SILKAIR SINGAPORE V.

CIR

Petitioner is a corporation organized under the laws of Singapore which has a

Philippine representative office, is an online international air carrier.

Silkair filed with the Bureau of Internal Revenue (BIR) for the refund of excise
taxes for their purchase of jet fuel.

The CIR, in their reply, said that petitioner failed to prove that the sale of the fuel
was directly made from a domestic oil company to them. The excise tax on
petroleum products is the direct liability of the manufacturer/producer,
and when added to the cost of the goods sold to the buyer, it is no longer a tax
but part of the price which the buyer has to pay to obtain the article.

The CTA denying Silkairs petition stated that as the excise tax was imposed
manufacturer of petroleum products, any claim for refund should be filed by the
latter; and where the burden of tax is shifted to the purchaser, the amount
passed on to it is no longer a tax but becomes an added cost of the goods
purchased.

ISSUE: Whether Silkair PTE. Ltd. can claim for tax credit.

HELD: The proper party to question, or seek a refund of, an indirect tax is the
statutory taxpayer, the person on whom the tax is imposed by law and who
paid the same even if he shifts the burden thereof to another.37 Section 130 (A)
(2) of the NIRC provides that unless otherwise specifically allowed, the return
shall be filed and the excise tax paid by the manufacturer or producer before
removal of domestic products from place of production." Thus, Petron
Corporation, not Silkair, is the statutory taxpayer which is entitled to claim a
refund based on Section 135 of the NIRC of 1997 and Article 4(2) of the Air
Transport Agreement between RP and Singapore.

Even if Petron Corporation passed on to Silkair the burden of the tax, the
additional amount billed to Silkair for jet fuel is not a tax but part of the price
which Silkair had to pay as a purchaser.
CONTEX V. CIR

1. Petitioner Contex Corporation: domestic corporation engaged in the

business of manufacturing hospital textiles and garments and other
hospital supplies for export

- Place of business: Subic Bay Freeport Zone (SBFZ)

- Duly registered with the Subic BayMetropolitan Authority (SBMA) as a

Subic Bay Freeport Enterprise (RA 7227)

- As an SBMA-registered firm, petitioner is exempt from all local and

national internal revenue taxes except for the preferential tax (Section
12c of RA 7227)

- Registered with the BIR as a NON-VAT TAXPAYER (Certificate of

Registration RDO)

2. Jan 1, 1997 to Dec 31, 1998: petitioner purchased various supplies and
materials necessary in the conduct of its manufacturing business

3. The suppliers of these goods SHIFTED UNTO PETITIONER the 10% VAT on the
purchased items, which led the petitioner to pay input taxes (P539,411.88
and P504,057.49 for 1997 and 1998, resp.)

4. Acting on the belief that it was exempt from all national and local taxes,
including VAT, petitioner filed two applications for tax refund or tax credit
of the VAT it paid but was denied.

ISSUE: Can it claim for tax refund?

HELD: NO. it may not be amiss to re-emphasize that the petitioner is

registered as a NON-VAT taxpayer and thus, is exempt from VAT. As an exempt
VAT taxpayer, it is not allowed any tax credit on VAT (input tax) previously
paid. In fine, even if we are to assume that exemption from the burden of VAT
on petitioners purchases did exist, petitioner is still not entitled to any tax credit or
refund on the input tax previously paid as petitioner is an exempt VAT taxpayer.

Rather, it is the petitioners suppliers who are the proper parties to claim the tax
credit and accordingly refund the petitioner of the VAT erroneously passed on
to the latter.
CIR V. SEAGATE TECHNOLOGY

Respondent is a resident foreign corporation duly registered with the Securities

and Exchange Commission to do business in the Philippines and is registered
with the Philippine Export Zone Authority (PEZA). The respondent is Value Added
Tax-registered entity and filed for the VAT returns. An administrative claim for
refund of VAT input taxes in the amount of P28,369,226.38 with supporting
documents (inclusive of the P12,267,981.04 VAT input taxes subject of this Petition
for Review), was filed on 4 October 1999 and no final action has been received
by the respondent from the petitioner on the claim for VAT refund. Hence,
petitioner is sued in his official capacity. The Tax Court rendered a decision
granting the claim for refund and CTA affirmed the decision. Hence, the present
petition for certiorari.

ISSUE: Whether Seagate, a VAT-registered PEZA Enterprise is entitled to the

refund.

HELD: Yes. Special laws expressly grant preferential tax treatment to business
establishments registered and operating within an ecozone, which by law is
considered as a separate customs territory. As such, respondent is exempt from
all internal revenue taxes, including the VAT, and regulations pertaining thereto.
It has opted for the income tax holiday regime, instead of the 5
percent preferential tax regime. As a matter of law and procedure, its
registration status entitling it to such tax holiday can no longer be questioned. Its
sales transactions intended for export may not be exempt, but like its purchase
transactions, they are zero-rated. No prior application for the effective zero
rating of its transactions is necessary. Being VAT-registered and having
satisfactorily complied with all the requisites for claiming a tax refund of or credit
for the input VAT paid on capital goods purchased, respondent is entitled to
such VAT refund or credit.

The latter scheme is not a perfunctory aftermath of a simple registration under

the PEZA law,[148] for EO 226[149] also has provisions to contend with. These two
regimes are in fact incompatible and cannot be availed of simultaneously by
the same entity. While EO 226 merely exempts it from income taxes, the PEZA
law exempts it from all taxes.

Therefore, respondent can be considered exempt, not from the VAT, but only
from the payment of income tax for a certain number of years, depending on its
registration as a pioneer or a non-pioneer enterprise. Besides, the remittance of
the aforesaid 5 percent of gross income earned in lieu of local and national
taxes imposable upon business establishments within the ecozone cannot
outrightly determine a VAT exemption. Being subject to VAT, payments
erroneously collected thereon may then be refunded or credited.

Even if it is argued that respondent is subject to the 5 percent preferential tax

regime in RA 7916, Section 24 thereof does not preclude the VAT. One can,
therefore, counterargue that such provision merely exempts respondent from
taxes imposed on business. To repeat, the VAT is a tax imposed on consumption,
not on business. Although respondent as an entity is exempt, the transactions it
enters into are not necessarily so. The VAT payments made in excess of the zero
rate that is imposable may certainly be refunded or credited.
CIR V. ESTATE OF BENIGNO TODA JR.

On 2 March 1989, CIC authorized Benigno P. Toda, Jr., President and owner of
99.991% of its outstanding capital stock, to sell the Cibeles Building. On 30 August
1989, Toda purportedly sold the property for P100 million to Rafael A. Altonaga,
who, in turn, sold the same property on the same day to Royal Match Inc. (RMI)
for P200 million. Three and a half years later Toda died. On 29 March 1994, the
BIR sent an assessment notice and demand letter to the CIC for deficiency
income tax for the year 1989. On 27 January 1995, the Estate of Benigno P. Toda,
Jr., represented by special co-administrators Lorna Kapunan and Mario Luza
Bautista, received a Notice of Assessment from the CIR for deficiency income
tax for the year 1989. The Estate thereafter filed a letter of protest. The
Commissioner dismissed the protest. On 15 February 1996, the Estate filed a
petition for review with the CTA. In its decision the CTA held that the
Commissioner failed to prove that CIC committed fraud to deprive the
government of the taxes due it. It ruled that even assuming that a pre-
conceived scheme was adopted by CIC, the same constituted mere tax
avoidance, and not tax evasion. Hence, the CTA declared that the Estate is not
liable for deficiency of income tax. The Commissioner filed a petition for review
with the Court of Appeals. The Court of Appeals affirmed the decision of the
CTA, hence, this recourse.

ISSUE: Is there tax evasion?

HELD: YES. Tax evasion connotes the integration of three factors:

(1) the end to be achieved, i.e. the payment of less than that known by the
taxpayer to be legally due, or the non-payment of tax when it is shown that a
tax is due;

(2) an accompanying state of mind which is described as being evil, in bad

faith, willfull, or deliberate and not accidental; and

(3) a course of action or failure of action which is unlawful.

All these factors are present in the instant case. All these factors are present in
the instant case. It is significant to note that as early as 4 May 1989, prior to the
purported sale of the Cibeles property by CIC to Altonaga, CIC received P40
million from RMI, and not from Altonaga. This would show that the real buyer of
the properties was RMI, and not the intermediary Altonaga.
 The scheme resorted to by CIC in making it appear that there were two sales of
the subject properties, i.e. from CIC to Altonaga, and then from Altonaga to RMI
cannot be considered a legitimate tax planning. Such scheme is tainted with
fraud. Altonagas sole purpose of acquiring and transferring title of the subject
properties on the same day was to create a tax shelter. The sale to him was
merely a tax ploy, a sham, and without business purpose and economic
substance. Doubtless, the execution of the two sales was calculated to mislead
the BIR with the end in view of reducing the consequent income tax liability.

Element 1:
Payment of a lesser tax by CIC (35% of 100M instead of the entire P300M)

Element 2:
If property was indeed purchased from CIC to RMI, then there is bad faith in all the parties by the
use of Altonaga as a mere conduit.

RMI should have reflected in its books that property was brought from CIC. Instead, RMI made it
appear that Altonaga sold the property presence of bad faith

Element 3:
Fabricated evidences