SPIT | B2015 CASE DIGESTS
Contex Corp. v. CIR July 2, 2004 Quisumbing, J. Francis G. Francisco
Contex is an SBMASBMA-reg regist istere ered d frm !i"! !i"! SUMMARY: Contex exem# exem#ts ts it $rom $rom a%% %o"a% %o"a% and nation nationa% a% intern interna% a% re&en' re&en'e e taxes ex"e#t $or t!e #re$erentia% tax #ro&ided $or in Se"tion 12 (") o$ *A +22+, Contex Contex Cor#, a%so registered registered it! t!e BI* as a non-AT tax#a.er, Contex is "%aiming a tax "redit $or 10/ AT #assed . its s'##%iers to Contex !en Contex #'r"!a #'r"!ased sed materia materia%s %s $rom $rom s'"! s'"! s'##%i s'##%iers ers,, SC !e%d !e%d t!at t!at Contex a%t!o'g! it is tr'e t!at t!e Contex Cor#, s!o'%d not !a&e een %ia%e $or t!e AT inad&ertent%. #assed on to it . its s'##%ier sin"e s'"! sa%e to an SBMA-registered frm is a ero-rated sa%e on t!e #art o$ t!e s'##%ier Contex Cor#, is not t!e #ro#er #ro#er #art. to "%aim s'"! AT AT re$'nd, Contex Cor#, is registered registered as a 343-A 343-AT T tax#a.er tax#a.er and t!'s is exem#t exem#t $rom AT AT, As an exem#t exem#t AT AT tax#a.er tax#a.er it is not a%%oed an. tax "redit on AT AT (in#'t t ax) #re&io's%. #aid, AT AT Exem#tio Exem#tion, n, An exem#tion exem#tion means DOCTRI DOCTRINE: NE: (a) t!at t!e sa%e o$ goods or #ro#erties andor ser&i"es and t!e 'se or %ease o$ #ro#erties is not s'6e"t to AT (o't#'t tax) and t!e se%%er is not a%%oed an. tax "redit on AT (in#'t tax) tax) #re&io #re&io's% 's%. . #aid, #aid, T!is T!is is a "ase "ase !erei !erein n t!e AT is remo&ed at t!e exem#t stage (i,e, at t!e #oint o$ t!e sa%e arter or ex"!ange o$ t!e goods or #ro#erties), T!e #erson ma7ing t!e exem#t sa%e o$ goods #ro#erties or ser&i"es s!a%% not i%% an. o't#'t tax to !is "'stomers e"a'se t!e said transa"tion is not s'6e"t to AT AT, 4n t!e ot!er !and a AT-r AT-registered egistered #'r"!aser o$ AT AT-exem#t goods#ro#erties or ser&i"es !i"! are exem#t $rom AT is not entit%ed to an. in#'t tax on s'"! #'r"!ase des#ite t!e iss'an"e o$ a AT AT in&oi"e or re"ei#t, () () 8ero 8ero-r -rat ated ed Sa%e Sa%es, s, T!es T!ese e are are sa%e sa%es s . ATregistered registered #ersons #ersons !i"! are s'6e"t to 0/ rate meaning t!e tax 'rden is not #assed on to t!e #'r"!aser, A erorated sa%e . a AT-registered #erson !i"! is a taxa%e
transa"tion $or AT #'r#oses s!a%% not res'%t in an. o't#'t tax, 9oe&er t!e in#'t tax on !is #'r"!ases #'r"!ases o$ goods #ro#erties or ser&i"es re%ated to s'"! ero-rated sa%e s!a%% e a&ai%a a&ai%a%e %e as tax "redit "redit or re$'nd re$'nd in a""orda a""ordan"e n"e it! it! t!ese reg'%ations, FACTS: Contex Cor#, is engaged in man'$a"t'ring !os#ita% text texti% i%es es and and garm garmen ents ts and and ot!e ot!err !os# !os#it ita% a% s'## s'##%i %ies es for export, Its #%a"e o$ 'siness is t!e S'i" Ba. ;ree#ort 8one (SB; (SB;8) 8) and and is d'%. d'%. regis egiste terred it! it! t!e t!e S'i S'i" " Ba. Ba. Metro Metro#o% #o%ita itan n A't!or A't!orit. it. (SBMA) (SBMA) as a S'i" S'i" Ba. ;ree#or ree#ortt Enter#rise Enter#rise #'rs'ant #'rs'ant to *A +22+, As an SBMA-regi SBMA-registere stered d frm frm Contex Contex Cor#, is exem# exem#tt $rom $rom a%% %o"a% and nation nationa% a% intern interna% a% re&en' re&en'e e taxes taxes ex"e# ex"e#tt $or t!e #re$er #re$erenti entia% a% tax #ro&ided $or in Se"tion 12 (") o$ *A *A +22+, Contex Cor#, a%so registered it! t!e BI* as a non-AT tax#a.er,
;rom rom 1<<+-1< 1<<+-1<<= <= Contex Contex Cor#, Cor#, #'r"!a #'r"!ased sed s'##%i s'##%ies es and materi materia%s a%s ne"ess ne"essar. ar. in t!e "ond'" "ond'"tt o$ its man'$a man'$a"t'r "t'ring ing 'siness, T!e s'##%iers o$ t!ese goods s!i$ted 'nto Contex Contex Cor#, t!e 10/ AT on t!e #'r"!ased items !i"! %ed t!e Contex Cor#, to #a. in#'t taxes, Be%ie&ing it as exem#t $rom AT Contex Cor#, f%ed to a##%i"ations $or tax re$'nd or tax "redit o$ t!e AT AT it #aid, >!en no res#onse as made $rom t!e BI* *egiona% Dire"tor Contex Cor#, e%e&ated t!e matter to t!e CTA !i"! granted on%. on%. a #artia #artia%% re$'nd re$'nd statin stating g t!at t!at Contex Contex Cor#, misrea misread d Se"tions Se"tions 10?(A)(2)(a) 10?(A)(2)(a) and 112(A) o$ t!e Tax Code, T!e tax "o'rt "o'rt stress stressed ed t!at t!at t!ese t!ese #ro&is #ro&ision ions s a##%. a##%. on%. on%. to t!ose t!ose entities registered as AT tax#a.ers !ose sa%es are erorated, Contex Cor#, does not $a%% 'nder 'nder t!is "ategor. sin"e it is a non-A non-AT T tax#a.er tax#a.er,, 3onet!e%ess 3onet!e%ess CTA CTA !e%d t!at t!e Contex Cor#, is exem#t $rom t!e im#osition o$ in#'t AT on its #'r"!ases o$ s'##%ies and materia%s and a%% t!at Contex Cor#, is re@'ired re@'ired to #a. is a 5/ #re$erentia% #re$erentia% tax, Contex Contex a##ea%ed to t!e CA, CI* sti%% arg'ed t!at $rom its &er. nat're t!e &a%'e-added tax is a 'rden #assed on . a AT registered #erson to t!e end 'sers !en"e t!e dire"t %iai%it. $or t!e tax %ies it! t!e
SPIT | B2015 CASE DIGESTS
s'##%iers and not Contex, T!e CA agreed it! t!e CI* and re&ersed t!e CTA, CTA, exem#tion ion emodi emodied ed in *A +22+ ISSUES: >43 t!e AT exem#t does not a##%. to Contex Cor#, as a #'r"!aser, #'r"!aser, "annot a##%. to Contex Contex as #'r"!aser #'r"!aser,, Contex Contex HELD: es it "annot Cor#,s "%aim $or exem#tion $rom AT $or its #'r"!ases o$ s'##%ies and ra materia%s is in"ongr'o's it! its "%aim t!at it is AT-Exem#t $or on%. AT-*egistered entities "an "%aim In#'t AT Credit*e$'nd, RATIO: RATIO: Contex Cor#, arg'es t!at *A +22+ "%ear%. mandate t!at no %o"a% and nationa% taxes s!a%% e im#osed im#osed '#on SB;8-regis SB;8-registered tered frms and !en"e said %a s!o'%d go&ern t!e "ase, Contex Cor#, a%so "ites reg'%ations iss'ed iss'ed . ot! t!e SBMA and and BI* "%ear%. "%ear%. #ro&iding #ro&iding t!at t!e tax exem#tion #ro&ided $or . *A +22+ in"%'des exem#tion $rom t!e im#osition im#osition o$ AT AT on #'r"!ases o$ s'##%ies and materia%s,
CI* CI* ta7e ta7es s t!e t!e &ie &ie t!at t!at !i% !i%e e *A +22+ +22+ does does grant grant tax tax exem# exem#tio tions ns s'"! s'"! grant grant is not a%%-en a%%-en"om# "om#ass assing ing 't is %imite %imited d on%. on%. to t!ose t!ose taxes taxes $or !i"! !i"! a SB;8-r SB;8-regi egiste stered red 'siness 'siness ma. e dire"t%. dire"t%. %ia%e, %ia%e, 9en"e SB;8 %o"ators %o"ators are not re%ie&ed $rom t!e indire"t taxes t!at ma. e s!i$ted to t!em . a AT-registered se%%er,
T!e #er son ma7ing t!e exem#t sa%e o$ goods #ro#erties or ser&i" ser&i"es es s!a%% s!a%% not i%% an. o't#'t tax to !is "'stomers "'stomers e"a'se e"a'se t!e said transa"tion transa"tion is not s'6e"t to AT AT, 4n t!e ot!er !and a AT-register -registered ed #'r"!aser #'r"!aser o$ AT AT-exem#t -exem#t goods#ro#erties or ser&i"es !i"! are exem#t $rom AT is not entit%ed to an. in#'t tax on s'"! #'r"!ase des#ite t!e iss'an"e o$ a AT in&oi"e or re"ei#t, () () 8eroero-ra rate ted d Sa%e Sa%es s, T!es !ese are are sa%es a%es . ATregistered #ersons !i"! are s'6e"t to 0/ rate meaning t!e tax 'rden is not #assed on to t!e #'r"!aser, A erorated sa%e . a AT-registered #erson !i"! is a taxa%e transa"tion $or AT #'r#oses s!a%% not res'%t in an. o't#'t tax, tax, 9oe&e 9oe&er r t!e in#'t tax on !is #'r"!ase #'r"!ases s o$ goods goods #ro#erties or ser&i"es re%ated to s'"! ero-rated sa%e s!a%% e a&ai%a%e as tax "redit or re$'nd in a""ordan"e it! t!ese reg'%ations, nder 8ero-rating a%% AT is remo&ed $rom t!e ero-rated goods a"ti&it. or frm, In "ontrast exem#tion on%. remo&es t!e AT at t!e exem#t stage and it i%% a"t'a%%. in"rease rat!er t!an red'"e t!e tota% taxes #aid . t!e exem#t frms 'siness or non-retai% "'stomers, It is $or t!is reason reason t!at a s!ar# distin"tion distin"tion m'st e made eteen eteen ero-rating ero-rating and exem#tion in designating a &a%'e-added tax,
Exem#tions Exem#tions $rom AT AT are are granted granted . ex#ress ex#ress #ro&ision #ro&ision o$ t!e Tax Tax Code or s#e"ia% s#e"ia% %as, %as, nder AT AT t!e transa"tion "an !a&e #re$erentia% treatment in t!e $o%%oing a.s:
Contex Cor#, rig!t%. "%aims t!at it is indeed AT-Exem#t and is e&en registered registered as a 343-A 343-AT T tax#a.er tax#a.er,, As s'"! it is exem#t $rom AT on a%% its sa%es and im#ortations o$ goods and ser&i"es,
(a) AT AT Exem#tion, An exem#tion means t!at t!e sa%e o$ goods or #ro#erties andor andor ser&i"es and t!e 'se or %ease o$ #ro#erties is not s'6e"t to AT (o't#'t tax) and t!e se%%er is not a%%oe a%%oed d an. tax "redit "redit on AT (in#'t (in#'t tax) tax) #re&io #re&io's% 's%. . #aid, #aid, T!is T!is is a "ase "ase !erei !erein n t!e AT AT is remo&e remo&ed d at t!e exem exem#t #t stag stage e (i,e (i,e, , at t!e #oin #ointt o$ t!e t!e sa%e sa%e art arter er or ex"!ange o$ t!e goods or #ro#erties),
9oe&er Contex Cor#,s "%aim $or exem#tion $rom AT $or its #'r"!ases is in"ongr'o's it! its "%aim t!at it is ATExem#t $or on%. AT-* AT-*egistered egistered entities "an "%aim In#'t AT Credit*e$'nd, >!i%e it is tr'e t!at t!e Contex Contex Cor#, s!o'%d not !a&e een %ia %ia%e %e $or $or t!e t!e AT inad inad&e &erte rtent nt%. %. #ass #assed ed on to it . its its s'##%ier sin"e s'"! is a ero-rated sa%e on t!e #art o$ t!e
SPIT | B2015 CASE DIGESTS
s'##%ier t!e Contex Cor#, is not t!e #ro#er #art. to "%aim s'"! AT re$'nd, nd nder t!e t!e 3I*C I*C Sales Sales to perso persons ns or entit entities ies whose whose exemp exemptio tion n unde underr speci special al laws, laws, e.g. e.g. .!. .!. "o. #22# #22# duly duly regist registere ered d and accre accredit dited ed ente enterpr rprise ises s with with Subic Subic $ay %etropo %etropolitan litan !uthori !uthority ty &S$%!' &S$%!' and (lar) *e+elop *e+elopmen ment t !uthority !uthority &(*!', . !. "o. #-, /hilippine conomic 1one !uthority !uthority &/1!', or international international agreements, agreements, e.g. !sian *e+elop *e+elopmen mentt $an) &!*$', &!*$', nterna nternation tional al ice esearch esearch nstitute &', etc. to which the /hilippines is a signatory e3ecti+ely subect such sales to 5ero6rate.7 Sin"e t!e transa"tion transa"tion is deemed ero-ra ero-rated ted Contex Contex Cor#,s Cor#,s s'# s'##%ie #%ierr ma. ma. "%ai "%aim m an In#'t n#'t AT "red "redit it it! it! no "orres#onding 4't#'t AT AT %iai%it., %iai%it., T!'s no 4't#'t AT AT ma. e #assed on to t!e Contex Cor#,, Contex Cor#, is registered as a 343-AT tax#a.er and t!'s is exem#t exem#t $rom AT AT, As an exem#t exem#t AT AT tax#a.er tax#a.er it is not a%%oed an. tax "redit on AT AT (in#'t t ax) #re&io's%. #aid, T!'s e&en ass'ming t!at exem#tion $rom t!e 'rden o$ AT AT on Contex Cor#,s #'r"!ases did exist Contex Cor#, is sti%% not entit%ed to an. tax "redit or re$'nd on t!e in#'t tax #re&io's%. #aid as Contex Cor#, is an exem#t AT AT tax#a.er, It is t!e Contex Cor#,s s'##%iers !o are t!e #ro#er #arties to "%aim t!e tax "redit and a""ording%. re$'nd t!e Contex Cor#, o$ t!e AT AT erroneo's%. #assed on to t!e %atter, DISPOSITIVE: T!e #etition is DE3IED, Contex "annot "%aim a tax re$'nd $or its #'r"!ases,
