Northern Mini Hydro vs. CIR CTA
Northern Mini Hydro vs. CIR CTA
Northern Mini Hydro vs. CIR CTA
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FIRST DIVISION
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DECISION
BAUTISTA, J.:
This case involves a claim for refund or issuance of tax credit certificate of unutilized
input value-added tax (VAT) in the amount of ONE MILLION ONE HUNDRED SEVENTY-FOUR
December 2003, allegedly arising from petitioner's domestic purchases of goods and
services which are attributable to its VAT zero-rated sales of power generation services to
organized and existing under and by virtue of the laws of the Philippines, with principal
registered as a VAT taxpayer with the Bureau of Internal Revenue (BIR) under Revenue
1
AnneX "B", Petition for Review.
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DECISION
C.T.A. CASE NO. 7257
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District No. 9 - Cordillera Adminstrative Region/ with Tax Identification Number (TIN) 001-
Petitioner is duly registered with the Securities and Exchange Commission (SEC) and
the Department of Energy. 3 It also has a duly approved Application for VAT Zero-Rate
issued by respondent. 4
Respondent is the Commissioner of the BIR1 who is duly appointed and empowered
to perform the duties of his officer including/ among others/ the duty to act and approve
claims for refund or tax credit as provided by law. He holds office at the BIR National Office
On March 41 20041 petitioner filed its Quarterly VAT Returns for the second 51 third 6
and fourth 7 quarters of taxable year 2003. However/ on March 21 1 2005 1 petitioner wittingly
or unwittingly filed once again the same set of returns, having exactly the same information
On May 26 1 2005 1 the instant Petition for Review was filed before this Court 1 seeking
refund or issuance of tax credit certificate of alleged unutilized input VAT payments for
taxable year 2003 in the sum of P1 1 1741 708.46. This amount actually referred to that which
On July 29 1 2005 1 respondent filed his Answerto the said Petition for Review.
The parties' Joint Stipulation of Facts and Issues filed on October 71 2005 was
2
Annex " A", Petition for Review.
3
Pars. 1 and 3, Summary of Admitted Facts, Joint Stipulation of Facts and Issues (JSFI), Rollo, p. 88.
1
Annex "D", Petition for Review.
5
Exhibit "5".
6
Exhibit "V".
7
Exhibit "Y".
8
Exhibits '\C", \'F", and "I".
• Par. 4, Summary of Admitted Facts, JSFI, Rollo, p. 89.
10
Qhibit " Y".
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DECISION \_)
C.T.A. CASE NO. 7257
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On June 20, 2006, respondent, through Regional Director Norberta D. Vitug, partially
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granted the said claim by issuing a tax credit certificate with serial number 006402 , in the
By virtue of such development, on August 9, 2006, petitioner filed a Motion tor Leave
of Court To File Supplemental Petition for Review, attaching a copy of the said supplemental
pleading.
At the hearing held on August 10, 2006, respondent interposed no objection and said
Motion was thus granted. Respondent however reserved the right to file a Supplemental
Answer. The Court then required respondent to file his Supplemental Answer within ten
By way of Amended Answer 2 filed on August 17, 2006, respondent alleged the
7. The decision of the Supreme Court in the case of Maceda vs. Macara ig
223 SCRA 217 (1993) which states that the NPC is exempt from all taxes,
duties, fees, imposts, charges and restrictions of the Republic of the
Philippines and its provinces, cities and municipalities, is not applicable to the
instant petition. What is being exempted in said decision is NPC per se and
such exemption does not extend to the supplier such as the petitioner in the
instant case.
9. Petitioner must show that it has complied with the prov1s1ons <Jf
Sections 204(C) and 229 of the 1997 Tax Code on the prescriptive period fc:x
claiming tax refund/credit.
11
R rilo, p. 269.
12
R rilo, pp. 277 to 280.
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:JJ J.
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DECISION
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C.T.A. CASE NO. 7257
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10. Claims for refund are construed strictly against the claimant for the
same partake the nature of exemption from taxation (Commissioner of
Internal Revenue vs. Ledesma, 31 SCRA 95) and as such, they are
looked upon with disfavor (Western Minolco Corp. vs. Commissioner of
Internal Revenue, 124 SCRA 1211)."
The parties' Additional Joint Stipulation of Facts and Issues filed on February 1, 2007
was approved per this Court's Resolution dated February 13, 2007.
The trial of the case continued; after which, the parties were ordered to file their
respective Memorandum. 13
On June 26, 2008, the case was submitted for decision, considering the
Memorandum filed by petitioner on March 7, 2008 and the Memorandum filed by respondent
3. Whether or not petitioner filed its claim for refund within the two (2) year
prescriptive period; '
5. Whether or not petitioner's input VAT have been carried forward to the
succeeding taxable period."
The Court will only resolve the first three issues inasmuch as their resolution is
enough to properly dispose of this case; however, the Court shall address them in a reverse
Section 112 of the National Internal Revenue Code (NIRC) of 1997 provides as
fo llows:
13
Resduuon dated December 18, 2007, Rollo, p. 434.
14
Issues To Be Tried, JSFI, Rollo, p. 89.
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DECISION
C.T.A. CASE NO. 7257
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(Formerly Southern Energy Quezon, Inc.) 15 , the Supreme Court made the following
pronouncement:
It can be gleaned from the foregoing Decision that the two-year prescriptive period
under Section 112(A) of the NIRC of 1997 for the recovery of creditable input VAT due or
paid attributable to zero-rated or effectively zero-rated sales is to be counted "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." Here, considering the amount of the
subject claim refers to the declared input VAT for the fourth quarter of taxable year 2003,
the two-year prescriptive period should be counted from the close of the said taxable
quarter on December 31, 2003 and shall end on December 31, 2005. And since the subject
15
G.R. No . 172129, September 12, 2008.
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DECISION \.__.../ .
C.T.A. CASE NO. 7257
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administrative claim was filed on Ma rch 31, 2005, while the instant judicial claim was filed
on May 26, 2005; both the administrative and judicial claims of petitioner were filed well
within the said two-year prescriptive period under the law. Such being the case,
The sale of electricity to NPC is zero-rated for VAT purposes pursuant to Section
108(8)(3) of the NIRC of 1997, as amended, in relation to Section 13 of Republic Act No.
6395, otherwise known as the NPC Charter, which are all quoted hereunder for easy
reference:
"Sec. 13. Non-profit Character of the Corpor?Jtion; Exemption from All Taxes,
Duties, Fees, Imposts and Other Charges by the Government and
Government Instrumentalities. - The corporation shall be non-profit and
shall devote all its returns from its capital investments, as well as excess
revenues from .its operation, for expansion. To enable the Corporation to pay
its indebtedness · and obligations and in furtherance of effective
implementation of the policy enunciated in Section One of this Act, the
Corporation, including its subsidiaries; is hereby declared exempt
from the payment of all forms of taxes, duties, fees, imposts as well as
costs and service fees including filing fees, appeal bonds, supersedeas bonds,
in any court or administrative proceedings." (Emphasis supplied)
This Court has consistently held that NPC is an entity with a special charter, which
categorically makes it exempt from payment of all taxes,-whether direct or indirect, including
DEOSION •,_) ._/
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VAT. Therefore, by virtue of the said charter, services rendered by a VAT-registered entity
like herein petitioner to NPC are effectively subject to zero percent (0%) VAT in accordance
Section 108(8)(3) of the NIRC of 1997 must not be read in isolation, but in
conjunction with Section 113(A) of the same Code, as implemented by Section 4.108-1 of
(2) The total amount which the purchaser pays or is obligated to pay to the
seller with the indication that such amount includes the value-added tax."
In the case of sale of real property subject to VAT and where the zonal <Jr
market value is higher than the actual consideration, the VAT shall I:Je
separately indicated in the invoice or receipt.
Only VAT-registered persons are required to print their TIN followed by tile
word 'VAT' in their invoice or receipts and this shall be considered as a 'VAT
DECISION
C.T.A. CASE NO. 72S7
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Invoice'. All purchases covered by invoices other than 'VAT Invoice' shall not
give rise to any input tax.
petitioner, covering the period June 11, 2003 to December 31, 2003, the following was
indicated:
"Valid only for sale of services from June 11, 2003 up to December 31, 2003
unless sooner revoked.
relation to Section 4.108-1 of Revenue Regulations No. 7-95, that a VAT-registered person
like herein petitioner must issue a duly registered VAT invoice or receipt for every sale
transaction. Such VAT invoice or receipt must show the taxpayer's identification number
(TIN) followed by the word "VAT", printer's BIR permit number and the word "zero-rated"
imprinted on the invoice or receipt covering a zero-rated sale. Accordingly, the zero-rated
sales of services referred to under Section 108(8)(3) of the NIRC of 1997 as subject to zero
percent (0%) VAT are those covered by duly registered VAT official receipts bearing all the
required information.
As to the documentation of petitioner's sales to NPC for the subject period of claim,
the former submitted Charge Invoices 16 and Official Receipts 17 as part of the supporting
A scrutiny of the said supporting documents shows that all the Charge Invoices and
Official Receipts · issued by the Company, which support the foregoing sales_, are not
imprinted/stamped with the word "zero-rated". The Court also noted that (1) all Charge
16
Exhibits " L" to "L-24".
1
'7 Exhibits "0" to "0-22".
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DEOSION \ ___/
C.T.A. CASE NO. 7257
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Invoices used were pre-printed with "NON VAT", and (2) all the Official Receipts used were
The law and regulations are explicit in emphasizing strict compliance with the
invoicing requirements because for the same transactions the output VAT of the seller
becomes the input VAT of the purchaser. Pursuant to Sections 106(D)(l), 108(C), and 110
· of the NIRC of 1997, as amended, the output or input tax on the sale or purchase of goods
is determined by the total amount indicated in the invoice, while the output or input tax on
the sale or purchase of services is determined by the total amount indicated in the official
receipt. In the case of zero-rated sales transactions, the regulations further require that the
word "zero-rated" be imprinted on the face of the covering invoices or official receipts. 18
The rationale for the requirement of imprinting the word "zero-rated" on the face of the
covering invoice or official receipt of the seller is for the buyer or purchaser not to claim any
input VAT from such purchase, as elucidated by the Court En Bane in the case of J.R.A.
18
American Express International, Inc,, Philippine ·Branch vs. Commissioner of Internal Revenue, CTA EB No.103, March 3,
~006 .
19
C.T.A. EB No. 128, January 15, 2007.
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DECISION
C.T.A. CASE NO. 7257
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promulgate all needful rules and regulations for the effective enforcement of the provisions
of the NIRC, Section 4.108-1 of Revenue Regulations No. 7-95 requiring the imprinting of
the word "zero-rated" on sales invoices or official receipts cannot be said as having no valid
basis or legislative root. On the contrary, it is both reasonable and necessary for the
Consequently, the requirement that sales invoices be imprinted with the word "zero-rated"
cannot be taken as an enlargement or expansion of the law for the reason that it merely
implements the provisions of the NI RC of 1997 on sales that are subject to ten percent
(10%) VAT, zero-rated sales (0% VAT), and exempt sales. The imprinting of "zero-rated" is
necessary to distinguish sales subject to 10% VAT, those that are subject to 0% VAT (zero-
rated) and exempt sales, to enable the Bureau of Internal Revenue to properly implement
and enforce the other provisions of the NIRC of 1997 on VAT, namely:
The rule is thatas long as the administrative regulation is not in conflict with the law
it seeks to implement, the same should be taken as part of the law taking into consideration
In fine, without valid VAT official receipts, petitioner's alleged sales of electricity to
NPC for taxable year 2003 cannot qualify for VAT zero-rating under Section 108(8)(3) of the
NIRC of 1997. Consequently, the claimed unutilized input VAT attributable thereto in the
amount of P717,030.29 cannot be granted. It is clear from the provision of Section 112(A)
of the NIRC of 1997 that there must be zero-rated or effectively zero-rated sales in order for
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DECISION ·,...._)
C.T.A. CASE NO. 7257
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SO ORDERED .
WE CONCUR:
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ERNESTO D. ACOSTA
Presiding Justice
CAESAR A. CASANOVA
Associate Justice
CERTIFICATION
Pursuant to Article VIII, Section 13 of the Constitution, it is hereby certified that the
conclusions in the above Decision were reached in consultation before the case was
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ERNESTO D. AC STA
Presiding Justice
Chairperson, First Division