Court orders BIR to return P19M in taxes wrongly collected from sugar co-op

BACOLOD CITY, Philippines—The Court of Tax Appeals has ordered the Bureau of Internal Revenue (BIR) to refund over P19 million in advance value added tax (VAT) erroneously collected from a sugar producers’ cooperative.

In its decision promulgated February 17, 2012, the court ruled that the sugar produced by the Negros Consolidated Farmers Association Multi-Purpose Cooperative should have been exempt from the payment of VAT.

“It is clear from a cursory reading Article 61 of Republic Act No. 6938 or the Cooperative Code of the Philippines that as a cooperative, the petitioner’s sugar is exempt from the payment of VAT,” the court said.

The cooperative filed a petition against the BIR commissioner and former BIR Region 12 Director Jose Tan to seek a refund of P20,998,638 it paid under protest on the basis of Revenue Regulations No. 13-2008.

The cooperative said the amount was advanced VAT payments for 205,869 LKG (50-kilo) bags of refined sugar, which it claimed was erroneously or illegally collected by then BIR Region 12 Officer-In-Charge director Rodita Galanto from Nov. 19, 2007 to Dec. 23, 2008.

In its decision, the tax court said that the petitioner had sufficiently proven that it was entitled to a refund of P19,978,638 and not P20,998,638.

The court disallowed the advance VAT payment dated December 13, 2007 under BIR ROR No. 02920957 in the amount of P1,020,000 because the petitioner failed to present the original documents in support of the claim.

The court said the cooperative presented a certificate of registration with the Cooperative Development Authority and a certificate of tax exemption declaring it a primary agricultural cooperative that is exempt from VAT.

The appellate court also noted that the BIR had waived its rights to present evidence to refute the presumption that the petitioner was a tax-exempt agricultural cooperative and that the latter’s certification of tax exemption had been nullified.

According to the court, the BIR commissioner had gone into unauthorized modification or amendment of RA 6983 in declaring that to avail oneself of the advance VAT tax exemption, a cooperative must be the agricultural producer of its sugar produce, the tiller of the land it owns or leases, incurs cost of agricultural production of the sugar and produces the sugar cane to be refined.

“Only Congress can do this,” the court said.

The decision was penned by Presiding Justice Ernesto Acosta and concurred in by Associate Justices Erlinda Uy and Esperanza Fabon-Victorino.