[G.R. NO.
172129, September 12, 2008] to pay the VAT component of the progress billings from Mitsubishi for the period covering
COMMISSIONER OF INTERNAL REVENUE, Petitioner, v. MIRANT PAGBILAO
CORPORATION (FORMERLY SOUTHERN ENERGY QUEZON, INC.), Respondent.
DECISION
VELASCO JR., J.:
Before us is a Petition for Review on Certiorari under Rule 45 assailing and seeking to set
aside the Decision1 dated December 22, 2005 of the Court of Appeals (CA) in CA-G.R. SP
No. 78280 which modified the March 18, 2003 Decision2 of the Court of Tax Appeals (CTA) in
CTA Case No. 6133 entitled Mirant Pagbilao Corporation (Formerly Southern Energy
Quezon, Inc.) v. Commissioner of Internal Revenue and ordered the Bureau of Internal
Revenue (BIR) to refund or issue a tax credit certificate (TCC) in favor of respondent Mirant
Pagbilao Corporation (MPC) in the amount representing its unutilized input value added tax
(VAT) for the second quarter of 1998. Also assailed is the CA's Resolution3 of March 31, 2006
denying petitioner's motion for reconsideration.
The Facts
MPC, formerly Southern Energy Quezon, Inc., and also formerly known as Hopewell (Phil.)
Corporation, is a domestic firm engaged in the generation of power which it sells to the
National Power Corporation (NPC). For the construction of the electrical and mechanical
equipment portion of its Pagbilao, Quezon plant, which appears to have been undertaken
from 1993 to 1996, MPC secured the services of Mitsubishi Corporation (Mitsubishi) of
Japan.
Under Section 134 of Republic Act No. (RA) 6395, the NPC's revised charter, NPC is exempt
from all taxes. In Maceda v. Macaraig,5 the Court construed the exemption as covering both
direct and indirect taxes.
In the light of the NPC's tax exempt status, MPC, on the belief that its sale of power
generation services to NPC is, pursuant to Sec. 108(B)(3) of the Tax Code,6 zero-rated for
VAT purposes, filed on December 1, 1997 with Revenue District Office (RDO) No. 60 in
Lucena City an Application for Effective Zero Rating. The application covered the construction
and operation of its Pagbilao power station under a Build, Operate, and Transfer scheme.
Not getting any response from the BIR district office, MPC refiled its application in the form of
a "request for ruling" with the VAT Review Committee at the BIR national office on January
28, 1999. On May 13, 1999, the Commissioner of Internal Revenue issued VAT Ruling No.
052-99, stating that "the supply of electricity by Hopewell Phil. to the NPC, shall be subject to
the zero percent (0%) VAT, pursuant to Section 108 (B) (3) of the National Internal Revenue
Code of 1997."
It must be noted at this juncture that consistent with its belief to be zero-rated, MPC opted not
April 1993 to September 1996--for the E & M Equipment Erection Portion of MPC's contract
with Mitsubishi. This prompted Mitsubishi to advance the VAT component as this serves as
its output VAT which is essential for the determination of its VAT payment. Apparently, it was
only on April 14, 1998 that MPC paid Mitsubishi the VAT component for the progress billings
from April 1993 to September 1996, and for which Mitsubishi issued Official Receipt (OR) No.
0189 in the aggregate amount of PhP 135,993,570.
On August 25, 1998, MPC, while awaiting approval of its application aforestated, filed its
quarterly VAT return for the second quarter of 1998 where it reflected an input VAT of PhP
148,003,047.62, which included PhP 135,993,570 supported by OR No. 0189. Pursuant to
the procedure prescribed in Revenue Regulations No. 7-95, MPC filed on December 20,
1999 an administrative claim for refund of unutilized input VAT in the amount of PhP
148,003,047.62.
Since the BIR Commissioner failed to act on its claim for refund and obviously to forestall the
running of the two-year prescriptive period under Sec. 229 of the National Internal Revenue
Code (NIRC), MPC went to the CTA via a petition for review, docketed as CTA Case No.
6133.
Answering the petition, the BIR Commissioner, citing Kumagai-Gumi Co. Ltd. v.
CIR,7 asserted that MPC's claim for refund cannot be granted for this main reason: MPC's
sale of electricity to NPC is not zero-rated for its failure to secure an approved application for
zero-rating.
Before the CTA, among the issues stipulated by the parties for resolution were, in gist, the
following:
1. Whether or not [MPC] has unapplied or unutilized creditable input VAT for the
2nd quarter of 1998 attributable to zero-rated sales to NPC which are proper
subject for refund pursuant to relevant provisions of the NIRC;
2. Whether the creditable input VAT of MPC for said period, if any, is
substantiated by documents; and
3. Whether the unutilized creditable input VAT for said quarter, if any, was
applied against any of the VAT output tax of MPC in the subsequent quarter.
To provide support to the CTA in verifying and analyzing documents and figures and entries
contained therein, the Sycip Gorres & Velayo (SGV), an independent auditing firm, was
commissioned.
The Ruling of the CTA
On the basis of its affirmative resolution of the first issue, the CTA, by its Decision dated
March 18, 2003, granted MPC's claim for input VAT refund or credit, but only for the amount No. 0189 dated April 14, 1998 x x x, it must be observed, however, that said VAT allegedly
of PhP 10,766,939.48. The fallo of the CTA's decision reads: paid pertains to the services which were rendered for the period 1993 to 1996. x x x
In view of all the foregoing, the instant petition is PARTIALLY GRANTED. Accordingly, The Ruling of the CA
respondent is hereby ORDERED to REFUND or in the alternative, ISSUE A TAX CREDIT
CERTIFICATE in favor of the petitioner its unutilized input VAT payments directly attributable Aggrieved, MPC appealed the CTA's Decision to the CA via a petition for review under Rule
to its effectively zero-rated sales for the second quarter of 1998 in the reduced amount of 43, docketed as CA-G.R. SP No. 78280. On December 22, 2005, the CA rendered its
P10,766,939.48, computed as follows: assailed decision modifying that of the CTA decision by granting most of MPC's claims for tax
refund or credit. And in a Resolution of March 31, 2006, the CA denied the BIR
Claimed Input VAT P148,003,047.62 Commissioner's motion for reconsideration. The decretal portion of the CA decision reads:
Less: Disallowances WHEREFORE, premises considered, the instant petition is GRANTED. The assailed
a.) As summarized by SGV & Co. in its initial report (Exh. Decision of the Court of Tax Appeals dated March 18, 2003 is hereby MODIFIED.
P) Accordingly, respondent Commissioner of Internal Revenue is ordered to refund or issue a
I. Input Taxes on Purchases of Services: tax credit certificate in favor of petitioner Mirant Pagbilao Corporation its unutilized input VAT
1. Supported by documents other than VAT Ors P 10,629.46 payments directly attributable to its effectively zero-rated sales for the second quarter of 1998
2. Supported by photocopied VAT OR 879.09 in the total amount of P146,760,509.48.
II. Input Taxes on Purchases of Goods:
1. Supported by documents other than VAT165,795.70 SO ORDERED.10
invoices
2. Supported by Invoices with TIN only 1,781.82 The CA agreed with the CTA on MPC's entitlement to (1) a zero-rating for VAT purposes for
3. Supported by photocopied VAT invoices 3,153.62 its sales and services to tax-exempt NPC; and (2) a refund or tax credit for its unutilized input
III. Input Taxes on Importation of Goods: VAT for the second quarter of 1998. Their disagreement, however, centered on the issue of
1. Supported by photocopied documents proper documentation, particularly the evidentiary value of OR No. 0189.
[IEDs and/or Bureau of Customs
(BOC) Ors] 716,250.00 The CA upheld the disallowance of PhP 1,242,538.14 representing zero-rated input VAT
2. Supported by broker's computations 91,601.00 990,090.69 claims supported only by photocopies of VAT OR/Invoice, documents other than VAT
b.) Input taxes without supporting documents as Invoice/OR, and mere broker's computations. But the CA allowed MPC's refund claim of PhP
summarized in Annex A of SGV & Co.'s 135,993,570 representing input VAT payments for purchases of goods and/or services from
supplementary report (CTA records, page 134) 252,447.45 Mitsubishi supported by OR No. 0189. The appellate court ratiocinated that the CTA erred in
c.) Claimed input taxes on purchases of services from disallowing said claim since the OR from Mitsubishi was the best evidence for the payment of
Mitsubishi Corp. for being substantiated by dubious 135,996,570.008 input VAT by MPC to Mitsubishi as required under Sec. 110(A)(1)(b) of the NIRC. The CA
OR ruled that the legal requirement of a VAT Invoice/OR to substantiate creditable input VAT was
Refundable Input P10,766,939.48 complied with through OR No. 0189 which must be viewed as conclusive proof of the
payment of input VAT. To the CA, OR No. 0189 represented an undisputable
SO ORDERED.9 acknowledgment and receipt by Mitsubishi of the input VAT payment of MPC.
Explaining the disallowance of over PhP 137 million claimed input VAT, the CTA stated that The CA brushed aside the CTA's ruling and disquisition casting doubt on the veracity and
most of MPC's purchases upon which it anchored its claims for refund or tax credit have not genuineness of the Mitsubishi-issued OR No. 0189. It reasoned that the issuance date of the
been amply substantiated by pertinent documents, such as but not limited to VAT ORs, said receipt, April 14, 1998, must be taken conclusively to represent the input VAT payments
invoices, and other supporting documents. Wrote the CTA: made by MPC to Mitsubishi as MPC had no real control on the issuance of the OR. The CA
We agree with the above SGV findings that out of the remaining taxes of P136,246,017.45, held that the use of a different exchange rate reflected in the OR is of no consequence as
the amount of P252,477.45 was not supported by any document and should therefore be what the OR undeniably attests and acknowledges was Mitsubishi's receipt of MPC's input
outrightly disallowed. VAT payment.
As to the claimed input tax of P135,993,570.00 (P136,246,017.45 less P252,477.45 ) on The Issue
purchases of services from Mitsubishi Corporation, Japan, the same is found to be of doubtful
veracity. While it is true that said amount is substantiated by a VAT official receipt with Serial Hence, the instant petition on the sole issue of "whether or not respondent [MPC] is entitled to
the refund of its input VAT payments made from 1993 to 1996 amounting to [PhP] Petitioner BIR Commissioner, echoing the CTA's stand, argues against the sufficiency of OR
146,760,509.48"11 No. 0189 to prove unutilized input VAT payment by MPC. He states in this regard that the
BIR can require additional evidence to prove and ascertain payment of creditable input VAT,
The Court's Ruling or that the claim for refund or tax credit was filed within the prescriptive period, or had not
previously been refunded to the taxpayer.
As a preliminary matter, it should be stressed that the BIR Commissioner, while making
reference to the figure PhP 146,760,509.48, joins the CA and the CTA on their disposition on To bolster his position on the dubious character of OR No. 0189, or its insufficiency to prove
the propriety of the refund of or the issuance of a TCC for the amount of PhP 10,766,939.48. input VAT payment by MPC, petitioner proffers the following arguments:
In fine, the BIR Commissioner trains his sight and focuses his arguments on the core issue of
whether or not MPC is entitled to a refund for PhP 135,993,570 (PhP 146,760,509.48 - PhP (1) The input tax covered by OR No. 0189 pertains to purchases by MPC from Mitsubishi
10,766,939.48 = PhP 135,993,570) it allegedly paid as creditable input VAT for services and covering the period from 1993 to 1996; however, MPC's claim for tax refund or credit was
goods purchased from Mitsubishi during the 1993 to 1996 stretch. filed on December 20, 1999, clearly way beyond the two-year prescriptive period set in Sec.
112 of the NIRC;
The divergent factual findings and rulings of the CTA and CA impel us to evaluate the
evidence adduced below, particularly the April 14, 1998 OR 0189 in the amount of PhP (2) MPC failed to explain why OR No. 0189 was issued by Mitsubishi (Manila) when the
135,996,570 [for US$ 5,190,000 at US$1: PhP 26.203 rate of exchange]. Verily, a claim for invoices which the VAT were originally billed came from the Mitsubishi's head office in Japan;
tax refund may be based on a statute granting tax exemption, or, as Commissioner of
Internal Revenue v. Fortune Tobacco Corporation 12 would have it, the result of legislative (3) The exchange rate used in OR No. 0189 was pegged at PhP 26.203: USD 1 or the
grace. In such case, the claim is to be construed strictissimi juris against the exchange rate prevailing in 1993 to 1996, when, on April 14, 1998, the date OR No. 0189
taxpayer,13 meaning that the claim cannot be made to rest on vague inference. Where the was issued, the exchange rate was already PhP 38.01 to a US dollar;
rule of strict interpretation against the taxpayer is applicable as the claim for refund partakes
of the nature of an exemption, the claimant must show that he clearly falls under the (4) OR No. 0189 does not show or include payment of accrued interest which Mitsubishi was
exempting statute. On the other hand, a tax refund may be, as usually it is, predicated on tax charging and demanded from MPC for having advanced a considerable amount of VAT. The
refund provisions allowing a refund of erroneous or excess payment of tax. The return of what demand, per records, is embodied in the May 12, 1995 letter of Mitsubishi to MPC;
was erroneously paid is founded on the principle of solutio indebiti, a basic postulate that no
one should unjustly enrich himself at the expense of another. The caveat against unjust (5) MPC failed to present to the CTA its VAT returns for the second and third quarters of
enrichment covers the government.14 And as decisional law teaches, a claim for tax refund 1995, when the bulk of the VAT payment covered by OR No. 0189--specifically PhP
proper, as here, necessitates only the preponderance-of-evidence threshold like in any 109,329,135.17 of the total amount of PhP 135,993,570--was billed by Mitsubishi, when such
ordinary civil case.15 return is necessary to ascertain that the total amount covered by the receipt or a large portion
thereof was not previously refunded or credited; and
We apply the foregoing elementary principles in our evaluation on whether OR 0189, in the
backdrop of the factual antecedents surrounding its issuance, sufficiently proves the alleged (6) No other documents proving said input VAT payment were presented except OR No.
unutilized input VAT claimed by MPC. 0189 which, considering the fact that OR No. 0188 was likewise issued by Mitsubishi and
presented before the CTA but admittedly for payments made by MPC on progress billings
The Court can review issues of fact where there are covering service purchases from 1993 to 1996, does not clearly show if such input VAT
divergent findings by the trial and appellate courts payment was also paid for the period 1993 to 1996 and would be beyond the two-year
prescriptive period.
As a matter of sound practice, the Court refrains from reviewing the factual determinations of
the CA or reevaluate the evidence upon which its decision is founded. One exception to this The petition is partly meritorious.
rule is when the CA and the trial court diametrically differ in their findings,16 as here. In such a
case, it is incumbent upon the Court to review and determine if the CA might have Belated payment by MPC of its obligation for creditable input VAT
overlooked, misunderstood, or misinterpreted certain facts or circumstances of weight, which,
if properly considered, would justify a different conclusion.17 In the instant case, the CTA, As no less found by the CTA, citing the SGV's report, the payments covered by OR No. 0189
unlike the CA, doubted the veracity of OR No. 0189 and did not appreciate the same to were for goods and service purchases made by MPC through the progress billings from
support MPC's claim for tax refund or credit. Mitsubishi for the period covering April 1993 to September 1996--for the E & M Equipment
Erection Portion of MPC's contract with Mitsubishi.18 It is likewise undisputed that said
payments did not include payments for the creditable input VAT of MPC. This fact is shown While available records do not clearly indicate when MPC actually paid the creditable input
by the May 12, 1995 letter19 from Mitsubishi where, as earlier indicated, it apprised MPC of VAT amounting to PhP 135,993,570 (USD 5,190,000) for the aforesaid 1993 to 1996 service
the advances Mitsubishi made for the VAT payments, i.e., MPC's creditable input VAT, and purchases, the presumption is that payment was made on the date appearing on OR No.
for which it was holding MPC accountable for interest therefor. 0189, i.e., April 14, 1998. In fact, said creditable input VAT was reflected in MPC's VAT return
for the second quarter of 1998.
In net effect, MPC did not, for the VATable MPC-Mitsubishi 1993 to 1996 transactions
adverted to, immediately pay the corresponding input VAT. OR No. 0189 issued on April 14, The aforementioned May 12, 1995 letter from Mitsubishi to MPC provides collaborating proof
1998 clearly reflects the belated payment of input VAT corresponding to the payment of the of the belated payment of the creditable input VAT angle. To reiterate, Mitsubishi, via said
progress billings from Mitsubishi for the period covering April 7, 1993 to September 6, 1996. letter, apprised MPC of the VAT component of the service purchases MPC made and
SGV found that OR No. 0189 in the amount of PhP 135,993,570 (USD 5,190,000) was duly reminded MPC that Mitsubishi had advanced VAT payments to which Mitsubishi was entitled
supported by bank statement evidencing payment to Mitsubishi (Japan).20 Undoubtedly, OR and from which it was demanding interest payment. Given the scenario depicted in said letter,
No. 0189 proves payment by MPC of its creditable input VAT relative to its purchases from it is understandable why Mitsubishi, in its effort to recover the amount it advanced, used the
Mitsubishi. PhP 26.203: USD 1 exchange formula in OR No. 0189 for USD 5,190,000.

OR No. 0189 by itself sufficiently proves payment of VAT No showing of interest payment not fatal to claim for refund

The CA, citing Sec. 110(A)(1)(B) of the NIRC, held that OR No. 0189 constituted sufficient Contrary to petitioner's posture, the matter of nonpayment by MPC of the interests demanded
proof of payment of creditable input VAT for the progress billings from Mitsubishi for the by Mitsubishi is not an argument against the fact of payment by MPC of its creditable input
period covering April 7, 1993 to September 6, 1996. Sec. 110(A)(1)(B) of the NIRC pertinently VAT or of the authenticity or genuineness of OR No. 0189; for at the end of the day, the
provides: matter of interest payment was between Mitsubishi and MPC and may very well be covered
Section 110. Tax Credits. - by another receipt. But the more important consideration is the fact that MPC, as confirmed
by the SGV, paid its obligation to Mitsubishi, and the latter issued to MPC OR No. 0189, for
A. Creditable Input Tax. - the VAT component of its 1993 to 1996 service purchases.

(1) Any input tax evidenced by a VAT invoice or official receipt issued in accordance with
Section 113 hereof on the following transactions shall be creditable against the output tax:
(a) Purchase or importation of goods:
x x x x
(b) Purchase of services on which a value-added tax has been actually paid. (Emphasis
ours.)
Without necessarily saying that the BIR is precluded from requiring additional evidence to
prove that input tax had indeed paid or, in fine, that the taxpayer is indeed entitled to a tax
refund or credit for input VAT, we agree with the CA's above disposition. As the Court
distinctly notes, the law considers a duly-executed VAT invoice or OR referred to in the above
provision as sufficient evidence to support a claim for input tax credit. And any doubt as to
what OR No. 0189 was for or tended to prove should reasonably be put to rest by the SGV
report on which the CTA notably placed much reliance. The SGV report stated that "[OR] No.
0189 dated April 14, 1998 is for the payment of the VAT on the progress billings" from
Mitsubishi Japan "for the period April 7, 1993 to September 6, 1996 for the E & M Equipment
Erection Portion of the Company's contract with Mitsubishi Corporation (Japan)"21
VAT presumably paid on April 14, 1998
The next question is, whether or not MPC is entitled to a refund or a TCC for the alleged
unutilized input VAT of PhP 135,993,570 covered by OR No. 0189 which sufficiently proves
payment of the input VAT.
NO!!!!
We answer the query in the negative.
Claim for refund or tax credit filed out of time
The claim for refund or tax credit for the creditable input VAT payment made by MPC
embodied in OR No. 0189 was filed beyond the period provided by law for such claim. Sec.
112(A) of the NIRC pertinently reads:
(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.
(Emphasis ours.)
The above proviso clearly provides in no uncertain terms that unutilized input VAT payments
not otherwise used for any internal revenue tax due the taxpayer must be claimed within two
years reckoned from the close of the taxable quarter when the relevant sales were
made pertaining to the input VAT regardless of whether said tax was paid or not. As the
CA aptly puts it, albeit it erroneously applied the aforequoted Sec. 112(A), "[P]rescriptive
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" 22 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. Be that as it may,
and given that the last creditable input VAT due for the period covering the progress billing of
September 6, 1996 is the third quarter of 1996 ending on September 30, 1996, any claim for
unutilized creditable input VAT refund or tax credit for said quarter prescribed two years after
September 30, 1996 or, to be precise, on September 30, 1998. Consequently, MPC's claim
for refund or tax credit filed on December 10, 1999 had already prescribed.
Reckoning for prescriptive period under
Secs. 204(C) and 229 of the NIRC inapplicable
To be sure, MPC cannot avail itself of the provisions of either Sec. 204(C) or 229 of the NIRC
which, for the purpose of refund, prescribes a different starting point for the two-year
prescriptive limit for the filing of a claim therefor. Secs. 204(C) and 229 respectively provide:
Sec. 204. Authority of the Commissioner to Compromise, Abate and Refund or Credit
Taxes.-- The Commissioner may - taxpayer:
x x x x
(c) Credit or refund taxes erroneously or illegally received or penalties imposed without
authority, refund the value of internal revenue stamps when they are returned in good
condition by the purchaser, and, in his discretion, redeem or change unused stamps that
have been rendered unfit for use and refund their value upon proof of destruction. No credit
or refund of taxes or penalties shall be allowed unless the taxpayer files in writing with
the Commissioner a claim for credit or refund within two (2) years after the payment of
the tax or penalty: Provided, however, That a return filed showing an overpayment shall be
considered as a written claim for credit or refund.
x x x x
Sec. 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, of any sum alleged to have been excessively or in any
manner wrongfully 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 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.
(Emphasis ours.)
Notably, the above provisions also set a two-year prescriptive period, reckoned from date of
payment of the tax or penalty, for the filing of a claim of refund or tax credit. Notably too, both
provisions apply only to instances of erroneous payment or illegal collection of internal
revenue taxes.
MPC's creditable input VAT not erroneously paid
For perspective, under Sec. 105 of the NIRC, creditable input VAT is an indirect tax which
can be shifted or passed on to the buyer, transferee, or lessee of the goods, properties, or
services of the taxpayer. The fact that the subsequent sale or transaction involves a wholly-
tax exempt client, resulting in a zero-rated or effectively zero-rated transaction, does not,
standing alone, deprive the taxpayer of its right to a refund for any unutilized creditable input
VAT, albeit the erroneous, illegal, or wrongful payment angle does not enter the equation.
In Commissioner of Internal Revenue v. Seagate Technology (Philippines), the Court
explained the nature of the VAT and the entitlement to tax refund or credit of a zero-rated
Viewed broadly, the VAT is a uniform tax x x x levied on every importation of goods, whether
or not in the course of trade or business, or imposed on each sale, barter, exchange or lease
of goods or properties or on each rendition of services in the course of trade or business as
they pass along the production and distribution chain, the tax being limited only to the value
added to such goods, properties or services by the seller, transferor or lessor. It is an indirect
tax that may be shifted or passed on to the buyer, transferee or lessee of the goods,
properties or services. As such, it should be understood not in the context of the person or
entity that is primarily, directly and legally liable for its payment, but in terms of its nature as a
tax on consumption. In either case, though, the same conclusion is arrived at.
The law that originally imposed the VAT in the country, as well as the subsequent
amendments of that law, has been drawn from the tax credit method. Such method adopted
the mechanics and self-enforcement features of the VAT as first implemented and practiced
in Europe x x x. Under the present method that relies on invoices, an entity can credit against
or subtract from the VAT charged on its sales or outputs the VAT paid on its purchases,
inputs and imports.
If at the end of a taxable quarter the output taxes charged by a seller are equal to the input
taxes passed on by the suppliers, no payment is required. It is when the output taxes exceed
the input taxes that the excess has to be paid. If, however, the input taxes exceed the output
taxes, the excess shall be carried over to the succeeding quarter or quarters. Should the
input taxes result from zero-rated or effectively zero-rated transactions or from the acquisition
of capital goods, any excess over the output taxes shall instead be refunded to the taxpayer
or credited against other internal revenue taxes.
x x x x

Zero-rated transactions generally refer to the export sale of goods and supply of services.
The tax rate is set at zero. When applied to the tax base, such rate obviously results in no
tax chargeable against the purchaser. The seller of such transactions charges no output
tax, but can claim a refund of or a tax credit certificate for the VAT previously charged
by suppliers.23 (Emphasis added.)
Considering the foregoing discussion, it is clear that Sec. 112(A) of the NIRC, providing a
two-year prescriptive period reckoned from the close of the taxable quarter when the relevant
sales or transactions were made pertaining to the creditable input VAT, applies to the instant
case, and not to the other actions which refer to erroneous payment of taxes.
As a final consideration, the Court wishes to remind the BIR and other tax agencies of their
duty to treat claims for refunds and tax credits with proper attention and urgency. Had RDO
No. 60 and, later, the BIR proper acted, instead of sitting, on MPC's underlying application for
effective zero rating, the matter of addressing MPC's right, or lack of it, to tax credit or refund
could have plausibly been addressed at their level and perchance freed the taxpayer and the
government from the rigors of a tedious litigation.
SERENO, CJ:
This Rule 45 Petition1 requires this Court to address the question of timeliness with respect to
petitioner's administrative and judicial claims for refund and credit of accumulated unutilized
input Value Added Tax (VAT) under Section 112(A) and Section 112(D) of the 1997 Tax
Code. Petitioner Mindanao II Geothermal Partnership (Mindanao II) assails the Decision2 and
Resolution3 of the Court of Tax Appeals En Banc (CTA En Banc) in CTA En Banc Case No.
448, affirming the Decision in CTA Case No. 7507 of the CTA Second Division.4 The latter
ordered the refund or issuance of a tax credit certificate in the amount of ₱6,791,845.24
representing unutilized input VAT incurred for the second, third, and fourth quarters of taxable
year 2004 in favor of herein respondent, Mindanao II.
FACTS
Mindanao II is a partnership registered with the Securities and Exchange Commission.5 It is
engaged in the business of power generation and sale of electricity to the National Power
Corporation (NAPOCOR)6 and is accredited by the Department of Energy.7

The all too familiar complaint is that the government acts with dispatch when it comes to tax Mindanao II filed its Quarterly VAT Returns for the second, third and fourth quarters of
collection, but pays little, if any, attention to tax claims for refund or exemption. It is high time taxable year 2004 on the following dates:8
our tax collectors prove the cynics wrong.

WHEREFORE, the petition is PARTLY GRANTED. The Decision dated December 22, 2005 Date filed
and the Resolution dated March 31, 2006 of the CA in CA-G.R. SP No. 78280 Quarter Taxable Year
are AFFIRMED with the MODIFICATION that the claim of respondent MPC for tax refund or Original Amended
credit to the extent of PhP 135,993,570, representing its input VAT payments for service
purchases from Mitsubishi Corporation of Japan for the construction of a portion of its 26 July 2004 12 July 2005 2nd 2004
Pagbilao, Quezon power station, is DENIED on the ground that the claim had prescribed.
22 October 2004 12 July 2005 3rd 2004
Accordingly, petitioner Commissioner of Internal Revenue is ordered to refund or, in the
alternative, issue a tax credit certificate in favor of MPC, its unutilized input VAT payments 25 January 2005 12 July 2005 4th 2004
directly attributable to its effectively zero-rated sales for the second quarter in the total
amount of PhP 10,766,939.48.
On 6 October 2005, Mindanao II filed with the Bureau of Internal Revenue (BIR) an
No pronouncement as to costs. application for the refund or credit of accumulated unutilized creditable input taxes.9 In
support of the administrative claim for refund or credit, Mindanao II alleged, among others,
SO ORDERED. that it is registered with the BIR as a value-added taxpayer10 and all its sales are zero-rated
under the EPIRA law.11 It further stated that for the second, third, and fourth quarters of
taxable year 2004, it paid input VAT in the aggregate amount of ₱7,167,005.84, which were
G.R. No. 191498               January 15, 2014
directly attributable to the zero-rated sales. The input taxes had not been applied against
output tax.
COMMISSIONER OF INTERNAL REVENUE, Petitioner,
vs.
Pursuant to Section 112(D) of the 1997 Tax Code, the Commissioner of Internal Revenue
MINDANAO II GEOTHERMAL PARTNERSHIP, Respondent.
(CIR) had a period of 120 days, or until 3 February 2006, to act on the claim. The
administrative claim, however, remained unresolved on 3 February 2006.
DECISION
Under the same provision, Mindanao II could treat the inaction of the CIR as a denial of its
claim, in which case, the former would have 30 days to file an appeal to the CTA, that is, on 5
March 2006. Mindanao II, however, did not file an appeal within the 30-day period.
Apparently, Mindanao II believed that a judicial claim must be filed within the two-year
prescriptive period provided under Section 112(A) and that such time frame was to be
reckoned from the filing of its Quarterly VAT Returns for the second, third, and fourth quarters
of taxable year 2004, that is, from 26 July 2004, 22 October 2004, and 25 January 2005,
respectively. Thus, on 21 July 2006, Mindanao II, claiming inaction on the part of the CIR and
that the two-year prescriptive period was about to expire, filed a Petition for Review with the
CTA docketed as CTA Case No. 6133.12
On 8 June 2007, while the application for refund or credit of unutilized input VAT of Mindanao
II was pending before the CTA Second Division, this Court promulgated Atlas Consolidated
Mining and Development Corporation v. CIR13 (Atlas). Atlas held that the two-year
prescriptive period for the filing of a claim for an input VAT refund or credit is to be reckoned
from the date of filing of the corresponding quarterly VAT return and payment of the tax.
On 12 August 2008, the CTA Second Division rendered a Decision14 ordering the CIR to
grant a refund or a tax credit certificate, but only in the reduced amount of ₱6,791,845.24,
representing unutilized input VAT incurred for the second, third and fourth quarters of taxable
year 2004.15
In support of its ruling, the CTA Second Division held that Mindanao II complied with the twin
requisites for VAT zero-rating under the EPIRA law: first, it is a generation company, and
second, it derived sales from power generation. It also ruled that Mindanao II satisfied the
requirements for the grant of a refund/credit under Section 112 of the Tax Code: (1) there
must be zero-rated or effectively zero-rated sales; (2) input taxes must have been incurred or
paid; (3) the creditable input tax due or paid must be attributable to zero-rated sales or
effectively zero-rated sales; (4) the input VAT payments must not have been applied against
any output liability; and (5) the claim must be filed within the two-year prescriptive period.16
As to the second requisite, however, the input tax claim to the extent of ₱375,160.60
corresponding to purchases of services from Mitsubishi Corporation was disallowed, since it
was not substantiated by official receipts.17
As regards to the fifth requirement in section 112 of the Tax Code, the tax court, citing Atlas,
counted from 26 July 2004, 22 October 2004, and 25 January 2005 – the dates when
Mindanao II filed its Quarterly VAT Returns for the second, third, and fourth quarters of
taxable year 2004, respectively – and determined that both the administrative claim filed on 6
October 2005 and the judicial claim filed on 21 July 2006 fell within the two-year prescriptive
period.18
On 1 September 2008, the CIR filed a Motion for Partial Reconsideration,19 pointing out that
prescription had already set in, since the appeal to the CTA was filed only on 21 July 2006,
which was way beyond the last day to appeal – 5 March 2006. 20 As legal basis for this
argument, the CIR relied on Section 112(D) of the 1997 Tax Code.21
Meanwhile, on 12 September 2008, this Court promulgated CIR v. Mirant Pagbilao
Corporation (Mirant).22 Mirant fixed the reckoning date of the two-year prescriptive period for
the application for refund or credit of unutilized input VAT at the close of the taxable quarter
when the relevant sales were made , as stated in Section 112(A).23
On 3 December 2008, the CTA Second Division denied the CIR’s Motion for Partial
Reconsideration.24 The tax court stood by its reliance on Atlas25 and on its finding that both
the administrative and judicial claims of Mindanao II were timely filed.26
On 7 January 2009, the CIR elevated the matter to the CTA En Banc via a Petition for
Review.27 Apart from the contention that the judicial claim of Mindanao II was filed beyond the
30-day period fixed by Section 112(D) of the 1997 Tax Code,28 the CIR argued that Mindanao
II erroneously fixed 26 July 2004, the date when the return for the second quarter was filed,
as the date from which to reckon the two-year prescriptive period for filing an application for
refund or credit of unutilized input VAT under Section 112(A). As the two-year prescriptive
period ended on 30 June 2006, the Petition for Review of Mindanao II was filed out of time on
21 July 2006.29 The CIR invoked the recently promulgated Mirant to support this theory.
On 11 November 2009, the CTA En Banc rendered its Decision denying the CIR’s Petition for
Review.30 On the question whether the application for refund was timely filed, it held that the
CTA Second Division correctly applied the Atlas ruling.31 It reasoned that Atlas remained to
be the controlling doctrine. Mirant was a new doctrine and, as such, the latter should not
apply retroactively to Mindanao II who had relied on the old doctrine of Atlas and had acted
on the faith thereof.32
As to the issue of compliance with the 30-day period for appeal to the CTA, the CTA En Banc
held that this was a requirement only when the CIR actually denies the taxpayer’s claim. But
in cases of CIR inaction, the 30-day period is not a mandatory requirement; the judicial claim
is seasonably filed as long as it is filed after the lapse of the 120-day waiting period but within
two years from the date of filing of the return.33
The CIR filed a Motion for Partial Reconsideration34 of the Decision, but it was denied for lack
of merit.35
Dissatisfied, the CIR filed this Rule 45 Petition, raising the following arguments in support of
its appeal:
I.
THE CTA 2ND DIVISION LACKED JURISDICTION TO TAKE COGNIZANCE OF THE
CASE.
II.
THE COURT A QUO’S RELIANCE ON THE RULING IN ATLAS IS MISPLACED.36
ISSUES
The resolution of this case hinges on the question of compliance with the following time
requirements for the grant of a claim for refund or credit of unutilized input VAT: (1) the two-
year prescriptive period for filing an application for refund or credit of unutilized input VAT;
and (2) the 120+30 day period for filing an appeal with the CTA.
WON Mindanao II is entitled to refund. NO, judicial claims were filed out of time
THE COURT’S RULING
We deny Mindanao II’s claim for refund or credit of unutilized input VAT on the ground that its
judicial claims were filed out of time, even as we hold that its application for refund was filed
on time.
I.
MINDANAO II’S APPLICATION FOR
REFUND WAS FILED ON TIME
We find no error in the conclusion of the tax courts that the application for refund or credit of
unutilized input VAT was timely filed. The problem lies with their bases for the conclusion as
to: (1) what should be filed within the prescriptive period; and (2) the date from which to
reckon the prescriptive period.
We thus take a different route to reach the same conclusion, initially focusing our discussion
on what should be filed within the two-year prescriptive period.
A. The Judicial Claim Need Not Be Filed Within the Two-Year Prescriptive Period
Section 112(A) provides:
SEC. 112. Refunds or Tax Credits of Input Tax. —
(A) Zero-rated or Effectively Zero-rated Sales — Any VAT-registered person, whose sales are
zero-rated or effectively zero-rated may, within two (2) years after the close of the taxable
quarter when the sales were made, apply for the issuance of a tax credit certificate or refund
of creditable input tax due or paid attributable to such sales, except transitional input tax, to
the extent that such input tax has not been applied against output tax: 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.
Both the CTA Second Division and CTA En Banc decisions held that the phrase "apply for the
issuance of a tax credit certificate or refund" in Section 112(A) is construed to refer to both
the administrative claim filed with the CIR and the judicial claim filed with the CTA. This view,
however, has no legal basis.
In Commissioner of Internal Revenue v. Aichi Forging Company of Asia, Inc. (Aichi), we
dispelled the misconception that both the administrative and judicial claims must be filed
within the two-year prescriptive period:37
There is nothing in Section 112 of the NIRC to support respondent’s view. Subsection (A) of
the said provision states that "any VAT-registered person, whose sales are zero-rated or
effectively zero-rated may, within two 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." The phrase "within two (2) years x x x 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.
In fact, applying the two-year period to judicial claims would render nugatory 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. The second paragraph of Section 112 (D) of the
NIRC envisions two scenarios: (1) when a decision is issued by the CIR before the lapse of
the 120-day period; and (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. (Emphasis supplied)
The message of Aichi is clear: 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.
Having disposed of this question, we proceed to the date for reckoning the prescriptive period
under Section 112(A).
B. Reckoning Date is the Close of the Taxable Quarter When the Relevant Sales Were Made.
The other flaw in the reasoning of the tax courts is their reliance on the Atlas ruling, which
fixed the reckoning point to the date of filing the return and payment of the tax.
The CIR’s Stand
The CIR’s stand is that Atlas is not applicable to the case at hand as it involves Section 230
of the 1977 Tax Code, which contemplates recovery of tax payments erroneously or illegally
collected. On the other hand, this case deals with claims for tax refund or credit of unutilized
input VAT for the second, third, and fourth quarters of 2004, which are covered by Section
112 of the 1977 Tax Code.38
The CIR further contends that Mindanao II cannot claim good faith reliance on the Atlas
doctrine since the case was decided only on 8 June 2007, two years after Mindanao II filed its
claim for refund or credit with the CIR and one year after it filed a Petition for Review with the
CTA on 21 July 2006.39
In lieu of Atlas, the CIR proposes that it is the Court's ruling in Mirant that should apply to this
case despite the fact that the latter was promulgated on 12 September 2008, after Mindanao
II had filed its administrative claim in 2005.40 It argues that Mirant can be applied retroactively
to this case, since the decision merely interprets Section 112, a provision that was already
effective when Mindanao II filed its claims for tax refund or credit.
The Taxpayer’s Defense
On the other hand, Mindanao II counters that Atlas, decided by the Third Division of this
Court, could not have been superseded by Mirant, a Second Division Decision of this Court.
A doctrine laid down by the Supreme Court in a Division may be modified or reversed only
through a decision of the Court sitting en banc.41
Mindanao II further contends that when it filed its Petition for Review, the prevailing rule in the
CTA reckons the two-year prescriptive period from the date of the filing of the VAT
return.42 Finally, after building its case on Atlas, Mindanao II assails the CIR’s reliance on the
Mirant doctrine stating that it cannot be applied retroactively to this case, lest it violate the
rock-solid rule that a judicial ruling cannot be given retroactive effect if it will impair vested
rights.43
Section 112(A) is the Applicable Rule
The issue posed is not novel. In the recent case of Commissioner of Internal Revenue v. San
Roque Power Corporation44 (San Roque), this Court resolved the threshold question of when
to reckon the two-year prescriptive period for filing an administrative claim for refund or credit
of unutilized input VAT under the 1997 Tax Code in view of our pronouncements in Atlas and
Mirant. In that case, we delineated the scope and effectivity of the Atlas and Mirant doctrines
as follows:
The Atlas doctrine, which held that claims for refund or credit of input VAT must comply with
the two-year prescriptive period under Section 229, should be effective only from its
promulgation on 8 June 2007 until its abandonment on 12 September 2008 in Mirant. The
Atlas doctrine was limited to the reckoning of the two-year prescriptive period from the date of
payment of the output VAT. Prior to the Atlas doctrine, the two-year prescriptive period for
claiming refund or credit of input VAT should be governed by Section 112(A) following the
verba legis rule. The Mirant ruling, which abandoned the Atlas doctrine, adopted the verba
legis rule, thus applying Section 112(A) in computing the two-year prescriptive period in
claiming refund or credit of input VAT. (Emphases supplied)
Furthermore, San Roque distinguished between Section 112 and Section 229 of the 1997
Tax Code:
The 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. The input VAT is a tax
liability of, and legally paid by, a VAT-registered seller of goods, properties or services used
as input by another VAT-registered person in the sale of his own goods, properties, or
services. This tax liability is true even if the seller passes on the input VAT to the buyer as
part of the purchase price. The second VAT-registered person, who is not legally liable for the
input VAT, is the one who applies the input VAT as credit for his own output VAT. If the input
VAT is in fact "excessively" collected as understood under Section 229, then it is the first
VAT-registered person — the taxpayer who is legally liable and who is deemed to have
legally paid for the input VAT — who can ask for a tax refund or credit under Section 229 as
an ordinary refund or credit outside of the VAT System. In such event, the second VAT-
registered taxpayer will have no input VAT to offset against his own output VAT.
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.
Under Section 110(B) and Section 112(A), the prescriptive period for filing a judicial claim for
"excess" input VAT 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. This prescriptive period has no
relation to the date of payment of the "excess" input VAT. The "excess" input VAT may have
been paid for more than two years but this does not bar the filing of a judicial claim for
"excess" VAT under Section 112(A), which has a different reckoning period from Section 229.
Moreover, the person claiming the refund or credit of the input VAT is not the person who
legally paid the input VAT. Such person seeking the VAT refund or credit does not claim that
the input VAT was "excessively" collected from him, or that he paid an input VAT that is more
than what is legally due. He is not the taxpayer who legally paid the input VAT.
As its name implies, the Value-Added Tax system is a tax on the value added by the taxpayer
in the chain of transactions. For simplicity and efficiency in tax collection, the VAT is imposed
not just on the value added by the taxpayer, but on the entire selling price of his goods,
properties or services. However, the taxpayer is allowed a refund or credit on the VAT
previously paid by those who sold him the inputs for his goods, properties, or services. The
net effect is that the taxpayer pays the VAT only on the value that he adds to the goods,
properties, or services that he actually sells.
Under Section 110(B), a taxpayer can apply his input VAT only against his output VAT. The
only exception is when the taxpayer is expressly "zero-rated or effectively zero-rated" under
the law, like companies generating power through renewable sources of energy. Thus, a non
zero-rated VAT-registered taxpayer who has no output VAT because he has no sales cannot
claim a tax refund or credit of his unused input VAT under the VAT System. Even if the
taxpayer has sales but his input VAT exceeds his output VAT, he cannot seek a tax refund or
credit of his "excess" input VAT under the VAT System. He can only carry-over and apply his
"excess" input VAT against his future output VAT. If such "excess" input VAT is an
"excessively" collected tax, the taxpayer should be able to seek a refund or credit for such
"excess" input VAT whether or not he has output VAT. The VAT System does not allow such
refund or credit. Such "excess" input VAT is not an "excessively" collected tax under Section
229. The "excess" input VAT is a correctly and properly collected tax. However, such
"excess" input VAT can be applied against the output VAT because the VAT is a tax imposed
only on the value added by the taxpayer. If the input VAT is in fact "excessively" collected
under Section 229, then it is the person legally liable to pay the input VAT, not the person to
whom the tax was passed on as part of the purchase price and claiming credit for the input
VAT under the VAT System, who can file the judicial claim under Section 229.
Any suggestion that the "excess" input VAT under the VAT System is an "excessively"
collected tax under Section 229 may lead taxpayers to file a claim for refund or credit for such
"excess" input VAT under Section 229 as an ordinary tax refund or credit outside of the VAT
System. Under Section 229, mere payment of a tax beyond what is legally due can be
claimed as a refund or credit. There is no requirement under Section 229 for an output VAT
or subsequent sale of goods, properties, or services using materials subject to input VAT.
From the plain text of Section 229, it is clear that what can be refunded or credited is a tax
that is "erroneously . . . illegally, . . . excessively or in any manner wrongfully collected." In
short, there must be a wrongful payment because what is paid, or part of it, is not legally due.
As the Court held in Mirant, Section 229 should "apply only to instances of erroneous
payment or illegal collection of internal revenue taxes." Erroneous or wrongful payment
includes excessive payment because they all refer to payment of taxes not legally due. Under
the VAT System, there is no claim or issue that the "excess" input VAT is "excessively or in
any manner wrongfully collected." In fact, if the "excess" input VAT is an "excessively"
collected tax under Section 229, then the taxpayer claiming to apply such "excessively"
collected input VAT to offset his output VAT may have no legal basis to make such offsetting.
The person legally liable to pay the input VAT can claim a refund or credit for such
"excessively" collected tax, and thus there will no longer be any "excess" input VAT. This will
upend the present VAT System as we know it.45
Two things are clear from the above quoted San Roque disquisitions. First, when it comes to
recovery of unutilized input VAT, Section 112, and not Section 229 of the 1997 Tax Code, is
the governing law. Second, prior to 8 June 2007, the applicable rule is neither Atlas nor
Mirant, but Section 112(A).
We present the rules laid down by San Roque in determining the proper reckoning date of the
two-year prescriptive period through the following timeline:
Thus, the task at hand is to determine the applicable period for this case.
In this case, Mindanao II filed its administrative claims for refund or credit for the second, third
and fourth quarters of 2004 on 6 October 2005. The case thus falls within the first period as
indicated in the above timeline. In other words, it is covered by the rule prior to the advent of
either Atlas or Mirant.
Accordingly, the proper reckoning date in this case, as provided by Section 112(A) of the
1997 Tax Code, is the close of the taxable quarter when the relevant sales were made.
C. The Administrative Claims Were Timely Filed
We sum up our conclusions so far: (1) it is only the administrative claim that must be filed
within the two-year prescriptive period; and (2) the two-year prescriptive period begins to run
from the close of the taxable quarter when the relevant sales were made.
Bearing these in mind, we now proceed to determine whether Mindanao II's administrative
claims for the second, third, and fourth quarters of 2004 were timely filed.
Second Quarter
Since the zero-rated sales were made in the second quarter of 2004, the date of reckoning
the two-year prescriptive period is the close of the second quarter, which is on 30 June 2004.
Applying Section 112(A), Mindanao II had two years from 30 June 2004, or until 30 June
2006 to file an administrative claim with the CIR. Mindanao II filed its administrative claim on
6 October 2005, which is within the two-year prescriptive period. The administrative claim for
the second quarter of 2004 was thus timely filed. For clarity, we present the rules laid down
by San Roque in determining the proper reckoning date of the two-year prescriptive period
through the following timeline:
Third Quarter
As regards the claim for the third quarter of 2004, the two-year prescriptive period started to
run on 30 September 2004, the close of the taxable quarter. It ended on 30 September 2006,
pursuant to Section 112(A) of the 1997 Tax Code. Mindanao II filed its administrative claim on
6 October 2005. Thus, since the administrative claim was filed well within the two-year
prescriptive period, the administrative claim for the third quarter of 2004 was timely filed. (See
timeline below)
Fourth Quarter
Here, the two-year prescriptive period is counted starting from the close of the fourth quarter
which is on 31 December 2004. The last day of the prescriptive period for filing an application
for tax refund/credit with the CIR was on 31 December 2006. Mindanao II filed its
administrative claim with the CIR on 6 October 2005. Hence, the claims were filed on time,
pursuant to Section 112(A) of the 1997 Tax Code. (See timeline below)
II.
MINDANAO II’S JUDICIAL CLAIMS WERE FILED OUT OF TIME
Notwithstanding the timely filing of the administrative claims, we find that the CTA En Banc
erred in holding that Mindanao II’s judicial claims were timely filed.
A. 30-Day Period Also Applies to Appeals from Inaction
Section 112(D) of the 1997 Tax Code states the time requirements for filing a judicial claim
for refund or tax credit of input VAT:
(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. (Emphases supplied)
Section 112(D) speaks of two periods: the period of 120 days, which serves as a waiting
period to give time for the CIR to act on the administrative claim for refund or credit, and the
period of 30 days, which refers to the period for interposing an appeal with the CTA. It is with
the 30-day period that there is an issue in this case.
The CTA En Banc’s holding is that, since the word "or" – a disjunctive term that signifies
dissociation and independence of one thing from another – is used in Section 112(D), the
taxpayer is given two options: 1) file an appeal within 30 days from the CIR’s denial of the
administrative claim; or 2) file an appeal with the CTA after expiration of the 120-day period,
in which case the 30-day appeal period does not apply. The judicial claim is seasonably filed
so long as it is filed after the lapse of the 120-day waiting period but before the lapse of the
two-year prescriptive period under Section 112(A).46
We do not agree.
The 30-day period applies not only to instances of actual denial by the CIR of the claim for
refund or tax credit, but to cases of inaction by the CIR as well. This is the correct
interpretation of the law, as held in San Roque:47
Section 112(C)48 also expressly grants the taxpayer a 30-day period to appeal to the CTA the
decision or inaction of the Commissioner, thus:
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.
This law is clear, plain, and unequivocal. Following the well-settled verba legis doctrine, this
law should be applied exactly as worded since it is clear, plain, and unequivocal. As this law
states, 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. (Emphasis supplied)
The San Roque pronouncement is clear. The taxpayer can file the 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.
B. The Judicial Claim Was Belatedly Filed
In this case, the facts are not up for debate. Mindanao II filed its administrative claim for
refund or credit for the second, third, and fourth quarters of 2004 on 6 October 2005. The
CIR, therefore, had a period of 120 days, or until 3 February 2006, to act on the claim. The
CIR, however, failed to do so. Mindanao II then could treat the inaction as a denial and
appeal it to the CTA within 30 days from 3 February 2006, or until 5 March 2006.
Mindanao II, however, filed a Petition for Review only on 21 July 2006, 138 days after the
lapse of the 30-day period on 5 March 2006. The judicial claim was therefore filed late. (See
timeline below.)
C. The 30-Day Period to Appeal is Mandatory and Jurisdictional
However, what is up for debate is the nature of the 30-day time requirement. The CIR posits
that it is mandatory. Mindanao II contends that the requirement of judicial recourse within 30
days is only directory and permissive, as indicated by the use of the word "may" in Section
112(D).49
The answer is found in San Roque. There, we declared that the 30-day period to appeal is
both mandatory and jurisdictional:
Section 112(C) also expressly grants the taxpayer a 30-day period to appeal to the CTA the
decision or inaction of the Commissioner, thus:
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. (Emphasis supplied)
This law is clear, plain, and unequivocal. Following the well-settled verba legis doctrine, this
law should be applied exactly as worded since it is clear, plain, and unequivocal. As this law
states, 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.
xxxx
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 anytime within
the two-year prescriptive period. If he files his claim on the last day of the two-year
prescriptive period, his claim is still filed on time. The Commissioner will have 120 days from
such filing to decide the claim. If the Commissioner decides the claim on the 120th day, or
does not decide it on that day, the taxpayer still has 30 days to file his judicial claim with the
CTA. This is not only the plain meaning but also the only logical interpretation of Section
112(A) and (C).
xxxx
When Section 112(C) states that "the taxpayer affected may, within thirty (30) days from
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 law does
not make the 120+30 day periods optional just because the law uses the word " may." 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.50
D. Exception to the mandatory and jurisdictional nature of the 120+30 day period not
applicable
Nevertheless, San Roque provides an exception to the mandatory and jurisdictional nature of
the 120+30 day period ─ BIR Ruling No. DA-489-03 dated 10 December 2003. The BIR
ruling declares that the "taxpayer-claimant need not wait for the lapse of the 120-day period
before it could seek judicial relief with the CTA by way of Petition for Review."
Although Mindanao II has not invoked the BIR ruling, we deem it prudent as well as
necessary to dwell on this issue to determine whether this case falls under the exception.
For this question, we come back to San Roque, which provides that BIR Ruling No. DA-489-
03 is a general interpretative rule; thus, taxpayers can rely on it from the time of its issuance
on 10 December 2003 until its reversal by this Court in Aichi on 6 October 2010, when the
120+30 day periods were held to be mandatory and jurisdictional. The Court reasoned as
follows:
Taxpayers should not be prejudiced by an erroneous interpretation by the Commissioner,
particularly on a difficult question of law. The abandonment of the Atlas doctrine by Mirant
and Aichi is proof that the reckoning of the prescriptive periods for input VAT tax refund or
credit is a difficult question of law. The abandonment of the Atlas doctrine did not result in
Atlas, or other taxpayers similarly situated, being made to return the tax refund or credit they
received or could have received under Atlas prior to its abandonment. This Court is applying
Mirant and Aichi prospectively. Absent fraud, bad faith or misrepresentation, the reversal by
this Court of a general interpretative rule issued by the Commissioner, like the reversal of a
specific BIR ruling under Section 246, should also apply prospectively. x x x.
xxxx
Thus, the only issue is whether BIR Ruling No. DA-489-03 is a general interpretative rule
applicable to all taxpayers or a specific ruling applicable only to a particular taxpayer.
BIR Ruling No. DA-489-03 is a general interpretative rule because it was a response to a
query made, not by a particular taxpayer, but by a government agency tasked with
processing tax refunds and credits, that is, the One Stop Shop Inter-Agency Tax Credit and
Drawback Center of the Department of Finance . This government agency is also the
addressee, or the entity responded to, in BIR Ruling No. DA-489-03. Thus, while this
government agency mentions in its query to the Commissioner the administrative claim of
Lazi Bay Resources Development, Inc., the agency was in fact asking the Commissioner
what to do in cases like the tax claim of Lazi Bay Resources Development, Inc., where the
taxpayer did not wait for the lapse of the 120-day period.
Clearly, BIR Ruling No. DA-489-03 is a general interpretative rule. Thus, all taxpayers can
rely on BIR Ruling No. DA-489-03 from the time of its issuance on 10 December 2003 up to
its reversal by this Court in Aichi on 6 October 2010, where this Court held that the 120+30
day periods are mandatory and jurisdictional.51
Thus, in San Roque, the Court applied this exception to Taganito Mining Corporation
(Taganito), one of the taxpayers in San Roque. Taganito filed its judicial claim on 14 February
2007, after the BIR ruling took effect on 10 December 2003 and before the promulgation of
Mirant. The Court stated:
Taganito, however, filed its judicial claim with the CTA on 14 February 2007, after the
issuance of BIR Ruling No. DA-489-03 on 10 December 2003. Truly, Taganito can claim that
in filing its judicial claim prematurely without waiting for the 120-day period to expire, it was
misled by BIR Ruling No. DA-489-03. Thus, Taganito can claim the benefit of BIR Ruling No.
DA-489-03, which shields the filing of its judicial claim from the vice of prematurity.52
San Roque was also careful to point out that the BIR ruling does not retroactively apply to
premature judicial claims filed before the issuance of the BIR ruling:
However, BIR Ruling No. DA-489-03 cannot be given retroactive effect for four reasons: first,
it is admittedly an erroneous interpretation of the law; second, prior to its issuance, the BIR
held that the 120-day period was mandatory and jurisdictional, which is the correct
interpretation of the law; third, prior to its issuance, no taxpayer can claim that it was misled
by the BIR into filing a judicial claim prematurely; and fourth, a claim for tax refund or credit,
like a claim for tax exemption, is strictly construed against the taxpayer.53
Thus, San Roque held that taxpayer San Roque Power Corporation, could not seek refuge in
the BIR ruling as it jumped the gun when it filed its judicial claim on 10 April 2003, prior to the
issuance of the BIR ruling on 10 December 2003.1âwphi1 The Court stated:
San Roque, therefore, cannot benefit from BIR Ruling No. DA-489-03 because it filed its
judicial claim prematurely on 10 April 2003, before the issuance of BIR Ruling No. DA-489-03
on 10 December 2003. To repeat, San Roque cannot claim that it was misled by the BIR into
filing its judicial claim prematurely because BIR Ruling No. DA-489-03 was issued only after
San Roque filed its judicial claim. At the time San Roque filed its judicial claim, the law as
applied and administered by the BIR was that the Commissioner had 120 days to act on
administrative claims. This was in fact the position of the BIR prior to the issuance of BIR
Ruling No. DA-489-03. Indeed, San Roque never claimed the benefit of BIR Ruling No. DA-
489-03 or RMC 49-03, whether in this Court, the CTA, or before the Commissioner.54
San Roque likewise ruled out the application of the BIR ruling to cases of late filing. The
Court held that the BIR ruling, as an exception to the mandatory and jurisdictional nature of
the 120+30 day periods, is limited to premature filing and does not extend to late filing of a
judicial claim. Thus, the Court found that since Philex Mining Corporation, the other party in
the consolidated case San Roque, filed its claim 426 days after the lapse of the 30-day
period, it could not avail itself of the benefit of the BIR ruling:
Philex’s situation is not a case of premature filing of its judicial claim but of late filing, indeed
Very late filing. BIR Ruling No. DA-489-03 allowed premature filing of a judicial claim, which
means non-exhaustion of the 120-day period for the Commissioner to act on an
administrative claim. Philex cannot claim the benefit of BIR Ruling No. DA-489-03 because
Philex did not file its judicial claim prematurely but filed it long after the lapse of the 30-day
period following the expiration of the 120-day period. In fact, Philex filed its judicial claim 426
days after the lapse of the 30-day period.55
We sum up the rules established by San Roque on the mandatory and jurisdictional nature of
the 30-day period to appeal through the following timeline:
Bearing in mind the foregoing rules for the timely filing of a judicial claim for refund or credit of
unutilized input VAT, we rule on the present case of Mindanao II as follows:
We find that Mindanao II’s situation is similar to that of Philex in San Roque.
As mentioned above, Mindanao II filed its judicial claim with the CTA on 21 July 2006. This
was after the issuance of BIR Ruling No. DA-489-03 on 10 December 2003, but before its
reversal on 5 October 2010. However, while the BIR ruling was in effect when Mindanao II
filed its judicial claim, the rule cannot be properly invoked. The BIR ruling, as discussed
earlier, contemplates premature filing. The situation of Mindanao II is one of late filing. To
repeat, its judicial claim was filed on 21 July 2006 – long after 5 March 2006, the last day of
the 30-day period for appeal. In fact, it filed its judicial claim 138 days after the lapse of the
30-day period. (See timeline below)
E. Undersigned dissented in San Roque to the retroactive application of the mandatory and
jurisdictional nature of the 120+30 day period.
It is worthy to note that in San Roque, this ponente registered her dissent to the retroactive
application of the mandatory and jurisdictional nature of the 120+30 day period provided
under Section 112(D) of the Tax Code which, in her view, is unfair to taxpayers. It has been
the view of this ponente that the mandatory nature of 120+30 day period must be completely
applied prospectively or, at the earliest, only upon the finality of Aichi in order to create
stability and consistency in our tax laws. Nevertheless, this ponente is mindful of the fact that
judicial precedents cannot be ignored. Hence, the majority view expressed in San Roque
must be applied.
SUMMARY OF RULES ON PRESCRIPTIVE PERIODS FOR CLAIMING REFUND OR
CREDIT OF INPUT VAT
The lessons of this case may be summed up as follows:
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. Petitioner Pilipinas Total Gas, Inc. (Total Gas) is engaged in the business of selling,
transporting and distributing industrial gas. It is also engaged in the sale of gas equipment
3. As a general rule, the 3 0-day period to appeal is both mandatory and and other related businesses. For this purpose, Total Gas registered itself with the Bureau of
jurisdictional. (Aichi and San Roque) Internal Revenue (BIR) as a Value Added Tax (VAT) taxpayer.

On April 20, 2007 and July 20, 2007, Total Gas filed its Original Quarterly VAT Returns for
4. As an exception to the general rule, premature filing is allowed only if filed between
the First and Second quarters of 2007, respectively with the BIR.
10 December 2003 and 5 October 2010, when BIR Ruling No. DA-489-03 was still in
force. (San Roque)
On May 20, 2008, it filed its Amended Quarterly VAT Returns for the first two quarters of
2007 reflecting its sales subject to VAT, zero-rated sales, and domestic purchases of non-
5. Late filing is absolutely prohibited, even during the time when BIR Ruling No. DA- capital goods and services.
489-03 was in force. (San Roque)
For the First and Second quarters of 2007, Total Gas claimed it incurred unutilized input VAT
SUMMARY AND CONCLUSION credits from its domestic purchases of noncapital goods and services in the total amount of
P8,124,400.35. Of this total accumulated input VAT, Total Gas claimed that it had
In sum, our finding is that the three administrative claims for the refund or credit of unutilized P7,898,433.98 excess unutilized input VAT.
input VAT were all timely filed, while the corresponding judicial claims were belatedly filed.
On May 15, 2008, Total Gas filed an administrative claim for refund of unutilized input VAT
The foregoing considered, the CT A lost jurisdiction over Mindanao Il’s claims for refund or for the first two quarters of taxable year 2007, inclusive of supporting documents.
credit.1âwphi1 The CTA EB erred in granting these claims.
On August 28, 2008, Total Gas submitted additional supporting documents to the BIR.
WHEREFORE, we GRANT the Petition. The assailed Court of Tax Appeals En Banc
On January 23, 2009, Total Gas elevated the matter to the CTA in view of the inaction of the
Decision dated 11 November 2009 and Resolution dated 3 March 2010 of the in CTA EB
Commissioner of Internal Revenue (CIR).
Case No. 448 (CTA Case No. 7507) are hereby REVERSED and SET ASIDE. A new ruling is
entered DENYING respondent s claim for a tax refund or credit of ₱6,791,845.24.
During the hearing, Total Gas presented, as witnesses, Rosalia T. Yu and Richard Go, who
identified documentary evidence marked as Exhibits "A" to "ZZ-1," all of which were admitted.
SO ORDERED. Respondent CIR, on the other hand, did not adduce any evidence and had the case
submitted for decision.
G.R. No. 207112, December 08, 2015
Ruling of the CTA Division
PILIPINAS TOTAL GAS, INC., Petitioner, v. COMMISSIONER OF INTERNAL
REVENUE, Respondent. In its January 13, 2011 Decision,5 the CTA Division dismissed the petition for being
prematurely filed. It explained that Total Gas failed to complete the necessary documents to
DECISION substantiate a claim for refund of unutilized input VAT on purchases of goods and services
enumerated under Revenue Memorandum Order (RMO) No. 53-98. Of note were the lack of
Summary List of Local Purchases and the certifications from the Office of the Board of
MENDOZA, J.: Investment (BOD), the Bureau of Customs (BOC), and the Philippine Economic Zone
Authority (PEZA) that the taxpayer had not filed any similar claim for refund covering the
Before the Court is a petition for review on certiorari1 under Rule 45 of the Rules of Court same period.6
assailing the October 11, 2012 Decision2 and the May 8, 2013 Resolution3 of the Court of Tax
Appeals (CTA) En Banc, in CTA EB Case No. 776, which affirmed the January 13, 2011 Believing that Total Gas failed to complete the necessary documents to substantiate its claim
Decision4 of the CTA Third Division (CTA Division) in CTA Case No. 7863. for refund, the CTA Division was of the view that the 120-day period allowed to the CIR to
decide its claim under Section 112 (C) of the National Internal Revenue Code of 1997
The Facts (NIRC), had not even started to run. With this, the CTA Division opined that the petition for
review was prematurely filed because Total Gas failed to exhauist the appropriate
administrative remedies. The CTA Division stressed that tax refunds partake of the nature of
an exemption, putting into operation the rule of strict interpretation, with the taxpayer being
charged with the burden of proving that he had satisfied all the statutory and administrative
requirements.7
Total Gas sought for reconsideration8 from the CTA Division, but its motion was denied for
lack of merit in a Resolution, dated April 19, 2011.9 In the same resolution, it reiterated that
"that the complete supporting documents should be submitted to the BIR before the 120-day
period for the Commissioner to decide the claim for refund shall commence to run. It is only
upon the lapse of the 120-day period that the taxpayer can appeal the inaction [to the
CTA.]"10 It noted that RMO No. 53-98, which provides a checklist of documents for the BIR to
consider in granting claims for refund, also serves as a guideline for the courts to determine if
the taxpayer had submitted complete supporting documents.11 It also stated that Total Gas
could not invoke Revenue Memorandum Circular (RMC) No. 29-09 because it was issued
after the administrative claim was filed and could not be applied retroactively. 12 Thus, the CTA
Division disposed:
WHEREFORE, premises considered, the present Petition for Review is hereby DENIED DUE
COURSE, and, accordingly DISMISSED for having been prematurely filed.
SO ORDERED.13ChanRoblesVirtualawlibrary
Ruling of the CTA En Banc
In its assailed decision, the CTA En Banc likewise denied the petition for review of Total Gas
for lack of merit. It condensed its arguments into two core issues, to wit: (1) whether Total
Gas seasonably filed its judicial claim for refund; and (2) whether it was unable to
substantiate its administrative claim for refund by failing to submit the required documents
that would allow respondent to act on it.14
As to the first issue, the CTA En Banc ruled that the CTA Division had no jurisdiction over the
case because Total Gas failed to seasonably file its petition. Counting from the date it filed its
administrative claim on May 15, 2008, the CTA En Banc explained that the CIR had 120 days
to act on the claim (until September 12, 2008), and Total Gas had 30 days from then, or until
October 12, 2008, to question the inaction before the CTA. Considering that Total Gas only
filed its petition on January 23, 2009, the CTA En Banc concluded that the petition for review
was belatedly filed. For the tax court, the 120-day period could not commence on the day
Total Gas filed its last supporting document on August 28, 2008, because to allow such would
give the taxpayer unlimited discretion to indefinitely extend the 120-day period by simply filing
the required documents piecemeal.15
As to the second issue, the CTA En Banc affirmed the CTA Division that Total Gas failed to
submit the complete supporting documents to warrant the grant of its application for refund.
Quoting the pertinent portion of the decision of its division, the CTA En Banc likewise
concurred in its finding that the judicial claim of Total Gas was prematurely filed because the
120-day period for the CIR to decide the claim had yet to commence to run due to the lack of
essential documents.16
Total Gas filed a motion for reconsideration,17 but it was denied in the assailed resolution of
the CTA En Banc.18
Hence, the present petition.
ISSUES
(a) whether the judicial claim for refund was belatedly filed on 23 January 2009, or way
beyond the 30-day period to appeal as provided in Section 112(c) of the Tax Code, as
amended; NO
and
(b) whether the submission of incomplete documents at the adminstrative level (BIR)
renders the judicial claim premature and dismissible for lack of jurisdiction. NO
In its petition, Total Gas argues that its judicial claim was filed within the prescriptive period
for claiming excess unutilized input VAT refund as provided under Section 112 of the NIRC
and expounded in the Court's ruling in CIR v. Aichi Forging Company of Asia 20 (Aichi) and in
compliance with Section 112 of the NIRC. In addition to citing Section 112 (C) of the Tax
Code, Total Gas points out that in one of its previous claims for refund of excess unutilized
input VAT, the CTA En Banc in CTA En Banc Case No. 674,21 faulted the BIR in not
considering that the reckoning period for the 120-period should be counted from the date of
submission of complete documents.22 It then adds that the previous ruling of the CTA En
Banc was in accordance with law because Section 112 (C) of the Tax Code is clear in
providing that the 120-day period should be counted from the date of its submission of the
complete documents or from August 28, 2008 and not from the date it filed its administrative
claim on May 15, 2008.23 Total Gas argues that, since its claim was filed within the period of
exception provided in CIR v. San Roque Power Corporation 24 (San Roque), it did not have to
strictly comply with 120+30 day period before it could seek judicial relief.25cralawred
Moreover, Total Gas questions the logic of the CTA En Banc which stated that the petition
was filed both belatedly and prematurely. Total Gas points out that on the one hand, the
CTA En Banc ruled that it filed the judicial claim belatedly as it was way beyond the 120+30
day period. Yet, it also affirmed the findings of its division that its petition for review was
prematurely filed since the 120-day period did not even commence to run for lack of complete
supporting documents.26
For Total Gas, the CTA En Banc violated the doctrine of stare decisis because the tax
tribunal had, on numerous occassions, held that the submission of incomplete supporting
documents should not make the judicial appeal premature and dismissible for lack of
jurisdiction. In these decisions, the CTA En Banc had previously held that non-compliance
with RMO No. 53-98 should not be fatal since the requirements listed therein refer to
requirements for refund or tax credit in the administrative level for purposes of establishing
the authenticity of a taxpayer's claim; and that in the judicial level, it is the Rules of Court that
govern and, thus, whether or not the evidence submitted by the party to the court is sufficient
lies within the sound discretion of the court. Total Gas emphasizes that RMO No. 53-98 does
not state that non-submission of supporting documents will nullify the judicial claim. It posits
that once a judicial claim is filed, what should be examined are the evidence formally offered
in the judicial proceedings.27
Even assuming that the supporting documents submitted to the BIR were incomplete, Total
Gas argues that there was no legal basis to hold that the CIR could not decide or act on the
claim for refund without the complete supporting documents. It argues that under RMC No.
29-09, the BIR is tasked with the duty to notify the taxpayer of the incompleteness of its
supporting documents and, if the taxpayer fails to complete the supporting supporting
documents despite such notice, the same shall be denied. The same regulation provides that
for purposes of computing the 120-day period, it should be considered tolled when the
taxpayer is notified. Total Gas, however, insists that it was never notified and, therefore, was
justified in seeking judicial relief.28
(C) Period within which Refund or Tax Credit of Input Taxes shall be Made. - In proper cases,
the Commissioner shall grant a refund or issue the tax credit certificate for creditable input
taxes within one hundred twenty (120) days from the date of submission of complete
documents in support of the application filed in accordance with 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.
xxxx

Although Total Gas admits that RMC No. 29-09 was not yet issued at the time it filed its [Emphasis and Underscoring Supplied]
administrative claim, the BIR still erred for not notifying them of their lack of supporting
From the above, it is apparent that the CIR has 120 days from the date of submission of
documents. According to Total Gas, the power to notify a taxpayer of lacking documents and
complete documents to decide a claim for tax credit or refund of creditable input taxes. The
to deny its claim if the latter would not comply is inherent in the CIR's power to decide refund
taxpayer may, within 30 days from receipt of the denial of the claim or after the expiration of
cases pursuant to Section 4 of the NIRC. It adds "[s]ound policy also dictates that it should be
the 120-day period, which is considered a "denial due to inaction," appeal the decision or
the taxpayer who should determine whether he has already submitted all documents
unacted claim to the CTA.
pertinent to his claim. To rule otherwise would result into a never-ending conflict/issue as to
the completeness of documents which, in turn, would delay the taxpayer's claim, and would
To be clear, Section 112(C) categorically provides that the 120-day period is counted "from
put to naught the protection afforded by Section 112 (C) of the Tax Code." 29
the date of submission of complete documents in support of the application." Contrary to
this mandate, the CTA En Banc counted the running of the period from the date the
In her Comment,30 the CIR echoed the ruling of the CTA En Banc, that Total Gas filed its
application for refund was filed or May 15, 2008, and, thus, ruled that the judicial claim was
petition out of time. She countered that the 120-day period could not be counted from the
belatedly filed.
time Total Gas submitted its additional documents on August 28, 2008 because such an
interpretation of Section 112(D) would indefinitely extend the prescriptive period as provided
This should be corrected.
in favor of the taxpayer.
Indeed, the 120-day period granted to the CIR to decide the administrative claim under the
In its Reply,31 Total Gas insisted that Section 112(C) stated that the 120-day period should be
Section 112 is primarily intended to benefit the taxpayer, to ensure that his claim is decided
reckoned from the date of submission of complete documents, and not from the date of the
judiciously and expeditiously. After all, the sooner the taxpayer successfully processes his
filing of the administrative claim.
refund, the sooner can such resources be further reinvested to the business translating to
greater efficiencies and productivities that would ultimately uplift the general welfare. To allow
Ruling of the Court the CIR to determine the completeness of the documents submitted and, thus, dictate the
running of the 120-day period, would undermine these objectives, as it would provide the CIR
The petition has merit. the unbridled power to indefinitely delay the administrative claim, which would ultimately
prevent the filing of a judicial claim with the CTA.
Judicial claim timely filed
Section 112 (C) of the NIRC provides:chanRoblesvirtualLawlibrary A hypothetical situation illustrates the hazards of granting the CIR the authority to decide
when complete documents have been submitted - A taxpayer files its administrative claim for
SEC. 112. Refunds or Tax Credits of Input Tax. - VAT refund/credit with supporting documents. After 121 days, the CIR informs the taxpayer
that it must submit additional documents. Considering that the CIR had determined that
xxxx complete documents have not yet been submitted, the 120-day period to decide the
administrative claim has not yet begun to run. In the meantime, more than 120 days have
already passed since the application with the supporting documents was filed to the detriment [Emphasis supplied]
of the taxpayer, who has no opportunity to file a judicial claim until the lapse of the 120+30 Again, while the CIR was given only 60 days within which to act upon an administrative claim
day period in Section 112(C). With no limitation to the period for the CIR to determine when for refund or tax credit, the period came to be reckoned "from the date of submission of
complete documents have been submitted, the taxpayer may be left in a limbo and at the complete documents in support of the application ." With this amendment, the date when
mercy of the CIR, with no adequate remedy available to hasten the processing of its a taxpayer made its submission of complete documents became relevant. In order to ensure
administrative claim. that such date was at least determinable, RMO No. 4-94 provides:
REVENUE MEMORANDUM ORDER NO. 40-94
Thus, the question must be asked: In an administrative claim for tax credit or refund of
creditable input VAT, from what point does the law allow the CIR to determine when it should SUBJECT : Prescribing the Modified Procedures on the Processing of Claims for Value-
decide an application for refund? Or stated differently: Under present law, when should the Added Tax Credit/Refund
submission of documents be deemed "completed" for purposes of determining the running of
the 120-day period? III. Procedures
     REGIONAL OFFICE
Ideally, upon filing his administrative claim, a taxpayer should complete the necessary      A. Revenue District Office
documents to support his claim for tax credit or refund or for excess utilized VAT. After all,      In General:chanRoblesvirtualLawlibrary
should the taxpayer decide to submit additional documents and effectively extend the 120-
period, it grants the CIR more time to decide the claim. Moreover, it would be prejudicial to 1. Ascertain the completeness of the supporting documents prior to the receipt of the
the interest of a taxpayer to prolong the period of processing of his application before he may application for VAT credit/refund from the taxpayer.
reap the benefits of his claim. Therefore, ideally, the CIR has a period of 120 days from the
date an administrative claim is filed within which to decide if a claim for tax credit or refund of 2. Receive application for VAT Credit/Refund (BIR Form No. 2552) in three (3) copies in the
excess unutilized VAT has merit. following manner:
a. stamp the word "RECEIVED" on the appropriate space provided in all copies of
Thus, when the VAT was first introduced through Executive Order No. 273, 32 the pertinent application;
rule was that:
(e) Period within which refund of input taxes may be made by the Commissioner. The b. indicate the claim number;
Commissioner shall refund input taxes within 60 days from the date the application for
refund was filed with him or his duly authorized representative. No refund or input taxes c. indicate the date of receipt; and
shall be allowed unless the VAT-registered person files an application for refund within the
period prescribed in paragraphs (a), (b) and (c), as the case maybe. d. initial by receiving officer.
[Emphasis supplied] The application shall be received only if the required attachments prescribed in RAMO 1-91
have been fully complied with x x x.
Here, the CIR was not only given 60 days within which to decide an administrative claim for
refund of input taxes, but the beginning of the period was reckoned "from the date the Then, when the NIRC34 was enacted on January 1, 1998, the rule was once more amended
application for refund was filed." to read:
(D) Period within which Refund or Tax Credit of Input Taxes shall be Made. - In proper cases,
When Republic Act (R.A.) No. 771633 was, however, enacted on May 5, 1994, the law the Commissioner shall grant a refund or issue the tax credit certificate for creditable input
was amended to read: taxes within one hundred twenty (120) days from the date of submission of compete
(d) Period within which refund or tax credit of input taxes shall be made. - In proper cases, documents in support of the application filed in accordance with Subsections (A) and (B)
The Commissioner shall grant a refund or issue the tax credit for creditable input taxes within hereof.
sixty (60) days from the date of submission of complete documents in support of the
application filed in accordance with sub-paragraphs (a) and (b) hereof. In case of full or In case of full or partial denial of the claim for tax refund or tax credit, or the failure on the part
partial denial of the claim for tax refund or tax credit, or the failure on the part of the of the Commissioner to act on the application within the period prescribed above, the
Commissioner to act on the application within the period prescribed above, the taxpayer taxpayer affected may, within thirty (30) days from the receipt of the decision denying the
affected may, within thirty (30) days from the receipt of the decision denying the claim or after claim or after the expiration of the one hundred twenty day-period, appeal the decision or the
the expiration of the sixty-day period, appeal the decision or the unacted claim with the Court unacted claim with the Court of Tax Appeals.
of Tax Appeals.
[Emphasis supplied] 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.
This time, the period granted to the CIR to act upon an admmistrative claim for refund was
extended to 120 days. The reckoning point however, remained "from the date of
In case of full or partial denial of the claim for tax refund or tax credit, or the failure on the part
submission of complete documents."
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
Aware that not all taxpayers were able to file the complete documents to allow the CIR to
claim or after the expiration of the one hundred twenty day-period, appeal the decision or the
properly evaluate an administrative claim for tax credit or refund of creditable input taxes, the
unacted claim with the Court of Tax Appeals.
CIR issued RMC No. 49-2003, which provided:
Q-18: For pending claims with incomplete documents, what is the period within which to With the amendments only with respect to its place under Section 112, the Court finds that
submit the supporting documents required by the investigating/processing office? When RMC No. 49-2003 should still be observed. Thus, taking the foregoing changes to the law
should the investigating/processing office officially receive claims for tax credit/refund and altogether, it becomes apparent that, for purposes of determining when the supporting
what is the period required to process such claims? documents have been completed — it is the taxpayer who ultimately determines when
complete documents have been submitted for the purpose of commencing and continuing the
A-18: For pending claims which have not been acted upon by the investigating/processing running of the 120-day period. After all, he may have already completed the necessary
office due to incomplete documentation, the taxpayer-claimants are given thirty (30) days documents the moment he filed his administrative claim, in which case, the 120-day period is
within which to submit the documentary requirements unless given further extension reckoned from the date of filing.
by the head of the processing unit, but such extension should not exceed thirty (30)
days. The taxpayer may have also filed the complete documents on the 30 th day from filing of his
application, pursuant to RMC No. 49-2003. He may very well have filed his supporting
For claims to be filed by claimants with the respective investigating/processing office of the documents on the first day he was notified by the BIR of the lack of the necessary
administrative agency, the same shall be officially received only upon submission of documents. In such cases, the 120-day period is computed from the date the taxpayer is able
complete documents. to submit the complete documents in support of his application.

For current and future claims for tax credit/refund, the same shall be processed within one Then, except in those instances where the BIR would require additional documents in order
hundred twenty (120) days from receipt of the complete documents. If, in the course of the to fully appreciate a claim for tax credit or refund, in terms what additional document must be
investigation and processing of the claim, additional documents are required for the proper presented in support of a claim for tax credit or refund - it is the taxpayer who has that right
determination of the legitimate amount of claim, the taxpayer-claimants shall submit such and the burden of providing any and all documents that would support his claim for tax credit
documents within thirty (30) days from request of the investigating/processing or refund. After all, in a claim for tax credit or refund, it is the taxpayer who has the burden to
office, which shall be construed as within the one hundred twenty (120) day period. prove his cause of action. As such, he enjoys relative freedom to submit such evidence to
prove his claim.
[Emphases Supplied]
The foregoing conclusion is but a logical consequence of the due process guarantee under
Consequently, upon filing of his application for tax credit or refund for excess creditable input
the Constitution. Corollary to the guarantee that one be afforded the opportunity to be heard,
taxes, the taxpayer-claimant is given thirty (30) days within which to complete the required
it goes without saying that the applicant should be allowed reasonable freedom as to when
documents, unless given further extension by the head of the processing unit. If, in the course
and how to present his claim within the allowable period.
of the investigation and processing of the claim, additional documents are required for the
proper determination of the legitimate amount of claim, the taxpayer-claimants shall submit
Thereafter, whether these documents are actually complete as required by law - is for
such documents within thirty (30) days from request of the investigating/processing office.
the CIR and the courts to determine. Besides, as between a taxpayer-applicant, who seeks
Notice, by way of a request from the tax collection authority to produce the complete
the refund of his creditable input tax and the CIR, it cannot be denied that the former has
documents in these cases, became essential. It is only upon the submission of these
greater interest in ensuring that the complete set of documentary evidence is provided for
documents that the 120-day period would begin to run.
proper evaluation of the State.
Then, when R.A. No. 933735 was passed on July 1, 2005, the same provision under the NIRC
Lest it be misunderstood, the benefit given to the taxpayer to determine when it should
was retained. With the amendment to Section 112, particularly the deletion of what was once
complete its submission of documents is not unbridled. Under RMC No. 49-2003, if in the
Section 112(B) of the NIRC, Section 112 (D) was amended and renamed 112(C). Thus:
course of the investigation and processing of the claim, additional documents are required for
(C) Period within which Refund or Tax Credit of Input Taxes shall be Made. - In proper cases,
the proper determination of the legitimacy of the claim, the taxpayer-claimants shall submit
the Commissioner shall grant a refund or issue the tax credit certificate for creditable input
such documents within thirty (30) days from request of the investigating/processing Thus, under the current rule, the reckoning of the 120-day period has been withdrawn from
office. Again, notice, by way of a request from the tax collection authority to produce the taxpayer by RMC 54-2014, since it requires him at the time he files his claim to complete
the complete documents in these cases, is essential. his supporting documents and attest that he will no longer submit any other document to
prove his claim. Further, the taxpayer is barred from submitting additional documents after he
Moreover, under Section 112(A) of the NIRC, 36 as amended by RA 9337, a taxpayer has two has filed his administrative claim.
(2) years, after the close of the taxable quarter when the sales were made, to apply for the
issuance of a tax credit certificate or refund of creditable input tax due or paid attributable to On this score, the Court finds that the foregoing issuance cannot be applied rectroactively
such sales. Thus, before the adminstrative claim is barred by prescription, the taxpayer must to the case at bar since it imposes new obligations upon taxpayers in order to perfect their
be able to submit his complete documents in support of the application filed. This is because, administrative claim, that is, [1] compliance with the mandate to submit the "supporting
it is upon the complete submission of his documents in support of his application that it can documents" enumerated under RMC 54-2014 under its "Annex A"; and [2] the filing of "a
be said that the application was, "officially received" as provided under RMC No. 49-2003. statement under oath attesting to the completeness of the submitted documents," referred to
in RMC 54-2014 as "Annex B." This should not prejudice taxpayers who have every right to
To summarize, for the just disposition of the subject controversy, the rule is that from the date pursue their claims in the manner provided by existing regulations at the time it was filed.
an administrative claim for excess unutilized VAT is filed, a taxpayer has thirty (30) days
within which to submit the documentary requirements sufficient to support his claim, unless As provided under Section 246 of the Tax Code:
given further extension by the CIR. Then, upon filing by the taxpayer of his complete SEC. 246. Non-Retroactivity of Rulings. - Any revocation, modification or reversal of any of
documents to support his application, or expiration of the period given, the CIR has 120 days the rules and regulations promulgated in accordance with the preceding Sections or any of
within which to decide the claim for tax credit or refund. Should the taxpayer, on the date of the rulings or circulars promulgated by the Commissioner shall not be given retroactive
his filing, manifest that he no longer wishes to submit any other addition documents to application if the revocation, modification or reversal will be prejudicial to the
complete his administrative claim, the 120 day period allowed to the CIR begins to run from taxpayers, except in the following cases:chanRoblesvirtualLawlibrary
the date of filing.
(a) Where the taxpayer deliberately misstates or omits material facts from his return or any
In all cases, whatever documents a taxpayer intends to file to support his claim must be document required of him by the Bureau of Internal Revenue;
completed within the two-year period under Section 112(A) of the NIRC. The 30-day period
from denial of the claim or from the expiration of the 120-day period within which to appeal (b) Where the facts subsequently gathered by the Bureau of Internal Revenue are materially
the denial or inaction of the CIR to the CTA must also be respected. different from the facts on which the ruling is based; or

It bears mentioning at this point that the foregoing summation of the rules should only be (c) Where the taxpayer acted in bad faith.
made applicable to those claims for tax credit or refund filed prior to June 11, 2014, such as
the claim at bench. As it now stands, RMC 54-2014 dated June 11, 2014 mandates that: [Emphasis and Italics Supplied]
The application for VAT refund/tax credit must be accompanied by complete supporting
Applying the foregoing precepts to the case at bench, it is observed that the CIR made no
documents as enumerated in Annex "A" hereof. In addition, the taxpayer shall attach a
effort to question the inadequacy of the documents submitted by Total Gas. It neither gave
statement under oath attesting to the completeness of the submitted documents (Annex B).
notice to Total Gas that its documents were inadequate, nor ruled to deny its claim for failure
The affidavit shall further state that the said documents are the only documents which the
to adequately substantiate its claim. Thus, for purposes of counting the 120-day period, it
taxpayer will present to support the claim. If the taxpayer is a juridical person, there should be
should be reckoned from August 28, 2008, the date when Total Gas made its "submission of
a sworn statement that the officer signing the affidavit (i.e., at the very least, the Chief
complete documents to support its application" for refund of excess unutilized input VAT.
Financial Officer) has been authorized by the Board of Directors of the company.
Consequently, counting from this later date, the BIR had 120 days to decide the claim or until
December 26, 2008. With absolutely no action or notice on the part of the BIR for 120 days,
Upon submission of the administrative claim and its supporting documents, the claim shall be
Total Gas had 30 days or until January 25, 2009 to file its judicial claim.
processed and no other documents shall be accepted/required from the taxpayer in the
course of its evaluation. A decision shall be rendered by the Commissioner based only on the
Total Gas, thus, timely filed its judicial claim on January 23, 2009.
documents submitted by the taxpayer. The application for tax refund/tax credit shall be
denied where the taxpayer/claimant failed to submit the complete supporting documents. For
Anent RMO No. 53-98, the CTA Division found that the said order provided a checklist of
this purpose, the concerned processing/investigating office shall prepare and issue the
documents for the BIR to consider in granting claims for refund, and served as a guide for the
corresponding Denial Letter to the taxpayer/claimant.
courts in determining whether the taxpayer had submitted complete supporting documents.
This should also be corrected. documents submitted by a taxpayer are actually complete to support a claim for tax credit or
refund of excess unutilized excess VAT. As expounded in Commissioner of Internal Revenue
To quote RMO No. 53-98: v. Team Sual Corporation (formerely Mir ant Sual Corporation):37
REVENUE MEMORANDUM ORDER NO. 53-98 The CIR's reliance on RMO 53-98 is misplaced. There is nothing in Section 112 of the NIRC.
RR 3-88 or RMO K3-Q8 itself that requires submission of the complete documents
SUBJECT: Checklist of Documents to be Submitted by a Taxpayer upon Audit of his Tax enumerated in RMO 53-98 for a grant of a refund or credit of input VAT. The subject of RMO
Liabilities as well as of the Mandatory Reporting Requirements to be Prepared by a Revenue 53-98 states that it is a "Checklist of Documents to be Submitted by a Taxpayer
Officer, all of which Comprise a Complete Tax Docket. upon Audit of his Tax Liabilities x x x." In this case, TSC was applying for a grant of refund or
credit of its input tax. There was no allegation of an audit being conducted by the CIR. Even
TO: All Internal Revenue Officers, Employees and Others Concerned assuming that RMO 53-98 applies, it specifically states that some documents are required to
be submitted by the taxpayer "if applicable."
I. BACKGROUND
Moreover, if TSC indeed failed to submit the complete documents in support of its application,
It has been observed that for the same kind of tax audit case, Revenue Officers differ in their the CIR could have informed TSC of its failure, consistent with Revenue Memorandum
request for requirements from taxpayers as well as in the attachments to the dockets Circular No. (RMC) 42-03. However, the CIR did not inform TSC of the document it failed to
resulting to tremendous complaints from taxpayers and confusion among tax auditors and submit, even up to the present petition. The CIR likewise raised the issue of TSC's alleged
reviewers. failure to submit the complete documents only in its motion for reconsideration of the CTA
Special First Division's 4 March 2010 Decision. Accordingly, we affirm the CTA EB's finding
For equity and uniformity, this Bureau comes up with a prescribed list of requirements from that TSC filed its administrative claim on 21 December 2005, and submitted the complete
taxpayers, per kind of tax, as well as of the internally prepared reporting requirements, all of documents in support of its application for refund or credit of its input tax at the same time.
which comprise a complete tax docket.
[Emphasis included. Underlining Ours.]
II. OBJECTIVE
As explained earlier and underlined in Team Sual above, taxpayers cannot simply be faulted
for failing to submit the complete documents enumerated in RMO No. 53-98, absent notice
This order is issued to:chanRoblesvirtualLawlibrary
from a revenue officer or employee that other documents are required. Granting that the BIR
found that the documents submitted by Total Gas were inadequate, it should have notified the
a. Identify the documents to be required from a taxpayer during audit, according to particular
latter of the inadequacy by sending it a request to produce the necessary documents in order
kind of tax; and
to make a just and expeditious resolution of the claim.
b. Identify the different audit reporting requirements to be prepared, submitted and attached
Indeed, a taxpayer's failure with the requirements listed under RMO No. 53-98 is not fatal to
to a tax audit docket.
its claim for tax credit or refund of excess unutilized excess VAT. This holds especially true
when the application for tax credit or refund of excess unutilized excess VAT has arrived at
III. LIST OF REQUIREMENTS PER TAX TYPE
the judicial level. After all, in the judicial level or when the case is elevated to the Court, the
Rules of Court governs. Simply put, the question of whether the evidence submitted by a
Income Tax/ Withholding Tax
party is sufficient to warrant the granting of its prayer lies within the sound discretion and
- Annex A (3 pages)
judgment of the Court.
Value Added Tax
At this point, it is worth emphasizing that the reckoning of the 120-day period from August 28,
- Annex B (2 pages)
2008 cannot be doubted. First, a review of the records of the case undubitably show that
- Annex B-1 (5 pages)
Total Gas filed its supporting documents on August 28, 2008, together with a transmittal letter
bearing the same date. These documents were then stamped and signed as received by the
xxxx
appropriate officer of the BIR. Second, contrary to RMO No. 40-94, which mandates officials
As can be gleaned from the above, RMO No. 53-98 is addressed to internal revenue officers of the BIR to indicate the date of receipt of documents received by their office in every claim
and employees, for purposes of equity and uniformity, to guide them as to what documents for refund or credit of VAT, the receiving officer failed to indicate the precise date and time
they may require taxpayers to present upon audit of their tax liabilities. Nothing stated in when he received these documents. Clearly, the error is attributable to the BIR officials and
the issuance would show that it was intended to be a benchmark in determining whether the should not prejudice Total Gas.

Third, it is observed that whether before the CTA or this Court, the BIR had never questioned
the date it received the supporting documents filed by Total Gas, or the propriety of the filing
thereof. In contrast to the contiuous efforts of Total Gas to complete the necessary
documents needed to support its application, all that was insisted by the CIR was that the
reckoning period should be counted from the date Total Gas filed its application for refund of
excess unutilized input VAT. There being no question as to whether these documents were
actually received on August 28, 2008, this Court shall not, by way of conjecture, cast doubt
on the truthfullness on such submission. Finally, in consonance with the presumption that a
person acts in accordance with the ordinary course of business, it is presumed that such
documents were received on the date stated therein.
Verily, should there be any doubt on whether Total Gas filed its supporting documents on
August 28, 2008, it is incumbent upon the CIR to allege and prove such assertion. As the
saying goes, contra preferentum.
If only to settle any doubt, this Court is by no means setting a precedent by leaving it to the
mercy of the taxpayer to determine when the 120- day reckoning period should begin to run
by providing absolute discretion as to when he must comply with the mandate submitting
complete documents in support of his claim. In addition to the limitations thoroughly
discussed above, the peculiar circumstance applicable herein, as to relieve Total Gas from
the application of the rule, is the obvious failure of the BIR to comply with the specific
directive, under RMO 40-94, to stamp the date it received the supporting
documents which Total Gas had submitted to the BIR for its consideration in the processing
of its claim. The utter failure of the tax administrative agency to comply with this simple
mandate to stamp the date it receive the documents submitted by Total Gas - should not in
any manner prejudice the taxpayer by casting doubt as to when it was able to submit its
complete documents for purposes of determing the 120-day period.
While it is still true a taxpayer must prove not only his entitlement to a refund but also his
compliance with the procedural due process38 - it also true that when the law or rule
mandates that a party or authority must comply with a specific obligation to perform an act for
the benefit of another, the non-compliance therof by the former should not operate to
prejudice the latter, lest it render the nugatory the objective of the rule. Such is the situation in
case at bar.
Judicial claim not prematurely filed
The CTA En Banc curiously ruled in the assailed decision that the judicial claim of Total Gas
was not only belatedly filed, but prematurely filed as well, for failure of Total Gas to prove that
it had submitted the complete supporting documents to warrant the grant of the tax refund
and to reckon the commencement of the 120-day period. It asserted that Total Gas had failed
to submit all the required documents to the CIR and, thus, the 120-day period for the CIR to
decide the claim had not yet begun to run, resulting in the premature filing of the judicial
claim. It wrote that the taxpayer must first submit the complete supporting documents before
the 120-day period could commence, and that the CIR could not decide the claim for refund
without the complete supporting documents.
The Court disagrees.
The alleged failure of Total Gas to submit the complete documents at the administrative level
did not render its petition for review with the CTA dismissible for lack of jurisdiction. First, the
120-day period had commenced to run and the 120+30 day period was, in fact, complied
with. As already discussed, it is the taxpayer who determines when complete documents
have been submitted for the purpose of the running of the 120-day period. It must again be
pointed out that this in no way precludes the CIR from requiring additional documents
necessary to decide the claim, or even denying the claim if the taxpayer fails to submit the
additional documents requested.
Second, the CIR sent no written notice informing Total Gas that the documents were
incomplete or required it to submit additional documents. As stated above, such notice by
way of a written request is required by the CIR to be sent to Total Gas. Neither was there any
decision made denying the administrative claim of Total Gas on the ground that it had failed
to submit all the required documents. It was precisely the inaction of the BIR which prompted
Total Gas to file the judicial claim. Thus, by failing to inform Total Gas of the need to submit
any additional document, the BIR cannot now argue that the judicial claim should be
dismissed because it failed to submit complete documents.
Finally, it should be mentioned that the appeal made by Total Gas to the CTA cannot be said
to be premature on the ground that it did not observe the otherwise mandatory and
juridictional 120+30 day period. When Total Gas filed its appeal with the CTA on January 23,
2009, it simply relied on BIR Ruling No. DA-489-03, which, at that time, was not yet struck
down by the Court's ruling in Aichi. As explained in San Roque, this Court recognized a
period in time wherein the 120-day period need not be strictly observed. Thus:
To repeat, a claim for tax refund or credit, like a claim for tax exemption, is construed strictly
against the taxpayer. One of the conditions for a judicial claim of refund or credit under the
VAT System is compliance with the 120+30 day mandatory and jurisdictional periods. Thus,
strict compliance with the 120+30 day periods is necessary for such a claim to prosper,
whether before, during, or after the effectivity of the Atlas doctrine, except for the period
from the issuance of BIR Ruling No. DA-489-03 on 10 December 2003 to 6 October 2010
when the Aichi doctrine was adopted, which again reinstated the 120+30 day periods
as mandatory and jurisdictional.
xxxx
Clearly, BIR Ruling No. DA-489-03 is a general interpretative rule. Thus, all taxpayers can
rely on BIR Ruling No. DA-489-03 from the time of its issuance on 10 December 2003
up to its reversal by this Court in Aichi on 6 October 2010, where this Court held that
the 120+30 day periods are mandatory and jurisdictional.
At this stage, a review of the nature of a judicial claim before the CTA is in order. In Atlas
Consolidated Mining and Development Corporation v. CIR, it was ruled -
x x x First, a judicial claim for refund or tax credit in the CTA is by no means an original action WHEREFORE, the petition is PARTIALLY GRANTED. The October 11, 2012 Decision and
but rather an appeal by way of petition for review of a previous, unsuccessful administrative the May 8, 2013 Resolution of the Court of Tax Appeals En Banc, in CTA EB No. 776
claim. Therefore, as in every appeal or petition for review, a petitioner has to convince the are REVERSED and SET ASIDE.
appellate court that the quasi-judicial agency a quo did not have any reason to deny its
claims. In this case, it was necessary for petitioner to show the CTA not only that it was The case is REMANDED to the CTA Third Division for trial de novo.
entitled under substantive law to the grant of its claims but also that it satisfied all the
documentary and evidentiary requirements for an administrative claim for refund or tax SO ORDERED.chanroblesvirtuallawlibrary
credit. Second, cases filed in the CTA are litigated de novo. Thus, a petitioner should prove
every minute aspect of its case by presenting, formally offering and submitting its evidence to G.R. No. 175142               July 22, 2013
the CTA. Since it is crucial for a petitioner in a judicial claim for refund or tax credit to show
that its administrative claim should have been granted in the first place, part of the evidence BONIFACIO WATER CORPORATION (formerly BONIFACIO VIVENDI WATER
to be submitted to the CTA must necessarily include whatever is required for the successful CORPORATION), Petitioner,
prosecution of an administrative claim.39 vs.
THE COMMISSIONER OF INTERNAL REVENUE, Respondent.
[Underscoring Supplied]
A distinction must, thus, be made between administrative cases appealed due to inaction and DECISION
those dismissed at the administrative level due to the failure of the taxpayer to submit
supporting documents. If an administrative claim was dismissed by the CIR due to the PERALTA, J.:
taxpayer's failure to submit complete documents despite notice/request, then the judicial
claim before the CTA would be dismissible, not for lack of jurisdiction, but for the taxpayer's
failure to substantiate the claim at the administrative level. When a judicial claim for refund or This resolves the Petition for Review on Certiorari under Rule 45 of the Rules of Court which
tax credit in the CTA is an appeal of an unsuccessful administrative claim, the taxpayer has to seeks the review of the Court of Tax Appeals En Banc Decision1 dated June 26, 2006, and
convince the CTA that the CIR had no reason to deny its claim. It, thus, becomes imperative Resolution2 dated October 19, 2006.
for the taxpayer to show the CTA that not only is he entitled under substantive law to his
claim for refund or tax credit, but also that he satisfied all the documentary and evidentiary The facts follow.
requirements for an administrative claim. It is, thus, crucial for a taxpayer in a judicial claim for
refund or tax credit to show that its administrative claim should have been granted in the first Petitioner is a domestic corporation engaged in the collection, purification and distribution of
place. Consequently, a taxpayer cannot cure its failure to submit a document requested by water. It is registered with the Bureau of Internal Revenue (BIR) as a value-added tax (VAT)
the BIR at the administrative level by filing the said document before the CTA. taxpayer, with VAT Registration/Taxpayer Identification No. 201-403-657-000.

In the present case, however, Total Gas filed its judicial claim due to the inaction of the BIR. Petitioner duly filed with the BIR its quarterly VAT returns for the 4th quarter of 1999, 1st
Considering that the administrative claim was never acted upon; there was no decision for the quarter of 2000, 2nd quarter of 2000, 3rd quarter of 2000, and 4th quarter of 2000, declaring
CTA to review on appeal per se. Consequently, the CTA may give credence to all evidence the following information:
presented by Total Gas, including those that may not have been submitted to the CIR as the
case is being essentially decided in the first instance. The Total Gas must prove every minute
QUART TAXABL OUTPU INPUT DOMESTI INPUT TOTAL EXCESS
aspect of its case by presenting and formally offering its evidence to the CTA, which must
ER EX E T TAX C VAT AVAILABL INPUT
necessarily include whatever is required for the successful prosecution of an administrative
INVOLVH. SALES VAT CARRIED PURCHAS E VAT
claim.40
ED OVER ES INPUT
FROM VAT
The Court cannot, however, make a ruling on the issue of whether Total Gas is entitled to a
PREVIOU
refund or tax credit certificate in the amount of P7,898,433.98. Considering that the judicial
S
claim was denied due course and dismissed by the CTA Division on the ground of premature
QUARTE
and/or belated filing, no ruling on the issue of Total Gas entitlement to the refund was made.
R
The Court is not a trier of facts, especially when such facts have not been ruled upon by the
  (F)=(C)+ (G)=(B)+
lower courts. The case shall, thus, be remanded to the CTA Division for trial de novo.   (A) (B) (C) (D) (E)
(E) (F)
2000                
 4th Qtr. A -   25,291,05 196,306,59 19,630,65 44,921,713 44,921,71 In said case, the CTA Second Division held that an examination of the various official receipts
3.62 7.30 9.73 .35 3.35 presented by petitioner, to support its purchases for capital goods, shows that some of its
1999                 purchases, such as rental, management fees and direct overhead, cannot be considered as
1st Qtr. B -   44,921,71 186,000,88 18,600,08 63,521,801 63,521,80 capital goods. Further, it ruled that the official receipts under the name "Bonifacio GDE Water
3.35 1.70 8.17 .52 1.52 Corporation" were disallowed on the ground that the use of said business name by petitioner
2nd Qtr.C 2,182,61 218,261 63,521,80 151,074,71 15,107,47 78,629,273 78,411,01 was never approved by the Securities and Exchange Commission (SEC). Thus, the court
5.75 .57 1.52 9.10 1.91 .43 1.86 ruled as follows:
3rd Qtr. D 1,505,78 292,412 78,411,01 121,599,04 12,159,90 90,570,916 90,420,33
6.70 .71 1.86 3.00 4.30 .16 7.49 WHEREFORE, in the light of the foregoing, the Petition for Review is PARTIALLY
4th Qtr. E 2,924,12 292,412 90,420,33 96,717,388 9,671,738 100,092,07 99,799,66 GRANTED. The respondent is hereby ORDERED TO REFUND or TO ISSUE A TAX
7.10 .71 7.49 .90 .89 6.38 3.67 CREDIT CERTIFICATE in favor of the petitioner in the reduced amount of ₱40,875,208.64,
representing unutilized input VAT on capital goods for the period from the 4th quarter of 1999
For said period, petitioner alleges that its input VAT included, among others, input VAT paid to the 4th quarter of 2000, computed as follows:
on purchases of capital goods amounting to ₱65,642,814.65. These purchases supposedly
pertain to payment to contractors in connection with the construction of petitioner’s Sewage
Amount Claimed P 65,642,814.65
Treatment Plant, Water and Waste System, and Water Treatment Plant, broken down as
follows: Less: Disallowance per
Court’s Evaluation 24,767,606.01
Quarter Input VAT Paid on Total Amount
Purchase of Capital Goods Refundable Amount P 40,875,208.64
1999    
SO ORDERED.4
4th Quarter ₱11,607,748.20 ₱11,607,748.20
2000     The parties filed their respective motions for reconsideration against said Decision. However,
in a Resolution5 dated August 23, 2005, the CTA Second Division held as follows:
1st Quarter ₱18,281,682.96  
2nd Quarter 14,884,531.96   In sum, the refundable amount to be granted to petitioner should be increased to
₱45,446,280.55, computed as follows:
3rd Quarter 21,705,122.19  
4th Quarter (836,270.66) 54,035,066.45 Refundable Amount per Decision P 40,875,208.64

Grand Total   ₱65,642,814.65 Add: Additional Input VAT

a.) Construction in Progress P 1,439,629.72
On January 22, 2002, petitioner filed with Revenue District Office No. 44–Pateros and
Taguig, Revenue Region No. 8 of the BIR, an administrative claim for refund or issuance of a b.) Input VAT found not to
tax credit certificate in the amount of ₱65,642,814.65 representing unutilized input VAT on have been recorded twice 3,131,442.19 4,571,071.91
capital goods purchased for the period beginning the 4th quarter of 1999 up to the 4th quarter Total Refundable Amount P 45,446,280.55
of 2000.

The next day, petitioner filed its Petition for Review with the Court of Tax Appeals (CTA), to IN VIEW OF ALL THE FOREGOING, respondent’s Motion for Reconsideration is DENIED for
toll the running of the two-year prescriptive period. lack of merit, while petitioner’s Motion for Partial Reconsideration is PARTIALLY GRANTED.

On March 29, 2005, the CTA Second Division rendered a Decision3 partially granting
petitioner’s claim for refund in the reduced amount of ₱40,875,208.64.
Accordingly, respondent is ORDERED to REFUND or TO ISSUE A TAX CREDIT
CERTIFICATE in favor of petitioner in the increased amount of ₱45,446,280.55 as computed
above.
SO ORDERED.6
Petitioner thereafter filed its petition for review with the CTA En Banc arguing that it has
presented substantial evidence that proves its input VAT on purchases of capital goods from
the 4th quarter of 1999 to the 4th quarter of 2000, as well as the fact that petitioner and
"Bonifacio GDE Corporation" are one and the same entity.
In a Decision7 dated June 26, 2006, the CTA En Banc affirmed in toto the assailed Decision
and Resolution of the CTA Second Division. The fallo of the Decision states:
WHEREFORE, premises considered, the assailed Decision and Resolution of the Second
Division are hereby AFFIRMED in toto, and the Petition for Review is hereby DISMISSED for
lack of merit.
SO ORDERED.8
Unfazed, petitioner filed a motion for reconsideration against said Decision, which was denied
in a Resolution9 dated October 19, 2006.
Thus, the present petition wherein petitioner lists the following grounds in support of its
petition:
GROUNDS FOR THE PETITION
PETITIONER RESPECTFULLY MOVES THAT THE ASSAILED DECISION DATED 26 JUNE
2006, AND THE RESOLUTION DATED 19 OCTOBER 2006, ISSUED BY THE CTA EN
BANC, BE SET ASIDE, BASED ON ANY OR ALL OF THE FOLLOWING GROUNDS:
I
THE CTA EN BANC ERRED WHEN IT SANCTIONED THE PARTIAL DENIAL OF
PETITIONER’S CLAIM FOR REFUND ON THE GROUND THAT PETITIONER’S INVOICES
ARE NOT COMPLIANT WITH ADMINISTRATIVE REGULATIONS.
II
THE CTA EN BANC ERRED WHEN IT SANCTIONED THE PARTIAL DENIAL OF
PETITIONER’S CLAIM FOR REFUND BY ITS FAILURE TO APPLY THE DEFINITION OF
CAPITAL GOODS CONTAINED IN EXISTING JURISPRUDENCE TO CERTAIN
PURCHASES OF PETITIONER.
III
THE CTA EN BANC FAILED TO APPLY THE RULES REGARDING JUDICIAL
ADMISSIONS IN THE PROCEEDINGS BELOW.
IV
IN CIVIL CASES, SUCH AS CLAIMS FOR REFUND, STRICT COMPLIANCE WITH
TECHNICAL RULES OF EVIDENCE IS NOT REQUIRED. MOREOVER, A MERE
PREPONDERANCE OF EVIDENCE WILL SUFFICE TO JUSTIFY THE GRANT OF A
CLAIM. THE CTA EN BANC SANCTIONED THE USE OF A HIGHER STANDARD OF
EVIDENCE IN A NON-CRIMINAL PROCEEDING.10
Simply, the issue is whether or not the CTA En Banc erred in not granting petitioner’s claim
for refund or issuance of a tax credit certificate in the amount of ₱65,642,814.65. NO
Petitioner contends that non-compliance with the invoicing requirements under the 1997 Tax
Code does not automatically result in the denial of a claim for refund or tax credit when the
same is supported by substantial evidence. It contends that the CTA En Banc erred in
sustaining the ruling that petitioner is not entitled to a refund of the input VAT evidenced by
official receipts in the name of "Bonifacio GDE Water Corporation."
Petitioner further submits that the CTA erred in failing to properly apply the definition of
capital goods and insists that services incurred in the construction and installation of capital
assets and goods should be included in the cost of capital goods for purposes of determining
the proper amount of refundable input VAT.
It also posits that respondent made an "informal judicial admission" and partially recognized
its claims for excess input VAT on purchases of capital goods when Revenue District No. 44
issued a memorandum acknowledging, inter alia, that the input taxes claimed as refund were
duly supported by valid VAT invoices and/or receipts.
Lastly, petitioner asserts that the CTA imposed an overly strict standard of evidence in
disallowing petitioner’s invoices bearing the name "Bonifacio GDE Water Corporation." It
claims that the denial of the claim in its entirety based purely on technical grounds unduly
deprives petitioner of a right granted by law and constitutes an undue deprivation of its
property.
For its part, respondent argues that the instant petition raises purely questions of fact which is
not allowed under Rule 45 of the Rules of Court. He highlights the fact that the issue of
whether or not petitioner was able to present substantial evidence to prove and support its
claim for tax refund or tax credit calls for this Court to review and evaluate all the evidence to
enable it to determine and resolve the issues raised by petitioner.
Moreover, respondent avers that the CTA En Banc committed no error in not applying the
rules regarding judicial admissions, since no judicial admission was made by or was
attributable to respondent, either in the pleadings or in the course of the trial proceedings. He
argues that the admission made by a subordinate BIR official in support of the course of
action which he had proposed or submitted for approval by his superior cannot by any stretch
of imagination be considered an admission, much less a judicial admission, of the latter.
Finally, respondent stresses that the CTA En Banc did not err in using stricter rules of
evidence in cases involving claims for tax refund or tax credit as the same are in the nature of
tax exemptions and are regarded as in derogation of sovereign authority and to be construed
strictissimi juris against the entity claiming the exemption.
We agree with respondent.
At the outset, it must be emphasized that an appeal by petition for review on certiorari cannot
determine factual issues. In the exercise of its power of review, the Court is not a trier of facts
and does not normally undertake the re-examination of the evidence presented by the
contending parties during trial.11 However, although the rules provide for certain recognized
exceptions,12 the circumstances surrounding the present case do not fall under any of them.
Assuming, however, that this Court can take cognizance of the instant case, it bears stressing
that the arguments raised by petitioner have already been extensively discussed by both the
CTA Second Division and the CTA En Banc, to wit:
Petitioner, in support of its first ground, argues that it has presented substantial evidence that
unequivocally proved petitioner’s input VAT on purchases of capital goods from the 4th
quarter of 1999 to the 4th quarter of 2000 as well as the fact that petitioner and Bonifacio
GDE Corporation are one and the same entity.
We do not agree.
The change of name to Bonifacio GDE Corporation being unauthorized and without approval
from the Securities and Exchange Commission, petitioner cannot now seek for a refund of
input taxes which are supported by receipts under that name. This is pursuant to Sections
4.104-5 and 4.108-1 of Revenue Regulations No. 7-95 in relation to Sections 113 and 237 of
the Tax Code, reproduced below for easy reference.
xxxx
The requisite that the receipt be issued showing the name, business style, if any, and
address of the purchaser, customer or client is precise so that when the books of accounts
are subjected to a tax audit examination, all entries therein could be shown as adequately
supported and proven as legitimate business transactions. The absence of official receipts
issued in the taxpayer’s name is tantamount to non-compliance with the substantiation
requirements provided by law.
Petitioner cannot raise the argument that, "non-compliance with the invoicing requirements
under the 1997 NIRC, as amended, does not automatically result in the denial of a claim for
refund or tax credit when the same is supported by substantial evidence" and that, "In civil
cases, such as claims for refund, strict compliance with technical rules of evidence is not
required. Moreover, a mere preponderance of evidence will suffice to justify the grant of a
claim," in addition to its first ground in the instant petition. Taxpayers claiming for a refund or
tax credit certificate must comply with the strict and mandatory invoicing and accounting
requirements provided under the 1997 NIRC, as amended, and its implementing rules and
regulations. Rules and regulations with regard to procedures are implemented not to be
ignored or to be taken for granted, but are strictly adhered to for they are developed from the
law itself.13
From the foregoing, it is clear that petitioner must show satisfaction of all the documentary
and evidentiary requirements before an administrative claim for refund or tax credit will be
granted. Perforce, the taxpayer claiming the refund must comply with the invoicing and
accounting requirements mandated by the Tax Code, as well as the revenue regulations
implementing them.14
Thus, the change of petitioner’s name to "Bonifacio GDE Water Corporation," being
unauthorized and without approval of the SEC, and the issuance of official receipts under that
name which were presented to support petitioner’s claim for tax refund, cannot be used to
allow the grant of tax refund or issuance of a tax credit certificate in petitioner’s favor. The
absence of official receipts issued in its name is tantamount to noncompliance with the
substantiation requirements provided by law and, hence, the CTA En Banc’s partial grant of
its refund on that ground should be upheld.
Also, petitioner’s allegation that some of the disallowed input taxespaid on services related to
the construction of petitioner’s Waste Water Treatment and Water Sewerage Distribution
Networks, should be included as part of its capital goods, must fail. As comprehensively
discussed by the CTA Second Division in its Resolution15 dated August 23, 2005 –
Petitioner alleges that the disallowed input taxes are paid on services related to the
construction of petitioner’s Waste Water Treatment Plant and Water Sewerage Distribution
Networks, summarized as follows:
Expense Exhibi Payee
t
Professional services, project management and design, advisory O-27 Symonds Travers
works for operations and management, and contract preparation/ Morgan
supervision.
Lease for Water Treatment Plant, Waste Water Treatment Plant O-29 Fort Bonifacio
and Elevated Reservoir from April 1999 to August 2000 Development
Corporation
Professional services for project management and design for O-33 Symonds Travers Office furnitures, fixtures & equipment 6,658,699.00 335,209.00
August 2000 Morgan
Transportation rquipment 3,004,053.00 -
Rental on BDCA lot from 1 September 2000 to 31 November O-35 Fort Bonifacio
2001 for the Water Treatment Plant, Waste Water Treatment Development
Plant and Elevated Reservoir Corporation
₱ 1,786,130,649.00 ₱ 335,209.00
Insurance for turned-over waste water treatment facilities O-36 -do-
Less: Accumulated Depreciation 868,012.00 -
Professional services O-37 Symonds Travers
Morgan
Fort Bonifacio ₱ 1,785,262.637.00 ₱ 335,209.00
  O-39 Development Construction in Progress 73,185,765.00 832,065,352.00
Corporation
Contracted services and secondment O-41 Sade Compagnie
Generale de Travaux ₱ 1,858,448,402.00 ₱ 832,400,561.00
Contracted services for additional service connection O-42 -do-

xxxx Only the above real accounts are to be considered as capital goods since "capital goods" is
defined as:
Thus, it can be seen that the aforesaid expenses were correspondingly charged to "Pre-
Operating Expense," "Accrued Expense," "Direct Overhead," "Prepaid Insurance," and "Capital goods or properties" refer to goods or properties with estimated useful life greater
"Construction in Progress." than 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.
Records reveal that petitioner’s Property, Plant & Equipment account is composed of the
following specific account titles, to wit: Had petitioner intended the aforementioned itemized expenses to be part of Property, Plant &
Equipment, then it should have recorded the same to the foregoing specific accounts. Except
for the account "Construction in Progress," the other expense items do not fall within the
definition of capital goods pursuant to Section 4.106-1(b) of Revenue Regulations No. 7-
2000 1999 95.161âwphi1

Plant, machinery and equipment
Sewerage and water pipelines
Reservoir, tanks and pumping station
Leasehold improvements
Electronic and instrumentation
Building
Wells
As a final point, it is doctrinal that the Court will not lightly set aside the conclusions reached
₱ 625,868,017.00 ₱             - by the CT A which, by the very nature of its function of being dedicated exclusively to the
resolution of tax problems, has accordingly developed an expertise on the subject, unless
563,252,132.00 - there has been an abuse or improvident exercise of authority.17
186,127,317.00 -
In fact, in Barcelon, Roxas Securities, Inc. v. Commissioner of Internal Revenue,18 this Court
162,561,913.00 - held that it accords the findings of fact by the CT A with the highest respect. It ruled that
factual findings made by the CT A can only be disturbed on appeal if they are supported by
153,544,879.00 - substantial evidence or there is a showing of gross error or abuse on the part of the Tax
64,8865,059.00 - Court. In the absence of any clear and convincing proof to the contrary, this Court must
presume that the CT A rendered a decision which is valid in every respect.19
20,248,580.00 -
In the present case, no cogent reason exists for this Court to deviate from this well-
entrenched principle, since the CT A En Bane neither abused its authority nor committed
gross error in partially denying petitioner's refund claim.
WHEREFORE, premises considered, the instant petition is DENIED. The Court of Tax
Appeals En Bane Decision dated June 26, 2006, and Resolution dated October 19, 2006, are
hereby AFFIRMED.
SO ORDERED.
G.R. No. 181136               June 13, 2012
WESTERN MINDANAO POWER CORPORATION, Petitioner,
vs.
COMMISSIONER OF INTERNAL REVENUE, Respondent.
DECISION
SERENO, J.:
This is a Petition for Review under Rule 45 seeking the reversal of the 15 November 2007
Decision and 9 January 2008 Resolution of the Court of Tax Appeals (CTA) En Banc in
C.T.A. EB No. 272,1 which upheld the Court of Tax Appeals Second Division’s denial of the
Petition for refund of unutilized input Value Added Tax (VAT) on the ground that the Official
Receipts of petitioner Western Mindanao Power Corporation (WMPC) did not contain the
phrase "zero-rated," as required under Revenue Regulations No. 7-95 (RR 7-95).
Petitioner WMPC is a domestic corporation engaged in the production and sale of electricity.
It is registered with the Bureau of Internal Revenue (BIR) as a VAT taxpayer. Petitioner
alleges that it sells electricity solely to the National Power Corporation (NPC), which is in turn
exempt from the payment of all forms of taxes, duties, fees and imposts, pursuant to Section
132 of Republic Act (R.A.) No. 6395 (An Act Revising the Charter of the National Power
Corporation). In view thereof and pursuant to Section 108(B) (3) of the National Internal
Revenue Code (NIRC),3 petitioner’s power generation services to NPC is zero-rated.
Under Section 112(A) of the NIRC,4 a VAT-registered taxpayer may, within two years after the
close of the taxable quarter, apply for the issuance of a tax credit or refund of creditable input
tax due or paid and attributable to zero-rated or effectively zero-rated sales. Hence, on 20
June 2000 and 13 June 2001, WMPC filed with the Commissioner of Internal Revenue (CIR)
applications for a tax credit certificate of its input VAT covering the taxable
3rd and 4th quarters of 1999 (amounting to ₱ 3,675,026.67)5 and all the taxable quarters of
2000 (amounting to ₱ 5,649,256.81).6
Noting that the CIR was not acting on its application, and fearing that its claim would soon be
barred by prescription, WMPC on 28 September 2001 filed with the Court of Tax Appeals
(CTA) in Division a Petition for Review docketed as C.T.A. Case No. 6335, seeking refund/tax
credit certificates for the total amount of ₱ 9,324,283.30.
The CIR filed its Comment on the CTA Petition, arguing that WMPC was not entitled to the
latter’s claim for a tax refund in view of its failure to comply with the invoicing requirements
under Section 113 of the NIRC in relation to Section 4.108-1 of RR 7-95, which provides:
SECTION 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.
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 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.
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.
(Underscoring supplied.)
WMPC countered that the invoicing and accounting requirements laid down in RR 7-95 were
merely "compliance requirements," which were not indispensable to establish the claim for
refund of excess and unutilized input VAT. Also, Section 113 of the NIRC prevailing at the
time the sales transactions were made did not expressly state that failure to comply with all
the invoicing requirements would result in the disallowance of a tax credit refund. 7 The
express requirement – that "the term ‘zero-rated sale’ shall be written or printed prominently"
on the VAT invoice or official receipt for sales subject to zero percent (0%) VAT – appeared in
Section 113 of the NIRC only after it was amended by Section 11 of R.A. 9337. 8 This
amendment cannot be applied retroactively, considering that it took effect only on 1 July
2005, or long after petitioner filed its claim for a tax refund, and considering further that the
RR 7-95 is punitive in nature. Further, since there was no statutory requirement for imprinting
the phrase "zero-rated" on official receipts prior to 1 July 2005, the RR 7-95 constituted
undue expansion of the scope of the legislation it sought to implement.
CTA Second Division Decision
On 1 September 2006, the CTA Second Division dismissed 9 the Petition. It held that while
petitioner submitted in evidence its Quarterly VAT Returns for the periods applied for, "the
same do not reflect any zero-rated or effectively zero-rated sales allegedly incurred during
said periods. The spaces provided for such amounts were left blank, which only shows that
there existed no zero-rated or effectively zero-rated sales for the 3rd and 4th quarters of 1999
and the four quarters of 2000."10 Moreover, it found that petitioner’s VAT Invoices and Official
Receipts did not contain on their face the phrase "zero-rated," contrary to Section 4.108-1 of
RR 7-95.
Petitioner moved for reconsideration, but the motion was denied by the CTA in Division in its
Resolution dated 30 January 2007.11
CTA En Banc Decision
On 13 March 2007, WMPC appealed to the CTA En Banc, which on 15 November 2007
issued a Decision dismissing the appeal and affirming the CTA ruling. The CTA En Banc held
that the receipts and evidence presented by petitioner failed to fully substantiate the
existence of the latter’s effectively zero-rated sales to NPC for the 3rd and 4th quarters of
taxable year 1999 and the four quarters of taxable year 2000. The CTA En Banc quoted the
CTA Second Division finding that the Quarterly VAT Returns that petitioner adduced in
evidence did not reflect any zero-rated or effectively zero-rated sales allegedly incurred
during the said period, to wit:
Petitioner submitted in evidence its Quarterly Value Added Tax Returns for the 3rd and 4th
quarters of 1999 and the four quarters of 2000 to prove that it had duly reported the input
taxes paid on its domestic purchases of goods and services (Exhibits ‘E’ to ‘J’). However, a
closer examination of the returns clearly shows that the same do not reflect any zero-rated or
effectively zero-rated sales allegedly incurred during the said periods. The spaces provided
for such amounts were left blank, which only shows that there existed no zero-rated or
effectively zero-rated sales for the 3rd and 4th quarters of 1999 and the four quarters of 2000.
In addition, the CTA En Banc noted that petitioner’s Official Receipts and VAT Invoices did
not have the word "zero-rated" imprinted/stamped thereon, contrary to the clear mandate of
Section 4.108-1 of RR 7-95.
CTA Presiding Justice Ernesto Acosta filed a Concurring and Dissenting Opinion. Justice
Acosta disagreed with the majority’s view regarding the supposed mandatory requirement of
imprinting the term "zero-rated" on official receipts or invoices. He opined that Section 113 in
relation to Section 23712 of the NIRC does not require the imprinting of the phrase "zero-rated"
on an invoice or official receipt for the document to be considered valid for the purpose of
claiming a refund or an issuance of a tax credit certificate. Hence, the absence of the term
"zero-rated" in an invoice or official receipt does not affect its admissibility or competency as
evidence in support of a refund claim. Also, assuming that stamping the term "zero-rated" on
an invoice or official receipt is a requirement of the current NIRC, the denial of a refund claim
is not the imposable penalty for failure to comply with that requirement.
Nevertheless, Justice Acosta agreed with the "decision to deny the claim due to petitioner’s
failure to prove the input taxes it paid on its domestic purchases of goods and services during
the period involved."
WMPC filed a Motion for Reconsideration, which was denied by the CTA En Banc in a
Resolution dated 9 January 2008.13
Hence, the present Petition.
Issue
Whether the CTA En Banc seriously erred in dismissing the claim of petitioner for a refund or
tax credit on input tax on the ground that the latter’s Official Receipts do not contain the
phrase "zero-rated" NO
Our Ruling
We deny the Petition.
Being a derogation of the sovereign authority, a statute granting tax exemption is strictly
construed against the person or entity claiming the exemption. When based on such statute,
a claim for tax refund partakes of the nature of an exemption. Hence, the same rule of strict
interpretation against the taxpayer-claimant applies to the claim.14
In the present case, petitioner’s claim for a refund or tax credit of input VAT is anchored on
Section 112(A) of the NIRC, viz:
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 of 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.
Thus, a taxpayer engaged in zero-rated or effectively zero-rated sale may apply for the
issuance of a tax credit certificate, or refund of creditable input tax due or paid, attributable to
the sale.
In a claim for tax refund or tax credit, the applicant must prove not only entitlement to the
grant of the claim under substantive law. It must also show satisfaction of all the documentary
and evidentiary requirements for an administrative claim for a refund or tax credit.15 Hence,
the mere fact that petitioner’s application for zero-rating has been approved by the CIR does
not, by itself, justify the grant of a refund or tax credit. The taxpayer claiming the refund must
further comply with the invoicing and accounting requirements mandated by the NIRC, as
well as by revenue regulations implementing them. 16
Under the NIRC, a creditable input tax should be evidenced by a VAT invoice or official
receipt,17 which may only be considered as such when it complies with the requirements of
RR 7-95, particularly Section 4.108-1. This section requires, among others, that "(i)f the sale
is subject to zero percent (0%) value-added tax, the term ‘zero-rated sale’ shall be written or
printed prominently on the invoice or receipt."
Internal Revenue19 that the subsequent incorporation of Section 4.108-1 of RR 7-95 in Section
113 (B) (2) (c) of R.A. 9337 actually confirmed the validity of the imprinting requirement on
VAT invoices or official receipts – a case falling under the principle of legislative approval of
administrative interpretation by reenactment.
In fact, this Court has consistently held as fatal the failure to print the word "zero-rated" on the
VAT invoices or official receipts in claims for a refund or credit of input VAT on zero-rated
sales, even if the claims were made prior to the effectivity of R.A. 9337.20 Clearly then, the
present Petition must be denied.
In addition, it is notable that the CTA Second Division and the CTA En Banc, including
Presiding Justice Acosta in his Concurring and Dissenting Opinion, both found that petitioner
failed to sufficiently substantiate the existence of its effectively zero-rated sales to NPC for
the 3rd and 4th quarters of taxable year 1999, as well as all four quarters of taxable year
2000. It must also be noted that the CTA is a highly specialized court dedicated exclusively to
the study and consideration of revenue-related problems, in which it has necessarily
developed an expertise.21 Hence, its factual findings, when supported by substantial evidence,
will not be disturbed on appeal.22 We find no sufficient reason to exempt the present case
from this general rule.
WHEREFORE, premises considered, we DENY the Petition and AFFIRM the Decision dated
15 November 2007 and Resolution dated 9 January 2008 of the Court of Tax Appeals En
Banc in CTA EB No. 272.
SO ORDERED.
MARIA LOURDES P. A. SEREN

We are not persuaded by petitioner’s argument that RR 7-95 constitutes undue expansion of
the scope of the legislation it seeks to implement on the ground that the statutory requirement
for imprinting the phrase "zero-rated" on VAT official receipts appears only in Republic Act
No. 9337. This law took effect on 1 July 2005, or long after petitioner had filed its claim for a
refund.1âwphi1

RR 7-95, which took effect on 1 January 1996, proceeds from the rule-making authority
granted to the Secretary of Finance by the NIRC for the efficient enforcement of the same
Tax Code and its amendments. In Panasonic Communications Imaging Corporation of the
Philippines v. Commissioner of Internal Revenue,18 we ruled that this provision is "reasonable
and is in accord with the efficient collection of VAT from the covered sales of goods and
services." Moreover, we have held in Kepco Philippines Corporation v. Commissioner of