Kinds of Legislative History and Rule

Kinds of Contemporaneous Instances

Commissioner of Customs vs. Court of Tax Appeals

Case No. 71 G.R. Nos. 48886-88 (July 21, 1993)
Chapter III, Page 101, Footnote No.133

GR 152609 | June 29, 2005

FACTS:
Petitioner contends that the importation of the
foodstuffs in question is prohibited and the articles
thus imported may be subject to forfeiture under Sec.
2530 (f) and 102 (k) of the Tariff and Customs Code.
The foodstuffs in question being articles of prohibited
importation cannot be released under bond.
ISSUE:
W/N the imported foodstuffs in question are not
contraband, and are not as stated by Respondent
Court, among the prohibited importations enumerated
in Sec. 102 of the Tariff and Customs Code therefore
these foodstuffs may be released under bond as
provided in Sec. 2301 of the same code.
HELD:
Yes. The imported foodstuffs are considered
prohibited importation under Sec. 102 (k) of the
Tariff and Customs Code
NOTE:
Sec. 102. Prohibited Importations. The
importation into the Philippines of the following
articles is prohibited:
(k) All other articles the importation of which is
prohibited by law.
Sec. 2530. Property Subject to Forfeiture Under
Tariff and Customs Laws. Any vessel or aircraft,
cargo, articles and other objects shall, under the
following conditions, be subject to forfeiture:
(f.) Any article of prohibited importation or
exportation, the importation or exportation of which
is effected or attempted contrary to law, and all other
articles which, in the opinion of the Collector, have
been used, are or were intended to be used as
instrument in the importation or exportation of the
former.

Facts:

Respondent, a VAT taxpayer, is the Philippine Branch

of AMEX USA and was tasked with servicing a unit
of AMEX-Hongkong Branch and facilitating the
collections of AMEX-HK receivables from card
members situated in the Philippines and payment to
service establishments in the Philippines.
It filed with BIR a letter-request for the refund of its
1997 excess input taxes, citing as basis Section 110B
of the 1997 Tax Code, which held that xxx Any
input tax attributable to the purchase of capital goods
or to zero-rated sales by a VAT-registered person may
at his option be refunded or credited against other
internal revenue taxes, subject to the provisions of
Section 112.
In addition, respondent relied on VAT Ruling No.
080-89, which read, In Reply, please be informed
that, as a VAT registered entity whose service is paid
for in acceptable foreign currency which is remitted
inwardly to the Philippine and accounted for in
accordance with the rules and regulations of the
Central Bank of the Philippines, your service income
is automatically zero rated xxx
Petitioner claimed, among others, that the claim for
refund should be construed strictly against the
claimant as they partake of the nature of tax
exemption.
CTA rendered a decision in favor of respondent,
holding that its services are subject to zero-rate. CA
affirmed this decision and further held that
respondents services were services other than the
processing, manufacturing or repackaging of goods
for persons doing business outside the Philippines
and paid for in acceptable foreign currency and
accounted for in accordance with the rules and
regulations of BSP.
Issue:
W/N AMEX Phils is entitled to refund

Held:
Yes. Section 102 of the Tax Code provides for the
VAT on sale of services and use or lease of properties.
Section 102B particularly provides for the services or
transactions subject to 0% rate:
(1) Processing, manufacturing or repacking
goods for other persons doing business
outside the Philippines which goods are
subsequently exported, where the services
are paid for in acceptable foreign currency
and accounted for in accordance with the
rules and regulations of the BSP;
(2) Services other than those mentioned in the
preceding subparagraph, e.g. those rendered
by hotels and other service establishments,
the consideration for which is paid for in
acceptable foreign currency and accounted
for in accordance with the rules and
regulations of the BSP
Under subparagraph 2, services performed by VATregistered persons in the Philippines (other than the
processing, manufacturing or repackaging of goods
for persons doing business outside the Philippines),
when paid in acceptable foreign currency and
accounted for in accordance with the R&R of BSP,
are zero-rated. Respondent renders service falling
under the category of zero rating.

As a general rule, the VAT system uses

the destination principle as a basis for the
jurisdictional reach of the tax. Goods and services are
taxed only in the country where they are consumed.
Thus, exports are zero-rated, while imports are taxed.
In the present case, the facilitation of the collection of
receivables is different from the utilization of
consumption of the outcome of such service. While
the facilitation is done in the Philippines, the
consumption is not. The services rendered by
respondent are performed upon its sending to its
foreign client the drafts and bulls it has gathered from
service establishments here, and are therefore,
services also consumed in the Philippines. Under the
destination principle, such service is subject to 10%
VAT.
However, the law clearly provides for an exception to
the destination principle; that is 0% VAT rate for
services that are performed in the Philippines, paid
for in acceptable foreign currency and accounted for
in accordance with the R&R of BSP. The respondent
meets the following requirements for exemption, and
thus should be zero-rated:
(1) Service be performed in the Philippines
(2) The service fall under any of the categories
in Section 102B of the Tax Code
(3) It be paid in acceptable foreign currency
accounted for in accordance with BSP
R&R.