroborate the summary schedule, making the claim unverifiable.

ISSUE

Whether the Court of Tax Appeals erred in denying the tax refund claim for insufficiency of evidence despite the petitioner’s presentation of substantial evidence and the respondent’s failure to present any controverting evidence.

RULING

The Supreme Court reversed the CTA and ordered the refund. The Court held that the CTA committed reversible error in requiring the presentation of sales invoices as the sole means to prove the claim. Philphos had discharged its burden of proof by presenting substantial evidence, including Petron’s certification, detailed schedules, and official BIR documents (Authorities to Accept Payment) showing Petron’s tax payments. This evidence, unrebutted by the CIR who presented no evidence at all, constituted prima facie proof of the claim’s validity.
The Court emphasized that tax refund cases, while strictly construed against the taxpayer, must be decided based on equity and substantial justice. Technical rules of evidence are not strictly applied in the CTA. Where the right to a refund is established and the taxpayer presents credible evidence, the State cannot unjustly retain the money based on a rigid demand for a specific type of document. The State must observe the same fairness it demands from taxpayers. Since Philphos’s entitlement to exemption was uncontested and it presented substantial evidence of the taxes paid and passed on, the denial of the refund based merely on the absence of invoices was a denial of substantial justice. The claim was therefore granted.