Antecedents

The petitioner, a duly registered domestic corporation engaged in the production of

electricity as an independent power producer (IPP) and in the sale of electricity solely to
the National Power Corporation (NPC), claimed the refund or issuance of the tax credit
certificate for 74,658,461.68 for the VAT incurred in taxable year 2002.

It appears that the petitioner filed its quarterly VAT returns for the four quarters of
taxable year 2002, thereby showing the incurred expenses representing the importation
and domestic purchases of goods and services, including the input VAT thereon. On
April 13, 2004, it brought its administrative claim for refund with Revenue District
Office (RDO) No. 43 of the Bureau of Internal Revenue (BIR), claiming excess input VAT
amounting to P74,658,481.68 for taxable year 2002.

On April 22, 2004, nine days after filing the administrative claim, the petitioner filed its
petition for review (CTA Case No. 6966), which was assigned to the Second Division of
the CTA (CTA in Division).

Judgment of the CTA in Division

On April 14, 2009, the CTA in Division rendered judgment in CTA Case No. 6966 partly
granting the petition for review ,2 and ordering the respondent to refund or to issue a
tax credit certificate in the reduced amount of P23,389,050.05 representing the
petitioner's unutilized excess input VAT attributable to its zero-rated sales to NPC for
the second, third and fourth quarters of taxable year 2002, but denying the petitioner's
input VAT claim for the first quarter of taxable year 2002 on the ground of prescription,
and the other input VAT claims for lack of the required documentary evidence.3

On April 30, 2009, the petitioner moved for partial reconsideration with prayer to admit
attached additional supporting documents. It argued that its claim for the first quarter
of taxable year 2002 should not be denied because the rules and jurisprudence then
prevailing stated that the reckoning point of the two-year period for filing the claim for
refund of unutilized input taxes was the date of filing of the return and payment of the
tax due pursuant to the two-year rule under Atlas Consolidated Mining and
Development Corporation v. Commissioner of Internal Revenue (Atlas).4

Acting on the petitioner's motion for partial reconsideration, the CTA in Division
promulgated the amended decision dated February 18, 2011 denying the entire claim
on the ground of prematurity.5 It opined that it did not acquire jurisdiction over the
petition for review because of the petitioner's non-observance of the periods provided
under the NIRC,6 citing the rulings in Commissioner of Internal Revenue v. Mirant
Pagbilao Corporation (Mirant)7 and Commissioner of Internal Revenue v. Aichi Forging
Company of Asia, Inc. (Aichi). 8 It decreed thusly:

WHEREFORE, premises considered, the Motion for Partial Reconsideration is

hereby DENIED for lack of merit. On the other hand, the assailed Decision promulgated
on April 14, 2009 is hereby SET ASIDE and the instant Petition for Review is
hereby DISMISSED for lack of jurisdiction.
SO ORDERED.9
Decision of CTA En Banc

The petitioner elevated the case to the CTA En Banc, contending that it had seasonably
filed its administrative and judicial claims; and that the CTA had properly acquired
jurisdiction over the judicial claim.

Through the now assailed decision promulgated on September 6,2012,10 the CTA En
Banc denied the petition for review, disposing:

WHEREFORE premises considered, the Petition for Review docketed as CTA EB NO.
733 is DISMISSED. The Amended Decision dated February 18, 2011 of the Former
Second Division of this Court in CTA Case No. 6966, is hereby affirmed. No
pronouncement as to cost.

SO ORDERED.11
On December 13, 2012, the CTA En Banc denied the petitioner's motion for
reconsideration.12

Hence, this appeal.

Issue

The petitioner submits that the CTA acquired jurisdiction over the case; that the rulings
in Mirant and Aichi should be applied prospectively, and, accordingly, did not apply
hereto; that the two-year period for filing the claim for refund of unutilized input taxes
was to be reckoned from the filing of the return and the payment of the tax due; and
that the claim for the refund of P72,618,752.22 should be granted.

Ruling of the Court

The appeal is partly meritorious.

The relevant provisions of the NIRC are Section 112(A) and Section 112(C), to wit:

SEC. 112. Refunds or Tax Credits of Input Tax.-

(A) Zero-rated or Effectively Zero-rated Sales. - Any VAT registered person, whose
sales are zero-rated or effectively zero-rated may, within two (2) years after the close
of the taxable quarter when the sales were made, apply for the issuance of a tax credit
certificate or refund of creditable input tax due or paid attributable to such sales, except
transitional input tax, to the extent that such input tax has not been applied against
output tax: x x x.

x x x x

(C) Period within which Refund or Tax Credit of Input Taxes shall be Made. - In proper
cases, the Commissioner shall grant a refund or issue the tax credit certificate for
creditable input taxes within one hundred twenty (120) days from the date of
submission of complete documents in support of the application filed in accordance with
Subsection (A) hereof.

In case of full or partial denial of the claim for tax refund or tax credit, or the failure on
the part of the Commissioner to act on the application within the period prescribed
above, the taxpayer affected may, within thirty (30) days from the receipt of the
decision denying the claim or after the expiration of the one hundred twenty-day
period, appeal the decision or the unacted claim with the Court of Tax Appeals.
Under the foregoing, a VAT-registered taxpayer claiming a refund or tax credit of
excess and unutilized input VAT must file the administrative claim within two years
from the close of the taxable quarter when the sales were made.

The CTA En Banc ruled that the statutory period for claiming the refund or tax credit
was clearly provided under Section 112 of the NIRC; that the ruling in Mirant - which
did not create a new doctrine but only pronounced the correct application of Section
112 (A) of the NIRC - was the applicable jurisprudence; and that, therefore, no. new
doctrine had been retroactively applied to the petitioner.

The petitioner avers herein that when it filed its administrative claim on April 13, 2004
it relied in good faith on the prevailing rule that the two-year prescriptive period should
be reckoned from the filing of the return and payment of the tax due; and that its
reliance on the controlling laws as affirmed in Atlas ripened into a property right that
neither Mirant nor Aichi could simply take away.

The resolution of when to reckon the two-year prescriptive period for the filing an
administrative claim for refund or credit of unutilized input VAT in light of the
pronouncements in Atlas and Mirant was extensively addressed and dealt with
in Commissioner of Internal Revenue v. San Roque Corporation (San Roque).13 To
recall, the Court ruled in Atlas that "it is more practical and reasonable to count the
two-year prescriptive period for filing a claim for refund/credit of input VAT on zero-
rated sales from the date of filing of the return and payment of the tax due which,
according to the law then existing, should be made within 20 days from the end of each
quarter."14 On the other hand, Mirant abandoned Atlas and announced that "the
reckoning frame would always be the end of the quarter when the pertinent sales or
transaction was made, regardless when the input VAT was paid,"15 applying Section
112(A) of the NIRC and no other provisions that pertained to erroneous tax
payments.16 In San Roque, promulgated on February 12, 2013, therefore, the Court
clarified the effectivity of the pronouncements in Atlas and Mirant on reckoning the two-
year prescriptive period,17 elucidating that: (a) the Atlas pronouncement was effective
only from its promulgation on June 8, 2007 until its abandonment on September 12,
2008 through Mirant; and (b) prior to the promulgation of the ruling in Atlas, Section
112 (A) should be applied following the verba legis rule adopted in Mirant.18

The records show that the petitioner herein filed its administrative claims for refund for
the first, second, third, and fourth quarters of taxable year 2002 on April 13, 2004.
Such claims were covered by Section 112(A) of the N1RC that was the rule applicable
prior to Atlas and Mirant. As such, the proper reckoning date in this case, pursuant to
Section 112(A) of the NIRC, was the close of the taxable quarter when the relevant
sales were made.19 Specifically, the close of the quarters of taxable year 2002 took
place on March 31, 2002, June 30, 2002, September 30, 2002 and December 31, 2002,
giving to the petitioner until March 31, 2004, June 30, 2004, September 30, 2004 and
December 31, 2004 within which to file its administrative claims for the first, second,
third and fourth quarters, respectively. Under the circumstances, the petitioner had
belatedly filed its administrative claim corresponding to the first quarter of taxable year
2002, which was thereby already barred. But the claims for the refund of the input
taxes corresponding to the second, third and fourth quarters were timely and not
barred.

We next determine the timeliness of the filing of the judicial claim in the CTA.

The petitioner brought its judicial claim in the CTA on April 22, 2004 or nine days after
filing the administrative claim in the BIR. It did not await the lapse of the 120-day
period provided under the NIRC, leading the CTA En Banc to declare that the petitioner
had prematurely brought its appeal. Indeed, under Section 112 (c) of the NIRC, the
respondent had 120 days from the submission of the complete documents in support of
the application of the respondent for the tax refund or tax credit within which to decide
whether or not to grant or deny the claim. In case of the denial of the claim, or in case
of the failure of the respondent to act on the application within the period prescribed,
the taxpayer has 30 days from the receipt of the decision or from the expiration of the
120-day period within which to file the petition for review in the CTA.

In Aichi, the Court clarified that the 120-day period granted to the respondent was
mandatory and jurisdictional; hence, the non-observance of the period was fatal to the
filing of the judicial claim in the CTA .20 This was because prior to the expiration of the
120-day period, the respondent still had the statutory authority to render a decision. If
there was no decision and the period did not yet expire, there was no cause of action
that justified a resort to the CTA.21

In San Roque, the Court acknowledged an instance when a premature filing in the CTA
was allowed.22 The mandatory and jurisdictional nature of the 120-30 period rule did
not apply to claims for refund that were prematurely filed during the interim period
from the issuance of BIR Ruling No. DA-489-03 on December 10, 2003 to October 6,
2010 when the Aichi doctrine was adopted. The exemption was premised on the fact
that prior to the promulgation of Aichi, there was an existing interpretation laid down in
BIR Ruling No. DA-489-03 wherein the BIR expressly ruled that the taxpayer need not
wait for the expiration of the 120-day period before it could seek judicial relief with the
CTA. As the Court put it in San Roque:

BIR Ruling No. DA-489-03 does provide a valid claim for equitable estoppel under
Section 246 of the Tax Code. BIR Ruling No. DA-489-03 expressly states that
the "taxpayer-claimant need not wait for the lapse of the 120-day period
before it could seek judicial relief with the CTA by way of Petition for
Review." Prior to this ruling, the BIR held, as shown by its position in the Court of
Appeals, that the expiration of the 120-day period is mandatory and jurisdictional
before a judicial claim can be filed.

There is no dispute that the 120-day period is mandatory and jurisdictional, and that
the CTA does not acquire jurisdiction over a judicial claim that is filed before the
expiration of the 120-day period. There are, however, two exceptions to this rule. The
first exception is if the Commissioner, through a specific ruling, misleads a particular
taxpayer to prematurely file a judicial claim with the CTA. Such specific ruling is
applicable only to such particular taxpayer. The second exception is where the
Commissioner, through a general interpretative rule issued under Section 4 of the Tax
Code, misleads all taxpayers into filing prematurely judicial claims with the CTA. In
these cases, the Commissioner cannot be allowed to later on question the CTA's
assumption of jurisdiction over such claim since equitable estoppel has set in as
expressly authorized under Section 246 of the Tax Code.23
The petitioner filed its administrative and judicial claims for refund on April 13, 2004
and April 22, 2004, respectively. Both claims were filed after BIR Ruling No. DA-589-03
was issued on December 10, 2003, but before the promulgation of
the Aichi pronouncement on October 06, 2010. Thus, notwithstanding the petitioner's
having filed its judicial claim without waiting for the decision of the respondent or for
the expiration of the 120-day mandatory period, the C TA could still take cognizance of
the claims because they were filed within the period exempted from the mandatory and
jurisdictional 120-30 period rule.

As a result, the case has to be remanded to the CTA in Division for further proceedings
on the claim for refund of the petitioner's input VAT for the second, third and fourth
quarters of taxable year 2002.

WHEREFORE, the Court PARTLY GRANTS the petition for review

on certiorari; REVERSES and SETS ASIDE the decision promulgated on September 6,
2012 by the Court of Tax Appeals En Banc in CTA EB Case No. 733; and ORDERS the
remand of the case to the Court of Tax Appeals in Division for further proceedings on
the petitioner's claim for refund of its unutilized excess input Value-Added Tax for the
second, third and fourth quarters of taxable year 2002.

No pronouncement on costs of suit.

SO ORDERED.

Leonardo-De Castro, C.J., Del Castillo, Tijam, and A, Reyes, Jr., JJ., concur.
 THIRD DIVISION

JULY 23, 2018

G.R. No. 203249

SAN ROQUE POWER CORPORATION, Petitioner

vs.
COMMISSIONER OF INTERNAL REVENUE, Respondent

DECISION

MARTIRES, J.:

The application of the 120-day and 30-day periods provided in Section 112 (D) [later renumbered as
Section 112 (C)] of the National Internal Revenue Code (NIRC) is at the heart of the present case.

In Commissioner of Internal Revenue v. Aichi Forging Company of Asia, Inc. (Aichi), 1 the Court
considered whether the simultaneous filing of both the administrative claim (before the Bureau of
Internal Revenue [BIR]) and judicial claim (before the Court of Tax Appeals [CTA]) for refund/credit
of input VAT under the cited law is permissible. In that case, the respondent asserted that the non-
observance of the 120-day period is not fatal to the filing of a judicial claim as long as both the
administrative and the judicial claims are filed within the two-year prescriptive period. We held that
the premature filing of respondent's claim for refund/credit before the CTA warrants a dismissal
inasmuch as no jurisdiction was acquired by that court.

In the case before us, San Roque Power Corporation (petitioner) brought its judicial claims before
the CT A prior to the promulgation of the Aichi ruling. Yet, the lower court (CTA En Banc) dismissed
the petitioner's judicial claims on the ground of prematurity, a decision that happily coincided with the
Court's ruling in Aichi. In its petition, San Roque Power Corporation rues the retroactive application
of Aichi to taxpayers who merely relied on the alleged prevailing rule of procedure antecedent
to Aichi that allowed the filing of judicial claims before the expiration of the 120-day period.

We hold that there is no established precedence prior to Aichi that permits the simultaneous filing of
administrative and judicial claims for refund/credit under Section 112 of the NIRC. Nonetheless, we
concede that the CT A has jurisdiction over the claims in this case in view of our pronouncement
in Commissioner of Internal Revenue v. San Roque Power Corporation (San Roque).2 In said case,
the Court, while upholding Aichi, recognized an exception to the mandatory and jurisdictional
character of the 120-day period: taxpayers who relied on BIR Ruling DA-489-03, issued on 10
December 2003, until its reversal in Aichi on 6 October 2010, are shielded from the vice of
prematurity. The said ruling expressly stated that "a taxpayer-claimant need not wait for the lapse of
the 120-day period before it could seek judicial relief with the CT A by way of a Petition for Review."

THE FACTS

This is a petition for review on certiorari under Rule 45 of the Rules of Court assailing the 4 April
2012 Decision3 of the CTA En Banc in CT A EB No. 657. The CTA En Banc dismissed the
petitioner's judicial claims on the ground of prematurity, thus, setting aside the CTA Second
Division's partial grant of the refund claims in the consolidated CTA Case Nos. 7424 and 7492. In
the subsequent 17 August 2012 Resolution4 of the CTA En Banc, the court a quo denied the
petitioner's motion for reconsideration.
 The Antecedents

San Roque Power Corporation is a VAT-registered taxpayer which was granted by the BIR a zero-
rating on its sales of electricity to National Power Corporation (NPC) effective 14 January 2004, up
to 31 December 2004.5

On 22 December 2005 and 27 February 2006, the petitioner filed two separate administrative
claims for refund of its alleged unutilized input tax for the period 1 January 2004 up to 31 March
2004, and 1 April 2004 up to 31 December 2004, respectively.6

Due to the inaction of respondent CIR, the petitioner filed petitions for review before the CTA (raffled
to the Second Division): (1) on 30 March 2006, for its unutilized input VAT for the period 1 January
2004 to 31 March 2004, amounting to ₱17,017,648.31, docketed as CTA Case No. 7424; and (2) on
20 June 2006, for the unutilized input VAT for the period 1 April 2004 to 31 December 2004,
amounting to ₱14,959,061.57, docketed as CTA Case No. 7492.

The Ruling of the CTA Division

During trial, the petitioner presented documentary and testimonial evidence to prove its claim. On
the other hand, respondent CIR was deemed to have waived its right to present evidence due to its
failure to appear in the two scheduled hearings on the presentation of evidence for the defense. In
due course, the CTA Division partially granted the refund claim of the petitioner in the total amount of
₱29,931,505.18 disposing as follows:

WHEREFORE, premises considered, the instant Petitions for Review are hereby PARTIALLY
GRANTED. Accordingly, respondent Commissioner of Internal Revenue is hereby ORDERED TO
REFUND or TO ISSUE A TAX CREDIT CERTIFICATE in the reduced amount of TWENTY-NINE
MILLION NINE HUNDRED THIRTY-ONE THOUSAND FIVE HUNDRED FIVE PESOS AND 18/100
(₱29,931,505.18) in favor of petitioner, representing unutilized input VAT attributable effectively
zero-rated sales of electricity to NPC for the four quarters of 2004.

SO ORDERED.7

The CIR moved for reconsideration but to no avail. Thus, on 4 August 2010, the CIR filed a petition
for review with the CTA En Banc.

The Petition for Review before

the CTA En Banc

Among other issues, the CIR questioned the claimant's judicial recourse to the CT A as inconsistent
with the procedure prescribed in Section 112 (D) of the NIRC. The CIR asserted that the petitions for
review filed with the CT A were premature, and thus, should be dismissed.

The Ruling of the CTA En Banc

The CTA En Banc sided with the CIR in ruling that the judicial claims of the petitioner were
prematurely filed in violation of the 120-day and 30- day periods prescribed in Section 112 (D) of the
NIRC. The court held that by reason of prematurity of its petitions for review, San Roque Power
Corporation failed to exhaust administrative remedies which is fatal to its invocation of the court's
power of review. The dispositive portion of the CTA En Bane's assailed decision reads:
WHEREFORE, the Petition for Review filed by petitioner Commissioner of Internal Revenue is
hereby GRANTED. Accordingly, the Petition for Review filed by respondent on March 30, 2006
docketed as CTA Case No. 7424, as well as the Petition for Review filed on June 20, 2006 docketed
as CTA Case No. 7492 are hereby DISMISSED on ground of prematurity.

SO ORDERED.8

The Present Petition for Review

The petitioner argues that at the time it filed the petitions for review before the CTA on 30 March
2006 and 20 June 2006, no ruling yet was laid down by the Supreme Court concerning the 120-day
and 30-day periods provided in Section 112 of the NIRC. Instead, taxpayers such as the petitioner
were guided only by the rulings of the CTA9 which consistently adopted the interpretation that a
claimant is not bound by the 120-day and 30-day periods but by the two-year prescriptive period as
provided in Section 112 (A) of the NIRC. Such CTA decisions, according to the petitioner, are
recognized interpretations of Philippines' tax laws.

The petitioner also assets that the CT A En Banc erred in applying retroactively the Aichi ruling as
regards the 120-day and 30-day periods under Section 112 of the NIRC for the following
reasons: (1) the Aichi ruling laid down a new rule of procedure which cannot be given retroactive
effect without impairing vested rights; (2) a judicial ruling oven-uling a previous one cannot be
applied retroactively before its abandonment; and (3) a judicial decision which declares an otherwise
permissible act as impermissible violates the ex post facto rule under the Constitution.

THE COURT'S RULING

We grant the petition.

I.

No retroactive application of
the Aichi ruling

At the outset, it bears stressing that while Aichi was already firmly established at the time the CTA
En Banc promulgated the assailed decision, nowhere do we find in such assailed decision, however,
that the court a quo cited or mentioned the Aichi case as basis for dismissing the subject petitions for
review. As we see it, the CTA En Banc merely relied on Section 112 (D) of the NIRC, which provides
-

SEC. 112. Refunds or Tax Credits of Input Tax. –

(A) Zero-rated or Effectively Zero-rated Sales.- Any VAT-registered person, whose sales are zero-
rated or effectively zero-rated may, within two (2) years after the close of the taxable quarter when
the sales were made, apply for the issuance of a tax credit certificate or refund of creditable input tax
due or paid attributable to such sales, except transitional input tax, to the extent that such input tax
has not been applied against output tax:

xxxx

(D) Period within which Refund or Tax Credit of Input Taxes shall be Made. - In proper cases, the
Commissioner shall grant a refund or issue the tax credit certificate for creditable input taxes within
one hundred twenty (120) days.from the date of submission of complete documents in support
of the application filed in accordance with Subsections (A) and (B) hereof.

In case of full or partial denial of the claim for tax refund or tax credit, or the failure on the part of
the Commissioner to act on the application within the period prescribed above, the taxpayer
affected may, within thirty (30) days from the receipt of the decision denying the claim or after
the expiration of the one hundred twenty-day period, appeal the decision or the unacted claim
with the Court of Tax Appeals. (emphases supplied)

- correctly interpreting the 120-day and 30-day periods prescribed therein as mandatory and
jurisdictional. Thus, it cannot appropriately be insisted that the CTA En Bane's imputed error may be
traced to a misplaced invocation of Aichi.

Be that as it may, the petitioner cannot find solace in the various CTA decisions that allegedly
dispense with the timeliness of the judicial claim for as long as it is within the two-year prescriptive
period. Such legal posturing has already been passed upon.

Thus, in San Roque, 10 a case involving the same parties and substantially the same factual
antecedents as in the present petition, we rejected the claim that the CTA decisions may be relied
upon as binding precedents. We said –

There is also the claim that there are numerous CTA decisions allegedly supporting the argument
that the filing dates of the administrative and judicial claims are inconsequential, as long as they are
within the two-year prescriptive period. Suffice it to state that CTA decisions do not constitute
precedents, and do not bind this Court or the public. That is why CTA decisions are appealable to
this Court, which may affirm, reverse or modify the CT A decisions as the facts and the law may
warrant. Only decisions of this Court constitute binding precedents, forming part of the Philippine
legal system. As held by this Court in The Philippine Veterans Affairs Office v. Segundo:

x x x Let it be admonished that decisions of the Supreme Court "applying or interpreting the laws or
the Constitution . . . form part of the legal system of the Philippines," and, as it were, "laws" by their
own right because they interpret what the laws say or mean. Unlike rulings of the lower courts, which
bind the parties to specific cases alone, our judgments are universal in their scope and application,
and equally mandatory in character. Let it be warned that to defy our decisions is to court
contempt. 11 (emphasis supplied)

We further held in said case that Article 8 of the Civil Code12 enjoins adherence to judicial
precedents. The law requires courts to follow a rule already established in a final decision of
the Supreme Court. Contrary to the petitioner's view, the decisions of the CTA are not given the
same level of recognition.

Concerning the 120-day period in Section 112 (D) of the NIRC, there was no jurisprudential
rule prior to Aichi interpreting such provision as permitting the premature filing of a judicial claim
before the expiration of the 120-day period. The alleged CTA decisions that entertained the judicial
claims despite their prematurity are not to be relied upon because they are not final decisions of the
Supreme Court worthy of according binding precedence. That Aichi was yet to be promulgated at
that time did not mean that the premature filing of a petition for review before the CTA was a
permissible act.

It was only in Aichi that this Court directly tackled the 120-day period in Section 112 (D) of the NIRC
and declared it to be mandatory and jurisdictional. In particular, Aichi brushed aside the contention
that the nonobservance of the 120-day period is not fatal to the filing of a judicial claim as long as
both the administrative and judicial claims are filed within the two-year prescriptive period provided in
Section 112 (A) of the NIRC.

The mandatory and jurisdictional nature of the 120-day period first expressed in Aichi, however, is
not a new rule of procedure to be followed in pursuit of a refund claim of unutilized creditable input
VAT attributable to zero-rated sales. As suggested above, the pronouncement in Aichi regarding the
mandatory and jurisdictional nature of the 120-day period was the Court's interpretation of Section
112 (D) of the NIRC. It is that law, Section 112 (D) of the NIRC, that laid the rule of procedure for
maintaining a refund claim of unutilized creditable input VAT attributable to zero-rated sales. In said
provision, the Commissioner has 120 days to act on an administrative claim.

Hence, from the effectivity of the 1997 NIRC on 1 January 1998, the procedure has always been
definite: the 120-day period is mandatory and jurisdictional. Accordingly, a taxpayer can file a judicial
claim (1) only within thirty days after the Commissioner partially or fully denies the
claim within the 120-day period, or (2) only within thirty days from the expiration of the 120- day
period if the Commissioner does not act within such period. 13 This is the rule of procedure beginning
1 January 1998 as interpreted in Aichi.

Given all the foregoing, it is indubitable that, subject to our discussion below on the reason why the
present petition should nonetheless be granted, the petitioner's arguments have no leg to stand on –

(1) The Aichi ruling laid down a new rule of procedure which cannot be given retroactive effect
without impairing vested rights. Section 112 (D) of the NIRC, not the Aichi ruling, lays down the rule
of procedure governing refund claims of unutilized creditable input VAT attributable to zero-rated
sales; Aichi is merely an interpretation of an existing law; there is no vested right to speak of
respecting a wrong construction of the law 14 (permitting a premature filing of judicial claim);

(2) A judicial ruling overruling a previous one cannot be applied retroactively before its
abandonment.

There was no established doctrine abandoned or overturned by Aichi; the petitioner merely harps on
CTA decisions that cannot be relied on as binding precedents; and

(3) A judicial decision which declares an otherwise permissible act as impermissible violates the ex
post facto rule under the Constitution –

Prior to Aichi, there was no law or jurisprudence permitting the premature filing of a judicial claim of
creditable input VAT; Aichi did not declare as impermissible that which was previously recognized by
law or jurisprudence as a permissible act; it is, therefore, inconsequential to consider the ex
postfacto provision of the Constitution.

To reiterate, the 120-day and 30-day periods, as held in the case

of Aichi, are mandatory and jurisdictional. Thus, noncompliance with the mandatory 120+ 30-day
period renders the petition before the CTA void. The ruling in said case as to the mandatory and
jurisdictional character of said periods was reiterated in San Roque and a host of succeeding similar
cases.

Significantly, a taxpayer can file a judicial claim only within thirty (30) days from the expiration of the
120-day period if the Commissioner does not act within the 120-day period. The taxpayer cannot file
such judicial claim prior to the lapse of the 120-day period, unless the CIR partially or wholly denies
the claim within such period. The taxpayer-claimant must strictly comply with the mandatory period
by filing an appeal to the CTA within thirty days from such inaction; otherwise, the court cannot
validly acquire jurisdiction over it.

In this case, the petitioner timely filed its administrative claims for refund/credit of its unutilized input
VAT for the first quarter of 2004, and for the second to fourth quarters of the same year, on 22
December 2005 and 27 February 2006, respectively, or within the two-year prescriptive period.
Counted from such dates of submission of the claims (with supporting documents), the CIR had 120
days, or until 13 April 2006, with respect to the first administrative claim, and until 27 June 2006, on
the second administrative claim, to decide.

However, the petitioner, without waiting for the full expiration of the 120-day periods and without any
decision by the CIR, immediately filed its petitions for review with the CT A on 30 March 2006, or a
mere ninety-eight (98) days for the first administrative claim; and on 20 June 2006, or only one
hundred thirteen (113) days for the second administrative claim, from the submission of the said
claims. In other words, the judicial claims of the petitioner were prematurely filed as correctly found
by the CTA En Banc.

II.

Ordinarily, a prematurely filed appeal is to be dismissed for lack of jurisdiction in line with our ruling
in Aichi. But, as stated in the premises, we shall accord to the CTA jurisdiction over the claims in this
case due to our ruling in San Roque.

BIR Ruling No. DA-489-03

constitutes an exception to
the mandatory and
jurisdictional nature of the
120+30-day period.

In the consolidated cases of San Roque, the Court en bane recognized an exception to the
mandatory and jurisdictional nature of the 120+30-day period. It was noted that BIR Ruling No. DA-
1âwphi1

489-03, which expressly stated-

[A] taxpayer-claimant need not wait for the lapse of the 120-day period before it could seek judicial
relief with the CTA by way of Petition for Review.

- is a general interpretative rule issued by the CIR pursuant to its power under Section 4 of the
NIRC, hence, applicable to all taxpayers. Thus, taxpayers can rely on this ruling from the time of its
issuance on 10 December 2003. The conclusion is impelled by the principle of equitable estoppel
enshrined in Section 246 15 of the NIRC which decrees that a BIR regulation or ruling cannot
adversely prejudice a taxpayer who in good faith relied on the BIR regulation or ruling prior to its
reversal.

Then, in Taganito Mining Corporation v. CIR, 16 the Court further clarified the doctrines
in Aichi and San Roque explaining that during the window period from 10 December 2003, upon
the issuance of BIR Ruling No. DA-489-03 up to 6 October 2010, or date of promulgation
of Aichi, taxpayers need not observe the stringent 120-day period. 17

In other words, the 120+ 30-day period is generally mandatory and jurisdictional from the effectivity
of the 1997 NIRC on 1 January 1998, up to the present. By way of an exception, judicial claims filed
during the window period from 10 December 2003 to 6 October 2010, need not wait for the
exhaustion of the 120-day period. The exception in San Roque has been applied consistently in
numerous decisions of this Court.

In this case, the two judicial claims filed by the petitioner fell within the window period, thus, the CTA
can take cognizance over them.

The petitioner is similarly situated as Taganito Mining Corporation (Taganito) in the consolidated
cases of San Roque. In that case, Taganito prematurely filed on 14 February 2007 its petition for
review with the CT A, or within the window period from I 0 December 2003, with the issuance of BIR
Ruling DA-489-03 and 6 October 2010, when Aichi was promulgated. The Court considered
Taganito to have filed its administrative claim time. Similarly, the judicial claims in this case were
filed on 30 March 2006 and 20 June 2006, or within the said window period. Consequently, the
exception to the mandatory and jurisdictional character of the 120-day and 30-day periods is
applicable.

What this means is that the CTA can validly take cognizance over the two judicial claims filed in this
case. The CTA Division, in fact, did this, which eventually led to the partial grant of the refund claims
in favor of the petitioner. In reversing the CTA Division for lack of jurisdiction, the CTA En Banc failed
to consider BIR Ruling No. DA-489-03.

III.

It is imperative, however, to point out that the petitioner did not actually invoke BIR Ruling No. DA-
489-03 in all its pleadings to justify the timeliness of its judicial claims with the CTA. To recall, the
petitioner vociferously insisted on the propriety of its judicial claims in view of the prevailing
interpretations of the CTA prior to Aichi that allowed premature filing of petitions for review before the
CTA. This apparently also explains the silence on the end of the CTA En Banc regarding such BIR
ruling in disposing of the matter on jurisdiction.

Hence, whether the petitioner can benefit from BIR Ruling DA-489- 03 even if it did not invoke it is a
question worthy of consideration.

The beneficiaries of BIR

Ruling No. DA-489-03 include
those who did not specifically
invoke it.

We resolve to apply the exception recognized in San Roque, which we quote, viz:

x x x BIR Ruling No. DA-489-03 is a general interpretative rule. Thus, all taxpayers can rely on BIR
Ruling No. DA-489-03 from the time of its issuance on 10 December 2003 up to its reversal by this
Court in Aichi on 6 October 2010, where this Court held that the 120+30-day periods are mandatory
and jurisdictional. 18 (emphasis supplied)

As previously stated, San Roque has been consistently applied in a long line of cases that
recognized the exception to the mandatory and jurisdictional nature of the 120+30-day period. To
limit the application of BIR Ruling No. DA-489-03 only to those who invoked it specifically would
unduly strain the pronouncements in San Roque. To provide jurisprudential stability, it is best to
apply the benefit of BIR Ruling No. DA-489-03 to all taxpayers who filed their judicial claims within
the window period from 10 December 2003 until 6 October 2010.
We said the same in Commissioner of Internal Revenue v. Air Liquide Philippines, Inc., 19 thus –

The Court agrees with ALPI in its survey of cases which shows that BIR Ruling No. DA-489-03 was
applied even though the taxpayer did not specifically invoke the same. As long as the judicial claim
was filed between December I 0, 2003 and October 6, 2010, then the taxpayer would not be
required to wait for the lapse of 120-day period. This doctrine has been consistently upheld in the
recent decisions of the Court. On the other hand, in Nippon Express v. CIR, Applied Food
Ingredients v. CIR and Silicon Philippines v. CIR, the taxpayer did not benefit from 13IR Ruling No.
DA-489-03 because they filed their precipitate judicial claim before December 10, 2003.

Indeed, BIR Ruling No. DA-489-03 is a general interpretative law and it applies to each and every
taxpayer. To subscribe to the contention of the CIR would alter the Court's ruling in San Roque. It
will lead to an unreasonable classification of the beneficiaries of BIR Ruling No. DA- 489-03 and
further complicate the doctrine. ALPI cannot be faulted for not specifically invoking BIR Ruling No.
DA-489-03 as the rules for its application were not definite until the San Roque case was
promulgated.

In the furtherance of the doctrinal pronouncements in San Roque, the better approach would be to
apply BIR Ruling No. DA-489-03 to all taxpayers who filed their judicial claim for VAT refund within
the period of exception from December 10, 2003 to October 6, 2010. 20 (citations omitted)

Moreover, in Procter and Gamble Asia Pte Ltd. v. Commissioner of internal Revenue, 21 we
considered as insignificant the failure of a taxpayer to invoke BIR Ruling No. DA-489-03 before the
CT A. Our reason was that the said ruling is an official act emanating from the BIR. We can take
judicial notice of such issuance and its consistent application in past rulings of the Court relating to
the timeliness of judicial claims which makes it even more mandatory in taking cognizance of the
same.

All told, the CTA has jurisdiction over the judicial claims filed by the petitioner in this case. The CTA
En Banc, thus, erred in setting aside the decision of the CT A Division on the ground of lack of
jurisdiction. Consequently, the decision of the CTA Division partially granting the claim for
refund/credit in favor of the petitioner must be reinstated.

WHEREFORE, the petition is GRANTED. The 4 April 2012 Decision and 1 7 August 2012
Resolution of the Court of Tax Appeals En Banc in CTA EB No. 657 are REVERSED and SET
ASIDE. The 8 January 2010 Decision and 28 June 2010 Resolution of the CT A Former Second
Division in CTA Cases Nos. 7424 and 7492 are hereby REINSTATED.

The public respondent Commissioner of Internal Revenue is hereby ORDERED TO REFUND or, in
the alternative, TO ISSUE A TAX CREDIT CERTIFICATE in favor of the petitioner in the total sum of
Twenty-Nine Million Nine Hundred Thirty-One Thousand Five Hundred Five Pesos and 18/100
Centavos (₱29,931,505.18) representing unutilized input VAT attributable to zero-rated sales to the
NPC for the four taxable quarters of 2004.

SO ORDERED.
 THIRD DIVISION

JULY 23, 2018

G.R. No. 191495

NIPPON EXPRESS (PHILIPPINES) CORPORATION, Petitioner

vs.
COMMISSIONER OF INTERNAL REVENUE, Respondent

DECISION

MARTIRES, J.:

In a claim for refund under Section 112 of the National Internal Revenue Code (N/RC), the claimant
must show that: (1) it is engaged in zero-rated sales of goods or services; and (2) it paid input VAT
that are attributable to such zero-rated sales. Otherwise stated, the claimant must prove that it made
a purchase of taxable goods or services for which it paid VAT (input), and later on engaged in
the sale of goods or services subject to VAT (output) but at zero rate. There is a refundable sum
when the amount of input (VAT (attributable to zero-rated sale) is higher than the claimant's output
VAT during one taxable period (quarter).

The issue in the present petition Cl1ncerns the proof that the claimant, petitioner Nippon Express
(Philippines) Corporation (Nippon Express), is engaged in zero-rated sales of services (not goods or
properties).

THE FACTS

Petitioner Nippon Express repaired to the Court via its petition for review on certiorari under Rule 45
of the Rules of Court to assail the 15 December 2009 Decision of the Court of Tax
Appeals (CTA) En Banc in CTA EB No. 492. The CTA En Banc affirmed the ruling of the CTA
Second Division in CTA Case No. 7429 denying the refund claim of Nippon Express.

The present controversy stemmed from an application for the issuance of a tax credit
certificate (TCC) of Nippon Express' excess or unutilized input tax attributable to its zero-rated sales
for all four taxable quarters in 2004 pursuant to Section 112 of the National Internal Revenue
Code (NIRC).

The Antecedents

Nippon Express is a domestic corporation registered with the Large Taxpayer District
Office (LTDO) of the Bureau of Internal Revenue (BIR). Revenue Region No. 8-Makati, as a Value
Added Tax (VAT) taxpayer. 1

On 30 March 2005, Nippon Express filed with the LTDO, Revenue Region No. 8, an application for
tax credit of its excess/unused input taxes attributable to zero-rated sales for the taxable year 2004
in the total amount of ₱27,828,748.95.

By reason of the inaction by the BIR, Nippon Express filed a Petition for Review before the CTA
on 31 March 2006.2In its Answer, respondent Commissioner of Internal Revenue (CIR) interposed
the defense, among others, that Nippon Express' excess input VAT paid for its domestic purchases
of goods and services attributable to zero-rated sales for the four quarters of taxable year 2004 was
not fully substantiated by proper documents. 3

The Ruling of the CTA Division

After trial, the CTA Division (the court) found that Nippon Express' evidentiary proof of its zero-rated
sale of services to PEZA-registered entities consisted of documents other than official receipts.
Invoking Section 113 of the NIRC, as amended by Section 11 of Republic Act (R.A.) No. 9337, the
court held the view that the law provided for invoicing requirements of VAT-registered persons to
issue a VAT invoice for every sale, barter or exchange of goods or properties, and a VAT official
receipt for every lease of goods or properties, and for every sale, barter or exchange of services.
Noting that Nippon Express is engaged in the business of providing services, the court denied the
latter's claim for failure to submit the required VAT official receipts as proof of zero-rated sales. The
dispositive portion of the CTA Division's Decision, dated 5 December 2008, reads:

WHEREFORE, premises considered, the instant Petition for Review is hereby DENIED DUE
COURSE, and accordingly, DISMISSED for lack of merit.

SO ORDERED.4

Aggrieved, Nippon Express moved for reconsideration or new trial but was rebuffed by the CTA
Division in its Resolution5 of 5 May 2009. Hence, Nippon Express filed on 10 June 2009 a petition for
review with the CTA En Banc.

The Petition for Review before

the CTA En Banc

In its appeal before the CTA En Banc, Nippon Express alleged that it had fully complied with the
invoicing requirements when it submitted sales invoices to support its claim of zero-rated sales.
Nippon argued that there is nothing in the tax laws and regulations that requires the sale of goods or
properties to be supported only by sales invoices, or the sale of services by official receipts only.
Thus, as Nippon Express put it, the CTA Division erred in holding that the sales invoices and their
supporting documents are insufficient to prove Nippon Express' zero-rated sales.

The Ruling of the CTA En Banc

As stated at the outset, the CTA En Banc affirmed the decision of the CTA Division. The CTA En
Banc disposed as follows:

"WHEREFORE, the Petition for Review is DISMISSED. Accordingly, the impugned Decision of the
Court in Division dated December 5, 2008 and its Resolution promulgated on May 5, 2009 in CTA
Case No. 7429 are AFFIRMED.

SO ORDERED."6

Worth mentioning is the lone dissent registered by Presiding Justice (PJ) Ernesto D. Acosta who
opined that an official receipt is not the only acceptable evidence to prove zero-rated sales of
services. He ratiocinated:

Sections 113 and 237 of the 1997 National Internal Revenue Code (NIRC) x x x made use of the
disjunctive term "or" which connotes that either act qualifies as two different evidences of input VAT.
X x x It is indicative of the intention of the lawmakers to use the same interchangeably in the sale of
goods or services.

This is bolstered by the fact that Section 113 of the 1997 NIRC has been amended by Section 11 of
Republic Act (RA) No. 9337, wherein the amendatory provisions of the law categorically required
that VAT invoice shall be issued for sale of goods while VAT official receipt for the sale of services,
which is absent in the amended law. Since this amendment took effect on July L 2005, the same
cannot be applied in the instant case which involves a claim for refund for taxable year 2004. RA
9337 cannot apply retroactively to the prejudice of petitioner given the well-entrenched principle that
statutes, including administrative rules and regulations operate prospectively only, unless the
legislative intent to the contrary is manifest by express terms or by necessary implication.

Equally relevant are Section 110 of the 1997 NIRC and Section 4.106-5 of Revenue Regulations
No. 7-95. x x x A reading of both provisions would show the intention to accept other evidence to
substantiate claims for VAT refund, particularly the use of either a VAT invoice or official receipt.7

Nippon Express opted to forego the filing of a motion for reconsideration; hence, the direct appeal
before the Court.

The Present Petition for Review

In its petition, Nippon Express reiterated its stance that nowhere is it expressly stated in the laws or
implementing regulations that only official receipts can support the sale of services, or that only sales
invoices can support the sale of goods or properties. Nippon Express also adopted at length the
dissenting opinion of PJ Acosta, viz the use of the disjunctive term "or" in Section 237 of the NIRC
connoting the interchangeable nature of either VAT invoice or official receipt as evidence of sale of
goods or services; the lack of any statutory basis for the exclusivity of official receipts as proof of
sale of service; and the non-retroactivity of R.A. No. 9337, enacted in 2005, to the petitioner's case.

In addition, Nippon Express posed the query on whether it may still be allowed to submit official
receipts, in addition to those already produced during trial, in order to prove the existence of its zero-
rated sales.

By way of Comment,8 the CIR impugns the petition as it essentially seeks the re-evaluation of the
evidence presented during trial which cannot be done in a petition for review under Rule 45.
Likewise, the CIR argues that the evidence of the sale of service, as the CT A held, is none other
than an official receipt. In contrast, the sales invoice is the evidence of a sale of goods. Since the
petitioner's transactions involve sales of services, they should have been properly supported by
official receipts and not merely by sales invoices.

THE COURT'S RULING

We deny the petition.

I.

The judicial claim of Nippon

Express was belatedly filed.
The thirty (30)-day period of
appeal is mandatory
and jurisdictional, hence,
the CTA did not acquire
jurisdiction over Nippon
Express' judicial claim.

First, we observe that much of the CT A's discussion in the assailed decision dwelt on the
substantiation of the petitioner's claim for refund of unutilized creditable input VAT. It did not touch
on the subject of the court's jurisdiction over the petition for review filed before it by Nippon Express.
Neither did the CIR bring the matter to the attention of the court a quo.

Nonetheless, even if not raised in the present petition, the Court is not prevented from considering
the issue on the court's jurisdiction consistent with the well-settled principle that when a case is on
appeal, the Court has the authority to review matters not specifically raised or assigned as error if
their consideration is necessary in reaching a just conclusion of the case.9 The matter of jurisdiction
cannot be waived because it is conferred by law and is not dependent on the consent or objection or
the acts or omissions of the parties or any one of them. 10 Besides, courts have the power to motu
proprio dismiss an action over which it has no jurisdiction pursuant to Section 1, Rule 9 of the
Revised Rules of Court.11

Concerning the claim for refund of excess or unutilized creditable input VAT attributable to zero-
rated sales, the pertinent law is Section 112 of the NIRC 12 which reads:

SEC. 112. Refunds or Tax Credits of Input Tax. –

(A) Zero-rated or Effectively Zero-rated Sales.- Any VAT-registered person, whose sales are zero-
rated or effectively zero-rated may, within two (2) years after the close of the taxable quarter
when the sales were made, apply for the issuance of a tax credit certificate or refund of creditable
input tax due or paid attributable to such sales, except transitional input tax, to the extent that such
input tax has not been applied against output tax:

xxxx

(D) Period within which Refund or Tax Credit of Input Taxes shall be Made. - In proper cases, the
Commissioner shall grant a refund or issue the tax credit certificate for creditable input taxes within
one hundred twenty (120) days from the date of submission of complete documents in support
of the application filed in accordance with Subsections (A) and (B) hereof.

In case of full or partial denial of the claim for tax refund or tax credit, or the failure on the part of
the Commissioner to act on the application within the period prescribed above, the taxpayer
affected may, within thirty (30) days from the receipt of the decision denying the claim or after
the expiration of the one hundred twenty-day period, appeal the decision or the unacted claim
with the Court of Tax Appeals. (emphases supplied)

Under the aforequoted provision, a VAT-registered taxpayer who has excess and unutilized
creditable input VAT attributable to zero-rated sales may file an application for cash refund or
issuance of TCC (administrative claim) before the CIR who has primary jurisdiction to decide such
application. 13 The period within which to file the administrative claim is two (2) years reckoned from
the close of the taxable quarter when the pertinent zero-rated sales were made.

From the submission of complete documents to support the administrative claim, the CIR is given a
120-day period to decide. In case of whole or partial denial of or inaction on the administrative claim,
the taxpayer may bring his judicial claim, through a petition for review, before the CTA who has
exclusive and appellate jurisdiction. 14 The period to appeal is thirty (30) days counted from the
receipt of the decision or inaction by the CIR.

The 30-day period is further emphasized in Section 11 of R.A. No. 1125, as amended by R.A. No.
9282, or the CTA charter, which reads:

SEC. 11. Who May Appeal; Mode of Appeal; Effect of Appeal. - Any party adversely affected by a
decision, ruling or inaction of the Commissioner of Internal Revenue, the Commissioner of Customs,
the Secretary of Finance, the Secretary of Trade and Industry or the Secretary of Agriculture or the
Central Board of Assessment Appeals or the Regional Trial Courts may file an appeal with the
CTA within thirty (30) days after the receipt of such decision or ruling or after the expiration of the
period fixed by law for action as referred to in Section 7(a)(2) herein. (emphases supplied)

In the seminal cases of Commissioner of Internal Revenue (Commissioner) v. Aichi Forging

Company of Asia, Inc. 15 and Commissioner v. San Roque Power Corporation/Taganito Mining
Corporation v. Commissioner/Philex Mining Corporation v. Commissioner (San Roque), 16 the Court
interpreted the 30-day period of appeal as mandatory and jurisdictional. Thus, noncompliance with
the mandatory 30-day period renders the petition before the CTA void. The ruling in said cases as to
the mandatory and jurisdictional character of the 30-day period of appeal was reiterated in a litany of
cases thereafter.

Pertinently, the CTA law expressly provides that when the CIR fails to take action on the
administrative claim, the "inaction shall be deemed a denial" of the application for tax refund or
credit. The taxpayer-claimant must strictly comply with the mandatory period by filing an appeal with
the CTA within thirty days from such inaction, otherwise, the court cannot validly acquire jurisdiction
over it.

In this case, Nippon Express timely filed its administrative claim on 30 March 2005, or within the
two-year prescriptive period. Counted from such date of submission of the claim with supporting
documents, the CIR had 120 days, or until 28 July 2005, the last day of the 120-day period, to
decide the claim. As the records reveal, the CIR did not act on the application of Nippon Express.
Thus, in accordance with law and the cited jurisprudence, the claimant, Nippon Express, had thirty
days from such inaction "deemed a denial," or until 27 August 2005, the last day of the 30- day
period, within which to appeal to the CTA.

However, Nippon Express filed its petition for review with the CTA only on 31 March 2006, or two
hundred forty-six (246) days from the inaction by the CIR. In other words, the petition of Nippon
Express was belatedly filed with the CTA and, following the doctrine above, the court ought to have
dismissed it for lack of jurisdiction.

The present case is similar to the case of Philex Mining Corporation (Philex) in the consolidated
cases of San Roque. In that case, Philex: (1) filed on 21 October 2005 its original VAT return for the
third quarter of taxable year 2005; (2) filed on 20 March 2006 its administrative claim for refund or
credit; (3) filed on 17 October 2007, its petition for review with the CTA. 17 As in this case, the CIR did
not act on Philex's claim.

The Court considered Philex to have timely filed its administrative claim on 20 March 2006, or within
the two-year period; but, its petition for review with the CTA on 1 7 October 2007, was late by 426
days. Thus, the Court ruled that the CTA Division did not acquire jurisdiction.

Due to the lack of jurisdiction of the CTA over the Nippon Express petition before it, all the
proceedings held in that court must be void. The rule is that where there is want of jurisdiction over a
subject matter, the judgment is rendered null and void. 18 It follows that the decision and the
resolution of the CTA Division, as well as the decision rendered by the CTA En Banc on appeal,
should be vacated orset aside.

As noted previously, Nippon Express asked leave from this Court to allow it to submit in evidence
the official receipts of its zero-rated sales in addition to the sales invoices and other documents
already presented before the CTA. Considering our finding as to the CTA's lack of jurisdiction, it is
thus futile to even consider or allow such official receipts of Nippon Express.

II.

In view of the lack of jurisdiction of the CTA, we shall clarify and resolve, if only for academic
purposes, the focal issue presented in this petition, i.e., whether the sales invoices and documents
other than official receipts are proper in substantiating zero-rated sales of services in connection
with a claim for refund under Section 112 of the NIRC.

Substantiation requirements
to be entitled to refund or tax
credit under Sec. 112, NIRC

As stated in our introduction, the burden of a claimant who seeks a refund of his excess or unutilized
creditable input VAT pursuant to Section 112 of the NIRC is two-fold: (1) prove payment of input
VAT to suppliers; and (2) prove zero-rated sales to purchasers. Additionally, the taxpayer-claimant
has to show that the VAT payment made, called input VAT, is attributable to his zero-rated sales.

Be it noted that under the law on VAT, as contained in Title IV of the NIRC, there are three known
taxable transactions, namely: (i) sale of goods or properties (Section 106); (ii) importation (Section
107); and (iii) sale of services and lease of properties (Section 108). Both sale transactions in
Section 106 and 108 are qualified by the phrase 'in the course of trade or business,' whereas
importation in Section 107 is not.

At this juncture, it is imperative to point out that the law had set apart the sale of goods or properties,
as contained in Section 106, from the sale of services in Section 108.

In establishing the fact that taxable transactions like sale of goods or properties or sale of services
were made, the law provided for invoicing and accounting requirements, to wit:

Section 113. Invoicing and Accounting Requirements fhr VAT-Registered Persons. –

(A) Invoicing Requirements. - A VAT-registered person shall, for every sale, issue
an invoice or receipt. In addition to the information required under Section 23 7, the
following information shall be indicated in the invoice or receipt:

(1) A statement that the seller is a VAT-registered person, followed by his taxpayer's
identification number (TIN); and

(2) The total amount which the purchaser pays or is obligated to pay to the seller with
the indication that such amount includes the value-added tax.

(B) Accounting Requirements. -- Notwithstanding the provisions of Section 233, all persons
subject to the value-added tax under Sections 106 and 108 shall, in addition to the regular
 accounting records required, maintain a subsidiary sales journal and subsidiary purchase
journal on which the daily sales and purchases are recorded. The subsidiary journals shall
contain such information as may be required by the Secretary of Finance.

xxxx

Section 237. Issuance of Receipts or Sales or Commercial Invoices. - All persons subject to an
internal revenue tax shall, for each sale or transfer of merchandise or for services rendered valued at
Twenty-five pesos (1!25.00) or more, issue duly registered receipts or sales or
commercial invoices, prepared at least in duplicate, showing the date of transaction, quantity, unit
cost and description of merchandise or nature of service: Provided, however, That in the case of
sales, receipts or transfers in the amount of One hundred pesos (₱100.00) or more, or regardless of
the amount, where the sale or transfer is made by a person liable to value-added tax to another
person also liable to value-added tax; or where the receipt is issued to cover payment made as
rentals, commissions, compensations or fees, receipts or invoices shall be issued which shall
show the name, business style, if any, and address of the purchaser, customer or client: Provided,
further, That where the purchaser is a VAT-registered person, in addition to the information herein
required, the invoice or receipt shall further show the Taxpayer Identification Number (TIN) of the
purchaser.

The original of each receipt or invoice shall be issued to the purchaser, customer or client at the
time the transaction is effected, who, if engaged in business or in the exercise of profession, shall
keep and preserve the same in his place of business for a period of three (3) years from the close of
the taxable year in which such invoice or receipt was issued, while the duplicate shall be kept and
preserved by the issuer, also in his place of business, for a like period. (emphases supplied)

The CTA En Banc held the view that while Sections 113 and 23 7 used the disjunctive term "or," it
must not be interpreted as giving a taxpayer an unconfined choice to select between issuing an
invoice or an official receipt. 19 To the court a quo, sales invoices must support sales of goods or
properties while official receipts must support sales of services.20

We agree.

Actually, the issue is no longer novel.

In AT&T Communications Services Philippines, Inc. v. Commissioner (AT&T), 21 we interpreted

Sections 106 and 108 in conjunction with Sections 113 and 23 7 of the NIRC relative to the
significance of the difference between a sales invoice and an official receipt as evidence for zero-
rated transactions. For better appreciation, we simply quote the pertinent discussion, viz:

Although it appears under [Section 113] that there is no clear distinction on the evidentiary value of
an invoice or official receipt, it is worthy to note that the said provision is a general provision which
covers all sales of a VAT registered person, whether sale of goods or services. It does not
necessarily follow that the legislature intended to use the same interchangeably. The Court therefore
cannot conclude that the general provision of Section 113 of the NIRC of 1997, as amended,
intended that the invoice and official receipt can be used for either sale of goods or services,
because there are specific provisions of the Tax Code which clearly delineates the difference
between the two transactions.

In this instance, Section l 08 of the NIRC of 1997, as amended, provides:

SEC. 108. Value-added Tax on Sale of Services and Use or Lease of Properties.-
 xxxx

(C) Determination of the Tax -The tax shall be computed by multiplying the total amount indicated in
the official receipt by one-eleventh (emphases supplied)

Comparatively, Section 106 of the same Code covers sale of goods, thus:

SEC. 106. Value-added Tax on Sale of Goods or Properties.-

xxxx

(D) Determination of the Tax. - The tax shall be computed by multiplying the total amount indicated
in the invoice by one-eleventh (1/11). (emphases supplied)

Apparently, the construction of the statute shows that the legislature intended to distinguish the use
of an invoice from an official receipt. It is more logical therefore to conclude that subsections of a
statute under the same heading should be construed as having relevance to its heading. The
legislature separately categorized VAT on sale of goods from VAT on sale of services, not only by its
treatment with regard to tax but also with respect to substantiation requirements. Having been
grouped under Section 108, its subparagraphs, (A) to (C), and Section 106, its subparagraphs (A) to
(0), have significant relations with each other.

xxxx

Settled is the rule that every part of the statute must be considered with the other
parts. Accordingly, the whole of Section 108 should be read in conj unction with Sections 113 and
1âw phi 1

237 so as to give life to all the provisions intended for the sale of services. There is no conflict
between the provisions of the law that cover sale of services that are subject to zero rated sales;
thus, it should be read altogether to reveal the true legislative intent. 22

Contrary to the petitioner's position, invoices and official receipts are not used interchangeably for
purposes of substantiating input V AT;23 or, for that matter, output VAT. Nippon Express
cites Commissioner v. Manila Mining Corporation (Manila Mining)24as its authority in arguing that the
law made no distinction between an invoice and an official receipt. We have read said case and
therein found just quite the opposite. The Manila Mining case in fact recognized a difference
between the two, to wit:

A "sales or commercial invoice" is a written account of goods sold or services rendered indicating the
prices charged therefor or a list by whatever name it is known which is used in the ordinary course of
business evidencing sale and transfer or agreement to sell or transfer goods and services.

A "receipt" on the other hand is a written acknowledgment of the fact of payment in money or other
settlement between seller and buyer of goods, debtor or creditor, or person rendering services and
client or customer. 25

At this point, it is worth mentioning that the VAT law at issue in Manila Mining was Presidential
Decree No. 1158 (National Internal Revenue Code of 1977). That a distinction between an invoice
and receipt was recognized even as against the NIRC of 1977 as the legal backdrop is authority
enough to dispel any notion harbored by the petitioner that a distinction between the two, with the
legal effects that follow, arose only after the enactment of R.A. No. 9337. For emphasis, even prior
to the enactment of R.A. No. 9337, which clearly delineates the invoice and official receipt, our Tax
Code has already made the distinction.26

The Manila Mining case proceeded to state –

These sales invoices or receipts issued by the supplier are necessary to substantiate the actual
amount or quantity of goods sold and their selling price, and taken collectively are the best means to
prove the input VAT payments. 27

While the words "invoice" and "receipt" in said decision are seemingly used without distinction, it
cannot be rightfully interpreted as allowing either document as substantiation for any kind of taxable
sale, whether of goods/properties or of services. A closer reading of Manila Mining indeed shows
that the question on whether an invoice is the proper documentary proof of a sale of goods or
properties to the exclusion of an official receipt, and vice versa, official receipt as the proof of sale of
services to the exclusion of an invoice, was not the pivotal issue.

It was in Kepco Philippines Corporation v. Commissioner (Kepco)28that the Court was directly
confronted with the adequacy of a sales invoice as proof of the purchase of services and official
receipt as evidence of the purchase of goods. The Court initially cited the distinction between an
invoice and an official receipt as expressed in the Manila Mining case. We then declared for the first
time that a VAT invoice is necessary for every sale, barter or exchange of goods or properties while
a VAT official receipt properly pertains to every lease of goods or properties, and for every sale,
barter or exchange of services. Thus, we held that a VAT invoice and a VAT receipt should not be
confused as referring to one and the same thing; the law did not intend the two to be used
alternatively. We stated:

[T]he VAT invoice is the seller's best proof of the sale of the goods or services to the buyer while the
VAT receipt is the buyer's best evidence of the payment of goods or services received from the
seller. Even though VAT invoices and receipts are normally issued by the supplier/seller alone, the
said invoices and receipts, taken collectively, are necessary to substantiate the actual amount or
quantity of goods sold and their selling price (proof of transaction), and the best means to prove the
input VAT payments (proof of payment). Hence, VAT invoice and VAT receipt should not be
confused as referring to one and the same thing. Certainly, neither does the law intend the two to be
used alternatively. 29

In Kepco, the taxpayer tried to substantiate its input VAT on purchases of goods with official
receipts and on purchases of services with invoices. The claim was appropriately denied for not
complying with the required standard of substantiation. The Court reasoned that the invoicing and
substantiation requirements should be followed because it is the only way to determine the veracity
of the taxpayer's claims. Unmistakably, the indispensability of an official receipt to substantiate a
sale of service had already been illustrated jurisprudentially as early as Kepco.

The doctrinal teaching in Kepco was further reiterated and applied in subsequent cases.

Thus, in Luzon Hydro Corp. v. Commissioner,30 the claim for refund/tax credit was denied because
the proof for the zero-rated sale consisted of secondary evidence like financial statements.

Subsequently, in AT&T, 31 the Court rejected the petitioner's assertion that there is no distinction in
the evidentiary value of the supporting documents; hence, invoices or receipts may be used
interchangeably to substantiate VAT. Apparently, the taxpayer-claimant presented a number of bank
credit advice in lieu of valid VAT official receipts to demonstrate its zero-rated sales of services. The
CT A denied the claim; we sustained the denial.
Then, in Takenaka Corporation-Philippine Branch v. Commissioner,32 the proofs for zero-rated sales
of services were sales invoices. The claim was likewise denied.

Most recently, in Team Energy Corporation v. Commissioner of Internal Revenue/Republic of the

Philippines v. Team Energy Corporation,33 we sustained the CTA En Bane's disallowance of the
petitioner's claim for input taxes after finding that the claimed input taxes on local purchase of goods
were supported by documents other than VAT invoices; and, similarly, on local purchase of services,
by documents other than VAT official receipts.

Irrefutably, when a VAT-taxpayer claims to have zero-rated sales of services, it must substantiate
the same through valid VAT official receipts, not any other document, not even a sales invoice which
properly pertains to a sale of goods or properties.

In this case, the documentary proofs presented by Nippon Express to substantiate its zero-rated
sales of services consisted of sales invoices and other secondary evidence like transfer slips, credit
memos, cargo manifests, and credit notes.34 It is very clear that these are inadequate to support the
petitioner's sales of services. Consequently, the CT A, albeit without jurisdiction, correctly ruled that
Nippon Express is not entitled to its claim.

In sum, the CTA did not acquire jurisdiction over Nippon Express' judicial claim considering that its
petition was filed beyond the mandatory 30-day period of appeal. Logically, there is no reason to
allow the petitioner to submit further evidence by way of official receipts to substantiate its zero-rated
sales of services. Likewise, there is no need to pass upon the issue on whether sales invoices or
documents other than official receipts can support a sale of service considering the CTA's lack of
jurisdiction. Even so, we find that VAT official receipts are indispensable to prove sales of services
by a VAT-registered taxpayer. Consequently, the petitioner is not entitled to the claimed refund or
TCC.

WHEREFORE, for lack of jurisdiction, the 5 December 2008 Decision and 5 May 2009 Resolution of
the Court of Tax Appeals Second Division in CTA Case No. 7429, and the 15 December 2009
Decision of the Court of Tax Appeals En Banc in CT A-EB Case No. 492, are
hereby VACATED and SET ASIDE.

SO ORDERED.
 FIRST DIVISION

G.R. No. 212735, December 05, 2018

COMMISSIONER OF INTERNAL REVENUE, Petitioner, v. NEGROS CONSOLIDATED

FARMERS MULTI-PURPOSE COOPERATIVE, Respondent.

DECISION

TIJAM, J.:

Assailed in this Petition for Review on Certiorari1 under Rule 45 of the Rules of Court
are the Decision2 dated March 5, 2014 and the Resolution3 dated May 27, 2014 of the
Court of Tax Appeals (CTA) En Banc in CTA EB Case No. 992, declaring respondent
Negros Consolidated Farmers Multi-Purpose Cooperative (COFA) as exempt from the
Value-added tax (VAT) and hence, entitled to refund of the VAT it paid in advance.

The Antecedents

COFA is a multi-purpose agricultural cooperative organized under Republic Act (RA) No.
6938.4

As its usual course, COFA's farmer-members deliver the sugarcane produce to be milled
and processed in COFA's name with the sugar mill/refinery.5 Before the refined sugar is
released by the sugar mill, however, an Authorization Allowing the Release of Refined
Sugar (AARRS) from the Bureau of Internal Revenue (BIR) is required from COFA. For
several instances, upon COFA's application, the BIR issued the AARRS without requiring
COFA to pay advance VAT pursuant to COFA's tax exemption under Section 616 of RA
6938 and Section 109(r) (now under Section 109[L])7 of RA No. 84248, as amended by
RA No. 9337.9 As such, COFA was issued Certificates of Tax Exemption dated May 24,
1999 and April 23, 2003 by the BIR.10

However, beginning February 3, 2009, the BIR, through the Regional Director of Region
12-Bacolod City, required as a condition for the issuance of the AARRS the payment of
"advance VAT" on the premise that COFA, as an agricultural cooperative, does not fall
under the term "producer." According to the BIR, a "producer" is one who tills the land
it owns or leases, or who incurs cost for agricultural production of the sugarcane to be
refined by the sugar refinery.11

As bases for the required payment of advance VAT, the Regional Director pointed to
Sections 3 and 4 of Revenue Regulations (RR) No. 13-2008,12 which, in part,
respectively provide:
Sec. 3. Requirement to pay in Advance VAT Sale of Refined Sugar. - In general,
the advance VAT on the sale of refined sugar provided for under Sec. 8 hereof, shall be
paid in advance by the owner/seller before the refined sugar is withdrawn from any
sugar refinery/mill. x x x

xxxx

Sec. 4. Exemption from the Payment of the Advance VAT. - x x x

xxxx

A cooperative is said to be the producer of the sugar if it is 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.

xxxx
COFA was thus, constrained to pay advance VAT under protest13 and to seek the legal
opinion of the BIR Legal Division, as to whether COFA is considered the producer of the
sugar product of its members.

In a Ruling dated January 11, 2008, the BIR14 stated that the sales of sugar produce by
COFA to its members and non-members are exempt from VAT pursuant to Section
109(L) of RA 9337, as implemented by Revenue Regulations (RR) No; 4-2007. The
Ruling, in part, provides:
Thus, COFA and its members['] respective roles in the operation of the Cooperative
cannot be treated as separate and distinct from each other. Notwithstanding that COFA
is not the owner of the land and the actual tiller of the land, it is considered as the
actual producer of the members' sugarcane production because it primarily provided
the various production inputs (fertilizers), capital, technology transfer and farm
management. In short, COFA has direct participation in the sugarcane production of its
farmers-member.15
Thus, pursuant to Section 22916 of RA. 8424, as amended, COFA lodged with petitioner
Commissioner of Internal Revenue (CIR) an administrative claim for refund in the
amount of P11,172,570.00 for the advance VAT it paid on the 109,535 LKG bags of
refined sugar computed at P102.00 VAT per bag for the period covering February 3,
2009 to July 22, 2009. Because of the CIR's inaction, COFA filed a petition for
review17 before the CTA Division pursuant to Rule 8, Section 3(a)18 of the Revised Rules
of the CTA, but this time seeking the refund of the amount of P7,290,960.00
representing 71,480 LKG bags of refined sugar at P102.00 VAT per bag for the period
covering May 12, 2009 to July 22, 2009.19

In its Answer, the CIR raised as sole point COFA's alleged failure to comply with the
requisites for recovery of tax erroneously or illegally collected as spelled under Section
229 of RA 8424, specifically, the lack of a prior claim for refund or credit with the CIR.20

Trial on the merits thereafter ensued where only COFA presented evidence through its
Tax Consultant, Jose V. Ramos. The CIR, on the other hand, waived the presentation of
evidence. However, in its Memorandum,21 the CIR additionally argued that COFA is not
entitled to refund as it failed to present certain documents22 required under Sections 3
and 4 of RR No. 13-2008.23

On December 12, 2012, the CTA Division rendered its Decision24 finding COFA to be
exempt from VAT and thus, ordered the refund of the advance VAT it erroneously paid.
The CIR Division reasoned that COFA's Certificates of Tax Exemption dated May 24,
1999 and April 23, 2003 and the BIR Ruling dated January 11, 2008, which had not
been revoked or nullified, affirmed COFA's status as a tax-exempt agricultural
cooperative. It further held that based on said uncontroverted25 evidence, COFA is
"considered as the actual producer of the members' sugarcane production because it
primarily provided the various production inputs (fertilizers), capital, technology
transfer and farm management."26 The CIR Division likewise held that COFA
substantiated its claim for refund in the amount of P7,290,960.00 representing advance
VAT on the 71,480 LKG bags of refined sugar from May 12, 2009 to July 22, 2009, by
submitting in evidence the Summary of VAT Payments Under Protest with the related
BIR Certificates of Advance Payment ofVAT and Revenue Official Receipts.27

In disposal, the CIR Division pronounced:

WHEREFORE, the instant Petition for Review is hereby GRANTED. Accordingly, [CIR] is
hereby ORDERED TO REFUND in favor of [COFA] the amount of SEVEN MILLION TWO
HUNDRED NINETY THOUSAND NINE HUNDRED SIXTY PESOS (P7,290,960.00),
representing erroneously paid advance VAT for the period covering May 12, 2009 to
July 22, 2009.

SO ORDERED.28
The CIR's motion for reconsideration met similar denial in the CTA Division's
Resolution29 dated March 5, 2013, thus prompting a petition for review before the
CTA En Banc.

The CIR maintained its argument that COFA failed to present evidence to prove that the
refined sugar withdrawn from the sugar mills were actually produced by COFA through
its registered members as required under RA 8424, as amended. The CIR argues that
COFA's failure to present the quedan of the raw sugar issued by sugar mills in COFA's
name is fatal to its claim for refund as it cannot be determined whether its registered
members are the actual producers of the refined sugar before it was transferred in
COFA's name and before COFA sells it to its members and non-members.30

Further, the CIR pointed to COFA's failure to present documentary evidence to prove
that it is indeed the principal provider of the various production inputs (fertilizers),
capital, technology transfers and farm management, as well as documentary evidence
to show that COFA has sales transactions with its members and non-members. The CIR
reiterated its argument that COFA failed to present the documents required for the
administrative and judicial claim for refund in accordance with RR No. 13-2008.

COFA countered that the instant case involves advance VAT assessed on its withdrawal
of sugar from the refinery/mill, and not on its sale of sugar to members or non-
members. Thus, COFA argued that the payment in advance of VAT for the withdrawal of
sugar from the refinery/mill was without basis.

In its presently assailed Decision, the CTA En Banc affirmed COFA's status as an
agricultural cooperative entitled to VAT exemption. By evidence consisting of COFA's
Certificate of Registration dated October 19, 2009 and Certificate of Good Standing
dated May 19, 2010, as well as the CIR's admission in its Answer, pre-trial brief and
stipulation of facts, it was established that COFA is an agricultural cooperative.
According to the CTA En Banc, COFA, at the time of the subject transactions, was a
cooperative in good standing as indicated in the Certification of Good Standing issued
and renewed by the CDA on May 19, 2010.

As such, the CTA En Banc held that pursuant to Section 109(L) of RA 8424, as
amended, transactions such as sales by agricultural cooperatives duly registered with
the CDA to their members, as well as sales of their produce, whether in its original
state or processed fom1, to nonmembers, are exempt from VAT. Citing Article 61 of RA
6938, as amended by RA 9520, the CTA En Banc held that cooperatives were exempt
from VAT for sales or transactions with members. As well, the CTA En Banc held that
COFA was exempt from VAT for transactions with non-members, provided that the
goods subject of the transaction were produced by the members of the cooperative;
that the processed goods were sold in the name and for the account of the cooperative;
and, that at least 25% of the net income of the cooperatives was returned to the
members in the form of interest and/or patronage refunds.

The CIR's motion for reconsideration was denied by the CTA En Banc in its Resolution
dated May 27, 2014, thus, giving rise to the present petition.

The Issue

The issue to be resolved is whether or not COFA, at the time of the subject
transactions, i.e., from May 12, 2009 to July 22, 2009, is VAT-exempt and therefore
entitled to a tax refund for the advance VAT it paid.

The Ruling of the Court

We deny the petition.

COFA is a VAT-exempt agricultural cooperative. Exemption from the payment of VAT on

sales made by the agricultural cooperatives to members or to non-members necessarily
includes exemption from the payment of "advance VAT" upon the withdrawal of the
refined sugar from the sugar mill.

VAT is a tax on transactions, imposed at every stage of the distribution process on the
sale, barter, exchange of goods or property, and on the performance of services, even
in the absence of profit attributable thereto, so much so that even a non-stock, non-
profit organization or government entity, is liable to pay VAT on the sale of goods or
services.31 Section 105 of RA 8424, as amended, provides:
Section 105. Persons Liable. - Any person who, in the course of trade or business, sells,
barters, exchanges, leases goods or properties, renders services, and any person who
imports goods shall be subject to the value-added tax (VAT) imposed in Sections 106 to
108 of this Code.

The value-added tax is an indirect tax and the amount of tax may be shifted or passed
on to the buyer, transferee or lessee of the goods, properties or services. This rule shall
likewise apply to existing contracts of sale or lease of goods, properties or services at
the time of the effectivity of Republic Act No. 7716.

The phrase "in the course of trade or business" means the regular conduct or pursuit of
a commercial or an economic activity. including transactions incidental thereto, by any
person regardless of whether or not the person engaged therein is a non-stock, non-
profit private organization (irrespective of the disposition of its net income and whether
or not it sells exclusively to members or their guests), or government entity.

The rule of regularity, to the contrary notwithstanding, services as defined in this Code
rendered in the Philippines by nonresident foreign persons shall be considered as being
course of trade or business.
There are, however, certain transactions exempt from VAT32 such as the sale of
agricultural products in their original state, including those which underwent simple
processes of preparation or preservation for the market, such as raw cane sugar. Thus,
Section 7 of RA 9337 amending Section 109 of RA 8424 provides:
Section 7. Section 109 of the same Code, as amended, is hereby further amended to
read as follows:
"Section 109. Exempt Transactions. - (1) Subject to the provisions of Subsection (2)
hereof, the following transactions shall be exempt from the value-added tax:

"A) Sale or importation of agricultural and marine food products in their original state,
livestock and poultry of a kind generally used as, or yielding or producing foods for
human consumption; and breeding stock and genetic materials therefor.

"Products classified under this paragraph shall be considered in their original

state even if they have undergone the simple processes of preparation or
preservation for the market, such as freezing, drying, salting, broiling, roasting,
smoking or stripping. Polished and/or husked rice, corn grits, raw cane sugar and
molasses, ordinary salt, and copra shall be considered in their original state;
(Emphasis ours)

x x x x"
While the sale of raw sugar, by express provision of law, is exempt from VAT, the sale
of refined sugar, on the other hand, is not so exempted as refined sugar already
underwent several refining processes and as such, is no longer considered to be in its
original state. However, if the sale of the sugar, whether raw or refined, was made by
an agricultural cooperative to its members or non-members, such transaction is still
VAT-exempt. Section 7 of RA 9337 amending Section 109 (L) of RA 8424, the law
applicable at the time material to the claimed tax refund, further reads:
Section 7. Section 109 of the same Code, as amended, is hereby further amended to
read as follows:
"SEC. 109. Exempt Transactions. - (1) Subject to the provisions of Subsection (2)
hereof, the following transactions shall be exempt from the value-added tax:

xxxx

"(L) Sales by agricultural cooperatives duly registered with the Cooperative

Development Authority to their members as well as sale of their produce,
whether in its original state or processed form, to non-members; their
importation of direct farm inputs, machineries and equipment, including spare parts
thereof, to be used directly and exclusively in the production and/or processing of their
produce;" (Emphasis ours)
Relatedly, Article 61 of RA 6938, as amended by RA 9520, provides:
ART. 61. Tax and Other Exemptions. Cooperatives transacting business with both
members and non-members shall not be subjected to tax on their transaction with
members. In relation to this, the transactions of members with the cooperative shall
not be subject to any taxes and fees, including but not limited to final taxes on
members' deposits and documentary tax. Notwithstanding the provisions of any law or
regulation to the contrary, such cooperatives dealing with nonmembers shall enjoy the
following tax exemptions:
(1) Cooperatives with accumulated reserves and undivided net savings of not more
than Ten million pesos (P10,000,000.00) shall be exempt from all national, city,
provincial, municipal or barangay taxes of whatever name and nature. Such
cooperatives shall be exempt from customs duties, advance sales or compensating
taxes on their importation of machineries, equipment and spare parts used by them
and which are not available locally as certified by the Department of Trade and Industry
(DTI). All tax free importations shall not be sold nor the beneficial ownership thereof be
transferred to any person until after five (5) years, otherwise, the cooperative and the
transferee or assignee shall be solidarily liable to pay twice the amount of the imposed
tax and/or duties.

(2) Cooperatives with accumulated reserves and divided net savings of more than Ten
million pesos (P10,000,000.00) shall fee (sic) the following taxes at the full-rate:
(a) Income Tax - x x x;

(b) Value-Added Tax - On transactions with nonmembers: Provided, however,

That cooperatives duly registered with the Authority; are exempt from the
payment of value-added tax; subject to Section 109, subsections L, M and N of
Republic Act No. 9337, the National Internal Revenue Code, as amended:
Provided, That the exempt transaction under Section 109 (L) shall include
sales made by cooperatives duly registered with the Authority organized and
operated by its member to undertake the production and processing of raw
materials or of goods produced by its members into finished or process
products for sale by the cooperative to its members and non-
members: Provided, further, That any processed product or its derivative arising from
the raw materials produced by its members, sold in then (sic) name and for the account
of the cooperative: Provided, finally, That at least twenty-five per centum (25%) of the
net income of the cooperatives is returned to the members in the form of interest
and/or patronage refunds;

xxxx
Thus, by express provisions of the law under Section 109 (L) of RA 8424, as amended
by RA 9337, and Article 61 of RA 6938 as amended by RA 9520, the sale itself 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.

In the interim, or on September 19, 2008, the BIR issued RR No. 13-2008 consolidating
the regulations on the advance payment of VAT or "advance VAT" on the sale of refined
sugar.33 Generally, the advance VAT on the sale of the refined sugar is required to be
paid in advance by the owner/seller before the refined sugar is withdrawn from the
sugar refinery/mill. The "sugar owners" refer to those persons having legal title over
the refined sugar and may include, among others, the cooperatives.34

By way of exception, withdrawal of refined sugar is exempted from advance VAT upon
the concurrence of certain conditions which ultimately relate to a two-pronged
criteria: first, the character of the cooperative seeking the exemption; and second, the
kind of customers to whom the sale is made.

As to the character of the cooperative, Section 4 of RR No. 13-2008 in part, provides:

Sec. 4. Exemption from the Payment of the Advance VAT. - Notwithstanding the
provisions of the foregoing Section, the following withdrawals shall be exempt from the
payment of the advance VAT:
(a) Withdrawal of Refined Sugar by Duly Accredited and Registered Agricultural
Producer Cooperative of Good Standing. - In the event the refined sugar is owned and
withdrawn from the Sugar Refinery/Mill by an agricultural cooperative of good standing
duly accredited and registered with the Cooperative Development Authority (CDA),
which cooperative is the agricultural producer of the sugar cane that was refined into
refined sugar, the withdrawal is not subject to the payment of advance VAT. x x x
Thus, for an agricultural cooperative to be exempted from the payment of advance VAT
on refined sugar, it must be (a) a cooperative in good standing duly accredited and
registered with the CDA; and (b) the producer of the sugar. Section 4 of RR No. 13-
2008 defines when a cooperative is considered in good standing and when it is said to
be the producer of the sugar in this manner:
A cooperative shall be considered in good standing if it is a holder of a "Certificate of
Good Standing" issued by the CDA. x x x

A cooperative is said to be the producer of the sugar if it is 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.
As to the kind of customers to whom the sale is made, Section 4 of RR No. 13-2008
differentiates the treatment between the sale of a refined sugar to members and non-
members as follows:
Sale of sugar in its original form is always exempt from VAT regardless of who the seller
is pursuant to Sec. 109 (A) of the Tax Code. On the other hand, sale of sugar, in its
processed form, by a cooperative is exempt from VAT if the sale is made to members of
the cooperative. Whereas, if the sale of sugar in its processed form is made by the
cooperative to non-members, said sale is exempt from VAT only if the cooperative is an
agricultural producer of the sugar cane that has been converted into refined sugar as
herein defined and discussed.
Nevertheless, RR No. 13-2008 makes it clear that the withdrawal of refined sugar by
the agricultural cooperative for sale to its members is not subject to advance VAT, while
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. Thus, it appears that the
requirement as to the character of the cooperative being the producer of the sugar is
relevant only when the sale of the refined sugar is likewise made to non-members.

The foregoing requisites for the application of the VAT-exemption for sales by
agricultural cooperatives to apply were likewise identified by the Court in Commissioner
of Internal Revenue v. United Cadiz Sugar Farmers Association Multi-Purpose
Cooperative,35 thus:
First, the seller must be an agricultural cooperative duly registered with the CDA. An
agricultural cooperative is "duly registered" when it has been issued a certificate of
registration by the CDA. This certificate is conclusive evidence of its registration.

Second, the cooperative must sell either:

1) exclusively to its members; or

2) to both members and non-members, its produce, whether in its original state or
processed form.

The second requisite differentiates cooperatives according to its customers. If the

cooperative transacts only with members, all its sales are VAT-exempt, regardless of
what it sells. On the other hand, if it transacts with both members and non-members,
the product sold must be the cooperative's own produce in order to be VAT-exempt. x x
x36
Having laid down the requisites when an agricultural cooperative is considered exempt
from the payment of advance VAT for the withdrawal of the refined sugar from the
sugar refinery/mill, the next task is to measure whether, indeed, COFA met the
foregoing requirements.

We find no reason to disturb the CTA En Banc's finding that COFA is a cooperative in
good standing as indicated in the Certification of Good Standing previously issued and
subsequently renewed by the CDA. It was likewise established that COFA was duly
accredited and registered with the CDA as evidenced by the issuance of the CDA
Certificate of Registration. There is no showing that the CIR disputed the authenticity of
said documents or that said certifications had previously been revoked. Consequently,
such must be regarded as conclusive proof of COFA's good standing and due
registration with the CDA.37

Similarly, COFA is considered the producer of the sugar as found by the CTA Division
and affirmed by the CTA En Banc. That COFA is regarded as the producer of the sugar
is affirmed no other than the BIR itself when it issued its Ruling38 on the matter, the
pertinent portions of which are herein quoted:
xxxx

As a multi-purpose cooperative, COFA is an agricultural co-producer of the sugarcane

produced by all its cooperative members. Being a juridical person, it is legally
impossible for the cooperative to do the actual tillage of the land but the cooperative
and all its members altogether carry out the sugar farming activities during the
agricultural crop year. The cooperative members have consistently provided the sugar
farms/plantations and the tillage while COFA, in its capacity as co-producer, has
provided the following services to its members as its co-producers x x x.

xxxx

Moreover, being the exclusive marketing arm of the harvested sugarcane from the
various farms of its members, the cooperative does not: engage in the purchase of
sugarcane produced by non-members. As such, the sugarcane produced by the
cooperative members will be harvested, hauled, delivered and milled to the sugarmill in
the name of COFA. The sugarmill issues the quedan of the raw sugar in the name of
COFA pursuant to the membership agreement that the cooperative will be solely and
exclusively tasked to market the sugar, molasses and other derivative products.
Thereafter, COFA turns over to its members the net proceeds of the sale of the
sugarcane produce. When COFA further decides to process the produced raw sugar of
its members into refined sugar, the sugarmill issues refined sugar quedan in the name
of COFA.

xxxx

The farmer-members of COFA joined together to form the COFA with the objective of
producing and selling of sugar as its products. The members thereof made their
respective equitable contributions required to achieve their objectives. Consequently,
the proceeds of the sale thereof are intended to be shared among them in accordance
with cooperative principles.

x x x x39
The above BIR ruling operates as an equitable estoppel precluding the CIR from
unilaterally revoking its pronouncement and thereby depriving the cooperative of the
tax exemption provided by law.40

Having established that COFA is a cooperative in good standing and duly registered with
the CDA and)s the-producer of the sugar, its sale then of refined sugar whether sold to
members or non-members, following the express provisions of Section 109(L) of RA
8424, as amended, is exempt from VAT. As a logical and necessary consequence then
of its established VAT exemption, COFA is likewise exempted from the payment of
advance VAT required under RR No. 13-2008.

The CIR, however, breeds confusion when it argues that the VAT exemption given to
cooperatives under the laws pertain only to the sale of the sugar but not to the
withdrawal of the sugar from the refinery. The CIR is grossly mistaken. To recall, VAT is
a transaction tax - it is imposed on sales, barters, exchanges of goods or property, and
on the performance of services. The withdrawal from the sugar refinery by the
cooperative is not the incident which gives rise to the imposition of VAT, but the
subsequent sale of the sugar. If at all, the withdrawal of the refined sugar gives rise to
the obligation to pay the VAT on the would-be sale. In other words, 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." It is therefore erroneous to treat the withdrawal of
the refined sugar as a tax incident different from or in addition to the sale itself.

Finally, as regards the CIR's contention that COFA failed to submit complete
documentary requirements fatal to its claim for tax refund, suffice it to say, that COFA
was a previous recipient and holder of certificates of tax exemption issued by the BIR,
and following the Court's pronouncement in United Cadiz Sugar Farmers Association
Multi-Purpose Cooperative, the issuance of the certificate of tax exemption presupposes
that the cooperative submitted to the BIR the complete documentary requirements. In
the same manner, COFA's entitlement to tax exemption cannot be made dependent
upon the submission of the monthly VAT declarations and quarterly VAT returns, as the
CIR suggests. Here, it was established that COFA satisfied the requirements under
Section 109(L) of RA 8424, as amended, to enjoy the exemption from VAT on its sale of
refined sugar; its exemption from the payment of advance VAT for the withdrawal it
made from May 12, 2009 to July 22, 2009 follows, as a matter of course.

WHEREFORE, the petition is DENIED. The Decision dated March 5, 2014 and the
Resolution dated May 27, 2014 of the Court of Tax Appeals En Banc in CTA EB Case No.
992, declaring respondent Negros Consolidated Farmers Multi-Purpose Cooperative
exempt from Value-added tax (VAT) and hence, entitled to refund of the VAT it paid in
advance in the amount of SEVEN MILLION TWO HUNDRED NINETY THOUSAND NINE
HUNDRED SIXTY PESOS (P7,290,960.00) for the withdrawal of the refined sugar it
made from May 12, 2009 to July 22, 2009 are AFFIRMED.

SO ORDERED.

Bersamin, C. J., (Chairperson), Del Castillo, Gesmundo, and Carandang,*JJ., concur.

SECOND DIVISION

G.R. No. 230412, March 27, 2019

COMMISSIONER OF INTERNAL REVENUE, PETITIONER, v. TEAM ENERGY

CORPORATION (FORMERLY MIRANT PAGBILAO CORPORATION), RESPONDENT.

DECISION

J. REYES, JR., J.:

The Facts and the Case

Before this Court is a petition for review on certiorari1 seeking to reverse and set aside
the August 31, 2016 Decision2 and the January 30, 2017 Resolution3 of the Court of Tax
Appeals (CTA) En Banc in CTA EB No. 1364 which affirmed the May 29, 2015 and
September 9, 2015 Resolutions of the CTA Special First Division which reinstated the
July 13, 2010 Decision of the CTA First Division in CTA Case No. 7617.

The facts, as found by the CTA En Banc are as follows: cralawred

x x x Respondent is principally engaged in the business of power generation and the

subsequent sale thereof to the National Power Corporation (NPC) under a Build,
Operate, Transfer Scheme.

Respondent is also registered with the BIR as a VAT taxpayer in accordance with
Section 107 of the National Internal Revenue Code of 1977 [now Section 236 of the
National Internal Revenue Code of 1997 (NIRC of 1997)] with Tax Identification No.
001-726-870 as shown on its BIR Certificate of Registration bearing RDO Control No.
96-600-002498.

xxxx

On December 17, 2004, respondent filed with the BIR Audit Information, Tax
Exemption and Incentives Division an Application for Effective Zero-Rate for the supply
of electricity to the NPC for the period January 1, 2005 to December 31, 2005, which
was subsequently approved.

Respondent filed with the BIR its Quarterly VAT Returns for the first three quarters of
2005 on April 25, 2005, July 26, 2005, and October 25, 2005, respectively. Respondent
also filed its Monthly VAT Declaration for the month of October 2005 on November 21,
2005, which was subsequently amended on May 24, 2006. These VAT Returns
reflected, among others, the following entries: cralawred

Exhibit Period Zero-Rated Taxable Sales Output VAT Input VAT

Covered Sales/Receipts

"C" 1st Qtr-2005 P3,044,160,148.16 P1,397,107.80 P139,710.78 P16,803,760.82

"D" 2nd Qtr-2005 3,038,281,557.57 1,241,576.30 124,157.63 32,097,482.29

"E" 3rd Qtr-2005 3,125,371,667.08 452,411.64 45,241.16 16,937,644.73

"G" October 910,949.50 91,094.95 14,297,363.76

(amended) 2005

Total P9,207,813,372.81 P4,002,045.24 P400,204.52 P80,136,251.60

On December 20, 2006, petitioner filed an administrative claim for cash refund or
issuance of tax credit certificate corresponding to the input VAT reported in its
Quarterly VAT Returns for the first three quarters of 2005 and Monthly VAT Declaration
for October 2005 in the amount of [P]80,136,251.60.

Due to petitioner's inaction on its claim, respondent filed a Petition for Review before
the Court in Division on April 18, 2007, docketed as CTA Case No. 7617.

In her Answer filed on May 25, 2007, petitioner interposed the following Special and
Affirmative Defenses: cralawred

(1) The alleged claim for refund is subject to administrative investigation/examination;

(2) Taxes remitted to the BIR are presumed to have been made in the regular course of business
and in accordance with the provision of law;

(3) Respondent failed to prove compliance with: (a) the registration requirements of a value-
added taxpayer; (b) the invoicing and accounting requirements for VAT-registered persons;
(c) the filing and payment of VAT in compliance with the provisions of Sections 113 and
114 of the Tax Code of 1997, as amended; (d) the submission of complete documents in
 support of the administrative claim pursuant to Section 112 (D). Respondent likewise failed
to prove that the input taxes paid were attributable to zero-rated sales, used in the course of
its trade or business, and have not been applied against any output tax and that the claim for
tax credit or refund of the unutilized input tax (VAT) was filed within two (2) years after
the close of the taxable quarter when the sales were made in accordance with Section 112
(A) of the Tax Code of 1997, as amended; (e) the governing rules and regulations with
reference to recovery of tax erroneously or illegally collected as explicitly found in Sections
112 (A) and 229 of the Tax Code, as amended.

(4) The burden of proof is on the taxpayer to establish its right to refund and failure to sustain
the burden is fatal to the claim for refund/credit; and,

(5) Claims for refund are construed strictly against the claimant for the same partake the nature
of exemption from taxation.

During trial, respondent presented documentary and testimonial evidence. The exhibits
enumerated in respondent's Formal Offer of Evidence were admitted in the Resolution
dated January 29, 2009. Petitioner, on the other hand, waived her right to present
evidence.

The case was submitted for Decision on July 13, 2009.

On July 13, 2010, the Court in Division issued a Decision partially granting respondent's
Petition, the dispositive portion of which reads: cralawred

WHEREFORE, the instant Petition for Review is hereby PARTIALLY GRANTED.

Accordingly, respondent is hereby ORDERED TO REFUND or in the alternative, ISSUE
A TAX CREDIT CERTIFICATE in the amount of SEVENTY-NINE MILLION ONE
HUNDRED EIGHTY-FIVE THOUSAND SIX HUNDRED SEVENTEEN AND 33/100
PESOS (P79,185,617.33) in favor of petitioner, representing petitioner's unutilized
input VAT, attributable to its effectively zero-rated sales of power generation services to
NPC for the period covering January 1, 2005 to October 31, 2005.

SO ORDERED.

On August 5, 2010, petitioner filed a "Motion for Reconsideration (Re: Decision

promulgated 13 July 2010)."

On November 26, 2010, the Court in Division issued an Amended Decision which
granted petitioner's Motion for Reconsideration, reversed and set aside the Decision
dated July 13, 2010, and dismissed the Petition for Review for having been filed
prematurely.
On December 17, 2010, respondent filed a "Petition for Review" before the Court En
Banc docketed as CTA En Banc Case No. 706.

In a Resolution dated May 2, 2011, the Court En Banc denied due course to
respondent's Petition for Review for lack of merit. Respondent filed a "Motion for
Reconsideration" on May 24, 2011 [,] assailing the 2 May 2011 Resolution, but the
same was denied in the Court En Banc's Resolution dated July 15, 2011 [,] for lack of
merit.

On September 8, 2011, respondent filed a "Motion to Admit Attached Petition for

Review on [Certiorari]" before the Supreme Court. The Supreme Court Third Division
issued a Resolution on November 28, 2011 granting respondent's Motion.

On January 13, 2014, the Supreme Court issued a Decision granting respondent's
Petition for Review on Certiorari, reversing and setting aside the May 2, 2011 and July
15, 2011 Resolutions issued by the Court En Banc in CTA EB No. 706, and remanding
the case to this Court for the proper determination of the refundable amount. The Court
in Division received the Notice of Judgment and Decision from the Supreme Court on
February 26, 2014. The dispositive portion of the Supreme Court's Decision reads: cralawred

WHEREFORE, the foregoing considered, the instant Petition for Review on [Certiorari] is
hereby GRANTED. The May 2, 2011 and the July 15, 2011 Resolutions of the Court of
Tax Appeals [En Banc] in CTA EB Case No. 706 are REVERSED and SET ASIDE. Let this
case be remanded to the Court of Tax Appeals for the proper determination of the
refundable amount.

SO ORDERED.

The said Supreme Court Decision became final and executory on March 10, 2014[,] and
was recorded in the Book of Entries of Judgments by the Deputy Clerk of Court & Chief,
Judicial Records Office of the Supreme Court. The Court received the Entry of
Judgement on July 15, 2014.

On January 9, 2015, respondent filed a "Manifestation with Motion for Reinstatement of

the 13 July 2010 Decision of the Court of Tax Appeals."

On May 29, 2015, the Court in Division issued a Resolution granting respondent's
Motion for Reinstatement and reinstated the July 13, 2010 Decision of the Court in
Division. Petitioner posted a "Motion for Reconsideration (re: Resolution dated 29 May
2015)" on June 23, 2015.

On September 9, 2015, the Court in Division denied petitioner's Motion for

Reconsideration.

On October 16, 2015, which is within the extended period, petitioner Commissioner of
Internal Revenue [CIR] filed the present Petition for Review before the Court En Banc.
Respondent filed its "Comment/Opposition (To: Petitioner's Petition for Review dated 16
October 2015)" on February 19, 2016.4
chanRoble svirtual Law1ib ra ry
On August 31, 2016, the CTA En Banc rendered a Decision, the dispositive portion of
which reads: cralawred

WHEREFORE, in light of the foregoing, petitioner Commissioner of Internal

Revenue's Petition for Review is DENIED. The assailed Resolutions dated May 29, 2015
and September 9, 2015 reinstating the July 13, 2010 Decision of the Court Special First
Division in CTA Case No. 7617 are AFFIRMED.

SO ORDERED.5
chanRoble svirtual Law1ib ra ry

It held that the failure of the respondent to present its Certificate of Compliance (COC)
is not fatal to its claim for refund of unutilized input VAT attributable to its zero-rated
sales of electricity to NPC for the period covering January 1, 2005 to October 31, 2005
because its claim for refund is not based on Republic Act (R.A.) No. 9136 or the Electric
Power Industry Reform Act (EPIRA) but on Section 108(B)(3) of the 1997 NIRC, as
amended (Tax Code). According to the CTA En Banc, Section 108(B)(3) of the Tax Code
allows zero-rating of services rendered to persons or entities whose exemption under
special law effectively subjects the supply of such services to zero-rate. It is undisputed
that the respondent is principally engaged in the business of power generation and
subsequent sale thereof, to NPC under a Build, Operate, Transfer Scheme, and that it
actually generated receipts from power generation services rendered to NPC. Thus,
such sale of power generation services to NPC qualifies for zero-rating under Section
108(B)(3) of the Tax Code since NPC is an entity enjoying exemption from payment of
all taxes pursuant to Section 13 of R.A. No. 6395,6 as amended by Section 10 of
Presidential Decree No. 9387 (Section 13 of the NPC Chapter). Since NPC is exempt
from the payment of all taxes including VAT, respondent should be allowed to claim a
refund or credit of its unutilized input VAT attributable to its zero-rated sales of
electricity to NPC for the period covering January 1, 2005 to October 31, 2005 pursuant
to Section 108 (B)(3) of the Tax Code, despite the absence of a COC.

The Court, also found to be bereft of merit, the claim of the petitioner that the
respondent filed its judicial claim prematurely as it did not exhaust administrative
remedies when it failed to submit complete supporting documents for its administrative
claim. It held that the set of documents enumerated in Revenue Memorandum Order
No. 53-98 (RMO 53-98) is not a requirement for a grant of refund of input tax as it is
merely a checklist of documents to be submitted by a taxpayer in relation to an audit of
tax liabilities. Moreover, the petitioner had the obligation to inform the taxpayer that
the documents submitted were incomplete, and to require it to submit additional
documents. Since the petitioner did not send any written notice to the respondent
requiring it to submit additional documents, petitioner can no longer validly argue that
the judicial claim was premature on account of alleged non-submission of complete
documents in the administrative level.

Petitioner moved for reconsideration, but the same was denied in a Resolution dated
January 30, 2017.

Issue Presented
Hence, the present petition on the ground that the CTA En Banc erred in reinstating the
Decision of the CTA dated July 13, 2010, which ordered the petitioner to refund or, in
the alternative, issue a tax credit certificate in the amount of P79,185,617.33 in favor
of the respondent.

Arguments of the Parties

Petitioner did not agree with the CTA that respondent need not secure a COC before it
may be entitled to a refund on the ground that its claim for a refund is anchored on
Section 108(B)(3) of the Tax Code and not under the EPIRA. He argued that before VAT
registered persons may be considered to be subject to zero percent (0%) rate of VAT
on its sale of services under Section 108(B)(3), it is imperative that it be authorized
and qualified under the law to render such services. Thus, a generation company
supplying services to the NPC must prove that it has complied with all the relevant
regulatory requirements under the law, including the EPIRA. It is clear from Section 4
of the EPIRA as well as Sections 1 and 4 (a) of Rule 5 of its Implementing Rules and
Regulations, that before an entity may engage in the business of generation of
electricity, the ERC must authorize it to carry out such operations and issue in its favor
a COC. Otherwise, it cannot be considered as a generation company as contemplated
under the law. Since respondent miserably failed to prove its authority to operate as a
generation company, as defined by the EPIRA, by presenting its COC from the ERC, it
has no vested right or legal basis to claim for a refund of excess and/or unutilized input
VAT attributable to its zero-rated sales of power generation services under Section
108(B)(3) of the Tax Code.8

Petitioner also stood pat on its claim that the judicial claim for refund that was filed by
the respondent was filed prematurely for its failure to exhaust administrative remedies.
He explained that as part of every taxpayer's duty to exhaust administrative remedies,
the law requires the submission of complete documents in support of the application
filed with the Bureau of Internal Revenue (BIR) before the 120-day audit period shall
apply, and before the taxpayer can avail of judicial remedies provided by law. Given
that the respondent failed to substantiate its administrative claim with documents that
would prove its entitlement to tax refund, or credit, its judicial claim for refund must,
perforce, be denied.9

Respondent, on the other hand, reiterated that its claim for refund of unutilized input
VAT attributable to its zero-rated sales of electricity to NPC is based on Section
108(B)(3) of the Tax Code in relation to Section 13 of the NPC Charter, and not the
EPIRA. Given NPC's exemption from all direct and indirect taxes as provided in its
Charter and applying Section 108(B)(3) of the Tax Code, the only conclusion that can
be drawn is that respondent's sale of power generation services to NPC are subject to
VAT zero-rating. Respondent also contended that there is nothing in Section 112(A), in
relation to Section 108(B)(3) of the Tax Code and Section 13 of the NPC Charter which
requires the respondent to qualify as a "generation company" under the EPIRA before
its sale of services to NPC may be subject to VAT zero-rating. The Tax Code provision
on VAT zero-rating only provides that for an entity to be subject to VAT zero-rated
treatment, its services must be rendered to entities which are tax exempt under special
laws or international agreements to which the Philippines is a signatory. Simply put, the
basis for the VAT zero-rated treatment of the supplier, respondent in this case, is the
tax exemption of NPC, the purchaser of services, and not the qualification of the
supplier itself.10

Furthermore, the respondent averred that contrary to the claim of the petitioner, it
submitted the complete supporting documents to the BIR to support its administrative
claim on December 20, 2006. Had there been documents it did not submit, petitioner
failed to specifically point out what document was not submitted. Petitioner's failure to
inform the respondent of the need to submit additional documents, bars the former
from validly arguing that the judicial claim was premature on account of the alleged
non-submission of complete documents. Moreover, in a judicial claim due to the
inaction of the petitioner, the CTA may consider all evidence presented including those
that may not have been submitted, to the petitioner.11

Ruling of the Court

Respondent's failure to submit a Certificate of Compliance issued by the Energy Regulatory

Commission does not disqualify it from claiming a tax refund or tax credit

Petitioner's argument against the grant of tax refund or tax credit in favor of the
respondent is mainly hinged on respondent's lack of COC from the ERC. Petitioner
insisted that without a COC, respondent may not be considered a generation company
under the EPIRA, and therefore, its sales of generated power to the NPC may not be
subject to zero percent VAT rate and enjoy the benefits under Section 108(B)(3) of the
Tax Code as would entitle it to claim a tax refund or tax credit of its unutilized input
VAT attributable to its sale of electricity to NPC. According to the petitioner, its
assertion that COC is indispensable to a claim for refund finds support in the case
decided by the CTA entitled, Toledo Power Company v. Commissioner of Internal
Revenue.12

Petitioner's contention lacks merit.

Petitioner was less than truthful when he lifted only portions of the CTA Decision
in Toledo13 that were favorable to him. In the said case, while it may be true that the
CTA ruled that the failure of Toledo to submit its approved COC from the ERC cannot
qualify its sales of generated power for VAT zero-rating under the EPIRA, the same
decision likewise granted Toledo's claim for refund of unutilized input VAT attributable
to its sales of electricity to NPC under Section 108(B)(3) of the Tax Code. In short, the
decision differentiated the requirements for a claim for refund under the EPIRA, and a
claim for refund based on Section 108(B)(3) of the Tax Code. In Commissioner of
Internal Revenue v. Toledo Power Company14 which affirmed the said CTA decision, this
Court essentially held that the requirements of the EPIRA must be complied with only if
the claim for refund is based on EPIRA. The pertinent portion of the decision reads: cralawred

Now, as to the validity of TPC's claim, there is no question that TPC is entitled to a
refund or credit of its unutilized input VAT attributable to its zero-rated sales of
electricity to NPC for the taxable year 2002 pursuant to Section 108 (B) (3) of the
NIRC, as amended, in relation to Section 13 of the Revised Charter of the NPC, as
amended. Hence, the only issue to be resolved is whether TPC is entitled to a refund of
its unutilized input VAT attributable to its sales of electricity to CEBECO, ACMDC, and
AFC.

xxxx

Section 6 of the EPIRA provides that the sale of generated power by generation
companies shall be zero-rated. Section 4 (x) of the same law states that a generation
company "refers to any person or entity authorized by the ERC to operate facilities used
in the generation of electricity." Corollarily, to be entitled to a refund or credit of
unutilized input VAT attributable to the sale of electricity under the EPIRA, a taxpayer
must establish: (1) that it is a generation company, and (2) that it derived sales from
power generation.

xxxx

In this case, when the EPIRA took effect in 2001, TPC was an existing generation
facility. And at the time the sales of electricity to CEBECO, ACMDC, and AFC were made
in 2002, TPC was not yet a generation company under EPIRA. Although it filed an
application for a COC on June 20, 2002, it did not automatically become a generation
company. It was only on June 23, 2005, when the ERC issued a COC in favor of TPC,
that it became a generation company under EPIRA. Consequently, TPC's sales of
electricity to CEBECO, ACMDC, and AFC cannot qualify for VAT zero-rating under the
EPIRA.15 (Citations omitted)

In the recent case of Team Energy Corporation v. Commissioner of Internal

Revenue,16 the Court likewise rejected the contention of the CIR that Team Energy is
not entitled to tax refund or tax credit because it cannot qualify for VAT zero-rating for
its failure to submit its ERC Registration and COC required under the EPIRA. In this
case, the Court ruled: cralawred

Here, considering that Team Energy's refund claim is premised on Section 108(B)(3) of
the 1997 NIRC, in relation to NPC's charter, the requirements under the EPIRA are
inapplicable. To qualify its electricity sale to NPC as zero-rated, Team Energy needs
only to show that it is a VAT-registered entity and that it has complied with the
invoicing requirements under Section 108(B)(3) of the 1997 NIRC, in conjunction with
Section 4,.108-1 of Revenue Regulations No. 7-95.17
chanRoble svirtual Law1ib ra ry

Given that respondent in this case likewise anchors its claim for tax refund or tax credit
under Section 108(B)(3) of the Tax Code, it cannot be required to comply with the
requirements under the EPIRA before its sale of generated power to NPC should qualify
for VAT zero-rating. Section 108(B)(3) of the Tax Code in relation to Section 13 of the
NPC Charter, clearly provide that sale of electricity to NPC is effectively zero-rated for
VAT purposes. The said provisions read: cralawred

Section 108(B)(3) of the Tax Code

Sec. 108. Value-added Tax on Sale of Services and Use or Lease of Properties. -
xxxx

(B) Transactions Subject to Zero Percent (0%) Rate. - The following services performed
in the Philippines by VAT-registered persons shall be subject to zero percent (0%)
rate:cralawred

xxxx

(3) Services rendered to persons or entities whose exemption under special

laws or international agreements to which the Philippines is a signatory effectively
subjects the supply of such services to zero percent (0%) rate. (Emphasis
supplied)

Section 13 of the NPC Charter, as amended by Section 10 of P.D. No. 938 —

Sec. 13. Non-profit Character of the Corporation; Exemption from All Taxes, Duties,
Fees, Imposts and Other Charges by the Government and Government
Instrumentalities. - The Government shall be non-profit and shall devote all its return
from its capital investment, as well as excess revenues from its operation, for
expansion. To enable the Corporation to pay its indebtedness and obligations and in
furtherance and effective implementation of the policy enunciated in Section One of this
Act, the Corporation, including its subsidiaries, is hereby declared exempt from
the payment of all forms of taxes, duties, fees, imposts as well as costs and
service fees including filing fees, appeal bonds, supersedeas bonds, in any
court or administrative proceedings. (Emphasis supplied)

As correctly argued by the respondent, the basis for the VAT zero-rated treatment of
the supplier is the tax exemption of the purchaser of services, and not the qualification
of the supplier itself, in order to relieve the tax-exempt purchaser from tax burden
considering that it may not be able to offset or utilize any input tax passed on by its
supplier of services, had the services it purchased been subject to VAT of 12%.18

It bears emphasis that effective zero-rating is not intended as benefit to the person
legally liable to .pay the tax, such as the [respondent,] but to relieve certain exempt
entities, such as the NPC, from the burden of indirect tax so as to encourage the
development of particular industries. Before, as well as after, the adoption of the VAT,
certain special laws were enacted for the benefit of various entities and international
agreements were entered into by the Philippines with foreign governments and
institutions exempting sale of goods or supply of services from indirect taxes at the
level of their suppliers. Effective zero-rating was intended to relieve the exempt entity
from being burdened with the indirect tax which is or which will be shifted to it had
there been no exemption. In this case, respondent is being exempted from paying VAT
on its purchases to relieve NPC of the burden of additional costs that respondent may
shift to NPC by adding to the cost of the electricity sold to the latter.19

The judicial claim was not prematurely filed

Petitioner's argument that respondent's judicial claim for refund was prematurely filed
for its failure to exhaust administrative remedies when it failed to submit complete
supporting documents for its administrative claim, deserves scant consideration.

The authority of the CIR to require additional supporting documents necessary to

determine the taxpayer's entitlement to a refund of input tax, and the consequences of
the CIR's failure to inform the taxpayer of the need to submit additional documents for
claims for tax refund, or credit filed prior to June 11, 2014, such as this case, had been
settled in Pilipinas Total Gas, Inc. v. Commissioner of Internal Revenue20 in this wise:cralawred

To summarize, for the just disposition of the subject controversy, the rule is that from
the date an administrative claim for excess unutilized VAT is filed, a taxpayer has thirty
(30) days within which to submit the documentary requirements sufficient to support
his claim, unless given further extension by the CIR. Then, upon filing by the taxpayer
of his complete documents to support his application, or expiration of the period given,
the CIR has 120 days within which to decide the claim for tax credit or refund. Should
the taxpayer, on the date of his filing, manifest that he no longer wishes to submit any
other addition documents to complete his administrative claim, the 120[-]day period
allowed to the CIR begins to run from the date of filing.21

The alleged failure of Total Gas to submit the complete documents at the administrative
level did not render its petition for review with the CTA dismissible for lack of
jurisdiction. First, the 120-day period had commenced to run and the 120+30[-]day
period was, in fact, complied with. As already discussed, it is the taxpayer who
determines when complete documents have been submitted for the purpose of the
running of the 120-day period. It must again be pointed out that this in no way
precludes the CIR from requiring additional documents necessary to decide the claim,
or even denying the claim if the taxpayer fails to submit the additional documents
requested.

Second, the CIR sent no written notice informing Total Gas that the documents were
incomplete or required it to submit additional documents. As stated above, such notice
by way of a written request is required by the CIR to be sent to Total Gas. Neither was
there any decision made denying the administrative claim of Total Gas on the ground
that it had failed to submit all the required documents. It was precisely the inaction of
the BIR which prompted Total Gas to file the judicial claim. Thus, by failing to inform
Total Gas of the need to submit any additional document, the BIR cannot now argue
that the judicial claim should be dismissed because it failed to submit complete
documents.22
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Thus, as correctly found by the CTA En Banc: cralawred

Upon perusal of the records, there is no showing that the CIR sent a written notice
requiring respondent to submit additional documents — a process that is indispensable
in computing the 120+30[-] day period. Thus, petitioner could no longer validly argue
that the judicial claim was premature on account of alleged non-submission of complete
documents as it is petitioner himself who fails to inform respondent about the need to
submit additional documents in the administrative level.23
chanRoble svirtual Law1ib ra ry

In fine, respondent is entitled to a refund or credit of its unutilized input VAT

attributable to its effectively zero-rated sales of electricity to NPC for the period
covering January 1, 2005 to October 31, 2005, pursuant to Section 108(B)(3) of the
Tax Code, in relation to Section 13 of the NPC Charter.

WHEREFORE, premises considered, the petition is DENIED. The August 31, 2016
Decision and January 30, 2017 Resolution of the Court of Tax Appeals En Banc in CTA
EB No. 1364 are AFFIRMED.

SO ORDERED.