COMMISSIONER OF INTERNAL REVENUE v.
MANILA MINING CORPORATION 468 SCRA 571 (2005) NORTHERN MINDANAO POWER CORPORATION, Petitioner VS. COMMISSIONER OF INTERNAL
For a judicial claim for refund to prosper, the party must not only prove that it is a VAT registered entity,
it must substantiate the input VAT paid by purchase invoices or official receipts.
Respondent Manila Mining Corporation (MMC), a VAT-registered enterprise, filed its VAT Returns for the
year of 1991 with the BIR. MMC, relying on Sec. 2 of Executive Order (E.O.) 581 as amended which
provides that gold sold to the Central Bank is considered an export sale which under Section 100(a)(1) of
the NIRC, as amended by E.O. 273, is subject to zero-rated if such sale is made by a VAT-registered
person, filed an application for tax refund/credit of the input VAT it paid from such year. The
Commissioner of Internal Revenue (CIR) failed to act upon MMC’s application within sixty (60) days from
the dates of filing. MMC was then filed a Petition for Review against the CIR before the Court of Tax
Appeals (CTA) seeking the issuance of tax credit certificate or refund. The CIR specifically denied the
veracity of the amounts stated in MMC’s VAT returns and application for credit/refund as the same
continued to be under investigation. However, such was not verified prompting MMC to file a
“SUPPLEMENT (To Annotation of Admission)” alleging that as the reply was not under oath, “an implied
admission of its requests arose” as a consequence thereof. The CTA granted MMC’s Request for
Admissions and denied the CIR’s Motion to Admit Reply. The CTA denied MMC’s claim for refund of
input VAT for failure to prove that it paid the amounts claimed as such for the year 1991, no
sales invoices, receipts or other documents as required having been presented. Upon appeal of MMC to
the Court of Appeals (CA), it reversed the decision of the CTA and granted MMC’s claim for refund or
issuance of tax credit certificates on the ground that there was no need for MMC to present the
photocopies of the purchase invoices or receipts evidencing the VAT paid and the best evidence rule is
misplaced since this rule does not apply to matters which have been judicially admitted.
ISSUE: Whether or not MMC adduced sufficient evidence to prove its claim for refund of its input
VAT for taxable year 1991.
HELD: As export sales, the sale of gold to the Central Bank is zero-rated, hence, no tax
is chargeable to it as purchaser. Zero rating is primarily intended to be enjoyed by the seller – MMC,
which charges no output VAT but can claim a refund of or a tax credit certificate for the input VAT
previously charged to it by suppliers. For a judicial claim for refund to prosper, however, MMC must not
only prove that it is a VAT registered entity and that it filed its claims within the prescriptive period. It
must substantiate the input VAT paid by purchase invoices or official receipts. It is required that a
photocopy of the purchase invoice or receipt evidencing the value added tax paid shall be submitted
together with the application. This MMC failed to do.
REVENUE, Respondent (G.R. No. 185115, February 18, 2015)
FACTS:
 Petitioner is engaged in the production sale of electricity as an independent power producer and sells
electricity to National Power Corporation (NPC). It allegedly incurred input value-added tax (VAT) on its
domestic purchases of goods and services that were used in its production and sale of electricity to NPC.
For the 3rd and the 4th quarters of taxable year 1999, petitioner’s input VAT totaled to P2,490,960.29,
while that incurred for all the quarters of taxable year 2000 amounted to P3,920,932.55.
 Petitioner filed an administrative claim for a refund on 20 June 2000 for the 3rd and the 4th quarters of
taxable year 1999, and on 25 July 2001 for taxable year 2000 in the sum of P6,411,892.84.
 Alleging inaction of respondent on these administrative claims, petitioner filed a Petition with the CTA
on 28 September 2001. The CTA First Division denied the Petition and the subsequent Motion for
Reconsideration for lack of merit. The Court in Division found that the term "zero-rated" was not
imprinted on the receipts or invoices presented by petitioner in violation of Section 4.108-1 of Revenue
Regulations No. 7-95. Petitioner failed to substantiate its claim for a refund and to strictly comply with
the invoicing requirements of the law and tax regulations.
 On appeal to the CTA En Banc, the Petition was likewise denied. The court ruled that for every sale of
services, VAT shall be computed on the basis of gross receipts indicated on the official receipt. Official
receipts are proofs of sale of services and cannot be interchanged with sales invoices as the latter are
used for the sale of goods.
ISSUE:
1.) Whether or not the CTA acquired jurisdiction over the claim for a refund of input VAT covering the
3rd and the 4th quarters of taxable year 1999 and on 25 July 2001 covering all the quarters of taxable
year 2000?
2.) Whether or not Section 4.108-1 of Revenue Regulations (RR) No. 7- 95 which expanded the statutory
requirements for the issuance of official receipts and invoices found in Section 113 of the 1997 Tax Code
by providing for the additional requirement of the imprinting of the terms “zero-rated” is constitutional?
RULING:
The CTA did not acquire jurisdiction over the claim for a refund of input VAT covering the 3rd and the 4th
quarters of taxable year 1999 and taxable year 2000.
Pursuant to Section 112(D) of the NIRC of 1997, CIR had 120 days from the date of submission of
complete documents in support of the application within which to decide on the administrative claim.
The burden of proving entitlement to a tax refund is on the taxpayer. Absent any evidence to the
contrary, it is presumed that in order to discharge its burden, petitioner attached to its applications
complete supporting documents necessary to prove its entitlement to a refund. Thus, the 120-day period
for the CIR to act on the administrative claim commenced on 20 June 2000 and 25 July 2001.
Both judicial claims must be disallowed.
* Claim for a refund of input VAT covering the 3rd and the 4th quarters of taxable year 1999: Counting
120 days from 20 June 2000, the CIR had until 18 October 2000 within which to decide on the claim of
petitioner for the period covering the 3rd and the 4th quarters of taxable year 1999. If after the
expiration of that period respondent still failed to act on the administrative claim, petitioner could
elevate the matter to the court within 30 days or until 17 November 2000.
Petitioner belatedly filed its judicial claim with the CTA on 28 September 2001. Petitioner’s claim for the
3rd and the 4th quarters of taxable year 1999 was filed 319 days after the expiration of the 30-day
period. It already lost its right to claim a refund or credit of its alleged excess input VAT attributable to
zero-rated or effectively zero-rated sales for the 3rd and the 4th quarters of taxable year 1999 by virtue
of its own failure to observe the prescriptive periods.
* Claim for the refund of input VAT covering all quarters of taxable year 2000:
For the year 2000, records show that petitioner filed its Petition with the CTA on 28 September 2001
without waiting for the expiration of the 120-day period. Barely 64 days had lapsed when the judicial
claim was filed with the CTA. On 28 September 2001
– the date on which petitioner filed its judicial claim for the period covering taxable year 2000 - the
120+30 day mandatory period was already in the law and BIR Ruling No. DA-489-03 had not yet been
issued. Considering this fact, petitioner did not have an excuse for not observing the 120+30 day period.
The judicial claim was thus prematurely filed for failure of petitioner to observe the 120- day waiting
period.
Revenue Regulations (RR) No. 7-95 is constitutional. 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.
Clearly then, the present Petition must be denied.
A VAT invoice is the seller's best proof of the sale of goods or services to the buyer, while a VAT receipt
is the buyer's best evidence of the payment of goods or services received from the seller. A VAT invoice
and a VAT receipt should not be confused and made to refer to one and the same thing. Certainly,
neither does the law intend the two to be used alternatively.
QUESTIONS:
a.) What are the information(s) contained in the VAT invoice or VAT official receipt? Cite your legal basis.
b.) If in case, the taxpayer claiming refund failed to print the needed information in the VAT invoice or
VAT official receipt, will it cause dismissal of the claim? Explain your answer.
Contex Corporation vs Commissioner of Internal Revenue
(G.R. No.151135, July 2, 2004)
FACTS: Petitioner Contex Corporation (CONTEX) is a domestic corporation engaged in the business
manufacturing hospital textiles and garments and other hospital supplies for export. Petitioner’s place of
business is at the Subic Bay Freeport Zone (SBFZ). It is duly registered with the Subic Bay Metropolitan
Authority (SBMA) as a Subic Freeport Enterprise, pursuant to the provisions of RA 7227. As an SBMA-
registered firm, petitioner is except from all local and national international revenue taxes except for the
5% preferential tax provided in RA 7227. Petitioner also registered with the BIR as a The Court of Appeals
reversed the CTA’s ruling, hence, this petition.
Issues: Was COMASERCO engaged in the sale of services, and thus, liable to pay VAT?
HELD: Yes. Section 99 of the National Internal Revenue Code of 1986 provides that: “any person
who, in the course of trade or business sells, barters or exchanges goods, renders services, or engages in
similar transactions and any person, who, imports goods shall be subject to VAT imposed in Sections 100
to 102 of this Code. The Higher Court clarified the meaning of the term “in the course of trade or
business” by citing Section 105 of RA 8424 which took effect on January 1, 1998.
The phrase “in the course of trade or business” means the regular conduct or pursuit of a commercial or
an economic activity, including transactions incidental thereto, by any person regardless of whether or
not the person engaged therein is a non-stock non-profit organization (irrespective of the disposition of
its net income and whether or not it sells exclusively to members or their guests) or government entity.
It is immaterial whether the primary purpose of a corporation indicates that it receives payments for
services rendered to its affiliates on a reimbursement-of-cost basis only, without realizing profit, for
purposes of determining liability for VAT on services rendered. As long as the entity provides services for
a fee, remuneration or consideration, then the service rendered is subject to VAT.
Secondly, it is a rule that business taxes are the lifeblood of the nation, statutes that allow exemptions
are construed strictly against the grantee and liberally in favor of the government. Otherwise stated, any
exemption from the payment of a tax must be clearly stated in the language of the Law, it cannot be
merely implied therefrom. In the case of the VAT, Section 109, RA 8424, clearly enumerates the
transactions exempted from VAT. The services rendered by COMASERCO do not fall within the
exemptions.
GR No. 153866 CIR vs. Seagate Commissioner of Internal Revenue v. Seagate Technology
FACTS: Respondent is a resident foreign corporation duly registered with the Securities and Exchange
G.R. No. 153866. February 11, 2005
Commission to do business in the Philippines and is registered with the Philippine Export Zone Authority
(PEZA). The respondent is Value Added Tax-registered entity and filed for the VAT returns. An
FACTS: Respondent is a resident foreign corporation duly registered with the Securities and Exchange
administrative claim for refund of VAT input taxes in the amount of P28,369,226.38 with supporting
Commission to do business in the Philippines and is registered with the Philippine Export Zone Authority
documents (inclusive of the P12,267,981.04 VAT input taxes subject of this Petition for Review), was filed
(PEZA). The respondent is Value Added Tax-registered entity and filed for the VAT returns. An
on 4 October 1999, but no final action has been received by the respondent from the petitioner on the
administrative claim for refund of VAT input taxes in the amount of P28,369,226.38 with supporting
claim for VAT refund. CIR asserts that by virtue of the PEZA registration alone of respondent, the latter is
documents (inclusive of the P12,267,981.04 VAT input taxes subject of this Petition for Review), was filed
not subject to the VAT. Consequently, the capital goods and services respondent has purchased are not
on 4 October 1999 and no final action has been received by the respondent from the petitioner on the
considered used in the VAT business, and no VAT refund or credit is due.
claim for VAT refund. Hence, petitioner is sued in his official capacity. The Tax Court rendered a decision
granting the claim for refund and CTA affirmed the decision. Hence, the present petition for certiorari.
ISSUE: Whether or not Seagate, a VAT-Registered PEZA Enterprise is entitled to tax refund or credit.
ISSUE: Whether or not respondent is entitled to the refund or issuance of Tax Credit Certificate in
the amount of P12,122,922.66 representing alleged unutilized input VAT paid on capital goods
HELD: Yes, Seagate is entitled to refund or credit. As a PEZA-registered enterprise within a special
purchased for the period April 1, 1998 to June 30, 1999
economic zone, respondent is entitled to the fiscal incentives and benefit provided for in either PD 66 or
EO 226. It shall, moreover, enjoy all privileges, benefits, advantages or exemptions under both Republic
HELD: The Petition is unmeritorious. As a PEZA-registered enterprise within a special economic
Act Nos. (RA) 7227 and 7844.
zone, respondent is entitled to the fiscal incentives and benefit provided for in either PD 66 or EO 226. It
shall, moreover, enjoy all privileges, benefits, advantages or exemptions under both Republic Act Nos.
Respondent, which as an entity is exempt, is different from its transactions which are not exempt. The (RA) 7227 and 7844. Respondent as an entity is exempt from internal revenue laws and regulations. This
end result, however, is that it is not subject to the VAT. The non-taxability of transactions that are exemption covers both direct and indirect taxes, stemming from the very nature of the VAT as a tax on
otherwise taxable is merely a necessary incident to the tax exemption conferred by law upon it as an consumption, for which the direct liability is imposed on one person but the indirect burden is passed on
entity, not upon the transactions themselves. to another. Respondent, as an exempt entity, can neither be directly charged for the VAT on its sales nor
indirectly made to bear, as added cost to such sales, the equivalent VAT on its purchases. The exemption
is both express and pervasive, among other reasons, since RA 7916 states that “no taxes, local and
The petitioner’s assertion that the capital goods and services respondent has purchased are not national, shall be imposed on business establishments operating within the ecozone”. Even though the
considered used in the VAT business, and thus no VAT refund or credit is due is non sequitur. On this VAT is not imposed on the entity but on the transaction, it may still be passed on and, therefore,
matter, the SC held that by the VAT’s very nature as a tax on consumption, the capital goods and services indirectly imposed on the same entity -- a patent circumvention of the law. That no VAT shall be
respondent has purchased are subject to the VAT, although at zero rate. imposed directly upon business establishments operating within the ecozone under RA 7916 also means
that no VAT may be passed on and imposed indirectly. Quando aliquid prohibetur ex directo prohibetur
et per obliquum. When anything is prohibited directly, it is also prohibited indirectly. Special laws
Seagate has complied with all the requisites for VAT refund or credit. First, respondent is a VAT-
expressly grant preferential tax treatment to business establishments registered and operating within an
registered entity. Second, the input taxes paid on the capital goods of respondent are duly supported by
ecozone, which by law is considered as a separate customs territory. As such, respondent is exempt
VAT invoices and have not been offset against any output taxes.
from all internal revenue taxes, including the VAT, and regulations pertaining thereto. Thus, the petition
is denied and the decision of lower courts affirmed.
To summarize, special laws expressly grant preferential tax treatment to business establishments
registered and operating within an ecozone, which by law is considered as a separate customs territory.
As such, respondent is exempt from all internal revenue taxes, including the VAT, and regulations
pertaining thereto. Its sales transactions intended for export may not be exempt, but like its purchase
transactions, they are zero-rated. No prior application for the effective zero rating of its transactions is
necessary. Being VAT-registered and having satisfactorily complied with all the requisites for claiming a
tax refund of or credit for the input VAT paid on capital goods purchased, respondent is entitled to such
VAT refund or credit.

Having determined that respondent’s purchase transactions are subject to a zero VAT rate, the SC has
determined that tax refund or credit is in order.
CIR vs Seagate Technology (Philippines) G.R. No. 153866, 11 February 2005
Facts:
Seagate Technology was claiming a refund for the input tax it paid on the unutilized capital go
ods purchased. It asserted that it is exempt from all internal revenue taxes including VAT since it is regist
ered in and operating from the Special Economic Zone in Naga, Cebu.
Issue:
Whether or not an entity registered and operating within an ecozone is exempt from all reven
ue taxes including VAT.
Ruling:
Yes. Ecozone is considered by law as a separate customs authority. It means that in such zone
is created the legal fiction of foreign authority although it is a geographical territory of the Philippines.
Under the crossborder principle of the VAT system, no VAT shall be imposed to form part of the cost of
the goods destined for consumption outside of the territorial border of the taxing authority. If exports of
goods and services from the Philippines to a foreign authority are free of VAT, then the same rule holds f
or such exports from the national territory to an ecozone.
This is to encourage foreign investments in order to win international markets and to promote sustainabl
e economic growth.
THE COMMISIONER OF INTERNAL REVENUE, Petitioner, 
vs.
ACESITE (PHILIPPINES) HOTEL
CORPORATION, Respondent.
FACTS:
1. Acesite is the owner and operator of the Holiday Inn Manila Pavilion Hotel. It leases 6,768.53 square
meters of the hotel’s premises to the Philippine Amusement and Gaming Corporation for casino
operations and caters food and beverages to PAGCOR’s casino patrons through the hotel’s restaurant
outlets.
2.For the period January 96 to April 1997, Acesite incurred VAT amounting to P30,152,892.02 from its
rental income and sale of food and beverages to PAGCOR during said period. Acesite tried to shift the
said taxes to PAGCOR by incorporating it in the amount assessed to PAGCOR but the latter refused to
pay the taxes on account of its tax exempt status.1awphi1.net
3. PAGCOR paid the amount due to Acesite minus the P30,152,892.02 VAT while the latter paid the VAT
to the Commissioner of Internal Revenue.
4.However, Acesite belatedly arrived at the conclusion that its transaction with PAGCOR was subject to
zero rate as it was rendered to a tax-exempt entity.
5. Acesite filed an administrative claim for refund with the CIR but the latter failed to resolve the same.
Acesite filed a petition with the Court of Tax Appeals
CTA Decision: Petitioner is subject to zero percent tax insofar as its gross income from rentals and sales
to PAGCOR, a tax exempt entity by virtue of a special law. Accordingly, the amounts of P21,413,026.78
and P8,739,865.24, representing the 10% EVAT on its sales of food and services and gross rentals,
respectively from PAGCOR shall be refunded to the petitioner..
CA Decision: PAGCOR was not only exempt from direct taxes but was also exempt from indirect taxes
like the VAT and consequently, the transactions between respondent Acesite and PAGCOR were
"effectively zero-rated" because they involved the rendition of services to an entity exempt from indirect
taxes.
ISSUE/S: (1) whether PAGCOR’s tax exemption privilege includes the indirect tax of VAT to entitle Acesite
to zero percent (0%) VAT rate; and (2) whether the zero percent (0%) VAT rate under then Section 102
(b)(3) of the Tax Code (now Section 108 (B)(3) of the Tax Code of 1997) legally applies to Acesite.
HELD:
1. Yes. PAGCOR is exempt from payment of indirect taxes
It is undisputed that P.D. 1869, the charter creating PAGCOR, grants the latter an exemption from the
payment of taxes. Section 13 of P.D. 1869 pertinently provides exemption.
Under the above provision [Section 13 (2) (b) of P.D. 1869], the term "Corporation" or operator refers to
PAGCOR. Although the law does not specifically mention PAGCOR’s exemption from indirect taxes,
PAGCOR is undoubtedly exempt from such taxes because the law exempts from taxes persons or
entities contracting with PAGCOR in casino operations. Although, differently worded, the provision
clearly exempts PAGCOR from indirect taxes. In fact, it goes one step further by granting tax exempt
status to persons dealing with PAGCOR in casino operations. The unmistakable conclusion is that
PAGCOR is not liable for the P30,152,892.02 VAT and neither is Acesite as the latter is effectively subject
to zero percent rate under Sec. 108 B (3). R.A. 8424. (Emphasis supplied.)
2. The manner of charging VAT does not make PAGCOR liable to said tax
It is true that VAT can either be incorporated in the value of the goods, properties, or services sold or
leased, in which case it is computed as 1/11 of such value, or charged as an additional 10% to the value.
Verily, the seller or lessor has the option to follow either way in charging its clients and customer. In the
instant case, Acesite followed the latter method, that is, charging an additional 10% of the gross sales
and rentals. Be that as it may, the use of either method, and in particular, the first method, does not
denigrate the fact that PAGCOR is exempt from an indirect tax, like VAT.
3. Yes. VAT exemption extends to Acesite
Thus, while it was proper for PAGCOR not to pay the 10% VAT charged by Acesite, the latter is not liable
for the payment of it as it is exempt in this particular transaction by operation of law to pay the indirect
tax. Such exemption falls within the former Section 102 (b) (3) of the 1977 Tax Code, as amended (now
Sec. 108 [b] [3] of R.A. 8424), which provides:
Section 102. Value-added tax on sale of services – (a) Rate and base of tax – There shall be levied,
assessed and collected, a value-added tax equivalent to 10% of gross receipts derived by any person
engaged in the sale of services x x x; Provided, that the following services performed in the Philippines by
VAT-registered persons shall be subject to 0%
(3) Services rendered to persons or entities whose exemption under special laws or international
agreements to which the Philippines is a signatory effectively subjects the supply of such services to zero
(0%) rate (emphasis supplied).
4. Acesite paid VAT by mistake
Considering the foregoing discussion, there are undoubtedly erroneous payments of the VAT pertaining
to the effectively zero-rate transactions between Acesite and PAGCOR. Verily, Acesite has clearly shown
that it paid the subject taxes under a mistake of fact, that is, when it was not aware that the transactions
it had with PAGCOR were zero-rated at the time it made the payments.
Solutio indebiti applies to the Government
Tax refunds are based on the principle of quasi-contract or solutio indebiti and the pertinent laws
governing this principle are found in Arts. 2142 and 2154 of the Civil Code. When money is paid to
another under the influence of a mistake of fact, that is to say, on the mistaken supposition of the
existence of a specific fact, where it would not have been known that the fact was otherwise, it may be
recovered.
Action for refund strictly construed; Acesite discharged the burden of proof
Since an action for a tax refund partakes of the nature of an exemption, which cannot be allowed unless
granted in the most explicit and categorical language, it is strictly construed against the claimant who
must discharge such burden convincingly.11
PHILIPPINE AMUSEMENT AND GAMING CORPORATION VS. BUREAU OF INTERNAL REVENUE
ISSUE: Is Republic Act 9337 constitutional insofar as it excluded PAGCOR from the enumeration of
GOCCs exempt from the payment of corporate income tax?
HELD: YES. The original exemption of PAGCOR from corporate income tax was not made pursuant to
a valid classification based on substantial distinctions so that the law may operate only on some and not
on all. Instead, the same was merely granted due to the acquiescence of the House Committee on Ways
and Means to the request of PAGCOR.
The argument that the withdrawal of the exemption also violates the non-impairment clause will not
hold since any franchise is subject to amendment, alteration or repeal by Congress.
However, the Court made it clear that PAGCOR remains exempt from payment of indirect taxes and as
such its purchases remain not subject to VAT, reiterating the rule laid down in the Acesite case.
PHILIPPINE AMUSEMENT v. BIR, GR No. 172087, 2011-03-15
Facts: Petitioner further seeks to prohibit the implementation of Bureau of Internal Revenue (BIR)
Revenue Regulations No. 16-2005 for being contrary to law.
With the enactment of R.A. No. 9337[10] on May 24, 2005, certain sections of the National Internal
Revenue Code of 1997 were amended. Different groups came to this Court via petitions for certiorari
and prohibition[11] assailing the validity and constitutionality of R.A. No. 9337
10% Value Added Tax (VAT) on sale of goods and properties
10% VAT on importation of goods
10% VAT on sale of services and use or lease of properties... the Court dismissed all the petitions and
upheld the constitutionality of R.A. No. 9337.
On the same date, respondent BIR issued Revenue Regulations (RR) No. 16-2005,[13] specifically
identifying PAGCOR as one of the franchisees subject to 10% VAT imposed under Section 108 of the
National Internal Revenue Code of 1997, as amended by R.A.No. 9337.
Furthermore, according to the OSG,... public respondent BIR exceeded its statutory authority when it
enacted RR No. 16-2005, because the latter's provisions are contrary to the mandates of P.D. No. 1869 in
relation to R.A. No. 9337.
Issues: Whether or not PAGCOR is still exempt... hether or not PAGCOR is still exempt.. from
VAT with the enactment of R.A. No. 9337.
Ruling: Anent the validity of RR No. 16-2005, the Court holds that the provision subjecting PAGCOR to
10% VAT is invalid for being contrary to R.A. No. 9337. Nowhere in R.A. No. 9337 is it provided that
petitioner can be subjected to VAT. R.A. No. 9337 is clear only as to... the removal of petitioner's
exemption from the payment of corporate income tax, which was already addressed above by this Court.
As pointed out by the OSG, R.A. No. 9337 itself exempts petitioner from VAT pursuant to Section 7 (k)
thereof... the following transactions shall be exempt from the value-added tax:
Transactions which are exempt under international agreements to which the Philippines is a signatory or
under special laws
Petitioner is exempt from the payment of VAT, because PAGCOR's charter, P.D. No. 1869, is a special law
that grants petitioner exemption from taxes.
Moreover, the exemption of PAGCOR from VAT is supported by Section 6 of R.A. No. 9337
The following services performed in the Philippines by VAT-registered persons shall be subject to zero
percent (0%) rate;
Services rendered to persons or entities whose exemption under special laws... subjects the supply of
such services to zero percent (0%) rate... although R.A. No. 9337 introduced amendments to Section 108
of R.A. No. 8424 by imposing VAT on other services not previously covered, it did not amend the portion
of Section 108 (B) (3) that subjects to zero percent rate services performed by
VAT-registered persons to persons or entities whose exemption under special laws or international
agreements to which the Philippines is a signatory effectively subjects the supply of such services to 0%
rate.
G.R. No. 164365 June 8, 2007
COMMISSIONER OF INTERNAL REVENUE vs. PLACER DOME TECHNICAL SERVICES (PHILS.), INC.
Facts: At the San Antonio Mines in Marinduque owned by Marcopper Mining Corporation
(Marcopper), mine tailings from the Taipan Pit started to escape through the Makulapnit Tunneland
Boac Rivers, causing the cessation of mining and milling operations, and causing potential environmental
damage. To contain the damage and prevent the further spread of the tailing leak, Placer Dome, Inc.
(PDI), the owner of 39.9% of Marcopper, undertook to perform the clean-up and rehabilitation of the
Makalupnit and Boac Rivers, through a subsidiary. To accomplish this, PDI engaged Placer Dome
Technical Services Limited (PDTSL), a non-resident foreign corporation with office in Canada, to carry out
the project. In turn, PDTSL engaged the services of Placer Dome Technical Services (Philippines), Inc.
(respondent), a domestic corporation and registered Value-Added Tax (VAT) entity, to implement the
project in the Philippines. PDTSL and respondent thus entered into an Implementation Agreement. Due
to the urgency and potentially significant damage to the environment, respondent had agreed to
immediately implement the project, and that PDTSL was to pay respondent "an amount of money, in
U.S. funds, equal to all Costs incurred for Implementation Services as well as a fee agreed to one percent
(1%) of such Costs." Respondent amended its quarterly VAT returns. In the amended returns, respondent
declared a total input VAT payment of P43,015,461.98 for the said quarters, and P42,837,933.60 as its
total excess input VAT for the same period. Then respondent filed an administrative claim for the refund
of its reported total input VAT payments in relation to the project it had contracted from PDTSL,
amounting to P43,015,461.98. Respondent argued that the revenues it derived from services rendered
to PDTSL qualified as zero-rated sales under Section 102(b)(2) of the then Tax Code, since it was paid in
foreign currency inwardly remitted to the Philippines. When the CIR did not act on this claim, respondent
duly filed a Petition for Review with the CTA. CTA ruled in favor of respondent but only the resulting
input VAT of P17,178,373.12 could be refunded. The Court of Appeals affirmed such ruling.
Issue: Whether Placer is entitled to the refund as the revenues qualified as zero-rated sales.
Ruling: Yes.
Section 102(b) Transactions Subject to Zero Percent (0%) Rate ─ The following services performed in the
Philippines by VAT-registered persons shall be subject to zero percent (0%) rate:(1) Processing,
manufacturing or repacking goods for other persons doing business outside the Philippines which goods
are subsequently exported, where the services are paid for in acceptable foreign currency and accounted
for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP); (2) Services
other than those mentioned in the preceding subparagraph, the consideration for which is paid for in
acceptable foreign currency and accounted for in accordance with the rules and regulations of the [BSP].
It is Section 102(b)(2) which finds special relevance to this case. The VAT is a tax on consumption
"expressed as a percentage of the value added to goods or services" purchased by the producer or
taxpayer. As an indirect tax on services, its main object is the transaction itself or, more concretely, the
performance of all kinds of services conducted in the course of trade or business in the Philippines.
These services must be regularly conducted in this country; undertaken in "pursuit of a commercial or an
economic activity;" for a valuable consideration; and not exempt under the Tax Code, other special laws,
or any international agreement. Yet even as services may be subject to VAT, our tax laws extend the
benefit of zero-rating the VAT due on certain services. Under the last paragraph of Section 102(b),
services performed by VAT-registered persons in the Philippines, when paid in acceptable foreign
currency and accounted for in accordance with the rules and regulations of the BSP, are zero-rated.
Petitioner invokes the "destination principle," citing that respondent’s services, while rendered to a non-
resident foreign corporation, are not destined to be consumed abroad. Hence, the onus of taxation of
the revenue arising there from is also within the Philippines. The Court in American Express debunked
this argument. As a general rule, the VAT system uses the destination principle as a basis for the
jurisdictional reach of the tax. Goods and services are taxed only in the country where they are
consumed. Thus, exports are zero-rated, while imports are taxed. Confusion in zero rating arises because
petitioner equates the performance of a particular type of service with the consumption of its output
abroad. The consumption contemplated by law does not imply that the service be done abroad in order
to be zero-rated. Consumption is the use of a thing in a way that thereby exhausts it. Applied to services,
the term means the performance or successful completion of a contractual duty, usually resulting in the
performer's release from any past or future liability. Its services, having been performed in the
Philippines, are therefore also consumed in the Philippines. Unlike goods, services cannot be physically
used in or bound for a specific place when their destination is determined. Instead, there can only be a
predetermined end of a course when determining the service location or position for legal purposes.
However, the law clearly provides for an exception to the destination principle; that is, for a zero percent
VAT rate for services that are performed in the Philippines, paid for in acceptable foreign currency and
accounted for in accordance with the rules and regulations of the BSP.
Further, the cost of respondent's service to be zero-rated need not be tacked in as part of the cost of
goods exported. The law neither imposes such requirement nor associates services with exported goods.
It simply states that the services performed by VAT-registered persons in the Philippines if paid in
acceptable foreign currency and accounted for in accordance with the rules and regulations of the BSP,
are zero-rated. The service rendered by respondent is clearly different from the product that arises from
the rendition of such service. The activity that creates the income must not be confused with the main
business in the course of which that income is realized. The law neither makes a qualification nor adds a
condition in determining the tax situs of a zero-rated service. Under this criterion, the place where the
service is rendered determines the jurisdiction to impose the VAT. Performed in the Philippines, such
service is necessarily subject to its jurisdiction, for the State necessarily has to have "a substantial
connection" to it, in order to enforce a zero rate. The place of payment is immaterial; much less is the
place where the output of the service will be further or ultimately used.
CIR V AMERICAN EXPRESS INTERNATIONAL, INC. (Phil. Branch)
GR 152609 | June 29, 2005 | J. Panganiban
Facts: Respondent, a VAT taxpayer, is the Philippine Branch of AMEX USA and was tasked with
servicing a unit of AMEX-Hongkong Branch and facilitating the collections of AMEX-HK receivables from
card members situated in the Philippines and payment to service establishments in the Philippines.
It filed with BIR a letter-request for the refund of its 1997 excess input taxes, citing as basis Section 110B
of the 1997 Tax Code, which held that “xxx Any input tax attributable to the purchase of capital goods or
to zero-rated sales by a VAT-registered person may at his option be refunded or credited against other
internal revenue taxes, subject to the provisions of Section 112.”
In addition, respondent relied on VAT Ruling No. 080-89, which read, “In Reply, please be informed that,
as a VAT registered entity whose service is paid for in acceptable foreign currency which is remitted
inwardly to the Philippine and accounted for in accordance with the rules and regulations of the Central
Bank of the Philippines, your service income is automatically zero rated xxx”
Petitioner claimed, among others, that the claim for refund should be construed strictly against the
claimant as they partake of the nature of tax exemption.
CTA rendered a decision in favor of respondent, holding that its services are subject to zero-rate. CA
affirmed this decision and further held that respondent’s services were “services other than the
processing, manufacturing or repackaging of goods for persons doing business outside the Philippines”
and paid for in acceptable foreign currency and accounted for in accordance with the rules and
regulations of BSP.
Issue: W/N AMEX Phils is entitled to refund
Held: Yes. Section 102 of the Tax Code provides for the VAT on sale of services and use or lease of
properties. Section 102B particularly provides for the services or transactions subject to 0% rate:
(1) Processing, manufacturing or repacking goods for other persons doing business outside the
Philippines which goods are subsequently exported, where the services are paid for in acceptable foreign
currency and accounted for in accordance with the rules and regulations of the BSP;
(2) Services other than those mentioned in the preceding subparagraph, e.g. those rendered by hotels
and other service establishments, the consideration for which is paid for in acceptable foreign currency
and accounted for in accordance with the rules and regulations of the BSP
Under subparagraph 2, services performed by VAT-registered persons in the Philippines (other than the
processing, manufacturing or repackaging of goods for persons doing business outside the Philippines),
when paid in acceptable foreign currency and accounted for in accordance with the R&R of BSP, are
zero-rated. Respondent renders service falling under the category of zero rating.
As a general rule, the VAT system uses the destination principle as a basis for the jurisdictional reach of
the tax. Goods and services are taxed only in the country where they are consumed. Thus, exports are
zero-rated, while imports are taxed.
In the present case, the facilitation of the collection of receivables is different from the utilization of
consumption of the outcome of such service. While the facilitation is done in the Philippines, the
consumption is not. The services rendered by respondent are performed upon its sending to its foreign
client the drafts and bulls it has gathered from service establishments here, and are therefore, services
also consumed in the Philippines. Under the destination principle, such service is subject to 10% VAT.
However, the law clearly provides for an exception to the destination principle; that is 0% VAT rate for
services that are performed in the Philippines, “paid for in acceptable foreign currency and accounted for
in accordance with the R&R of BSP.” The respondent meets the following requirements for exemption,
and thus should be zero-rated:
(1) Service be performed in the Philippines
(2) The service fall under any of the categories in Section 102B of the Tax Code
(3) It be paid in acceptable foreign currency accounted for in accordance with BSP R&R.
CIR vs American Express International, Inc (Philippine Branch)
G.R. No. 152609 June 29, 2005
COMMISSIONER OF INTERNAL REVENUE, Petitioner,
vs.
AMERICAN EXPRESS INTERNATIONAL, INC. (PHILIPPINE BRANCH), Respondent.

FACTS: Respondent] is a Philippine branch of American Express International, Inc., a corporation duly
organized and existing under and by virtue of the laws of the State of Delaware, U.S.A. It is a servicing
unit of American Express International, Inc. – Hongkong Branch (Amex-HK) and is engaged primarily to
facilitate the collections of Amex-HK receivables from card members situated in the Philippines and
payment to service establishments in the Philippines.
Amex Philippines registered itself with the Bureau of Internal Revenue (BIR), as a value-added tax (VAT)
taxpayer effective March 1988.
On April 1999 respondent filed with the BIR a letter-request for the refund of its 1997 excess input taxes
citing as basis therefor, Section 110 (B) of the 1997 Tax Code to wit:
‘Section 110. Tax Credits. –
xxxxxxxxx
‘(B) Excess Output or Input Tax. – If at the end of any taxable quarter the output tax exceeds the input
tax, the excess shall be paid by the VAT-registered person. If the input tax exceeds the output tax, the
excess shall be carried over to the succeeding quarter or quarters. Any input tax attributable to the
purchase of capital goods or to zero-rated sales by a VAT-registered person may at his option be
refunded or credited against other internal revenue taxes, subject to the provisions of Section 112.’
There being no immediate action on the part of the [petitioner], [respondent’s] petition was filed on
April 15, 1999.
In addition, [respondent] relied on VAT Ruling No. 080-89, dated April 3, 1989, the pertinent portion of
which reads as follows:
‘In Reply, please be informed that, as a VAT registered entity whose service is paid for in acceptable
foreign currency which is remitted inwardly to the Philippines and accounted for in accordance with the
rules and regulations of the Central [B]ank of the Philippines, your service income is automatically zero
rated effective January 1, 1998. [Section 102(a)(2) of the Tax Code as amended]
B. Input taxes on domestic purchases of taxable goods and services related to zero-rated revenues are
available as tax refund in accordance with Section 106 (now Section 112) of the [Tax Code] and Section
8(a) of [Revenue] Regulations [(RR)] No. 5-87, to state:
‘Section 106. Refunds or tax credits of input tax. –
(A) Zero-rated or effectively Zero-rated Sales. – Any VAT-registered person, except those covered by
paragraph (a) above, whose sales are zero-rated or are effectively zero-rated, may, within two (2) years
after the close of the taxable quarter when such sales were made, apply for the issuance of tax credit
certificate or refund of the input taxes due or attributable to such sales, to the extent that such input tax
has not been applied against output tax. x x x. [Section 106(a) of the Tax Code]’
ISSUE: W/N petitioner is entitled to a refund
HELD: YES. Section 102 of the Tax Code provides:
“(b) Transactions subject to zero percent (0%) rate. — The following services performed in the
Philippines by VAT-registered persons shall be subject to zero percent (0%) rate[:]
‘(1) Processing, manufacturing or repacking goods for other persons doing business outside the
Philippines which goods are subsequently exported, where the services are paid for in acceptable foreign
currency and accounted for in accordance with the rules and regulations of the Bangko Sentral ng
Pilipinas (BSP);
‘(2) Services other than those mentioned in the preceding subparagraph, the consideration for which is
paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of
the [BSP];’”
xxxxxxxxx
Under the last paragraph quoted above, services performed by VAT-registered persons in the Philippines
(other than the processing, manufacturing or repacking of goods for persons doing business outside the
Philippines), when paid in acceptable foreign currency and accounted for in accordance with the rules
and regulations of the BSP, are zero-rated.
Respondent is a VAT-registered person that facilitates the collection and payment of receivables
belonging to its non-resident foreign client, for which it gets paid in acceptable foreign currency inwardly
remitted and accounted for in conformity with BSP rules and regulations. Certainly, the service it renders
in the Philippines is not in the same category as “processing, manufacturing or repacking of goods” and
should, therefore, be zero-rated. In reply to a query of respondent, the BIR opined in VAT Ruling No. 080-
89 that the income respondent earned from its parent company’s regional operating centers (ROCs) was
automatically zero-rated effective January 1, 1988.
In sum, having resolved that transactions of respondent are zero-rated, the Court upholds the former’s
entitlement to the refund as determined by the appellate court. Moreover, there is no conflict between
the decisions of the CTA and CA. This Court respects the findings and conclusions of a specialized court
like the CTA “which, by the nature of its functions, is dedicated exclusively to the study and consideration
of tax cases and has necessarily developed an expertise on the subject.”93
Furthermore, under a zero-rating scheme, the sale or exchange of a particular service is completely freed
from the VAT, because the seller is entitled to recover, by way of a refund or as an input tax credit, the
tax that is included in the cost of purchases attributable to the sale or exchange.94“[T]he tax paid or
withheld is not deducted from the tax base.” Having been applied for within the reglementary period,
respondent’s refund is in order.
[ GR No. 201326, Feb 08, 2017 ] On March 28, 2006, Sitel filed separate formal claims for refund or issuance of tax credit with the One-
Stop Shop Inter-Agency Tax Credit and Duty Drawback Center of the Department of Finance for its
unutilized input VAT arising from domestic purchases of goods and services attributed to zero-rated
SITEL PHILIPPINES CORPORATION v. CIR +
transactions and purchases/importations of capital goods for the 1st, 2nd, 3rd and 4th quarters of 2004 in
the aggregate amount of P23,093,899.59.[7]
This Petition for Review on Certiorari[1] under Rule 45 of the Rules of Court filed by petitioner Sitel
Philippines Corporation (Sitel) against the Commissioner of Internal Revenue (CIR) seeks to reverse and
On March 30, 2006, Sitel filed a judicial claim for refund or tax credit via a petition for review before the
set aside the Decision dated November 11, 2011[2] and Resolution dated March 28, 2012[3] of the Court
CTA, docketed as CTA Case No. 7423.
of Tax Appeals (CTA) En Banc in CTA EB No. 644, which denied Sitel's claim for refund of unutilized input
value-added tax (VAT) for the first to fourth quarters of taxable year 2004 for being prematurely filed.

Ruling of the CTA Division

Facts
On October 21, 2009, the CTA Division rendered a Decision[8] partially granting Sitel's claim for VAT
refund or tax credit, the dispositive portion of which reads as follows:
Sitel, a corporation organized and extsting under the laws of the Philippines, is engaged in the business
of providing call center services from the Philippines to domestic and offshore businesses. It is registered
In view of the foregoing, the instant Petition for Review is hereby PARTIALLY GRANTED. Petitioner is
with the Bureau of Internal Revenue (BIR) as a VAT taxpayer, as well as with the Board of Investments on
entitled to the instant claim in the reduced amount of P11,155,276.59 computed as follows:
pioneer status as a new information technology service firm in the field of call center.[4]

Amount of Input VAT Claim P 23,093,899.59

For the period from January 1, 2004 to December 31, 2004, Sitel filed with the BIR its Quarterly VAT
Less: Input VAT Claim on Zero-Rated Sales 7,170,276.02
Returns as follows:
Input VAT Claim on Capital Goods Purchases P 15,923,623.57
Not Properly Substantiated Input VAT Claim on Capital Goods
Period Covered Date Filed Less:
Purchases
1st Quarter 2004 26 April 2004
Per ICPA Report (P15,923,623.57 less P13,824,129.14) 2,099,494.43
2nd Quarter 2004 26 July 2004
Per this Court's further verification 2,668,852.55
3rd Quarter 2004 25 October 2004
Refundable Input VAT on Capital Goods Purchases P 11,155,276.59
4th Quarter 2004 25 January 2005[5]
Accordingly, respondent is ORDERED to REFUND OR ISSUE A TAX CREDIT CERTIFICATE in the reduced
Sitel's Amended Quarterly VAT Returns for the first to fourth quarters of 2004 declared as follows:
amount of P11,155,276.59 representing unutilized input VAT arising from petitioner's domestic
purchases of goods and services which are attributable to zero-rated transactions and
Input
purchases/importations of capital goods for the taxable year 2004.
Input Tax Tax Input Tax
Taxable Zero-Rated Input Tax from Allocate Allocated to
Total Sales Input Tax for SO ORDERED.[9]
Sales Sales from Capital Regular d to Zero-Rated
the [Quarter] The CTA Division denied Sitel's P7,170,276.02 claim for unutilized input VAT attributable to its zero-rated
Goods Transaction Taxable Sales
sales for the four quarters of 2004. Relying upon the rulings of this Court in Commissioner of Internal
s Sales
(C=A+B) (D) Revenue v. Burmeister and Wain Scandinavian Contractor Mindanao, Inc.[10] (Burmeister), the CTA
(A) (B) (E) [H=(B/C) x
Division found that Sitel failed to prove that the recipients of its services are doing business outside the
(F+D-E) [G=(A/C) (F)]
Philippines, as required under Section 108(B)(2) of the National Internal Revenue Code of 1997 (NIRC), as
x (F)]
amended.[11]
180,450,030.2 180,957,830.0 1,400,623.8
509,799.74 3,842,714.21 2,422,090.40 3,930.40 1,396,693.41
9 3 1
The CTA Division also disallowed the amount of P2,668,852.55 representing input VAT paid on capital
142,664,271.0 142,664,271.0
0 3,554,922.94 2,846,225.66 708,696.58 - 708,696.58 goods purchased for taxable year 2004 for failure to comply with the invoicing requirements under
0 0
Sections 113, 237, and 238 of the NIRC of 1997, as amended, and Section 4.108-1 of Revenue
205,021,590.4 205,539,326.8 1,938,312.8
517,736.36 9,568,047.25 7,629,734.40 4,882.45 1,933,430.40 Regulations No. 7-95 (RR 7-95).[12]
6 2 5
334,384,766.4 334,384,766.4 3,313,455.6
0 6,137,028.74 3,005,573.11 - 3,313,455.63 Aggrieved, Sitel filed a motion for partial reconsideration[13] and Supplement (To Motion for
8 8 3
Reconsideration [of Decision dated October 21, 2009]),[14] on November 11, 2009 and March 26,2010,
1,025,536.1 862,520,658.2 863,546,194.3 23,102,712.4 15,923,623.5 7,179,088.8 7,170,276.02[
8,812.85 6] respectively.
0 3 3 4 7 7
Prior thereto, or on January 8, 2010, Sitel filed a Motion for Partial Execution of Judgment[15] seeking the
execution pending appeal of the portion of the Decision dated October 21, 2009 granting refund in the
amount of P11,155,276.59, which portion was not made part of its motion for partial reconsideration.
On May 31, 2010, the CTA Division denied Sitel's Motion for Reconsideration and Supplement (To
Motion for Reconsideration [of Decision dated October 21, 2009]) for lack of merit.[16]
Undaunted, Sitel filed a Petition for Review[17] with the CTA En Banc claiming that it is entitled to the
amount denied by the CTA Division.
Ruling of the CTA En Banc
In the assailed Decision, the CTA En Banc reversed and set aside the ruling of the CTA Division. Citing the
case of Commissioner of Internal Revenue v. Aichi Forging Company of Asia, Inc.[18] (Aichi), the CTA En
Banc ruled that the 120-day period for the CIR to act on the administrative claim for refund or tax credit,
under Section 112(D) of the NIRC of 1997, as amended, is mandatory and jurisdictional. Considering that
Sitel filed its judicial claim for VAT refund or credit without waiting for the lapse of the 120-day period
for the CIR to act on its administrative claim, the CTA did not acquire jurisdiction as there was no
decision or inaction to speak of.[19] Thus, the CTA En Banc denied Sitel's entire refund claim on the
ground of prematurity. The dispositive portion of the CTA En Banc's Decision reads as follows:
WHEREFORE, on the basis of the foregoing considerations, the Petition for Review En Banc is DISMISSED.
Accordingly, the Decision of the CTA First Division dated October 21, 2009 and the Resolution issued by
the Special First Division dated May 31, 2010, are hereby reversed and set aside. Petitioner's refund
claim of P19,702,880.80 is DENIED on the ground that the judicial claim for the first to fourth quarters of
taxable year 2004 was prematurely filed.
SO ORDERED.[20]
Aggrieved, Sitel moved for reconsideration,[21] but the same was denied by the Court En Banc for lack of
merit.[22]
Hence, the instant petition raising the following issues:
x x x WHETHER OR NOT THE AICHI RULING PROMULGATED ON OCTOBER 6, 2010 MAY BE APPLIED
RETROACTIVELY TO THE INSTANT CLAIM FOR REFUND OF INPUT VAT INCURRED IN 2004.
x x x WHETHER OR NOT THE CTA EN BANC CAN VALIDLY WITHDRAW AND REVOKE THE PORTION OF THE
REFUND CLAIM ALREADY GRANTED TO PETITIONER IN THE AMOUNT OF P11,155,276.59 AFTER TRIAL ON
THE MERITS, NOTWITHSTANDING THAT SUCH PORTION OF THE DECISION HAD NOT BEEN APPEALED.
x x x WHETHER OR NOT PETITIONER IS ENTITLED TO A REFUND OR TAX CREDIT OF ITS UNUTILIZED INPUT
VAT ARISING FROM PURCHASES OF GOODS AND SERVICES ATTRIBUTABLE TO ZERO-RATED SALES AND
PURCHASES/IMPORTATIONS OF CAPITAL GOODS FOR THE 1ST, 2ND, 3RD, [AND] 4TH QUARTERS OF TAXABLE
YEAR 2004 IN THE AGGREGATE AMOUNT OF P20,994,405.16.[23]
In the Resolution[24] dated July 4, 2012, the CIR was required to comment on the instant petition. In
compliance thereto, the CIR filed its Comment[25] on November 14, 2012.
On January 16, 2013, the Court issued a Resolution[26] denying Sitel's petition for failure to sufficiently
show that the CTA En Banccommitted reversible error in denying its refund claim on the ground of
prematurity based on prevailing jurisprudence.
Soon thereafter, however, or on February 12, 2013, the Court En Banc decided the consolidated cases
of Commissioner of Internal Revenue v. San Roque Power Corporation, Taganito Mining Corporation v.
Commissioner of Internal Revenue, and Philex Mining Corporation v. Commissioner of Internal
Revenue[27] (San Roque). In that case, the Court recognized BIR Ruling No. DA-489-03 as an exception to
the mandatory and jurisdictional nature of the 120-day waiting period.
Invoking San Roque, Sitel filed a Motion for Reconsideration.[28]
In the Resolution[29] dated June 17, 2013, the Court granted Sitel's motion and reinstated the instant
petition.
In the instant petition, Sitel claims that its judicial claim for refund was timely filed following the Court's
pronouncements in San Roque; thus, it was erroneous for the CTA En Banc to reverse the ruling of the
CTA Division and to dismiss its petition on the ground of prematurity. Sitel further argues that the
previously granted amount for refund of P11,155,276.59 should be reinstated and declared final and
executory, the same not being the subject of Sitel's partial appeal before the CTA En Banc, nor of any
appeal from the CIR.
Finally, Sitel contends that insofar as the denied portion of the claim is concerned, which the CTA En
Banc failed to pass upon with the dismissal of its appeal, speedy justice demands that the Court resolved
the same on the merits and Sitel be declared entitled to an additional refund in the amount of
P9,839,128.57.
The Court's Ruling
The Court finds the petition partly meritorious.
Site/'s Judicial Claim for VAT Refund was deemed timely filed pursuant to the Court's pronouncement
in San Roque.
Section 112(C) of the NIRC, as amended, provides:
SEC. 112. Refunds or Tax Credits of Input Tax. -
xxxx
(C) Period within which Refund or Tax Credit of Input Taxes shall be Made. - In proper cases, the
Commissioner shall grant a refund or issue the tax credit certificate for creditable input taxes within one
hundred twenty (120) days from the date of submission of complete documents in support of the
application filed in accordance with Subsection (A) hereof.
In case of full or partial denial of the claim for tax refund or tax credit, or the failure on the part of the
Commissioner to act on the application within the period prescribed above, the taxpayer affected may,
within thirty (30) days from the receipt of the decision denying the claim or after the expiration of the
one hundred twenty day-period, appeal the decision or the unacted claim with the Court of Tax Appeals.
(Emphasis supplied)
Based on the plain language of the foregoing provision, the CIR is given 120 days within which to grant or
deny a claim for refund. Upon receipt of CIR's decision or ruling denying the said claim, or upon the
expiration of the 120-day period without action from the CIR, the taxpayer has thirty (30) days within
which to file a petition for review with the CTA.
In Aichi, the Court ruled that the 120-day period granted to the CIR was mandatory and jurisdictional, the
non-observance of which was fatal to the filing of a judicial claim with the CTA. The Court further
explained that the two (2)-year prescriptive period under Section 112(A) of the NIRC pertained only to
the filing of the administrative claim with the BIR; while the judicial claim may be filed with the CTA
within thirty (30) days from the receipt of the decision of the CIR or the expiration of the 120-day period
of the CIR to act on the claim. Thus:
Section 112 (D) of the NIRC clearly provides that the CIR has "120 days, from the date of the submission
of the complete documents in support of the application [for tax refund/credit]," within which to grant
or deny the claim. In case of full or partial denial by the CIR, the taxpayer's recourse is to file an appeal
before the CTA within 30 days from receipt of the decision of the CIR. However, if after the 120-day
period the CIR fails to act on the application for tax refund/credit, the remedy of the taxpayer is to
appeal the inaction of the CIR to CTA within 30 days.
In this case, the administrative and the judicial claims were simultaneously filed on September 30, 2004.
Obviously, respondent did not wait for the decision of the CIR or the lapse of the 120-day period. For this
reason, we find the filing of the judicial claim with the CTA premature.
Respondent's assertion that the non-observance of the 120-day period is not fatal to the filing of a
judicial claim as long as both the administrative and the judicial claims are filed within the two-year
prescriptive period has no legal basis.
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.
xxxx
In fine, the premature filing of respondent's claim for refund/credit of input VAT before the CTA warrants
a dismissal inasmuch as no jurisdiction was acquired by the CTA.[30]
However, in San Roque, the Court clarified that the 120-day period does not apply to claims for refund
that were prematurely filed during the period from the issuance of BIR Ruling No. DA-489-03, on
December 10, 2003, until October 6, 2010, when Aichi was promulgated. The Court explained that BIR
Ruling No. DA-489-03, which expressly allowed the filing of judicial claims with the CTA even before the
lapse of the 120-day period, provided for a valid claim of equitable estoppel because the CIR had misled
taxpayers into prematurely filing their judicial claims before the CTA:
There is no dispute that the 120-day period is mandatory and jurisdictional, and that the CTA does not
acquire jurisdiction over a judicial claim that is filed before the expiration of the 120-day period. There
are, however, two exceptions to this rule. The first exception is if the Commissioner, through a specific
ruling, misleads a particular taxpayer to prematurely file a judicial claim with the CTA. Such specific ruling
is applicable only to such particular taxpayer. The second exception is where the
Commissioner, through a general interpretative rule issued under Section 4 of the Tax Code, misleads
all taxpayers into filing prematurely judicial claims with the CTA. In these cases, the Commissioner
cannot be allowed to later on question the CTA's assumption of jurisdiction over such claim since
equitable estoppel has set in as expressly authorized under Section 246 of the Tax Code.
xxxx
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.[31] (Emphasis supplied).
In Visayas Geothermal Power Company v. Commissioner of Internal Revenue,[32] the Court came up with
an outline summarizing the pronouncements in San Roque, to wit:
For clarity and guidance, the Court deems it proper to outline the rules laid down in San Roque with
regard to claims for refund or tax credit ofunutilized creditable input VAT. They are as follows:
1. When to file an administrative claim with the CIR:
a. General rule- Section 112(A) and Mirant
Within 2 years from the close of the taxable quarter when the sales were made.
 b. Exception - Atlas
Within 2 years from the date of payment of the output VAT, if the administrative claim was
filed from June 8, 2007 (promulgation of Atlas) to September 12, 2008 (promulgation
of Mirant).
2. When to file a judicial claim with the CTA:
a. General rule-Section 112(D); not Section 229
i. Within 30 days from the full or partial denial of the administrative claim by the
CIR; or
ii. Within 30 days from the expiration of the 120-day period provided to the CIR to
decide on the claim. This is mandatory and jurisdictional beginning January 1,
1998 (effectivity of 1997 NIRC).
b. Exception - BIR Ruling No. DA-489-03
The judicial claim need not await the expiration of the 120-day period, if such was filed
from December 10, 2003 (issuance of BIR Ruling No. DA-489-03) to October 6, 2010
(promulgation of Aichi).[33](Emphasis and underscoring supplied).
In this case, records show that Sitel filed its administrative and judicial claim for refund on March 28,
2006 and March 30, 2006, respectively, or after the issuance of BIR Ruling No. DA-489-03, but before the
date when Aichi was promulgated. Thus, even though Sitel filed its judicial claim prematurely, i.e.,
without waiting for the expiration of the 120-day mandatory period, the CTA may still take cognizance of
the case because the claim was filed within the excepted period stated in San Roque. In other words,
Sitel's judicial claim was deemed timely filed and should have not been dismissed by the CTA En Banc.
Consequently, the October 21, 2009 Decision[34] of the CTA Division partially granting Sitel's judicial claim
for refund in the reduced amount of P11,155,276.59, which is not subject of the instant appeal, should
be reinstated. In this regard, since the CIR did not appeal said decision to the CTA En Banc, the same is
now considered final and beyond this Court's review.
Sitel now questions the following portions of its refund claim which the CTA Division denied: (1)
P7,170,276.02, representing unutilized input VAT on purchases of goods and services attributable to
zero-rated sales, which was denied because Sitel failed to prove that the call services it rendered for the
year 2004 were made to non-resident foreign clients doing business outside the Philippines; and (2)
P2,668,852.55 representing input VAT on purchases of capital goods, because these are supported by
invoices and official receipts with pre-printed TIN-V instead of TIN-VAT, as required under Section 4.108-
1 of RR 7-95.
Sitel claims that testimonial and documentary evidence sufficiently established that its clients were non-
resident foreign corporations not doing business in Philippines. It also asserts that the input VAT on its
purchases of capital goods were duly substantiated because the supporting official receipts substantially
complied with the invoicing requirements provided by the rules.
In other words, Sitel wants the Court to review factual findings of the CTA Division, reexamine the
evidence and determine on the basis thereof whether it should be refunded the additional amount of
P9,839,128.57. This, however, cannot be done in the instant case for settled is the rule that this Court is
not a trier of facts and does not normally embark in the evaluation of evidence adduced during trial.[35] It
is not this Court's function to analyze or weigh all over again the evidence already considered in the
proceedings below, the Court's jurisdiction being limited to reviewing only errors of law that may have
been committed by the lower court.[36]
Furthermore, the Court accords findings and conclusions of the CTA with the highest respect.[37] As a
specialized court dedicated exclusively to the resolution of tax problems, the CTA has accordingly
developed an expertise on the subject of taxation.[38] Thus, its decisions are presumed valid in every
aspect and will not be overturned on appeal, unless the Court finds that the questioned decision is not
supported by substantial evidence or there has been an abuse or improvident exercise of authority on
the part of the tax court.[39]
Upon careful review of the instant case, and directly addressing the issues raised by Sitel, the Court finds
no cogent reason to reverse or modify the findings of the CTA Division.
The Court expounds.
Sitel failed to prove that the recipients of its call services are foreign corporations doing business
outside the Philippines.
Sitel's claim for refund is anchored on Section 112(A)[40] of the NIRC, which allows the refund or credit of
input VAT attributable to zero-rated or effectively zero-rated sales. In relation thereto, Sitel points to
Section 108(B)(2) of the NIRC [formerly Section 102(b)(2) of the NIRC of 1977, as amended] as legal basis
for treating its sale of services as zero-rated or effectively zero-rated. Section 108(B)(2) reads:
SEC. 108. Value-added Tax on Sale of Services and Use or Lease of Properties. -
xxxx
(B) Transactions Subject to Zero Percent (0%) Rate. - The following services performed in the Philippines
by VAT-registered persons shall be subject to zero percent (0%) rate:
xxxx
(2) Services other than those mentioned in the preceding paragraph rendered to a person engaged in
business conducted outside the Philippines or to a nonresident person not engaged in business who is
outside the Philippines when the services are performed, the consideration for which is paid for in
acceptable foreign currency and accounted for in accordance with the rules and regulations of the
Bangko Sentral ng Pilipinas (BSP); (Emphasis supplied)
In Burmeister, the Court clarified that an essential condition to qualify for zero-rating under the
aforequoted provision is that the service-recipient must be doing business outside the Philippines, to wit:
The Tax Code not only requires that the services be other than "processing, manufacturing or repacking
of goods" and that payment for such services be in acceptable foreign currency accounted for in
accordance with BSP rules. Another essential condition for qualification to zero-rating under Section
102(b)(2) is that the recipient of such services is doing business outside the Philippines. x x x
This can only be the logical interpretation of Section 102(b)(2). If the provider and recipient of the "other
services" are both doing business in the Philippines, the payment of foreign currency is irrelevant.
Otherwise, those subject to the regular VAT under Section 102(a) can avoid paying the VAT by simply
stipulating payment in foreign currency inwardly remitted by the recipient of services. To interpret
Section 102(b)(2) to apply to a payer-recipient of services doing business in the Philippines is to make the
payment of the regular VAT under Section 102(a) dependent on the generosity of the taxpayer. The
provider of services can choose to pay the regular VAT or avoid it by stipulating payment in foreign
currency inwardly remitted by the payer-recipient. Such interpretation removes Section 102(a) as a tax
measure in the Tax Code, an interpretation this Court cannot sanction. A tax is a mandatory exaction, not
a voluntary contribution.
xxxx
Thus, when Section 102(b)(2) speaks of "[s]ervices other than those mentioned in the preceding
subparagraph," the legislative intent is that only the services are different between subparagraphs 1 and
2. The requirements for zero-rating, including the essential condition that the recipient of services is
doing business outside the Philippines, remain the same under both subparagraphs.
Significantly, the amended Section 108(b) [previously Section 102 (b)] of the present Tax Code clarifies
this legislative intent. Expressly included among the transactions subject to 0% VAT are "[s]ervices other
than those mentioned in the [first] paragraph [of Section 108(b)] rendered to a person engaged in
business conducted outside the Philippines or to a nonresident person not engaged in business who is
outside the Philippines when the services are performed, the consideration for which is paid for in
acceptable foreign currency and accounted for in accordance with the rules and regulations of the
BSP."[41]
Foilowing Burmeister, the Court, in Accenture, Inc. v. Commissioner of Internal Revenue,[42] (Accenture),
emphasized that a taxpayer claiming for a VAT refund or credit under Section 108(B) has the burden to
prove not only that the recipient of the service is a foreign corporation, but also that said corporation is
doing business outside the Philippines. For failure to discharge this burden, the Court denied Accenture's
claim for refund.
We rule that the recipient of the service must be doing business outside the Philippines for the
transaction to qualify for zero-rating under Section 108(B) of the Tax Code.
xxxx
The evidence presented by Accenture may have established that its clients are foreign. This fact does not
automatically mean, however, that these clients were doing business outside the Philippines. After all,
the Tax Code itself has provisions for a foreign corporation engaged in business within the Philippines
and vice versa, to wit:
SEC. 22. Definitions. - When used in this Title:
xxxx
(H) The term "resident foreign corporation" applies to a foreign corporation engaged in trade or business
within the Philippines.
(I) The term 'nonresident foreign corporation' applies to a foreign corporation not engaged in trade or
business within the Philippines. (Emphasis in the original)
Consequently, to come within the purview of Section 108(B)(2), it is not enough that the recipient of
the service be proven to be a foreign corporation; rather, it must be specifically proven to be a
nonresident foreign corporation.
There is no specific criterion as to what constitutes "doing" or "engaging in" or "transacting" business.
We ruled thus in Commissioner of Internal Revenue v. British Overseas Airways Corporation:
x x x. There is no specific criterion as to what constitutes "doing" or "engaging in" or "transacting"
business. Each case must be judged in the light of its peculiar environmental circumstances. The term
implies a continuity of commercial dealings and arrangements, and contemplates, to that extent, the
performance of acts or works or the exercise of some of the functions normally incident to, and in
progressive prosecution of commercial gain or for the purpose and object of the business organization.
"In order that a foreign corporation may be regarded as doing business within a State, there must be
continuity of conduct and intention to establish a continuous business, such as the appointment of a
local agent, and not one of a temporary character."
A taxpayer claiming a tax credit or refund has the burden of proof to establish the factual basis of that
claim. Tax refunds, like tax exemptions, are construed strictly against the taxpayer.
Accenture failed to discharge this burden. It alleged and presented evidence to prove only that its
clients were foreign entities. However, as found by both the CTA Division and the CTA En Banc, no
evidence was presented by Accenture to prove the fact that the foreign clients to whom petitioner
rendered its services were clients doing business outside the Philippines.
As ruled by the CTA En Banc, the Official Receipts, Intercompany Payment Requests, Billing Statements,
Memo Invoices-Receivable, Memo Invoices-Payable, and Bank Statements presented by Accenture
merely substantiated the existence of sales, receipt of foreign currency payments, and inward
remittance of the proceeds of such sales duly accounted for in accordance with BSP rules, all of these
were devoid of any evidence that the clients were doing business outside of the Philippines.[43] (Emphasis
supplied; citations omitted)
In the same vein, Sitel fell short of proving that the recipients of its call services were foreign
corporations doing business outside the Philippines. As correctly pointed out by the CTA Division, while
Sitel's documentary evidence, which includes Certifications issued by the Securities and Exchange
Commission and Agreements between Sitel and its foreign clients, may have established that Sitel
rendered services to foreign corporations in 2004 and received payments therefor through inward
remittances, said documents failed to specifically prove that such foreign clients were doing business
outside the Philippines or have a continuity of commercial dealings outside the Philippines.
Thus, the Court finds no reason to reverse the ruling of the CTA Division denying the refund of
P7,170,276.02, allegedly representing Sitel's input VAT attributable to zero-rated sales.
Sitel failed to strictly comply with invoicing requirements for VAT refund.
The CTA Division also did not err when it denied the amount of P2,668,852.55, allegedly representing
input taxes claimed on Sitel's domestic purchases of goods and services which are supported by
invoices/receipts with pre-printed TIN-V. In Western Mindanao Power Corp. v. Commissioner of Internal
Revenue,[44] the Court ruled that 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, he must also show satisfaction of all the
documentary and evidentiary requirements for an administrative claim for a refund or tax credit and
compliance with the invoicing and accounting requirements mandated by the NIRC, as well as by
revenue regulations implementing them. The NIRC requires that the creditable input VAT should be
evidenced by a VAT invoice or official receipt,[45] which may only be considered as such when the TIN-
VAT is printed thereon, as required by Section 4.108-1 of RR 7-95.
The Court's pronouncement in Kepco Philippines Corp. v. Commissioner of Internal Revenue[46] is
instructive:
Furthermore, Kepco insists that Section 4.108-1 of Revenue Regulation 07-95 does not require the word
"TIN-VAT" to be imprinted on a VAT-registered person's supporting invoices and official receipts and so
there is no reason for the denial of its P4,720,725.63 claim of input tax.
In this regard, Internal Revenue Regulation 7-95 (Consolidated Value-Added Tax Regulations) is clear.
Section 4.108-1 thereof reads:
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.
Contrary to Kepco's allegation, the regulation specifically requires the VAT registered person to imprint
TIN-VAT on its invoices or receipts. Thus, the Court agrees with the CTA when it wrote: "[T]o be
considered a 'VAT invoice,' the TIN-VAT must be printed, and not merely stamped. Consequently,
purchases supported by invoices or official receipts, wherein the TIN-VAT is not printed thereon, shall
not give rise to any input VAT. Likewise, input VAT on purchases supported by invoices or official receipts
which are NON-VAT are disallowed because these invoices or official receipts are not considered as 'VAT
Invoices."[47]
In the same vein, considering that the subject invoice/official receipts are not imprinted with the
taxpayer's TIN followed by the word VAT, these would not be considered as VAT invoices/official receipts
and would not give rise to any creditable input VAT in favor of Sitel.
At this juncture, it bears to emphasize that "[t]ax refunds or tax credits just like tax exemptions are
strictly construed against taxpayers, the latter having the burden to prove strict compliance with the
conditions for the grant of the tax refund or credit."[48]
WHEREFORE, premises considered, the instant petition for review is GRANTED IN PART. The Decision
dated November 11, 2011 and Resolution dated March 28, 2012 of the CTA En Banc in CTA EB No. 644
are hereby REVERSED and SET ASIDE. Accordingly, the October 21, 2009 Decision of the CTA First
Division in CTA Case No. 7423 is hereby REINSTATED.
Respondent is hereby ORDERED TO REFUND or, in the alternative, TO ISSUE A TAX CREDIT CERTIFICATE,
in favor of the petitioner in the amount of P11,155,276.59, representing unutilized input VAT arising
from purchases/importations of capital goods for taxable year 2004.
SO ORDERED.
MEDICARD PHILIPPINES, INC VS. COMMISSIONER OF INTERNAL REVENUE (GR NO. 222743) APRIL 5,
2017
FACTS: MEDICARD is a health maintenance organization (HMO) that provides prepaid health and medical
insurance coverage to its clients. Individuals enrolled in its health care programs pay an annual
membership fee and are entitled to various preventive, diagnostic and curative medical services
provided by duly licensed physicians, specialists, and other professional technical staff participating in
the group practice health delivery system at a hospital or clinic owned, operated or accredited by it.
MEDICARD filed it first, second, and third quarterly VAT Returns through Electronic Filing and Payment
System (EFPS) on April 20, July 25, and October 25, 2006, respectively, and its fourth quarterly VAT
Return on January 25, 2007.
Upon finding some discrepancies between MEDICARD’s Income Tax Returns (ITR) and VAT Returns, the
CIR issued a Letter Notice (LN) dated September 20, 2007. Subsequently, the CIR also issued a
Preliminary Assessment Notice (PAN) against MEDICARD for deficiency VAT. MEDICARD received CIR’s
FAN dated December 10, 2007 for allegedly deficiency VAT for taxable year 2006 including penalties.
MEDICARD filed a protest arguing, among others, that that the services it render is not limited merely to
arranging for the provision of medical and/or hospitalization services but include actual and direct
rendition of medical and laboratory services. On June 19, 2009, MEDICARD received CIR’s Final Decision
denying its protest. The petitioner MEDICARD proceeded to file a petition for review before the CTA.
The CTA Division held that the determination of deficiency VAT is not limited to the issuance of Letter of
Authority (LOA) alone and that in lieu of an LOA, an LN was issued to MEDICARD informing it if the
discrepancies between its ITRs and VAT Returns and this procedure is authorized under Revenue
Memorandum Order (RMO) No. 30-2003 and 42-2003. Also, the amounts that MEDICARD earmarked
and eventually paid to doctors, hospitals and clinics cannot be excluded from the computation of its
gross receipts because the act of earmarking or allocation is by itself an act of ownership and
management over the funds by MEDICARD which is beyond the contemplation of RR No. 4-2007.
Furthermore, MEDICARD’s earnings from its clinics and laboratory facilities cannot be excluded from its
gross receipts because the operation of these clinics and laboratory is merely an incident to MEDICARD’s
line of business as an HMO.
MEDICARD filed a Motion for Reconsideration but it was denied. Petitioner elevated the matter to the
CTA en banc.
CTA en banc partially granted the petition only insofar as 10% VAT rate for January 2006 is concerned
but sustained the findings of the CTA Division.
ISSUES: Is the absence of the Letter of Authority fatal?
Should the amounts that MEDICARD earmarked and eventually paid to the medical service providers still
form part of its gross receipts for VAT purposes?
RULING: Yes. The absence of the LOA violated MEDICARD’s right to due process. An LOA is the
authority given to the appropriate revenue officer assigned to perform assessment functions. Under the
NLRC, unless authorized by the CIR himself or by his duly authorized representative, through an LOA, an
examination of the taxpayer cannot ordinarily be undertaken. An LOA is premised on the fact that the
examination of a taxpayer who has already filed his tax returns is a power that statutorily belongs only to
the CIR himself or his duly authorized representatives. In this case, there is no dispute that no LOA was
issued prior to the issuance of a PAN and FAN against MEDICARD. Therefore, no LOA was also served on
MEDICARD.
No. The VAT is a tax on the value added by the performance of the service by the taxpayer. It is, thus,
this service and the value charged thereof by the taxpayer that is taxable under the NLRC.
CIR vs. Magsaysay Lines, Inc. , et. al G.R. 146984, 28 July 2006
Facts:
Because of a government program of privatization, National Development Company(NDC) dec
ided to sell its National Marine Corporation(NMC) shares and five of its ships. In a VAT Ruling, it was held
that the sale was subject to VAT since NDC was a VAT
registered enterprise and the transaction is incident to its normal VAT-
registered activity of leasing out personal property.
Issue: Whether or not the sale by NDC whose VAT
registered activity is leasing out personal property is subject to VAT considering that such sale was made
pursuant to a government program of privatization.
Ruling:
No, the sale of the vessels is not subject to VAT since it was not in the ordinary course of trad
e or business of NDC. “Course of business” is what is usually done in the management of trade or busines
s. It connotes regularity. In the case at bar, the sale was an isolated transaction. The sale which was invol
untary and made pursuant to the declared policy of government for privatization could no longer be rep
eated or carried on with regularity. It should be emphasized that the normal VAT
registered activity of NDC is leasing personal property. Any sale, barter, or exchange of goods or services
not in the course of trade or business is not subject to tax.
FORT BONIFACIO DEVELOPMENT CORPORATION vs. COMMISSIONER OF INTERNAL REVENUE-
Transitional Input Value Added Tax
FACTS: Petitioner was a real estate developer that bought from the national government a parcel of
land that used to be the Fort Bonifacio military reservation. At the time of the said sale there was as yet
no VAT imposed so Petitioner did not pay any VAT on its purchase. Subsequently, Petitioner sold two
parcels of land to Metro Pacific Corp. In reporting the said sale for VAT purposes (because the VAT had
already been imposed in the interim), Petitioner claimed transitional input VAT corresponding to its
inventory of land. The BIR disallowed the claim of presumptive input VAT and thereby assessed
Petitioner for deficiency VAT.
ISSUE: Is Petitioner entitled to claim the transitional input VAT on its sale of real properties given its
nature as a real estate dealer and if so (i) is the transitional input VAT applied only to the improvements
on the real property or is it applied on the value of the entire real property and (ii) should there have
been a previous tax payment for the transitional input VAT to be creditable?
HELD: YES. Petitioner is entitled to claim transitional input VAT based on the value of not only the
improvements but on the value of the entire real property and regardless of whether there was in fact
actual payment on the purchase of the real property or not.
The amendments to the VAT law do not show any intention to make those in the real estate business
subject to a different treatment from those engaged in the sale of other goods or properties or in any
other commercial trade or business. On the scope of the basis for determining the available transitional
input VAT, the CIR has no power to limit the meaning and coverage of the term "goods" in Section 105 of
the Tax Code without statutory authority or basis. The transitional input tax credit operates to benefit
newly VAT-registered persons, whether or not they previously paid taxes in the acquisition of their
beginning inventory of goods, materials and supplies.
 FORT BONIFACIO DEVELOPMENT CORPORATION vs. CIR
GR No. 158885 & GR No. 170680, April 2, 2009
Elements:
I. Parties
Petitioner: Fort Bonifacio Development Corporation
Respondents:
1. Commissioner of Internal Revenue, Regional Director, Revenue Region No. 8
and Chief, Assessment Division Revenue Region No. 8 (GR 158885)
2. Commissioner of Internal Revenue and Revenue District Officer, Revenue
District No. 44, Taguig and Pateros, Bureau of Internal Revenue (GR 170680)
II. Prior Proceedings
 Fort Bonifacio Development Corporation initiated the proceedings by
filing a petition for review before the court. But before the case
reached the Supreme Court, it went through the Court of Tax Appeals
and Court of Appeals.
 COURT OF TAX APPEALS
The court rendered a decision affirming the assessment
made by the respondents. FBDC has to pay an amount of
Php 45,188,708.08 representing deficiency tax for the 4th
quarter of 1996, including surcharge, interest, and penalty.
The CTA sustained the BIR’s application of Section 4.105-1 of
RR 7-95 that the basis of the transitional tax for real estate
dealers shall be the improvements constructed on or after
the effectivity of EO 273. Moreover, FBDC is precluded from
availing of transitional input tax credit because in 1995, sale
of real properties was still exempt from VAT. (first petition)
The court denied the FBDC’s claim for refund. The
government, which is a tax exempt entity, did not pass on
any VAT or business tax upon FBDC. To allow FBDC 8%
transitional input tax to offset its output VAT liability
without having paid any previous taxes has the net effect of
granting FBDC an outright bonus equivalent to 10% VAT it
may tack on the goods it would sell to its subsequent
purchasers. The inventory under Section 105 of the NIRC is
limited to improvements. (second petition)
 COURT OF APPEALS
It affirmed the decision of the Court of Tax Appeals, but
removing the surcharge, interest, and penalties, thus
reducing the amount due to Php 28,413,783. The
regulations embodied in RR 7-95 were a valid exercise of the
BIR’s delegated rulemaking power and were consistent with
the letter and spirit of substantive laws establishing the VAT
system. A first time taxpayer who becomes liable for VAT is
entitled to a transitional input tax under Section 105 of the
NIRC. (first petition)
The Court affirmed the CTA decision. It ruled that the grant
of transitional input tax presupposes that the VAT taxpayer
had previously paid some form of business tax on his
inventory of goods.
III. Theories of the Parties
G. R. No. 158885
Petitioner
On September 19, 1996, in order to avail itself of the transitional input
tax credit, FBDC submitted to the BIR, Revenue District No. 44, Taguig and Pateros, an
inventory of its real properties with a Book Value of Php 71,227,503,200 on which it
claims a transitional input tax credit of Php 5,698,200,256. It also registered itself as a
VAT taxpayer.
On October 14, 1996, two contracts to sell were executed in favor of
Metro Pacific Corporation.
Sales
Php 3,498,888,713.60
Output Tax Payable
318,080,792.14
Cash Paid
269,340,469.45
Transitional Input Tax Credit
28,413,783.00
Regular Input Tax Credit on Purchases of goods and services
20,326,539.69
FBDC submitted two letters to BIR informing it of the transaction and computation of its VAT
payments and requesting for a ruling on whether its transitional input VAT on the land inventory was in
order. The BIR Commissioner sent a letter to the petitioner disallowing the presumptive input tax arising
from land inventory on the ground that “the basis of the 8% presumptive input tax of the real estate
dealer shall be limited to the book value of improvements, in addition to its inventory of supplies and
materials for use in its business. FBDC requested for the computation of surcharges, interest and
penalties and for the issuance of assessment notice to enable it to pursue its remedy under the NIRC.
Respondents:
The BIR Commissioner cited RR No. 7-95 and RMC No. 3-96. Specifically, the BIR
Commissioner referred to Sec. 4.105-1 and the Transitory Provisions of RR 7-95 issued in
implementations of the amendments made by RA 7716, which provides “in case of real estate dealers,
the basis of the presumptive input tax shall be the improvements. BIR Commissioner directed petitioner
to pay VAT equivalent to the disallowed presumptive input tax on land improvements.
 Acting Assistant Chief Pascual De Leon sent a letter informing the total amount due and G.R. No. 179632 October 19, 2011
Regional Director Ortega ruled that petitioner’s request for reconsideration/protest was barred by thte
statute of limitations because it was filed more than 30 days. SOUTHERN PHILIPPINES POWER CORPORATION vs. COMMISSIONER OF INTERNAL REVENUE

Facts: Petitioner Southern Philippines Power Corporation, a power company that generates and
sells electricity to the National Power Corporation (NPC), applied with the Bureau of Internal Revenue
G. R. No. 170680 (BIR) for zero-rating of its transactions under Section 108(B)(3) of the National Internal Revenue Code
(NIRC). The BIR approved the application for taxable years 1999 and 2000. Petitioner also filed a claim
Petitioner with respondent Commissioner of Internal Revenue (CIR) for a tax credit of its unutilized input VAT
attributable to its zero-rated sale of electricity to NPC. Before the lapse of the two-year prescriptive
For the third quarter of 1997: period for such actions, petitioner filed with the Court of Tax Appeals (CTA) Second Division a petition for
review covering its claims for refund or tax credit. CTA Second Division denied the petition, holding that
Sales and Lease of Land its zero-rated official receipts did not correspond to the quarterly VAT returns, bearing a difference of
Php 3,591,726,328.11 P800,107,956.61. Further, these receipts do not bear the words "zero-rated" in violation of RR 7-95. The
Second Division denied SPP’s motion for reconsideration and on appeal, the CTA En Banc affirmed the
Output VAT payable
Second Division’s decision. The CTA En Banc rejected petitioner’s contention that its sales invoices
359,172,623.81
reflected the words "zero-rated," pointing out that it is on the official receipts that the law requires the
printing of such words. Moreover, SPP did not report in the corresponding quarterly VAT return the sales
Cash paid
subject of its zero-rated receipts.
347,741,695.74

Issue: Whether or not the word “zero-rated” must be reflected on the official receipts for the petitioner
Regular Input Tax
to be entitled to a tax credit of unutilized VAT input on its zero-rated transactions.
19,743,565.73

On May 11, 1999, petitioner filed with the BIR a claim for the tax refund of its output VAT
cash payments for the third quarter of 1997 for the reason that it was illegally collected because the BIR
didi not take into account its transitional input tax credit. It alleged that its input tax credit was more
than enough to offset the VAT paid for the third quarter and as such, it was entitled to a refund.
Respondents
FBDC is not automatically entitled to 8% transitional input tax allowed under Sec. 105 of the
NIRC because it purchased the land at the Global City from the government under a VAT free sale.
IV. Objectives of the Parties
Petitioner
1. To restrain the respondents from collecting the transitional input tax credit
due for the 4th Quarter of 1996.
2. To refund the amount it had paid for the 3rd quarter of 1997 in the light of
transitional input tax credit entitled to it.
Ruling: No.
NIRC Section 110 (A.1) provides that the input tax subject of tax refund is to be evidenced by a VAT
invoice "or" official receipt issued in accordance with Section 113. Section 113 does not distinguish
between an invoice and a receipt when used as evidence of a zero-rated transaction. Consequently, the
CTA should have accepted either or both of these documents as evidence of petitioner’s zero-rated
transactions. Section 237 of the NIRC also makes no distinction between receipts and invoices as
evidence of a commercial transaction. The Court held in Seaoil Petroleum Corporation v. Autocorp Group
that business forms like sales invoices are recognized in the commercial world as valid between the
parties and serve as memorials of their business transactions.
The Supreme Court also ruled that petitioner’s failure to indicate its zero-rated sales in its VAT returns is
not sufficient reason to deny it its claim for tax credit or refund when there are other documents from
which the CTA can determine the veracity of SPP’s claim. Although such failure partakes of a criminal act
under Section 255 of the NIRC could warrant the criminal prosecution of the responsible person/s, the
omission does not furnish ground for the outright denial of the claim for tax credit or refund if such claim
is in fact justified.

Respondents:

1. To sustain their decision to collect and not to give refund to the petitioner in
the light of the RRs.
[ G.R. No. 193321, October 19, 2016 ]
TAKENAKA CORPORATION-PHILIPPINE BRANCH, PETITIONER, VS. COMMISSIONER OF INTERNAL
REVENUE, RESPONDENT.
DECISION
BERSAMIN, J.:
The petitioner as taxpayer appeals before the Court the adverse decision entered on March 29,
2010[1] and the resolution issued on August 12, 2010[2] in C.T.A. EB No. 514, whereby the Court of Tax
Appeals (CTA) En Banc respectively denied its claim for refund of excess input value-added tax (VAT)
arising from its zero-rated sales of services for taxable year 2002, and denied its ensuing motion for
reconsideration.
services rendered by respondent Takenaka to PIATCO are subject to zero-percent (0%) VAT and requires
no prior approval for zero rating based on Revenue Memorandum Circular 74-99.
On April 11, 2003, respondent Takenaka filed its claim for tax refund covering the aforesaid period
before the BIR Revenue District Office No. 51, Pasay City Branch.
For failure of the BIR to act on its claim, respondent Takenaka filed a Petition for Review with this Court,
docketed as C.T.A. Case No. 6886.
After trial on the merits, on November 4, 2008, the Former First Division rendered a Decision partly
granting the Petition for Review and ordering herein petitioner CIR to refund to respondent Takenaka
the reduced amount of P53,374,366.52, with a Concurring and Dissenting Opinion from Presiding Justice
Ernesto D. Acosta.

The factual and procedural antecedents, as narrated by the CTA En Banc, are quoted below: Not satisfied, on November 26, 2008, respondent Takenaka filed a "Motion for Reconsideration".

Respondent Takenaka, as a subcontractor, entered into an On-Shore Construction Contract with
Philippine Air Terminal Co., Inc. (PIATCO) for the purpose of constructing the Ninoy Aquino Terminal III
(NAIA-IPT3).
PIATCO is a corporation duly organized and existing under the laws of the Philippines and was duly
registered with the Philippine Economic Zone Authority (PEZA), as an Ecozone Developer/Operator
under RA 7916.
Respondent Takenaka filed its Quarterly VAT Returns for the four quarters of taxable year 2002 on April
24, 2002, July 22, 2002, October 22, 2002 and January 22, 2003, respectively. Subsequently, respondent
Takenaka amended its quarterly VAT returns several times. In its final amended Quarterly VAT Returns,
the following were indicated thereon:
During the deliberation of respondent Takenaka's "Motion for Reconsideration", Associate Justice Caesar
A. Casanova changed his stand and concurred with Presiding Justice Ernesto D. Acosta, while the
original Ponente, Associate Justice Lovell R. Bautista, maintained his stand. Thus, respondent Takenaka's
"Motion for Reconsideration" was granted by the Former First Division in its Amended Decision dated
March 16, 2009, with a Dissenting Opinion from Associate Justice Lovell R. Bautista.
On April 7, 2009, petitioner CIR filed a "Motion for Reconsideration" of the Amended Decision, which the
Former First Division denied in a Resolution dated June 29, 2009, with Associate Justice Lovell R. Bautista
reiterating his Dissenting Opinion.[3]
Consequently, the respondent filed a petition for review in the CTA En Banc to seek the reversal of the
March 16, 2009 decision and the June 29, 2009 resolution of the CTA Former First Division.[4]

On March 29, 2010, the CTA En Banc promulgated its decision disposing thusly:
Exh. Year Input VAT
Zero-rate
Taxable Sales Output VAT
Sales/Receipts
2002 This Quarter Excess WHEREFORE, premises considered, the present Petition for Review is hereby GRANTED. Accordingly, the
Amended Decision dated March 16, 2009 and Resolution dated June 29, 2009 rendered by the Former
Q 1st P854,160,170.42 P5,292,340.00 P529,234.00 P52,044,766.05 P51,515,532.05 First Division are hereby REVERSED and SET ASIDE, and another one is hereby
entered DENYING respondent Takenaka's claimed input tax attributable to its zero rated sales of services
II 2nd 599,459,273.90 60,588,638.09 60,588,638.09 for taxable year 2002 in the amount of P143,997,333.40.

DDD 3rd 480,168,744.90 55,234,736.15 55,234,736.15 SO ORDERED.[5]

VVV 4th 304,283,730.15 30,494,993.51 30,494,993.51

Later on, through the resolution dated August 12, 2010,[6] the CTA En Banc denied the petitioner's
motion for reconsideration.
P2.23
TOTAL P5,292,340.00 P529,234.00P198,363,133.80P197,833,899.80
8,071,899.37
Hence, this petition for review on certiorari.

On January 13, 2003, the BIR issued VAT Ruling No. 011-03 which states that the sales of goods and
 Issue Amount Actual date Last day for
Close Last day for
Claimed and of filing filing judicial clai Actual filing
of quarter whe filing administra ti
The lone issue is whether or not the sales invoices presented by the petitioner were sufficient as Taxable of administra ti m of judicial clai
n sales were ve claim for
evidence to prove its zero-rated sale of services to Philippine Air Terminal Co., Inc. (PIATCO), thereby Period covere ve claim for with CTA (120+3 m with CTA
made refund (2 years)
entitling it to claim the refund of its excess input VAT for taxable year 2002. d refund 0)

Ruling of the Court P51,515,532.0

March
5, 1st quarter March 31, 2002 March 31, 2004 April 11, 2003 September 8, 2003
10, 2004
We deny the appeal of 2002

First of all, the Court deems it appropriate to determine the timeliness of the petitioner's judicial claim P60,588,638.0
for refund in order to ascertain whether or not the CTA properly acquired jurisdiction thereof. Well- 9, 2ndquarter June 30, 2002 June 30, 2004
settled is the rule that the issue of jurisdiction over the subject matter may at any time either be raised of 2002
by the parties or considered by the Court motu proprio. As such, the jurisdiction of the CTA over the
appeal could still be determined by this Court despite its not being raised as an issue by the parties.[7] P55,234,736.1
September 30,
5, 3rdquarter September 30, 2004
In Mindanao II Geothermal Partnership v. Commissioner of Internal Revenue,[8] the Court has 2002
of 2002
underscored that:
P30,494,993.5
An administrative claim must be filed with the CIR within two years after the close of the taxable December 31,
(1) 1, 4thquarter of December 31, 2004
quarter when the zero-rated or effectively zero-rated sales were made. 2002
2002

The CIR has 120 days from the date of submission of complete documents in support of the
administrative claim within which to decide whether to grant a refund or issue a tax credit
certificate. The 120-day period may extend beyond the two-year period from the filing of the
(2)
administrative claim if the claim is filed in the later part of the two-year period. If the 120-day
period expires without any decision from the CIR, then the administrative claim may be considered
to be denied by inaction.
A judicial claim must be filed with the CTA within 30 days from the receipt of the CIR's decision
(3) denying the administrative claim or from the expiration of the 120-day period without any action
from the CIR.
Based on the foregoing, the petitioner's situation is actually a case of late filing and is similar with the
case of Philex Mining Corporation in Commissioner of Internal Revenue v. San Roque Power
Corporation.[9]
The petitioner timely filed its administrative claim on April 11, 2003, within the two-year prescriptive
period after the close of the taxable quarter when the zero-rated sales were made. The respondent had
120 days, or until August 9, 2003, to decide the petitioner's claim. Considering that the respondent did
not act on the petitioner's claim on or before August 9, 2003, the latter had until September 8, 2003, the
last day of the 30-day period, within which to file its judicial claim. However, it brought its petition for
review in the CTA only on March 10, 2004, or 184 days after the last day for the filing. Clearly, the
petitioner belatedly brought its judicial claim for refund, and the CTA did not acquire jurisdiction over the
petitioner's appeal.

All taxpayers, however, can rely on BIR Ruling No. DA-489-03 from the time of its issuance on 10
(4) December 2003 up to its reversal by this Court in Aichi on 6 October 2010, as an exception to the
mandatory andjurisdictional 120+30 day periods.
We note, however, that the petitioner's judicial claim was brought well within the two-year prescriptive
period. Be that as it may, it must be stressed that the two-year prescriptive period refers to the period
within which the taxpayer can file an administrative claim, not the judicial claim with the
CTA.[10] Accordingly, the CTA should have denied petitioner's claim for tax refund or credit for lack of
jurisdiction.

In this case, the following dates are relevant to determine the timeliness of the petitioner's claim for
refund, to wit:
Nonetheless, the CTA did not err in denying the claim for refund on the ground that the petitioner had
not established its zero-rated sales of services to PIATCO through the presentation of official receipts. In
this regard, as evidence of an administrative claim for tax refund or tax credit, there is a certain
distinction between a receipt and an invoice. The Court has reiterated the distinction in Northern
Mindanao Power Corporation v. Commissioner of Internal Revenue[11] in this wise:

Section 113 of the NIRC of 1997 provides that a VAT invoice is necessary for every sale, barter or
exchange of goods or properties, while a VAT official receipt properly pertains to every lease of goods or
properties; as well as to every sale, barter or exchange of services.
The Court has in fact distinguished an invoice from a receipt in Commissioner of Internal Revenue v.
Manila Mining Corporation:
A "sales or commercial invoice" is a written account of goods sold or services rendered indicating the
prices charged therefor or a list by whatever name it is known which is used in the ordinary course of
business evidencing sale and transfer or agreement to sell or transfer goods and services.
A "receipt" oh the other hand is a written acknowledgment of the fact of payment in money or other
settlement between seller and buyer of goods, debtor or creditor, or person rendering services and
client or customer.
A VAT invoice is the seller's best proof of the sale of goods or services to the buyer, while a VAT receipt is
the buyer's best evidence of the payment of goods or services received from the seller. A VAT invoice
and a VAT receipt should not be confused and made to refer to one and the same thing. Certainly,
neither does the law intend the two to be used alternatively. (Bold underscoring supplied for emphasis)
The petitioner submitted sales invoices, not official receipts, to support its claim for refund. In light of
the aforestated distinction between a receipt and an invoice, the submissions were inadequate for the
purpose thereby intended. The Court concurs with the conclusion of the CTA En Banc, therefore, that
"[w]ithout proper VAT official receipts issued to its clients, the payments received by respondent
Takenaka for providing services to PEZA-registered entities cannot qualify for VAT zero-rating. Hence, it
cannot claim such sales as zero-rated VAT not subject to output tax."[12]
Under VAT Ruling No. 011-03, the sales of goods and services rendered by the petitioner to PIATCO were
subject to zero-percent (0%) VAT, and required no prior approval for zero rating based on Revenue
Memorandum Circular 74-99.[13] This notwithstanding, the petitioner's claim for refund must still be
denied for its failure as the taxpayer to comply with the substantiation requirements for administrative
claims for tax refund or tax credit. The Court explains why in Western Mindanao Power Corporation v.
Commissioner of Internal Revenue:[14]
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. 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. (Bold underscoring supplied for emphasis)
WHEREFORE, the Court DENIES the petition for review on certiorari; AFFIRMS the decision promulgated
on March 29, 2010 in C.T.A. EB No. 514; and DIRECTS the petitioner to pay the costs of suit.
SO ORDERED.
CIR vs. MIRANT PAGBILAO CORPORATION (FORMERLY SOUTHERN ENERGY QUEZON, INC.)
VELASCO JR., J.:
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).
From 1993 to 1996, MPC secured the services of Mitsubishi Corporation (Mitsubishi) of Japan. for the
construction of the electrical and mechanical equipment portion of its Pagbilao, Quezon.
In its revised charter, as found in RA No. 6395, it is exempt from all taxes. The following ensued after the
sale of the power generation service to NPC, viz:
 December 1, 1997:
With the above-mentioned exemption, it filed with the RDO No. 60 in Lucena City an
application for Effective Zero Rating covering the construction and operation of its
Pagbilao power state under a Build, Operate, and Transfer scheme. This application,
it based with Section 108(B)(3) of the Tax Code - Zero-rated for VAT purposes.
 January 28, 1998:
Since, no response has been received from the BIR district office (RDO), it refiled the
same application before the BIR.
 May 13, 1999:
CIR 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 NIRC of 1997."
 April 14, 1998
MPC paid Mitsubishi the VAT component for the progress billings from April 1993-
September 1996, supported by OR No. 0189 covering P135,993,570.00. Mitsubishi
had advanced the VAT component as this serves as its output VAT which is essential
for the determination of its VAT payment.
 August 25, 1998
While awaiting approval of its application, it file its quarterly VAT return, 2 nd quarter of
1998, reflecting total Input VAT of P148,003,047.62 (inclusive of the P135,993,570.00
VAT component of the progress billings)
 December 20, 1999
 MPC filed a claim for refund of the unutilized Input VAT of P148,003,047.62
 No action from the CIR as of yet…

It filed a petition for review before the CTA and contends that with the inaction of the CIR, its claim for
refund forestall the running of the two-year prescriptive period under Section 229 of the NIRC. CIR
asserted that the MPC's claim for refund cannot be granted because MPC's sale of electricity to NPC is
not zero-rated for its failure to secure an approved application for zero-rating. CTA granted MPC's claim
for input VAT refund or credit, but only P 10,766,939.48 and ordered the CIR to refund or issued Tax
Credit Certificate to MPC. Before the CA, modified CTAs decision by ordering the CIR to make refund or
issue a tax credit certificate in favor of MPC of its unutilized input VAT payments directly attributable to
its effectively zero-rated sales, 2nd quarter 1998 of P146,760,509.48.
ISSUES:
 MPCs entitlement to zero-rating for VAT purposed for its sales and services to tax-
exempt NPC
 Refund or Tax Credit for its unutilized input VAT, 2nd quarter of 1998
HELD: Petition is Partly granted, ordering the CIR for the issuance of the tax credit
certificate to MPC representing its unutilized input VAT payments directly attributable to its effectively
zero-rated sales, 2nd quarter of P10,766,939.48 but denying the tax refund or credit to the extent of
P135,993,570 (P146,760,509.48 - P10,766,939.48) representing its input VAT payments for service
purchases from Mitsubishi Corporation of Japan for the construction of a portion of its Pagbilao, Quezon
power station on the ground
that it has prescribed.
On claim for refund:
The claim for tax refund may be based on a statute granting tax exemption, which is to be construed
strictissimi juris against the taxpayer, meaning that the claim cannot be made to rest on vague inference.
Where the 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 exempting statute.
On Prescription:
The claim for tax refund/ credit of input tax covered by OR No. 0189, re: purchases by MPC from
Mitsubishi from 1993 to 1996 was filed on December 20, 1999,clearly way beyond the two-year
prescriptive period set in Sec. 112 of the NIRC, which provides:
(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
The above proviso clearly provides 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.
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.
The 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 on September 30,
1998. Consequently, MPC's claim for refund or tax credit filed on December
10, 1999 had already prescribed.
MPC cannot avail itself of the provisions of Section 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
therefore and in both instances apply only to erroneous payment or illegal collection of internal revenue
taxes.
 Sec. 204. Authority of the Commissioner to Compromise, Abate and Refund or Credit
Taxes.-- The Commissioner may –
xxxx
 (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.
xxxx
 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.)
On entitlement to creditable input VAT:
Section 105 of the NIRC provides that a 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.
Its application has been drawn from the Tax Credit Method, of which 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.
On Zero-rated transactions:
It refers 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.
CIR v. Aichi Forging Company of Asia, Inc., G.R. No. 184823, October 6, 2010
FACTS:
On September 30, 2004, Aichi Forging filed a claim for refund/credit of input VAT attributable to its zero-
rated sales for the period July 1, 2002 to September 30, 2002 with the CIR through the DOF One-Stop
Shop. On the same day, Aichi Forging filed a Petition for Review with the CTA for the same action. The
BIR disputed the claim and alleged that the same was filed beyond the two-year period given that 2004
was a leap year and thus the claim should have been filed on September 29, 2004. The CIR also raised
issues related to the reckoning of the 2-year period and the simultaneous filing of the administrative and
judicial claims.
ISSUES:
(1) Was the Petitioner’s administrative claim filed out of time?
(2) Was the filing of the judicial claim premature?
HELD:
(1) NO. The right to claim the refund must be reckoned from the “close of the taxable quarter when the
sales were made” – in this case September 30, 2004. The Court added that the rules under Sections 204
(C) and 229 as cross-referred to Section 114 do not apply as they only cover erroneous payments or
illegal collections of taxes which is not the case for refund of unutilized input VAT. Thus, the claim was
filed on time even if 2004 was a leap year since the sanctioned method of counting is the number of
months.
(2) YES. Section 112 mandates that the taxpayer filing the refund must either wait for the decision of the
CIR or the lapse of the 120-day period provided therein before filing its judicial claim. Failure to observe
this rule is fatal to a claim. Thus, Section 112 (A) was interpreted to refer only to claims filed with the CIR
and not appeals to the CTA given that the word used is “application”. Finally, the Court said that applying
the 2-year period even to judicial claims would render nugatory Section 112 (D) which already provides
for a specific period to appeal to the CTA --- i.e., (a) within 30 days after a decision within the 120-day
period and (b) upon expiry of the 120-day without a decision.
---------------------------------
COMMISSIONER OF INTERNAL REVENUE vs. SAN ROQUE POWER CORP.
G.R. No. 187485 February 12, 2013
707 SCRA 66 Supreme Court En Banc
FACTS:
 On October 11, 1997, San Roque Power Corporation (San Roque) entered into a Power Purchase
Agreement (PPA) with the National Power Corporation (NPC) by building the San Roque Multi-
Purpose Project in San Manuel, Pangasinan.
 The San Roque Multi-Purpose Project allegedly incurred, excess input VAT in the amount of
P559,709,337.54 for taxable year 2001 which it declared in its Quarterly VAT Returns filed for the
same year.
 San Roque duly filed with the BIR separate claims for refund, amounting to P559,709,337.54,
representing unutilized input taxes as declared in its VAT returns for taxable year 2001.
 However, on March 28, 2003, San Roque filed amended Quarterly VAT Returns for the year 2001
since it increased its unutilized input VAT To the amount of P560,200,283.14. San Roque filed with
the BIR on the same date, separate amended claims for refund in the aggregate amount of
P560,200,283.14.
 On April 10, 2003, a mere 13 days after it filed its amended administrative claim with the CIR on
March 28, 2003, San Roque filed a Petition for Review with the CTA.
 CIR alleged that the claim by San Roque was prematurely filed with the CTA.
ISSUE:
 WON San Roque is entitled to tax refund? – NO.
HELD:
 No. San Roque is not entitled to a tax refund because it failed to comply with the mandatory and
jurisdictional requirement of waiting 120 days before filing its judicial claim.
 On April 10, 2003, a mere 13 days after it filed its amended administrative claim with the CIR on
March 28, 2003, San Roque filed a Petition for Review with the CTA, which showed that San Roque
did not wait for the 120-day period to lapse before filing its judicial claim.
 Compliance with the 120-day waiting period is mandatory and jurisdictional, under RA 8424 or the
Tax Reform Act of 1997. Failure to comply renders the petition void.
 It violates the doctrine of exhaustion of administrative remedies and renders the petition
premature and without a cause of action, with the effect that the CTA does not acquire jurisdiction
over the taxpayer’s petition.
 Article 5 of the Civil Code provides, "Acts executed against provisions of mandatory or prohibitory
laws shall be void, except when the law itself authorizes their validity."
 Thus, San Roque’s petition with the CTA is a mere scrap of paper.
 Well-settled is the rule that tax refunds or credits, just like tax exemptions, are strictly construed
against the taxpayer.
 Whether the Atlas doctrine or the Mirant doctrine is applied to San Roque is immaterial because
what is at issue in the present case is San Roque’s non-compliance with the 120-day mandatory and
jurisdictional period, which is counted from the date it filed its administrative claim with the CIR.
The 120-day period may extend beyond the two-year prescriptive period, as long as the
administrative claim is filed within the two-year prescriptive period. However, San Roque’s fatal
mistake is that it did not wait for the CIR to decide within the 120-day period, a mandatory period
whether the Atlas or the Mirant doctrine is applied.
 Section 112(D) of the 1997 Tax Code is clear, unequivocal, and categorical that the CIR has 120 days
to act on an administrative claim. The taxpayer can file the judicial claim
(1) Only within 30 days after the CIR partially or fully denies the claim within the 120- day
period, or
(2) only within 30 days from the expiration of the 120- day period if the CIR does not act
within the 120-day period.
 Even if, contrary to all principles of statutory construction as well as plain common sense, we
gratuitously apply now Section 4.106-2(c) of Revenue Regulations No. 7-95, still San Roque cannot
recover any refund or credit because San Roque did not wait for the 60-day period to lapse,
contrary to the express requirement in Section 4.106-2(c).
 SC granted the petition of CIR to deny the tax refund or credit claim of San Roque.
G.R. No. 187485 October 8, 2013
COMMISSIONER OF INTERNAL REVENUE, Petitioner,
vs.
SAN ROQUE POWER CORPORATION, Respondent.
x-----------------------x
G.R. No. 196113
TAGANITO MINING CORPORATION, Petitioner,
vs.
COMMISSIONER OF INTERNAL REVENUE, Respondent.
x-----------------------x
G.R. No. 197156
PHILEX MINING CORPORATION, Petitioner,
vs.
COMMISSIONER OF INTERNAL REVENUE, Respondent.
RESOLUTION
CARPIO, J.:
This Resolution resolves the Motion for Reconsideration and the Supplemental Motion for
Reconsideration filed by San Roque Power Corporation (San Roque) in G.R. No. 187485, the Comment to
the Motion for Reconsideration filed by the Commissioner of Internal Revenue (CIR) in G.R. No. 187485,
the Motion for Reconsideration filed by the CIR in G.R.No. 196113, and the Comment to the Motion for
Reconsideration filed by Taganito Mining Corporation (Taganito) in G.R. No. 196113.
San Roque prays that the rule established in our 12 February 2013 Decision be given only a prospective
effect, arguing that "the manner by which the Bureau of Internal Revenue (BIR) and the Court of Tax
Appeals(CTA) actually treated the 120 + 30 day periods constitutes an operative fact the effects and
consequences of which cannot be erased or undone."1
The CIR, on the other hand, asserts that Taganito Mining Corporation's (Taganito) judicial claim for tax
credit or refund was prematurely filed before the CTA and should be disallowed because BIR Ruling No.
DA-489-03 was issued by a Deputy Commissioner, not by the Commissioner of Internal Revenue.
We deny both motions.
The Doctrine of Operative Fact
The general rule is that a void law or administrative act cannot be the source of legal rights or duties.
Article 7 of the Civil Code enunciates this general rule, as well as its exception: "Laws are repealed only
by subsequent ones, and their violation or non-observance shall not be excused by disuse, or custom or
practice to the contrary. When the courts declared a law to be inconsistent with the Constitution, the
former shall be void and the latter shall govern. Administrative or executive acts, orders and regulations
shall be valid only when they are not contrary to the laws or the Constitution."
The doctrine of operative fact is an exception to the general rule, such that a judicial declaration of
invalidity may not necessarily obliterate all the effects and consequences of a void act prior to such
declaration.2 In Serrano de Agbayani v. Philippine National Bank,3 the application of the doctrine of
operative fact was discussed as follows:
The decision now on appeal reflects the orthodox view that an unconstitutional act, for that matter an
executive order or a municipal ordinance likewise suffering from that infirmity, cannot be the source of
any legal rights or duties. Nor can it justify any official act taken under it. Its repugnancy to the
fundamental law once judicially declared results in its being to all intents and purposes a mere scrap of
paper. As the new Civil Code puts it: "When the courts declare a law to be inconsistent with the
Constitution, the former shall be void and the latter shall govern. Administrative or executive acts, orders
and regulations shall be valid only when they are not contrary to the laws of the Constitution." It is
understandable why it should be so, the Constitution being supreme and paramount. Any legislative or
executive act contrary to its terms cannot survive.
Such a view has support in logic and possesses the merit of simplicity. It may not however be sufficiently
realistic. It does not admit of doubt that prior to the declaration of nullity such challenged legislative or
executive act must have been in force and had to be complied with. This is so as until after the judiciary,
in an appropriate case, declares its invalidity, it is entitled to obedience and respect. Parties may have
acted under it and may have changed their positions. What could be more fitting than that in a
subsequent litigation regard be had to what has been done while such legislative or executive act was in
operation and presumed to be valid in all respects. It is now accepted as a doctrine that prior to its being
nullified, its existence as a fact must be reckoned with. This is merely to reflect awareness that precisely
because the judiciary is the governmental organ which has the final say on whether or not a legislative or
executive measure is valid, a period of time may have elapsed before it can exercise the power of judicial
review that may lead to a declaration of nullity. It would be to deprive the law of its quality of fairness
and justice then, if there be no recognition of what had transpired prior to such adjudication.
In the language of an American Supreme Court decision: "The actual existence of a statute, prior to such
a determination of unconstitutionality, is an operative fact and may have consequences which cannot
justly be ignored. The past cannot always be erased by a new judicial declaration. The effect of the
subsequent ruling as to invalidity may have to be considered in various aspects, with respect to
particular relations, individual and corporate, and particular conduct, private and official." This language
has been quoted with approval in a resolution in Araneta v. Hill and the decision in Manila Motor Co.,
Inc. v. Flores. An even more recent instance is the opinion of Justice Zaldivar speaking for the Court in
Fernandez v. Cuerva and Co. (Boldfacing and italicization supplied)
Clearly, for the operative fact doctrine to apply, there must be a "legislative or executive measure,"
meaning a law or executive issuance, that is invalidated by the court. From the passage of such law or
promulgation of such executive issuance until its invalidation by the court, the effects of the law or
executive issuance, when relied upon by the public in good faith, may have to be recognized as valid. In
the present case, however, there is no such law or executive issuance that has been invalidated by the
Court except BIR Ruling No. DA-489-03.
To justify the application of the doctrine of operative fact as an exemption, San Roque asserts that "the
BIR and the CTA in actual practice did not observe and did not require refund seekers to comply with
the120+30 day periods."4This is glaring error because an administrative practice is neither a law nor an
executive issuance. Moreover, in the present case, there is even no such administrative practice by the
BIR as claimed by San Roque.
In BIR Ruling No. DA-489-03 dated 10 December 2003, the Department of Finance’s One-Stop Shop Inter-
Agency Tax Credit and Duty Drawback Center (DOF-OSS) asked the BIR to rule on the propriety of the
actions taken by Lazi Bay Resources Development, Inc. (LBRDI). LBRDI filed an administrative claim for
refund for alleged input VAT for the four quarters of 1998. Before the lapse of 120 days from the filing of
its administrative claim, LBRDI also filed a judicial claim with the CTA on 28March 2000 as well as a
supplemental judicial claim on 29 September 2000.In its Memorandum dated 13 August 2002 before the
BIR, the DOF-OSS pointed out that LBRDI is "not yet on the right forum in violation of the provision of
Section 112(D) of the NIRC" when it sought judicial relief before the CTA. Section 112(D) provides for the
120+30 day periods for claiming tax refunds.
The DOF-OSS itself alerted the BIR that LBRDI did not follow the120+30 day periods. In BIR Ruling No.
DA-489-03, Deputy Commissioner Jose Mario C. Buñag ruled that "a taxpayer-claimant need not wait for
the lapse of the 120-day period before it could seek judicial relief with the CTA by way of Petition for
Review." Deputy Commissioner Buñag, citing the 7February 2002 decision of the Court of Appeals (CA) in
Commissioner of Internal Revenue v. Hitachi Computer Products (Asia) Corporation5 (Hitachi), stated
that the claim for refund with the Commissioner could be pending simultaneously with a suit for refund
filed before the CTA.
Before the issuance of BIR Ruling No. DA-489-03 on 10 December 2003, there was no administrative
practice by the BIR that supported simultaneous filing of claims. Prior to BIR Ruling No. DA-489-03, the
BIR considered the 120+30 day periods mandatory and jurisdictional.
Thus, prior to BIR Ruling No. DA-489-03, the BIR’s actual administrative practice was to contest
simultaneous filing of claims at the administrative and judicial levels, until the CA declared in Hitachi that
the BIR’s position was wrong. The CA’s Hitachi decision is the basis of BIR Ruling No. DA-489-03 dated 10
December 2003 allowing simultaneous filing. From then on taxpayers could rely in good faith on BIR
Ruling No. DA-489-03 even though it was erroneous as this Court subsequently decided in Aichi that the
120+30 day periods were mandatory and jurisdictional.
We reiterate our pronouncements in our Decision as follows:
At the time San Roque filed its petition for review with the CTA, the 120+30 day mandatory periods were
already in the law. Section112(C) expressly grants the Commissioner 120 days within which to decide the
taxpayer’s claim. The law is clear, plain, and unequivocal: "x x x 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." Following the verbalegis doctrine, this law must be applied
exactly as worded since it is clear, plain, and unequivocal. The taxpayer cannot simply file a petition with
the CTA without waiting for the Commissioner’s decision within the 120-daymandatory and jurisdictional
period. The CTA will have no jurisdiction because there will be no "decision" or "deemed a denial"
decision of the Commissioner for the CTA to review. In San Roque’s case, it filed its petition with the CTA
a mere 13 days after it filed its administrative claim with the Commissioner. Indisputably, San Roque
knowingly violated the mandatory 120-day period, and it cannot blame anyone but itself.
Section 112(C) also expressly grants the taxpayer a 30-day period to appeal to the CTA the decision or
inaction of the Commissioner x x x.
xxxx
To repeat, a claim for tax refund or credit, like a claim for tax exemption, is construed strictly against the
taxpayer.1âwphi1One 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.6
San Roque’s argument must, therefore, fail. The doctrine of operative fact is an argument for the
application of equity and fair play. In the present case, we applied the doctrine of operative fact when
we recognized simultaneous filing during the period between 10 December 2003, when BIR Ruling No.
DA-489-03 was issued, and 6 October 2010, when this Court promulgated Aichi declaring the 120+30 day
periods mandatory and jurisdictional, thus reversing BIR Ruling No. DA-489-03.
The doctrine of operative fact is in fact incorporated in Section 246 of the Tax Code, which provides:
SEC. 246. Non-Retroactivity of Rulings. - Any revocation, modification or reversal of any of the rules and
regulations promulgated in accordance with the preceding Sections or any of the rulings or circulars
promulgated by the Commissioner shall not be given retroactive application if the revocation,
modification or reversal will be prejudicial to the taxpayers, except in the following cases:
However, CTA or CA rulings are not the executive issuances covered by Section 246 of the Tax Code,
which adopts the operative fact doctrine. CTA or CA decisions are specific rulings applicable only to the
parties to the case and not to the general public. CTA or CA decisions, unlike those of this Court, do not
form part of the law of the land. Decisions of lower courts do not have any value as precedents.
Obviously, decisions of lower courts are not binding on this Court. To hold that CTA or CA decisions, even
if reversed by this Court, should still prevail is to turn upside down our legal system and hierarchy of
courts, with adverse effects far worse than the dubious doomsday scenario San Roque has conjured.
San Roque cited cases7 in its Supplemental Motion for Reconsideration to support its position that
retroactive application of the doctrine in the present case will violate San Roque’s right to equal
protection of the law. However, San Roque itself admits that the cited cases never mentioned the issue
of premature or simultaneous filing, nor of compliance with the 120+30 day period requirement. We
reiterate that "any issue, whether raised or not by the parties, but not passed upon by the Court, does
not have any value as precedent."8 Therefore, the cases cited by San Roque to bolster its claim against
the application of the 120+30 day period requirement do not have any value as precedents in the
present case.

(a) Where the taxpayer deliberately misstates or omits material facts from his return or any
Authority of the Commissioner
document required of him by the Bureau of Internal Revenue;
to Delegate Power

(b) Where the facts subsequently gathered by the Bureau of Internal Revenue are materially
In asking this Court to disallow Taganito’s claim for tax refund or credit, the CIR repudiates the validity of
different from the facts on which the ruling is based; or
the issuance of its own BIR Ruling No. DA-489-03. "Taganito cannot rely on the pronouncements in BIR
Ruling No. DA-489-03, being a mere issuance of a Deputy Commissioner."9
(c) Where the taxpayer acted in bad faith. (Emphasis supplied)

Under Section 246, taxpayers may rely upon a rule or ruling issued by the Commissioner from the time
the rule or ruling is issued up to its reversal by the Commissioner or this Court. The reversal is not given
retroactive effect. This, in essence, is the doctrine of operative fact. There must, however, be a rule or
ruling issued by the Commissioner that is relied upon by the taxpayer in good faith. A mere
administrative practice, not formalized into a rule or ruling, will not suffice because such a mere
administrative practice may not be uniformly and consistently applied. An administrative practice, if not
formalized as a rule or ruling, will not be known to the general public and can be availed of only by those
within formal contacts with the government agency.
Although Section 4 of the 1997 Tax Code provides that the "power to interpret the provisions of this
Code and other tax laws shall be under the exclusive and original jurisdiction of the Commissioner,
subject to review by the Secretary of Finance," Section 7 of the same Code does not prohibit the
delegation of such power. Thus, "the Commissioner may delegate the powers vested in him under the
pertinent provisions of this Code to any or such subordinate officials with the rank equivalent to a
division chief or higher, subject to such limitations and restrictions as may be imposed under rules and
regulations to be promulgated by the Secretary of Finance, upon recommendation of the
Commissioner."

WHEREFORE, we DENY with FINALITY the Motions for Reconsideration filed by San Roque Power
Since the law has already prescribed in Section 246 of the Tax Code how the doctrine of operative fact Corporation in G.R. No. 187485,and the Commissioner of Internal Revenue in G.R. No. 196113.
should be applied, there can be no invocation of the doctrine of operative fact other than what the law
has specifically provided in Section 246. In the present case, the rule or ruling subject of the operative
SO ORDERED.
fact doctrine is BIR Ruling No. DA-489-03 dated 10 December 2003. Prior to this date, there is no such
rule or ruling calling for the application of the operative fact doctrine in Section 246. Section246, being
an exemption to statutory taxation, must be applied strictly against the taxpayer claiming such
exemption.

San Roque insists that this Court should not decide the present case in violation of the rulings of the CTA;
otherwise, there will be adverse effects on the national economy. In effect, San Roque’s doomsday
scenario is a protest against this Court’s power of appellate review. San Roque cites cases decided by the
CTA to underscore that the CTA did not treat the 120+30 day periods as mandatory and jurisdictional.
G.R. No. 172378
January 17, 2011
SILICON PHILIPPINES, INC. (formerly INTEL PHILIPPINES MANUFACTURING, INC.) vs. COMMISSIONER
OF INTERNAL REVENUE
Facts: Petitioner Silicon Philippines, Inc., a Philippine corporation engaged in the business of
designing, developing, manufacturing and exporting advance and large-scale integrated circuit
components or "IC’s.", is registered with the Bureau of Internal Revenue (BIR) as a Value Added Tax
(VAT) taxpayer. Petitioner filed with the respondent Commissioner of Internal Revenue (CIR) an
application for credit/refund of unutilized input VAT for 1998 in the amount of P31,902,507.50. The CIR
denied this application. On appeal to the Court of Tax Appeals (CTA) Division, petitioner’s claim for
refund of unutilized input VAT on capital goods was granted. However, the CTA Division reduced the
amount which petitioner claimed from P15,170,082.00 to P9,898,867.00 .With regard to petitioner’s
claim for credit/refund of input VAT attributable to its zero-rated export sales, the CTA Division denied
the same. Upon denial of its motion for reconsideration, petitioner elevated the case to the CTA En Banc.
The CTA En Banc denied petitioner’s claim for credit/ refund of input VAT attributable to its zero-rated
sales due to its failure to show that it secured an Authorization-to-Print (ATP) invoices from the BIR and
to indicate the same in its export sales invoices; and failure to print the word "zero-rated" in its export
sales invoices. It also ruled that the items being claimed as capital goods (training materials, office
supplies, posters, banners, t-shirts, books and the like) purchased by petitioner were not duly proven to
have been used, directly or indirectly in the production or sale of taxable goods or services. As such, they
cannot be considered as capital goods, and so the reduction decided by the CTA Division was upheld.
Issues:
1. Whether or not petitioner can claim credit/refund of input VAT attributable to its zero-rated sales.
2. Whether or not the petitioner can claim input VAT paid on capital goods.
Ruling:
1. No.
In a claim for credit/refund of input VAT attributable to zero-rated sales, Section 112 (A) of the NIRC lays
down four requisites: (1) the taxpayer must be VAT-registered; (2) the taxpayer must be engaged in sales
which are zero-rated or effectively zero-rated; (3) the claim must be filed within two years after the close
of the taxable quarter when such sales were made; and (4) the creditable input tax due or paid must be
attributable to such sales, except the transitional input tax, to the extent that such input tax has not
been applied against the output tax.
Under Section 112(A) of the NIRC, a claimant must be engaged in sales which are zero-rated or
effectively zero-rated. To prove this, duly registered invoices or receipts evidencing zero-rated sales must
be presented. However, since the ATP is not indicated in the invoices or receipts, the only way to verify
whether the invoices or receipts are duly registered is by requiring the claimant to present its ATP from
the BIR. Without this proof, the invoices or receipts would have no probative value for the purpose of
refund. In the case of Intel, we emphasized that “It is not specifically required that the BIR authority to
print be reflected or indicated therein. Indeed, what is important with respect to the BIR authority to
print is that it has been secured or obtained by the taxpayer, and that invoices or receipts are duly
registered.”
The non-presentation of the ATP and the failure to indicate the word "zero-rated" in the invoices or
receipts are fatal to a claim for credit/refund of input VAT on zero-rated sales. The failure to indicate the
ATP in the sales invoices or receipts, on the other hand, is not. In this case, petitioner failed to present its
ATP and to print the word "zero-rated" on its export sales invoices. Thus, the CTA ruled correctly.
2. No.
To claim a refund of input VAT on capital goods, Section 112 (B) of the NIRC requires that: (1) The
claimant must be a VAT registered person; (2) The input taxes claimed must have been paid on capital
goods; (3) The input taxes must not have been applied against any output tax liability; and (4) The
administrative claim for refund must have been filed within two years after the close of the taxable
quarter when the importation or purchase was made. Section 4.106-1(b) of RR No. 7-95 defines capital
goods as “goods or properties with estimated useful life greater that one year and which are treated as
depreciable assets under Section 29 (f), used directly or indirectly in the production or sale of taxable
goods or services.” Based on this definition, the Supreme Court affirmed the findings of the CTA that
training materials, office supplies, posters, banners, T-shirts, books, and the other similar items reflected
in petitioner’s Summary of Importation of Goods are not capital goods. The reduction in the refundable
input VAT on capital goods from P15,170,082.00 to P9,898,867.00 is proper.
Procter & Gamble Asia PTE Ltd., Petitioner vs. Commissioner of Internal Revenue (CIR), Respondent
(G.R. No. 202071, February 19, 2014)
Facts: “This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court assailing the
Court of Tax Appeals (CTA) En Banc Decision and Resolution in CTA EB No. 746, which denied petitioner’s
claim for refund of unutilized input value-added tax (VAT) for not observing the mandatory 120-day
waiting period under Section 112 of the National Internal Revenue Code.
“On 26 September and 13 December 2006, petitioner filed administrative claims with the Bureau of
Internal Revenue (BIR) for the refund or credit of the input VAT attributable to the former’s zero-rated
sales covering the periods 1 July-30 September 2004 and 1 October-31 December 2004, respectively.
“On 2 October and 29 December 2006, petitioner filed judicial claims docketed as CTA Case Nos. 7523
and 7556, respectively, for the aforementioned refund or credit of its input VAT. Respondent filed
separate Answers to the two cases, which were later consolidated, basically arguing that petitioner failed
to substantiate its claims for refund or credit.”
Issue: Whether the 120-day waiting period, reckoned from the filing of the administrative claim for
the refund or credit of unutilized input VAT before the filing of the judicial claim, is not jurisdictional.
Held: The SC said:
“On 3 June 2013, we required respondent to submit its Comment, which it filed on 4 December 2013.
Citing the recent case CIR v. San Roque Power Corporation, respondent counters that the 120-day period
to file judicial claims for a refund or tax credit is mandatory and jurisdictional. Failure to comply with the
waiting period violates the doctrine of exhaustion of administrative remedies, rendering the judicial
claim premature. Thus, the CTA does not acquire jurisdiction over the judicial claim.
“Respondent is correct on this score. However, it fails to mention that San Roque also recognized the
validity of BIR Ruling No. DA-489-03. The ruling expressly states that the “taxpayer-claimant need not
wait for the lapse of the 120- day period before it could seek judicial relief with the CTA by way of
Petition for Review.”
“The Court, in San Roque, ruled that equitable estoppel had set in when respondent issued BIR Ruling
No. DA-489- 03. This was a general interpretative rule, which effectively misled all taxpayers into filing
premature judicial claims with the CTA. Thus, taxpayers could rely on the ruling from its issuance on 10
December 2003 up to its reversal on 6 October 2010, when CIR v. Aichi Forging Company of Asia, Inc. was
promulgated.
“The judicial claims in the instant petition were filed on 2 October and 29 December 2006, well within
the ruling’s period of validity. Petitioner is in a position to “claim the benefit of BIR Ruling No. DA489-03,
which shields the filing of its judicial claim from the vice of prematurity.
“WHEREFORE, the petition is GRANTED. The Decision and Resolution of the Court of Tax Appeals En Banc
in CTA EB No. 746 are REVERSED and SET ASIDE. This case is hereby REMANDED to the CTA First Division
for further proceedings and a determination of whether the claims of petitioner for refund or tax credit
of unutilized input value-added tax are valid.”
APOLLO SEMICONDUCTOR PHILIPPINES vs. COMMISSIONER OF INTERNAL REVENUE, G.R. No. 168950,
January 14, 2015
FACTS: Petitioner Rohm Apollo is a domestic corporation registered with the Securities and Exchange
Commission. It is also registered with the Philippine Economic Zone Authority as an Ecozone Export
Enterprise. Rohm Apollo is in the business of manufacturing semiconductor products, particularly
microchip transistors and tantalium capacitors at the People’s Technology Complex – Special Economic
Zone, Barangay Maduya, Carmona Cavite.Further, it is registered with the Bureau of Internal Revenue
(BIR) as a value-added taxpayer.hanRoblesvirtualLawlibrary
Sometime in June 2000, prior to the commencement of its operations on 1 September 2001, Rohm
Apollo engaged the services of Shimizu Philippine Contractors, Inc. (Shimizu) for the construction of a
factory.For services rendered by Shimizu, petitioner made initial payments of P198,551,884.28 on 7 July
2000 and P132,367,923.58 on 3 August 2000.hanRoblesvirtualLawlibrary
It should be noted at this point that Section 112(B), in relation to Section 112(A) of the 1997 Tax Code,
allows a taxpayer to file an application for the refund or tax credit of unutilized input VAT when it comes
to the purchase of capital goods. The provision sets a time frame for the filing of the application at two
years from the close of the taxable quarter when the purchase was made.
Going back to the case, petitioner treated the payments as capital goods purchases and thus filed with
the BIR an administrative claim for the refund or credit of accumulated unutilized creditable input taxes
on 11 December 2000. As the close of the taxable quarter when the purchases were made was 30
September 2000, the administrative claim was filed well within the two-year prescriptive period.
Pursuant to Section 112(D) of the 1997 Tax Code, the Commissioner of Internal Revenue (CIR) had a
period of 120 days from the filing of the application for a refund or credit on 11 December 2000, or until
10 April 2001, to act on the claim. The waiting period, however, lapsed without any action by the CIR on
the claim.
Instead of filing a judicial claim within 30 days from the lapse of the 120-day period on 10 April, or until
10 May 2001, Rohm Apollo filed a Petition for Review with the CTA docketed as CTA Case No. 6534 on 11
September 2002. It was under the belief that a judicial claim had to be filed within the two-year
prescriptive period ending on 30 September 2002.hanRoblesvirtualLawlibrary
On 27 May 2004, the CTA First Division rendered a Decision denying the judicial claim for a refund or tax
credit. In support of its ruling, the CTA First Division held, among others, that petitioner must have at
least submitted its VAT return for the third quarter of 2001, since it was in that period that it began its
business operations. The purpose was to verify if indeed petitioner did not carry over the claimed input
VAT to the third quarter or the succeeding quarters.
On 14 July 2004, petitioner Rohm Apollo filed a Motion for Reconsideration, but the tax court stood by
its Decision.nRoblesvirtualLawlibrary
On 18 January 2005, the taxpayer elevated the case to the CTA En Banc via a Petition for
Review.hanRoblesvirtualLawlibrary
On 22 June 2005, the CTA En Banc rendered its Decision denying Rohm Apollo’s Petition for Review.The
appellate tax court held that the failure to present the VAT returns for the subsequent taxable year
proved to be fatal to the claim for a refund/tax credit, considering that it could not be determined
whether the claimed amount to be refunded remained unutilized.
Petitioner filed a Motion for Reconsideration of the Decision, but it was denied for lack of merit.
Persistent, the taxpayer filed this Rule 45 Petition, arguing that it has satisfied all the legal requirements
for a valid claim for refund or tax credit of unutilized input VAT.cralawre
ISSUE: Whether the CTA acquired jurisdiction over the claim for the refund or tax credit of unutilized
input VAT?
RULING: NO.
The judicial claim was filed out of time.
Section 112(D) of the 1997 Tax Code states the time requirements for filing a judicial claim for the refund
or tax credit of input VAT. The legal provision 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 a refund or
credit; and the period of 30 days, which refers to the period for filing a judicial claim with the CTA. It is
the 30-day period that is at issue in this case.

On 11 December 2000, petitioner filed with the BIR an application for the refund or credit of
accumulated unutilized creditable input taxes. Thus, the CIR had a period of 120 days from 11 December
2000, or until 10 April 2001, to act on the claim. It failed to do so, however. Rohm Apollo should then
have treated the CIR’s inaction as a denial of its claim. Petitioner would then have had 30 days, or until
10 May 2001, to file a judicial claim with the CTA. But Rohm Apollo filed a Petition for Review with the
CTA only on 11 September 2002. The judicial claim was thus filed late.
The 30-day period to appeal is mandatory and jurisdictional.
As a general rule, the 30-day period to appeal is both mandatory and jurisdictional. The only exception to
the general rule is when BIR Ruling No. DA-489-03 was still in force, that is, between 10 December 2003
and 5 October 2010, The BIR Ruling excused premature filing, declaring 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. In San Roque, the High Court explained both the general rule and the
exception:chanroblesvirtuallawlibrary
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 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.
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 the late filing of a judicial
claim.27chanRoblesvirtualLawlibrary
In sum, premature filing is allowed for cases falling during the time when BIR Ruling No. DA-489-03 was
in force; nevertheless, late filing is absolutely prohibited even for cases falling within that period.
As mentioned above, the taxpayer filed its judicial claim with the CTA on 11 September 2002. This
was before the issuance of BIR Ruling No. DA-489-03 on 10 December 2003. Thus, Rohm Apollo could
not have benefited from the BIR Ruling. Besides, its situation was not a case of premature filing of its
judicial claim but one of late filing. To repeat, its judicial claim was filed on 11 September 2002 – long
after 10 May 2001, the last day of the 30-day period for appeal. The case thus falls under the general rule
– the 30-day period is mandatory and jurisdictional.cralawred
In fine, our finding is that the judicial claim for the refund or credit of unutilized input VAT was belatedly
filed. Hence, the CTA lost jurisdiction over Rohm Apollo’s claim for a refund or credit.
A final note, the taxpayers are reminded that that when the 120-day period lapses and there is inaction
on the part of the CIR, they must no longer wait for it to come up with a decision thereafter. The CIR’s
inaction is the decision itself. It is already a denial of the refund claim. Thus, the taxpayer must file an
appeal within 30 days from the lapse of the 120-day waiting period.
Pilipinas Total Gas, Inc. vs Commissioner of Internal Revenue. G.R. No. 207112. December 8, 2015.
FACTS: Total Gas filed its Amended Quarterly VAT Returns. Total claims that they incurred unused
input VAT credits.
On May 15, 2008, Total filed an administrative claim for the refund. On August 28, 2008, Total submitted
to the BIR additional documents. On January 23, 2009, Total elevated the case to the CTA.
The CTA dismissed the case citing that the case was prematurely filed as the neccesary documents were
incomplete; that the 120 day period allowed to the CIR to decide on the claim under Section 112 of the
NRC has not started to run.
With the CTA en banc, the case was again dismissed reiterating the decision of the Division. The en banc
also stated that the reckoning point of the 120 day period was on May 2008 thus the petition filed on
January 2009 was considered belatedly filed.
ISSUE: Whether the claim has prescribed.
RULING: NO.
The SC held that Total timely filed its judicial claim on January 2009.
The NIRC provides that the CIR has 120 days from the date of submission of complete documents to
decide on the claim for tax credits. Upon inaction of the BIR after 120 days, the taxpayer may, within 30
days, appeal on the CTA.
The BIR did not give notice to Total with regard to the documents submitted on August 2008. Thus the
counting of the 120 day period should start from August 2008 or when Total made its submission of
complete documents to support its application. The BIR had until December 2008 to decide. Because of
the BIR's inaction, Total had until January 25, 2009 to file their judicial claim.
G.R. No. 207112, December 8, 2015
Pilipinas Total Gas, Inc. vs CIR
Facts: Total Gas is engaged in the business of selling, transporting and distributing industrial gas,
sale of gas equipment and other related business. For this purpose, Total Gas registered itself with BIR as
VAT taxpayer.
For the 1st and 2nd quarters of 2007, Total Gas claimed VAT credits from its domestic purchases of non
capital goods and services. Later, they filed an administrative claim for refund of the unutilized VAT for
the 1st two quarters of 2007. Due to the inaction of CIR, Total Gas elevated their claim to the CTA.
CTA dismissed the petition for being prematurely filed, saying that Total Gas failed to complete Chevron appealed to the Court, but the Court (Second Division) denied the petition for review on
necessary documents to substantiate a claim for refund. Motion for reconsideration was denied too by certiorari through the resolution for failure to show any reversible error on the part of the CTA En Banc.
the CTA. Hence, Chevron has filed the Motion for Reconsideration.

CTA En Banc also denied the petition to review. It ruled that CTA division had no jurisdiction over the
case because Total Gas failed to seasonably file its 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; and
(b) whether the submission of incomplete documents at the administrative level (BIR) renders
the judicial claim premature and dismissible for lack of jurisdiction.
Ruling: Petition has merit.
Judicial claim timely filed. CIR has 120 days from the date of submission of complete documents to
decide a claim for tax credit or refund. CTA counted the period from May 15, 2008.
Indeed, the 120-day period granted to the CIR to decide the administrative claim under the Section 112
is primarily intended to benefit the taxpayer, to ensure that his claim is decided judiciously and
expeditiously. After all, the sooner the taxpayer successfully processes his 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 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 unbridled power to indefinitely delay the administrative claim,
which would ultimately prevent the filing of a judicial claim with the CTA.
ISSUE:
Whether Chevron was entitled to the tax refund or the tax credit for the excise taxes paid on the
importation of petroleum products that it had sold to CDC in 2007.
RULING:
Yes, Chevron was entitled to the refund or credit of the excise taxes erroneously paid on the importation
of the petroleum products sold to CDC.
Pursuant to Section 135(c), petroleum products sold to entities that are by law exempt from direct and
indirect taxes are exempt from excise tax. As a duly-registered enterprise in the Clark Special Economic
Zone, CDC has been exempt from paying direct and indirect taxes pursuant to Section 24 of Republic Act
No. 7916 (The Special Economic Zone Act of 1995), in relation to Section 15 of Republic Act No. 9400
(Amending Republic Act No. 7227, otherwise known as the Bases Conversion Development Act of 1992).
In as much as its liability for the payment of the excise taxes accrued immediately upon importation and
prior to the removal of the petroleum products from the customs house, Chevron was bound to pay, and
actually paid such taxes. But the status of the petroleum products as exempt from the excise taxes would
be confirmed only upon their sale to CDC in 2007. Before then, Chevron did not have any legal basis to
claim the tax refund or the tax credit as to the petroleum products. Consequently, the payment of the
excise taxes by Chevron upon its importation of petroleum products was deemed illegal and erroneous
upon the sale of the petroleum products to CDC. Section 204 of the NIRC explicitly allowed Chevron as
the statutory taxpayer to claim the refund or the credit of the excise taxes thereby paid.

Chevron Phils., Inc. vs. CIR G.R. No. 210836 | September 1, 2015

TOPIC: Tax credit/refund for excise taxes paid

FACTS: Chevron Phils. Inc. (Chevron) sold and delivered petroleum products to CDC in the period
from August 2007 to December 2007. Chevron did not pass on to CDC the excise taxes paid on the
importation of the petroleum products sold to Clark Development Corporation (CDC) in taxable year
2007; hence, it filed an administrative claim for tax refund or issuance of tax credit certificate.
Considering that respondent Commissioner of Internal Revenue (CIR) did not act on the administrative
claim for tax refund or tax credit, Chevron elevated its claim to the CTA by petition for review.

CTA First Division denied Chevron's judicial claim for tax refund or tax credit through its decision and
later on also denied Chevron's Motion for Reconsideration. In due course, Chevron appealed to the CTA
En Banc, which affirmed the ruling of the CTA First Division, stating that there was nothing in Section
135(c) of the NIRC that explicitly exempted Chevron as the seller of the imported petroleum products
from the payment of the excise taxes; and holding that because it did not fall under any of the categories
exempted from paying excise tax, Chevron was not entitled to the tax refund or tax credit. Chevron
sought reconsideration, but the CTA En Banc denied its motion for that purpose in the resolution.
[ GR No. 186223, Oct 01, 2014 ] petitioner. The petitioner filed a motion for reconsideration, which was denied by the CTA En Banc in the
assailed Resolution[9] dated January 30, 2009.
CIR v. PHILIPPINE ASSOCIATED SMELTING
In granting PASAR's petition for review, the CTA En Banc ruled that it is the proper party to claim the
The instant petition filed under Rule 45 of the Revised Rules of Court seeks to reverse and set aside the
refund/credit, citing Commissioner of Customs v. Philippine Phosphate Fertilizer Corp.[10] and Philippine
Court of Tax Appeals (CTA) En Bane Decision[1] dated November 12, 2008 in CTA E.B. Case No. 351 (CTA
Phosphate Fertilizer Corporation v. Commissioner of Internal Revenue.[11] According to the CTA, since
Case No. 7565) entitled "Philippine Associated Smelting and Refining Corporation v. The Honorable
PASAR is a PEZA-registered entity enjoying tax exemption privilege under Presidential Decree (P.D.) No.
Commissioner of Internal Revenue" which ruled that respondent is a PEZA-registered enterprise and
66 and subsequently, Republic Act (R.A.) No. 7916, it is exempt from payment of excise taxes on
enjoys tax exemption privilege; hence, it is exempt from paying the excise tax on petroleum products in
petroleum products. And following the Court's ruling in the Philippine Phosphate Fertilizer Corporation,
issue and entitled to seek a refund thereof. The Resolution[2] dated January 30, 2009 denied the motion
PASAR, therefore, may seek refund.[12]
for reconsideration filed by the Commissioner of Internal Revenue (petitioner).

The grounds relied upon in this petition are as follows:

The respondent Philippine Associated Smelting and Refining Corporation (PASAR) is a domestic
corporation engaged in the business of processing, smelting, refining and exporting refined copper
I. THE CTA SHOULD HAVE DISMISSED RESPONDENT'S PETITION FOR REVIEW
cathodes and other copper products, and a registered Zone Export Enterprise with the Export Processing
FOR LACK OF JURISDICTION OVER THE SUBJECT MATTER OF THE CASE.
Zone Authority (EPZA).[3] PASAR uses petroleum products for its manufacturing and other processes, and
purchases it from local distributors, which import the same and pay the corresponding excise taxes. The
II. THE CTA EN BANC'S RELIANCE ON COMMISSIONER OF CUSTOMS V.
excise taxes paid are then passed on by the local distributors to its purchasers. In this particular case,
PHILIPPINE PHOSPHATE FERTILIZER CORPORATION AND PHILIPPINE
Petron passed on to PASAR the excise taxes it paid on the petroleum products bought by the latter
PHOSPHATE FERTILIZER CORPORATION V. COMMISSIONER OF INTERNAL
during the period of January 2005 to October 2005, totalling eleven million six hundred eighty-seven
REVENUE IS MISPLACED.
thousand four hundred sixty-seven 62/100 (P11,687,467.62).

III. RESPONDENT IS NOT THE PROPER PARTY TO CLAIM A TAX CREDIT AND/OR
In December 2006, PASAR filed a claim for refund and/or tax credit with the Office of the Regional
REFUND.
Director of Region XIV, which denied the same in a letter dated January 3, 2007.[4]

PASAR then filed a petition for review with the Court of Tax Appeals (CTA) Second Division, which was
IV. THE SPECIFIC TAXES HEREIN SOUGHT TO BE REFUNDED/CREDITED DO NOT
contested by the petitioner. The petitioner also filed a motion to preliminarily resolve whether PASAR is
FORM PART OF THE EXPORT PRODUCTS MANUFACTURED BY RESPONDENT
the proper party to ask for a refund. Thereafter, the parties agreed to the following stipulation of issues:
AND, THEREFORE, NOT REFUNDABLE.[13]
1. Whether or not petroleum products purchased from Petron and delivered to PASAR to be used in its
The petitioner contends that the CTA has no jurisdiction over the BIR Regional Director's denial of
operation in LIDE are exempt from excise taxes under Section 17 of P.D. No. 66 and thus entitled to a
PASAR's claim, arguing that the CTA's exclusive appellate jurisdiction pertains only to decisions of the
refund or issuance of a tax credit certificate.
Commissioner of Internal Revenue, as provided in Section 7 of R.A. No. 1125, as amended by Section 7 of
R.A. No. 9282. The petitioner also objects to the CTA En Banc's application of the Commissioner of
2. Whether or not PASAR is the proper party to claim for refund or issuance of tax credit certificate for
Customs and Philphos cases in the present case and argues that Commissioner of Customs involved the
excise taxes paid.
tax refund/credit of customs duties and not excise taxes; Philphos, on the other hand, did not squarely
resolve the issue of whether an EPZA-registered enterprise is exempt from paying the excise taxes on
3. Whether or not the claim for tax credit/refund is properly substantiated by receipts and invoices.
petroleum products indirectly used. The petitioner also contends that the proper party to seek a tax
refund/credit is the statutory taxpayer or the person on whom the tax was imposed and paid the same,
4. Whether or not the claim for tax credit/refund is timely filed.[5]
which in this case was Petron, even though the latter subsequently shifted the burden to PASAR. Finally,
the petitioner believes that Section 17 of P.D. No. 66 does not clearly provide that petroleum products
On September 19, 2007, the CTA Second Division issued a Resolution[6] granting the petitioner's motion
delivered to EPZA-registered enterprises are exempt from taxes, and that the petroleum products
to preliminarily resolve whether PASAR is the proper party to ask for a refund, and dismissed its petition
purchased by PASAR from Petron do not form part of the export products it manufactures.[14]
for review. When its motion for reconsideration was denied in the Resolution[7] dated December 3, 2007,
PASAR filed a petition for review with the CTA En Banc.
Respondent, meanwhile, claims that the petitioner is estopped from questioning the jurisdiction of the
CTA. Respondent also contends, in sum, that Commissioner of Customs and Philphos are applicable in
In the assailedResolution[8]
dated November 12, 2008, the CTA En Banc set aside CTA Resolutions dated
this case, that it is the proper party to apply for a tax refund and that it is exempted from paying excise
September 19, 2007 and December 3, 2007, and ordered the remand of the petition for review to the
taxes.[15]
CTA Second Division for reception of evidence and determination of the amount to be refunded to the
At the outset, it must be stated that the Court will limit the issue to be resolved in this case to whether
PASAR is the proper party to claim the tax credit/refund on the excise taxes paid on the petroleum
products purchased from Petron. The other grounds raised by the petitioner, i.e., jurisdiction and the
factual basis of PASAR's claim for tax refund/credit, are not proper at the moment inasmuch as the
CTA En Banc's review only dealt with the petitioner's "motion to preliminary resolve the issue of whether
or not [respondent] is the proper party that may ask for a refund."[16] And on this issue, the Court finds
that the CTA En Banc did not commit any reversible error when it ruled that PASAR is the proper party to
file a claim for the refund/credit of excise taxes. Hence, the petition must be denied.
PASAR is a business enterprise registered with the EPZA pursuant to P.D. No. 66.[17] There is no dispute as
regards its use of fuel and petroleum products for the processing, smelting and refining of its export
copper products, and that Petron, from which PASAR purchased its fuel and petroleum, products, passed
on the excise taxes paid to the latter. In ruling that PASAR is the proper party to file the claim for the
refund/credit, the CTA En Bane chiefly relied on the Court's rulings in Commissioner of Customs v.
Philippine Phosphate Fertilizer Corp.[18] and Philippine Phosphate Fertilizer Corporation v. Commissioner
of Internal Revenue.[19]
Commissioner of Customs involved a claim for refund by Philippine Phosphate Fertilizer Corporation
(Philphos) of the customs duties it indirectly paid on fuel and petroleum products purchased from Petron
Corporation for the period of October 1991 until June 1992. This was opposed by the Commissioner of
Customs. One of the issues raised in the case was the legal basis for Philphos' exemption from duties and
taxes, it being an EPZA-registered company. While it may be true that Commissioner of Customs involved
the refund of customs duties paid on petroleum products, it was nevertheless correctly applied by the
CTA En Banc.
Notably, in Commissioner of Customs, the Court squarely interpreted the exemption granted under
Section 17 of P.D. No. 66 as applicable to both customs duties and internal revenue taxes, viz:
The incentives offered to enterprises duly registered with the PEZA consist, among others, of tax
exemptions, x x x
Section 17 of the EPZA Law particularizes the tax benefits accorded to duly registered enterprises. It
states:
SEC. 17. Tax Treatment of Merchandize in the Zone. - (1) Except as otherwise provided in this Decree,
foreign and domestic merchandise, raw materials, supplies, articles, equipment, machineries, spare parts
and wares of every description, except those prohibited by law, brought into the Zone to be sold, stored,
broken up, repacked, assembled, installed, sorted, cleaned, graded, or otherwise processed,
manipulated, manufactured, mixed with foreign or domestic merchandise or used whether directly or
indirectly in such activity, shall not be subject to customs and internal revenue laws and regulations nor
to local tax ordinances, the following provisions of law to the contrary notwithstanding.
The cited provision certainly covers petroleum supplies used, directly or indirectly, by Philphos to
facilitate its production of fertilizers, subject to the minimal requirement that these supplies are brought
into the zone. The supplies are not subject to customs and internal revenue laws and regulations, nor
to local tax ordinances. It is clear that Section 17(1) considers such supplies exempt even if they are
used indirectly, as they had been in this case.[20] (Emphasis and underscoring ours)
Thus, the Court affirmed the refund of customs duties granted by the CTA and in closing, stated that
"[t]he grant of exemption under Section 17(1) is clear and unambiguous, x x x."[21]
Philphos, meanwhile, involved Philphos' claim for refund of excise taxes passed on by Petron. One of the
issues identified by the Court in the case was whether the CTA should have granted the claim for refund.
In resolving said issue, the Court ruled that the CTA erred when it disallowed the petitioner's claim due
to its failure to present invoices as there is nothing in CTA Circular No. 1-95 that requires its
presentation. The issue of whether the petitioner was entitled to exemption from payment of excise
taxes was not lengthily discussed by the Court because it was already undisputed. Thus, the Court
stated:
In this case, there is no dispute that petitioner is entitled to exemption from the payment of excise
taxes by virtue of its being an EPZA registered enterprise. As stated by the CTA, the only thing left to be
determined is whether or not petitioner is entitled to the amount claimed for refund.
xxxx
Since it is not disputed that petitioner is entitled to tax exemption, it should not be precluded from
presenting evidence to substantiate the amount of refund it is claiming on mere technicality especially in
this case, where the failure to present invoices at the first instance was adequately explained by
petitioner.[22] (Emphasis ours)
Applying the foregoing rulings in this case, it is therefore undeniable that PASAR is exempted from
payment of excise taxes.
The next pivotal question then that must be resolved is whether PASAR has the legal personality to file
the claim for the refund of the excise taxes passed on by Petron. The petitioner insists that PASAR is not
the proper party to seek a refund of an indirect tax, such as an excise tax or Value Added Tax, because it
is not the statutory taxpayer. The petitioner's argument, however, has no merit.
The rule that it is the statutory taxpayer which has the legal personality to file a claim for refund[23] finds
no applicability in this case. In Philippine Airlines, Inc. v. Commissioner of Internal Revenue,[24] the Court
distinguished between the kinds of exemption enjoyed by a claimant in order to determine the propriety
of a tax refund claim. "If the law confers an exemption from both direct or indirect taxes, a claimant is
entitled to a tax refund even if it only bears the economic burden of the applicable tax. On the other
hand, if the exemption conferred only applies to direct taxes, then the statutory taxpayer is regarded as
the proper party to file the refund claim."[25] In PASAR's case, Section 17 of P.D. No. 66, as affirmed
in Commissioner of Customs, specifically declared that supplies, including petroleum products, whether
used directly or indirectly, shall not be subject to internal revenue laws and regulations. Such exemption
includes the payment of excise taxes, which was passed on to PASAR by Petron. PASAR, therefore, is the
proper party to file a claim for refund.
WHEREFORE, the petition is DENIED for lack of merit. Accordingly, the Decision dated November 12,
2008 and its Resolution dated January 30, 2009 of the Court of Tax Appeals En Banc in CTA E.B. Case No.
351 are hereby AFFIRMED in toto.
SO ORDERED.