CIR Vs Cargill PH

CIR vs. Cargill Philippines Inc.
CTA EB No. 2001, June 30, 2020

Tag/s: Creditable Input Tax; Tax Refund
FACTS:
Cargill Philippines Inc (CPI), a domestic corporation, filed its quarterly VAT returns
wherein CPI reflected overpayments. The said overpayments were allegedly due to CPI’s export
sales of coconut oil, the proceeds paid with foreign currency, thus, were zero-rated for VAT
purposes. CPI thus filed two administrative claims before the BIR for refund. The CIR invoked
that the subject of the claim for refund was not properly documented. The case was elevated, and
the CTA division partially granted the refund to the amount of P3,053,469.99 then reduced it to
P1,779,377.16 while the other case was dismissed. Both the CIR and CPI filed a Petition for
Review before the CTA en banc.
In the CIR’s petition for review, the CIR argues that only “creditable input taxes” that are
“directly attributable” may be refunded. Per the CIR, Section 112 of the NIRC does not state that
all input taxes of a VAT-taxpayer whose sales are zero-rated are refundable; but only creditable
input taxes incurred from purchases of goods that form part of the finished product or directly
used in the chain of production are refundable. Thus, “DIRECT” connection of the purchase or
input tax to the finished product, subject to zero-rated sale must be established. CPI believes that
the CIR’s discussion of creditable input tax attributable to zero-rated sales is vague.
In CPI’s petition for review, CPI avers that in arriving at the refundable amount of
P1,779,377.16, the CTA division removed the from CPI’s excess input VAT the amount of
P1,274,092.82 which pertains to the allegedly overpayment for the period of April 1, 2001 to
February 28, 2003 (Case No. 6714). This amount should no longer be treated as overpayment
since CTA case No. 6714 was dismissed but should instead be considered as input VAT carried-
over from previous quarter. CPI added that the amount of P1,274,092.82 was fully substantiated
as excess input VAT carried over from previous quarter, and may be credited against its output
VAT for the period of March 1, 2003 to August 31, 2004.
HELD:
1) CIR’s Petition for Review
CIR claims that since only creditable input taxes incurred from purchases of goods that form
part of the finished product of the taxpayer or directly used in the chain of production are
refundable, CPI had the burden of proof in establishing direct connection of the input tax to the
finished product.
The CTA held that that Section 112 of the NIRC states that input taxes that bear a direct or
indirect connection with a taxpayer’s zero-rated sales satisfy the requirement of the law. In fact,
the allocation of input taxes in case the same cannot be directly and entirely attributed to any of
the sales is allowed. The NIRC did not limit input taxes to those purchases that only form part of
the finished product of the taxpayer. When Section 112 of the NIRC speaks of “creditable input
tax due or paid attributable to such sales” it is more logical interpret this phrase as referring to
instances of an apportionment of the input VAT in mixed transactions. (Ex. Zero-rated sales and
exempt sales) However, respondent seem to have confused the phrases “attributable to such
sales” and “directly and entirely attributed” to mean “direct costs” which applies to the
computation of gross income. It is a rule under statutory construction that every part of the
statute must be considered together with the other parts and kept subservient to the general intent
of the whole law, Section 112 provides for a scenario of mixed transactions.
2) CPI’s Petition for Review

The CTA held that the CPI failed to substantiate it’s the input VAT from previous quarters.
The CTA denied CPI’s claim stating that there being no substantiated input VAT from the
previous quarters, the refundable input VAT should only be the excess of the substantiated input
VAT for the period of March 1, 2003 to August 31, 2004 after deducting the output tax. Thus,
the contention of CPI does not hold water.

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CIR vs. Cargill Philippines Inc.

CTA EB No. 2001, June 30, 2020

2) CPI’s Petition for Review

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