FIRST DIVISION

G.R. No. 185969 November 19, 2014

AT&T COMMUNICATIONS SERVICES PHILIPPINES, INC., Petitioner,

vs.
COMMISSIONER OF INTERNAL REVENUE, Respondent.

DECISION

PEREZ, J.:

Before the Court is a Petition for Review on Certiorari seeking to reverse and set aside the 24 September
2008 Decision1 and the 13 January 2009 Resolution2 of the Court of Tax Appeals (CTA) En Banc in C.T.A.
EB No. 381 which affirmed the Decision and Resolution dated 12 December 2007 and 12 March 2008,
respectively, of the First Division of the CTA (CTA in Division)3 in C.T.A. Case No. 7221, dismissing the
petition for lack of merit; and accordingly, denied petitioner's claim for the refund or issuance of a tax
credit certificate (TCC) in the amount of ₱3,003,265.14 allegedly representing excess or unutilized input
Value-Added Tax (VAT) attributable to its zero-rated sales ofservices for the period covering 1 January
2003 to 31 December 2003.

The Facts

The factual antecedents of this case reveal that petitioner AT&T Communications Services Philippines,
Inc. (petitioner), being a domestic corporation principally engaged in the business of rendering
information, promotional, supportive and liaison service, entered into a Service Agreement with AT&T
Communications Services International, Inc. (AT&T-CSI), a non-resident foreign corporation, on 1 January
1999, whereby compensation for such services is paid in US Dollars.4

Petitioner has an Assignment Agreement with AT&T Solutions, Inc. (AT&T-SI) where the latter assigned to
petitioner the performance of services AT&T-SI was supposed to provide Mastercard International, Inc. (a
non-resident foreign corporation) under a Virtual Private Network Service Agreement. Likewise, the
compensation for such services is paid in US Dollars to be inwardly remitted to the Philippines by AT&T-
SI, which acts as the collecting agent of petitioner.5

Thereafter, a second Assignment Agreement was executed and entered into by petitioner with AT&T-SI
for the purpose of performing the latter’s obligation to Lexmark International, Inc. (also a non-resident
foreign corporation) by providing services to its affiliates in the Philippines, namely: Lexmark Research
and Development Corporation and Lexmark International (Philippines), Inc. (both Philippine Economic
Zone Authority [PEZA]-registered enterprises). Payment of petitioner’s aforesaid services is as well paid
in US Dollars through telegraphic transfer.6

Consequently, petitioner filed its Quarterly VAT Returns with the Bureau of Internal Revenue (BIR) for the
taxable year period covering 1 January 2003 to 31 December 2003,detailed hereunder as follows:
Date of Filing Period Covered
22 April 2003 1st Quarter
23 July 2003 2nd Quarter
22 October 2003 3rd Quarter
26 January 2004 4th Quarter7
On 5 February 2004, petitioner filed its first Amended Quarterly VAT Return for the Fourth Quarter of
taxable year 2003; while on 26 April 2004, petitioner filed its Amended Quarterly VAT Returns for the
First to Fourth Quarters of the taxable year 2003.8

Petitioner filed on 13 April 2005 with the BIR an application for refund and/or tax credit of its unutilized
VAT input taxes for the aforesaid taxable period amounting to ₱3,003,265.14. However, there being no
action on said administrative claim, petitioner filed a Petition for Review before the CTA in Division on 20
April 2005 (or exactly seven [7] days from the time it filed its administrative claim) in order to suspend
the running of the prescriptive period provided under Section 229 of the National Internal Revenue Code
(NIRC) of 1997, as amended.9

The Ruling of the CTA in Division

In C.T.A. Case No. 7221, the CTA in Division rendered a Decision dated 12 December 200710 dismissing
petitioner’s claim for the refund or issuance of a TCC. It ruled that in order to be entitled to its refund
claim, petitioner must show proof of compliance with the substantiation requirements as mandated
bylaw and regulations. Therefore, considering that the subject revenues pertain to gross receipts from
services rendered by petitioner, valid official receipts and not mere sales invoices should have been
presented and submitted in evidence in support thereof. Without proper VAT official receipts, the foreign
currency payment received by petitioner from services rendered for the four (4) quarters of taxable year
2003 cannot qualify for zero-rating for VAT purposes. Since it is clear from the provisions of Section
112(A) ofthe NIRC of 1997, as amended, that there must be zero-rated sales or effectively zero-rated
sales in order for a refund claim of input VAT could prosper, the claimed input VAT payments allegedly
attributable thereto in the amount of ₱3,003,265.14 cannot be granted.11

On 12 March 2008, the CTA in Division denied petitioner’s Motion for Reconsideration for lack of merit
considering that no new matter was raised which were not taken into consideration in arriving at the
subject Decision that would warrant its reversal or modification.12

Unsatisfied, petitioner filed a Petition for Review before the CTA En Bancpursuant to Section 18 of
RepublicAct (R.A.) No. 1125, as amended by Section 11 of R.A. No. 9282, docketed as C.T.A. EB No.
381.13

The Ruling of the CTA En Banc

Finding no merit in petitioner’s contentions, the CTA En Banc rendered the assailed 24 September 2008
Decision which affirmed both the Decision and Resolution rendered by the CTA in Division in C.T.A. Case
No. 7221. It categorically pronounced that official receipt cannot be interchanged with sales invoice.14 It
further emphasized that proof of inward remittances like bank credit advices cannot be used in lieu of
VAT official receipts to demonstrate petitioner’s zero-rated transactions. Under Section 113 of the NIRC
of 1997, as amended, irrespective of the nature of transaction, be it taxable, exempt orzero-rated sale,
the law mandates that the taxpayer "for every sale, issue an invoice or receipt." Thus, the enumerated
zero-rated transactions under Sections 106and 108 are those which are duly covered by VAT invoices (in
the case of sales of goods), and VAT official receipts (in the case of sales of services).15 In other words,
the law itself clearly specified that an official receipt shall cover sales of services, and did not provide for
any other document which can be used as an alternative to or in lieu thereof.

Upon denial of petitioner’s Motion for Reconsideration thereof, it filed the instant Petition for Review on
Certiorari before this Court seeking the reversal of the aforementioned Decision and the 13 January 2009
Resolution16 rendered in C.T.A. EB No. 381.

In support thereof, petitioner raises the following grounds: (1) the NIRC of 1997, as amended, does not
limit the proof of input or output VAT to a single document. There is no distinction of the evidentiary
value of the supporting documents. Hence, it is clear that invoices or receipts may be used
interchangeably to substantiate VAT; (2) the use of the VAT official receipt as proof of payment of the sale
of service loses its significance due to the requirement that petitioner must prove the validity of its
inward remittances; (3) petitioner presented substantial evidence that unequivocally proved its zero-
rated transactions for the taxable year 2003; and (4) in civil cases, such as claims for refund or issuance
of a TCC, a mere preponderance of evidence will suffice to justify the grant of the claim.17

The Issue

The sole issue for this Court’s consideration is whether or not petitioner is entitled to a refund or
issuance of a TCC in its favor amounting to ₱3,003,265.14 allegedly representing unutilized input VAT
attributable to petitioner’s zero-rated sales for the period of 1 January 2003 to 31 December 2003, in
accordance with the provisions of the NIRC of 1997, as amended, other pertinent laws, and applicable
jurisprudential proclamations.

Our Ruling

At this juncture, it bears emphasis that jurisdiction over the subject matter or nature of an action is
fundamental for a court to act on a given controversy,18 and is conferred only by law and not by the
consent or waiver upon a court which, otherwise, would have no jurisdiction over the subject matter or
nature of an action. Lack of jurisdiction of the court over an action or the subject matter of an action
cannot be cured by the silence, acquiescence, or even by express consent of the parties.19 If the court
has no jurisdiction over the nature of an action,its only jurisdiction is to dismiss the case. The court could
not decide the case on the merits.20 Needless to state, to obviate the possibility that its decision may be
rendered void, the Court can, by its own initiative, raise the question of jurisdiction, although not raised
by the parties.21 As a corollary thereto, to inquire into the existence of jurisdiction over the subject
matter is the primary concern of a court, for thereon would depend the validityof its entire
proceedings.22 Therefore, even if there was no jurisdictional issue raised by any party, the Court may
look into it at anytime of the proceedings, even during this appeal.

It has long been established thatthe CTA is a court of special jurisdiction. As such, it can only take
cognizance of such matters as are clearly within its jurisdiction.23 Hence, when it appears from the
pleadings or the evidence on record that the court has no jurisdiction over the subject matter, the court
shall dismiss the claim.24

Relevant thereto, the Court sitting En Banchas finally settled the issue on proper observance of the
prescriptive periods in claiming for refund of creditable input tax due or paid attributable to any zero-
rated or effectively zero-rates sales. Thus, in view of the jurisprudential pronouncements rendered in
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
(San Roquecase),25 this Court finds it imperative to first look into the factual findings of the CTA for the
purpose of achieving a complete determination of the issue presented, particularly as to the timeliness
of its administrative and judicial claims.

In C.T.A. Case No. 7221, the CTA in Division solely ruled on petitioner’s non-compliance with the
substantiation requirements, expressing that the evidence submitted by petitioner to prove its zero-
rated sales were insufficient so as to entitle it to the claim for refund or issuance of a TCC. Similar
declaration was made by the CTA En Bancin the assailed 24 September 2008 Decision and 13 January
2009 Resolution in C.T.A. EB No. 381.

Nonetheless, although it is true thatthe substantiation requirements in establishing a refund claim is a

valid issue for this Court to rule upon, the prior determination of whether or notthe CTA properly
acquired jurisdiction over petitioner’s claim covering the four (4) quarters of taxable year 2003, taking
into consideration the timeliness of the filing of the administrative and judicial claims pursuant to
Section 112 of the NIRC of 1997, as amended, and consistent with the pronouncements made in the San
Roque case, is still our primary concern. Clearly, petitioner’s claim can only proceed upon compliance
with the aforesaid jurisdictional requirement.

Section 112 of the NIRC of 1997, as amended, reads:

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

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

xxxx

(D)26 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 twentyday period, appeal the decision orthe unacted claim with the Court of Tax Appeals.

x x x x (Emphases and underscoring supplied)

As mentioned earlier, the proper interpretation of the afore-quoted provision was finally settled in the
San Roquecase27 by this Court sitting En Banc. The relevant portions of the discussion pertinent to the
focal issue presented in this case are quoted hereunder, to wit:

First, Section 112(A) clearly, plainly, and unequivocally provides that the taxpayer "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 the creditable input tax due or paid to such sales." In short, the law
statesthat the taxpayer may apply with the Commissioner for a refund or credit "within two (2) years,"
which means at anytime within two years. Thus, the application for refund or credit may be filed by the
taxpayer with the Commissioner on the last day of the two-year prescriptive period and it will still strictly
comply with the law. The two-year prescriptive period is a grace period in favor of the taxpayer and he
can avail ofthe full period before his right to apply for a tax refund or credit is barred by prescription.

Second, Section 112(C) provides that the Commissioner shall decide the application for refund orcredit
"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)." The reference in Section 112(C) of the
submission of documents "in support of the application filed in accordance with Subsection A" means
that the application in Section 112(A) is the administrative claim that the Commissioner must decide
within the 120-day period. In short, the two year prescriptive period in Section 112(A) refers to the
period within which the taxpayer can file an administrative claim for tax refund or credit. Stated
otherwise, the two-year prescriptive period does not refer to the filing of the judicial claim with the CTA
but to the filing of the administrative claim with the Commissioner. As held in Aichi, the "phrase ‘within
two years x x x apply for the issuance of a tax credit or refund’ refers to applications for refund/credit
with the CIR and not to appeals made to the CTA."

xxxx

Section 112(A) and (C) must be interpreted according to its clear, plain, and unequivocal language. The
taxpayer can file his administrative claim for refund or credit at anytime within the twoyear prescriptive
period. If he files his claim on the last day of the two-year prescriptive period, his claim is still filed on
time. The Commissioner will have 120 days from such filing to decide the claim. If the Commissioner
decides the claim on the 120th day, or does not decide it on that day, the taxpayer still has 30 days to file
his judicial claim with the CTA. This is not only the plain meaning but also the only logical interpretation
of Section 112(A) and (C).28 (Emphases supplied)

It was moreover pronounced:

The Atlas doctrine, which held that claims for refund or credit of input VAT must comply with the two-
year prescriptive period under Section 229, should be effective only from its promulgation on 8 June
2007 until its abandonment on 12 September 2008 in Mirant. The Atlas doctrine was limited to the
reckoning of the two-year prescriptive period from the date of payment of the output VAT. Prior to the
Atlas doctrine, the two-year prescriptive period for claiming refund or credit of input VAT should be
governed by Section 112(A) following the verba legis rule.The Mirant ruling, which abandoned the Atlas
doctrine, adopted the verba legis rule, thus applying Section 112(A) in computing the two-year
prescriptive period in claiming refund or credit of input VAT.29 (Emphasis and underlining supplied)

Applying the foregoing pronouncements, and considering that petitioner’s administrative claim was filed
before the promulgation of the Atlas case,30 it is clear that petitioner only had a period of two (2) years
from the close of the taxable quarter when the zero-rated or effectively zero-rated sales were made, to
file an administrative claim for refund or issuance of a TCC in its favor. As aptly found by the CTA in
Division and the CTA En Banc, the administrative claim covering all four (4) quarters of taxable year 2003,
was filed by petitioner on 13 April 2005. However, although petitioner’s administrative claim was filed
within the prescribed 2-year period under Section 112(A) of the NIRC of 1997, as amended, insofar as to
the Second, Third, and Fourth Quartersof taxable year 2003 are concerned, it appears that its claim
covering the First Quarter of taxable year 2003 was belatedly filed, detailed hereunder as follows:

Taxable year 2003 (close of taxable quarters) Last day of filing administrative claims (within the 2-year
period from the close of the taxable quarters) Filing date of the administ rative claim
1st Quarter (31 March 2003) 30 March 200531 13 April
2005
2nd Quarter (30 June 2003) 29 June 2005
3rd Quarter (30 September 2003) 29 September 2005
4th Quarter (31 December 2003) 30 December 2005
Clearly, the CTA had no jurisdiction to rule on petitioner’s refund claim covering the First Quarter of
taxable year 2003 since its administrative claim was filed beyond the 2-year prescriptive periodas
mandated by law, or exactly fourteen (14) days after the last day to file the same.

On the other hand, as to petitioner’s claims covering the remaining quarters of taxable year 2003, the
Court finds that petitioner has indeed properly filed its judicial claim beforethe CTA, even without
waiting for the expiration of the one hundred twenty (120)-day period, since at the time petitioner filed
its petition, BIR Ruling No. DA-489-03 issued on 10 December 2003 was already in effect. This ruling is
not without any legal basis. Thus:

Like San Roque, Taganito also filed its petition for review with the CTA without waiting for the 120-day
period to lapse.1âwphi1 Also, like San Roque, Taganito filed its judicial claim before the promulgation of
the Atlas doctrine. Taganito filed a Petition for Review on 14 February 2007 with the CTA. This is almost
fourmonths before the adoption of the Atlas doctrine on 8 June 2007. Taganito is similarly situated as
San Roque - both cannot claim being misled, misguided, or confused by the Atlas doctrine.

However, Taganito can invoke BIR Ruling No. DA-489-03 dated 10 December 2003, which expressly ruled
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."Taganito filed its judicial claim after the
issuance of BIR Ruling No. DA-489-03 but before the adoption of the Aichidoctrine. Thus, xxx Taganito is
deemed to have filed its judicial claim with the CTA on time.32 (Emphasis supplied)
xxxx

To repeat, a claim for tax refund or credit, like a claim for tax refund exemption, is construed strictly
against the taxpayer. One of the conditions for a judicial claim of refund or credit under the VAT System is
compliance with the 120+30 day mandatory and jurisdictional periods. Thus, strict compliance with the
120+30 day periods is necessary for such a claim to prosper, whether before, during, or after the
effectivity of the Atlas doctrine, except for the period from the issuance of BIR Ruling No. DA-489-03 on
10 December 2003 to 6 October 2010 when the Aichi doctrine was adopted, which again reinstated the
120+30 day periods as mandatory and jurisdictional.33 (Emphasis supplied)

Without doubt, it is evident from the foregoing jurisprudential pronouncements that as a general rule, a
taxpayer-claimant needs to wait for the expiration of the one hundred twenty(120)-day period before it
may be considered as "inaction" on the partof the Commissioner of Internal Revenue (CIR). Thereafter,
the taxpayer-claimant is given only a limited period of thirty (30) days from said expiration tofile its
corresponding judicial claim with the CTA. However, with the exception of claims made during the
effectivity of BIR Ruling No. DA-489-03 (from 10 December 2003 to 5 October 2010),34 petitioner has
indeed properly and timely filed its judicial claim covering the Second, Third, and Fourth Quarters of
taxable year 2003, within the bounds of the law and existing jurisprudence.

Now, the significance of the difference between a sales invoice and an official receipt as evidence for
zero-rated transactions.

This is not novel.

For emphasis, even prior to the enactment of R.A. No. 9337,35 which clearly delineates the invoice and
official receipt, our Tax Code has already made the distinction.

Section 113 of the NIRC of 1997, as amended is the focal provision, to wit:

SEC. 113. Invoicing and Accounting Requirements for VATregistered Persons.-

(A) Invoicing Requirements.- A VAT-registered person shall, for every sale, issue an invoice or receipt. In
addition to the information required under Section 237, the following information shall be indicated in
the invoice or receipt:(Emphasis supplied)

xxxx

Although it appears under the above-quoted provision that there is no clear distinction on the
evidentiary value of an invoice or official receipt, it is worthy to note that the said provision is a general
provision which covers all sales of a VAT registered person, whether sale of goods or services. It does not
necessarily follow that the legislature intended to use the same interchangeably. The Court therefore
cannot conclude that the general provision of Section 113 of the NIRC of 1997, as amended, intended
that the invoice and official receipt can beused for either sale of goods or services, because there are
specific provisions of the Tax Code which clearly delineates the difference between the two transactions.
In this instance, Section 108 of the NIRC of 1997, as amended, provides:

SEC. 108. Value-added Tax on Sale of Servicesand Use or Lease of Properties.-

xxxx

(C) Determination of the Tax -The tax shall be computed by multiplying the total amount indicated in the
official receiptby oneeleventh (1/11). (Emphasis supplied)

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

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

xxxx

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

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

Legislative intent must be ascertained from a consideration of the statute as a whole and not of an
isolatedpart or a particular provision alone. This is a cardinal rule in statutory construction. For taken in
the abstract, a word or phrase might easily convey a meaning quite different from the one actually
intended and evident when the word or phrase is considered with those with which it is associated.
Thus, an apparently general provision may have a limited application if viewed together with the other
provisions.36

Settled is the rule that every part of the statute must be considered with the other parts.37 Accordingly,
the whole of Section 108 should be read in conjunction with Sections 113 and 237 so as to give life to all
the provisions intended for the sale of services. There is no conflict between the provisions of the law
that cover sale of services that are subject to zero rated sales; thus, it should be read altogether to reveal
the true legislative intent.

To finally settle this matter, this Court declared in KEPCO Philippines Corporation v. Commissioner of
Internal Revenue,38 that the VAT invoice is the seller's best proof of the sale of the goods or services to
the buyer while the VAT receipt is the buyer's best evidence of the payment of goods or services
received from the seller. Thus, the High Court concluded that VAT invoice and VAT receipt should not be
confused as referring to one and the same thing. Certainly, neither does the law intend the two to be
used interchangeably. Accordingly, we agree with the ruling of the CTA in Division, as well as that of the
CTA En Banc, insofar as to its discussion on the relevancy of the aforesaid substantiation requirements.

WHEREFORE, the petition is DENIED. No costs.

SO ORDERED.

Western Mindanao Power Corp vs CIR Case

Digest GR 181136 June 13 2012

Facts: WMPC, engaged in the production and sale of electricity, is registered as a VAT taxpayer. It sells
electricity solely to the National Power Corporation (NPC), which is in turn exempt from the payment of
all forms of taxes, duties, fees and imposts, pursuant to its charter. Also, pursuant to Section 108(B) (3) of
the NIRC, WMPC’s power generation services to NPC is zero-rated. Thus, WMPC tried to file an
application for tax credit certificates on input VAT paid to its zero-rated sales. However, its application
was denied because of WMPC’s failure to comply with the invoicing requirements under Section 113 of
the NIRC in relation to Sec 4.108-1 of RR 7-95.

Issue: W/N denial of application for tax refund or tax credit on the ground that the taxpayer’s Official
Receipts do not contain the phrase “zero-rated” is proper

Yes. Failure to indicate the term zero-rated in the invoice or receipt for zero-rated transactions is fatal. In
a claim for tax refund or tax credit, the taxpayer must prove not only entitled to the grant of claim under
substantive law, but must also show satisfaction of all the documentary and evidentiary requirements for
an administrative claim of a refund or tax cre
dit. Hence, the mere fact that the applicant’s zero -rating has been approved by the CIR does not, by
itself, justify the grant of a refund or tax credit. The taxpayer must further comply with the invoicing and
accounting requirements mandated by the NIRC, as well as the revenue regulations implementing them.

Under the NIRC, a creditable input tax should be evidenced by a VAT receipt or Official Receipt, which
may only be considered as such when it complies with the requirements of RR 7-95 particulary Section
4.108-1 thereof. This section requires, among others, that if the sale is subject to zero-percent VAT, the
term zero-rated sale shall be written or printed prominently on the invoice or receipt

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.

Title: coral bay nickel corporation vs cir

Topic: VAT

Doctrine:

 VAT is an indirect tax that may be shifted

 A company registered in the ecozone is vat exempt

Facts:

 This appeal is brought by a taxpayer whose claim for the refund or credit pertaining to its alleged
unutilized input tax for the third and fourth quarters of the year 2002 amounting to P50,124,086.75
 The petitioner, a domestic corporation engaged in the manufacture of nickel and/or cobalt mixed
sulphide, is a VAT entity registered with the Bureau of Internal Revenue (BIR). It is also registered with the
Philippine Economic Zone Authority (PEZA) as an Ecozone Export Enterprise at the Rio Tuba Export
Processing Zone under PEZA Certificate of Registration dated December 27, 2002
 On August 5, 2003,2 the petitioner filed its Amended VAT Return declaring unutilized input tax
from its domestic purchases of capital goods
 On June 14, 2004,3 it filed with Revenue District Office No. 36 in Palawan its Application for Tax
Credits/Refund (BIR Form 1914) together with supporting documents.
 the petitioner elevated its claim to the CTA on July 8, 2004 by petition for review, praying for the
refund of the aforesaid input VAT

CTA division ruling:

 the claim for tax refund is denied

  petitioner was not entitled to the refund of alleged unutilized input VAT following Section 106(A)
(2)(a)(5) of the National Internal Revenue Code (NIRC) of 1997, as amended, in relation to Article 77(2) of
the Omnibus Investment Code and conformably with the Cross Border Doctrine.
 the CTA in Division cited Commissioner of Internal Revenue v. Toshiba Information Equipment
(Phils) Inc. and Revenue Memorandum Circular ("RMC") No. 42-03.7chanrobleslaw

CTA en banc ruling :

 affirmed division ruling that tax refund should be denied.

The main contention of the corporation?

 petitioner contends that Toshiba is not applicable inasmuch as the unutilized input VAT subject of
its claim w(as incurred from May 1, 2002 to December 31, 2002 as a VAT-registered taxpayer, not as a
PEZA-registered enterprise; that during the period subject of its claim, it was not yet registered with PEZA
because it was only on December 27, 2002 that its Certificate of Registration was issued;12 that until then, it
could not have refused the payment of VAT on its purchases because it could not present any valid proof of
zero-rating to its VAT-registered suppliers; and that it complied with all the procedural and substantive
requirements under the law and regulations for its entitlement to the refund.

Sc ruling:

 the appeal of the corporation is bereft of merit

 The petitioner's insistence, that Toshiba is not applicable because Toshiba Information Equipment
(Phils) Inc., the taxpayer involved thereat, was a PEZA-registered entity during the time subject of the
claim for tax refund or credit, is unwarranted
 The most significant difference between Toshiba and this case is that Revenue Memorandum
Circular No. 74-9916 was not yet in effect at the time Toshiba Information Equipment (Phils) Inc. brought
its claim for refund. Regardless of the distinction, however, Toshiba actually discussed the VAT implication
of PEZA-registered enterprises and ECOZONE-located enterprises in its entirety, which
renders Toshiba applicable to the petitioner's case.

What is the old VAT rule?

(1) if the PEZA-registered enterprise chose the 5% preferential tax on its gross income in lieu of all taxes, as
provided by Republic Act No. 7916, as amended, then it was VAT-exempt; and

(2) if the PEZA-registered enterprise availed itself of the income tax holiday under Executive Order No. 226, as
amended, it was subject to VAT at 10%17(now, 12%).

 Based on this old rule, Toshiba allowed the claim for refund or credit on the part
of Toshiba Information Equipment (Phils) Inc.
 With the issuance of RMC 74-99, the distinction under the old rule was disregarded and the new
circular took into consideration the two important principles of the Philippine VAT system: the
 Cross Border Doctrine
 and the Destination Principle.

RMC No. 74-99, significance?....

  The rule that any sale by a VAT-registered supplier from the Customs Territory to a PEZA-
registered enterprise shall be considered an export sale and subject to zero percent (0%) VAT was clearly
established only on 15 October 1999, upon the issuance of RMC No. 74-99
 This old rule clearly did not take into consideration the Cross Border Doctrine essential to the
VAT system or the fiction of the ECOZONE as a foreign territory.

What is the old rule again? (emphasis)

 the old VAT rule for PEZA-registered enterprises was based on their choice of fiscal incentives:
(1) If the PEZA-registered enterprise chose the five percent (5%) preferential tax on its gross income, in
lieu of all taxes, as provided by Rep. Act No. 7916, as amended, then it would be VAT-exempt; (2) If the
PEZA-registered enterprise availed of the income tax holiday under Exec. Order No. 226, as amended, it
shall be subject to VAT at ten percent (10%).
 This distinction was abolished by RM no. 74-99
 RM no. 74-99 ,categorically declared that all sales of goods, properties, and services made by a
VAT-registered supplier from the Customs Territory to an ECOZONE enterprise shall be subject to VAT,
at zero percent (0%) rate, regardless of the tatter's type or class of PEZA registration; and, thus,
affirming the nature of a PEZA-registered or an ECOZONE enterprise as a VAT-exempt entity
 fiction that an ECOZONE is a foreign tenitory separate and distinct from the customs territory
 Accordingly, the sales made by suppliers from a customs territory to a purchaser located within an
ECOZONE will be considered as exportations.
 . Following the Philippine VAT system's adherence to the Cross Border Doctrine and Destination
Principle, the VAT implications are that "no VAT shall be imposed to form part of the cost of goods destined
for consumption outside of the territorial border of the taxing authority

According to the toshiba case. Why are company’s registered in ecozone VAT exempt?

 because of Section 8 of the same statute which establishes the fiction that ECOZONES are
foreign territory.
 The petitioner's principal office was located in Barangay Rio Tuba, Bataraza, Palawan.21 Its plant
site was specifically located inside the Rio Tuba Export Processing Zone — a special economic zone
(ECOZONE) created by Proclamation No. 304, Series of 2002, in relation to Republic Act No. 7916. As
such, the purchases of goods and services by the petitioner that were destined for consumption within the
ECOZONE should be free of VAT; hence, no input VAT should then be paid on such purchases, rendering
the petitioner not entitled to claim a tax refund or credit. Verily, if the petitioner had paid the input VAT, the
CTA was correct in holding that the petitioner's proper recourse was not against the Government but against
the seller who had shifted to it the output VAT
 Vat is an indirect tax which can be shifted
 In the meantime, the claim for input tax credit by the exporter-buyer should be denied without
prejudice to the claimant's right to seek reimbursement of the VAT paid, if any, from its supplier.
 Note that the claim of tax refund is in the nature of a tax exemption. It is therefore the burden of
the claimant to prove that it is entitled to such refund.
 Petition of corporation is denied

LUZON HYDRO CORPORATION, vs. COMMISSIONER OF INTERNAL REVENUE,

Facts: Luzon Hyrdo Corporation, a corporation duly organized under the laws of the Philippines, has
been registered with the Bureau of Internal Revenue (BIR) as a VAT taxpayer. It was formed as a
consortium of several corporations. Pursuant to the Power Purchase Agreement entered into with
the National Power Corporation (NPC), the electricity produced by the petitioner from its operation of
the Bakun Hydroelectric Power Plant was to be sold exclusively to NPC.

Relative to its sale to NPC, the petitioner was granted by the BIR a certificate for Zero Rate for VAT
purposes in the periods from January 1, 2000 to December 31, 2000; February 1, 2000 to December
31, 2000. The petitioner alleged herein that it had incurred input VAT in the amount of P9,795,427.89
on its domestic purchases of goods and services used in its generation and sales of electricity to
NPC in the four quarters of 2001; and that it had declared the input VAT of P9,795,427.89 in its
amended VAT returns for the four quarters on 2001. On November 26, 2001, the petitioner filed a
written claim for refund or tax credit relative to its unutilized input VAT for the period from October
1999 to October 2001 aggregating P14,557,004.38. Subsequently, on July 24, 2002, it amended the
claim for refund or tax credit to cover the period from October 1999 to May 2002 forP20,609,047.56

The BIR, through Revenue Examiner Felicidad Mangabat of Revenue District Office No. 2 in Vigan
City, concluded an investigation, and made a recommendation favorable to the petitioner’s claim for
the period from January 1, 2001 to December 31, 2001. Respondent Commissioner of Internal
Revenue (Commissioner) did not ultimately act on the petitioner’s claim despite the favorable
recommendation. Hence, on April 14, 2003, the petitioner filed its petition for review in the CTA,
praying for the refund or tax credit certificate (TCC) corresponding to the unutilized input VAT paid
for the four quarters of 2001 totalling P9,795,427.88. The CTA in Division promulgated its decision in
favor of the respondent denying the petition for review on the ground that in the petitioner’s VAT
returns for the four quarters of 2001, no amount of zero-rated sales was declared. Without zero-
rated sales for the four quarters of 2001, the input VAT payments allegedly attributable thereto
cannot be refunded On May 5, 2009, the CTA En Banc promulgated the assailed decision affirming
the Division, and denying the claim for refund or tax credit. Hence, this appeal to the SC.

Issue: Whether or not Luzon Hydro Corporation is entitled to a tax refund or tax credit certificate for
the Input VAT payments allegedly attributable to zero-rated sales. NO

Ruling: The SC said NO, the petition is without merit. Section 112 of the National Internal Revenue
Code 1997 provides: SEC. 112. Refunds or Tax Credits of Input Tax.— (A) Zero-rated or Effectively
Zero-rated Sales--Any VAT-registered person, whose sales are zero-rated or effectively zero-rated
may, within two (2) years after the close of the taxable quarter when the sales were made, apply for
the issuance of a tax credit certificate or refund of creditable input tax due or paid attributable to such
sales, except transitional input tax, to the extent that such input tax has not been applied against
output tax: Provided, however, That in the case of zero-rated sales under Section 106(A)(2)(a)(1), (2)
and (B) and Section 108(B)(1) and (2), the acceptable foreign currency exchange proceeds thereof
had been duly accounted for in accordance with the rules and regulations of the Bangko Sentral ng
Pilipinas (BSP): Provided, further, That where the taxpayer is engaged in zero-rated or effectively
zero-rated sale and also in taxable or exempt sale of goods or properties or services, and the
amount of creditable input tax due or paid cannot be directly and entirely attributed to any one of the
transactions, it shall be allocated proportionately on the basis of the volume of sales. A claim for
refund or tax credit for unutilized input VAT may be allowed only if the following requisites concur,
namely: (a) the taxpayer is VAT-registered; (b) the taxpayer is engaged in zero-rated or effectively
zero-rated sales; (c) the input taxes are due or paid; (d) the input taxes are not transitional input
taxes; (e) the input taxes have not been applied against output taxes during and in the succeeding
quarters; (f) the input taxes claimed are attributable to zero-rated or effectively zero-rated sales; (g)
for zero-rated sales under Section 106(A)(2)(1) and (2); 106(B); and 108(B)(1) and (2), the
acceptable foreign currency exchange proceeds have been duly accounted for in accordance with
the rules and regulations of the Bangko Sentral ng Pilipinas; (h) where there are both zero-rated or
effectively zero-rated sales and taxable or exempt sales, and the input taxes cannot be directly and
entirely attributable to any of these sales, the input taxes shall be proportionately allocated on the
basis of sales volume; and (i) the claim is filed within two years after the close of the taxable quarter
when such sales were made. The petitioner did not competently establish its claim for refund or tax
credit.1avvphi1Â We agree with the CTA En Banc that the petitioner did not produce evidence
showing that it had zero-rated sales for the four quarters of taxable year 2001. As the CTA En Banc
precisely found, the petitioner did not reflect any zero-rated sales from its power generation in its
four quarterly VAT returns, which indicated that it had not made any sale of electricity. Had there
been zero-rated sales, it would have reported them in the returns. Indeed, it carried the burden not
only that it was entitled under the substantive law to the allowance of its claim for refund or tax credit
but also that it met all the requirements for evidentiary substantiation of its claim before the
administrative official concerned, or in the de novo litigation before the CTA in Division. Although the
petitioner has correctly contended here that the sale of electricity by a power generation company
like it should be subject to zero-rated VAT under Republic Act No. 9136,31Â its assertion that it need
not prove its having actually made zero-rated sales of electricity by presenting the VAT official
receipts and VAT returns cannot be upheld. It ought to be reminded that it could not be permitted to
substitute such vital and material documents with secondary evidence like financial statements.
SHELUMIEL RYAN B. ABAPO