VAT April 20, N/A 1st Qtr., P26.

03M April 20, 1994

GR No. 141104 (2007) – Atlas Consolidated Mining and Development Corporation v. 1992 1992
CIR
Chico-Nazario, J. a. CTA ruled IFO respondent CIR on the ground of prescription, insufficiency of
evidence, and failure to comply with Section 230 of the 1977 Tax Code1
Petitioner is engaged in the mining business and sells its goods to companies that are (Note: all references to sections in the main body of this digest would be to
registered with BOI and EPZA. It treated such sales as zero-rated sales, so it filed for an the 1977 Tax Code unless explicitly referred to NIRC; all references in the
application for refund/credit for the last 3 quarters of 1990 and the 1 st quarter of 1991, footnotes would be to the NIRC as amended by TRAIN).
which was denied by CTA and affirmed by CA and SC. Petitioner failed to substantiate its i. CTA also denied petitioner’s alternate prayer for a new trial
claims to the input VAT. because it did not fall under any of the grounds provided by
Section 1, Rule 37 of RoC and it was not supported by affidavits of
merits as required by Section 2, Rule 37 of RoC.
DOCTRINE
It is only through the filing of quarterly VAT return would a taxpayer know with certainty b. CA affirmed. It ruled that the petitions were timely filed, but petitioner failed
how much input VAT one can apply against its output VAT; how much output VAT it is due to substantiate its claims.
to pay; how much input VAT it may carry-over to the following quarter or ask for i. It relied on Revenue Regulation (RR) 2-88, which required the
refund/credit. taxpayer claiming zero-rated sales to buyer companies were not
just BOI-registered, but also exporting 70% of their total annual
VAT-registered taxpayers must be able to establish that production
1. it does have refundable/creditable input VAT;
2. such has not been applied against its output VAT liabilities. ISSUE with HOLDING
3. These are evidenced by copies of the taxpayer’s VAT return/s for the taxable 3. WON the claims have prescribed – NO, as to the 1990 claims; YES, as to the 1992
quarter/s concerned for the application for refund/credit. claims.
a. Petitioner: The 2-year prescriptive period must be counted from the date of
Taxpayer-claimant has the burden of proving the filing of the quarterly VAT return and payment of the tax due 20 days after,
1. legal basis: its sales qualify for VAT zero-rating under the existing laws; and as provided by Section 110(b) 2 and not from the close of the quarter when
2. factual basis: that said sales were actually made and resulted in the zero-rated sales were made.
refundable/creditable input VAT in the amount being claimed. b. SC: Agreed with petitioner because it would be more practical and
reasonable.
i. Section 106(b) and (c)3 provides that the 2-year prescriptive period
FACTS for filing the application for refund/credit of input VAT on zero-rated
1. Petitioner Atlas Consolidated Mining and Development Corporation is engaged in the sales shall be determined from the close of the quarter when such
business of mining, production, and sale of various mineral products such as gold. It sales were made.
is also a VAT-registered taxpayer. 1. Settled in jurisprudence that the 2-year prescriptive
2. It sold to Philippine Smelting and Refinining Corporation (PASAR) and Philippine period to recover corporate income tax erroneously or
Phospate, Inc. (PHILPHOS), companies that were registered not only with the Board illegally paid under Section 230 was to be counted from
of Investments (BOI), but also with the Export Processing Zone Authority (EPZA), the filing of the final adjustment return.
which it considered as zero-rated sales. a. ACCRA Investments Corporation v. CA:
a. It also sold gold to the Central Bank of the Philippines (CBP). rationale in computing the 2-year prescriptive
3. It filed several quarterly returns and applications for the refund/credit of its input VAT period with respect to a corporate taxpayer’s
on its purchases of capital goods and its zero-rated sales. BIR ignored such, so claim for refund from the time it filed its final
petitioner filed for petitions for review before CTA. adjustment return is that it could only ascertain
whether it made profits or incurred losses.
Date of Date of Period Amount Date of Filing of b. CIR v. TMX Sales, Inc.: filing of quarterly
Filing of Application for Covered Applied For Petition for income tax returns and payment of quarterly
Return (with Refund/Credit (Approximate) Review (with income tax should be considered mere
BIR) (with BIR) CTA) installments of the annual tax due; these
July 20, August 21, 1990 2nd Qtr., P54.01M July 20, 1992 quarterly payments should be treated as
1990 1990
October 18, November 21, 3rd Qtr., P75.30M October 9, 1992
1 Now Section 229
1990 1990 1990
January 20, February 19, 4th Qtr., P43.83 January 14, 2 Now Section 114: which provides 25 days for the payment of the VAT
1991 1991 1990 1993 3 Now Section 112

1
 advances of the annual income tax due to be
adjusted at the end of the calendar/fiscal year.
c. CIR v. Prieto: when a tax is paid in installments,
the 2-year prescriptive period is counted from
the date of the final payment.
ii. SC thinks that the aforecited cases applies to petitions involving
the same prescriptive period for claims for refund/credit of input
VAT on zero-rated sales, despite VAT being paid on a purely
quarterly basis without the need for a final adjustment at the end of
the year.
1. It is only through the filing of quarterly VAT return would
a taxpayer know with certainty
a. how much input VAT one can apply against its
output VAT;
b. how much output VAT it is due to pay;
c. how much input VAT it may carry-over to the
following quarter or ask for refund/credit.
2. SC reiterated here that a taxpayer has an option to
a. Directly apply its input VAT against his output
VAT; OR
b. Carry over any excess input VAT; OR
c. File an application for refund or issuance of a
tax credit certificate.
3. Even there is no final adjustment returns, VAT-registered
taxpayers must make adjustments in its VAT return every
quarter, factoring in the input VAT which are creditable or
had been carried over.
4. VAT-registered taxpayers must be able to establish that
a. it does have refundable/creditable input VAT;
b. such has not been applied against its output
VAT liabilities.
c. These are evidenced by copies of the
taxpayer’s VAT return/s for the taxable
quarter/s concerned for the application for
refund/credit.
5. It must be remembered that a refund/credit is a privilege
extended to those who are qualified and registered VAT
taxpayers.
c. As applied in this case
i. As seen on the table (see fact #3), all administrative and judicial
claims of petitioner were timely filed for its application for zero-
rated sales for its 1990 claims.
ii. As for its 1992 claim, there is no showing that petitioner filed an
administrative claim with BIR because of defects in its application
(it was unsigned by petitioner’s authorized representative, it was
not dated, stamped, and initialed by the BIR official who
supposedly received it).
1. Section 106(e)4 explicitly provided that no refund of input
VAT will be allowed unless an application for refund is
filed with BIR within the prescriptive period.
4 Can’t find the counterpart of this in NIRC nor in the 1977 Tax Code itself
4. WON petitioner had the burden of proving that the buyer companies were not just
BOI-registered, but also exporting 70% of their total annual production as provided by
RR No. 2-88 – NO, it applied the wrong RR. CA should have applied RR 7-95.
a. SC discussed zero-rated sales where a VAT-registered taxpayer of goods
will not have any output tax but may use its input VAT for a tax credit/refund.
b. Petitioner: RR 2-88 is invalid because it imposed additional requirements not
found in the law for the zero-rated sales to BOI- and EPZA-registered
companies.
c. Respondent: RR 2-88 merely echoes the requirement imposed by the BOI
on export-oriented corporations registered with it.
d. SC: Not ready to strike down RR 2-88’s validity because it was misapplied in
this case because petitioner’s basis for the zero-rated sale is the fact that it
dealt with EPZA-registered enterprises.
i. RR 2-88 applies to zero-rated sales to export-oriented BOI-
registered enterprises whose export sales should exceed 70% of
their total annual production.
ii. Distinction must be made between these two types of zero-rated
sales because each may have different substantiation
requirements.
e. SC: compared the definitions of export sales of the Tax Code and the
Omnibus Investments Code of 1987 (EO 226) and found that the latter’s is
more comprehensive.
i. EO 226 recognizes actual exportation (applicable to BOI-
registered enterprises whose export sales should exceed 70% of
their total annual production) and constructive exportation (EPZ
are considered as foreign territory, so any sale in said area is
considered an export already even if it is still within the same
geographic location as the customs territory; this results in a
special tax treatment).
ii. Said tax treatment is consistent with the
1. Destination Principle: goods and services are taxed
only in the country where these are consumed; and
2. Cross-Border Doctrine: no VAT shall be imposed to
form the part of the cost of goods destined for
consumption outside the territorial border of the taxing
authority.
f. Given this distinction, RR 7-95 should have applied, which was eventually
adopted by Section 106 (A)(2)(a) of NIRC, as amended.
5. WON petitioner sufficiently proved that it was entitled to the input VAT refund/credit –
NO because it failed to prove the factual basis (it was able to prove the legal basis
though).
a. Taxpayer-claimant has the burden of proving the
i. legal basis: its sales qualify for VAT zero-rating under the existing
laws; and
ii. factual basis: that said sales were actually made and resulted in
refundable/creditable input VAT in the amount being claimed.
b. Re: legal basis that allowed the refund/credit of input VAT on export sales to
enterprises operating within EPZ and registered with EPZA and to CBP (see
fact #2).
i. The fact that PASAR and PHILPHOS were operating inside an
EPZ and duly registered with EPZA was never raised as in issue in
this case.
2
 ii. It was already judicially recognized in the 1999 case involving the
same parties.
iii. Section 106(c)5 allowed for such.
iv. CIR v. Benguet Corporation: SC affirmed the effective zero-rating
of sales of gold to CBP6.
c. Re: factual bases for its applications
i. Petitioner failed both in the administrative and judicial level
because it failed to comply with the appropriate revenue
regulations such as
1. RR 3-88 and
a. Pieces of evidence to be presented to prove
actual zero-rated VAT sales to qualified buyers
such as
i. Photocopy of the approved
application for zero-rate if filing for the
first time;
ii. Sales invoice/receipt showing the
name of the person/entity to whom
the goods/services were delivered,
date of delivery, amount of
consideration, and description of
goods/services delivered; and
iii. Evidence of actual receipt of
goods/services.
2. CTA Circular No. 1-95 as amended.
a. If the taxpayer’s claim is supported by
voluminous documents (receipts, long
accounts, invoices, vouchers), it must present
i. A summary containing a unnecessary by the presentation of unrebutted evidence. This must be
chronological listing of the numbers,
dates, and amounts covered by the
invoices or receipts and the amount/s
of tax paid;
ii. A certification of an independent
CPA attesting to the correctness of
the contents of the summary after
making an examination, evaluation,
and audit of the voluminous records.
iii. Effect: the individual presentation for
marking, identification, and
comparison with the originals need
not be done before CTA or Clerk of
Court if the above are followed.
b. Since petitioner’s petitions were pending before
the CTA when the Circular was issued, then it
must have complied with it during the course of
the trial.
i. CIR v. Manila Mining Corporation:
sales invoices or receipts issued by
5 1. Ordinary prudence would have dictated the presentation
Section 112(A)
6 of all evidence that would have supported the claims for
Sale of gold to CBP is considered to be an exempt transaction under NIRC,
as amended.
the supplier are necessary to
substantiate the actual
amount/quantity of goods sold and
their selling price because these are
the best means to prove input VAT
payments.
ii. As applied in this case
1. Petitioner failed to present the following
a. sales invoices or receipts;
b. purchase invoices or receipts;
c. evidence of actual receipt of goods;
d. BOI statement showing the amount and
description of sale of goods, etc.;
e. original or attested copies of invoice or receipt
on capital equipment locally purchased; and
f. photocopy of import entry document and
confirmation receipt on imported capital
equipment.
2. CTA could not determine if there were actual local and
imported purchase of capital goods as well as domestic
purchase of non-capital goods without the required
purchase invoice/receipt, and confirmation receipts.
3. Tax refunds are in the nature of tax exemptions, which
must be strictly construed against the taxpayer.
6. WON CTA and CA erred in denying petitioner’s motion for new trial – NO.
a. Petitioner: It should have been granted because its counsel failed to adduce
the necessary evidence because he believed that such evidence was
considered as excusable negligence or mistake.
i. CTA should have not denied it for its failure to attach an affidavit of
merit. Rules of procedure must be liberally construed in pursuance
of substantive justice.
ii. Also, in another CTA case involving the same parties, CTA
granted petitioner’s motion for new trial.
b. SC: Yes, CTA should not have denied the motion for failure to attach an
affidavit of merit, but it must still deny said motion because there is no legal
basis.
i. It is CTA’s discretion to grant/deny motions for new trial.
ii. Petitioner’s counsel does not constitute excusable negligence
because such negligence must be imputable to the party. If it were
the counsel, then his negligence would be binding on the client.
1. For negligence to be excusable, it must be one which
ordinary diligence and prudence could not have guarded
against.
2. RR 3-88 had been in effect more than 2 years before
petitioner filed its earliest application for refund/credit.
3. CTA Circular 1-95 was issued during the pendency of the
cases, so petitioner had ample time to comply with such.
iii. Mistake must be of fact, not of law.
refund/credit of input VAT.
3

ZERO-RATING AND REFUND OF VAT PAYMENTS
G.R. No. 147295 – CIR v. ACESITE (PHILIPPINES) HOTEL CORPORATION
VELASCO, J.P.
Acesite PH Hotel Corporation is the owner and operator of Holiday Inn Manila Pavilion Hotel along UN
Ave. in Manila. It leases a part of the hotel's premises to PAGCOR for casino operations and caters
food and beverages to PAGCOR'S casino patrons through the hotel's restaurants. Acesite incurred
VAT from its rental income and sale of food and beverages to PAGCOR, hence it tried to shift such
taxes to PAGCOR by including it in the amount assessed to PAGCOR, however, the latter refused to
pay on account of its exempt status. Acesite still paid the VAT to the CIR however, for fear of the legal
consequences of non-payment. Acesite belatedly concluded that its transaction with PAGCOR was
subject to zero-rate as it was rendered to a tax exempt entity and subsequently filed a claim for tax
refund with the CTA. The CTA and CA ruled in favor of Acesite and ordered the CIR to refund. Thus,
CIR appealed to the SC. The SC affirmed the CTA and CA decisions, holding that since PAGCOR is
exempt from payment of indirect taxes such VAT exemption extends to Acesite per Section 108 of the
NIRC. The manner of charging VAT – whether it be incorporated in the goods sold or charged as an
additional 10% - does not affect PAGCOR's tax exemption.
DOCTRINE
The exemption of PAGCOR from taxes refers to its direct AND indirect tax liabilities.
PAGCOR's charter P.D. 1869, Sec. 13 thereof, pertinently provides that "no tax of any kind or form xxx
shall be assessed and collected under this Franchise from the Corporation xxx." Such section also
stated that such exemption "shall inure to the benefit of and extend to corporation(s), association(s),
agenc(ies), or individual(s) with whom the Corporation or operator has any contractual relationship in
connection with the operations of the casino(s) authorized to be conducted under this Franchise." By
extending the exemption to entities or individuals dealing with PAGCOR, the legislature clearly
granted exemption also from indirect taxes.
Action for refund is strictly construed against the claimant
An action for a tax refund partakes of the nature of an exemption, which cannot be allowed unless
granted in the most explicit and categorical language, it is strictly construed against the claimant who
must discharge such burden convincingly. In this case, Acesite successfully discharged the burden of
proof as found by CTA and the CA.
FACTS
4. Acesite (Philippines) Hotel Corporation ("Acesite") is the owner and operator of the Holiday Inn
Manila Pavillon Hotel along UN Avenue in Manila.
5. Acesite leases around 6.7K square meters of the hotel to the Philippine Amusement and Gaming
Corporation ("PAGCOR") for its casino operations. Acesite also caters food and beverages to
PAGCOR's patrons through the hotel restaurants.
6. From January 1996 to April 1997, Acesite incurred VAT [PHP 30,152,892.02] from its rental
income and sale of food and beverages to PAGCOR.
7. Acesite tried shifting such taxes to PAGCOR by incorporating it in the amount assessed to the
latter, but PAGCOR refused to pay the same.
8. Acesite, fearing legal consequences that might befall it from non-payment of taxes, paid the VAT
to the CIR.
9. Eventually (though belatedly) Acesite realized it paid such tax erroneously because the
transaction with PAGCOR should have been zero-rated as it was rendered to a tax-exempt entity.
10. Thus, Acesite filed a petition for refund with the CTA which decided in its favor.
11. The CTA held that based on the NIRC and the principle of solution indebiti, Acesite is entitled a
refund of PHP 30,054,148.64 (a little different from Acesite's first estimate).
12. The CIR appealed to the CA, however, the CA affirmed in toto the decision of the CTA.
13. Hence this petition.
ISSUE with HOLDING
1. WON PAGCOR's tax exemption privilege includes indirect tax such as VAT to entitle Acesite to
0% VAT rate. – YES.
a. It is undisputed that PAGCOR's charter provides for its tax exemption privilege which
includes indirect taxes.
b. Section 13 states:
xxx
(2) Income and other taxes. — (a) Franchise Holder: No tax of any kind or form,
income or otherwise, as well as fees, charges or levies of whatever nature, whether
National or Local, shall be assessed and collected under this Franchise from the
Corporation; nor shall any form of tax or charge attach in any way to the earnings of
the Corporation xxx.
(b) Others: The exemptions herein granted for earnings derived from the operations
conducted under the franchise specifically from the payment of any tax, income or
otherwise, as well as any form of charges, fees or levies, shall inure to the benefit of
and extend to corporation(s), association(s), agency(ies), or individual(s) with whom
the Corporation or operator has any contractual relationship in connection with the
operations of the casino(s) authorized to be conducted under this Franchise xxx.
c. The foregoing clearly gives a blanket exemption with no distinction to the kind of taxes.
Moreover, by extending the exemption (see the second paragraph above) to entities/
individuals dealing with PAGCOR, the legislature clearly granted exemption also
from indirect taxes.
i. Since indirect taxes can be shifted to the buyer, transferee or lessee,
extending the tax exemption to entities or individuals dealing with
PAGCOR, is already exempting PAGCOR from being liable from indirect
taxes.
d. In addition, The manner of charging VAT – whether it be incorporated in the goods
sold or charged as an additional 10% - does not denigrate the fact that PAGCOR is
exempt from indirect tax.
2. WON the 0% VAT under the Tax Code applies to Acesite. – YES.
a. Acesite is not liable for the payment of it as it is exempt in this particular transaction by
operation of law to pay the indirect tax. Such exemption falls within the former Section
102 (b) (3) of the 1977 Tax Code, as amended (now Sec. 108 [b] [5] of R.A. 8424)
3. WON Acesite is entitled to a refund? – YES.
a. Solutio indebiti applies to the Government: The Government comes within the scope of
solutio indebiti principle as elucidated in Commissioner of Internal Revenue v.
Fireman's Fund Insurance Company, where we held that: "Enshrined in the basic legal
principles is the time-honored doctrine that no person shall unjustly enrich himself at
the expense of another. It goes without saying that the Government is not exempted
from the application of this doctrine."
b. In UST Cooperative Store v. City of Manila, we explained that "there is erroneous
payment of taxes when a taxpayer pays under a mistake of fact, as for the instance in
a case where he is not aware of an existing exemption in his favor at the time the
payment was made." Such payment is held to be not voluntary and, therefore, can
be recovered or refunded.
DISPOSITIVE PORTION
WHEREFORE, the petition is DENIED for lack of merit and the November 17, 2000 Decision of the CA
is hereby AFFIRMED. No costs.
SO ORDERED.
OTHER NOTES
The BIR must release the refund to respondent without any unreasonable delay. Indeed, fair dealing is
expected by our taxpayers from the BIR and this duty demands that the BIR should refund without any
unreasonable delay what it has erroneously collected.
4
 VAT
GR No. L-31092 – CIR v. John Gotamco & Sons, Inc.
Yap, J.
WHO was granted exemptions from paying direct and indirect taxes under the Host
Agreement in entered with the PH. It awarded a construction contract to Gotamco to
construct a building for its Manila office. CIR demanded from Gotamco the payment of 3%
contractor’s tax from its gross receipts from the construction, claiming that it was a direct
tax due from the contractor and thus not covered by WHO’s exemption. SC held that the
contractor’s tax is an indirect tax because it is ultimately WHO that shoulders the burden of
the tax as it can be shifted by the contractor and included in the bid price. Thus, Gotamco
is not liable to pay contractor’s tax by virtue of WHO’s exemption
DOCTRINE
The contractor's tax is payable by the contractor but in the last analysis it is the owner of
the building that shoulders the burden of the tax because the same is shifted by the
contractor to the owner as a matter of self-preservation. Thus, it is an indirect tax.
FACTS
14. The World Health Organization (WHO) enjoys privileges and immunities under the
Host Agreement (1951) it entered into with PH. Sec 11 of said agreement states that
"the Organization, its assets, income and other properties shall be: (a) exempt from
all direct and indirect taxes.”
15. When WHO decided to construct a building to house its offices in Manila, it entered
into further agreement which provided that it “may import into the country materials
and fixtures required for the construction free from all duties and taxes…” The
Agreement also referred to the above-mentioned Host Agreement.
16. During the invitation for bids, WHO informed the bidders that the building was exempt
from the payment of all fees, licenses, and taxes, and that their bids "must take this
into account and should not include items for such payments to Government
agencies.
17. The contract was awarded to John Gotamco & Sons, Inc. on Feb 10, 1958, with a
price of P452,544.00.
18. WHO received an opinion from CIR stating that the gross receipts derived by the
contractors are exempt from tax since the 3% contractor's tax is an indirect tax on the
assets and income of the Organization, pursuant to the Host Agreement.
19. CIR later reversed saying that the 3% tax is actually due on the contractor and
not WHO, this not covered by the Host Agreement.
20. WHO issued a certification stating that it informed its bidders of the exemption and
they submitted their bids in good faith thus Gotamco should be exempted from any
taxes relating to the building construction.
21. CIR demanded payment of P16,970.40 as 3% contractor’s tax from Gotamco.
22. CTA, upon Gotamco’s appeal, reversed the CIR decision and held that Gotamco is
not liable to pay the contractor’s tax. Hence this petition.
ISSUE with HOLDING
4. W/N WHO is entitled to exemption by virtue of the Host Agreement? YES.
 CIR contends that the Host Agreement is null and void, not having been ratified
by the Philippine Senate as required by the Constitution. SC disagrees.
 While treaties are required to be ratified by the Senate under the Constitution,
less formal types of international agreements may be entered into by the Chief
Executive and become binding without the concurrence of the legislative body.
 The Host agreement comes under the latter category. The Courts have
recognized the privileges and immunities granted to WHO under the said
agreement.
5. W/N the 3% contractor’s tax is an indirect tax within the purview of Host
Agreement? YES.
 CIR claims that the contractor's tax is in the nature of an excise tax which is
imposed upon the performance of an act, the enjoyment of a privilege or the
engaging in an occupation . . . and due primarily and directly on the contractor,
not WHO. SC disagrees and affirms CTA.
 The contractor's tax is of course payable by the contractor but in the last
analysis it is the owner of the building that shoulders the burden of the tax
because the same is shifted by the contractor to the owner as a matter of
self-preservation. Thus, it is an indirect tax.
o Direct taxes - demanded from the very person who, it is intended or desired,
should pay them
o Indirect taxes - demanded in the first instance from one person in the
expectation and intention that he can shift the burden to someone else.
 Although it is payable by [Gotamco], the latter can shift its burden on the WHO. It
is the WHO that will pay the tax indirectly through the contractor and it certainly
cannot be said that 'this tax has no bearing upon the Organization.
 The case of Philippine Acetylene Company v. CIR is not controlling.
o Said case involved a tax on sales of goods which under the law had to be
paid by the manufacturer/producer; the fact that the manufacturer/producer
might have added the amount of the tax to the price of the goods did not
make the sales tax "a tax on the purchaser”.
o SC held that sales tax must be paid by the manufacturer or producer even if
the sale is made to tax-exempt entities
 The Host Agreement, in specifically exempting the WHO from "indirect
taxes," contemplates taxes which, although not imposed upon or paid by
the Organization directly, form part of the price paid or to be paid by it.
o Under Sec 12 of the Host Agreement, when the Organization is making
important purchases for official use of property on which such duties and
taxes have been charged the PH Government shall make appropriate
administrative arrangements for the remission or return of the amount of
duty or tax.
o The provision though referring only to “purchases” elucidates clear intention
to exempt WHO from indirect taxation.
 The 3% contractor's tax should be viewed as a form of an "indirect tax" on the
Organization, as the payment thereof or its inclusion in the bid price would have
meant an increase in the construction cost of the building.
DISPOSITIVE PORTION
CTA decision affirmed.
OTHER NOTES
DIGESTER: Sophia Sy
5
 Value-Added Tax
G.R. No. 180173, 06 April 2011 – MICROSOFT PHILS. v. CIR
CARPIO
Microsoft Phils. engages in zero-rated transactions. It filed a claim with the BIR for tax credit of input VAT of
P11.4M. It then filed a petition for review with the CTA after the BIR failed to act upon the claim. The CTA
denied the claim on the ground that Microsoft failed to comply with the invoicing requirement that official
receipts must bear the imprinted word “zero-rated” on its face. The SC affirmed, holding that Microsoft’s
invoice, lacking the word “zero-rated”, is not a VAT invoice, and thus cannot give rise to any input tax under
RR 7-95.
DOCTRINE
All purchases covered by invoices other than a VAT invoice shall not give rise to any input tax.
FACTS
23. Microsoft Philippines, Inc. (Microsoft) is a VAT taxpayer duly registered with the BIR. It renders
marketing services to MOP and MLI (Microsoft Operations Pte Ltd. and Microsoft Licensing, Inc.,
respectively), affiliated non-resident foreign corporations.
24. The services rendered by Microsoft qualify as zero-rated sales for VAT purposes under Sec. 108(B)(2),
i.e. paid for in acceptable foreign currency and accounted for in accordance with BSP rules and
regulations.
25. Microsoft paid input VAT of P11.4M in 2001.
26. Microsoft filed a claim for tax credit of input VAT within the reglementary period (two years from the
close of the taxable quarters when the zero-rated sales were made).
27. Because of the BIR’s inaction, Microsoft filed a petition for review with the CTA. The CTA denied the
claim on the ground that Microsoft’s official receipts did not bear the imprinted word “zero-rated”
on its face and thus cannot be considered valid evidence to prove zero-rated sales. CTA (2nd div., then
en banc) denied MR.
28. Microsoft appealed to the SC. It argued that the NIRC and RR 7-95 do not provide that the failure to put
“zero-rated” results in outright invalidation of invoices/receipts.
ISSUE with HOLDING
1. W/N Microsoft is entitled to tax credit for input VAT attributable to zero-rated sales even if the
word “zero-rated” is not imprinted on its ORs – NO
When Microsoft filed its claim for tax credit, RR 7-95 was already in effect. Sec. 4.108-1 thereof states
the information which must appear on the face of the receipts/invoices issued by VAT-registered persons,
among which is “the word zero-rated imprinted on the invoice covering zero-rated sales”.
RR 7-95 expressly states that [A]ll purchases covered by invoices other than a VAT invoice shall not
give rise to any input tax. Microsoft's invoice, lacking the word zero-rated, is not a VAT invoice, and thus
cannot give rise to any input tax.
DISPOSITIVE PORTION
Petition denied.
OTHER NOTES
The printing of the word zero-rated is required to be placed on VAT invoices or receipts covering zero-rated sales
in order to be entitled to claim for tax credit or refund.
The subsequent codification of the invoicing requirements of RR 7-95 does not mean that prior to such codification
the administrative regulations were not enforceable.
Panasonic v. CIR: 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 is actually paid. Absent such word, the government may be
refunding taxes it did not collect.
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.
DIGESTER: Gabi Timbancaya
VAT
Panasonic Communications Imaging Corp v. CIR
Abad
Panasonic filed a claim for a refund of the input VAT it had paid, claiming that its export
sales are zero-rated and the input VAT for such sales was unutilized. The BIR did not act
on the claim, so Panasonic filed a petition before the CTA. Th CTA denied the petition on
the ground that the word zero-rated was not printed on its export invoices. The SC upheld
the CTA’s decision, holding that Panasonic must comply with invoicing requirements.
DOCTRINE
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.
For the effective zero rating of such transactions the taxpayer has to be VAT-registered
and must comply with invoicing requirements.
FACTS
29. Panasonic produces and exports plain paper copiers and their sub-assemblies, parts,
and components.
- It is registered with the BOI as a preferred pioneer enterprise under the Omnibus
Investments Code.
- It is also a registered VAT enterprise.
30. Panasonic generated export sales In the following amounts:
- Apr – Sep 1998: US$12,819,475.15
- Oct 1998 – Mar 1999: US$11,859,489.78
- Total: US$24,678,964.93.
31. Believing that these export sales were zero-rated for VAT under Section
106(A)(2)(a)(1) of the1997 NIRC, Panasonic paid input VAT of P4,980,254.26 and
P4,388,228.14 for the two periods or a total of P9,368,482.40 attributable to its zero-
rated sales.
32. Claiming that the input VAT it paid remained unutilized or unapplied, Panasonic filed
with the BIR two separate applications for refund or tax credit of what it paid.
- When the BIR did not act on the same, Panasonic filed on December 16, 1999 a
petition for review with the CTA, averring the inaction of the CIR on its
applications.
33. The CTA’s 1st Division denied the petition.
- While Panasonic’s export sales were subject to 0% VAT under Section
106(A)(2)(a)(1) of the 1997 NIRC, the same did not qualify for zero-rating
because the word zero-rated was not printed on Panasonic’s export invoices.
- This omission violates the invoicing requirements of Section 4.108-1 of Revenue
Regulations 7-95.
34. Panasonic appealed the decision to the CTA en banc, but the CTA en banc dismissed
the petition.
ISSUE with HOLDING
6
6. Whether or not the CTA en banc correctly denied Panasonic’s claim for refund of the
VAT it paid as a zero-rated taxpayer on the ground that its sales invoices did not state
on their faces that its sales were zero-rated – CTA was correct.
- 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.
- For the effective zero rating of such transactions, the taxpayer has to be
VAT-registered and must comply with invoicing requirements.
- The CIR ruled that under Revenue Memorandum Circular 42-20037, the
taxpayer’s failure to comply with invoicing requirements will result in the
disallowance of his claim for refund.
- Panasonic: In requiring the printing on its sales invoices of the word zero-rated,
the Secretary of Finance unduly expanded, amended, and modified by a
mere regulation the letter and spirit of Sections 113 and 237 of the 1997
NIRC, prior to their amendment by R.A. 9337.
o Sections 113 and 237 required the VAT-registered taxpayers receipts
or invoices to indicate only the following information:
 A statement that the seller is a VAT-registered person,
followed by his TIN
 The total amount which the purchaser pays or is obligated to
pay to the seller with the indication that such amount includes
the value-added tax;
 The date of transaction, quantity, unit cost and description of
the goods or properties or nature of the service; and
 The name, business style, if any, address and TIN of the
purchaser, customer or client.
o Sections 113 and 237 did not require the inclusion of the word zero-
rated for zero-rated sales covered by its receipts or invoices. The BIR
incorporated this requirement only after the enactment of R.A. 9337 on
November 1, 2005, a law that did not yet exist at the time it issued its
invoices.
- SC: When Panasonic made the export sales subject of this case (April 1998 to
March 1999), the rule that applied was Section 4.108-1 of RR 7-95 (Consolidated
Value-Added Tax Regulations), which was issued on December 9, 1995 and took
effect on January 1, 1996.
o It already required the printing of the word zero-rated on the invoices
covering zero-rated sales. When RA 9337 amended the 1997 NIRC, it
7
RMC 42-2003 provides:
A-13. Failure by the supplier to comply with the invoicing requirements on the documents
supporting the sale of goods and services will result to the disallowance of the claim for input tax
by the purchaser-claimant.
If the claim for refund/TCC is based on the existence of zero-rated sales by the taxpayer but it
fails to comply with the invoicing requirements in the issuance of sales invoices (e.g., failure to
indicate the TIN), its claim for tax credit/refund of VAT on its purchases shall be denied
considering that the invoice it is issuing to its customers does not depict its being a VAT-
registered taxpayer whose sales are classified as zero-rated sales. Nonetheless, this treatment
is without prejudice to the right of the taxpayer to charge the input taxes to the appropriate
expense account or asset account subject to depreciation, whichever is applicable. Moreover,
the case shall be referred by the processing office to the concerned BIR office for verification of
other tax liabilities of the taxpayer.
made this particular revenue regulation a part of the tax code. This
conversion from regulation to law did not diminish the binding force of
such regulation with respect to acts committed prior to the enactment of
that law.
o 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
o The requirement is reasonable and is in accord with the efficient
collection of VAT from the covered sales of goods and services.
o 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.
o Further, the printing of the word zero-rated on the invoice helps
segregate sales that are subject to 10% VAT from those sales that are
zero-rated.
o Unable to submit the proper invoices, petitioner Panasonic has been
unable to substantiate its claim for refund.
- In Intel Technology Phils v. CIR, the CIR denied the claim for tax refund on the
ground of the taxpayer’s failure to indicate on its invoices the BIR authority to
print.
o But Sec. 4.108-1 required only the following to be reflected on the
invoice:
 The name, TIN and address of seller;
 Date of transaction;
 Quantity, unit cost and description of merchandise or nature
of service;
 The name, TIN, business style, if any, and address of the
VAT-registered purchaser, customer or client;
 The word zero-rated imprinted on the invoice covering zero-
rated sales; and
 The invoice value or consideration.
o The SC held that since the BIR authority to print is not one of the items
required to be indicated on the invoices or receipts, the BIR erred in
denying the claim for refund.
- In this case, the ground for denial of Panasonic’s claim for tax refund is the
absence of the word zero-rated on its invoices. This requirement is one which is
specifically and precisely included in the above enumeration.
DISPOSITIVE PORTION
WHEREFORE, the petition is DENIED for lack of merit.
DIGESTER: Sarah
Value Added Tax
GR No. 172378 – Silicon Philippines, Inc. v. CIR
Del Castillo
Silicon Philippines was claiming refunds for unutilized input tax attributed to some of its
zero-rated export sales and the purchase of capital goods. The CTA reduced the refund
7
after finding that Silicon had failed to prove the zero-rated sales. It held that the invoices
presented by Silicon had no probative value since these were issued by Silicon without an
Authority to Print (ATP) and the same invoices did not bear the words “zero-rated” as
required by law. It also ruled that Silicon failed to prove the purchase of capital goods.
Silicon’s argument that it had been issued such authority did not hold sway as the court
found that the purported authority granted to it by the BIR only pertained to the authority to
use computerized books of account, not the authority to print invoices. The Supreme Court
upheld the CTA’s decision.
DOCTRINE
It is a principle in interpreting tax law granting exemptions that such be construed strictly
against the person claiming the exemption. To claim such exemption, it is not enough that
a claimant proves he is entitled to it. The claimant must prove it had complied with the
requirements of the law.
FACTS
35. Silicon Philippines (Silicon), a corporation engaged in the design, manufacturing and
exporting of integrated circuits, and organized and existing under Philippine laws, filed
an application for refund with the BIR for unutilized input VAT (i.e., input VAT not
deducted from output VAT) in the amount of P32 million for the 4 th quarter of 1998.
36. The refund application covered unutilized input VAT from:
a. Zero-rated export sales worth P3 billion to its parent company Intel, paid for
in acceptable foreign currency in accordance with Bangko Sentral
regulations.
i. It presented as proof invoices issued by Silicon reflecting such
export sales to Intel.
b. Purchase of capital goods.
37. Since the BIR did not act on its application, Silicon filed a petition for review with the
Court of Tax Appeals. The BIR opposed the petition, arguing that Silicon failed to
show that it had complied with Sec. 229 of the National Internal Revenue Code. BIR
also argued that since the claim for refund was based on an exemption, which should
be strictly construed, the burden of proving compliance with the law lies with the
applicant. It is not enough for the applicant to prove that it was entitled to the
exemption.
38. The CTA acting in division did not award the full refund. It found that training
materials, office supplies, posters, banners, shirts and books purchased by Silicon
were not considered capital goods. Additionally, it could not grant the refund
attributable to zero-rated export sales since Silicon failed to present an Authority to
Print (ATP) invoices from the BIR. Silicon also had failed to print such ATP and the
words “zero-rated” on its invoices. Thus, the invoices presented by Silicon as
evidence of such zero-rated export sales have no probative value.
39. In its Motion for Reconsideration (MR), Silicon averred that it had already been
granted by the BIR a “Permit to Adopt Computerized Accounting Documents.” Also,
since virtually all export sales were made to its parent company, Intel, which is a non-
resident and non-VAT-registered entity, printing the words “zero-rated” on the invoices
was unnecessary.
40. The MR was denied. The CTA explained that Silicon only had authority to the use of
computerized books of account. It found that Silicon was only permitted to issue
computerized invoices in 2001, or 3 years after the zero-rated export sales in
question.
41. Silicon elevated the case to the CTA en banc. The CTA en banc likewise denied the
petition. It said that the procurement of an ATP and the printing of the words “zero-
rated” on the invoices were required by Sec. 238 of the NIRC and Revenue
Regulation No. 7-95, respectively. The rationale for those requirements was to
eliminate the use of unregistered receipts and double/multiple use of receipts.
a. Also, the CTA en banc said that since exemptions from tax are strictly
construed, an applicant availing of such exemptions must prove compliance
with substantiation requirements.
b. In addition, the capital goods in questions were not duly proven to have
been used directly or indirectly in the production of taxable goods.
ISSUE with HOLDING
W/N Silicon was entitled to a full refund of unutilized input VAT attributable to zero-
rated export sales and the purchase of capital goods for 4Q 1998.
 NO. Silicon was claiming input tax credit attributable to zero-rated export
sales, as granted by Sec. 112 (A) of the NIRC, and purchase of capital
goods, as provided for in Sec. 112 (B) of the same law. To claim such
credit, the applicant must prove it had complied with the requirements of
the law. It is a principle in interpreting tax law granting exemptions that
such be construed strictly against the person claiming the exemption.
o The law expressly requires an Authority to Print (ATP) for the printing of
invoices under Sec. 238 of the NIRC. To prove zero-rated sales, the
applicant must show registered invoices evidencing such sales. The
only way for the BIR to verify whether the invoices are duly registered is
by requiring the applicant to present its ATP from the BIR. Without this
proof, the invoices hold no probative value. (However, no law requires
that the ATP itself must be printed on the invoice.
o Printing the words “zero-rated” on invoices is required by Revenue
Regulation No. 7-95. This is a valid regulation. Its issuance proceeds
from the rule-making authority, granted by Sec. 244 of the NIRC, of the
Secretary of Finance
o Capital goods are defined in Revenue Regulation 7-95 as “goods or
properties with estimated useful life greater that one year and which are
treated as depreciable assets under Section 29 (f), used directly or
indirectly in the production or sale of taxable goods or services.” There
was no reason to deviate from the CTA’s finding that the goods in
question were not capital goods.
DISPOSITIVE PORTION
Wherefore, the petition is hereby DENIED.
OTHER NOTES
DIGESTER: Horace
SECTION 229. Recovery of Tax Erroneously or Illegally Collected.
No suit or proceeding shall be maintained in any court for the recovery of any national internal revenue
tax hereafter alleged to have been erroneously or illegally assessed or collected, or of any penalty
claimed to have been collected without authority, or of any sum alleged to have been excessively or in
any manner wrongfully collected, until a claim for refund or credit has been duly filed with the
8
Commissioner; but such suit or proceeding may be maintained, whether or not such tax, penalty, or
sum has been paid under protest or duress.
In any case, no such suit or proceeding shall be filed after the expiration of two (2) years from the date
of payment of the tax or penalty regardless of any supervening cause that may arise after payment:
Provided, however, That the Commissioner may, even without a written claim therefor, refund or credit
any tax, where on the face of the return upon which payment was made, such payment appears clearly
to have been erroneously paid.
SECTION 112. Refunds or Tax Credits of Input Tax.
(A) Zero-rated or Effectively Zero-rated Sales. - Any VAT-registered person, whose sales are zero-
rated or effectively zero-rated may, within two (2) years after the close of the taxable quarter when the
sales were made, apply for the issuance of a tax credit certificate or refund of creditable input tax due
or paid attributable to such sales, except transitional input tax, to the extent that such input tax has not
been applied against output tax: Provided, however, That in the case of zero-rated sales under Section
106(A)(2)(a)(1),(2) and (B) and Section 108 (B)(1) and (2), the acceptable foreign currency exchange
proceeds thereof had been duly accounted for in accordance with the rules and regulations of the
Bangko Sentral ng Pilipinas (BSP): Provided, further, That where the taxpayer is engaged in zero-rated
or effectively zero-rated sale and also in taxable or exempt sale of goods or properties or services, and
the amount of creditable input tax due or paid cannot be directly and entirely attributed to any one of
the transactions, it shall be allocated proportionately on the basis of the volume of sales.
(B) Capital Goods. - A VAT-registered person may apply for the issuance of a tax credit certificate or
refund of input taxes paid on capital goods imported or locally purchased, to the extent that such input
taxes have not been applied against output taxes. The application may be made only within two (2)
years after the close of the taxable quarter when the importation or purchase was made.
SECTION 238. Printing of Receipts or Sales or Commercial Invoices.
All persons who are engaged in business shall secure from the Bureau of Internal Revenue an
authority to print receipts or sales or commercial invoices before a printer can print the same.
No authority to print receipts or sales or commercial invoices shall be granted unless the receipts or
invoices to be printed are serially numbered and shall show, among other things, the name, business
style, Taxpayer Identification Number (TIN) and business address of the person or entity to use the
same, and such other information that may be required by rules and regulations to be promulgated by
the Secretary of Finance, upon recommendation of the Commissioner.
All persons who print receipt or sales or commercial invoices shall maintain a logbook/register of
taxpayers who availed of their printing services. The logbook/register shall contain the following
information:
(1) Names, Taxpayer Identification Numbers of the persons or entities for whom the receipts or sales
or commercial invoices were printed; and
(2) Number of booklets, number of sets per booklet, number of copies per set and the serial numbers
of the receipts or invoices in each booklet.
Value-Added Tax
G.R. No. 179961 – Kepco Philippines Corp. v. CIR
Mendoza, J.
Kepco filed a claim for refund for input VAT which it incurred on the purchase of goods and
services it used in its sale of electricity to NPC (a zero-rated transaction). CTA only
partially granted the claim because Kepco failed to imprint the word ‘zero-rated’ on the
official receipts of some transactions. SC affirmed CTA.
DOCTRINE
For a taxpayer to be able to claim input tax refund for zero-rated transactions, the
requirement of imprinting the word “zero-rated” on the invoices or receipts under Sec.
4.108-1, RR 7-95 is mandatory.
The imprinting of “zero-rated” is necessary to distinguish sales subject to 10% VAT, those
that are subject to 0% VAT (zero-rated) and exempt sales, to enable the BIR to properly
implement and enforce the other provisions of the 1997 NIRC on VAT, namely:
 Zero-rated sales (Sec. 106(A)(2) and Sec. 108(B));
 Exempt transactions (Sec. 109 in relation to Sec. 112(A));
 Tax Credits (Sec. 110); and
 Refunds or tax credits of input tax (Sec. 112)
FACTS
1. Petitioner Kepco Philippines Corporation (Kepco) is a VAT-registered independent
power producer engaged in the business of generating electricity. It exclusively sells
electricity to National Power Corporation (NPC), an entity exempt from taxes under
Sec. 13, RA 6395.
2. Kepco filed an application for zero-rated sales. It was subsequently approved.
3. In the course of doing business with NPC, Kepco claimed expenses sustained in the
production and sale of electricity to NPC, paying input VAT and attributing the same to
its zero-rated sales of electricity to NPC.
4. Afterwards, Kepco filed before CIR a claim for a tax refund of P10,527,202.54
covering unutilized input VAT payments attributable to its zero-rated sales
transactions. When the CIR failed to act on the claim, Kepco filed a petition for review
before the CTA.
 CIR averred that claims for refund were strictly construed against the
taxpayer as it was similar to a tax exemption.
 Kepco argued that the NIRC does not require the imprinting of the word
zero-rated on invoices and/or official receipts covering zero-rated sales.
o It claimed that Sec. 1138 in relation to Sec. 2379 of the NIRC "does
not mention the requirement of imprinting the words ‘zero-rated’ to
purchases covering zero-rated transactions."
8 Sec. 113. Invoicing and Accounting Requirements for VAT-Registered Persons. –
(A) Invoicing Requirements. – A VAT-registered person shall, for every sale, issue an invoice or receipt. In
addition to the information required under Section 237, the following information shall be indicated in the invoice or
receipt:
(1) A statement that the seller is a VAT-registered person, followed by his taxpayer’s identification
number; and
(2) The total amount which the purchaser pays or is obligated to pay to the seller with the indication
that such amount includes the value-added tax.
(B) Accounting Requirements. – Notwithstanding the provisions of Section 233, all persons subject to the value-
added tax under Sections 106 and 108 shall, in addition to the regular accounting records required, maintain a
subsidiary sales journal and subsidiary purchase journal on which the daily sales and purchases are recorded. The
subsidiary journals shall contain such information as may be required by the Secretary of Finance.
9
Sec. 237. Issuance of Receipts or Sales or Commercial Invoices. – All persons subject to an internal revenue tax shall, for
each sale or transfer of merchandise or for services rendered valued at Twenty-five pesos (P25.00) or more, issue duly
registered receipts or sales or commercial invoices, prepared at least in duplicate, showing the date of transaction, quantity, unit
cost and description of merchandise or nature of service:
Provided, however, That in the case of sales, receipts or transfers in the amount of One Hundred Pesos (P100.00) or more, or
regardless of amount, where the sale or transfer is made by a person liable to value-added tax to another person also liable to
9
 o Only Sec. 4.108-1, RR No. 7-95 (see Other Notes) requires the
imprinting of the word ‘zero-rated’ on the VAT invoice or receipt.
Thus, Section 4.108-1 of RR 7-95 cannot be considered as a valid
legislation considering the long settled rule that administrative
rules and regulations cannot expand the letter and spirit of the law
they seek to enforce.
5. CTA Second Division partially granted the claim, ruling that out of the total declared
zero-rated sales of P3,285,308,055.85, Kepco was only able to properly
substantiate P1,451,788,865.52 as its zero-rated sales. Only 44.19% of the validly
supported input VAT payments being claimed could be considered. The CTA Second
Division likewise disallowed the P5,170,914.20 of Kepco’s claimed input VAT due to
its failure to comply with the substantiation requirement.
6. Kepco appealed to the CTA en banc, which dismissed the petition and ruled that in
order for Kepco to be entitled to its claim for refund/issuance of tax credit certificate
representing unutilized input VAT attributable to its zero-rated sales for taxable year
2002, it must comply with the substantiation requirements under RR 7-95.
ISSUE with HOLDING
7. W/N the word "zero-rated" should be imprinted on invoices/ official receipts as
part of the invoicing requirement to be eligible for input tax refund – Yes
a. Sec. 4.108-1 of RR 7-95 proceeds from the rule-making authority granted to
the Secretary of Finance under Sec. 245, NIRC for the efficient enforcement
of the tax code. The requirement is reasonable and is in accord with the
efficient collection of VAT from the covered sales of goods and services.
b. 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.
c. 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 has been unable
to substantiate its claim for refund.
d. Sec. 4.108-1 of RR 7-95 neither expanded nor supplanted the tax code but
merely supplemented what the tax code already defined and discussed. In
fact, the necessity of indicating "zero-rated" into VAT invoices/receipts
became more apparent when the provisions of this revenue regulation was
later integrated into RA No. 9337, the amendatory law of the 1997 NIRC
e. Evidently, as it failed to indicate in its VAT invoices and receipts that the
transactions were zero-rated, Kepco failed to comply with the correct
substantiation requirement for zero-rated transactions.
8. W/N Sec. 4.108.1, RR 7-95 requires the word "TIN-VAT" to be imprinted on a
VAT-registered person’s supporting invoices and official receipts – Yes
value-added tax; or where the receipt is issued to cover payment made as rentals, commissions, compensations or fees,
receipts or invoices shall be issued which shall show the name, business style, if any, and address of the purchaser, customer or
client;
Provided, further, That where the purchaser is a VAT-registered person, in addition to the information herein required, the invoice
or receipt shall further show the Taxpayer Identification Number (TIN) of the purchaser.
The original of each receipt or invoice shall be issued to the purchaser, customer or client at the time the transaction is effected,
who, if engaged in business or in the exercise of profession, shall keep and preserve the same in his place of business for a
period of three (3) years from the close of the taxable year in which such invoice or receipt was issued, while the duplicate shall
be kept and preserved by the issuer, also in his place of business, for a like period.
The Commissioner may, in meritorious cases, exempt any person subject to an internal revenue tax from compliance with the
provisions of this Section.
a. Only VAT-registered persons are required to print their TIN followed by the
word "VAT" in their invoice or receipts and this shall be considered as a
"VAT" Invoice. All purchases covered by invoices other than ‘VAT Invoice’
shall not give rise to any input tax.
b. Under the law, a VAT invoice is necessary for every sale, barter or
exchange of goods or properties while a VAT official receipt properly
pertains to every lease of goods or properties, and for every sale, barter or
exchange of services
c. The SC distinguished an invoice from a receipt:
i. A "sales or commercial invoice" is a written account of goods sold
or services rendered indicating the prices charged therefor or a list
by whatever name it is known which is used in the ordinary course
of business evidencing sale and transfer or agreement to sell or
transfer goods and services.
ii. A "receipt" on the other hand is a written acknowledgment of the
fact of payment in money or other settlement between seller and
buyer of goods, debtor or creditor, or person rendering services
and client or customer.
d. In other words, the VAT invoice is the seller’s best proof of the sale of the
goods or services to the buyer while the VAT receipt is the buyer’s best
evidence of the payment of goods or services received from the seller. Even
though VAT invoices and receipts are normally issued by the supplier/seller
alone, the said invoices and receipts, taken collectively, are necessary to
substantiate the actual amount or quantity of goods sold and their selling
price (proof of transaction), and the best means to prove input VAT
payments (proof of payment).
e. Hence, VAT invoice and VAT receipt should not be confused as referring to
one and the same thing. Certainly, neither does the law intend the two to be
used alternatively.
DISPOSITIVE PORTION
Petition denied.
OTHER NOTES
Sec. 4.108.1, RR 7-95. 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;
6. The invoice value or consideration.
In the case of sale of real property subject to VAT and where the zonal or market value is higher
than the actual consideration, the VAT shall be separately indicated in the invoice or receipt.
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 "VAT Invoice." All purchases covered
by invoices other than "VAT Invoice" shall not give rise to any input tax.
If the taxable person is also engaged in exempt operations, he should issue separate invoices or
receipts for the taxable and exempt operations. A "VAT Invoice" shall be issued only for sales of
goods, properties or services subject to VAT imposed in Sections 100 and 102 of the code.
The invoice or receipt shall be prepared at least in duplicate, the original to be given to the buyer
and the duplicate to be retained by the seller as part of his accounting records.
10
 VAT
GR 166732 – Intel Technology PH Inc v CIR
Callejo Sr J
Petitioner applied for tax credit/refund with the CIR. It then filed a petition for review with CTA
due to CIR’s inaction. CTA denied claim because no BIR authority to print said invoices nor the
Taxpayer’s Identification Number-VAT (TIN-V) was indicated thereon. CA affirmed CTA. SC
reversed CA and remanded the case for proper determination of the amount of refund. SC held
that BIR authority to print and the TIN-V are not among those required to be printed in the
invoices/receipts.
DOCTRINE
The ff items are required to be indicated in the receipts or invoices:
(1) A statement that the seller is a VAT-registered entity followed by its TIN-V;
(2) The total amount which the purchaser pays or is obligated to pay to the seller with the
indication that such amount includes the value-added tax;
(3) Date of the transaction;
(4) Quantity of merchandise;
(5) Unit cost;
(6) Description of merchandise or nature of service;
(7) The name, business style, if any, and address of the purchaser, customer or client in
the case of sales, receipt or transfers in the amount of ₱100.00 or more, or regardless
of the amount, where the sale or transfer is made by a person liable to VAT to another
person also liable to VAT, or where the receipt is issued to cover payment made as
rentals, commissions, compensations or fees;
(8) The TIN of the purchaser where the purchaser is a VAT-registered person.
Absence of a statement stating authority to print by the BIR or the TIN-V of the taxpayer on the
invoices or receipts does not forfeit tax refund/credit nor automatically invalidate claim for tax
credit certification.
FACTS
1. Petitioner Intel Technology PH is a domestic corporation engaged primarily in business of
designing developing, manufacturing and exporting advanced and large-scale integrated
circuit components. It is in turn registered as a VAT-paying entity and likewise registered
with the Philippine Economic Zone Authority (PEZA) as an Ecozone export enterprise.
2. It filed Monthly VAT and Quarterly VAT return for second quarter of 1998 declaring zero-
rated export sales of 2.5 Million and VAT input taxes of 11.7 Million. Petitioner then alleged
that its zero-rated export sales were paid in acceptable foreign currency and in accordance
with the regulations of the BSP. Hence it filed with the CIR a claim for tax credit/refund of
the VAT input taxes amounting 11.7 Million.
3. Petitioner then filed with CTA a petition for review when the two-year prescription period to
file a refund without any action by the CIR on its claim. CTA through an independent
auditor conducted an audit and evaluate said claim. Said auditor reported that only up the
amount of 9.7 Million pesos is a valid claim for tax credit.
4. CTA rendered judgment denying claim for refund or issuance of tax credit certificate
because although it is legally entitled for refund or issuance of tax credit of unutilized VAT
input taxes on domestic purchases of goods and service attributable to zero-rated sales,
the export invoices adduced by petitioner could not be considered as competent evidence
to prove its zero-rated sales because no BIR authority to print said invoices was
indicated thereon.
a. CTA also observed that the invoices contained no Taxpayer’s Identification
Number-VAT (TIN-V) as required in section 113 in conjunction with Section 237 of
TC.
5. MR denied, hence the petition for review with CA averring that the requirements under
sections 113 and 237 apply only to domestic or local sales. Such requirements do not apply
to its export sales since no input VAT may be claimed thereon. Also it pointed that the
transaction is subject to 0% rate, there is no input VAT to be claimed and the latter is not a
VAT registered entity in PH, therefore should not be subjected to strict compliance since
the absence of BIR authority on some of the invoices is not fatal as to invalidate the
documents to prove its export sales since it declared that it used computerized accounting
forms as sales invoices based on a letter authority dated April 17, 1997 of the BIR, and it
was only through plain mistake and inadvertence that sales invoices had no authority to
print.
a. CA rejected appeal, hence affirming the CTA ruling.
6. Hence this present petition to the SC
ISSUE with HOLDING
W/N the absence of BIR authority to print or the absence of the TIN-V in petitioner’s export sales
invoices operates to forfeit its entitlement to a tax refund/credit and w/n failure to indicate “TIN-V”
in sales invoices automatically invalidates claim for tax credit certification – NO – it is not
required under the law to display said statements
 Sections 106(A)(2)(a)(1) in relation to 112(A), a taxpayer engaged in zero-rated or
effectively zero-rated transactions may apply for a refund or issuance of a tax credit
certificate for input taxes paid attributable to such sales upon complying with the following
requisites:
(1) The taxpayer is engaged in sales which are zero-rated (like 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;
(5) In case of zero-rated sales under Section 106(A)(2)(a)(1) and (2), Section 106(B), and
Section 108(B)(1) and (2), the acceptable foreign currency exchange proceeds thereof
had been duly accounted for in accordance with BSP rules and regulations.
o It is added that, "where the taxpayer is engaged in zero-rated or effectively zero-rated
sale and also in taxable or exempt sale of goods or properties or services, and the
amount of creditable input tax due or paid cannot be directly or entirely attributed to
any one of the transactions, it shall be allocated proportionately on the basis of the
volume of the sales.
 In the present case, petitioner as a VAT-registered and PEZA-registered entity engaged in
the export of advanced and large-scale ICs is claiming for refund or tax credit certificate of
11.7 Million for VAT input taxes.
o To prove its compliance it offered evidence copies of summary of export sales, sales
invoices, official receipts, airway bills, export declarations and certification of inward
remittances, and the Certificate of Registration by BIR and by PEZA to prove that it is
a VAT-registered entity and an Ecozone export enterprise.
o SC deemed that these documentary evidence prove that the petitioner is engaged
in the sale and actual shipment of goods from PH to a foreign country. The
certification of inward remittances attests that petition complied with the rules and
regulations of the BSP, hence petitioner was able to sufficiently establish that it is
entitled to a claim for refund or issuances of tax credit certificate for creditable
input VAT.
11

 CTA and CA both found petitioner to be legally entitled but denied said claim because the
petitioner failed to comply with invoicing requirements under sections 113 and 237 since
the invoices do not bear the BIR authority to print and do not indicate the TIN-V.
o SC disagrees with this ruling because there is NO LAW NOR BIR RULE OR
REGULATION requiring the petitioner’s authority from the BIR to print its sales
invoices.
o Section 113, 237, 238 and RR 2-90 section 19(d), and RR 7-95 are clear that while
they are required to secure from BIR an authority to print receipts or invoices and to
issue duly registered receipts or invoices, it is not required that the BIR authority to
print be reflected or indicated therein.
o Only the ff items are required to be indicated in the receipts or invoices:
(1) A statement that the seller is a VAT-registered entity followed by its TIN-V;
(2) The total amount which the purchaser pays or is obligated to pay to the seller
with the indication that such amount includes the value-added tax;
(3) Date of the transaction;
(4) Quantity of merchandise;
(5) Unit cost;
(6) Description of merchandise or nature of service;
(7) The name, business style, if any, and address of the purchaser, customer or
client in the case of sales, receipt or transfers in the amount of ₱100.00 or more,
or regardless of the amount, where the sale or transfer is made by a person
liable to VAT to another person also liable to VAT, or where the receipt is issued
to cover payment made as rentals, commissions, compensations or fees;
(8) The TIN of the purchaser where the purchaser is a VAT-registered person.
o Items 7 and 8 do not apply because petitioner is engaged in export sales and hence
logically, not VAT-registered in our country.
 The provisions thus cited do not provide that failure to indicate BIR authority to print
and the TIN-V would result in outright invalidation of the invoices or receipts nor
outright denial of claim for tax credit/refund. Instead Section 264 of TC imposes penalty of
fine and imprisonment.
 RMC No. 42-2003 (failure to comply with requirements would result to disallowance of
claim for refund or issuance of tax credit) do not apply because the principal ground of
denial in this case is its failure to reflect or indicate in invoices or receipts the authority to
print, and as already discussed, is not one of the items required by law to be reflected.
And in any case it cannot be applied retroactively because it would prejudice the petitioner.
 The question of what amount is the petitioner legally entitled to is a matter to be determined
in the remand of the case to the CTA considering that in the report of the auditor only 9.7
Million was deemed as valid claim for tax credit.
DISPOSITIVE PORTION
WHEREFORE, premises considered, the petition is PARTIALLY GRANTED. The Decision dated
August 12, 2004 of the CA in CA-G.R. SP No. 79327 is REVERSED and SET ASIDE. The
instant case is REMANDED to the Court of Tax Appeals for the determination and computation
of petitioner’s tax credit/refund.
DIGESTER: Dino De Guzman
Vat
Phil Acetelyne vs CIR
Castro J
Phil Acetelyne sells oxygen and acetelyne gases. It sold gases to NPC and VOA. By virtue
of these purchases it was assessed and demanded deficiency sales taxes and surcharges.
It denied liability claiming that it’s buyers are both exempt from taxation and as such, it, as
a seller, should not be taxed as well as it would then constitute indirect taxation of both
entities. The court ruled against Phil Acetelyne holding that it is still duty bound to pay for
Sales Taxes because in essence it is still the seller that pays the tax. It is not passed on to
the purchaser merely because the purchase price reflects the tax imposed.
DOCTRINE
In sales tax; the purchaser does not pay the tax. He pays or may pay the seller more
for the goods because of the seller's obligation, but that is all and the amount added
because of the tax is paid to get the goods and for nothing else
FACTS
42. Petitioner (Phil. Acetelyne) is a corporation that makes and sells oxygen and
acetylene gases.
43. Petitioner made various sales to the National Power Corp (NPC; an agency of the
Gov’t; total= Php. 145, 866.70), and to the Voice of America (VOA; agency of the US
Gov’t, total- Php. 1683)
44. Because of this, respondent CIR assessed and demanded Php. 12, 910.60 as
deficiency sales tax and surcharges citing: then Sec. 186 and 183 , NIRC
45. Petitioner denies liability;
- claims that both NPC and VOA are exempt from taxation. CIR rules against it
hence the appeal to CTA
46. CTA:
- Sec. 186 tax on NPC is tax on manufacturer, not the buyer; hence Phil Acet
cannot claim all the tax exemption of the buyer
- VOA sales goods bought by the US for its agencies from manufacturers or
producers are exempt from the payment of the sales tax based on the agreement
between the RP and the US, provided that there are certificates of exemption
a. Since purchases amounted only to Php. 558 of the Php. 1683 weren’t
covered; this amount is the one to be considered for tax purposes
- Hence assessment was reduced from Php. 12,910.60 to Php. 12,812.16
47. Thus, petitioner appealed to the SC, claiming that it isn’t liable for the payment of tax
on the sales it made to the NPC and the VOA because both are exempt from taxation
ISSUE with HOLDING
9. Can Phil Acetelyne claim exemption by virtue of its buyer’s (NPC) exemption from
taxation?
Petitioner’s claim: immunity given to NPC would be impaired by the imposition of a sales
tax made to Phil Acet because it would in effect, burden the former with indirect tax
GR: NPC enjoys tax exemption due to an Act of Congress, saying that it’s exempted from
all taxes and all duties, fees, imposts, charges and restrictions except real property tax
(Sec. 2, RA 987)
12
SC: No.
Justice Oliver Wendell Holmes (Lash’s Products v. US): "The phrase 'passed the
tax on' is inaccurate, as obviously the tax is laid and remains on the manufacturer
and on him alone. While the incidence of the tax ultimately settles on the
purchaser, it is not for that reason alone that one may validly argue that it is a tax
on the purchaser.
The exemption granted to the NPC may be likened to the immunity of the
Federal Government from state taxation and vice versa in the federal
system of government of the United States.
Examination of cases (from Panhandle Oil Co. v. Missisipi (which Holmes
dissented ), to James v. Dravo Constructing Co , to Alabama v. King & Boozer ,
to Esso Standard Oil v. Evans ) suggests that even in those cases where
exemption from tax was sought on the ground of state immunity, the attempt has
not met with success.
If a claim of exemption from sales tax based on state immunity cannot command
assent, much less can a claim resting on statutory grant.
numbered Certificates of Tax Exemption issued by the vendee-agency, as required by
General Circular No. V-41, dated October 16, 1947. . . .
1. Only sales made "for exclusive use in the construction, maintenance, operation
or defense of the bases," in a word, only sales to the quartermaster, are exempt under
article V from taxation. Sales of goods to any other party even if it be an agency of the
United States, such as the VOA, or even to the quartermaster but for a different purpose,
are not free from the payment of the tax.
2. On the other hand, article XVIII exempts from the payment of the tax sales made
within the base by (not sales to) commissaries and the like in recognition of the principle
that a sales tax is a tax on the seller and not on the purchaser.
3. In American tax law, exemption must be strictly construed and that the exemption
will not be held to be conferred unless the terms under which it is granted clearly and
distinctly show that such was the intention of the parties. Hence the BIR circular
expanding the scope of the exemption is void
iv. Recomputed the percentage taxes, found they’re liable for Php. 12,910.60.
DISPOSITIVE PORTION
Lorem ipsum dolor sit amet, consectetur adipiscing elit. Quisque ac erat placerat turpis
suscipit congue id quis erat. Curabitur lobortis metus ut purus venenatis…

It may indeed be that the economic burden of the tax finally falls on the OTHER NOTES
purchaser; when it does, the tax becomes a part of the price which the purchaser Lorem ipsum dolor sit amet, consectetur adipiscing elit. Quisque ac erat placerat turpis
must pay. It does not matter that an additional amount is billed as tax to the suscipit congue id quis erat. Curabitur lobortis metus ut purus venenatis…
purchaser.

The method of listing the price and the tax separately and defining taxable gross DIGESTER: SD
receipts as the amount received less the amount of the tax added, merely avoids
payment by the seller of a tax on the amount of the tax.

Same effect still; purchaser does not pay the tax. He pays or may pay the
seller more for the goods because of the seller's obligation, but that is all
and the amount added because of the tax is paid to get the goods and for
nothing else

But the tax burden may not even be shifted to the purchaser at all. A decision to
absorb the burden of the tax is largely a matter of economics and can no longer
be contended that a sales tax is a tax on the purchaser. (it is the choice of the
purchaser to take the price of the product as it is or leave it). By inference, in
cases where the gov’t is the purchaser, the government is given the option to
take the product at it’s stipulated price, whether or not such price reflects the tax
burden.

10. 2. Can Phil Acetelyne claim exemption by virtue of its buyer’s (VOA) exemption
from taxation?

Court: Same conclusion as the NPC theory.

the Voice of America is an agency of the United States Government and as such, all
goods purchased locally by it directly from manufacturers or producers are exempt
from the payment of the sales tax under the provisions of the agreement between the
Government of the Philippines and the Government of the United States, (See
Commonwealth Act No. 733) provided such purchases are supported by serially

13
 VAT
Philippine National Police MultiPurpose Cooperative, Inc. vs CIR
CTA: Gruba, Manuel; Assoc Judge.
FACTS
1. PNP Multipurpose Cooperative is a cooperative composed of gov’t employees and
organized under RA 6938.
2. Oct. – Dec. 1991, PNPMC purchased merchandise from various suppliers. Those
suppliers included in their sales price the 10% VAT amounting to P75,110.88.
3. June 25, 1992 – PNPMC filed an application for refund from the CIR, alleging that it was
exempt from gov’t tax under the internal revenue laws and other tax laws.
4. CIR denied the refund. Held that the VAT is an indirect tax that the seller is liable for, but
can be passed onto the buyer. Once shifted to the customer it becomespart of the cost that
the customer has to pay, but that doesn’t mean he’s the one liable for it.
5. PNPMC filed before the CTA a petition for review of above decision.
ISSUE with HOLDING
1. W/N PNPMC is entitled to the refund.
SC: No.
The tax exemption from " any government taxes or fees imposed under the
internal revenue laws and other ·laws" does not include indirect taxes such as
VAT and sales tax passed on by the seller to the buyer. Fo r a taxpayer to be .
exempt from indirect taxes, there should be a clear intention on the part of the
Legislature to grant such exempt ion. The exempting law should categorically
or specifically provide for exemption from indirect taxes.
The persons liable for the VAT are not the buyers or purchasers but the sellers
or importers of goods and those performing services £or a £ee. Being the
buyer or purchaser, petitioner has no legal standing to claim £or t h e re£und
o£ the input taxes it paid on its purchases.
DISPOSITIVE PORTION
WHEREFORE, in view of all the foregoing , t h e claim
for refund in the amount of P75,110.88 is hereby DENIED
for lack of merit. No pronouncement as to costs.
SO ORDERED.
Quezon City, Metro Manila ,
~ a. One June, 1988, CIR issued a VAT Ruling, stating that they are exempt
OTHER NOTES
Cooperative Code:
"ART 61. Tax Treatment of Cooperative
Duly registered cooperatives under this Code which do not transact any business with
nonmembers or the general public shall not be subject to any government taxes or £ees
imposed under the internal revenue laws and other tax laws. xxx"
Sections 100(a)(2) and 103(u) of the Tax Code
The VAT Implementing Regulations provide £or the distinctions between zero-rated and
exempt transactions, thus:
SEC. 8. Zero-rating. - (a) In general.
SEC. 9. Exemptions. In general.
VAT
G.R. No. 168129 – April 24, 2007
CIR vs Phil Health Care Providers, Inc.
SANDOVAL-GUTIERREZ, J.
Philippine Health Care Providers Inc (PHCPI) is a corporation that arranges for medical
and/or hospital services to its members. It acts as a conduit between its members and their
accredited hospitals/clinics. PHPCPI wrote a letter to the CIR inquiring whether its services
are exempt from the payment of VAT. The CIR stated that they are exempt from VAT
coverage. Later on however, the BIR revoked its ruling, assessing PHCPI for VAT
deficiency payments. PHCPI protested this, and the Supreme Court partially held in favor
of them. The SC held that PHCPI’s services are not VAT exempt (see doctrine). However,
the nonretroactivity of BIR rulings applies in this case, and so the BIR cannot revoke its
earlier ruling that PHCPI is VAT exempt, which the latter relied on in not paying VAT for
the taxable years involved.
DOCTRINE
An exempt transaction is one involving goods or services which, by their nature, are
specifically listed in and expressly exempted from VAT under the Tax Code, without regard
to the tax status of the party in the transaction. Health maintenance organizations do not
provide medical and/or hospital services, but merely arranges for the same. Thus, they are
not VAT exempt.
FACTS
48. Philippine Health Care Providers, Inc (PHCPI) is a corporation whose primary
purpose is:
a. “to establish, maintain, conduct and operate a prepaid group practice health
care delivery system or a health maintenance organization to take care of
the sick and disabled persons enrolled in the health care plan and
b. to provide for the administrative, legal, and financial responsibilities of the
organization.
49. President Cory Aquino issued EO 273, imposing VAT on the sale of goods and
services. This took effect on January 1, 1988.
50. Before the effectivity of EO 273 (December, 1987), PHCPI wrote to the CIR
inquiring whether the services it provides are exempt from the payment of the VAT.
from the VAT coverage.
51. On January 1, 1998, RA 7716 took effect amending the NIRC and substantially
adopting and reproducing the provisions of EO 273 on VAT, and RA 7716 on E-VAT.
52. On October 1, 1999, the BIR assessed PHCPI for deficiency in its payment of VAT
and DST, for taxable years 1996-1997.
53. PHCPI filed a protest with the BIR, and eventually a petition for review before the
CTA.
54. The CTA initially held that PHCPI is liable for the 1996 and 1997 deficiency VAT, but
exempt from DST.
a. Upon an MR from PHCPI, the CTA granted the motion, holding that PHCPI
is exempt from both VAT and DST.
55. Thus, the BIR filed this petition for review before the SC.
ISSUE with HOLDING
11. WoN PHCPI’s services are subject to VAT. YES.
14
 a. An exempt transaction is one involving goods or services which, by their
nature, are specifically listed in and expressly exempted from VAT under the
Tax Code, without regard to the tax status of the party in the transaction.
b. Sec. 103 of the NIRC (now Sec 109) specifies the exempt transactions
from VAT: “(l) Medical, dental, hospital and veterinary services except
those rendered by professional”
c. In this case, and as correctly found by the CTA, PHCPI does not actually
provide medical and/or hospital services, but merely arranges for the
same.
i. it merely acts as a conduit between the members and their
accredited and recognized hospitals and clinics
ii. it contracts the services of physicians, medical and dental
practitioners, clinics and hospitals to perform such services to its
enrolled members
d. Thus, its services are not VAT-exempt.
12. WoN the the revocation of the VAT ruling exempting PHCPI from payment of VAT has
retroactive application. NO.
a. As a general rule, rulings, circulars, rules and regulations promulgated by
the CIR have no retroactive application if to apply them would prejudice
the taxpayer.
b. The exceptions to this rule are (i.e. when such rulings can be given
retroactive application, even if it would prejudice the taxpayer):
i. where the taxpayer deliberately misstates or omits material
facts from his return or in any document;
ii. where the facts subsequently gathered by the BIR are materially
different from the facts on which the ruling is based; or
iii. Where the taxpayer acted in bad faith.
c. In this case, none of the three exceptions are present.
i. The CTA itself has found that there is no showing that PHCPI
deliberately committed mistakes or omitted material facts in
obtaining the VAT ruling.
ii. The letter which served as the basis for the VAT ruling sufficiently
described its business and there is no way the BIR could have
been misled by it as to the real nature of said business.
iii. The failure of PHCPI to refer to itself as a “health maintenance
organization” is not an indication of bad faith.
1. the term “health maintenance organization” did not as yet
have any particular significance for tax purposes at the
time the ruling was issued.
d. PHCPI acted in good faith. Good faith is that state of mind denoting
honesty of intention and freedom from knowledge of circumstances
which ought to put the holder upon inquiry.
e. Moreover, undue prejudice will be caused to petitioner if the revocation of
VAT Ruling exempting PHCPI from VAT will be retroactively applied to its
case.
DISPOSITIVE PORTION
WHEREFORE, we DENY the petition and AFFIRM the assailed Decision and Resolution of the
Court of Appeals in CA-G.R. SP No. 76449. No costs.
SO ORDERED
DIGESTER: Xave Libardo
VAT
560 SCRA 606 – First Planters Pawnshop, Inc. v. BIR
PONENTE
The BIR assessed First Planters Pawnshop as having VAT (and DST) deficiencies. First
Planters averred that it wasn’t liable for VAT because it is a nonbank financial
intermediary. It indeed wasn’t liable for VAT during the tax years when collection of VAT
from nonbank financial intermediaries was specifically deferred by law. But since VAT was
fully implemented on nonbank financial intermediaries starting 2003, First Planters was
then liable for [10%] (now 12%) VAT. HOWEVER, starting 2004 up to present, First
Planters is no longer subject to VAT but is now subject to Percentage Tax on gross
receipts (0%-5%) by virtue of RA 9238.
DOCTRINE
Prior to the EVAT Law, pawnshops were treated as lending investors subject to lending
investor’s tax. Subsequently, with the Court’s ruling in Lhuillier, pawnshops were then
treated as VATable enterprises under the general classification of “sale or exchange of
services” under Section 108(A) of the Tax Code of 1997, as amended. R.A. No. 9238
finally classified pawnshops as Other Nonbank Financial Intermediaries. The Court finds
that pawnshops should have been treated as nonbank financial intermediaries from the
very beginning, subject to the appropriate taxes provided by law.
FACTS
56. In July 2003, the BIR informed First Planters Pawnshop, Inc. (“First Planters”) that it
had an existing tax deficiency on its VAT (and DST or Documentary Stamp Tax)
liabilities for the year 2000.
 VAT deficiency: Php541,102.79
 DST deficiency: Php24,747.13
57. First Planters filed a protest—w/c was denied10.
58. First Planters filed a petition for review w/ the CTA.
 CTA upheld the deficiency assessment.
 First Planters filed an MR but it was denied.
 First Planters appealed to the CTA En Banc. It was DENIED. MR also
denied.
59. Hence, First Planters filed a 45 petition before the SC saying that:
 CTA erred in finding First Planters is liable for VAT.
 CTA erred in ruling that First Planters is liable for DST on pawn tickets.
ISSUE w/ HOLDING: W/N First Planters Pawnshop was liable for VAT. – YES (for a
certain period), but not for the year 2000 (i.e., the disputed assessment) when levy,
collection, and assessment for VAT was deferred by law. And then later on, it WASN’T
subject to VAT again. (Note: This is a case of statutory ping pong, so to speak.)
13. The determination of First Planter’s tax liability depends on the tax treatment of a
pawnshop business. Oddly, there hasn’t been any definitive declaration in this regard,
considering pawnshops have been around for so long. The BIR itself has maintained
an ambivalent stance on this issue.
10 Denied by Acting Regional Director Anselmo G.Adriano on a final decision in 2004
15
14. There were a series of laws passed and cases decided that led to the conclusion
that pawnshops are liable for VAT. (Please See Other Notes For Statutory
History!!!)
15. In a nut shell: Prior to the EVAT Law, pawnshops were treated as lending
investors subject to lending investor’s tax. Subsequently, with the Court’s ruling in
Lhuillier, pawnshops were then treated as VAT-able enterprises under the general
classification of “sale or exchange of services” under Section 108(A) of the Tax Code
of 1997, as amended. R.A. No. 9238 finally classified pawnshops as Other Nonbank
Financial Intermediaries (w/c is subject to VAT).
16. SC finds that pawnshops should’ve been treated as non-bank financial
intermediaries from the beginning, subject to the appropriate taxes provided by law.
But lucky for First Planters, there were several deferments in the law, making it dodge
the 2000 assessment:
 Although the levy, collection, and assessment of the [10%] VAT on services
rendered by banks, non-bank financial intermediaries, finance companies,
and other financial intermediaries not performing quasi-banking functions
were made effective on Jan. 1, 1998, RA 8424 (w/c gave us our present Tax
Code) deferred the said levy, collection, and assessment until Dec. 31, ’99.
 RA 8761 FURTHER DEFERRED it until DEC. 31, 2000 and further still until
DEC. 31, 2002, by RA 9010.
17. The levy, collection, and assessment of the [10%] VAT imposition on the mentioned
entities were FINALLY MADE EFFECTIVE beginning Jan. 1, 2003.
18. At the time of the disputed assessment (i.e., year 2000), pawnshops weren’t subject
to [10%] VAT under the gen. provision on “sale or exchange of services11” (under
Sec. 108(A)).
19. Eventually, RA 9238 was enacted making services of non-bank financial
intermediaries (under w/c pawnshops fall) were specifically exempted from VAT, and
the 0%-5% percentage tax on gross receipts on other non-bank financial
intermediaries was reimposed under Sec. 122, Tax Code.
20. The tax treatment of pawnshops as non-bank financial intermediaries HAS BASIS.
The Court looked into the usage of terms in several laws and analyzed how
pawnshops really do fall under non-bank financial intermediaries (w/c are subject to
VAT). (See Other Notes for the full discussion of these BASES.)
21. Since First Planters is a non-bank financial intermediary, it’s subject to [10%] VAT for
the tax years 1996-2002; HOWEVER, w/ the levy, assessment, and collection of VAT
from non-bank financial intermediaries being specifically deferred by law, then
First Planters is NOT liable for VAT during these tax years.
 But w/ the full implementation of the VAT system on non-bank financial
intermediaries starting Jan 1, 2003, First Planters is liable for [10%] VAT for
that year.
 And beginning 2004 up to the present, by virtue of RA 9238, First Planters is
no longer liable for VAT but it’s subject to percentage tax on gross receipts
from 0% to 5%, as the case may be.
11 Sec. 108. x x x The phrase “sale or exchange of services” means the performance of all kinds of services
in the Philippines for other for a fee, remuneration or consideration, including x x x services of banks, non-
bank financial intermediaries and finance companies…
22. As to W/N First Planters is liable for DST (documentary stamp tax) – YES. SC
has settled this issue in Michel J. Lhuillier Pawnshop, Inc. vs. CIR in w/c it ruled that
the subject of DST is not limited to the document alone. Pledge (w/c is essentially the
business of pawnshops) is also subject to DST. The pawn tickets (on w/c First
Planters is made liable for DST) is a proof of an exercise of a taxable privilege of
concluding a contract of pledge. Sec. 195,Tax Code unqualifiedly subjects all pledges
to DST. Pawn tickets is also not included in Sec. 199 (list of exempted pledges).
DISPOSITIVE PORTION
Petition is PARTIALLY GRANTED. (CTA Decision is modified—BIR assessment for VAT
deficiency for the year 2000 is reversed, while its assessment for DST deficiency is
upheld.)
OTHER NOTES
STATUTORY HISTORY
(Important but had to be discussed separately para ‘di magulo)
 Not subject to VAT  1991 – BIR issued Revenue Memorandum Order No. 15-
91 stating that a pawnshop business was considered as “akin to lending
investor’s business activity” and subject to 5% percentage tax (starting 1/1/1991)
 Subject to VAT  1994 – RA 7716 or EVAT Law was passed. BIR abandoned its
earlier position saying that pawnshops are subject to 10% VAT (as implemented
by RR 7-95)
 Subject to VAT  Revenue Memorandum Circular No. 45-01 provided that
pawnshop operators are liable to the 10% VAT based on gross receipts.
Pawnshops whose gross annual receipts don’t exceed 550k are liable for
percentage tax.
 Subject to VAT  CTA decisions affirmed the BIR’s position that pawnshops are
subject to VAT. CTA’s view: The services rendered by pawnshops fall under the
general addition of “sale or exchange of services”
 H. Tambunting Pawnshop, Inc. vs. CIR
 Antam Pawnshop Corporation vs. CIR
 CIR vs. Micael J. Lhuiller Pawnshop, Inc. – while pawnshops are engaged
in the business of lending money, they are not consider “lending investor”
because:
(1) Under the Tax Code, pawnshops and lending investors were subjected to
different tax treatments;
(2) Congress never intended pawnshops to be treated in the same way as
lending investors;
(3) Sec. 116 of the Tax Code subjects only dealers in securities and lending
investors
(4) Prior to the issuance of RMO No. 15-91 and RMC 43-91, BIR had ruled
several times that pawnshops were not subject to the 5% percentage tax on
lending investors imposed by Sec. 116.
 Revenue Memorandum Circular (“RMC”) 36-2004 was issued to cancel the
previous lending investor’s tax assessments on pawnshops.
 RMC No. 37-2004 was issued on the same date whereby pawnshops
business were allowed to settle their VAT liabilities for the tax years 1996-2002
 Non-banks NOT subject to VAT Meanwhile, Congress passed RA 9238
entitled “An Act Amending Certain Sections of the NIRC by Excluding Several
Services from the Coverage of the VAT and Reimposing the Gross Receipts Tax
on Banks and Non-bank Financial Intermediaries Performing Quasi-banking
Functions and Other Non-bank Financial Intermediaries beginning Jan. 1, 2004.”
 Non-banks to become subject to VAT again  Pending publication of RA 9238,
the BIR issued Bank Bulletin No. 2004-01 advising all banks and non-bank
financial intermediaries that they shall remain liable under the VAT system.
16
  Pawnshops classified as NON-BANK  When RA 9238 took effect, the Dept. of
Finance issued RR No. 10-2004 classifying pawnshops as Other Non-bank
Financial Intermediaries.
 Thus, pawnshops are now subject to VAT  BIR then issued RMC No. 73-2004
prescribing the guidelines and policies on the assessment and collection of 10%
VAT for gross annual sales/receipts exceeding 550k or 3% percentage tax for
gross annual sales/receipts not exceeding 550k of pawnshops prior to Jan. 1,
2005.
 But the enactment of RA 9238 made the services of banks, non-bank financial
intermediaries, finance companies, and other financial intermediaries not
performing quasi-banking functions were specifically exempted from VAT. The
0%-5% percentage tax on gross receipts on other non-bank financial
intermediaries was reimposed under Sec. 122 of the Tax Code.
BASES for Classifying Pawnshops
as Non-Bank Financial Intermediaries:
 The Gen. Banking Law of 2000 (RA 337) defines “banks” and “financial
intermediaries”. Financial intermediaries are defined as “persons or entities
whose principal functions include the lending, investing or placement of funds or
evidences of indebtedness or equity deposited w/ them, acquired by them, or
otherwise coursed through them, either for their own account or for the account
of others.”
- Pawnshops obviously do not fall under the category of banks.
- So do they fall under “financial intermediaries”? YES they do because of the
nature of their business—its principal function is LENDING.
 A pawnshop’s business operations are governed by the Pawnshop Regulation
Act (PD No. 114) and CBC No. 374 (RR for Pawnshops).
- Sec. 3, PD No. 114 defines “pawnshop” as “a person or entity engaged in
the business of lending money on personal property delivered as security
for loans and shall be synonymous, and made used interchangeably, w/
pawnbroker or pawn brokerage.”
 Pawnshops are under the regulatory supervision of the Bangko Sentral ng
Pilipinas and covered by its Manual of Regulations for Non-Bank Financial
Institutions. The Manual includes pawnshops in the list of non-bank financial
intermediaries.
 RR No. 10-2004 even recognized these bases in Sec. 212 thereof: “BASES OF
QUALIFYING PAWNSHOPS AS NON-BANK FINANCIAL INTERMEDIARIES”
 RA 9238 categorically confirmed the classification of pawnshops as non-bank
financial intermediaries.
DIGESTER: Viveka
12 “SEC. 2. BASES OF QUALIFYING PAWNSHOPS AS NONBANK FINANCIAL INTERMEDIARIES.
—Whereas, in relation to Sec. 2.3 of Rev. Regs No. 92004 defining “Nonbank Financial Intermediaries, the
term “pawnshop” as defined under Presidential Decree No. 114 which authorized its creation, to be a person
or entity engaged in the business of lending money, all fall within the classification of Nonbank Financial
Intermediaries and therefore, covered by Sec. 4 of R.A. No. 9238. This classification is equally supported by
Subsection 4101Q.1 of the BSP Manual of Regulations for NonBank Financial Intermediaries and reiterated in
BSP Circular No. 20499, classifying pawnshops as one of Nonbank Financial Intermediaries within the
supervision of the Bangko Sentral ng Pilipinas.”
VAT
172087– PAGCOR v BIR
Peralta
PAGCOR was subjected to VAT after the BIR issued a revenue regulation pursuant to
Abakada Guro v. Ermita, which ruled that PAGCOR was subject to corporate income tax
based on its omission from the list of GOCCs exempted from such taxes. The SC held that
nowhere in RA 9337 was it provided the PAGCOR can be subjected to VAT, only to
corporate income tax.
DOCTRINE
In case of discrepancy between the basic law and a rule or regulation issued to implement
said law, the basic law prevails, because the said rule or regulation cannot go beyond the
terms and provisions of the basic law. The provision in Revenue Regulation No. 16-2005
subjecting PAGCOR to VAT is invalid for being contrary to RA 9337.
FACTS (lifted from Reggie’s digest)
60. PAGCOR was created pursuant to PD 1067-A; simultaneously, PD 1067-B was
enacted granting PAGCOR the exemption from paying tax of any kind
61. The only tax PAGCOR pays is the 5% franchise tax taken against the gross revenue
or earnings derived by the Corporation from its operation under this franchise.
62. When RA 9337 was enacted on 24 May 2005, Section 1 of said RA excluded
PAGCOR form the enumeration of GOCCs that are exempt from payment of
corporate income tax.
63. Different groups came to this court via petitions for certiorari and prohibition assailing
the validity and constitutionality of RA 9336, particularly questioning imposition of
various VATs on goods, services, and the like, alleging that certain sections of the RA
were unconstitutional as they violated the equal protection clause, as well as
questioning the manner in which the law was passed.
64. The Court dismissed all the petitions and upheld RA 9337. The same day the court
issued this resolution, BIR also came out with a Revenue Regulation identifying
PAGCOR as one of the franchisees subject to 10% Vat
65. HENCE the present petition for certiorari
ISSUE with HOLDING
23. Whether or not PAGCOR is still exempt from corporate income tax– NO
a. PAGCOR failed to prove that it was still exempt from the payment of
corporate income tax. Pursuant to Sec. 1, RA 9337, which amended Sec.
27(c), PAGCOR was no longer exempt from corporate income tax since it
was omitted from the list of GOCCs exempt from such tax. The express
mention of the GOCCs exempted from corporate income tax excluded all
others. Not being excepted, PAGCOR came within the purview of the
general rule that GOCCs shall pay corporate income tax. In fact, from the
records of the Bicameral Conference Meeting on RA 9337, it was shown
that legislature truly intended to subject PAGCOR to corporate income tax.
b. The allegation that the omission violated the equal protection clause failed
because its exemption found in the original provision was a result of
PACGOR’s own request to be exempted. It was not made pursuant to a
valid classification based on substantial distinctions and the other
17
 requirements of a reasonable classification. As its invocation of the non-
impairment clause, it was ruled that a franchise was in the nature of a grant
beyond the purview of the clause. Congress had the power to amend, alter
or repeal such when the common good so required.
24. W/N PAGCOR is still exempt from VAT – YES
a. The revenue regulation in question (RR No. 16-2005) subjecting PAGCOR
to 10% VAT is invalid for being contrary to RA 9337 since nowhere in the
law was it provided that PAGCOR can be subjected to VAT. In fact, as
pointed out by the OSG, RA 9337 exempts petitioner from VAT. Sec. 7
provides:
i. Sec. 7. Section 109 of the same Code, as amended, is hereby
further amended to read as follows:
b. Section 109. Exempt Transactions. - (1) Subject to the provisions of
Subsection (2) hereof, the following transactions shall be exempt from the
value-added tax:
i. (k) Transactions which are exempt under international agreements
to which the Philippines is a signatory or under special
laws, except Presidential Decree No. 529.
c. PAGCOR is exempt from the paying VAT because its charter is a special
law that grants it exemption from taxes. In addition, Sec. 6 of RA 9337
retained Sec. 108 (B) (3) of the NIRC, which provides that:
i. (3) Services rendered to persons or entities whose exemption
under special laws or international agreements to which the
Philippines is a signatory effectively subjects the supply of such
services to zero percent (0%) rate;
d. SC already ruled in CIR v. Acesite Hotel that the charter of PAGCOR gave it
a blanket exemption from taxes with no distinction whether they were direct
or indirect. Since the PAGCOR’s tax exemption was extended to entities or
individuals dealing with it in casino operations, SC found that the law also
exempted PAGCOR from indirect taxes.
e. In case of discrepancy between the basic law and a rule or regulation issued
to implement said law, the basic law prevails, because the said rule or
regulation cannot go beyond the terms and provisions of the basic law. The
provision in Revenue Regulation No. 16-2005 subjecting PAGCOR to VAT
is invalid for being contrary to RA 9337.
DISPOSITIVE PORTION
Petition PARTLY GRANTED. Section 1 of RA 9337 excluding petitioner PAGCOR from the
enumeration of GOCCS exempted from corporate income tax is VALID and
CONSTITTIONAL while BIR rules and regulations imposing the VAT on PAGCOR is
deemed null and void.
DIGESTER: Gab.
VAT
G.R. No. 88291 (1993) – Maceda v. Macaraig
Nocon, J.
In question in this case is the eligibility of the National Power Corporation to be reimbursed
for ad valorem taxes it has previously paid for the purchase of oil from its suppliers. The
Court first ruled on its status as an exempt entity, finding that NPC enjoys such exemption
by virtue of PD 1931. The Court then ruled that it is the oil companies who should shoulder
the taxes sold to NPC, because NPC is exempt from indirect taxation.
DOCTRINE
By the very nature of indirect taxation, the economic burden of such taxation is expected to
be passed on through the channels of commerce to the user or consumer of the goods
sold.
Note: Some parts are copied from Horace’s Tax 1 Digest
FACTS
66. 1936 – The National Power Corporation (NPC) was created under Commonwealth
Act No. 120 for the electrification of the country. Under its charter and several
amending laws, the NPC was exempt from the payment of all taxes.
 RA 6395 Sec. 13 (See Other Notes)
 PD 380 – amended RA 6395, Sec. 13: (d) From all taxes, duties, fees, imposts,
and all other charges imposed directly or indirectly by the Republic of the
Philippines, its provinces, cities, municipalities and other government agencies
and instrumentalities, on all petroleum products used by the Corporation in the
generation, transmission, utilization and sale of electric power.
 PD 938 – amended RA 6395, Sec. 13, as amended: The Corporation shall be
non-profit and shall devote all its returns from its capital investment as well as
excess revenues from its operation, for expansion. To enable the Corporation to
pay to its indebtedness and obligations and in furtherance and effective
implementation of the policy enunciated in Section one of this Act, the
Corporation, including its subsidiaries, is hereby declared exempt from the
payment of all forms of taxes, duties, fees, imposts as well as costs and
service fees including filing fees, appeal bonds, supersedeas bonds, in any court
or administrative proceedings.
67. 1977 – Then President Marcos issued PD 1177 (Other Notes), which withdrew the tax
exemptions granted to government owned and controlled corporations.
68. 1984 – Marcos issued PD 1931 which, in Sec. 1, reiterated the withdrawal of the tax
exemptions of GOCC’s. However, it provided in Sec. 2, that the President or Minister
of Finance may, upon the recommendation of the Fiscal Incentives Review Board
(FIRB), restore partially or totally the exemptions withdrawn by Sec. 1.
 Feb 1985 – FIRB issued Resolution 10-85 restored the tax exemption privileges
of NPC effective retroactively to June 11, 1984 up to June 30, 1985.
69. Sept 1985 – NPC filed with the Bureau of Internal Revenue (BIR) several claims for
reimbursement over its payment of ad valorem tax levied upon some amount of
bunker fuel oil it ordered from Caltex and Pilipinas Shell. It claimed that it was
exempted from paying taxes, including ad valorem taxes, based on its charter and the
subsequent amending laws.
70. The BIR had granted an earlier claim by NPC, reimbursing the amount of P58 million.
18
71. Petitioner Maceda is thus trying to block the release of another P411 million in
reimbursements, arguing that NPC’s tax exemption privileges have been abolished by
P.D. No. 1177 as well as other amending decrees.
ISSUE with HOLDING
25. W/N NPC is exempt from paying ad valorem (indirect) taxes – YES
 Maceda: PD 938 repealed the indirect tax exemption of NPC as the phrase "all
forms of taxes etc.," in its section 10, amending Section 13, R.A. No. 6395 does
not expressly include "indirect taxes." If the intention was to preserve the indirect
tax exemption of NPC, Marcos should have just retained or used similar wording
found in PD 380 in PD 938.
 Court: What Marcos did was actually to lump Secs. 13(b), 13(c), and 13(d)
(which all provided for exemption from different types of taxes) into the phrase
“all forms of taxes” found in PD 938.
 Maceda: PD 1177 (July 1977) abolished direct and indirect tax exemptions
enjoyed by NPC. As such, PD 1931 (June 1984) which apparently restored
NPC’s tax exempt status, could not validly affect NPC’s status.
o Sec. 1 withdrew all exemptions
o Sec. 2 provided for the authority of the Fiscal Incentives Review Board
(FIRB) to restore the exemptions withdrawn by Sec. 1.
Sec. 1 could not have withdrawn any privilege as PD 1177 had already abolished
it previously. As such, Sec. 2 could not restore anything anymore. Resolutions
issued by the FIRB under such Section would in effect be creating, not restoring,
a tax exempt status.
 Court: Though P.D. 1177 had abolished tax exemption privileges, the
subsequent law, P.D. 1931, allowed NPC to apply for a total restoration of those
privileges. NPC applied for the restoration. This application was granted by the
Fiscal Incentives Review Board, an inter-agency body created by P.D. 1931 to
review tax exemption applications. The exemption was retroactively applied to
include the period when the privilege was abolished.
Sec. 13. The Corporation shall be non-profit and shall devote all its returns from its capital
investment, as well as excess revenues from its operation, for expansion. To enable the
Corporation to pay its indebtedness and obligations and in furtherance and effective
implementation of the policy enunciated in Section one of this Act, the Corporation is
hereby declared exempt:
(a) From the payment of all taxes, duties, fees, imposts, charges costs and
service fees in any court or administrative proceedings in which it may be a party,
restrictions and duties to the Republic of the Philippines, its provinces, cities, and
municipalities and other government agencies and instrumentalities;
(b) From all income taxes, franchise taxes and realty taxes to be paid to the
National Government, its provinces, cities, municipalities and other government agencies
and instrumentalities;
(c) From all import duties, compensating taxes and advanced sales tax, and
wharfage fees on import of foreign goods required for its operations and projects; and
(d) From all taxes, duties, fees, imposts and all other charges its provinces,
cities, municipalities and other government agencies and instrumentalities, on all
petroleum products used by the Corporation in the generation, transmission, utilization,
and sale of electric power.
PD 1177 in part
All units of government, including government-owned or controlled corporations, shall pay
income taxes, customs duties and other taxes and fees are imposed under revenues laws:
provided, that organizations otherwise exempted by law from the payment of such
taxes/duties may ask for a subsidy from the General Fund in the exact amount of
taxes/duties due: provided, further, that a procedure shall be established by the Secretary
of Finance and the Commissioner of the Budget, whereby such subsidies shall
automatically be considered as both revenue and expenditure of the General Fund.
DIGESTER: Alyssa Mateo

26. W/N NPC is liable for the ad valorem tax – NO

 Private respondents-oil companies have to absorb the taxes they add to the
bunker fuel oil they sell to NPC.
 By the very nature of indirect taxation, the economic burden of such taxation is
expected to be passed on through the channels of commerce to the user or
consumer of the goods sold. Because, however, the NPC has been exempted
from both direct and indirect taxation, the NPC must be held exempted from
absorbing the economic burden of indirect taxation.
 If NPC purchases such oil from the oil companies — because to do so may be
more convenient and ultimately less costly for NPC than NPC itself importing and
hauling and storing the oil from overseas — NPC is entitled to be reimbursed by
the BIR for that part of the buying price of NPC which verifiably represents the
tax already paid by the oil company-vendor to the BIR.

DISPOSITIVE PORTION
WHEREFORE, in view of all the foregoing, the Motion for Reconsideration of petitioner is
hereby DENIED for lack of merit and the decision of this Court promulgated on May 31,
1991 is hereby AFFIRMED. SO ORDERED.

OTHER NOTES
RA 6395

19
 Value-Added Taxes
G.R. No. 145526 — Atlas Consolidated Mining v. CIR (2007)
Corona, J.
The petitioner sought the reversal of the CTA ruling that its transactions with several
entities were not zero-rated and thus not eligible for tax refund or credit. The SC
affirmed the decision, finding that the petitioner failed to present sufficient evidence
that demonstrated that the transactions resulted in excess input taxes.
DOCTRINE
While the CTA is not governed strictly by technical rules of evidence, as rules of
procedure are not ends in themselves but are primarily intended as tools in the
administration of justice, the presentation of the purchase receipts and/or invoices is
not a mere procedural technicality which may be disregarded considering that it is the
only means by which the CTA may ascertain and verify the truth of respondent’s
claims.
Requirements to acquire zero-rating for transactions:
1. show that its sales qualified for zero-rating under the laws then in force and
2. present sufficient evidence that those sales resulted in excess input taxes.
FACTS
1. The petitioner Atlas Consolidated Mining and Development Corporation
(“Atlas”) is engaged in the business of mining, production and sale of mineral
products.
2. On March 1993, the petitioner presented to the respondent CIR applications
for refund / tax credit of excess input taxes for the 2nd, 3rd and 4th quarters
of 1992. It also brought its claims to the CTA by way of petition for review.
a. The petitioner attributed these claims to its sales of gold, copper
concentrates and pyrite to the Central Bank, Philippine Associated
Smelting and Refining Corporation (“PASAR”) and Philippine
Phosphates, Inc. (“Philpos”), respectively, on the theory that these
were zero-rated transactions.
3. The CTA denied their claims on the grounds of prescription and insufficiency
of evidence. The CA affirmed this decision, reversing the CTA’s ruling on
prescription but affirmed the latter’s decision re: insufficiency of evidence.
4. Hence this appeal by certiorari, arguing mainly on the fact that the
respondent CIR had approved the petitioner’s previous applications for the
zero-rating of its sales to the Central Bank, PASAR and Philpos.
ISSUE with HOLDING
WoN the lower court was wrong in not granting the refund / tax credit? Yes.
1. It has always been the rule that those seeking tax refunds or credits bear the
burden of proving the factual bases of their claims and of showing, by words
too plain to be mistaken, that the legislature intended to entitle them to such
claims.
2. The rule, in this case, required petitioner to:
a. show that its sales qualified for zero-rating under the laws then in
force and
b. present sufficient evidence that those sales resulted in excess input
taxes.
3. While the Court agrees that the previous transactions may demostrate that
the petitioner has complied with the first requirement, the onus was still on
the petitioner to submit sufficient evidence to justify the granting of a refund
or tax credit.
4. The petitioner failed to comply with the evidentiary requirements for claims
for tax credits or refunds, which were set forth in Section 2(c) of Revenue
Regulations 3-88 and in CTA Circular 1-95.
a. Revenue Regulations 3-88 provide that: “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.
b. CTA Circular 1-95 also required the submission of invoices or
receipts to be introduced as evidence.
5. The lower courts both correctly observed that the petitioner never submitted
any of the invoices or receipts.
6. While the CTA is not governed strictly by technical rules of evidence, as
rules of procedure are not ends in themselves but are primarily intended as
tools in the administration of justice, the presentation of the purchase
receipts and/or invoices is not a mere procedural technicality which may be
disregarded considering that it is the only means by which the CTA may
ascertain and verify the truth of respondent’s claims.
DISPOSITIVE PORTION
WHEREFORE, the petition is hereby DENIED. The decision of the Court of Appeals
in CA-G.R. SP No. 47824 is AFFIRMED.
DIGESTER: Jose Ranulfo R. Mendoza
20
 VAT 1. no evidence which has not been presented can be considered
G.R. No. 159490 - Atlas Consolidated Mining and Development Corp. vs CIR (2008) 2. the summary with the certification by an independent CPA and the testimony of its
Velasco, Jr. Accounting and Finance Manager presented by Atlas does not replace the pertinent
invoices, receipts, and export sales documents as competent evidence to prove the
Atlas paid P7.9M for input taxes. Later in the year they applied for a tax credit or refund but the CTA
denied their claim on the ground that they submitted a summary instead of the actual documents or fact of refundable or creditable input VAT. They merely corroborated the actual
photocopies of the same evidencing the export sales which was required by RR 3-88 which applied the input VAT it paid and export sales.
VAT law at the time 3. remember the best evidence rule — the actual invoices, receipts and export sales
documents would’ve been the best evidence to substantiate their claim for tax credit
DOCTRINE or refund.
No evidence which has not been formally offered shall be considered; Where the pertinent invoices or 4. Atlas’ mere allegations of the figures in its amended VAT return as well as in its
receipts purportedly evidencing the Value-Added Tax (VAT) paid by the taxpayer were not submitted, the
petition before the CTA aren’t sufficient proof of the amount of its refund
courts cannot determine the veracity of the input Value-Added Tax (VAT) such taxpayer has paid. The
pertinent invoices, receipts, and export sales documents are the best and competent pieces of evidence entitlement. they do not even constitute evidence. the CTA could not ascertain from
required to substantiate a taxpayer’s claim for tax credit or refund which is merely corroborated by the the documents submitted the veracity of the figures in the documents — they failed
summary duly certified by a Certified Public Accountant (CPA) to meet the burden of proof required to establish the factual basis of its claim
5. considering that tax refunds are in the nature of tax exemptions and therefore
Actions for refund are in nature of a claim for exemption and the law is not only construed in strictissimi construed strictly against the taxpayer, the evidence Atlas presented cannot entitle
juris against the taxpayer, but also the pieces of evidence presented entitling a taxpayer to an exemption is them to a tax credit or refund
strictissimi scrutinized and must be duly proven.
2. if compliance with the documentary requirements of RR 3-88 was necessary — academic at
FACTS
1. Atlas is a domestic corporation engaged in the production of copper concentrates for export. It this point but the court discussed a little bit
is registered as a VAT entity. 1. a revenue regulation is binding on the courts as long as the procedure fixed for its
2. for the first quarter of 1993, it had a total of P642,685,032.24 received in acceptable foreign promulgation is followed. it has not been disputed that the RR was duly
currency and inwardly remitted in accordance with CB regulations. Atlas paid P7,905,662.53 promulgated pursuant to the rule-making power of the Sec. of Finance upon the
for input taxes as follows: recommendation of the CIR — the RRs or administrative issuances therefore have
a. Local: P7,117,222.53 the force of law
b. Importation: P790,440
3. if they were denied due process when they weren’t allowed to present the required documents
3. in September of the same year, Atlas applied with the BIR for the issuance of a tax credit
(after the CTA decision they asked if they could reopen the case so it could present the
certificate or refund under Section 106(b) representing the total VAT it paid for (which wasn’t
required documents)
applied against any output tax)
1. they only showed a willingness to submit after the CTA rendered its decision.
4. to prevent the running of the prescriptive period under Sec. 230 of the tax code (TC), Atlas
They’re guilty of inexcusable negligence in the prosecution of its case
filed a petition for review with the CTA
5. CIR filed his answer asserting that Atlas has the burden of proving erroneous or illegal
DISPOSITIVE PORTION
payment of the tax being claimed for refund rice refunds are strictly construed against the WHEREFORE, we DENY the petition for lack of merit, and AFFIRM the CA’s May 16, 2003 Decision
taxpayer. Note that the CIR didn’t present any evidence so the case was decided solely based and August 11, 2003 Resolution in CA-G.R. SP No. 46494. Costs against petitioner.
on the evidence of the CTA
6. CTA denied Atlas’ claim for tax credit or refund: (1) They failed to submit photocopies of DIGESTER: Anton Mendoza.
export documents, invoices, receipts evidencing the sale of goods as required by RR 3-88
implementing the then VAT law. (2) certification by Atlas’ bank did not indicate any
conversion rate for US dollars to pesos so the CTA couldn’t ascertain the veracity of the
contents in Atlas’ VAT return
7. Atlas argued that (1) they relied on Sec. 106 TC which merely required proof that the foreign
exchange proceeds has has been accounted for in accordance with the regulations of the
Central Bank (2) RR 3-88 was issued for claims for refund of input VAT to be processed by
the BIR (administrative claims, not judicial claims as in this case)
8. CA dismissed Atlas’ petition: (1) insufficiency of evidence to support the action for tax credit
or refund (2) RR 3-88 is applicable to judicial proceedings

ISSUE with HOLDING

1. if Atlas has sufficiently proven entitlement to a tax credit or refund — NO, Atlas failed to
show sufficient proof
21
 VAT 27. W/N MCC adduced sufficient evidence to prove its claim for refund of its input VAT for taxable year
GR 153204 – CIR vs Manila Mining Corp 1991 in the amounts of P5,683,035.04 and P8,173,789.60 – NO
Carpio Morales, J.
As export sales, the sale of gold to the CB is zero-rated, hence, no tax is chargeable to it as purchaser. Zero
MCC a domestic corp sold gold to the Central Bank. It then filed an application for tax refund/credit for the sale rating is primarily intended to be enjoyed by the seller respondent herein, which charges no output VAT but
of gold as such was characterized as a zero rated sale. But MCC in its application, failed to pre-mark and can claim a refund of or a tax credit certificate for the input VAT previously charged to it by suppliers.
submit the invoices and ORs to the CTA. Instead, MCC relied on the failure of CIR to reply to its request for
admission (thus failure was equivalent to the implied admission of MCC’s submissions of the invoices) and the For a judicial claim for refund to prosper, however, respondent must not only prove that it is a VAT registered
certification of independent CPAs stating that the figures given in the application were correct and in order as entity and that it filed its claims within the prescriptive period. It must substantiate the input VAT paid by
supported by ORs and invoices. Both CTA and SC held that MCC failed to provide sufficient evidence to purchase invoices or official receipts.
support its claim for refund bc MCC did not pre-mark the ORs and invoices and submit the same to the CTA
for examination. Thus the CTA could not make an accurate ruling on whether the figures given by MCC was Under RR 3-88, photocopies of the purchase invoice or receipt evidencing the VAT paid shall be submitted
true and accurate. Mere certification from the CPAs did not suffice bc such did not really show the auditing together with the application.
procedure or the fact that such input VAT came from the sale of gold.
Also, under Sec 8, RA 1125, CTA is described as a court of record. As cases filed before it are litigated de
DOCTRINE novo, party litigants should prove every minute aspect of their cases. No evidentiary value can be given
A mere listing of VAT invoices and receipts, even if certified to have been previously examined by an the purchase invoices or receipts submitted to the BIR as the rules on documentary evidence require that
independent certified public accountant, would not suffice to establish the truthfulness and accuracy of the these documents must be formally offered before the CTA.
contents of such invoices and receipts unless offered and actually verified by it (CTA), which requires that
photocopies of invoices, receipts and other documents covering said accounts of payments be pre-marked by MCC contends, however, that the certification of the independent CPA attesting to the correctness of the
the party concerned and submitted to the court. contents of the summary of suppliers invoices or receipts which were examined, evaluated and audited by
said CPA in accordance with CTA Circular No. 1-95 as amended by CTA Circular No. 10-97 should
FACTS substantiate its claims.
72. Manila Mining Corp (MCC) is a domestic corp engaged in mining and is registered with the BIR as VAT
There is nothing, however, in CTA Circular No. 1-95, as amended by CTA Circular No. 10-97, which either
registered enterprise.
expressly or impliedly suggests that summaries and schedules of input VAT payments, even if
73. In 1991, MCC’s sales of gold to the Central Bank amounted to P200, 832, 346.70. And MCC relying on a
certified by an independent CPA, suffice as evidence of input VAT payments.
letter from CIR Deputy Commissioner Deoferio, that characterized the sale of gold to the CB as zero
a. Said circular requires the pre-marking of such documents which will be submitted to the court
rated, filed an application for tax credit/refund for input VAT paid from July 1 – Dec 31, 1999 in the
amount of P8, 173, 789.60
It does not relieve MCC of its imperative task of pre-marking photocopies of sales receipts and invoices and
74. MCC subsequently filed on March 5, 1991 another application for tax refund/credit of input VAT it paid
the amount of P5, 683, 035.04 from January 1 - June 30, 1991. submitting the same to the court after the independent CPA shall have examined and compared them with the
originals.
75. Bc CIR failed to act on the 2 applications, MCC filed a petition for review with CTA which was docketed
as CTA Case 4968 and CTA Case 4991.
Without presenting these pre-marked documents as evidence from which the summary and schedules
76. In CTA 4968, MCC filed a Request for Admissions, alleging that the original copies of the ORs and Sale
were based, the court cannot verify the authenticity and veracity of the independent auditors’
Invoices were submitted to BIR-VAT.
conclusions.
a. CTA held that CIR impliedly admitted the facts in the request bc it failed to specifically deny
in a sworn statement the facts alleged therein
For the 1st semester of 1991, MCC merely submitted summary and schedule of input VAT payments and no
77. In CTA 4991, a Request for Admissions was also filed alleging that MCC attached copies of invoices
other evidence was adduced.
and other supporting docs to its refund application and that the original copies and ORs were submitted
to BIR-VAT.
As for the 2nd semester, merely gave a certification from Joaquin Cunanan and Co. (auditors). But it merely
a. CIR denied the accuracy and veracity of the amounts stated in the request.
stated that it used auditing procedures considered necessary and not auditing procedures which are in
78. CIR: The sales of gold to the CB may not be legally considered export sales for purposes of Section
100(a) in relation to Section 100(a)(1) of the Tax Code; and that assuming that a refund is proper, MCC accordance with generally accepted auditing principles and standards, and that the examination was made on
input tax payments by the Manila Mining Corporation, without specifying that the said input tax payments
must demonstrate that it complied with the provisions of Section 204(3) in relation to Section 230 of the
are attributable to the sales of gold to the Central Bank, this Court cannot rely thereon and regard it as
Tax Code.
sufficient proof of respondents input VAT payments for the second semester.
79. 2 CPAs were presented by MCC to support the figures that it gave CIR, and according to the two, there
was no error in the figure given and such were properly supported by ORs, invoices and other
documents.
DISPOSITIVE PORTION
80. CTA: The sale was zero rated. Nonetheless, the CTA denied MCC’s claim for refund of input VAT for
Petitioned granted. CTA decision reinstated.
failure to prove that it paid the amounts claimed as such for the year 1991, no sales invoices, receipts or
other documents as required under Section 2(c)(1) of Revenue Regulations No. 3-88 having been
presented.
a. The CTA explained that a mere listing of VAT invoices and receipts, even if certified to DIGESTER: Kharina
have been previously examined by an independent certified public accountant, would not
suffice to establish the truthfulness and accuracy of the contents of such invoices
and receipts unless offered and actually verified by it (CTA), which requires that
photocopies of invoices, receipts and other documents covering said accounts of payments
be pre-marked by the party concerned and submitted to the court.
81. CA: Reversed the CTA. No need for MCC to present photocopies of the ORs and invoices bc CIR in
CTA Case 4968, impliedly admitted the facts in the request bc of its failure to give a verified reply in
accordance with Rule 26, Sec 2, RoC.

ISSUE with HOLDING

22
 VAT CASES
G.R. No. 168129- CIR vs PHILIPPINE HEALTH CARE PROVIDERS, INC.,
Sandoval-Gutierrez Jr.
There was a previous VAT ruling ifo PHCPI, saying its services are VAT exempt. The SC
ruled that PHCPI does not in fact render services which are considered VAT exempt
because they are not engaged in the performance of medical, dental, hospital, and
veterinary services. But the Court ruled that because of the VAT ruling, in the absence of
bad faith on the part of PHCPI they were entitled to the benefit of the non-retroactivity of
ruling under Sec 246 Tax Code
DOCTRINE
SC: Perforce, as respondent does not actually provide medical and/or hospital
services, as provided under Section 103 on exempt transactions, but merely
arranges for the same, its services are not VAT-exempt.
FACTS
1. The Philippine Health Care Providers, Inc is a Philippine corp..Pursuant to its Articles
of Incorporation,ts primary purpose is To establish, maintain, conduct and operate a
prepaid group practice health care delivery system or a health maintenance
organization to take care of the sick and disabled persons enrolled in the health care
plan and to provide for the administrative, legal, and financial responsibilities of the
organization.
2. 1987, Aquino issued E.O. No. 273, amending the NIRC by imposing VAT on the sale
of goods and services- took effect on January 1, 1988.
3. Before the effectivity of E.O. No. 273, respondent wrote the CIR, inquiring whether the
services it provides to the participants in its health care program are exempt from the
payment of the VAT.
a. CIR issued VAT Ruling No. 231-88 stating that respondent, as a
provider of medical services, is exempt from the VAT coverage.
i. This was subsequently confirmed by Regional Director Osmundo
G. Umali of Revenue Region No. 8
4. Meanwhile, on January 1, 1996, RA No. 7716(Expanded VAT or E-VAT Law took
effect, amending further the National Internal Revenue Code of 1977. Then on
January 1, 1998, R.A. No. 8424 (National Internal Revenue Code of 1997) became
effective. This new Tax Code substantially adopted and reproduced the provisions of
E.O. No. 273 on VAT and R.A. No. 7716 on E-VAT.
5. October 1, 1999, the BIR sent respondent a Preliminary Assessment Notice for
deficiency in its payment of the VAT and documentary stamp taxes (DST) for
taxable years 1996 and 1997.
a. respondent filed a protest with the BIR.
6. 2000, CIR sent respondent a letter demanding payment of deficiency VAT in the
amount of P100,505,030.26 and DST in the amount of P124,196,610.92, or a total of
P224,702,641.18 for taxable years 1996 and 1997. Attached to the demand letter
were four (4) assessment notices.
a. Resp protested
7. CTA ruled ifo resp, first by removing the DST liability then upon MPR by also
removing the VAT liability of resp. It reasoned that PHCPI is entitled to the benefit of
non-retroactivity of rulings guaranteed under Section 246 of the Tax Code, in the
absence of showing of bad faith on its part. Clearly, undue prejudice will be caused to
petitioner if the revocation of VAT Ruling No. 231-88 will be retroactively applied to its
case.
8. CA affirmed CTA.
ISSUE with HOLDING
1. whether PHCPI services are subject to VAT- YES
a. 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 10% of gross receipts derived
from the sale or exchange of services, including the use or lease of
properties. The phrase sale or exchange of service means the performance
of all kinds of services in the Philippines for a fee, remuneration or
consideration, including those performed or rendered by construction and
service contractors x x x.
b. Section 103[6] of the same Code specifies the exempt transactions from the
provision of Section 102, thus: SEC. 103. Exempt Transactions. The
following shall be exempt from the value-added tax: (l) Medical, dental,
hospital and veterinary services except those rendered by professionals
c. SC: Provisions are plain and clear. It contemplates the exemption from
VAT of taxpayers engaged in the performance of medical, dental,
hospital, and veterinary services.
d. In CIR vs Seagate: an exempt transaction as one involving goods or
services which, by their nature, are specifically listed in and expressly
exempted from the VAT, under the Tax Code, without regard to the tax
status of the party in the transaction
e. In its letter to the BIR requesting confirmation of its VAT-exempt status,
PHCPI described its services and from it, the CTA made the following
conclusions:
i. PHCPI is not actually rendering medical service but merely acting
as a conduit between the members and their accredited and
recognized hospitals and clinics.
ii. It merely provides and arranges for the provision of pre-need
health care services to its members for a fixed prepaid fee for a
specified period of time.
iii. It then contracts the services of physicians, medical and dental
practitioners, clinics and hospitals to perform such services to its
enrolled members; and
iv. PHCPI also enters into contract with clinics, hospitals, medical
professionals and then negotiates with them regarding payment
schemes, financing and other procedures in the delivery of health
services.
f. SC: Perforce, as respondent does not actually provide medical and/or
hospital services, as provided under Section 103 on exempt
transactions, but merely arranges for the same, its services are not
VAT-exempt.
2. whether revocation VAT Ruling No. 231-88 exempting respondent from payment of
VAT has retroactive application- NO w/n the benefit of non-retroactivity of rulings
under Art 246 should apply- YES
a. In sustaining the CTA, the Court of Appeals found that the failure of
respondent to refer to itself as a health maintenance organization is not an
indication of bad faith or a deliberate attempt to make false representations.
As the term health maintenance organization did not as yet have any
particular significance for tax purposes, respondents failure to include
23
 a term that has yet to acquire its present definition and significance
cannot be equated with bad faith.
b. SC: AGREES WITH CA and CTA, PHCPI acted in good faith
i. In CSC vs Maala: good faith as that state of mind denoting honesty
of intention and freedom from knowledge of circumstances which
ought to put the holder upon inquiry; an honest intention to abstain
from taking any unconscientious advantage of another, even
through technicalities of law, together with absence of all
information, notice, or benefit or belief of facts which render
transaction unconscientious.
c. SC notes that the term health maintenance organization was first recorded
in the Philippine statute books only upon the passage of The National Health
Insurance Act of 1995 (Republic Act No. 7875). Section 4 (o) (3) thereof
defines a health maintenance organization as an entity that provides, offers,
or arranges for coverage of designated health services needed by plan
members for a fixed prepaid premium. Under this law, a health maintenance
organization is one of the classes of a health care provider.
d. In ABS-CBN Broadcasting Corp. v. CTA : under Section 246 of the 1997
Tax Code, the CIR is precluded from adopting a position contrary to one
previously taken where injustice would result to the taxpayer.
i. The rule is that the BIR rulings have no retroactive effect where a
grossly unfair deal would result to the prejudice of the taxpayer, as
in this case.
DISPOSITIVE PORTION
SC AFFIRMS CA. Ruling ifo Philhealth
DIGESTER: Nikki M.
VAT
Atlas vs CIR
Velasco
Atlas wanted to claim a tax credit or refund, after having paid input taxes from its
export sales. It presented a mere summary and certification by a CPA on the
figures/amount of its sales. The SC, agreeing with the lower courts, stated that Atlas’
evidence were insufficient to prove the amount of the tax credit or refund. Invoices,
receipts, export sales docs should have been presented or submitted to prove the
amount/figures.
DOCTRINE
The pertinent invoices, receipts, and export sales documents are the best and
competent pieces of evidence required to substantiate a taxpayer’s claim for tax
credit or refund which is merely corroborated by the summary duly certified by an
independent CPA and the testimony of its employee on the export sales.
FACTS
9. Atlas is a corporation engaged in the production of copper concentrates for export. It
is a VAT-registered entity.
10. For the first quarter of 1993, its export sales amounted to P642,685,032.24, and was
received in acceptable foreign currency and inwardly remitted in compliance with CB
regulations.
11. Atlas paid P7,907,662.53 for input taxes (local + importation)
12. Thereafter, it filed a VAT return with the BIR.
13. Atlas applied for a tax credit certificate or refund, under Sec. 106(b) of the Tax Code,
representing the VAT it previously paid, which corresponded to input taxes not applied
against any output VAT.
14. It filed a petition for review before the CTA to prevent the running of the prescriptive
period.
15. CTA Ruling
- Atlas’ claim for tax credit denied.
- Atlas failed to present sufficient evidence to warrant the grant of tax credit or
refund for the alleged input taxes.
- Relying on RR 3-88, the documents submitted by Atlas did not comply with the
said regulation. It failed to submit photocopies of export docs, invoices, or
receipts evidencing the sale of goods and others. Also, HSBC’s (Atlas’ bank)
certification did not indicate the conversion rate for USD to PHP.
16. CA Ruling
- CA affirmed CTA. It denied Atlas’ petition due to insufficiency of evidence.
- Atlas’ failure to submit the docs as required by RR 3-88 is fatal to its action.
Without these docs, its VAT export sales and the creditable/refundable input VAT
could not be ascertained.
17. Atlas’ arguments
- Sec. 106 of the Tax Code merely requires proof that the foreign exchange
proceeds has been accounted for in accordance with Central Bank regulations.
- The summary it presented, coupled with the testimony of its Accounting and
Finance Manager, and a certification from an independent CPA sufficiently
proved its case.
- RR 3-88 applied only for claims of refund of input VAT for administrative claims,
not for judicial claims.
24
 - CTA Circular No. 10-97, being a later law, should be deemed to qualify RR 3-88.
This circular merely requires a summary of the invoices and certification from an
independent CPA.
- Prayed for a re-trial under Sec. 2, Rule 37.
ISSUE with HOLDING
3. W/N Atlas has sufficiently proven entitlement to a tax credit or refund
Court: No.
GR: Sec. 34 Rule 132 on Evidence states that no evidence which has not been
formally offered shall be considered.
As applied: the invoices or receipts purportedly evidencing the VAT paid by
Atlas were not submitted. The lower courts could not determine the veracity of
the input VAT Atlas has paid.
Atlas also failed to submit pertinent export docs to prove actual export sales with due
certification from accredited banks on the export proceeds in foreign currency, with
the corresponding conversion rate into PHP. Hence, the courts could not determine
the veracity of the export sales as indicated in Atlas’ amended VAT return.
The summary presented by Atlas does not replace the pertinent invoices, receipts,
and export sales docs as competent evidence to prove the fact of refundable or
creditable input VAT. Mere summary, coupled with a certification by an independent
CPA, and the testimony of the Finance Manager are merely corroborative of the
actual input VAT it paid and the actual export sales.
Mere allegations of the figures in its amended VAT return are not sufficient proof of
the amount of its refund entitlement.
Tax refunds are in the nature of tax exemptions, and are to be construed strictissimi
juris against the taxpayer.
CTA Circular No. 10-97 took effect only in 1997, where the proceedings in this case
were conducted prior to 1997. Hence, the law cannot be applied retroactively. Also,
even though the circular would apply, the pieces of evidence it submitted is still
insufficient.
2. W/N Atlas should have been accorded a new trial
Court: No. The reason for atlas’ failure to present amounts to inexcusable
negligence.
The reason behind Atlas’ motion for a new trial was that it attempted to submit
the documents only after the CTA rendered its decision.
Atlas is duty-bound to ensure that all proofs required under the rules are duly
presented. It did not exercise the diligence required of a litigant who has the
burden of proof to present all that is required.
Forgotten evidence, not presented during the trial nor formally offered, is
not newly found evidence that merits a new trial. It goes against the orderly
administration of justice to allow submission of forgotten evidence which
could have offered with the exercise of ordinary diligence.
DISPOSITIVE PORTION
Atlas not entitled to tax credit/refund
VAT
GR No. 172129 – CIR v. Mirant Pagbilao Corporation
Velasco, J.
Mirant Pagbilao Corporation (MPC) sells power to NPC, a VAT-exempt entity. MPC
entered into a contract with Mitsubishi. MPC thought its sales with NPC was zero-rated, so
it did not pay for its VAT. Mitsubishi ended up advancing for it for the periods of 1993 to
1996. It was only in 1998 when MPC paid for it. Mitsubishi issued an official receipt
covering such. MPC filed an administrative claim for refund and used the OR as basis for
one of its claims. CTA did not grant such claim. CA granted said claim. SC disallowed such
claim because of prescription.
DOCTRINE
The available records do not clearly indicate when MPC exactly paid the creditable input
VAT, but there is a presumption is that the payment was made on the date appearing on
the subject OR, as it was reflected in MPC’s VAT return for the 2nd quarter of 1998.
The reckoning frame would always be the end of the quarter when the pertinent sales or
transaction was made, regardless when the input Vat was paid.
FACTS
18. Mirant Pagbilao Corporation (MPC; formerly known as Southern Energy Quezon, Inc.
and as Hopewell (Phil.) Corporation) is a domestic firm engaged in the generation of
power which it sells to the National Power Corporation (NPC).
a. Under Section 13 of RA 6395, NPC is exempt from all taxes. Maceda v.
Macaraig construed such provision to cover both direct and indirect taxes.
19. MPC secured the services of Mitsubishi Corporation of Japan for the construction of
the electrical and mechanical equipment portion of its Pagbilao, Quezon plant.
20. MPC filed an Application for Effective Zero Rating with BIR district office.
a. Since BIR did not respond, it refiled its application in the form of a “request
for ruling”, which BIR ruled that the sale to the NPC is subject to the zero-
percent VAT.
21. Because of this, MPC did not to pay the VAT component of the progress billings from
Mitsubishi for April 1993 to September 1996. This prompted Mitsubishi to advance the
VAT component as its output VAT for the same period.
a. It was only in April 14, 1998 that MPC paid Mitsubishi the VAT component
for the same period. Mitsubishi issued Official Receipt (OR) No. 0189
(subject OR) in the amount of P136 M.
22. MPC, while waiting for its application, filed its quarterly VAT return for the 2 nd quarter
of 1998, which reflected an input VAT of P148 M, including the P136 M supported by
subject OR.
a. December 20, 199913 MPC filed an administrative claim for refund for the
said amount.
23. BIR did not act on its application, so it filed a petition for review before CTA.
a. BIR Commissioner: MPC’s claim cannot be granted because its sale to NPC
is not zero-rated since it failed to secure an approved application for zero-
rating.
b. CTA: granted MPC’s claim for input VAT, but for P10.77 M only because
MPC’s claims were not properly substantiated by pertinent documents, such
as but not limited to VAT ORs, invoices, and other supporting documents.
i. Particularly, it ruled that the subject OR pertains to the services
which were rendered for 1993 – 1996 (application was for 1998).
13
The ratio said it was December 10, 1998
25
24. CA modified CTA’s decision by granting most of MPC’s claims. It allowed the claim
covered by the subject OR since it was considered the best evidence for the payment
of input VAT.
a. The subject OR must be taken conclusively to represent the input VAT
payments made by MPC to Mitsubishi because MPC had no real control on
the issuance of the OR.
ISSUE with HOLDING
4. WON MPC is entitled to the refund of its input VAT payments made from 1993 to
1996 amounting to P147 M – YES.
a. SC had to evaluate the evidence because of the divergent rulings of the
CTA and CA.
i. Claim for tax refund may be based on a statute granting tax
exemption, which must be construed strictly against the taxpayer.
ii. A tax refund may be predicated on tax refund provisions allowing a
refund of erroneous or excess payment of tax, which is based on
solution indebiti.
b. Petitioner: subject OR is insufficient to prove MPC’s input VAT
i. The claim has prescribed because it was filed beyond the 2-year
prescriptive period;
ii. MPC did not explain why subject OR was issued by Mitsubishi
(Manila) when the invoices were from Mitsubishi Japan;
iii. No other documents proving said input VAT payment were
presented except the subject OR.
c. SC: The available records do not clearly indicate when MPC exactly paid the
creditable input VAT, but there is a presumption is that the payment was
made on the date appearing on the subject OR, as it was reflected in MPC’s
VAT return for the 2nd quarter of 1998 (see fact #5).
5. WON MPC is entitled to a refund for the unutilized input VAT of P136 M – NO,
because filed out of the 2-year prescriptive period.
a. Section 112(A) of the NIRC is clear that the 2 years is reckoned from the
close of the taxable quarter when the relevant sales were made pertaining to
the input regardless of whether said tax was paid or not.
i. When a zero-rated VAT taxpayer pays its input VAT a year after
the pertinent transaction, said taxpayer only has 1 year to file a
claim for refund or tax credit.
ii. The reckoning frame would always be the end of the quarter when
the pertinent sales or transaction was made, regardless when the
input Vat was paid.
iii. Since the last creditable input VAT due for the period covering the
progress billing of September 6, 1996 is the 3rd quarter of 1996,
ending on September 30, 1996, any claim for unutilized creditable
input VAT refund for said quarter prescribed on September 30,
1998.
1. Since MPC’s claim was filed on December 20, 1999, it
was filed out of time.
b. SC reminded BIR and other tax agencies of their duty to treat claims for
refunds and tax credits with proper attention and urgency.
DISPOSITIVE PORTION
Petition is PARTITIALLY GRANTED. Claim for the Mitsubishi contract was denied.
DIGESTER: Lulu Querido.
VALUE ADDED TAX (VAT) – PERIOD FOR REFUND
G.R. No. 184823 – CIR v. AICHI FORGING COMPANY OF ASIA, INC.
DEL CASTILLO, J.
Respondent Aichi Forging Company of Asia ("AFCA"), a company engaged in
manufacturing, producing and processing steel is a VAT-registered entity. AFCA filed a
claim for refund/ credit of input VAT for July 2002 to September 2002 with the CIR. On the
same day it also filed a Petition for Review with the Court of Tax Appeals 2 ND Division for
the refund/credit of the same input VAT. Petitioner CIR filed its answer raising the defense
that such claim for refund by AFCA is subject to the administrative investigation of the CIR
wherein AFCA must prove that its sales are export sales as the burden of proof is on the
taxpayer to establish its right to refund. CIR also claimed that AFCA filed beyond the 2-
year period prescribed for refund. AFCA was successful in the CTA hence CIR's appeal to
the SC. The SC held that while AFCA was correct in claiming that it filed within the
prescriptive period (which commences from the close of the taxable quarter when the
sales were made and not from the time the input VAT was paid nor the time when the OR
issued) its filing of the judicial claim was premature since the CIR still has 120 days within
which to grant or deny the refund/ credit claim.
DOCTRINE
A taxpayer is entitled to a refund either by authority of a statute expressly granting such
right, privilege, or incentive in his favor, or under the principle of solutio indebiti requiring
the return of taxes erroneously or illegally collected. In both cases, a taxpayer must prove
not only his entitlement to a refund but also his compliance with the procedural due
process as non-observance of the prescriptive periods within which to file the
administrative and the judicial claims would result in the denial of his claim.
Claimant of refund/credit must comply with the following requisites:
(1) the taxpayer is engaged in sales which are zero-rated 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; and
(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
The prescriptive period commences from the close of the taxable quarter when the sales
were made and not from the time the input VAT was paid nor from the time the official
receipt was issued. Thus, when a zero-rated VAT taxpayer pays its input VAT a year after
the pertinent transaction, said taxpayer only has a year to file a claim for refund or tax
credit of the unutilized creditable input VAT. The reckoning frame would always be the
end of the quarter when the pertinent sales or transaction was made, regardless when
the input VAT was paid.
FACTS
25. Aichi Forging Company of Asia, Inc. ("AFCA") is a corporation organized under the
laws of the Philippines and registered with the Bureau of Internal Revenue ("BIR") as
a Value Added Tax ("VAT") entity. It is engaged in the manufacturing, production, and
processing of steel and its by-products.
26. [September 30, 2004] AFCA filed a claim for refund/credit of input VAT for the period
July 1, 2002 to September 30, 2002 in the total amount of PHP 3,891,123.82 with
petitioner Commission of Internal Revenue ("CIR") through the Department of Finance
("DOF") One-Stop Shop Inter-Agency Tax Credit and Duty Drawback Center.
26
27. [September 30, 2004] On even date, AFCA filed a Petition for Review with the Court
of Tax Appeals ("CTA") for the refund/credit of the same input VAT. This was raffled to
the Second Division of the CTA. AFCA alleged the following:
a. For the period it was applying a refund for, it generated and recorded zero-
rated sales in the amount of PHP 131,791,399 which was paid.
b. For the same period it incurred and paid input VAT amounting to PHP
3,912,088.14 from purchase and importation attributable to the zero-rated
sales.
c. In its application for refund/credit filed with the DOF, it only claimed the
amount PHP 3,891,123.82
28. In response, the CIR filed its Answer, raising the following special and affirmative
defenses:
a. AFCA's claim is subject to administrative investigation by the Bureau
b. AFCA must prove that it paid VAT input taxes for the period
c. AFCA must prove that its sales are export sales contemplated under §
106(A)(2)(a) and § 108(B)(1) of the 1997 NIRC
d. AFCA must prove that such claim was filed within two (2) year period
prescribed in § 229 of the Tax Code
e. In actions for refund, the burden of proof is on the taxpayer to establish its
right to refund – failure to sustain this is fatal to the claim
f. Claims for refund are construed strictly against the claimant for they
partake of the nature of exemption from taxation
29. [January 4, 2008] The Second Division of the CTA partially granted AFCA's claim.
a. it found that AFCA complied with the first three requirements (see Doctrine)
b. it found that AFCA did not satisfactorily substantiate the fourth requirement
c. ordered the refund of PHP 3,239,119.25
30. CIR filed a motion for partial reconsideration, insisting the following:
a. AFCA's administrative and judicial claims were filed beyond the 2-year
period per § 112(A) and 229 of the NIRC
i. This is because 2004 was a leap year, hence the filing on
September 30, 2004 was beyond the 2-year period which
supposed to have expired on September 29, 2004
1. Basis is Article 13 of the CC (year = 365 days)
ii. Simultaneous filing of the administrative (with DOF) and judicial
(with CTA) claims contravened §112 and §229 of the NIRC
1. Requirement rests on doctrine of administrative remedies
2. Also on the fact that CTA IS AN APPELLATE BODY
which exercises power of judicial review over
administrative action of the BIR
31. However, the 2nd Division of the CTA denied CIR's MR. Hence, petitioner elevated the
same to the CTA En Banc
32. [July 30, 2008] The CTA En Banc affirmed the 2nd Division's decision. However, as to
the reckoning period, it made the following ruling:
a. We are not persuaded with the petitioner's argument that the filing of
administrative and judicial claims eliminates the authority of the Court to
exercise jurisdiction.
b. Based on § 114, a taxpayer has 25 days from the close of each taxable
quarter within which to file a quarterly return of the amount of his gross sales
or receipts
c. In the case at bar, the taxable quarter involved was for the period of July 1,
2002 to September 30, 2002. Applying Section 114 of the 1997 NIRC,
respondent has until October 25, 2002 within which to file its quarterly return
for its gross sales or receipts with which it complied when it filed its VAT
Quarterly Return on October 20, 2002.
d. In relation to this, the reckoning of the 2-year period provided under § 229 of
the NIRC should start from the payment of tax subject claim for refund.
e. Thus, AFCA's admin and judicial claims for refund filed on September 30,
2004 were filed on time because AFCA's has until October 20, 2004 within
which to file its claim for refund.
f. We also do not agree with the contention that the NIRC requires the
previous filing of an administrative claim for refund PRIOR to the judicial
claim. The law does not prohibit the simultaneous filing of the same. What is
controlling is that both must be filed within the 2-year period
33. CIR filed an MR which the CTA En Banc denied.
34. Hence this petition.
ISSUE with HOLDING
6. WON AFCA's judicial and administrative claims for tax refund/credit were filed within
the 2-year prescriptive period under § 112(A) and 229 of the NIRC. – YES
a. Petitioner: opines that the simultaneous filing of the administrative and the
judicial claims contravenes Section 229 of the NIRC, which requires the
prior filing of an administrative claim.
b. Respondent: "nonobservance of the 120-day period given to the CIR to act
on the claim for tax refund/credit in Section 112 (D) is not fatal because what
is important is that both claims are filed within the two-year prescriptive
period"
c. S. Court: "Respondent is correct.
i. Prescriptive period commences from the close of the taxable
quarter when the sales were made and not from the time the
input VAT was paid nor from the time the official receipt was
issued." Thus, when a zero-rated VAT taxpayer pays its input VAT
a year after the pertinent transaction, said taxpayer only has a year
to file a claim for refund or tax credit of the unutilized creditable
input VAT. The reckoning frame would always be the end of the
quarter when the pertinent sales or transaction was made,
regardless when the input VAT was paid
ii. The administrative claim was timely filed.
1. The Administrative Code is a specific law that actually
provides for the process of counting the number of days
in a year.
2. Applying Section 31, Chapter VIII, Book I of the
Administrative Code of 1987 to this case, the two-year
prescriptive period (reckoned from the time respondent
filed its final adjusted return on April 14, 1998) consisted
of 24 calendar months
3. Applying this to 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, respondent's administrative claim was
timely filed.
7. WON AFCA is entitled to its tax refund/credit. – NO.
a. Though petitioners' contention is correct, AFCA is still not entitled to its tax
refund as its judicial claim is premature.
27
 b. Such judicial complaint was filed in violation of 112(D) of the NIRC stating
that:
i. NIIRC 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
ii. The phrase "within two (2) years . . . apply for the issuance of a
tax credit certificate or refund" refers to applications for
refund/credit filed with the CIR and not to appeals made to the
CTA. This is apparent in the first paragraph of subsection (D) of
the same provision, which states that the CIR has "120 days from
the submission of complete documents in support of the
application filed in accordance with Subsections (A) and (B)" within
which to decide on the claim
c. Applying the two-year period to judicial claims would render nugatory.
d. Section 112 (D) of the NIRC, which already provides for a specific period
within which a taxpayer should appeal the decision or inaction of the CIR.
e. The second paragraph of Section 112 (D) of the NIRC envisions two
scenarios:
i. (1) when a decision is issued by the CIR before the lapse of the
120-day period; and
ii. (2) when no decision is made after the 120-day period. In both
instances, the taxpayer has 30 days within which to file an appeal
with the CTA. As we see it then, the 120-day period is crucial in
filing an appeal with the CTA
DISPOSITIVE PORTION
WHEREFORE, the Petition is hereby GRANTED. The assailed July 30, 2008
Decision and the October 6, 2008 Resolution of the Court of Tax Appeals are hereby
REVERSED and SET ASIDE. The Court of Tax Appeals Second Division is DIRECTED to
dismiss CTA Case No. 7065 for having been prematurely filed.
SO ORDERED.
DIGESTER:
VAT: Refunds or Tax Credits of Input Tax
G.R. No. 190928 - Team Energy Corp. v. CIR
PERALTA, J.
Team Energy Corp filed an administrative claim for refund of unutilized input VAT for 2002 with
BIR on Dec. 22, 2003. CIR did not act upon the claim thus it filed a judicial claim before CTA on
Apr. 22, 2004. CTA First Division granted a refund in the amount of ₱69,618,971.19 but this was
reduced by the CTA En Banc to ₱51,134,951.40, on the ground that the judicial claim for the first
quarter of 2002 was filed beyond the two-year period under Sec. 112 of NIRC. SC rules that
petitioner timely filed its administrative claim within the two-year prescriptive period and timely
filed its judicial claim within the 30-day period after expiration of the 120-day period granted to
BIR for deciding on the claim. The amount of refund as ruled by CTA First Division was upheld.
DOCTRINE
Section 112 (A) and (C) must be interpreted according to its clear, plain and unequivocal
language. The taxpayer can file his administrative claim for refund or credit at any time within the
two-year prescriptive period. What is only required of him is to file his judicial claim within thirty
(30) days after denial of his claim by CIR or after the expiration of the 120-day period within
which CIR can decide on its claim.
FACTS
35. Pet. Team Energy Corp filed with the BIR its 1st to 4th quarterly VAT returns for calendar
year 2002.
36. Dec. 22, 2003 – Pet. filed an administrative claim for refund of unutilized input VAT with the
Revenue District Office-Lucena, in the sum of ₱79,918,002.95 for calendar year 2002.
37. Apr. 22, 2004 – Due to CIR’s inaction, petitioner elevated its claim before the CTA First
Division, which ordered the CIR to refund or issue a tax credit certificate in the amount of
₱69,618,971.19, (representing unutilized input VAT paid by petitioner on its domestic
purchases of goods and services and importation of goods attributable to its effectively
zero-rated sales of power generation services to the NPC for 2002.) MR by CIR denied.
38. Upon appeal by CIR, CTA en banc reduced the refundable amount to ₱51,134,951.40,
on the ground that petitioner’s judicial claim for the first quarter of 2002 was filed
beyond the two-year period prescribed under Section 112 (A) of the Tax Code.
- The two-year prescriptive period was counted from the close of the taxable quarter
when the sales were made.
Period (2002) Close of Taxable Quarter Last Day for Filing of Claim
1st Quarter March 31, 2002 March 31, 2004
2nd Quarter June 30, 2002 June 30, 2004
3rd Quarter September 30, 2002 September 30, 2004
4th Quarter December 31, 2002 December 31, 2004
- Since pet. filed its judicial claim for refund for the four quarters of 2002, only on
April 22, 2004—22 days from March 31, 2004, the last day for filing as prescribed by
the Mirant Case, respondent is barred from claiming refund of its unutilized input
taxes for the first quarter of 2002. (Thus, portion of the claim corresponding to the
first quarter that had already prescribed was deducted.)
39. MR by petitioner denied, hence this petition.
ISSUE with HOLDING
8. W/N petitioner timely filed its judicial claim for refund of input VAT for the first
quarter of 2002? YES.
 In CIR v. San Roque Power Corporation, SC emphasized that Section 112 (A) and (C)
of the Tax Code must be interpreted according to its clear, plain and unequivocal
language. SC held that:
o The taxpayer can file his administrative claim for refund or issuance of tax
credit certificate anytime within the two-year prescriptive period. (Sec 112 (A)).
28
 o The Commissioner will then have 120 days from such filing to decide the claim.
(Sec 112 (C))
o The taxpayer, within thirty (30) days from receipt of the decision denying the
claim or after the expiration of the 120-day period, appeal the decision or the
unacted claim with the CTA. (Sec 112 (C))
 Three compelling reasons why the 30-day period need not necessarily fall within the
two-year prescriptive period, as long as the administrative claim is filed within said
prescriptive period:
1) Section 112 (A) clearly states that the taxpayer may apply with the
Commissioner for a refund or credit "within two (2) years," which means at
anytime within two years.
2) The two-year prescriptive period in Section 112 (A) refers to the period
within which the taxpayer can file an administrative claim not to the filing of
judicial claim with the CTA
3) If the 30-day period is required to fall within the two-year prescriptive period
(730 days), then the taxpayer must file his administrative claim within the
first 610 days of the two-year period, and filing beyond the 610 days will
result in the appeal to the CTA being filed beyond the two-year prescriptive
period.
o Such theory results in truncating 120 days from the 730 days that the
law grants the taxpayer for filing his administrative claim
 Here, petitioner timely filed its administrative claim with the Bureau of Internal
Revenue within the required period.
o Since its administrative claim was filed within the two-year prescriptive period
and its judicial claim was filed on the first day after the expiration of the 120-day
period granted to respondent to decide on its claim, SC rules that petitioner’s
claim for refund for the first quarter of 2002 should be granted.
DISPOSITIVE PORTION
We revert to the CTA First Division s finding that petitioner s total refundable amount should be
₱69,618,971.19.
OTHER NOTES
SEC. 112. Refund or Tax Credits of Input Tax. –
(A) Zero-rated or Effectively Zero-rated Sales. – Any VAT-registered person, whose sales are
zero-rated or effectively zero-rated may, within two (2) years after the close of the taxable
quarter when the sales were made, apply for the issuance of a tax credit certificate or refund of
creditable input tax due or paid attributable to such sales, …
(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 a 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.
NOTE: REVISIONS under TRAIN Law
 Sec 112 (C): 120-day period for BIR to decide on claims, now 90 days.
 Sec 112 (C): “Complete documents”, now “Official receipts or invoices and other
documents”
DIGESTER: Sophia Sy
Value-Added Tax
G.R. No. 191498, January 15, 2014 – CIR v. MINDANAO II GEOTHERMAL
PARTNERSHIP
SERENO
Mindanao II filed three administrative claims for tax refund/credit of input VAT, all within the
two-year prescriptive period from the close of the taxable quarter when the relevant sales
were made. However, when the CIR did not act upon them, Mindanao II failed to file an
appeal within 30 days from the lapse of the 120-day period within which the CIR was to
act. The CTA held that the claims were timely filed. However, upon appeal by the CIR, the
Court ruled that the tax claims should be denied, because although the administrative
claims (claim with the BIR) were properly filed within the two-year prescriptive period, the
judicial claims (appeal to CTA) were filed beyond the 30-day period after the lapse of the
120-day period (120+30 rule).
DOCTRINE
The taxpayer may, if he wishes, appeal the decision of the Commissioner to the
CTA within 30 days from receipt of the Commissioner's decision, or if the Commissioner
does not act on the taxpayer's claim within the 120-day period, the taxpayer may appeal to
the CTA within 30 days from the expiration of the 120-day period.
When it comes to recovery of unutilized input VAT, Section 112, and not Section
229 of the Tax Code, is the governing law. (See Other Notes for elucidation by the SC.)
FACTS
40. Mindanao II is a partnership registered with the SEC, engaged in power generation
and sale of electricity to NAPOCOR.
41. Mindanao filed its Quarterly VAT Returns for the 2nd, 3rd, and 4th quarters of 2004 (see
table at Other Notes) and on 06 October 2005, filed an application with the BIR for
refund/credit of input VAT.
42. The CIR did not resolve the claim within 120 days (Sec. 112(D) of Tax Code), i.e.
period up to 03 February 2006.
43. Mindanao II did not file an appeal within 30 days from the end of the 120-day period,
i.e. 05 March 2006. It instead filed a Petition for Review with the CTA on 21 July 2006.
Mindanao II reasoned that a judicial claim must be filed within the two-year period
from the filing of its quarterly returns.
44. During the pendency of the claim, the SC promulgated Atlas Consolidated Mining v.
CIR, in which it held that the two-year prescriptive period for filing an input VAT
refund/credit claim is to be reckoned from the date of filing of the quarterly VAT return
and payment of the tax. (It later overruled this doctrine in CIR v. Mirant.)
45. CTA granted the refund (although less than what Mindanao II claimed because some
of the claim was not substantiated by official receipts). (This disallowance, in the
amount of P375k, was no longer contested.)
46. CIR filed an MR, arguing that prescription had already set in (see fact #5). It relied on
Sec. 112(D) of the Tax Code for this argument. (Atlas was still the foremost doctrine
at the time, but Mirant was promulgated after this).
47. CTA relied on Atlas and ruled that the claims were timely filed. CTA en banc affirmed,
holding that the 30-day period applied only in case of actual denial of an
administrative claim—in case of BIR inaction, the judicial claim would be timely filed
as long as it was filed within the two-year prescriptive period.
ISSUE with HOLDING
29
2. W/N the claims were filed on time – Administrative, YES. Judicial, NO.
It is only the administrative claim that must be filed within the two-year prescriptive
period; the judicial claim need not fall within the two-year prescriptive period.
The reckoning date for the ADMINISTRATIVE CLAIM under Sec. 112(A) is two years
from the close of the taxable quarter when the sale was made by the person legally liable
to pay the output VAT.
Mindanao II’s claim was filed on 06 October 2005, so Atlas could not have
applied. Since its zero-rated sales were made in the second, third, and fourth quarters of
2004, Mindanao had up to 30 June, 30 September, and 31 December of 2006 to file,
respectively. Therefore, its administrative claims were timely filed.
HOWEVER, its judicial claims were filed out of time.
Sec. 112. x x x (D) Period within which Refund or Tax Credit of Input Taxes shall be Made.
— In proper cases, the Commissioner shall grant a refund or issue the tax credit certificate
for creditable input taxes within one hundred twenty (120) days from the date of
submission of complete documents in support of the application filed in accordance with
Subsection (A) and (B) hereof. In case of full or partial denial of the claim for tax refund or
tax credit, or the failure on the part of the Commissioner to act on the application within the
period prescribed above, the taxpayer affected may, within thirty (30) days from the receipt
of the decision denying the claim or after the expiration of the one hundred twenty day-
period, appeal the decision or the unacted claim with the Court of Tax Appeals.
The 30-day period applies not only in cases where the CIR denies the claim, but also
where the CIR fails to act upon it.
In case of actual denial, the 30-day period starts from denial.
In case of inaction, the 30-day period runs from the lapse of the 120-day period
in which the CIR should have acted.
Since the 120-day period lapsed on 03 February 2006, Mindanao II could have appealed
to the CTA until 05 March 2006. It filed it only on 21 July 2006, 138 days late.
The 30-day period to appeal is mandatory and jurisdictional. Although Sec. 112(C) states
that x x x 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., the word "may" simply
means that the taxpayer may or may not appeal the decision of the Commissioner
within 30 days from receipt of the decision, or within 30 days from the expiration of
the 120-day period. x x x.
DISPOSITIVE PORTION
Petition GRANTED. Tax refund/credit DENIED.
OTHER NOTES
Summary of rules on filing claims (verbatim from case)
A. Two-Year Prescriptive Period
1. It is only the administrative claim that must be filed within the two-year prescriptive period. (Aichi)
2. The proper reckoning date for the two-year prescriptive period is the close of the taxable quarter
when the relevant sales were made. (San Roque)
3. The only other rule is the Atlas ruling, which applied only from 8 June 2007 to 12 September 2008.
Atlas states that the two-year prescriptive period for filing a claim for tax refund or credit of unutilized
input VAT payments should be counted from the date of filing of the VAT return and payment of the
tax. (San Roque)
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.
3. As a general rule, the 3 0-day period to appeal is both mandatory and jurisdictional. (Aichi and San
Roque)
4. As an exception to the general rule, premature filing is allowed only if filed between 10 December
2003 and 5 October 2010, when BIR Ruling No. DA-489-03 was still in force. (San Roque)
5. Late filing is absolutely prohibited, even during the time when BIR Ruling No. DA-489-03 was in force.
(San Roque)
W/N INPUT VAT IS CONSIDERED EXCESSIVELY COLLECTED – NO
In a claim for refund or credit of "excess" input VAT under Section 110(B) and Section 112(A), the input
VAT is not "excessively" collected as understood under Section 229. At the time of payment of the input
VAT the amount paid is the correct and proper amount. Under the VAT System, there is no claim or
issue that the input VAT is "excessively" collected, that is, that the input VAT paid is more than what is
legally due. The person legally liable for the input VAT cannot claim that he overpaid the input VAT by
the mere existence of an "excess" input VAT. The term "excess" input VAT simply means that the input
VAT available as credit exceeds the output VAT, not that the input VAT is excessively collected because
it is more than what is legally due. Thus, the taxpayer who legally paid the input VAT cannot claim for
refund or credit of the input VAT as "excessively" collected under Section 229.
Under Section 229, the prescriptive period for filing a judicial claim for refund is two years from the date
of payment of the tax "erroneously, . . . illegally, . . . excessively or in any manner wrongfully collected."
The prescriptive period is reckoned from the date the person liable for the tax pays the tax. Thus, if the
input VAT is in fact "excessively" collected, that is, the person liable for the tax actually pays more than
what is legally due, the taxpayer must file a judicial claim for refund within two years from his date of
payment. Only the person legally liable to pay the tax can file the judicial claim for refund. The person to
whom the tax is passed on as part of the purchase price has no personality to file the judicial claim under
Section 229.
DIGESTER: Gabi Timbancaya
Proof of Foreign Law
G.R. 190021 – Commissioner of Internal Revenue v. Burmeister and Wain Scandinavian
Contractor Mindanao, Inc.
Perlas-Bernabe, J.
30

Burmeister, a Philippine corporation in the business of operating and maintaining power barges,
filed an application for tax refund with the BIR for input tax paid on sales for the 4 th quarter of
1998. The BIR failed to act upon the application, hence the matter was raised to the Court of Tax
Appeals (CTA). The BIR contended before the CTA en banc that Burmeister was barred by
prescription from elevating the case to the CTA. The CTA nonetheless ruled in favor of
Burmeister. It said it could not entertain the issue of prescription since it was belatedly raised.
The Court overturned the CTA’s decision. It found that Burmeister failed to elevate the case of
its refund application to the CTA within the period prescribed by law. Even if the CTA belatedly
referred to the issue of prescription, the law must still be followed.
DOCTRINE
The right to appeal to the CTA is a statutory privilege, not a constitutional right. The
exercise of such privilege requires strict compliance with the conditions attached by the
statute for its exercise.
FACTS
48. Burmeister was a Filipino corporation in the business of constructing and managing power-
generating facilities under contract with the Philippine government. It was a VAT-registered
entity.
49. Burmeister was a subcontractor of a foreign consortium composed of its mother company,
a Danish corporation, and Mitsui, a Japanese corporation, which was awarded the
operation and maintenance of two 100-megawatt power barges owned by the National
Power Corporation. These services were subject to 0% VAT.
50. On January 21, 1999, Burmeister filed its fourth quarter VAT return for 1998,
indicating sales of P68.8 million and an input VAT of P1.8 million paid on its
domestic purchase of goods and services.
51. On July 21, 1999, Burmeister filed with the BIR an application for Tax Credit/Refund
for the VAT paid for the third and fourth quarters of 1998. The total refund was pegged
at P4.2 million. The BIR did not act upon the application.
52. On January 9, 2001, a petition for review was filed by Burmeister with the Court of
Tax Appeals (CTA) praying for the refund. This was denied by the CTA, citing
insufficiency of evidence. However, on appeal, the case was remanded to the CTA
for the reception of evidence consisting of VAT invoices and receipts, which were
not submitted earlier.
53. The CTA ruled in favor of Burmeister and ordered the BIR to refund or issue a tax credit
certificate in the amount of P1.6 million. (The amount was reduced.) The CTA held that
the claim filed by Burmeister in July 1999 was well within the two-year prescriptive
period, as provided by law, reckoned from the date when the VAT return for the
fourth quarter of 1998 was filed. BIR’s motion for reconsideration was denied.
54. The BIR brought the matter to the CTA en banc. BIR alleged that Burmeister failed to
comply with the periods mandated by Sec. 112 of the Tax Reform Act (R.A. No. 8424).
BIR insisted that the CIR had 120 days after the filing of the claim to act upon it (or until
November 18, 1999). If the BIR failed to act upon it, Burmeister may elevate the case to the
CTA within 30 days, or until December 18, 1999. Burmeister filed a petition with the
CTA only in January 2001, which is beyond that period within which it may elevate
the case to the tax court.
55. The CTA en banc denied the petition. It ruled that the BIR could not raise the issue of
prescription for the first time. It was only after 8 years or when the case reached the CTA
en banc did the BIR bring up the issue of prescription.
ISSUE with HOLDING
W/N the CTA en banc correctly dismissed the BIR’s petition for review on the ground that
the issue of prescription was belatedly raised.
NO. The BIR was correct in contending that Burmeister’s January 2001 filing with the CTA
was well beyond the period allowed under the law. The right to appeal to the CTA is a
statutory privilege, not a constitutional right. The exercise of such privilege requires strict
compliance with the conditions attached by the statute for its exercise. The period
prescribed is also a rule of jurisdictional nature. Hence, when a petition is filed beyond
the required period, that court acquires no jurisdiction.
 Sec. 112 (A) of R.A. 8428 mandates that a VAT-registered person, whose sales are zero-
rated may, within two years after the close of taxable quarter when the sales were
made, apply for the issuance of a tax credit certificate or refund.
 Sec. 112 (D) requires the BIR to act upon the application for tax credit or refund within 120
days from the filing of such application. In case of denial or inaction, the taxpayer affected
may, within 30 days from the receipt of the decision of the BIR or after the expiration
of the 120-day period, appeal the decision or unacted claim with the CTA.
 According to the Court, the two-year period for filing a tax credit/refund application with
the BIR is reckoned from the close of the quarter for which refund is sought. In this
case, the refund sought was for the fourth quarter of 1998, which closed on December
31 of that same year. This was the Court’s ruling in Mirant, a 2008 case which overturned
the decision of the Court in Atlas Mining v. CIR. The ruling in Atlas identified the day when
the return was filed, presumably within 20 days after the close of the quarter, which is the
deadline for the filing of the quarterly returns, as the date from which the period should be
reckoned.
 Burmeister’s application for tax credit/refund was filed on July 21, 1999, which is well
within the two-year period prescribed by law, reckoned from the December 31, 1998,
which is the close of the fourth quarter.
 Once filed, the law says that the BIR has 120 days to act upon the application. The
taxpayer or applicant shall thereafter have 30 days from the receipt of the decision of
the BIR or after the expiration of the 120-day period to bring the case to the CTA.
 Applying that to this case, the BIR had until November 18, 1999 to act on the
application. It failed to do so, giving reason for Burmeister to elevate the case to the
CTA. It may do so after the expiration of the 120-day period mandated by law for the
BIR to act upon its application. Burmeister filed its petition with the CTA on January
9, 2001, which is well beyond the 30-day period prescribed by Sec. 112 of R.A. 8424.
DISPOSITIVE PORTION
Wherefore the petition is GRANTED. The decision of the CTA en banc is hereby REVERSED
and SET ASIDE.
OTHER NOTES
The BIR insisted that the two-year prescription period also covered the 120 and 30-day periods
prescribed for the BIR to act upon the application and for the affected taxpayer to raise the issue
to the tax court. The Court did not agree with this view. It held that the two-year period referred
only to the filing of the administrative claim with the BIR, and not to the filing of a judicial claim
with the tax court. Hence, the inclusion of the period in which the BIR must decide on the matter
and the period for raising the matter to the CTA would lead to the absurd situation wherein the
two-year period prescribed by law for filing a tax refund with the BIR is greatly diminished.
DIGESTER: Horace
VAT
CIR v. Dash Engineering
Mendoza
31
Dash Engineering filed a claim for credit/refund of its unutilized input VAT. The CTA
granted the claim, but the CIR filed an appeal, contending that the claim was filed beyond
the 12-+30 day period. The SC upheld the CIR, holding that the said period is mandatory
and jurisdictional.
DOCTRINE
The 120+30 day period under Sec 112(C) is mandatory and jurisdictional. (Please note
however that the said provision has been amended under TRAIN.)
FACTS
56. Dash Engineering Philippines, Inc. is a corporation duly registered with the SEC and
listed with the PEZA as an ecozone IT export enterprise. It is also a VAT-registered
entity engaged in the export sales of computer-aided engineering and design.
57. Dash filed its monthly and quarterly VAT returns for the period from January 1, 2003
to June 30, 2003.
58. On August 9, 2004, it filed a claim for tax credit or refund in the amount of
P2,149,684.88 representing unutilized input VAT attributable to its zero-rated sales.
59. Because the CIR failed to act upon the said claim, Dash filed a petition for review with
the CTA on May 5, 2005.
60. The CTA 2nd Division partially granted Dash’ claim for refund or issuance of a tax
credit certificate in the reduced amount of P1,147,683.78.
- The CTA found that the claims for refund for the 1st and 2nd quarters of 2003
were filed within the two-year prescriptive period which is counted from the date
of filing of the return and payment of the tax due.
o The amended quarterly VAT returns for the 1st and 2nd quarters of 2003
were filed on July 24, 2004. Thus, it had until July 24, 2006 to file its
judicial claim.
o Its filing of a petition for review with the CTA on April 26, 2005 was
within the prescriptive period.
61. The CIR elevated the case to the CTA En Banc.
- It argued that respondent failed to show that (1) its purchases of goods and
services were made in the course of its trade and business, (2) the said
purchases were properly supported by VAT invoices and/or official receipts and
other documents, and (3) that the claimed input VAT payments were directly
attributable to its zero-rated sales.
- The CIR also averred that the petition for review was filed out of time.
62. The CTA En Banc upheld the decision of the CTA 2nd Division.
- The judicial claim was filed on time because the use of the word "may" in Section
112(D) (now subparagraph C) of the NIRC indicates that judicial recourse within
30 days after the lapse of the 120-day period is only directory and permissive
and not mandatory and jurisdictional, as long as the petition was filed within the
two-year prescriptive period.
- The 2-year prescriptive period applies to both administrative and judicial claims.
ISSUE with HOLDING
9. Whether or not the CTA erred in holding that respondent’s judicial claim for refund
was filed within the prescriptive period provided under the Tax Code - YES.
- CIR: In CIR v. Aichi, the SC held that compliance with the prescribed periods in
Section 112 is mandatory and jurisdictional.
o Dash filed its administrative claim for refund on August 9, 2004. The
120-day period within which the CIR should act on the claim expired on
December 7, 2004 without any action on the part of petitioner.
o Thus, respondent only had 30 days from the lapse of the said period, or
until January 6, 2005, to file a petition for review with the CTA. The
petition, however, was filed only on May 5, 2005.
o The 30-day period within which to file an appeal with the CTA is
jurisdictional and failure to comply therewith would bar the appeal and
deprive the CTA of its jurisdiction to entertain the same.
- Dash: Petition was seasonably filed before the CTA
o Sections 204(c) and 229 of the NIRC provide for a 2-year prescriptive
period.
o It interprets Sec 112, in relation to Sec 229, to mean that the 120-day
period is the time given to the CIR to decide the case. The taxpayer, on
the other hand, has the option of either appealing to the CTA the denial
by the CIR of the claim for refund within 30 days from receipt of such
denial and within the two-year prescriptive period, or appealing an
unacted claim to the CTA any time after the expiration of the 120-day
period given to the CIR to resolve the administrative claim for as long
as the judicial claim is made within the two-year prescriptive period.
- SC: Sec 229 is inapplicable and the 2-year period in Sec 112 refers only to
administrative claims
o Sections 204 and 229 of the NIRC pertain to the refund of erroneously
or illegally collected taxes (Please refer to other notes)
 Section 229 of the NIRC does not apply to claims for
excess input VAT.
 In CIR v. San Roque Power Corporation, the SC held that
"input VAT is not ‘excessively’ collected as understood under
Section 229 because at the time the input VAT is collected the
amount paid is correct and proper."
 Hence, respondent cannot advance its position by
referring to Section 229 because Section 112 is the more
specific and appropriate provision of law for claims for
excess input VAT.
o Section 112(A) also provides for a two-year period for filing a claim for
refund
 The 2-year prescriptive period referred to in Section
112(A) applies only to the filing of administrative claims
with the CIR and not to the filing of judicial claims with
the CTA.
 In other words, for as long as the administrative claim is filed
with the CIR within the two-year prescriptive period, the 30-
day period given to the taxpayer to file a judicial claim with the
CTA need not fall in the same two-year period.
- The 120+30 day period under Sec 112(C) is mandatory and jurisdictional, as
held in the San Roque case
o In previous cases, the Court took into account BIR Ruling No. DA-489-
03 which misled taxpayers by explicitly stating that taxpayers may file a
petition for review with the CTA even before the expiration of the 120-
day period given to the CIR to decide the administrative claim for
refund, and relaxed the application of the 120+30 day period.
o This case does not involve the issue of premature filing of the petition
for review with the CTA, but of late filing.
o Therefore, in accordance with San Roque, respondent's judicial
claim for refund must be denied for having been filed late.
32
 o Although respondent filed its administrative claim with the BIR on
August 9, 2004 before the expiration of the two-year period in Section Section 204. Authority of the Commissioner to Compromise, Abate and Refund or Credit
112(A), it undoubtedly failed to comply with the 120+ 30-day period in Taxes. - The Commissioner may –
Section 112(D) (now subparagraph C) which requires that upon the
inaction of the CIR for 120 days after the submission of the documents (C) Credit or refund taxes erroneously or illegally received or penalties imposed without
in support of the claim, the taxpayer has to file its judicial claim within authority, refund the value of internal revenue stamps when they are returned in good
30 days after the lapse of the said period. condition by the purchaser, and, in his discretion, redeem or change unused stamps that
o The 120 days granted to the CIR to decide the case ended on have been rendered unfit for use and refund their value upon proof of destruction. No
December 7, 2004. Thus, DEPI had 30 days therefrom, or until January credit or refund of taxes or penalties shall be allowed unless the taxpayer files in
6, 2005, to file a petition for review with the CTA. Unfortunately, DEPI writing with the Commissioner a claim for credit or refund within two (2) years after
only sought judicial relief on May 5, 2005 when it belatedly filed its the payment of the tax or penalty: Provided, however, That a return filed showing an
petition to the CT A, despite having had ample time to file the same, overpayment shall be considered as a written claim for credit or refund.
almost four months after the period allowed by law. As a consequence
of DEPI's late filing, the CTA did not properly acquire jurisdiction Section 229. Recovery of Tax Erroneously or Illegally Collected. - No suit or proceeding
over the claim. shall be maintained in any court for the recovery of any national internal revenue tax
hereafter alleged to have been erroneously or illegally assessed or collected, or of any
DISPOSITIVE PORTION penalty claimed to have been collected without authority, of any sum alleged to have been
WHEREFORE, the petition is GRANTED. The July 17, 2008 Decision and the August 12, excessively or in any manner wrongfully collected without authority, or of any sum alleged
2008 Resolution of the CTA En Banc in C.T.A. EB No. 357 (C.T.A. Case No. 7243) are to have been excessively or in any manner wrongfully collected, until a claim for refund or
hereby REVERSED and SET ASIDE. Respondent DEPI's judicial claim for refund or tax credit has been duly filed with the Commissioner; but such suit or proceeding may be
credit through its petition for review before the CTA is DENIED. maintained, whether or not such tax, penalty, or sum has been paid under protest or
duress.
OTHER NOTES
Section 112 In any case, no such suit or proceeding shall be filed after the expiration of two (2)
OLD PROVISION AMENDED PROVISION years from the date of payment of the tax or penalty regardless of any supervening
Sec. 112. Refunds or Tax Credits of Input Sec. 112. Refunds or Tax Credits of Input cause that may arise after payment: Provided, however, That the Commissioner may,
Tax Tax even without a written claim therefor, refund or credit any tax, where on the face of the
(D) Period within which Refund or Tax (C) Period within which Refund of Input return upon which payment was made, such payment appears clearly to have been
Credit of Input Taxes shall be Made. – In Taxes shall be Made.— In proper cases, erroneously paid.
proper cases, the Commissioner shall the Commissioner shall grant a refund for
grant a refund or issue the tax credit creditable input taxes within ninety (90) DIGESTER: Sarah
certificate for creditable input taxes within days from the date of submission of
one hundred twenty (120) days from the official receipts or invoices and
the date of submission of complete other documents in support of the
documents in support of the application application filed in accordance with
filed in accordance with Subsections (A) Subsections (A) and (B) hereof: Provided,
and (B) hereof. That should the Commissioner find that
the grant of refund is not proper, the
In case of full or partial denial of the claim Commissioner must state in writing the
for tax refund or tax credit, or the failure legal and factual basis for the denial.
on the part of the Commissioner to act on
the application within the period “In case of full or partial denial of the claim
prescribed above, the taxpayer affected for tax refund, the taxpayer affected may,
may, within thirty (30) days from the within thirty (30) days from the receipt of
receipt of the decision denying the claim the decision denying the claim, appeal the
or after the expiration of the one hundred decision with the Court of Tax Appeals:
twenty day-period, appeal the decision or Provided, however, That failure on the
the unacted claim with the Court of Tax part of any official, agent, or employee of
Appeals. the BIR to act on the application within the
ninety (90)-day period shall be punishable VAT
under Section 269 of this Code. G.R. No. 183880 – CIR v. Toledo Power Inc.
Peralta, J.

33
TPI filed a petition for refund/ tax credit before CIR. Before the 120-day period for CIR to
act on the petition had expired, TPI filed 2 petitions for review before the CTA. SC ruled
that the 1st CTA case was filed prematurely, but the 2nd CTA case was not (because of a
BIR ruling valid at the time it was filed). Thus, TPI was able to claim input tax refund
prayed for in the 2nd CTA case.
DOCTRINE
The rules on the determination of the prescriptive period for filing a tax refund or credit of
unutilized input VAT, as provided in Sec. 112, NIRC are as follows:
10. An administrative claim must be filed with the CIR within 2 years after the close of the
taxable quarter when the zero-rated sales were made.
11. The CIR has 120 days (now 90 days under TRAIN) 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 2-year period from the filing of the
administrative claim if the claim is filed in the later part of the 2-year period.
 If the 120-day period expires without any decision from the CIR, then the
administrative claim may be considered denied by inaction.
12. Within 30 days from the receipt of the CIR’s decision denying the administrative claim
or from the expiration of the 120-day (now 90-day) period (if the CIR failed to act on
the petition), a judicial claim must be filed with the CTA.
In this case, TPI filed its claim for input tax refund for the 3rd quarter of 2001 with the CTA
prematurely because the 120-day period for CIR to act hadn’t expired yet. However, its
claim for the 4th quarter of 2001 was valid because of a BIR Ruling that was valid at the
time of filing of the CTA case for said quarter (said BIR ruling was later reversed in the
Aichi case).
Today, the rule is that one must first wait for the 120-day (now 90-day) period for CIR to
act on a petition for refund before filing a petition for review with the CTA.
FACTS
63. Respondent Toledo Power Inc. (TPI) is a general partnership at Toledo City, Cebu. It
is principally engaged in the business of power generation and subsequent sale
thereof to the National Power Corporation (NPC) and is registered with the BIR as a
Value Added Tax taxpayer in accordance with Sec. 236, NIRC.
64. For the 3rd and 4th quarters of 2001, TPI incurred and accumulated input VAT from
its domestic purchases of goods and services, which are all attributable to its zero-
rated sales of power generation services to NPC.
a. Said excess and unutilized input VAT was allegedly not utilized against any
output VAT liability in the subsequent quarters nor carried over to the
succeeding taxable quarters.
65. TPI filed with the BIR RDO No. 83 an administrative claim for refund or unutilized
input VAT for the 3rd and 4th quarters of 2001 in the amounts of P5,909,588.96 and
P3,219,781.31, respectively, totaling P9,129,370.27.
66. Petitioner CIR has not ruled upon petitioner’s administrative claim.
67. To preserve its right to file a judicial claim for the refund or the issuance of a tax credit
certificate of its unutilized input VAT, TPI filed 2 petitions for review before the CTA to
suspend the running of the 2-year prescriptive period under Section 112(D), NIRC
and Section 4.106-2(C), RR 7-95:
a. CTA Case No. 6805: Petition for Review for the refund or issuance of a tax
credit certificate in the amount of P5,909,588.96 for the 3rd quarter of 2001;
b. CTA Case No. 6851: Petition for Review for the refund or issuance of tax
credit certificate in the amount of P3,219,781.31 for the 4th quarter of 2001.
c. These two cases were consolidated.
68. CTA First Division partially granted TPI’s petition, ruling that only a claim of
P8,553,050.44 was substantiated as unutilized input VAT.
69. CIR appealed to the CTA En Banc, arguing that TPI failed to comply with the invoicing
requirements to prove entitlement to the refund. It also challenged the jurisdiction of
the CTA First Division to entertain TPI’s petition for review for failure on its part to
comply with the provisions of Sec. 112(C), NIRC14.
70. CTA En Banc affirmed with modification the First Division’s decision. It held that TPI
was entitled to the refund or issuance of tax credit certificate in the amount of
P8,088,151.07.
ISSUE with HOLDING
1. W/N TPI complied with the 120+30-day rule under Sec. 112(C) – Yes.
 To validly claim a refund or tax credit of input tax, compliance with the
120+30-day rule (now 90+30-day rule, according to the TRAIN law) under
Sec. 112 of the Tax Code is mandatory.
o Sec. 112 decrees that a VAT-registered person, whose sales are
zero-rated or effectively zero-rated, may apply for the issuance of
a tax credit or refund creditable input tax due or paid attributable to
such sales within 2 years after the close of the taxable quarter
when the sales were made.
o From the date of submission of complete documents in support of
its application, the CIR has 120 days (now 90 days) to decide
whether or not to grant the claim for refund or issuance of tax
credit certificate. In case of full or partial denial of the claim for tax
refund or tax credit, or the failure on the part of the CIR to act on
the application within the given period, the taxpayer may, within 30
days from receipt of the decision denying the claim or after the
expiration of the 120-day period, appeal with the CTA the decision
or inaction of the CIR.
o Sec. 112(C) also expressly grants the taxpayer a 30-day period to
appeal to the CTA the decision or inaction of the CIR.
14
Sec. 112(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 120 days
[now 90 days under the TRAIN law] from the date of submission of complete documents in support of the
application filed in accordance with Subsections (A) and (B) hereof.
In case of full or partial denial of the claim for tax refund or tax credit, or the failure on the part of the
Commissioner to act on the application within the period prescribed above, the taxpayer affected may, within
thirty (30) days from the receipt of the decision denying the claim or after the expiration of the one hundred
twenty day-period, appeal the decision or the unacted claim with the Court of Tax Appeals.
34
  The old rule that the taxpayer may file the judicial claim without waiting for
the Commissioner’s decision if the 2-year prescriptive period is about to
expire cannot apply because that rule was adopted before the enactment of
the 30-day period.
o The 30-day period was adopted precisely to do away with the old
rule, so that under the VAT system the taxpayer will always have
30 days to file the judicial claim even if the CIR acts only on the
120th day, or does not act at all during the 120-day period.
o With the 30-day period always available to the taxpayer, the
taxpayer can no longer file a judicial claim for refund or credit of
input VAT without waiting for the Commissioner to decide until the
expiration of the 120-day period.
 Here, TPI filed its third and fourth quarterly VAT returns for 2001 on October
25, 2001 and January 25, 2002, respectively. It then filed an administrative
claim for refund of its unutilized input VAT for the third and fourth quarters of
2001 on September 30, 2003.
o Thus, the CIR had 120 days or until January 28, 2004, after the
submission of TPI’s administrative claim and complete documents
in support of its application, within which to decide on its claim. It is
only after the expiration of the 120-day period, if there is inaction
on the part of the CIR, when TPI may elevate its claim with the
CTA within 30 days.
 However, it appears that TPI’s judicial claims for refund of its unutilized input
VAT covering the third and fourth quarters of 2001 were prematurely filed on
October 24, 2003 and January 22, 2004, respectively.
o Strict compliance with the 120+30 day mandatory and
jurisdictional periods is not necessary when the judicial
claims are filed between December 10, 2003 (issuance of BIR
Ruling No. DA-489-03 which states that the taxpayer need not
wait for the 120-day period to expire before it could seek
judicial relief) to October 6, 2010 (promulgation of the Aichi
doctrine).
o Therefore, TPI’s refund claim of unutilized input VAT for the 3rd
quarter of 2001 was denied for being prematurely filed with the
CTA, while its refund claim of unutilized input VAT for the 4th
quarter of 2001 may be entertained since it falls within the
exception provided in the Court’s most recent rulings.
DISPOSITIVE PORTION
Petition partially granted. CIR is ordered to issue a tax refund certificate for TPI’s claim of
unutilized input VAT for the 4th quarter.
DIGESTER: Cristelle Elaine V. Collera
VAT
GR 181858 – KEPCO Phils Corp v CIR (2010)
Mendoza J
KEPCO filed application for zero-rated sales. KEPCO then filed a claim for tax refund. Upon petition for
review before CTA, the CIR averred that the refund was denied due to the failure of KEPCO to prove
basis for refund. CTA partially granted petition allowing a portion of the total amount being claimed. On
petition to SC, SC affirmed CTA en banc decision ruling particularly on the need to comply with the
requirements (stamping “zero-rated” and TIN-VAT on the invoices and receipts), failure to do so would
amount to denial of claims.
DOCTRINE
On stamping of “zero-rated” and TIN-VAT:
o Section 4.108-1 of RR 7-95 proceeds from rule-making authority granted to Secretary of
Finance under Section 245 of 1977 NIRC for efficient enforcement of the tax code and of
course its amendments.
o Said requirement is deemed reasonable and in accord with efficient collection of VAT from
the covered of VAT from the covered sales of goods and services.
o RR 7-95 also specifically requires VAT registered person to imprint TIN-VAT on invoices or
receipts
Non-compliance with the requirements result in denial of refund of the claim
KEPCO Philippines Corporation (Kepco) – VAT-registered independent power producer engaged in
the business of generating electricity. It exclusively sells electricity to National Power Corporation
(NPC), an entity exempt from taxes under Section 13 of Republic Act No. 6395 (RA No. 6395)
FACTS
1. KEPCO filed an application for zero-rated sales with the BIR which was approved under VAT 64-
01. It filed for four Quarterly VAT returns declaring zero-rated sales in the amount of
P3,285,308,055.85.
a. KEPCO claimed expenses reportedly sustained in connection with production and sale of
electricity with NPC claiming input VAT of P11,710,868.86 attributing the same to its zero-
rated sales of electricity with NPC for 2002.
2. KEPCO then filed CIR a claim for tax refund covering unutilized input VAT payments
attributable to its zero-rated sales transactions. Two days after KEPCO filed a petition for review
before the CTA.
a. CIR averred the claims for refund were strictly construed against taxpayer as it was
similar to a tax exemption, hence the burden to show that the taxes were erroneous or
illegal lay upon the taxpayer. There is failure on part of KEPCO to prove the basis claimed
as a tax refund.
b. KEPCO presented court-commissioned Independent CPA Machacon who presented
official receipts, invoices, and vouchers to claim the refund for unutilized input VAT.
3. CTA ruled that out of total declared zero-rated sales of 3.285 Million, only 1.452 Million was
properly substantiated as zero-rated sales. CTA also disallowed 5.171 Million due to failure to
comply with substantiation requirement. Therefore only a total of 2.890 Million representing
unutilized input VAT for 2002.
a. CTA En Banc denied appeal by KEPCO.
4. Hence this petition.
ISSUE with HOLDING
W/N CTA erred in disallowing claims due to non-compliance with invoicing requirements (such as
stamping of “zero-rated” and the “TIN-VAT” on invoices and/or ORs) – NO. CTA is correct in
disallowing the claims
 KEPCO: 1997 NIRC does not require the imprinting of the word “zero-rated” on invoices and/or
official receipts covering zero-rated sales, citing Section 113 in relation to Section 237 of NIRC.
Only Section 4.108-1 of RR 7-95 required it. KEPCO claims that RR 7-95 cannot be considered
as valid legislation considering the long settled rule that administrative rules and regulations
cannot expand the letter and spirit of the law they seek to enforce.
 SC: Disagrees with KEPCO. Issue whether or not word zero-rated should be imprinted on
invoices and/or official receipts as part of invoicing requirement was settled in Panasonic
Communications v CIR and JRA Phil v Commissioner.
35
 o In the said cases, the court ruled that Section 4.108-1 of RR 7-95 proceeds from rule- application except for the first quarter of 2003, which was considered belatedly filed. The
making authority granted to Secretary of Finance under Section 245 of 1977 NIRC for 2-year prescriptive period provided for in Sec. 112 shall be counted from close of taxable
efficient enforcement of the tax code and of course its amendments. quarter. Also, by virtue of BIR Ruling DA-489-03 which was in effect at that time, as an
o Said requirement is deemed reasonable and in accord with efficient collection of VAT from
the covered of VAT from the covered sales of goods and services.
exception, petitioner validly filed a judicial claim for refund before this Court even before
o Furthermore, the printing of the word zero-rated on the invoice helps segregate sales that expiration of 120-day period given to CIR to act on administrative claim. The Court also
are subject to 10% (now 12% VAT) from the sales that are zero-rated. affirmed the CTA decision on petitioner's non-compliance with substantiation requirements.
 Unable to submit the proper invoices, petitioner Panasonic has unable to substantiate claim for Petitioner merely provided sales invoices, instead of valid official receipts, which was
refund. necessary to prove its claim that foreign currency payment it received for services it
o Following the ruling, the RR neither expanded nor supplanted the tax code but merely rendered qualify for zero-rating for VAT purposes.
supplemented what the tax code already defined and discussed.
o In the present case, KEPCO failed to comply with the correct substantiation requirement for
zero-rated transactions.
DOCTRINE
ON TIN-VAT requirement on invoices or receipts - REQUIRED
 Also contrary to KEPCO’s allegation, the regulation (RR 7-95) specifically requires the VAT VAT invoice is the seller's best proof of the sale of the goods or services to the buyer while
registered person to imprint TIN-VAT on invoices or receipts. the VAT receipt is the buyer's best evidence of the payment of goods or services received
o Thus CTA is correct when it ruled that TIN-VAT must be printed and not merely stamped. from the seller. (Kepco Phils. Corp. vs. CIR)
ON claim that the non-compliance should not result in denial of refund of the claim – NO!
 BUT KEPCO argues that non-compliance of invoicing requirements should not result in denial of
taxpayers refund claim. FAC
 SC however stated that the decision cited by petitioners (Atlas Consolidated v CIR) did not make TS Taxable Year 2003 Last Day of Filing Actual filing
any categorical ruling that refund should be allowed for those who had not complied with 71. A (close of taxable Administrative Claims date of
substantiation requirements. T quarters) (within 2-year period from administrative
&
ON interchanging invoices and Official Receipts – KEPCO is wrong close of taxable quarters) claim by
T
 KEPCO also argued that under Section 113(A) of NIRC, invoices and official receipts are used ’ AT&T
interchangeably for purposes of substantiating input VAT, thus the CTA should have accepted its 1st Quarter (31 Mar
s
substantiation of input VAT on purchases of goods with Official Receipts and on purchases of 30 March 2005
services with Invoices. s 2003)
 SC disagrees since under the law, a VAT invoice is necessary for every sale, barter or exchange e 2nd Quarter (30 June
of goods or properties, while VAT official receipt properly pertains to every lease of goods or r 29 June 2005
2003)
properties, and for every sale, barter or exchange of services. v 13 April 2005
o A VAT invoice is seller’s best proof of sale of goods or services to the buyer, while the i 3rd Quarter (30 Sept
VAT receipt is the buyer’s best evidence of the payment of goods or services received
29 September 2005
c 2003)
from the seller.
o Taken collectively, these invoices and receipts are necessary to substantiate the actual
e 4th Quarter (31 Dec
s 30 December 2005
amount or quantity of goods sold and their selling price (proof of transaction), and the 2003)
best means to prove the input VAT payments (proof of payment). Hence invoice and receipt w
should not be confused as referring to one and the same thing. They cannot be used ere:
alternatively. a. Service Agreement to render information, promotional, supportive and liaison
 Tax refunds are in the nature of tax exemptions which represent a loss of revenue of service to AT&T Communications Services International, Inc. (AT&T-CSI), a non-
government. These exemptions must be strictly construed against the taxpayer, as taxes are the resident foreign corporation = compensation paid in US dollars.
lifeblood of the government. b. Assignment Agreement with AT&T Solutions, Inc. (AT&T-SI) where latter assigned
the performance of services AT&T-SI was supposed to provide Mastercard
DISPOSITIVE PORTION
Petition denied International, Inc. (NRFC) = compensation paid in US dollars.
c. Assignment Agreement with AT&T-SI to perform latter's obligation to Lexmark
International, Inc. (NRFC) = also paid in US dollars through telegraphic transfer.
DIGESTER: Dino De Guzman 72. AT&T then filed Quarterly VAT Returns with BIR for taxable period 2003.
73. AT&T applied for refund and/or tax credit of unutilized VAT input taxes amounting to
P3,003,265.14.
AT&T Communications Services Philippines, Inc. vs. CIR 74. AT&T filed Petition for Review before CTA due to inaction of BIR. This was filed only 7
Perez, J. days from the time of administrative claim in order to suspend running of prescriptive
period.
75. CTA in Division: dismissed application. Petitioner must show proof of compliance
In April 2005, AT&T filed an application for refund and/or tax credit of its unutilized VAT through proper VAT official receipts, and not just mere sales invoices. MR was also
input taxes for taxable year 2003. The Court first ruled that CTA had jurisdiction over the denied.
36
76. CTA En Banc: affirmed CTA in Division. Official receipt cannot be interchanged with
sales invoice. It also emphasized that proof of inward remittances like bank credit
advices cannot be used in lieu of VAT official receipts to demonstrate petitioner’s
zero-rated transactions.
77. MR denied. Hence, this petition for review on certiorari.
ISSUE with HOLDING
1.) Whether or not the CTA properly acquired jurisdiction over petitioner’s claim
covering the four (4) quarters of taxable year 2003.
Court: YES, but only to 2nd-4th quarter. Claim over 1st quarter is filed 14 days late.
a. FIRST: As regards 2-year prescriptive period for filing of administrative claim
The proper interpretation of Section 112 15 of NIRC of 1997 was settled in CIR v.
San Roque Power Corp:
The law states that the taxpayer may apply with the Commissioner for a
refund or credit "within two (2) years," which means at anytime within two
years.
The phrase "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)" means that the application in Section 112(A) is the administrative
claim that the Commissioner must decide within the 120-day period.
In short, the two year prescriptive period in Section 112(A) refers to the period
within which the taxpayer can file an administrative claim for tax refund or credit.
Stated otherwise, the two-year prescriptive period does not refer to the filing of
the judicial claim with the CTA but to the filing of the administrative claim with the
Commissioner.
b. As applied:
Taxable Year 2003 (close of taxable quarters) Last Day of Filing Administrative
Claims (within 2-year period from close of taxable quarters) Actual filing
date of administrative claim by AT&T
CTA had no jurisdiction to rule on petitioner’s refund claim covering the 1st
Quarter of 2003 since its administrative claim was filed beyond the 2-year
prescriptive period as mandated by law, or exactly fourteen (14) days after the
last day to file the same.
15
SEC. 112. Refunds or Tax Credits of Input Tax. -
(A) Zero-rated or Effectively Zero-rated Sales.– Any VAT registered person, whose sales are zero-rated or
effectively zero-rated may, within two (2) years after the close of the taxable quarter when the sales were
made, apply for the issuance of a tax credit certificate or refund of creditable input tax due or paid attributable
to such sales, except transitional input tax, to the extent that such input tax has not been applied against
output tax: x x x x
(D) Period within which Refund or Tax Credit of Input Taxes shall be Made. - In proper cases, the
Commissioner shall grant a refund or issue the tax credit certificate for creditable input taxes within one
hundred twenty (120) days from the date of submission of complete documents in support of the application
filed in accordance with 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 orthe unacted claim with the Court of Tax Appeals. x x x x
2.) As regards WON petitioner properly filed its judicial claim before CTA, even without
waiting for expiration of 120-day period for CIR to act on its administrative claim.
Court: Yes
General Rule: A taxpayer-claimant needs to wait for the expiration of the
one hundred twenty(120)-day period before it may be considered as
"inaction" on the partof the Commissioner of Internal Revenue (CIR).
Thereafter, the taxpayer-claimant is given only a limited period of thirty (30)
days from said expiration to file its corresponding judicial claim with the
CTA.
Exception: Only for claims during the effectivity of BIR Ruling No. DA-
489-03 from 10 December 2003 to 5 October 2010.
As applied: Petitioner filed the judicial claim before CTA on April 2005, which was
when BIR Ruling was in effect. Thus, petitioner properly and timely filed its judicial
claim covering 2nd to 4th Quarters of taxable year 2003.
3. WON CTA erred in denying the claim of petitioner for failure to substantiate claims.
Court: NO, invoices are not sufficient. Petitioner rendered services and must be
proved with VAT official receipts.
Tax Code: SEC. 113. Invoicing and Accounting Requirements for VAT-registered
Persons.
(A) Invoicing Requirements.- A VAT-registered person shall, for every sale, issue
an invoice or receipt. In addition to the information required under Section 237,
the following information shall be indicated in the invoice or receipt. x x x
[Emphasis supplied]
Specific provisions:
SEC. 108. Value-added Tax on Sale of Services and Use or Lease of Properties.-
(C) Determination of the Tax -The tax shall be computed by multiplying the total
amount indicated in the official receipt by one eleventh (1/11). x x x [Emphasis
supplied]
SEC. 106. Value-added Tax on Sale of Goods or Properties.-
(D) Determination of the Tax. – The tax shall be computed by multiplying the total
amount indicated in the invoice by one-eleventh (1/11). [Emphasis supplied]
The construction of the statute shows that the legislature intended to
distinguish the use of an invoice from an official receipt. It is more logical
therefore to conclude that subsections of a statute under the same heading
should be construed as having relevance to its heading. The legislature
separately categorized VAT on sale of goods from VAT on sale of services, not
only by its treatment with regard to tax but also with respect to substantiation
requirements.
Cardinal rule on statutory construction: Legislative intent must be ascertained from a
consideration of the statute as a whole and not of an isolated part or a particular
provision alone
37
 Settled is the rule that every part of the statute must be considered with the other
parts.

The VAT invoice is the seller's best proof of the sale of the goods or services to the
buyer while the VAT receipt is the buyer's best evidence of the payment of goods or
services received from the seller. (Kepco Phils. Corp. vs. CIR)

DISPOSITIVE PORTION

Petition is DENIED.
OTHER NOTES
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suscipit congue id quis erat. Curabitur lobortis metus ut purus venenatis…

DIGESTER: SD

38