Maibarara Geothermal, Inc. vs. Commissioner of Internal Revenue

A DOE Certificate of Endorsement on a per-transaction basis cannot be required for a renewable energy developer to qualify for VAT zero-rating under Section 15(g) of Republic Act No. 9513, because the law's enumeration of incentives requiring DOE certification omitted VAT zero-rating; however, a claim for refund or credit of unutilized input VAT under Section 112(A) of the National Internal Revenue Code still requires proof of zero-rated or effectively zero-rated sales.

Maibarara Geothermal, Inc. is a corporation registered as a Renewable Energy Developer of the 20 MW Maibarara Geothermal Power Generation Project in Batangas and Laguna under DOE Certificate of Registration No. GRESC 2011-01-025 and BOI Certificate of Registration No. 2011-006; it is also a registered VAT taxpayer with the Bureau of Internal Revenue. The Commissioner of Internal Revenue is the respondent. Under Section 15(g) of Republic Act No. 9513, the sale of fuel or power generated from renewable sources is subject to zero percent VAT, while Section 112(A) of the National Internal Revenue Code permits a VAT-registered person with zero-rated or effectively zero-rated sales to claim a refund or credit of creditable input tax attributable to such sales. The DOE's 2009 Implementing Rules and Regulations of RA 9513 required a Certificate of Endorsement on a per-transaction basis, but this requirement was later removed by DOE Department Circular No. DC2021-12-0042.

Maibarara Geothermal, Inc. is a corporation organized and existing under Philippine laws. It is registered as a Renewable Energy Developer of the 20 MW Maibarara Geothermal Power Generation Project in Batangas and Laguna under DOE Certificate of Registration No. GRESC 2011-01-025 and BOI Certificate of Registration No. 2011-006. It is also a registered VAT taxpayer with the Bureau of Internal Revenue under Certificate of Registration No. OCN3RC0000483772 and Taxpayer's Identification Number 007-843-328-000. MGI filed with Revenue District Office No. 43A in Pasig City four administrative claims for refund of its alleged unutilized input VAT attributable to zero-rated sales for the four quarters of TY 2013: first quarter, filed March 26, 2015, for PHP 9,027,372.28; second quarter, filed June 26, 2015, for PHP 69,816,295.84; third quarter, filed September 18, 2015, for PHP 1,621,794.52; and fourth quarter, filed December 10, 2015, for PHP 1,107,254.17, for a total of PHP 81,572,707.81. The Commissioner of Internal Revenue failed to act on the administrative claims, prompting MGI to file petitions for review before the Court of Tax Appeals.

The CTA Special First Division denied the consolidated petitions for lack of merit in its Decision dated March 4, 2019. It emphasized the rule that a taxpayer must have been engaged in zero-rated or effectively zero-rated sales to successfully obtain a credit or refund of input VAT, citing Luzon Hydro Corporation vs. Commissioner of Internal Revenue. Based on its examination of MGI's quarterly VAT returns filed for TY 2013, the CTA Division found that MGI had no sales during that taxable period. MGI's Accounting Manager, Helenio B. Seraspi, admitted in his Judicial Affidavit that MGI had no sales during TY 2013, while MGI's Legal Officer, Atty. Roberto K. Santos, confirmed that MGI was able to sell electricity to Trans-Asia Oil and Energy Development Corporation only in February 2014. The CTA Division thus held that MGI had no zero-rated sales to which the subject input VAT could be attributed for TY 2013, and denied the refund of PHP 81,572,707.81. MGI's motion for reconsideration was denied on July 9, 2019.

On appeal, the CTA En Banc denied MGI's petition for review and affirmed the CTA Division in its Decision dated November 26, 2020. MGI argued that Section 112(A) of the National Internal Revenue Code does not require the zero-rated or effectively zero-rated sales to be made during the same period as when the input taxes sought to be refunded were incurred or paid. The CTA En Banc agreed with this contention but emphasized that the presence of zero-rated sales during the period of claim, regardless of when the claimed input VAT was incurred, must nonetheless be established. It explained that the two-year prescriptive period for filing an administrative claim for refund under Section 112(A) commences after the close of the taxable quarter when the zero-rated or effectively zero-rated sales were made, not from the time the input VAT was incurred. It cited San Roque Power Corporation vs. Commissioner of Internal Revenue and Luzon Hydro in holding that the existence of zero-rated sales is crucial in a claim for unutilized input VAT.

The CTA En Banc upheld the CTA Division's findings that MGI had no sales declared during TY 2013, based on its quarterly VAT returns and the testimonies of MGI's own witnesses. It disagreed with MGI's argument that its submission of quarterly VAT returns, income tax returns, audited financial statements from TY 2010 to 2013, Electric Supply Agreements with Trans-Asia Oil and Energy Development Corporation, and Official Receipt No. 0501 dated March 25, 2014, were sufficient to establish the existence of zero-rated sales. The CTA En Banc examined Official Receipt No. 0501 and found that the pertinent details thereon, such as the payor's name, date of transaction, payor's TIN, and nature of service performed, were illegible, so zero-rated sales could not be substantiated on its basis. It held that MGI's failure to establish the existence of zero-rated sales during the period of claim, TY 2013, or in any subsequent year, was fatal to its claim. It also found that MGI failed to establish that it was engaged in zero-rated sales. Citing Section 15 of Republic Act No. 9513 and Part III, Rule 5, Section 13(G) of its Implementing Rules and Regulations, the CTA En Banc held that three documents were required from an RE Developer to qualify for VAT zero-rating: the DOE Certificate of Registration, the BOI Certificate of Registration, and a Certificate of Endorsement from the DOE. While MGI had the first two, there was no showing that it was issued a Certificate of Endorsement by the DOE on a per-transaction basis. A Dissenting Opinion was issued by Associate Justice Jean Marie A. Bacorro-Villena, concurred in by Associate Justice Catherine T. Manahan, taking the position that a DOE Certificate of Endorsement is required only for an RE Developer to enjoy the Income Tax Holiday and duty-free incentives under the BOI Specific Terms and Conditions, but not to qualify for VAT zero-rating, and that MGI was able to establish its zero-rated sales for the first quarter of 2014. MGI's motion for reconsideration was denied by the CTA En Banc on June 2, 2021.

• No Same-Period Requirement: MGI argued that Section 112(A) of the National Internal Revenue Code does not require the zero-rated or effectively zero-rated sales to be made during the same period as when the input taxes sought to be refunded were incurred or paid.
• DOE Certificate of Endorsement Not Required for VAT Zero-Rating: MGI maintained that Section 15(g) of Republic Act No. 9513 only requires that the taxpayer be certified as an RE Developer by the DOE, and that it complied with this requirement through its Certificate of Registration No. GRESC 2011-01-025; a Certificate of Endorsement from the DOE is required only to avail of the incentives under Section 15(b), namely duty-free importation of RE machinery, equipment, and materials and the sale, transfer, or disposition of such imported capital machinery, equipment, and materials.
• IRR Exceeds Law: MGI argued that the inclusion of the Certificate of Endorsement requirement in the Implementing Rules and Regulations, not found in the law, is unconstitutional, as implementing rules may not go beyond the provisions of the law they implement.
• Official Receipt No. 0501: MGI insisted that Official Receipt No. 0501 demonstrates the pertinent details that establish the existence of its zero-rated sales, namely the payor's name, date of transaction, payor's TIN, and nature of service performed; that the CTA En Banc failed to consider the possibility of wear and tear or deterioration of the document; and that the Commissioner of Internal Revenue did not comment on its legibility, so objections on that ground were deemed waived.
• Prior CTA En Banc Case: MGI contended that it had already established the existence of its zero-rated sales for the first quarter of 2014 in another CTA En Banc VAT refund case involving MGI, where refund of its input VAT incurred in TY 2012 was granted.
• Grave Abuse and Misapprehension: MGI argued that the CTA En Banc committed grave abuse of discretion and that its judgment was based on a misapprehension of facts, bringing the case under exceptions to the rule that the Supreme Court is not a trier of facts.

• DOE Certificate of Endorsement for VAT Zero-Rating: Whether a DOE Certificate of Endorsement on a per-transaction basis is required for a renewable energy developer to qualify for VAT zero-rating under Republic Act No. 9513 and its Implementing Rules and Regulations.
• Proof of Zero-Rated Sales: Whether MGI established that it was engaged in zero-rated sales during taxable year 2013.
• Entitlement to Refund: Whether MGI is entitled to a refund or credit of unutilized input VAT under Section 112(A) of the National Internal Revenue Code.

• DOE Certificate of Endorsement for VAT Zero-Rating: No. The DOE cannot require a Certificate of Endorsement on a per-transaction basis for VAT zero-rating under Section 15(g) of Republic Act No. 9513; only DOE registration is required, aside from the conditions imposed by the National Internal Revenue Code.
• Proof of Zero-Rated Sales: No. MGI failed to establish any zero-rated sales during TY 2013, as its quarterly VAT returns showed no sales, its own officers admitted no sales in 2013, and Official Receipt No. 0501 was illegible.
• Entitlement to Refund: No. Under Section 112(A) of the National Internal Revenue Code, a refund or credit of unutilized input VAT requires proof of zero-rated or effectively zero-rated sales; absent such proof, MGI's claim for PHP 81,572,707.81 fails.

• DOE Certificate of Endorsement for VAT Zero-Rating: The Court first recognized that Section 15 of Republic Act No. 9513, in relation to Section 26, validly delegates to the DOE the authority to impose certification requirements, subject to the completeness and sufficient standard tests. Section 2 of Republic Act No. 9513 supplies the policy, and Section 26 allows further requirements by concerned agencies. However, an administrative issuance cannot override, supplant, or modify the law it implements. The legislative history showed that Section 26, originally Section 27 of Senate Bill No. 2046, enumerated the incentives for which DOE certification was required, and the VAT zero-rating incentive under Section 15(g) was not among them. Applying casus omisus pro omisso habendus est, the omission was deemed intentional. Thus, while the DOE may impose additional requirements for other incentives, it cannot require a Certificate of Endorsement on a per-transaction basis for VAT zero-rating. The only remaining requirement, aside from the conditions imposed by the National Internal Revenue Code, is DOE registration, which MGI satisfied through Certificate of Registration No. GRESC 2011-01-025.
• Proof of Zero-Rated Sales: The Court is not a trier of facts, and CTA factual findings are binding absent grave abuse of discretion or misapprehension of facts. MGI merely asserted these exceptions without convincing evidence. The CTA Division and CTA En Banc examined MGI's quarterly VAT returns for TY 2013 and found no sales. MGI's Accounting Manager, Helenio B. Seraspi, admitted in his Judicial Affidavit that MGI had no sales during TY 2013, and MGI's Legal Officer, Atty. Roberto K. Santos, confirmed that MGI sold electricity to Trans-Asia Oil and Energy Development Corporation only in February 2014. Official Receipt No. 0501, dated March 25, 2014, was deemed illegible as to the payor's name, date of transaction, payor's TIN, and nature of service; MGI's own admission of wear and tear prevented the Court from making its own assessment. Thus, no zero-rated sales were proven for TY 2013.
• Entitlement to Refund: Under Section 112(A) of the National Internal Revenue Code, a VAT-registered person with zero-rated or effectively zero-rated sales may claim a refund or credit of creditable input tax attributable to such sales within two years after the close of the taxable quarter when the sales were made. The Court in San Roque Power Corporation vs. Commissioner of Internal Revenue laid down nine criteria, including that the taxpayer is engaged in zero-rated or effectively zero-rated sales and that the claim is filed within two years after the close of the taxable quarter when such sales were made. The presence of zero-rated sales is critical because it determines the prescriptive period. MGI failed to prove any zero-rated sales during TY 2013, so the input VAT claimed could not be attributed to qualifying sales. Tax refunds are construed strictissimi juris against the taxpayer, who bears the burden of proving entitlement by sufficient and competent evidence. MGI failed to discharge that burden, and its claim for PHP 81,572,707.81 was properly denied.

• Subordinate Legislation and the Completeness and Sufficient Standard Tests — Administrative agencies may be delegated the power to implement broad policies laid down in a statute by filling in the details through administrative issuances. A delegation is valid if the law is complete, meaning it sets forth the policy to be executed, and if it provides a sufficient standard, meaning adequate guidelines or limitations that map out the boundaries of the delegate's authority and identify the conditions under which the policy is to be implemented. The Court applied this to Section 15 in relation to Section 26 of Republic Act No. 9513, finding a valid delegation to the DOE to impose certification requirements, with Section 2 of Republic Act No. 9513 supplying the policy and standard. However, the resulting administrative issuance must not override, supplant, or modify the law it implements.
• Casus Omisus Pro Omisso Habendus Est — A person, object, or thing omitted from an enumeration must be held to have been omitted intentionally, where there is reasonable certainty that the omission was made from a legislative enumeration. The Court applied this to Section 26, originally Section 27 of Senate Bill No. 2046, which enumerated the incentives requiring DOE certification; because VAT zero-rating under Section 15(g) was omitted, the DOE could not extend the Certificate of Endorsement requirement to it.
• VAT Refund/Credit Under Section 112(A) and the San Roque Criteria — To claim refund or tax credit under Section 112(A), the taxpayer must comply with the following criteria: (1) the taxpayer is VAT registered; (2) the taxpayer is engaged in zero-rated or effectively zero-rated sales; (3) the input taxes are due or paid; (4) the input taxes are not transitional input taxes; (5) the input taxes have not been applied against output taxes during and in the succeeding quarters; (6) the input taxes claimed are attributable to zero-rated or effectively zero-rated sales; (7) 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 BSP rules and regulations; (8) 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 attributed to any of these sales, the input taxes shall be proportionately allocated on the basis of sales volume; and (9) the claim is filed within two years after the close of the taxable quarter when such sales were made. The Court applied the second and ninth requirements, holding that MGI failed to prove zero-rated sales, which also determines the prescriptive period.
• Tax Refunds as Exemptions; Burden of Proof on Taxpayer — Tax refunds partake of the nature of exemption from taxation and, as such, must be looked upon with disfavor. The burden of proof rests upon the taxpayer to establish by sufficient and competent evidence its entitlement to a claim for refund. The Court applied this in denying MGI's claim because it failed to prove the legal and factual bases of its claim.
• Court Not a Trier of Facts; Binding Effect of CTA Factual Findings — The Supreme Court is not a trier of facts and generally reviews only legal questions; CTA factual findings are binding absent grave abuse of discretion, misapprehension of facts, or similar exceptions. A mere assertion of an exception is insufficient. The Court applied this in declining to overturn the CTA's finding that MGI had no zero-rated sales in TY 2013.

• "Consequently, while the DOE may impose further requirements before it can qualify the RE developer or their transactions to the fiscal incentives under Section 15, it cannot impose other certification requirements, such as a certificate of endorsement, to the VAT zero-rating incentive." — This passage states the ratio decidendi on the scope of the DOE's authority, limiting the Certificate of Endorsement requirement to incentives other than VAT zero-rating.
• "Thus, as it stands, the only other requirement for VAT zero-rating qualification, aside from the conditions imposed by the NIRC, is the RE Developer's registration with the DOE." — This passage identifies the remaining requirement for VAT zero-rating after the Court invalidated the per-transaction Certificate of Endorsement requirement.
• "As this Court previously held, tax refunds partake the nature of exemption from taxation and, as such, must be looked upon with disfavor. The burden of proof rests upon the taxpayer to establish by sufficient and competent evidence its entitlement to a claim for refund." — This passage states the standard and burden of proof for tax refund claims, which the Court applied against MGI.
• "As MGI failed to prove the legal and factual bases of its claim for tax refund, its Petition should be denied." — This passage summarizes the dispositive rationale for denying MGI's petition.

• San Roque Power Corporation vs. Commissioner of Internal Revenue, 620 Phil. 554 (2009) — The Court cited this as the source of the nine criteria for a refund or tax credit under Section 112(A); MGI failed the requirement of proving zero-rated sales.
• Luzon Hydro Corporation vs. Commissioner of Internal Revenue, 721 Phil. 202 (2013) — Cited by the CTA Division and CTA En Banc, and noted in the decision, for the rule that a taxpayer must competently establish zero-rated sales and cannot substitute vital documents like VAT official receipts and VAT returns with secondary evidence such as financial statements.
• Commissioner of Internal Revenue vs. Filminera Resources Corporation, 885 Phil. 515 (2020) — Cited for the rule that tax refunds are disfavored and the taxpayer bears the burden of proving entitlement by sufficient and competent evidence.
• People vs. Manantan, 115 Phil. 657 (1962) — Cited for the doctrine of casus omisus pro omisso habendus est, which the Court applied to the omission of VAT zero-rating from the enumeration of incentives requiring DOE certification.
• Abakada Guro Party List vs. Purisima, 584 Phil. 246 (2008) — Cited for the completeness and sufficient standard tests governing the validity of subordinate legislation.
• Department of Finance vs. Asia United Bank, G.R. Nos. 240163 et al., December 1, 2021 — Cited for the principle that an administrative issuance must not override, supplant, or modify the law it implements.
• China Banking Corp. vs. Cebu Printing and Packaging Corp., 642 Phil. 308 (2010) and Quitoriano vs. Department of Agrarian Reform Adjudication Board (DARAB), 571 Phil. 331 (2008) — Cited for the rule that the Supreme Court is not a trier of facts.
• Spouses Miano vs. Manila Electric Co., 800 Phil. 118 (2016) — Cited for the rule that a mere assertion is insufficient to show that an appeal falls under exceptions to the rule against factual review.
• Phil. Airlines, Inc. vs. Commissioner of Internal Revenue, 823 Phil. 1043 (2018) — Cited for the binding effect of CTA factual findings absent compelling reasons.
• Nippon Express (Phils.) Corporation vs. Commissioner of Internal Revenue, 706 Phil. 442 (2013) — Cited by the CTA En Banc for the plain-meaning rule, that when the law speaks in clear and categorical language, there is no occasion for interpretation, only application.

• Section 112(A), National Internal Revenue Code of 1997, as amended by Republic Act No. 9337 — Allows a VAT-registered person with zero-rated or effectively zero-rated sales to apply within two years after the close of the taxable quarter when the sales were made for the issuance of a tax credit certificate or refund of creditable input tax attributable to such sales, except transitional input tax, to the extent that such input tax has not been applied against output tax. Applied: MGI failed to prove zero-rated sales, so no refund could be granted.
• Section 108(B)(7), National Internal Revenue Code of 1997 — Provides that the sale of power or fuel generated through renewable sources of energy is subject to zero percent VAT. Applied: this was the basis for MGI's claimed zero-rating of its geothermal power sales.
• Section 15(g), Republic Act No. 9513 (Renewable Energy Act of 2008) — Provides that the sale of fuel or power generated from renewable sources is subject to zero percent VAT, and that all RE Developers are entitled to zero-rated VAT on purchases of local supply of goods, properties, and services needed for the development, construction, and installation of plant facilities. Applied: the Court held that a DOE Certificate of Endorsement is not required for this incentive.
• Section 15(b), Republic Act No. 9513 — Governs duty-free importation of RE machinery, equipment, and materials, and requires DOE endorsement before importation and before any sale, transfer, or disposition of the imported capital equipment, machinery, or spare parts. Applied: the Certificate of Endorsement is required only for this incentive, not for VAT zero-rating.
• Section 25, Republic Act No. 9513 — Provides for registration of RE Developers with the DOE and issuance of a certification upon registration to serve as the basis of their entitlement to incentives under Chapter VII. Applied: MGI complied with DOE registration.
• Section 26, Republic Act No. 9513 — Provides that all certifications required to qualify RE developers to avail of the incentives under the Act shall be issued by the DOE through the Renewable Energy Management Bureau, and that the certification is without prejudice to any further requirements that may be imposed by concerned agencies charged with administering the fiscal incentives. Applied: the Court recognized the DOE's authority to impose additional requirements generally, but not for VAT zero-rating because it was omitted from the enumeration.
• Section 2, Republic Act No. 9513 — Declares the policy to increase the utilization of renewable energy by institutionalizing the development of national and local capabilities and promoting its efficient and cost-effective commercial application through fiscal and nonfiscal incentives. Applied: this supplied the sufficient standard for the delegation to the DOE.
• Part III, Rule 5, Section 13(G) and Section 18(A), (B), and (C), RA 9513 Implementing Rules and Regulations (DOE Department Circular No. 2009-05-0008) — Required the DOE Certificate of Registration, BOI registration, and a DOE Certificate of Endorsement on a per-transaction basis for incentives. Applied: the CTA En Banc relied on this; the Supreme Court held it could not extend the endorsement requirement to VAT zero-rating.
• DOE Department Circular No. DC2021-12-0042 — Amended the Implementing Rules and Regulations, removed the per-transaction Certificate of Endorsement requirement, and provided that RE Developers are automatically qualified to avail of the incentives under Republic Act No. 9513 after securing a DOE Certificate of Registration, with the exception of duty-free importation. Applied: the Court noted that the amendment came after TY 2013 and removed the requirement.
• Rule 45, Rules of Court — Governs the Petition for Review on Certiorari filed by MGI. Applied: this was the mode of review before the Supreme Court.

• Justice Gaerlan — concurred.
• Justice Dimaampao — concurred.
• Justice Caguioa (Chairperson) — concurred and wrote a concurring opinion emphasizing that a DOE Certificate of Endorsement is not required to qualify a transaction for VAT zero-rating under Section 108(B)(7) of the National Internal Revenue Code in relation to Section 15(g) of Republic Act No. 9513; it is required only for duty-free importation of RE machinery, equipment, and materials, and their subsequent sale, transfer, or disposition. He noted that DOE Department Circular No. DC2021-12-0042 and Revenue Regulations No. 7-2022 support this view, and distinguished CBK Power Company Limited vs. CIR on the ground that the RE Developer there was not registered with the DOE or BOI.
• Justice Inting — concurred separately, agreeing that MGI failed to prove zero-rated sales and that the DOE may not require an added certification for VAT zero-rating. He opined that Section 26 of Republic Act No. 9513 does not authorize the DOE to impose extra certifications, and that the issue was mooted by the December 24, 2021 DOE circular, which should be given retroactive curative effect.

• Associate Justice Jean Marie A. Bacorro-Villena (CTA En Banc, dissenting) — No Supreme Court Justice dissented; this dissenting opinion was issued in the CTA En Banc, with Associate Justice Catherine T. Manahan concurring. They opined that a DOE Certificate of Endorsement is required only for an RE Developer to enjoy the Income Tax Holiday and duty-free incentives under the BOI Specific Terms and Conditions, but not to qualify for VAT zero-rating. They also viewed MGI as having established zero-rated sales for the first quarter of 2014, based on the CTA En Banc's grant of refund of MGI's input VAT incurred in 2012 in another VAT refund case.