TAX CASE DIGESTS (Batch 5) - VAT
ISSUE: Is the increase of VAT rate based on
ABAKADA GURO PARTY LIST vs.
HONORABLE EXECUTIVE SECRETARY
EDUARDO ERMITA
G.R. No. 168056; September 1, 2005
SUAMEN
Facts: RA 9337, an act amending certain
sections of the National Internal Revenue
Code of 1997, is questioned for being
unconstitutional. Aside from questioning the
so-called stand-by authority of the President
to increase the VAT rate to 12%, petitioners
also contend that the increase in the VAT
rate to 12% contingent on any of the two
conditions being satisfied violates the due
process clause embodied in Article III,
Section 1 of the Constitution, as it imposes
an unfair and additional tax burden on the
people, in that: (1) the 12% increase is
ambiguous because it does not state if the
rate would be returned to the original 10% if
the conditions are no longer satisfied; (2) the
rate is unfair and unreasonable, as the
people are unsure of the applicable VAT rate
from year to year; and (3) the increase in the
VAT rate, which is supposed to be an
incentive to the President to raise the VAT
collection to at least 2 4/5 of the GDP of the
previous year, should only be based on fiscal
adequacy. They also contend that the
limitation on the creditable input tax is
anything but regressive.
ISSUE: May the VAT rate be returned to 10%
if conditions under RA 9337 are not met?
HELD: No. Under the common provisos of
Sections 4, 5 and 6 of R.A. No. 9337, if any of
the two conditions are satisfied, the
President shall increase the VAT rate to 12%.
The provisions of the law are clear. It does
not provide for a return to the 10% rate nor
does it empower the President to so revert if,
after the rate is increased to 12%, the VAT
collection goes below the 2 4/5 of the GDP of
the previous year or that the national
government deficit as a percentage of GDP
of the previous year does not exceed 1%.
There is no basis for petitioners fear of a
fluctuating VAT rate because the law itself
does not provide that the rate should go
back to 10% if the conditions provided in
Sections 4, 5 and 6 are no longer present.
grounds?
HELD: Yes. Petitioners obviously overlooked
that increase in VAT collection is not the only
condition. There is another condition, i.e., the
national government deficit as a percentage
of GDP of the previous year exceeds one and
one-half percent.
That the first condition amounts to an
incentive to the President to increase the VAT
collection does not render it unconstitutional
so long as there is a public purpose for which
the law was passed, which in this case, is
mainly to raise revenue. In fact, fiscal
adequacy dictated the need for a raise in
revenue. It simply means that sources of
revenues must be adequate to meet
government expenditures and their
variations.The dire need for revenue cannot
be ignored. Our country is in a quagmire of
financial woe.
ISSUE: Does RA9337 violate the
constitutional mandate for Congress to
evolve a progressive system of taxation?
HELD: Not really. The VAT is an antithesis of
progressive taxation. By its very nature, it is
regressive. The principle of progressive
taxation has no relation with the VAT system
inasmuch as the VAT paid by the consumer
or business for every goods bought or
services enjoyed is the same regardless of
income. The VAT paid eats the same portion
of an income, whether big or small.
Nevertheless, the Constitution does not
really prohibit the imposition of indirect
taxes, like the VAT. What it simply provides is
that Congress shall "evolve a progressive
system of taxation." The Court stated in the
Tolentino case, thus: The constitutional
provision has been interpreted to mean
simply that direct taxes are . . . to be
preferred [and] as much as possible, indirect
taxes should be minimized but not avoided
entirely. In the case of the VAT, the law
minimizes the regressive effects of this
imposition by providing for zero rating of
certain transactions (R.A. No. 7716, 3,
amending 102 (b) of the NIRC), while
granting exemptions to other transactions.
(R.A. No. 7716, 4 amending 103 of the NIRC).

- ditto-(ABAKADA vs. Ermita) 18 Oct 05
GALLO
Facts: These are Motions for
Reconsideration of the Courts Decision dated
September 1, 2005 upholding the
constitutionality of Republic Act No. 9337 or
the VAT Reform Act. Respondents filed their
Consolidated Comment.
Contention 1: Petitioners Escudero, et al.,
insist that the bicameral conference
committee should not even have acted on
the no pass-on provisions since there is no
disagreement between House Bill Nos. 3705
and 3555 on the one hand, and Senate Bill
No. 1950 on the other, with regard to the no
pass-on provision for the sale of service for
power generation because both the Senate
and the House were in agreement that the
VAT burden for the sale of such service shall
not be passed on to the end-consumer. As to
the no pass-on provision for sale of
petroleum products, petitioners argue that
the fact that the presence of such a no pass-
on provision in the House version and the
absence thereof in the Senate Bill means
there is no conflict because a House
provision cannot be in conflict with
something that does not exist.
Ruling: Such argument is flawed. Note that
the rules of both houses of Congress provide
that a conference committee shall settle the
differences in the respective bills of each
house. Verily, the fact that a no pass-
on provision is present in one version but
absent in the other, and one version intends
two industries, i.e., power generation
companies and petroleum sellers, to bear the
burden of the tax, while the other version
intended only the industry of power
generation, transmission and distribution to
be saddled with such burden, clearly shows
that there are indeed differences between
the bills coming from each house, which
differences should be acted upon by the
bicameral conference committee. It is
incorrect to conclude that there is no clash
between two opposing forces with regard to
the no pass-on provision for VAT on the sale
of petroleum products merely because such
provision exists in the House version while it
is absent in the Senate version. It is precisely
the absence of such provision in the Senate
bill and the presence thereof in the House
bills that causes the conflict. The absence of
the provision in the Senate bill shows the
Senates disagreement to the intention of the
House of Representatives make the sellers of
petroleum bear the burden of the VAT. Thus,
there are indeed two opposing forces: on one
side, the House of Representatives which
wants petroleum dealers to be saddled with
the burden of paying VAT and on the other,
the Senate which does not see it proper to
make that particular industry bear said
burden. Clearly, such conflicts and
differences between the no pass-
on provisions in the Senate and House bills
had to be acted upon by the bicameral
conference committee as mandated by the
rules of both houses of Congress.
Moreover, the deletion of the no pass-
on provision made the present VAT law more
in consonance with the very nature of VAT
which, as stated in the Decision promulgated
on September 1, 2005, is a tax on spending
or consumption, thus, the burden thereof is
ultimately borne by the end-consumer.
Escudero, et al., then claim that there had
been changes introduced in the Rules of the
House of Representatives regarding the
conduct of the House panel in a bicameral
conference committee, since the time
of Tolentino vs. Secretary of Finance[2] to act
as safeguards against possible abuse of
authority by the House members of the
bicameral conference committee. Even
assuming that the rule requiring the House
panel to report back to the House if there are
substantial differences in the House and
Senate bills had indeed been introduced
after Tolentino, the Court stands by its ruling
that the issue of whether or not the House
panel in the bicameral conference committee
complied with said internal rule cannot be
inquired into by the Court. To reiterate, mere
failure to conform to parliamentary usage
will not invalidate the action (taken by a
deliberative body) when the requisite
number of members have agreed to a
particular measure.
Contention 2: Escudero, et. al., also
contend that Republic Act No. 9337 grossly
violates the constitutional imperative on
exclusive origination of revenue bills under
Section 24 of Article VI of the Constitution
when the Senate introduced amendments
not connected with VAT
Ruling: The Court is not persuaded.
Article VI, Section 24 of the Constitution
provides:
Sec. 24 All appropriation, revenue or tariff
bills, bills authorizing increase of the public
debt, bills of local application, and private
bills shall originate exclusively in the House
of Representatives, but the Senate may
propose or concur with amendments.
Section 24 speaks of origination of certain
bills from the House of Representatives
which has been interpreted in the Tolentino
case as follows:
To begin with, it is not the law but the
revenue bill which is required by the
Constitution to "originate exclusively" in the
House of Representatives. It is important to
emphasize this, because a bill originating in
the House may undergo such extensive
changes in the Senate that the result may be
a rewriting of the whole At this point, what is
important to note is that, as a result of the
Senate action, a distinct bill may be
produced. To insist that a revenue statute
and not only the bill which initiated the
legislative process culminating in the
enactment of the law must substantially be
the same as the House bill would be to deny
the Senate's power not only to "concur with
amendments" but also to " propose
amendments." It would be to violate the
coequality of legislative power of the two
houses of Congress and in fact make the
House superior to the Senate.
Given, then, the power of the Senate to
propose amendments, the Senate can
propose its own version even with respect to
bills which are required by the Constitution to
originate in the House.
...
Indeed, what the Constitution simply means
is that the initiative for filing revenue, tariff,
or tax bills, bills authorizing an increase of
the public debt, private bills and bills of local
application must come from the House of
Representatives on the theory that, elected
as they are from the districts, the members
of the House can be expected to be more
sensitive to the local needs and problems.
On the other hand, the senators, who are
elected at large, are expected to approach
the same problems from the national
perspective. Both views are thereby made to
bear on the enactment of such laws.
Clearly, after the House bills as approved on
third reading are duly transmitted to the
Senate, the Constitution states that the latter
can propose or concur with amendments.
The Court finds that the subject provisions
found in the Senate bill are within the
purview of such constitutional provision as
declared in the Tolentino case.
The intent of the House of Representatives in
initiating House Bill Nos. 3555 and 3705 was
to solve the countrys serious financial
problems. It was stated in the respective
explanatory notes that there is a need for the
government to make significant expenditure
savings and a credible package of revenue
measures. These measures include
improvement of tax administration and
control and leakages in revenues from
income taxes and value added tax. It is also
stated that one opportunity that could be
beneficial to the overall status of our
economy is to review existing tax rates,
evaluating the relevance given our present
conditions. Thus, with these purposes in
mind and to accomplish these purposes for
which the house bills were filed, i.e., to raise
revenues for the government, the Senate
introduced amendments on income taxes,
which as admitted by Senator Ralph Recto,
would yield about P10.5 billion a year.
Moreover, since the objective of these house
bills is to raise revenues, the increase in
corporate income taxes would be a great
help and would also soften the impact of VAT
measure on the consumers by distributing
the burden across all sectors instead of
putting it entirely on the shoulders of the
consumers.
Contention 3: Petitioners Escudero, et al.,
also reiterate that R.A. No. 9337s stand- by
authority to the Executive to increase the
VAT rate, especially on account of the
recommendatory power granted to the
Secretary of Finance, constitutes undue
delegation of legislative power. They submit
that the recommendatory power given to the
Secretary of Finance in regard to the
occurrence of either of two events using the
Gross Domestic Product (GDP) as a
benchmark necessarily and inherently
required extended analysis and evaluation,
as well as policy making.
Ruling: There is no merit in this contention.
The Court reiterates that in making his
recommendation to the President on the
existence of either of the two conditions, the
Secretary of Finance is not acting as the alter
ego of the President or even her
subordinate. He is acting as the agent of the
legislative department, to determine and
declare the event upon which its expressed
will is to take effect. The Secretary of Finance
becomes the means or tool by which
legislative policy is determined and
implemented, considering that he possesses
all the facilities to gather data and
information and has a much broader
perspective to properly evaluate them. His
function is to gather and collate statistical
data and other pertinent information and
verify if any of the two conditions laid out by
Congress is present. Congress granted the
Secretary of Finance the authority to
ascertain the existence of a fact, namely,
whether by December 31, 2005, the value-
added tax collection as a percentage of GDP
of the previous year exceeds two and four-
fifth percent (24/5%) or the national
government deficit as a percentage of GDP
of the previous year exceeds one and one-
half percent (1%). If either of these two
instances has occurred, the Secretary of
Finance, by legislative mandate, must submit
such information to the President. Then the
12% VAT rate must be imposed by the
President effective January 1, 2006. Congress
does not abdicate its functions or unduly
delegate power when it describes what job
must be done, who must do it, and what is
the scope of his authority; in our complex
economy that is frequently the only way in
which the legislative process can go
forward. There is no undue delegation of
legislative power but only of the discretion as
to the execution of a law. This is
constitutionally permissible. Congress did not
delegate the power to tax but the mere
implementation of the law. The intent and
will to increase the VAT rate to 12% came
from Congress and the task of the President
is to simply execute the legislative policy.
That Congress chose to use the GDP as a
benchmark to determine economic growth is
not within the province of the Court to
inquire into, its task being to interpret the
law.
Contention 4: Burdening the consumers
with significantly higher prices under a VAT
regime vis--vis a 3% gross tax renders the
law unconstitutional for being arbitrary,
oppressive and inequitable
Ruling: The Court also finds the same to be
without merit. As stated in the assailed
Decision, the Court recognizes the burden
that the consumers will be bearing with the
passage of R.A. No. 9337. But as was also
stated by the Court, it cannot strike down the
law as unconstitutional simply because of its
yokes. The legislature has spoken and the
only role that the Court plays in the picture is
to determine whether the law was passed
with due regard to the mandates of the
Constitution. Inasmuch as the Court finds
that there are no constitutional infirmities
with its passage, the validity of the law must
therefore be upheld.
Contention 5: Petioiners cited the
dissertation of Associate Justice Dante O.
Tinga in his Dissenting Opinion
Ruling: The glitch in petitioners arguments
is that it presents figures based on an event
that is yet to happen. Their illustration of
the possible effects of the 70% limitation,
while seemingly concrete, still remains
theoretical. Theories have no place in this
case as the Court must only deal with an
existing case or controversy that is
appropriate or ripe for judicial
determination, not one that is
conjectural or merely anticipatory. The
Court will not intervene absent an actual and
substantial controversy admitting of specific
relief through a decree conclusive in nature,
as distinguished from an opinion advising
what the law would be upon a hypothetical
state of facts.
The impact of the 70% limitation on the
creditable input tax will ultimately depend on
how one manages and operates its business.
Market forces, strategy and acumen will
dictate their moves. With or without these
VAT provisions, an entrepreneur who does
not have the ken to adapt to economic
variables will surely perish in the
competition. The arguments posed are within
the realm of business, and the solution lies
also in business.
Contention 6: Petitioners also reiterate
their argument that the input tax is a
property or a property right.
Ruling: In the same breath, the Court
reiterates its finding that it is not a property
or a property right, and a VAT-registered
persons entitlement to the creditable input
tax is a mere statutory privilege.
Contention 7: Petitioners also contend that
even if the right to credit the input VAT is
merely a statutory privilege, it has already
evolved into a vested right that the State
cannot remove.
Ruling: As the Court stated in its Decision,
the right to credit the input tax is a mere
creation of law. Prior to the enactment of
multi-stage sales taxation, the sales taxes
paid at every level of distribution are not
recoverable from the taxes payable. With
the advent of Executive Order No. 273
imposing a 10% multi-stage tax on all sales,
it was only then that the crediting of the
input tax paid on purchase or importation of
goods and services by VAT-registered
persons against the output tax was
established. This continued with the
Expanded VAT Law (R.A. No. 7716), and The
Tax Reform Act of 1997 (R.A. No. 8424). The
right to credit input tax as against the output
tax is clearly a privilege created by law, a
privilege that also the law can limit. It
should be stressed that a person has no
vested right in statutory privileges.
The concept of vested right is a consequence
of the constitutional guaranty of due process
that expresses a present fixed interest which
in right reason and natural justice is
protected against arbitrary state action; it
includes not only legal or equitable title to
the enforcement of a demand but also
exemptions from new obligations created
after the right has become vested. Rights are
considered vested when the right to
enjoyment is a present interest, absolute,
unconditional, and perfect or fixed and
irrefutable.
The Motions for Reconsideration are
hereby DENIED WITH FINALITY.
Note: Sorry for this lengthy digest. Daghang
contentions kay consolidated MRs ni sya in
relation to the first case and I dont know
unsa e focus ni maam kay unpredictable
sya. So I placed everything nalang. :D
CIR vs. SEAGATE TECHNOLOGY
(PHILIPPINES)
G.R. No. 153866 February 11,
2005
BONGANCISO
Facts: Seagate Technology Philippines is a
VAT-registered entity also registered with the
Philippine Export Zone Authority (PEZA) to
engage in the manufacture of recording
components primarily used in computers for
export.
Seagate filed an administrative claim for
refund of VAT input taxes in the amount of
P28M+ with supporting documents for the
period April 1998 to June 1999. No final
action has been received from the CIR on
such claim.
This prompted Seagate to elevate the case
to the CTA in July 2000 by way of Petition for
Review in order to toll the running of the two-
year prescriptive period. On appeal, the CA
affirmed the lower courts decision but in the
reduced amount of P12M+. This sum
represented the unutilized but substantiated
input VAT paid on capital goods purchased
for the said period.
Issue No. 1: Is Seagate entitled to the
refund or issuance of Tax Credit Certificate
representing alleged unutilized input VAT
paid on capital goods purchased for the
period April 1998 to June 1999?
Ruling: Yes. As a PEZA-registered enterprise
within a special economic zone, Seagate is
entitled to the fiscal incentives and benefits
provided for in either PD 669 or EO 226. It
shall, moreover, enjoy all privileges, benefits,
advantages or exemptions under both RA
7227 (Bases Conversion and Development
Act of 1992) and RA 7844 (Export
Development Act of 1994).
Special laws expressly grant preferential tax
treatment to business establishments
registered and operating within an ecozone,
which by law is considered as a separate
customs territory. As such, Seagate is
exempt from all internal revenue taxes,
including the VAT, and regulations pertaining
thereto. It has opted for the income tax
holiday regime, instead of the 5 percent
preferential tax regime. As a matter of law
and procedure, its registration status
entitling it to such tax holiday can no longer
be questioned. Its sales transactions
intended for export may not be exempt, but
like its purchase transactions, they are zero-
rated. No prior application for the effective
zero rating of its transactions is necessary.
Being VAT-registered and having
satisfactorily complied with all the requisites
for claiming a tax refund of or credit for the
input VAT paid on capital goods purchased,
Seagate is entitled to such VAT refund or
credit.
Issue No. 2: What is the nature of VAT and
the Tax Credit Method?
Ruling: Viewed broadly, the VAT is a uniform
tax ranging, at present, from 0 percent to 10
percent levied on every importation of goods
in the course of trade or business as they
pass along the production and distribution
chain. The tax is limited only to the value
added to such goods, properties or services
by the seller, transferor or lessor. It is an
indirect tax that may be shifted or passed on
to the buyer, transferee or lessee of the
goods, properties or services. As such, it
should be understood not in the context of
the person or entity that is primarily, directly
and legally liable for its payment, but in
terms of its nature as a tax on consumption.
In either case, though, the same conclusion
is arrived at.
The law that originally imposed the VAT in
the country, as well as the subsequent
amendments of that law, has been drawn
from the tax credit method. Under the
present method that relies on invoices, an
entity can credit against or subtract from the
VAT charged on its sales or outputs the VAT
paid on its purchases, inputs and imports.
If at the end of a taxable quarter the output
taxes charged by a seller are equal to the
input taxes passed on by the suppliers, no
payment is required. It is when the output
taxes exceed the input taxes that the excess
has to be paid. If, however, the input taxes
exceed the output taxes, the excess shall be
carried over to the succeeding quarter or
quarters. Should the input taxes result from
zero-rated or effectively zero-rated
transactions or from the acquisition of capital
goods, any excess over the output taxes
shall instead be refunded to the taxpayer or
credited against other internal revenue
taxes.
CIR vs Benguet Corp.
GR 145559, 14 July 2006
DU
FACTS: Since the inception of the VAT in
1988, sale of gold to Central Bank has been
considered by the BIR to be zero-rated. (VAT
Ruling 378-88 and RMC No. 5988). On
January 23, 1992, Commissioner Ong issued
VAT Ruling No. 008-92 declaring and holding
that the sale of gold to the CB are considered
domestic sales subject to the 10% VAT.
Subsequently, VAT Ruling No. 59-92 dated
April 28, 1992 was issued reiterating the
treatment of sales of gold to CB and
expressly countenancing the retroactive
application of VAT Ruling No. 008-92 to all
such sales made starting January 1, 1988.
ISSUES:
(1) Can a ruling, changing the tax
treatment of a transaction from one
 subject to 0% to one subject to 10%,
be given a retroactive application?
(2) Is there really an actual and imminent
injury to the taxpayer if the ruling is
given a retroactive application?
RULING:
(1) The SC ruled in the negative. Well-
entrenched is the rule that rulings and
circulars, rules and regulations,
promulgated by the Commissioner of
Internal Revenue, would have no
retroactive application if to so apply
them would be prejudicial to the
taxpayers. There is no question,
therefore, as to the prohibition against
the retroactive application of the
revocation, modification or reversal, as
the case maybe, of previously
established Bureau on Internal
Revenue (BIR) Rulings when the
taxpayer's interest would be
prejudiced thereby.
The CIR is precluded from adopting a position
inconsistent with one previously taken where
injustice would result therefrom, or when
there has been a misrepresentation to the
taxpayer. (citing ABS-CBN Broadcasting Corp.
vs. CTA and CIR, 108 SCRA 142)
(2) While the CTA said there is none, the
CA had taken a contrary view which
was affirmed by the SC. The VAT
system of taxation allows a VAT-
registered taxpayer to recover its
input VAT either by (1) passing on the
10% output VAT on the gross selling
price or gross receipts, as the case
may be, to its buyer, or (2) if the input
tax is attributable to the purchase of
capital goods or to zero-rated sales, by
filing a claim for refund or tax credit
with the BIR. Simply stated, a taxpayer
subject to 10% output VAT on its sales
of goods and services may recover its
input VAT costs by passing on said
costs as output VAT to its buyers of
goods and services but it cannot claim
the same as a refund or tax credit,
while a taxpayer subject to 0% on its
sales of goods and services may only
recover its input costs by filing a
refund or tax credit with the BIR.
The SC is correct in holding that a retroactive
imposition of the VAT on the sale of gold to
Central Bank will definitely result to
substantial economic prejudice to
respondent. First, the respondent could no
longer pass-on to CB the 10% output VAT
which would be retroactively imposed on
said transactions, and second, it will also be
prevented from claiming the refund because
the sale is no longer zero rated. If this
happens the entire cost of the input VAT will
be borne by respondent Benguet without any
avenue for recovery. Indeed, respondent
stands to suffer substantial economic
prejudice by the retroactive application of
the VAT Ruling in question.
Contex Corporation v. CIR
July 2, 2004
RAGAY
Facts: Contex is a domestic corporation
engaged in the business of manufacturing
hospital textiles and garments and other
hospital supplies for export. Contexs place
of business is at the Subic Bay Freeport Zone
(SBFZ). It is duly registered with the Subic
Bay Metropolitan Authority (SBMA) as a Subic
Bay Freeport Enterprise. As such, Contex is
exempt from all local and national internal
revenue taxes except for the preferential tax
provided for in Section 12 (c)of Rep. Act No.
7227. Contex is also registered with the BIR
as a non-VAT taxpayer.
From January 1, 1997 to December 31,
1998, Contex purchased various supplies and
materials. The suppliers shifted unto Contex
the 10% VAT on the purchased items, which
led Contex to pay input taxes in the amounts
of P539,411.88 and P504,057.49 for 1997
and 1998, respectively. Contex subsequently
filed two applications for tax refund or tax
credit of the VAT it paid.
Revenue District Officer Denied
Regional Director of BIR no response
CTA partially granted(P683,061.90)
CA denied
Motion for Reconsideration with CA denied
Issue: What is the difference between VAT
exemption and zero-rated sales?
Ruling: Under Zero-rating, all VAT is
removed from the zero-rated goods, activity
or firm. In contrast, exemption only removes
the VAT at the exempt stage, and it will
actually increase, rather than reduce the
total taxes paid by the exempt firms business
or non-retail customers. It is for this reason
that a sharp distinction must be
made between zero-rating and exemption in
designating a value-added tax.
Issue: was Contex correct in its claim for the
input VAT it paid?
Ruling: No. Contex is registered as a NON-
VAT taxpayer and thus, is exempt from VAT.
As an exempt VAT taxpayer, it is not allowed
any tax credit on input VAT previously
paid. Even if we are to assume that
exemption from the burden of VAT on
Contexs purchases did exist, Contex is still
not entitled to any tax credit or refund on the
input tax previously paid as Contex is an
exempt VAT taxpayer. Rather, it is Contexs
suppliers who are the proper parties to claim
the tax credit and accordingly refund the
petitioner of the VAT erroneously passed on
to the latter.
CIR vs Cebu Toyo Corporation
GUAZON
Facts: Cebu Toyo Corp. (Cebu) is a domestic
subsidiary of Toyo Lens Corporation Japan,
engaged in the manufacture of lenses and
various optical components used in TV sets,
cameras, cds, etc. Its principal office is
located at the Mactan Export Processing
Zone (MEPZ) as a zone export enterprise
registered with the PEZA. It is also registered
with the BIR as a VAT taxpayer. Cebu Toyo
sells 80% of its products to its mother
corporation, pursuant to an Agreement of
Offsetting. The rest are sold to various
enterprises doing business in the MEPZ. On
March 30, 1998, it filed an application for tax
credit/refund of VAT paid for the period April
1996 to December 1997 amounting to about
P4.4 million representing excess VAT input
payments. Cebu Toyo argues that as a VAT-
registered exporter of goods, it is subject to
VAT at the rate of 0% on its export sales that
do not result in any output tax. Hence, the
unutilized VAT input taxes on its purchases of
goods and services related to such zero-
rated activities are available as tax credits or
refund. The CTA ruled that not the entire
amount claimed for refund by Toyo were
actually offset against its related accounts. It
determined that the refund/credit amounted
only to P2.1M. The same was affirmed by the
CA.
Issue: Whether or not the granting of a
refund representing unutilized input VAT on
goods and services was proper.
Ruling:
Yes. Cebu is entitled to the P2.1M tax
refund/credit. Petitioners contention that
respondent is not entitled to refund for
being exempt form VAT is untenable. This
argument turns a blind eye to the fiscal
incentives given to PEZA registered
enterprises under RA 7916. Under this
statute, Cebu has to options with respect to
its tax burden. It could avail of an income tax
holiday pursuant to EO 226, thus exempting
it from income taxes for a number of years
(in this case, 4 years) but not from other
internal revenue taxes such as VAT; or it
could avail of the tax exemption on all taxes,
including VAT under PD 66 and pay only the
preferential rate of 5% under RA 7916. Thus,
availing of the first option, respondent is not
exempt from VAT and it correctly registered
itself as a VAT taxpayer. In fine, it is engaged
in a taxable rather than exempt transactions.
In taxable transactions, the seller (Cebu)
shall be entitled to tax credit for the VAT paid
on purchases and leases of goods properties
or services.
***Notes: While the zero rating and the
exemption are computationally the same,
they actually differ in several aspects:
(a) A zero-rated sale is a taxable transaction
but does not result in an output tax while an
exempted transaction is not subject to the
output tax;
(b) The input VAT on the purchases of a
VAT-registered person with zero-rated
sales may be allowed as tax credits or
refunded while the seller in an exempt
transaction is not entitled to any input tax on
his purchases despite the issuance of a VAT
invoice or receipt.
(c) Persons engaged in transactions which
are zero-rated, being subject to VAT, are
required to register while registration is
optional for VAT-exempt persons.
CIR vs AMERICAN EXPRESS 462 SCRA
2197
BALASABAS
Facts: [Respondent] is a Philippine branch of
American Express International, Inc., a
corporation duly organized and existing
under and by virtue of the laws of U.S. It is a
servicing unit of American Express
International, Inc. - Hongkong Branch (Amex-
HK) and is engaged primarily to facilitate the
collections of Amex-HK receivables from card
members situated in the Philippines and
payment to service establishments in the
Philippines.
Amex Philippines registered itself with
the Bureau of Internal Revenue (BIR) as a
value-added tax (VAT) taxpayer effective
March 1988. On April 13, 1999, Amex filed
with the BIR a letter-request for the refund of
its 1997 excess input taxes in the amount of
P3,751,067.04, which amount was arrived at
after deducting from its total input VAT paid
of P3,763,060.43 its applied output VAT
liabilities only for the third and fourth
quarters of 1997 amounting to P5,193.66
and P6,799.43, respectively citing as basis
therefor, Section 110 (B)(TAX CREDIT) of the
1997 Tax Code.
Section 110. Tax Credits. - x x x x x x x x x
(B) Excess Output or Input Tax. - If at the end
of any taxable quarter the output tax
exceeds the input tax, the excess shall be
paid by the VAT-registered person. If the
input tax exceeds the output tax, the excess
shall be carried over to the succeeding
quarter or quarters. Any input tax
attributable to the purchase of capital goods
or to zero-rated sales by a VAT-registered
person may at his option be refunded or
credited against other internal revenue
taxes, subject to the provisions of Section
112.
In addition, Amex relied on VAT Ruling
No. 080-89, dated April 3, 1989, the
pertinent portion of which reads as follows:
In Reply, please be informed that, as a VAT
registered entity whose service is paid for in
acceptable foreign currency which is
remitted inwardly to the Philippines and
accounted for in accordance with the rules
and regulations of the Central [B]ank of the
Philippines, your service income is
automatically zero rated effective January 1,
1998. [Section 102(a)(2) of the Tax Code as
amended].[4] For this, there is no need to file
an application for zero-rate.
Petitioner claimed that the claim for
refund is subject to investigation by the
Bureau of Internal Revenue. And taxes paid
and collected are presumed to have been
made in accordance with laws and
regulations, hence, not refundable. Claims
for tax refund are construed strictly against
the claimant as they partake of the nature of
tax exemption from tax and it is incumbent
upon the [respondent] to prove that it is
entitled thereto under the law and he who
claims exemption must be able to justify his
claim by the clearest grant of organic or
statue law. An exemption from the common
burden [cannot] be permitted to exist upon
vague implications.
CTA rendered a decision in favor of
respondent, holding that its services are
subject to zero-rate. CA affirmed this
decision and further held that respondents
services were services other than the
processing, manufacturing or repackaging of
goods for persons doing business outside the
Philippines and paid for in acceptable
foreign currency and accounted for in
accordance with the rules and regulations of
BSP.
Issue: Is American Express entitled to the
refund of the amount of P3,352,406.59
representing excess input VAT for the year
1997?
Ruling: Yes. Section 102 of the Tax Code[11]
provides: Sec. 102. Value-added tax on sale
of services and use or lease of properties. --
(a) Rate and base of tax. -- There shall be
levied, assessed and collected, a value-
added tax equivalent to ten percent (10%) of
gross receipts derived from the sale or
exchange of services x x x.
The phrase 'sale or exchange of
services' means the performance of all kinds
of services in the Philippines for others for a
fee, remuneration or consideration, including
those performed or rendered by x x x
persons engaged in milling, processing,
manufacturing or repacking goods for others;
x x x services of banks, non-bank financial
intermediaries and finance companies; x x x
and similar services regardless of whether or
not the performance thereof calls for the
exercise or use of the physical or mental
faculties. The phrase 'sale or exchange of
services' shall likewise include:
xxxxxxxxx
(3) The supply of x x x commercial
knowledge or information;
(4) The supply of any assistance that is
ancillary and subsidiary to and is furnished
as a means of enabling the application or
enjoyment of x x x any such knowledge or
information as is mentioned in subparagraph
(3);
xxxxxxxxx
(6) The supply of technical advice, assistance
or services rendered in connection with
technical management or administration of
any x x x commercial undertaking, venture,
project or scheme;
xxxxxxxxx
"The term 'gross receipts means the total
amount of money or its equivalent
representing the contract price,
compensation, service fee, rental or royalty,
including the amount charged for materials
supplied with the services and deposits and
advanced payments actually or
constructively received during the taxable
quarter for the services performed or to be
performed for another person, excluding
value-added tax.
"(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[:]
(1) Processing, manufacturing or repacking
goods for other persons doing business
outside the Philippines which goods are
subsequently exported, where the services
are paid for in acceptable foreign currency
and accounted for in accordance with the
rules and regulations of the Bangko Sentral
ng Pilipinas (BSP);
(2) Services other than those mentioned in
the preceding subparagraph, the
consideration for which is paid for in
acceptable foreign currency and accounted
for in accordance with the rules and
regulations of the [BSP];
xxxxxxxxx
The law is very clear. Under the last
paragraph quoted above, services performed
by VAT-registered persons in the Philippines
(other than the processing, manufacturing or
repacking of goods for persons doing
business outside the Philippines), when paid
in acceptable foreign currency and
accounted for in accordance with the rules
and regulations of the BSP, are zero-rated.
Respondent is a VAT-registered person
that facilitates the collection and payment of
receivables belonging to its non-resident
foreign client, for which it gets paid in
acceptable foreign currency inwardly
remitted and accounted for in conformity
with BSP rules and regulations. Certainly, the
service it renders in the Philippines is not in
the same category as processing,
manufacturing or repacking of goods and
should, therefore, be zero-rated. In reply to a
query of respondent, the BIR opined in VAT
Ruling No. 080-89 that the income
respondent earned from its parent companys
regional operating centers (ROCs) was
automatically zero-rated effective January 1,
1988.
Service has been defined as the art of
doing something useful for a person or
company for a fee or useful labor or work
rendered or to be rendered by one person to
another. For facilitating in the Philippines the
collection and payment of receivables
belonging to its Hong Kong-based foreign
client, and getting paid for it in duly
accounted acceptable foreign currency,
respondent renders service falling under the
category of zero rating. Pursuant to the Tax
Code, a VAT of zero percent should,
therefore, be levied upon the supply of that
service.
As a general rule, the VAT system uses
the destination principle as a basis for the
jurisdictional reach of the tax. Goods and
services are taxed only in the country where
they are consumed. Thus, exports are zero-
rated, while imports are taxed.
In the present case, the facilitation of
the collection of receivables is different from
the utilization of consumption of the outcome
of such service. While the facilitation is done
in the Philippines, the consumption is not.
The services rendered by respondent are
performed upon its sending to its foreign
client the drafts and bulls it has gathered
from service establishments here, and are
therefore, services also consumed in the
Philippines. Under the destination principle,
such service is subject to 10% VAT.
However, the law clearly provides for
an exception to the destination principle;
that is 0% VAT rate for services that are
performed in the Philippines, paid for in
acceptable foreign currency and accounted
for in accordance with the R&R of BSP. The
respondent meets the following requirements
for exemption, and thus should be zero-
rated:
(1) Service be performed in the Philippines
(2) The service fall under any of the
categories in Section 102B of the Tax Code
(3) It be paid in acceptable foreign
currency accounted for in accordance with
BSP R&R.
CIR vs TOSHIBA
G.R. No. 150154, 9 August 2005
BORROMEO
Facts:
Toshiba was claiming a refund for the
input tax it paid on unutilized capital goods
purchased. However, the CIR said that it
cannot because the capital goods and
services it purchased are considered not
used in VAT taxable business and therefore,
it is not entitled to refund of input taxes.
Toshiba, on the other hand, contended that it
is PEZA-registered and located within the
ecozone and therefore for, VAT-exempt entity.
Issue:
Whether or not Toshiba is entitled to
refund for the input tax it paid on unutilized
capital goods purchased considering that it is
registered with PEZA and located within the
ecozone.
Ruling:
Yes. CIR failed to differentiate between
VAT-exempt transactions from VAT-exempt
entities. An exempt transactions are
transactions specifically listed in and
expressly exempted from VAT under the Tax
Code without regard to the tax status, VAT-
exempt or not, of the taxpayer. An exempt
party, on the other hand, is a person or
entity granted VAT-exemption under the Tax
Code, special law or an international
agreement to which the Philippines is a
signatory and by virtue of which its taxable
transactions become exempt from VAT.
Toshiba, a PEZA-registered and located
within a ecozone is a VAT-exempt entity
because of Sec 8 of Ta 7916 which
establishes the fiction that ecozones are
foreign territory. Therefore, a supplier from
the custom territory cannot pass on output
VAT to an ecozone enterprise, like Toshiba,
since it is exempt.
CIR v Bursmeiters & Wain Scandinavian
GR 153205; January 22, 2007
VAT
BATULAN
Facts: A foreign consortium, parent
company of Burmeister, entered into an O&M
contract with NPC. The foreign entity then
subcontracted the actual O&M to Burmeister.
NPC paid the foreign consortium a mixture of
currencies while the consortium, in turn, paid
Burmeister foreign currency inwardly
remitted into the Philippines. BIR did not
want to grant refund since the services are
not destined for consumption abroad (or
the destination principle).
Issue: Are the receipts of Burmeister
entitled to VAT zero-rated status?
Held: PARTIALLY. Respondent is entitled to
the refund prayed for BUT ONLY for the
period covered prior to the filing of CIRs
Answer in the CTA.
The claim has no merit since the consortium,
which was the recipient of services rendered
by Burmeister, was deemed doing business
within the Philippines since its 15-year O&M
with NPC cannot be interpreted as an
isolated transaction.
In addition, the services referring to
processing, manufacturing, repacking and
services other than those in (1) of Sec. 102
both require (i) payment in foreign currency;
(ii) inward remittance; (iii) accounted for by
the BSP; AND (iv) that the service recipient is
doing business outside the Philippines. The
Court ruled that if this is not the case,
taxpayers can circumvent just by stipulating
payment in foreign currency.
The refund was partially allowed since
Burmeister secured a ruling from the BIR
allowing zero-rating of its sales to foreign
consortium. However, the ruling is only valid
until the time that CIR filed its Answer in the
CTA which is deemed revocation of the
previously-issued ruling. The Court said the
revocation cannot retroact since none of the
instances in Section 246 (bad faith, omission
of facts, etc.) are present.
CIR v. Magsaysay Lines Inc.
LACPAO
Facts: Pursuant to a government program
of privatization, the National Development
Company (NDC) decided to sell in one lot its
National Marine Corp. (NMC) shares and five
(5) of its ships. The vessels were constructed
for the NDC between 1981 and 1984, then
initially leased to Luzon Stevedoring
Company, also its wholly-owned subsidiary.
The vessels were then transferred and
leased, on a bareboat basis, to the NMC. The
NMC shares and the vessels were offered for
public bidding. Among the stipulated terms
and conditions for the public auction was
that the winning bidder was to pay "a value
added tax of 10% on the value of the
vessels." On June 3, 1988, private
respondent Magsaysay Lines, Inc.
(Magsaysay Lines) offered to buy the shares
and the vessels for P168,000,000.00. The bid
was made by Magsaysay Lines, purportedly
for a new company still to be formed
composed of itself and was approved by the
Committee on Privatization, and a Notice of
Award dated 1 July 1988 was issued to
Magsaysay Lines who in turn was assessed of
VAT through VAT Ruling No. 568-88 dated
December 14, 1988 from the BIR, holding
that the sale of the vessels was subject to
the 10% VAT. The ruling cited the fact that
NDC was a VAT-registered enterprise, and
thus its "transactions incident to its normal
VAT registered activity of leasing out
personal property including sale of its own
assets that are movable, tangible objects
which are appropriable or transferable are
subject to the 10% [VAT].
CTA ruled that the sale of a vessel was
an "isolated transaction," not done in the
ordinary course of NDCs business, and was
thus not subject to VAT, which under Section
99 of the Tax Code, was applied only to sales
in the course of trade or business. The CTA
further held that the sale of the vessels could
not be "deemed sale," and thus subject to
VAT, as the transaction did not fall under the
enumeration of transactions deemed sale as
listed either in Section 100(b) of the Tax
Code, or Section 4 of R.R. No. 5-87. Finally,
the CTA ruled that any case of doubt should
be resolved in favor of private respondents
since Section 99 of the Tax Code which
implemented VAT is not an exemption
provision, but a classification provision which
warranted the resolution of doubts in favor of
the taxpayer.
Issue: Whether or not the sale of five (5) of
vessels by the NDC is subject to value-added
tax (VAT) under the National Internal
Revenue Code of 1986 (Tax Code)? [note:
this was the prevailing law at the time of the
sale]
Ruling: No, the sale is not subject to
VAT. VAT is ultimately a tax on consumption,
even though it is assessed on many levels of
transactions on the basis of a fixed
percentage. It is the end user of consumer
goods or services which ultimately shoulders
the tax, as the liability therefrom is passed
on to the end users by the providers of these
goods or services who in turn may credit
their own VAT liability (or input VAT) from the
VAT payments they receive from the final
consumer (or output VAT). The final purchase
by the end consumer represents the final link
in a production chain that itself involves
several transactions and several acts of
consumption. The VAT system assures fiscal
adequacy through the collection of taxes on
every level of consumption, yet assuages the
manufacturers or providers of goods and
services by enabling them to pass on their
respective VAT liabilities to the next link of
the chain until finally the end consumer
shoulders the entire tax liability.
Yet VAT is not a singular-minded tax on
every transactional level. Its assessment
bears direct relevance to the taxpayers role
or link in the production chain. Hence, as
affirmed by Section 99 of the Tax Code and
its subsequent incarnations, the tax is levied
only on the sale, barter or exchange of goods
or services by persons who engage in such
activities, in the course of trade or business.
These transactions outside the course of
trade or business may invariably contribute
to the production chain, but they do so only
as a matter of accident or incident. As the
sales of goods or services do not occur within
the course of trade or business, the providers
of such goods or services would hardly, if at
all, have the opportunity to appropriately
credit any VAT liability as against their own
accumulated VAT collections since the
accumulation of output VAT arises in the first
place only through the ordinary course of
trade or business.
The sale of the vessels was not in the
ordinary course of trade or business. As
explained by the CTA:
In Imperial v. Collector of Internal Revenue,
G.R. No. L-7924, September 30, 1955 (97
Phil. 992), the term "carrying on business"
does not mean the performance of a single
disconnected act, but means conducting,
prosecuting and continuing business by
performing progressively all the acts
normally incident thereof; while "doing
business" conveys the idea of business being
done, not from time to time, but all the time.
"course of business" is what is usually done
in the management of trade or business.
The Court explained that "course of
business" or "doing business" connotes
regularity of activity. In the instant case, the
sale was an isolated transaction. The sale
which was involuntary and made pursuant to
the declared policy of Government for
privatization could no longer be repeated or
carried on with regularity. It should be
emphasized that the normal VAT-registered
activity of NDC is leasing personal
property. This finding is confirmed by the
Revised Charter of the NDC which bears no
indication that the NDC was created for the
primary purpose of selling real property. Any
sale, barter or exchange of goods or services
not in the course of trade or business is not
subject to VAT.
CIR vs. Manila Mining Corporation, GR
No. 153204, August 31, 2005
JAVIER
Facts: Manila Mining is engaged in selling
gold to the Bangko Sentral. They filed for a
VAT refund for the year 1991, but the CIR
opposed this saying that the veracity of the
amount is still under investigation. The CTA
denied Manila Minings claim since they
presented no receipts or sales invoices to
prove the refund. They only presented a
certification of a certified public accountant
that the receipts and sales invoices
examined by him were true.
Issue: Should Manila Mining be granted a
refund even though they did not present
receipts and sales invoices in court?
Ruling: No. For a judicial claim for refund to
prosper, however, respondent must not only
prove that it is a VAT registered entity and
that it filed its claims within the prescriptive
period. It must substantiate the input VAT
paid by purchase invoices or official receipts.
Manila Mining did not do this. A certification
of a CPA cannot substitute the documentary
evidence needed.
ATLAS CONSOLIDATED VS. CIR
G.R. 146221, September 25, 2007
DURON
Facts: Atlas Consolidated is a zero-rated VAT
person for being an exporter of copper
concentrates. On January 1994, Atlas filed its
VAT return for the fourth quarter of 1993,
showing a total input tax and an excess VAT
credit. Then, on January 1996, Atlas filed for
a tax refund or tax credit certificate with CIR.
However, the CTA denied Atlas claim for
refund due to Atlas failure to comply with
the documentary requirements prescribed
under Sec. 16 of RR No. 5-87, as amended by
RR No. 3-88.
CTA denied Atlas MR stating that Atlas has
failed to substantiate its claim that it has not
applied its alleged excess in put taxes to any
of its subsequent quarters output tax
liability.
The CA affirmed CTAs ruling.
Issue: What are the documents
required to claim for VAT input refund?
W/N Atlas is entitled to claim to a tax
refund.
Ruling: When claiming tax refund/credit, the
VAT-registered taxpayer must be able to
establish that it does not have refundable or
creditable input VAT, and the same has not
been applied against its output VAT liabilities
information which are supposed to be
reflected in the taxpayers VAT returns.
Thus, an application for tax refund/credit
must be accompanied by copies of the
taxpayers VAT return/s for the taxable
quarter/s concerned.
The formal offer of evidence of Atlas failed to
include photocopy of its export documents,
as required. Without the export documents,
the purchase invoice/receipts submitted by
Atlas as proof of its input taxes cannot be
verified as being directly attributable to the
goods so exported.
Atlas claim for credit or refund of input taxes
cannot be granted due to its failure to show
convincingly that the same has not been
applied to any of its output tax liability as
provided under Sec. 106(a) of the Tax Code.
National Internal Revenue Code; value-added
tax; claim for credit or refund of input value-
added tax; documentary requirements. When
claiming tax refund or credit, the value-
added taxpayer must be able to establish
that it does have refundable or creditable
input value-added tax (VAT), and the same
has not been applied against its output VAT
liabilities- information which are supposed to
be reflected in the taxpayers VAT returns.
Thus, an application for tax refund or credit
must be accompanied by copies of the
taxpayers VAT return or returns for taxable
quarter or quarters concerned. Atlas
Consolidated Mining and Development
Corporation vs Commissioner of Internal
Revenue, G.R. No. 159471, January 26, 2011.
In the recent case of Mirant Pagbilao
Corporation vs. CIR (G.R. No. 172129,
September 12, 2008), the Supreme Court
had ruled that the claim for refund of
unutilized input VAT payments must be
filedwithin two (2) years from the close of the
taxable quarter when the relevant sales were
made.
Said ruling, however, should not be made to
apply to the present case but should be
applied prospectively pursuant to and
consistent with the numerous rulings of the
Supreme Court, given that petitioner Kepco's
claim involves unutilized input taxes for the
3rd quarter of 2000. Hence, the prescriptive
period applicable in the instant case would
still be the period enunciated in the case of
Atlas Consolidated Mining and Development
Corporation vs. CIR (G.R. Nos. 141104 &
148763, June 8, 2007), where it was held
that the counting of the two-year prescriptive
period is reckoned from the filing of the
quarterly VAT returns. Kepco Ilijan
Corporation v. Commissioner of Internal
Revenue, C.T.A. E.B. Case No. 528 (C.T.A.
Case No. 6550), October 14, 201
Hitachi vs CIR
MAMUGAY
Facts: Petitioner Hitachi is a domestic
corporation engaged in the business of
manufacturing and exporting computer
products. On 4 August 2000, Hitachi filed an
administrative claim for refund or issuance
of a tax credit certificate before the BIR
involving P25,023,471.84 representing
excess input VAT attributable to Hitachis
zero-rated export sales for the four
taxable quarters of 1999.
Due to the BIRs inaction, Hitachi filed a
petition for review with the CTA. CTA Division
and CTA En Banc both denied petitioners
claim. CTA denied the claim for refund for
failure of petitioner to comply with the
mandatory invoicing requirements prescribed
by Section 4.108-1 of Revenue Regulation
No. 7-95 (RR 7-95):
Sec.4.108-1. Invoicing Requirements. - All
VAT-registered persons shall, for every sale
or lease of goods or properties or
services, issue duly registered receipts
or sales or commercial invoices which
must show:
1. the name, TIN and address of seller;
2. date of transaction;
3. quantity, unit cost and description of
merchandise or nature of service;
4. the name, TIN, business style, if any, and
address of the VAT-registered purchaser,
customer or client;
5. the word zero-rated imprinted on the
invoice covering zero-rated sales; and
6. the invoice value or consideration.
xxxx
Only VAT-registered persons are
required to print their TIN followed by
the word VAT in their invoices or
receipts and this shall be considered as
a VAT invoice. All purchases covered by
invoices other than a VAT invoice shall
not give rise to any input tax.
------------------------------
Hitachis export sales invoices
a) did not have pre-printed taxpayers
identification number (TIN) followed by the
word VAT
b) the invoices did not bear the
imprinted word zero-rated
-----------------------------
Petitioner contends that non-
observance of the requirements cannot
result in the outright invalidation of its claim
for refund, and that RR-75 is invalid for
expanding the requirements set forth in the
NIRC.
Issue: Can Hitachi claim tax refund
even if it has not complied with the
requirements of RR-75?
Ruling: No. When petitioner filed its
claim for refund, RR-75 was already in place.
Section 4.108-1 of RR 7-95 comes from the
rule-making authority granted to the
Secretary of Finance under Section 245 of
the 1997 NIRC (Presidential Decree 1158) for
the efficient enforcement of the tax code.
Furthermore, tax refunds, like tax
exemptions, are construed strictly against
the taxpayer. The claimants have the burden
of proof to establish the factual basis of their
claim for refund or tax credit. Hitachi failed
to establish the factual basis of its claim for
refund or tax credit.
J.R.A. PHILIPPINES, INC., vs. CIR
G.R. NO. 177127, October 11, 2010
DUNGOG
Facts: J.R.A. Philippines is a domestic
corporation engaged in the manufacture and
wholesale export of jackets, pants, trousers,
overalls, shirts, polo shirts, ladies wear,
dresses and other wearing apparel. It is
registered with the BIR as a VAT taxpayer
and as an Ecozone Export Enterprise with the
Philippine Economic Zone Authority (PEZA).
On separate dates, JRA filed with the
Revenue District Office (RDO) No. 54 of the
BIR applications for tax credit/refund of
unutilized input VAT on its zero-rated sales
for the taxable quarters of 2000 in the total
amount of P8,228,276.34. CIR failed to act
on the claim for credit/refund. Hence, JRA
was constrained to file a petition before the
CTA.
The Second Division of the CTA rendered a
Decision denying the claim for refund/credit
of input VAT attributable to its zero-rated
sales due to the failure of petitioner to
indicate its Taxpayers Identification Number-
VAT (TIN-V) and the word zero-rated on its
invoices. JRA filed an MOR however the
Second Division of the CTA stood firm on its
Decision. On January 15, 2007, the CTA En
Banc denied the petition, reiterating that
failure to comply with invoicing requirements
results in the denial of a claim for refund.
Issue: Whether or not the failure to print
the word zero-rated on the invoices/receipts
is fatal to a claim for credit/ refund of input
VAT on zero-rated sales?
Held: Yes. In Panasonic Communications
Imaging Corporation of the Philippines vs.
CIR, the court denied the claim for tax
credit/refund for non-compliance with
Section 4.108-1 of Revenue Regulations No.
7-95, which requires the word zero rated to
be printed on the invoices/receipts covering
zero-rated sales.
Section 4.108-1 of RR 7-95 proceeds from
the rule-making authority granted to the
Secretary of Finance under Section 245 of
the 1977 NIRC (Presidential Decree 1158) for
the efficient enforcement of the tax code and
of course its amendments. The requirement
is reasonable and is in accord with the
efficient collection of VAT from the covered
sales of goods and services. As aptly
explained by the CTAs First Division, the
appearance of the word zero-rated on the
face of invoices covering zero-rated sales
prevents buyers from falsely claiming input
VAT from their purchases when no VAT was
actually paid. If, absent such word, a
successful claim for input VAT is made, the
government would be refunding money it did
not collect. Further, the printing of the word
zero-rated on the invoice helps segregate
sales that are subject to 10% (now 12%) VAT
from those sales that are zero-rated. Unable
to submit the proper invoices, petitioner
Panasonic has been unable to substantiate
its claim for refund.
Zero-rated transactions generally refer to
the export sale of goods and services. The
tax rate in this case is set at zero. When
applied to the tax base or the selling price of
the goods or services sold, such zero rate
results in no tax chargeable against the
foreign buyer or customer. But, although the
seller in such transactions charges no output
tax, he can claim a refund of the VAT that his
suppliers charged him. The seller thus enjoys
automatic zero rating, which allows him to
recover the input taxes he paid relating to
the export sales, making him internationally
competitive. For the effective zero rating of
such transactions, however, the taxpayer
has to be VAT-registered and must comply
with invoicing requirements.
AT&T COMMUNICATIONS SERVICES
PHILIPPINES, INC. v. CIR
G.R. No. 182364 August 3, 2010
SUAMEN
Facts: Petitioner filed an application for tax
refund and/or tax credit of its
excess/unutilized input VAT from zero-rated
sales. To prevent the running of the
prescriptive period, it subsequently filed a
petition for review with the CTA. In support of
its claim, petitioner presented documents
including its Summary of Zero-Rated Sales
(with corresponding supporting documents;
VAT invoices on which were stamped zero-
rated and bank credit advices; copies of
Service Agreements; and report of the
commissioned certified public accountant.
The CTA First Division, relying on Sections
106 and 108 of the Tax Code, held that since
petitioner is engaged in sale of services, VAT
Official Receipts should have been presented
in order to substantiate its claim of zero-
rated sales, not VAT invoices which pertain to
sale of goods or properties. CTA En Banc
affirmed.
Issue: Does the sales invoice suffice as a
proof for entitlement to tax refund and/or tax
credit of its excess/unutilized input VAT from
zero-rated sales?
Held: Yes. A taxpayer engaged in zero-rated
transactions may apply for tax refund or
issuance of tax credit certificate for
unutilized input VAT, subject to the following
requirements: (1) the taxpayer is engaged in
sales which are zero-rated (i.e., export sales)
or effectively zero-rated; (2) the taxpayer is
VAT-registered; (3) the claim must be filed
within two years after the close of the
taxable quarter when such sales were made;
(4) the creditable input tax due or paid must
be attributable to such sales, except the
transitional input tax, to the extent that such
input tax has not been applied against the
output tax; and (5) in case of zero-rated
sales, the acceptable foreign currency
exchange proceeds thereof have been duly
accounted for in accordance with BSP rules
and regulations.
Section 113* of the Tax Code does not create
a distinction between a sales invoice and an
official receipt. Parenthetically, to determine
the validity of petitioners claim as to
unutilized input VAT, an invoice would suffice (A) Invoicing Requirements. A
provided the requirements under Sections VAT-registered person
113 and 237 of the Tax Code are met. shall, for every sale,
issue an invoice or
receipt. In addition to the
Sales invoices are recognized commercial
information required under
documents to facilitate trade or credit Section 237, the following
transactions. They are proofs that a business information shall be
transaction has been concluded, hence, indicated in the invoice or
should not be considered bereft of probative receipt:
value. Only the preponderance of evidence
(1) A statement that the
threshold as applied in ordinary civil cases is
seller is a VAT-
needed to substantiate a claim for tax refund registered person,
proper. followed by his
taxpayers
Note: identification number
(TIN); and
Provisions: (2) The total amount
which the purchaser
pays or is obligated to
Sec. 2. Section 16 of Revenue
pay to the seller with
Regulations 5-87 is hereby the indication that
amended to read as follows: x x such amount includes
x the value-added tax.
(emphasis, italics and
(c) Claims for tax underscoring
credits/refunds Application for supplied)
Tax Credit/Refund of Value-
Added Tax Paid (BIR Form No.
Section 110 of the 1997 Tax Code in fact
2552) shall be filed with the
provides:
Revenue District Office of the
city or municipality where the
principal place of business of A. Creditable Input Tax.
the applicant is located or
directly with the Commissioner, (1) Any input tax evidenced
Attention: VAT Division. by a VAT invoice or official
receipt issued in accordance
A photocopy of the with Section 113 hereof on
purchase invoice or receipt the following transactions shall
evidencing the value added be creditable against the output
tax paid shall be submitted tax:
together with the application.
The original copy of the said (b) Purchase of services on
invoice/receipt, however shall which a value-added tax has
be presented for cancellation actually been paid.
prior to the issuance of the Tax
Credit Certificate or refund. x x
x (emphasis and underscoring
supplied) ATLAS CONSOLIDATED MINING AND
DEVELOPMENT CORPORATION vs. CIR
*Sec. 113. Invoicing and G.R. No. 159471
Accounting Requirements for January 26, 2011
VAT-Registered Persons. GALLO
FACTS: Under Section 100 of the Tax Code of
the Philippines, petitioner is a zero-rated
Value Added Tax (VAT) person for being an
exporter of copper concentrates. On January
20, 1994, it filed its VAT return for the 4 TH
quarter of 1993, showing a total input tax
of P863,556,963.74 and an excess VAT credit
of P842,336,291.60 and, on January 25,
1996, it applied for a tax refund or a tax
credit certificate for the latter amount with
the CIR. On the same date, petitioner filed
the same claim for refund with the CTA,
claiming that the 2-year prescriptive period
provided for under Section 230 of the Tax
Code for claiming a refund was about to
expire. The CIR failed to file his answer with
the CTA; thus, the former declared the latter
in default.
The CTA denied petitioner's claim for refund
due to petitioner's failure to comply with the
documentary requirements prescribed under
Revenue Regulations No. 3-88.
Petitioner filed a Motion for
Reconsideration praying for the reopening of
the case in order for it to present the
required documents. The CTA granted the
motion. However thereafter, in a Resolution,
the CTA denied petitioner's claim stating that
the action has already prescribed and that
petitioner has failed to substantiate its claim
that it has not applied its alleged excess
input taxes to any of its subsequent quarter's
output tax liability.
The Court of Appeals affirmed in toto the
Decision of the CTA. The Supreme Court
affirmed the CAs decision, denying the
petition for lack of merit.
Issue 1: Is petitioner entitled to refund?
Ruling: No, for failure to submit the
necessary documents and other pieces of
evidence.
Applications for refund/credit of input VAT
with the BIR must comply with the
appropriate revenue regulations. As this
Court has already ruled, Revenue
Regulations No. 2-88 is not relevant to the
applications for refund/credit of input VAT
filed by petitioner corporation; nonetheless,
the said applications must have been in
accordance with Revenue Regulations No. 3-
88, amending Section 16 of Revenue
Regulations No. 5-87, which provided as
follows
SECTION 16. Refunds or tax credits of input
tax.
xxxx
(c) Claims for tax credits/refunds.
Application for Tax Credit/Refund of Value-
Added Tax Paid (BIR Form No. 2552) shall be
filed with the Revenue District Office of the
city or municipality where the principal place
of business of the applicant is located or
directly with the Commissioner, Attention:
VAT Division.
A photocopy of the purchase invoice or
receipt evidencing the value added tax
paid shall be submitted together with
the application. The original copy of the
said invoice/receipt, however, shall be
presented for cancellation prior to the
issuance of the Tax Credit Certificate or
refund. In addition, the following documents
shall be attached whenever applicable:
xxxx
3. Effectively zero-rated sale of goods and
services.
i) photocopy of approved application for
zero-rate if filing for the first time.
ii) sales invoice or receipt showing name of
the person or entity to whom the sale of
goods or services were delivered, date of
delivery, amount of consideration, and
description of goods or services delivered.
iii) evidence of actual receipt of goods or
services.
4. Purchase of capital goods.
i) original copy of invoice or receipt showing
the date of purchase, purchase price,
amount of value-added tax paid and
description of the capital equipment locally
purchased.
ii) with respect to capital equipment
imported, the photocopy of import entry
document for internal revenue tax purposes
and the confirmation receipt issued by the
Bureau of Customs for the payment of the
value-added tax.
5. In applicable cases,
where the applicants zero-rated transactions
are regulated by certain government
agencies, a statement therefrom showing the
amount and description of sale of goods and
services, name of persons or entities (except
in case of exports) to whom the goods or
services were sold, and date of transaction
shall also be submitted.
In all cases, the amount of refund or tax
credit that may be granted shall be limited to
the amount of the value-added tax (VAT)
paid directly and entirely attributable to the
zero-rated transaction during the period
covered by the application for credit or
refund.
Where the applicant is engaged in zero-rated
and other taxable and exempt sales of goods
and services, and the VAT paid (inputs) on
purchases of goods and services cannot be
directly attributed to any of the
aforementioned transactions, the following
formula shall be used to determine the
creditable or refundable input tax for zero-
rated sale:
Amount of Zero-rated Sale
Total Sales
x to such summary and certification pursuant
Total Amount of Input Taxes
= Amount Creditable/Refundable
In case the application for refund/credit of
input VAT was denied or remained unacted
upon by the BIR, and before the lapse of the
two-year prescriptive period, the taxpayer-
applicant may already file a Petition for
Review before the CTA. If the taxpayers
claim is supported by voluminous
documents, such as receipts, invoices,
vouchers or long accounts, their presentation
before the CTA shall be governed by CTA
Circular No. 1-95, as amended, reproduced in
full below
In the interest of speedy administration of
justice, the Court hereby promulgates the
following rules governing the presentation of
voluminous documents and/or long accounts,
such as receipts, invoices and vouchers, as
evidence to establish certain facts pursuant
to Section 3(c), Rule 130 of the Rules of
Court and the doctrine enunciated
in Compania Maritima vs. Allied Free
Workers Union (77 SCRA 24), as well as
Section 8 of Republic Act No. 1125:
1. The party who desires to introduce as
evidence such voluminous documents must,
after motion and approval by the Court,
present:
(a) a Summary containing, among others, a
chronological listing of the numbers, dates
and amounts covered by the invoices or
receipts and the amount/s of tax paid; and
(b) a Certification of an independent Certified
Public Accountant attesting to the
correctness of the contents of the summary
after making an examination, evaluation and
audit of the voluminous receipts and
invoices. The name of the accountant or
partner of the firm in charge must be stated
in the motion so that he/she can be
commissioned by the Court to conduct the
audit and, thereafter, testify in Court relative
to Rule 32 of the Rules of Court.
2. The method of individual presentation of
each and every receipt, invoice or account
for marking, identification and comparison
with the originals thereof need not be done
before the Court or Clerk of Court anymore
after the introduction of the summary and
CPA certification. It is enough that the
receipts, invoices, vouchers or other
documents covering the said accounts or
payments to be introduced in evidence must
be pre-marked by the party concerned and
submitted to the Court in order to be made
accessible to the adverse party who desires
to check and verify the correctness of the
summary and CPA certification. Likewise, the
originals of the voluminous receipts, invoices
or accounts must be ready for verification
and comparison in case doubt on the
authenticity thereof is raised during the
hearing or resolution of the formal offer of
evidence.
As aptly ruled by this Court in Atlas: Whether
petitioner corporation actually made zero-
rated sales; whether it paid input VAT on
these sales in the amount it had declared in
its returns; whether all the input VAT subject
of its applications for refund/credit can be
attributed to its zero-rated sales; and
whether it had not previously applied the
input VAT against its output VAT liabilities,
are all questions of fact which could only be
answered after reviewing, examining,
evaluating, or weighing the probative value
of the evidence it presented.
Issue 2: Did petitioner, in not submitting its
export documents, fail to present adequate
proof that its input taxes are directly
attributable to its export sales?
Ruling: Yes. The CTA, applying the
abovementioned rules ruled that the formal
offer of evidence of the petitioner failed to
include photocopy of its export documents,
as required. There is no way therefore, in
determining the kind of goods and actual
amount of export sales it allegedly made
during the quarter involved. This finding is
very crucial when we try to relate it with the
requirement of the aforementioned
regulations that the input tax being claimed
for refund or tax credit must be shown to be
entirely attributable to the zero-rated
transaction, in this case, export sales of
goods. Without the export documents, the
purchase invoice/receipts submitted by the
petitioner as proof of its input taxes cannot
be verified as being directly attributable to
the goods so exported.
Issue 3: Did petitioner fail to present
adequate proof that it had not applied the
claimed input tax to its output taxes from
prior and succeeding quarters?
Ruling: Yes. The CTA cannot grant
petitioner's claim for credit or refund of input
taxes due to its failure to show convincingly
that the same has not been applied to any of
its output tax liability as provided under
Section 106 (a) of the Tax Code. There is no
evidence to show that the amount herein
claimed for refund when applied for
on January 25, 1996 has not been priorly or
thereafter applied to its output tax liability
The above factual findings were affirmed and
accorded respect by the CA. Nevertheless,
petitioner insists that it has submitted
documents and other pieces of evidence,
except those required by law, that would
establish the existence of the input VAT for
the fourth quarter of 1993 and that the
excess input VAT claimed for refund or tax
credit has not been applied to its output tax
liability for prior and succeeding quarters.
The above argument, however, is flawed. It
must be remembered that when claiming tax
refund/credit, the VAT-registered taxpayer
must be able to establish that it does have
refundable or creditable input VAT, and the
same has not been applied against its output
VAT liabilities information which are
supposed to be reflected in the taxpayers
VAT returns. Thus, an application for tax
refund/credit must be accompanied by
copies of the taxpayers VAT return/s for the
taxable quarter/s concerned. The CTA and
the CA, based on their appreciation of the
evidence presented, committed no error
when they declared that petitioner failed to
prove that it is entitled to a tax refund and
this Court, not being a trier of facts, must
defer to their findings.
Issue 4: Has petitioners claim for refund
prescribed?
Ruling: Anent the issue of prescription,
wherein petitioner questions the ruling of the
CA that the former's claim for refund has
prescribed, disregarding the failure of
respondent Commissioner of Internal
Revenue and the CTA to raise the said issue
in their answer and original decision,
respectively, this Court finds the same moot
and academic. Although it may appear that
the CTA only brought up the issue of
prescription in its later resolution and not in
its original decision, its ruling on the merits
of the application for refund, could only imply
that the issue of prescription was not the
main consideration for the denial of
petitioner's claim for tax refund. Otherwise,
the CTA would have just denied the
application on the ground of prescription.
CIR vs. Aichi Forging Company of Asia,
Inc.
G.R. No. 184823 October 6,
2010
Keyword: Claim for refund
BONGANCISO
Facts: Aichi Forging Company of Asia, Inc. is
engaged in the manufacturing, producing,
and processing of steel and its by-products,
also registered as a VAT entity. Its products,
"close impression die steel forgings" and
"tool and dies," are registered with the Board
of Investments (BOI) as a pioneer status.
In 30 September 2004, Aichi filed a claim for
refund/credit of input VAT for the period July
2002 to September 2002 in the total amount
of P3M+ with the CIR), through the DOFs
One-Stop Shop Inter-Agency Tax Credit and
Duty Drawback Center.
This Petition for Review on Certiorari under
Rule 45 seeks to set aside the Decision and
Resolution of the CTA En Banc, affirming the
the Second Divisions Decision allowing the
partial tax refund/credit in favor of
respondent. However, as to the reckoning
point for counting the two-year period, the
CTA En Banc ruled that the reckoning of the
two-year period provided under Section 229
of the 1997 NIRC should start from the
payment of tax subject claim for refund.
Thus, Aichis administrative and judicial
claims for refund filed on September 30,
2004 were filed on time because it has until
October 20, 2004 within which to file its
claim for refund.
Issue: Were the judicial and administrative
claims for tax refund/credit filed within the
two-year prescriptive period provided in
Sections 112(A) and 229 of the NIRC?
Ruling: The administrative claim was filed
within the reglementary period. However,
the filing of the judicial claim was premature,
in violation of Section 112(D) of the NIRC.
Section 112 of the NIRC is the pertinent
provision for the refund/credit of input VAT.
Thus, the two-year period should be
reckoned from the close of the taxable
quarter when the sales were made. In the
present case, the two-year period to file a
claim for tax refund/credit for the period July
1, 2002 to September 30, 2002 expired on
September 30, 2004. Hence, respondents
administrative claim was timely filed.
Section 112(D) of the NIRC clearly provides
that the CIR has "120 days, from the date of
the submission of the complete documents
in support of the application [for tax
refund/credit]," within which to grant or deny
the claim. In case of full or partial denial by
the CIR, the taxpayers recourse is to file an
appeal before the CTA within 30 days from
receipt of the decision of the CIR. However, if
after the 120-day period the CIR fails to act
on the application for tax refund/credit, the
remedy of the taxpayer is to appeal the
inaction of the CIR to CTA within 30 days.
In this case, the administrative and the
judicial claims were simultaneously filed on
September 30, 2004. Obviously, respondent
did not wait for the decision of the CIR or the
lapse of the 120-day period. For this reason,
we find the filing of the judicial claim with the
CTA premature. The premature filing of
Aichis claim for refund/credit of input VAT
before the CTA warrants a dismissal
inasmuch as no jurisdiction was acquired by
the CTA.
CIR vs. SAN ROQUE POWER CORP.
G.R. No. 187485 February 12, 2013
DU

FACTS: On October 11, 1997, San Roque
Power Corporation (San Roque) entered into
a Power Purchase Agreement (PPA) with the
National Power Corporation (NPC) by building
the San Roque Multi-Purpose Project in San
Manuel, Pangasinan. The San Roque Multi-
Purpose Project allegedly incurred, excess
input VAT in the amount of P559,709,337.54
for taxable year 2001 which it declared in its
Quarterly VAT Returns filed for the same
year. San Roque duly filed with the BIR
separate claims for refund, amounting to
P559,709,337.54, representing unutilized
input taxes as declared in its VAT returns for
taxable year 2001. However, on March 28,
2003, San Roque filed amended Quarterly
VAT Returns for the year 2001 since it
increased its unutilized input VAT To the
amount of P560,200,283.14. San Roque filed
with the BIR on the same date, separate
amended claims for refund in the aggregate
amount of P560,200,283.14. On April 10,
2003, a mere 13 days after it filed its
amended administrative claim with the CIR
on March 28, 2003, San Roque filed a Petition
for Review with the CTA. CIR alleged that the
claim by San Roque was prematurely filed
with the CTA.
ISSUE: WON San Roque is entitled to tax
refund
RULING: No. San Roque is not entitled to a
tax refund because it failed to comply with
the mandatory and jurisdictional requirement
of waiting 120 days before filing its judicial
claim. On April 10, 2003, a mere 13 days
after it filed its amended administrative
claim with the CIR on March 28, 2003, San
Roque filed a Petition for Review with the
CTA, which showed that San Roque did not
wait for the 120-day period to lapse before
filing its judicial claim. Compliance with the
120-day waiting period is mandatory and
jurisdictional, under RA 8424 or the Tax
Reform Act of 1997. Failure to comply
renders the petition void. It violates the
doctrine of exhaustion of administrative
remedies and renders the petition premature
and without a cause of action, with the effect
that the CTA does not acquire jurisdiction
over the taxpayers petition. Article 5 of the
Civil Code provides, "Acts executed against
provisions of mandatory or prohibitory laws
shall be void, except when the law itself
authorizes their validity."
Well-settled is the rule that tax refunds or
credits, just like tax exemptions, are strictly
construed against the taxpayer. Whether the
Atlas doctrine or the Mirant doctrine is
applied to San Roque is immaterial because
what is at issue in the present case is San
Roques non-compliance with the 120-day
mandatory and jurisdictional period, which is
counted from the date it filed its
administrative claim with the CIR. The 120-
day period may extend beyond the two-year
prescriptive period, as long as the
administrative claim is filed within the two-
year prescriptive period. However, San
Roques fatal mistake is that it did not wait
for the CIR to decide within the 120-day
period, a mandatory period whether the
Atlas or the Mirant doctrine is applied.
Section 112(D) of the 1997 Tax Code is clear,
unequivocal, and categorical that the CIR has
120 days to act on an administrative claim.
The taxpayer can file the judicial claim (1)
Only within 30 days after the CIR partially or
fully denies the claim within the 120- day
period, or (2) only within 30 days from the
expiration of the 120- day period if the CIR
does not act within the 120-day period. Even
if, contrary to all principles of statutory
construction as well as plain common sense,
we gratuitously apply now Section 4. 106-
2(c) of Revenue Regulations No. 7-95, still
San Roque cannot recover any refund or
credit because San Roque did not wait for
the 60-day period to lapse, contrary to the
express provision.
CBK Power v. CIR
RAGAY
Facts: CBK Power is a VAT-registered
domestic partnership. The BIR, in Revenue
Ruling DA-146-2006 stated that the billings
and fees for the sale of electricity of CBK to
NPC are subject to VAT at zero percent.
Subsequently, CBK filed an administrative
claim for the issuance of a tax credit
certificate for its unutilized input taxes which
were attributable to CBKs zero-rated sales.
The administrative claim was filed on March
26, 2009. The next day, CBK filed a petition
for review with the CTA. The CTA dismissed
the petition for being prematurely filed.
Issue: Was the administrative claim
premature?
Ruling: Yes. The administrative claim was
prematurely filed. According to Sec. 112 of
the NIRC, the Commissioner shall grant a
refund or issue a tax credit certificate for
creditable input taxes within 120 days from
the date of submission of complete
documents in support of the application. A
taxpayer may appeal the denial or inaction
of the Commissioner only within 30 days
from receipt of the decision that denied the
claim, or the expiration of the 120 day period
given to the commissioner to decide the
claim. However, the administrative claim is
exempt from the 120-day period as it was
filed within the window created in the case of
CIR v. San Roque.
Issue: was the demand for a tax credit
certificate timely made (based on a separate
set of facts- consolidated case; facts are
incorporated in the ruling)?
Ruling: No. Under Sec. 112 of the NIRC, such
demand may be made within two years after
the close of the taxable quarter when the
sales were made. with the close of the
second taxable quarter of 2006 being June
30, 2006, CBK should have filed its
administrative claim for its quarter on or
before June 30, 2008 and not on July 23,
2008. However, since the date of the
demand falls within the window of effectivity
of Atlas Consolidated v. CIR, CBKs
administrative claim for the second quarter
of 2006 was filed on time considering that
CBK filed its original VAT return for the
second quarter on July 25, 2006.
Silicon Phils vs CIR
GUAZON
Facts: Silicon Philippines, Inc. is a
corporation duly organized and existing
under the laws of the Philippines. On May 6,
1999, Silicon filed with the CIR an
application for credit/refund of unutilized
input VAT for the period of Oct. 1,1998 to
Dec. 31, 1998. Silicon alleged that the 3 rd
quarter of 1998, it generated and recorded
zero-rated export sales paid to Silicon in
acceptable foreign currency and that for the
said period, Silicon paid input VAT in the total
amount of P25,532,312.83. When respondent
Commissioner of Internal Revenue (CIR)
failed to act upon its aforesaid Application for
Tax Credit/Refund, SPI filed on September
29, 2000 a Petition for Review before the
CTA Division, which was docketed as CTA
Case No. 6170
Issue: Whether or not Silicons
administrative and judicial claims have
prescribed.
Ruling: (See Sec 112 of the NIRC) SPI filed
on May 6, 1999 its administrative claim for
tax credit/refund of the input VAT attributable
to its zero-rated sales and on its purchases of
capital goods for the Third Quarter of 1998.
The two-year prescriptive period for filing an
administrative claim, reckoned from the
close of the taxable quarter, prescribed on
September 30, 2000. Therefore, the
herein administrative claim of SPI was timely
filed.
Evidently, SPI belatedly filed its judicial
claim. It filed its Petition for Review with the
CTA 391 days after the lapse of the 120-day
period without the CIR acting on its
application for tax credit/refund, way beyond
the 30-day period under Section 112 of the
1997 Tax Code. Because the 30-day period
for filing its judicial claim had already
prescribed by the time SPI filed its Petition
for Review with the CTA Division, the CTA
Division never acquired jurisdiction over the
said Petition.
A. Two-Year Prescriptive Period
1. It is only the administrative claim that
must be filed within the two-year
prescriptive period.
2. The proper reckoning date for the two-
year prescriptive period is the close of
the taxable quarter when the relevant
sales were made.
B. 120+30 Day Period
1. The taxpayer can file an appeal in one
of two ways: (1) file the judicial claim
within thirty days after the
Commissioner denies the claim within
the 120-day period, or (2) file the
judicial claim within thirty days from
the expiration of the 120-day period if
the Commissioner does not act within
the 120-day period.
2. The 30-day period always applies,
whether there is a denial or inaction
on the part of the CIR. (inaction in this
case)
3. As a general rule, the 30-day period to
appeal is both mandatory and
jurisdictional.
4. Late filing is absolutely prohibited.
TOLEDO POWER COMPANY vs. CIR GR
NO 199645 AUGUST 10, 2015
BALASABAS
Facts: Toledo Power Company (TPC) is
engaged in the business of power generation
and sale to the National Power Corporation
(NPC), Cebu Electric Cooperative III
(CEBECO), Atlas Consolidated Mining and
Development Corporation, and Atlas
Fertilizer Corporation. Pursuant to Section 6,
Chapter II5 of Republic Act (R.A.) No. 9136
Electric Power Industry Reform Act of 2001
(EPIRA), value-added tax (VAT) on sales of
generated power by generation companies
are zero-rated.
C.T.A. EB No. 589
On 23 December 2004, TPC filed a
claim for refund with the Bureau of Internal
Revenue (BIR), for alleged unutilized input
VAT for the four quarters of 2004 in the total
amount of P17,443,855.22. TPCs claim was
elevated to the CTA on 24 April 2006.
The CTA First Division partly granted
the Petition and ordered the refund of
P8,617,425.41 to TPC. CIR raised the issue of
failure to submit the legally required
documents in its administrative application
for a refund. CTA En Banc denied the CIRs
appeal. The court ruled that the non-
submission of supporting documents to the
administrative level is not fatal to the claim
for a refund.
C.T.A. EB No. 708
On 23 December 2004, TPC filed with
BIR a claim for the refund of unutilized input
VAT for the four quarters of 2003 in the total
amount of P15,838,539.48.
On 22 April 2005, TPC filed the first
Petition with the CTA for the refund of
unutilized input VAT in the amount of
P3,907,783.80 for the first quarter of 2003.
Also filed by TPC on 22 July 2005
another claim for refund of unutilized input
VAT for the second quarter of 2003 in the
total amount of P2,124,847.14.
The two Petitions filed by TPC were
consolidated. On 15 December 2009, the
First Division partly granted the refund, but
only in the amount of P185,395.11 (original
Decision).
Upon Motion for Reconsideration of
both parties, the Special First Division
rendered an Amended Decision on 1
December 2010. The original Decision was
set aside and the Motion for Reconsideration
of the CIR, granted. Citing CIR v. Aichi
Forging Company of Asia, Inc. (Aichi), the
CTA Special First Division ruled that it had no
jurisdiction over TPCs Petitions, which were
thus dismissed.
The appeal of TPC to the CTA En Banc
was also dismissed on 7 July 2011. The
appellate court ruled that in accordance with
this Courts Decision in Aichi, the Petition in
C.T.A. Case No. 7233 was considered
prematurely filed, while that in C.T.A. Case
No. 7294 was filed late.
The CIR filed a Petition before this
Court assailing the Decision of the CTA En
Banc in C.T.A. EB No. 589, docketed as G.R.
No. 195175. The CIR mainly points out that
the law requires the submission of complete
supporting documents to the BIR before the
120-day audit period shall apply, and before
the taxpayer can avail itself of the judicial
remedies provided for by law. In this case,
TPC failed to submit complete documents in
support of its application for a tax refund. To
the CIR, such disregard of a mandatory
requirement warranted the denial of TPCs
claim for a refund.
On the other hand, TPC appealed the
denial of its claim in C.T.A. EB No. 708, which
was docketed as G.R. No. 199645. TPC
alleged that Section 229 of the NIRC of 1997,
which gives taxpayers two years within
which to claim a refund, should be applied to
this case, considering that the prevailing rule
at the time the Petitions were filed was that
the 120-30 day period was neither
mandatory nor compulsory. Also, TPC posits
that Aichi should not be applied retroactively,
and that there are differences between the
factual milieu of this case and that of Aichi.
Issue: Whether TPC is entitled to the refund
of its alleged unutilized input VAT for the first
and the second quarters of taxable year
2003, as well as for the four quarters of
taxable year 2004.
Ruling: The consolidated cases involve a
claim for input VAT pursuant to Section 112
of the National Internal Revenue Code (NIRC)
of 1997. Pursuant to this provision, the
requisites for claiming unutilized/excess
input VAT, except transitional input VAT, are
as follows:
1) The taxpayer-claimant is VAT registered;
2) The taxpayer-claimant is engaged in zero-
rated or effectively zero-rated sales;
3) There are creditable input taxes due or
paid attributable to the zero-rated or
effectively zero-rated sales;
4) This input tax has not been applied
against the output tax; and
5) The application and the claim for a refund
have been filed within the prescribed period.
With regard to the first and the second
requisites, it is undisputed that TPC is VAT-
registered and is engaged in the sale of
generated power, which is effectively zero-
rated. The third and the fourth requisites are
purely factual and the CTA has the
jurisdiction to determine compliance
therewith.
As to the prescriptive period, the Court
in the consolidated tax cases Commissioner
of Internal Revenue v. San Roque Power
Corporation, Taganito Mining Corporation v.
Commissioner of Internal Revenue, and
Philex Mining Corporation v. Commissioner of
Internal Revenue (hereby collectively
referred as San Roque), ruled that the
observance of the 120+30 day period is
mandatory and jurisdictional.
A summary of rules on prescriptive
periods involving claims for the refund of
input VAT was provided in Mindanao II
Geothermal Partnership v. Commissioner of
Internal Revenue and Mindanao I Geothermal
Partnership v. Commissioner of Internal
Revenue14 as follows:
Summary of Rules on Prescriptive
Periods Involving VAT
We summarize the rules on the
determination of the prescriptive period for
filing a tax refund or credit of unutilized input
VAT as provided in Section 112 of the 1997
Tax Code, as follows:
(1) An administrative claim must be
filed with the CIR within two years after the
close of the taxable quarter when the zero-
rated or effectively zero-rated sales were
made.
(2) The CIR has 120 days from the
date of submission of complete documents in
support of the administrative claim within
which to decide whether to grant a refund or
issue a tax credit certificate. The 120-day
period may extend beyond the two-year
period from the filing of the administrative
claim if the claim is filed in the later part of
the two-year period. If the 120-day period
expires without any decision from the CIR,
then the administrative claim may be
considered to be denied by inaction.
(3) A judicial claim must be filed with
the CTA within 30 days from the receipt of
the CIRs decision denying the administrative
claim or from the expiration of the 120-day
period without any action from the CIR.
(4) All taxpayers, however, 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, as an exception to the mandatory and
jurisdictional 120+30 day periods.
G.R. No. 195175
Since the filing of the administrative
and judicial claims was done in 2004 and
2006, respectively, it would seem that
compliance with the prescriptive period in
this case falls within the exception period
within which the Court recognizes the
validity of BIR Ruling No. DA-489-03.
However, records would show that TPC will
have the same fate as Philex in San Roque.
It is not disputed that the
administrative claim for a refund of
unutilized input VAT for all quarters of
taxable year 2004 was filed on 23 December
2004. Claiming that TPC made zero-rated or
effectively zero-rated sales within the four
quarters of 2004, the administrative claim for
the refund of unutilized input VAT
attributable to the sales in those periods was
timely filed on 23 December 2004. That date
was clearly within two years from the close
of the taxable quarters when the sales were
made.
Theoretically, from 23 December
2004, the CIR had 120 days or until 22 April
2005 within which to decide the
administrative claim. Thereafter, since it
rendered no decision within the 120-day
period, TPC had until 22 May 2005 to file its
Petition to the CTA.
In this case, however, since the filing
of the administrative claim was done within
the period where BIR Ruling No. DA-489-03
was recognized valid, TPC is not compelled
to observe the 120-day waiting period.
Nevertheless, it should have filed the Petition
within 30 days after the expiration of the
120-day period.
San Roque recognized BIR Ruling No.
DA-489-03 which allowed the premature
filing of a judicial claim as an exception to
the mandatory observance of the 120-day
period. By virtue of the doctrines laid down
in San Roque, TPC should have filed its
judicial claim from 23 December 2004 until
22 May 2005; however, it filed its Petition to
the CTA only on 24 April 2006. Just like
Philex, TPCs situation is not a case of
premature filing of a judicial claim, but of
late filing.
TPC lost its right to claim a refund or
credit of its alleged excess input VAT
attributable to zero-rated or effectively zero-
rated sales for taxable year 2004 by virtue of
its own failure to observe the prescriptive
periods.
G.R. No. 199645
 In both C.T.A. Case Nos. 7233 and
7294, the administrative claim for the refund
of unutilized input VAT attributable to the
zero-rated or effectively zero-rated sales was
timely filed on 23 December 2004, which
was within two years from the close of the
first and the second quarters of 2003 when
the sales were made. Similarly, this case also
falls within the exception period by virtue of
BIR Ruling No. DA-489-03 as recognized in
San Roque.
In C.T.A. Case No. 7233, TPC filed its
judicial claim on 22 April 2005. In theory,
the CTA does not have jurisdiction over the
Petition, since it was filed on the last day of
the 120-day period for the CIR, or without
waiting for the expiration of the aforesaid
period. However, BIR Ruling No. DA-489-03
allows this premature filing. TPC may claim
the benefits of that ruling in its Petition in
C.T.A. Case No. 7233 for the refund of the
unutilized input VAT attributable to zero-
rated or effectively zero-rated sales for the
first quarter of 2003.
CE Luzon Geothermal vs CIR
GR NO. 200841 August 26, 2015
Sec 112; 120 + 30 days rule
Facts: CE Luzon, a domestic corporation
duly organized and existing under Philippine
laws is engaged in the business of power
generation. It filed its quarterly VAT returns
for the year 2005 which reflected an
overpayment of P20,546,004.87. CE Luzon
maintained that its overpayment was due to
its domestic purchases of non-capital goods
and services, services rendered by non-
residents, and importation of non-capital
goods.
On November 30, 2006, CE Luzon filed
an administrative claim for refund of its
unutilized input VAT in the amount of
P20,546,004.87 before the BIR. On January 3,
2007, it filed a judicial claim for refund, by
way of a petition for review, before the CTA.
CIR claimed that the amount being
claimed by CE Luzon as unutilized input VAT
was not properly documented and that the
filing of its petition for review was premature
and should be denied.
The CTA Division Ruling
CTA Division partially granted CE
Luzon's claim for tax refund, and thereby
ordered the CIR to issue a tax credit
certificate in the reduced amount,
representing its unutilized input VAT which
was attributable to its VAT zero-rated sales
for the year 2005. It found that while CE
Luzon timely filed its administrative and
judicial claims within the 2-year prescriptive
period, it failed to duly substantiate the
remainder of its claim for unutilized input
VAT, resulting in the partial denial.
Both parties moved for partial
reconsideration.
CTA Division partially granted CE Luzon's
motion for reconsideration.
CE Luzon and the CIR respectively appealed
to the CTA En Banc.
The CTA En Banc Ruling
CTA En Banc set aside the CTA
Division's findings, holding that CE Luzon's
premature filing of its claim divested the CTA
of jurisdiction. It ruled that the filing of a
judicial claim must be made within thirty (30)
days to be computed from either: (a) the
receipt of the CIR's decision; or (b) after the
expiration of the 120-day period for the CIR
to act. CE Luzon's petition was filed only
after the lapse of 34 days from the time it
filed its administrative claim with the BIR.
Issue: Whether or not CE Luzon's claims for
tax refund of unutilized input VAT is
premature and should be dismissed.
The Court's Ruling
No.
It should be first pointed out that the rule
governing a taxpayer's claim for refund of
unutilized input VAT is found in Section 112
of the National Internal Revenue Code
(NIRC), as amended by Republic Act No. 9337
the pertinent portion of which reads:
SEC. 112. Refunds or Tax Credits of Input Tax.
- 30, 2006 and January 3, 2007, respectively,
(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.
xxxx
(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.
Records show that CE Luzon's administrative
and judicial claims were filed on November
or during the period of effectivity of BIR
Ruling No. DA-489-03 and, thus, fell within
the window period stated in San Roque, i.e.,
when taxpayer-claimants need not wait for
the expiration of the 120-day period before
seeking judicial relief. Verily, the CTA En
Banc erred when it outrightly dismissed CE
Luzon's petition on the ground of
prematurity.
Cargill vs. Commissioner of Internal
Revenue
G.R. No. 203774, March 11, 2015
VAT- Applicability
BATULAN
Facts: Cargill, a VAT-registered domestic
corporation, filed two petitions in the Court
of Tax Appeals for the refund of unutilized
input taxes attributable to zero-rated sales.
On June 27, 2003, Cargill filed an
administrative claim for refund of unutilized
input taxes with the BIR. Three days after, on
June 30, 2003, Cargill filed the first petition
with the Court of Tax Appeals. The second
petition was filed on May 31, 2005, which
was the same date when Cargill filed an
administrative claim with the BIR.
Issue: Whether or not Cargills petitions for
refund of unutilized input VAT before the CTA
should be dismissed on the ground of
prematurity?
Ruling: The first petition was filed
prematurely while the second petition was
properly filed because it was exempted from
the mandatory 120-day period.
Sec. 112(A) of RA 8424 provides that claims
for tax credit or tax refund of unutilized input
taxes attributable to zero-rated sales can be
claimed within two years after the close of
the taxable quarter when the sales were
made. Sec. 112(D) of RA 8424 also provides
that the Commissioner shall grant a refund
or issue the tax credit certificate for
creditable input taxes within one hundred
twenty days from the date of submission of
complete documents. Within thirty (30) days
from receipt of the Commissioners decision
or after the expiration of the 120-day period,
the taxpayer may appeal the decision or the
unacted claim with the CTA.
In the landmark case of Aichi Forging vs. CIR,
it was held that the observance of the 120-
day period is a mandatory and jurisdictional
requisite to the filing of a judicial claim for
refund before the CTA. As such, its non-
observance would warrant the dismissal of
the dismissal of the judicial claim for lack of
jurisdiction. In Aichi, it was held that the two-
year period only applies to administrative
claims, and not judicial claims. Once the
administrative claim is filed within the 2-year
period, the taxpayer must wait for the lapse
of the 120-day period before filing a judicial
claim for refund, even if the 120-day period
is beyond the original 2-year period
abovementioned.
489-03) was still effective at that time.
However, for the periods BEFORE and AFTER
the abovementioned period (December 10,
2003 to October 6, 2010) the 120-day period
was mandatory and jurisdictional.
Hence, in this case, the first petition, which
was filed on June 30, 2003, was prematurely
filed because Cargill did not wait for the
lapse of the 120-day period before seeking
relief with the CTA. The first petition is not
covered by the exception based on estoppel
because it was filed before the BIR issued
Ruling No. DA-489-03. The CTA did not have
jurisdiction over the first petition.
The second petition, however, fell within the
exemption from the 120-day period because
it was filed within the effectivity of BIR Ruling
No. DA-489-03 (within Dec. 10, 2003 to Oct.
6, 2010). Since the second petition was
timely filed, it was reinstated and remanded
to the CTA for its resolution on the merits.
Note: this case applies to claims for tax
credits or tax refunds of unutilized
input taxes attributable to zero-rated
sales of the VAT.

However, the Supreme Court held in CIR v.

San Roque that a valid claim for equitable
estoppel by the taxpayer because of reliance
of an earlier ruling issued by the BIR is an
exception to the mandatory nature of the
120-day period. BIR Ruling No. DA-489-03
stated that the taxpayer-claimant need not
wait for the lapse of the 120-day period
before seeking judicial relief. Taxpayers did
not need to observe the stringent 120-day
period for the period December 10, 2003 to
October 6, 2010 because the BIR Ruling (DA-