TOSHIBA INFORMATION EQUIPMENT (PHILS.

), COMMISSIONER OF INTERNAL REVENUE

INC.,

vs.

not entitled to a ta- credit.refund because it $as only raised by the /I0 for the first time in his 9otion for 0econsideration" /I0 filed a Petition for 0e2ie$ $ith the /ourt of Appeals" The /ourt of Appeals granted the" The appellate court ruled that Toshiba $as not entitled to the refund of its alleged unused input VAT payments because it $as a ta-&e-empt entity" As a P:;A&registered corporation, Toshiba $as liable for remitting to the national go2ernment the fi2e percent 5!67 preferential rate on its gross income earned $ithin the :/*;*<:, in lieu of all other national and local ta-es, including VAT" The /ourt of Appeals further ad4udged that the e-port sales of Toshiba $ere VAT&e-empt, not %ero&rated, transactions" The appellate court found that the Ans$er filed by the /I0 did not contain any admission that the e-port sales of Toshiba $ere %ero& rated transactions" At the least, $hat $as admitted by the /I0 in said Ans$er $as that the Ta- /ode pro2isions cited in the Petition for 0e2ie$ of Toshiba $ere correct" As to the 3oint ,tipulation of +acts and Issues filed by the parties, the appellate court declared that the /I0 signed the said pleading through palpable mista=e" This palpable mista=e in the stipulation of facts should not be ta=en against the /I0, for to do other$ise $ould result in suppressing the truth through falsehood" In addition, the ,tate could not be put in estoppel by the mista=es or errors of its officials or agents" Toshiba filed a 9otion for 0econsideration but $as denied" >ence, Toshiba filed the instant Petition for 0e2ie$" ISSUE/S: ?*< the /ourt of Appeals erred $hen it failed to dismiss outright and ga2e due course to /I0@s petition not$ithstanding its failure to adequately raise in issue during the trial in the /ourt of TaAppeals Toshiba@s claim for refund" ?*< the /ourt of Appeals erred $hen it ruled that the /ourt of Ta- Appeals@ findings, $ith regard Toshiba@s e-port sales being %ero rated sales for 2at purposes, $ere based merely on the admissions made by /I0@s counsel and not supported by substantial e2idence"

FACTS: In its VAT returns for the first and second quarters of 1997, Toshiba declared input VAT payments in the aggregate sum of P3, 7!,139"#!, $ith no %ero&rated sales" Toshiba subsequently submitted its amended VAT returns in the same amount of input VAT payments but, this time, $ith %ero&rated sales totaling P7,'9',#77,((("((" Toshiba filed $ith the )*+ *ne&,top ,hop applications for tacredit.refund in the total amount of P3,# !,''#"73" /I0 opposed the claim for ta- refund.credit of Toshiba" 1pon being ad2ised by the /TA, Toshiba and the /I0 filed a 3oint ,tipulation of +acts and Issues" )uring the trial before the /TA, Toshiba presented documentary e2idence in support of its claim for ta- credit.refund, $hile the /I0 did not present any e2idence at all" /TA rendered its )ecision fa2oring Toshiba" According to the /TA, the /I0 himself admitted that the e-port sales of Toshiba $ere sub4ect to %ero percent 5(67 VAT based on the Ta- /ode" Toshiba could then claim ta- credit or refund" 8oth Toshiba and the /I0 sought reconsideration of the foregoing /TA )ecision" Toshiba asserted that it had presented proper substantiation for the input VAT disallo$ed by the /TA" The /I0, on the other hand, argued in his 9otion for 0econsideration that Toshiba $as not entitled to the credit.refund of its input VAT payments because as a P:;A&registered :/*;*<: e-port enterprise, Toshiba $as not sub4ect to VAT" /I0 contended that all businesses and establishments $ithin the :/*;*<: $ere to remit to the go2ernment fi2e percent 5!67 of their gross income earned $ithin the %one, in lieu of all ta-es, including VAT" The VAT& e-emption of Toshiba meant that its sale of goods $as not sub4ect to output VAT and Toshiba as seller $as not allo$ed any ta- credit on the input VAT it had pre2iously paid" The /TA issued a 0esolution denying both 9otions for 0econsideration of Toshiba and the /I0" The /TA too= note that the pieces of e2idence referred to by Toshiba in its 9otion for 0econsideration $ere insufficient substantiation, being mere schedules of input VAT payments it had purportedly paid" *n the other hand, /TA refused to consider the argument that Toshiba $as

RULING: The Petition is impressed $ith merit"

The CIR did not timely raise before the CTA the issues on the VAT-exemptions of Toshiba and its export sales. 1pon the failure of the /I0 to timely plead and pro2e before the /TA the defenses or ob4ections that Toshiba $as VAT&e-empt, and that its e-port sales $ere VAT&e-empt transactions, the /I0 is deemed to ha2e $ai2ed the same" The /I0 did not argue straight a$ay that Toshiba had no right to the credit.refund of its input VAT payments because the latter $as VAT&e-empt and its e-port sales $ere VAT&e-empt transactions" The /I0 passed up the opportunity to pro2e the supposed VAT& e-emptions of Toshiba and its e-port sales $hen the /I0 chose not to present any e2idence at all during the trial before the /TA" The /I0 had $aited until the /TA already rendered its )ecision $hich granted the claim for credit.refund of Toshiba, before asserting in his 9otion for 0econsideration that Toshiba $as VAT&e-empt and its e-port sales $ere VAT&e-empt transactions" It is a-iomatic in pleadings and practice that no ne$ issue in a case can be raised in a pleading $hich by due diligence could ha2e been raised in pre2ious pleadings" The /ourt cannot simply grant the plea of the /I0 that the procedural rules be rela-ed based on the general a2erment of the interest of substanti2e 4ustice" It should not be forgotten that the first and fundamental concern of the rules of procedure is to secure a 4ust determination of e2ery action" Procedural rules are designed to facilitate the ad4udication of cases" /ourts and litigants ali=e are en4oined to abide strictly by the rules" ?hile in certain instances, the /ourt allo$s a rela-ation in the application of the rules, it ne2er intends to forge a $eapon for erring litigants to 2iolate the rules $ith impunity" The liberal interpretation and application of rules apply only in proper cases of demonstrable merit and under 4ustifiable causes and circumstances" ?hile it is true that litigation is not a game of technicalities, it is equally true that e2ery case must be prosecuted in accordance $ith the prescribed procedure to ensure an orderly and speedy administration of 4ustice" Party litigants and their counsel are $ell ad2ised to abide by, rather than flaunt, procedural rules for these rules illumine the path of the la$ and rationali%e the pursuit of 4ustice" The CIR judicially admitted that Toshiba was VAT-registered and its export sales were subject to VAT at ero percent !"#$ rate.

The admission ha2ing been made in a stipulation of facts at pre& trial by the parties, it must be treated as a 4udicial admission" 1nder ,ection ', 0ule 1A9 of the 0ules of /ourt, a 4udicial admission requires no proof" The admission may be contradicted only by a sho$ing that it $as made through palpable mista=e or that no such admission $as made" The /ourt cannot lightly set aside a 4udicial admission especially $hen the opposing party relied upon the same and accordingly dispensed $ith further proof of the fact already admitted" An admission made by a party in the course of the proceedings does not require proof" In the instant case, among the facts e-pressly admitted by the /I0 and Toshiba in their /TA&appro2ed 3oint ,tipulation are that Toshiba Bis a duly registered 2alue&added ta- entity,C that Bis sub4ect to %ero percent 5(67 2alue&added ta- on its e-port sales"C The /I0 $as bound by these admissions, $hich he could not e2entually contradict in his 9otion for 0econsideration of the /TA )ecision by arguing that Toshiba $as actually a VAT&e-empt entity and its e-port sales $ere VAT&e-empt transactions" *b2iously, Toshiba could not ha2e been subj !" "# VAT and $ %&" '(#% VAT at the same time" ,imilarly, the e-port sales of Toshiba could not ha2e been subj !" "# ) (# & (! *" (+,) VAT and $ %&" '(#% VAT as $ell" The CIR cannot escape the binding effect of his judicial admissions. The /ourt disagrees $ith the /ourt of Appeals $hen it ruled in its )ecision that the /I0 could not be bound by his admissions in the 3oint ,tipulation because 517 the said admissions $ere Bmade through palpable mista=eC $hich, if countenanced, B$ould result in falsehood, unfairness and in4usticeCD and 5A7 the ,tate could not be put in estoppel by the mista=es of its officials or agents" This ruling of the /ourt of Appeals is rooted in its conclusion that a Bpalpable mista=eC had been committed by the /I0 in the signing of the 3oint ,tipulation" >o$e2er, this /ourt finds no e2idence of the commission of a mista=e, much more, of a palpable one" The /I0 does not deny that his counsel, Atty" 3oselito +" 8ia%on, signed the 3oint ,tipulation, together $ith the counsel of Toshiba" /onsidering the presumption of regularity in the performance of official duty, Atty" 8ia%on is presumed to ha2e read, studied, and understood the contents of the 3oint ,tipulation before he signed the same" It rests on the /I0 to present e2idence to the contrary"

Eet, the /ourt obser2es that the /I0 himself ne2er alleged in his 9otion for 0econsideration of the /TA )ecision, nor in his Petition for 0e2ie$ before the /ourt of Appeals, that Atty" 8ia%on committed a mista=e in signing the 3oint ,tipulation" ,ince the /I0 did not ma=e such an allegation, neither did he present any proof in support thereof" The /I0 began to a2er the e-istence of a palpable mista=e only after the /ourt of Appeals made such a declaration in its )ecision" )espite the absence of allegation and e2idence by the /I0, the /ourt of Appeals, on its o$n, concluded that the admissions of the /I0 in the 3oint ,tipulation $ere due to a palpable mista=e based on the follo$ing deduction" The /ourt of Appeals pro2ided no e-planation as to $hy the admissions of the /I0 in his Ans$er deser2ed more $eight and credence than those he made in the 3oint ,tipulation" The appellate court failed to appreciate that the /I0, through counsel, Atty" 8ia%on, also signed the 3oint ,tipulationD and that absent e2idence to the contrary, Atty" 8ia%on is presumed to ha2e signed the 3oint ,tipulation $illingly and =no$ingly, in the regular performance of his official duties" Additionally, the 3oint ,tipulation of Toshiba and the /I0 $as a more recent pleading than the Ans$er of the /I0" It $as submitted by the parties after the pre&trial conference held by the /TA, and subsequently appro2ed by the ta- court" If there $as any discrepancy bet$een the admissions of the /I0 in his Ans$er and in the 3oint ,tipulation, the more logical and reasonable e-planation $ould be that the /I0 changed his mind or conceded some points to Toshiba during the pre&trial conference $hich immediately preceded the e-ecution of the 3oint ,tipulation" To automatically construe that the discrepancy $as the result of a palpable mista=e is a $ide leap $hich this /ourt is not prepared to ta=e $ithout substantial basis"