Cir Vs. Negros Consolidated Farmers Multi-purpose Cooperative (2018).docx

CIR vs. Negros Consolidated Farmers Multi-purpose Cooperative | G.R. No. 212735 | December 5, 2018 | Tijam, J. Petitioner: Commissioner of Internal Revenue Respondent: Negros Consolidated Farmers Multi-purpose Cooperative FACTS 1) Respondent Negros Consolidated Farmers Multi-purpose Cooperative (COFA) is a multi-purpose agricultural cooperative organized under R.A No. 6938 (Cooperative Code) 2) COFA’s farmer-members deliver the sugarcane produce to be milled and processed in COFA’s name. The BIR issued an Authorization Allowing the Release of Refined Sugar without requiring COFA to pay advance VAT pursuant to its tax exemption under the Cooperative Code and the Tax Code. COFA was issued Certificates of tax exemptions (May 24, 1999 and April 23, 2003) by the BIR 3) In February 2009, The BIR required as a condition for the issuance of the release authorization the payment of advance VAT as COFA as an agricultural cooperative was not a “producer”  In general, the advance VAT on the sale of refined sugar shall be paid in advance before the refined sugar is withdrawn.  An exemption: Cooperative which is the producer of the sugar. 4) COFA paid the advance VAT under protest. 5) In January 2008, a BIR ruling stated that the sales of sugar produce by COFA to its members and non-members are exempt from VAT and considered COFA as an actual producer. 6) COFA lodged a claim for refund with the CIR for the advance VAT it paid. The claim was not acted upon so COFA filed a petition for review with the CTA. 7) The CTA found COFA to be exempt from VAT and ordered the refund of the advance VAT erroneously paid. The CTA en banc affirmed the ruling. ISSUE Whether COFA was VAT exempt and therefore entitled to a tax refund – YES!   

 

   

COFA is a VAT-exempt agricultural cooperative. The sale of agricultural products in their original state, including those which underwent simple processes of preparation or preservation for the market is a transaction exempt from VAT. The sale of refined sugar is not exempted as it already underwent several refining processes, and as such is no longer considered to be in its original state. o However if the sale of the sugar was made by an agricultural cooperative to its members or non-members, such transaction is still VAT-exempt. (cf. R.A. No. 9337) (See also R.A. No. 6938) The sale by agricultural cooperatives duly registered with the CDA to their members as well as the sale of their produce, whether in its original state or processed form, to non-members are exempt from VAT. Generally, the advance VAT on the sale of the refined sugar is required to be paid in advance before the refined sugar is withdrawn from the sugar refinery/mill o Exception: Exempted from VAT:  A cooperative in good standing duly accredited and registered with the CDA and the producer of sugar  Sale to members and non-members; to non-members, it’s own produce The withdrawal is not subject to advance VAT; sale to non-members of refined sugar is not subject to advance VAT only if the cooperative is the agricultural producer of the sugar cane COFA satisfies the conditions for exemption. The BIR ruling affirmed that COFA is considered as the producer of the sugar; such ruling operates as an equitable estoppel. As a logical and necessary consequence of its VAT exemption, COFA is likewise exempted from the payment of advance VAT.

Whether the exemption given to the cooperatives pertain only to the sale of sugar, but not the withdrawal of the sugar from the refinery – NO! 

VAT is a transaction tax: The withdrawal by the cooperative is not the incident which gives rise to the imposition of VAT, but the subsequent sale of the sugar. o The advance VAT which is imposed upon the withdrawal of the refined sugar is the very same VAT which would be imposed on the sale of refined sugar following its withdrawal from the refinery, hence the term “advance”.

Petition DENIED.