Team Energy Corporation vs. Commissioner of Internal Revenue

Compliance with the 120+30-day periods under Section 112(D) of the 1997 NIRC is mandatory and jurisdictional for a judicial claim for VAT refund to prosper, and failure to file within these periods renders the Commissioner's "deemed a denial" decision final and inappealable. VAT invoices and VAT official receipts are not interchangeable for substantiating input VAT claims: purchases of goods must be supported by VAT invoices, while purchases of services must be supported by VAT official receipts.

Team Energy Corporation (formerly Mirant Pagbilao Corporation and Southern Energy Quezon, Inc.) is a VAT-registered entity engaged in power generation and the sale of electricity to the National Power Corporation (NPC) under a Build, Operate, and Transfer scheme. On November 13, 2002, Team Energy filed with the Bureau of Internal Revenue an Application for Effective Zero-Rate of its supply of electricity to NPC, which was subsequently approved. The NPC's exemption from direct and indirect taxes under its charter, Republic Act No. 6395, had long been settled by this Court, such that services rendered to NPC by VAT-registered persons are subject to 0% VAT pursuant to Section 108(B)(3) of the 1997 NIRC.

Team Energy Corporation is a VAT-registered entity with Certificate of Registration No. 96-600-002498, engaged in power generation and the sale of electricity to the National Power Corporation under a Build, Operate, and Transfer scheme. On November 13, 2002, Team Energy filed with the Bureau of Internal Revenue an Application for Effective Zero-Rate of its supply of electricity to NPC, which was subsequently approved.

For the taxable year 2003, Team Energy filed its Original and Amended Quarterly VAT Returns. The first quarter return was filed on April 25, 2003, with an amended return on July 25, 2003, reporting zero-rated sales of P3,170,914,604.24 and input VAT of P15,085,320.31. The second quarter return was filed on July 25, 2003, with an amended return on October 27, 2003, reporting zero-rated sales of P3,034,739,252.93 and input VAT of P15,898,643.56. The third quarter return was filed on October 27, 2003, reporting zero-rated sales of P2,983,478,607.66 and input VAT of P21,151,308.57. The fourth quarter return was filed on January 24, 2004, with an amended return on July 26, 2004, reporting zero-rated sales of P3,019,672,908.84 and input VAT of P31,330,081.06. The total zero-rated sales for the year were P12,208,805,373.67, with total input VAT of P83,465,353.50.

On December 17, 2004, Team Energy filed with the Revenue District Office No. 60 in Lucena City a claim for refund of unutilized input VAT in the amount of P83,465,353.50 for the first to fourth quarters of taxable year 2003. On April 22, 2005, Team Energy appealed its 2003 first quarter VAT claim of P15,085,320.31 to the Court of Tax Appeals, docketed as CTA Case No. 7229. The Commissioner opposed, averring that the amount claimed was not properly documented and that NPC's exemption from taxes did not extend to its electricity supplier. On July 22, 2005, Team Energy appealed its VAT refund claims for the second to fourth quarters of 2003 in the amount of P68,380,033.19, docketed as CTA Case No. 7298. The Commissioner raised as special and affirmative defenses the need for Team Energy to prove compliance with registration, invoicing, and accounting requirements under Revenue Memorandum Order No. 53-98, and to prove that the claims were filed within the prescriptive periods and that the input taxes had not been applied against output tax or carried over. The two cases were consolidated on October 12, 2005.

The Court of Tax Appeals First Division partially granted Team Energy's petition, holding that NPC's exemption from direct and indirect taxes had long been resolved, and that NPC's electricity purchases from independent power producers were subject to 0% VAT under Section 108(B)(3) of the 1997 NIRC. It excluded P20,986,302.67 from the reported zero-rated sales for failure to submit corresponding official receipts, leaving P12,187,819,071.00 as substantiated zero-rated sales, or 99.83% of the total. It disallowed P12,642,304.32 of the claimed input VAT for failure to meet substantiation requirements under Sections 110(A) and 113(A) of the 1997 NIRC and Sections 4.104-1, 4.104-5, and 4.108-1 of Revenue Regulations No. 7-95. The reported output VAT liability of P776.36 for the third quarter was deducted, yielding a total allowable input VAT of P70,700,533.01. On prescription, the First Division held that the two-year prescriptive period starts from the date of filing of the corresponding quarterly VAT return, applying the Mirant doctrine to cases filed after its promulgation.

On appeal, the Court of Tax Appeals En Banc held that Team Energy's judicial claim for the second, third, and fourth quarters of 2003 was filed on July 22, 2005, beyond the 30-day period prescribed under Section 112(D), and denied those claims for lack of jurisdiction. It found Team Energy entitled to a refund of P11,161,392.67 for the first quarter of 2003 only. The Commissioner argued on appeal that Team Energy's failure to submit its ERC Registration and Certificate of Compliance disqualified it from claiming a tax refund, an issue the Court of Tax Appeals En Banc rejected as raised for the first time in a motion for partial reconsideration.

• Non-Retroactivity of Aichi Doctrine: Team Energy argued that applying the Aichi doctrine to its claim would violate the rule on non-retroactivity of judicial decisions, since when it filed its claims, both the administrative and judicial claims for refund had to be filed within the two-year prescriptive period.
• Revenue Regulations No. 7-95: Team Energy argued that Revenue Regulations No. 7-95 did not require a specific number of days after the 60-day, now 120-day, period given to the Commissioner within which to appeal to the Court of Tax Appeals.
• Unjust Enrichment: Team Energy contended that denying its claim of P70,700,533.01, which was duly proven before the Court of Tax Appeals First Division, would result in unjust enrichment on the part of the government.
• Interchangeability of VAT Invoices and Official Receipts: Team Energy argued that at the time the unutilized input VAT was incurred in 2003, the applicable NIRC provisions did not create a distinction between an official receipt and an invoice in substantiating a claim for refund, and that the disallowed amount of P258,874.55 supported by VAT invoices or official receipts should be allowed.

• Prescription of Claims: The Commissioner argued that the Court of Tax Appeals First Division erred in allowing the tax refund/credit because Team Energy's administrative and judicial claims for the first and second quarters were filed beyond the two-year period prescribed in Section 112(A) of the 1997 NIRC.
• Late Filing of Judicial Claims: The Commissioner averred that Team Energy's judicial claims for the second, third, and fourth quarters of 2003 were filed beyond the 30-day period to appeal under Section 112 of the 1997 NIRC.
• EPIRA Compliance: The Commissioner maintained that Team Energy was not entitled to any tax refund or credit because it could not qualify for VAT zero-rating under Republic Act No. 9136 (EPIRA) for failure to submit its ERC Registration and Certificate of Compliance, and that to operate a generation facility, Team Energy must have a duly issued ERC Certificate of Compliance.
• State Not Bound by Counsel's Errors: The Commissioner asserted that her counsel's mistake in belatedly raising the EPIRA issue should not prejudice the State, as it is not bound by the errors of its officers or agents, and that despite the Stipulation of Facts, the Court of Tax Appeals should have determined Team Energy's compliance with the EPIRA law because the burden lies on the taxpayer to prove its entitlement to a refund.

• Jurisdiction over Second to Fourth Quarters: Whether the Court of Tax Appeals erred in disallowing Team Energy Corporation's claim for tax refund of its unutilized input VAT for the second to fourth quarters of 2003 on the ground of lack of jurisdiction.
• Interchangeability of VAT Invoices and Official Receipts: Whether the Court of Tax Appeals erred in failing to recognize the interchangeability of VAT invoices and VAT official receipts to comply with the substantiation requirements for refunds of excess or unutilized input tax under Sections 110 and 113 of the 1997 NIRC, resulting in the disallowance of P258,874.55.
• EPIRA Compliance: Whether Team Energy Corporation's failure to submit the Registration and Certificate of Compliance issued by the Energy Regulatory Commission disqualifies it from claiming a tax refund/credit.

• Jurisdiction over Second to Fourth Quarters: No. The judicial claim for the second to fourth quarters was filed 67 days beyond the mandatory 30-day appeal period under Section 112(D) of the 1997 NIRC, and the Court of Tax Appeals En Banc correctly denied the claim for lack of jurisdiction.
• Interchangeability of VAT Invoices and Official Receipts: No. VAT invoices and VAT official receipts are not interchangeable; purchases of goods must be supported by VAT invoices, while purchases of services must be supported by VAT official receipts, pursuant to Sections 106(D) and 108(C) in relation to Section 110 of the 1997 NIRC.
• EPIRA Compliance: No. Team Energy's refund claim was anchored on Section 108(B)(3) of the 1997 NIRC in relation to the NPC charter, not on the EPIRA law, and the Commissioner was estopped from raising the EPIRA issue for the first time on appeal.

• Jurisdiction over Second to Fourth Quarters: Section 112(D) of the 1997 NIRC explicitly provides that the taxpayer may appeal to the Court of Tax Appeals within 30 days from receipt of the decision denying the claim or after the expiration of the 120-day period given to the Commissioner to decide the claim. The Court first pronounced in Aichi Forging Company of Asia, Inc. that observance of the 120+30-day periods is crucial, and San Roque Power Corporation categorically held that compliance is mandatory and jurisdictional. The only exception is for prematurely filed claims between December 10, 2003, when BIR issued Ruling No. DA-489-03, and October 6, 2010, when Aichi was promulgated. Here, the administrative claim was filed on December 17, 2004, so the BIR had until April 16, 2005 to act, and Team Energy had until May 16, 2005 to file its judicial claim, but it filed only on July 22, 2005, or 67 days late. The Commissioner's inaction during the 120-day period is "deemed a denial" pursuant to Section 7(a)(2) of Republic Act No. 1125, as amended, and Team Energy's failure to appeal within 30 days rendered the deemed denial final and inappealable. The Court rejected Team Energy's non-retroactivity argument, holding that courts merely declare what a provision has always meant and do not create new legal obligations, and that interpretations of law made by courts necessarily always have a "retroactive" effect. The Court also rejected the unjust enrichment argument, holding that a claim for refund of excess input tax is in the nature of a tax exemption, construed strictly against the taxpayer, and that the 120+30-day periods are not a mere procedural technicality but a mandatory and jurisdictional condition imposed by law.

• Interchangeability of VAT Invoices and Official Receipts: Under Section 110(A)(1) of the 1997 NIRC, creditable input tax must be evidenced by a VAT invoice or official receipt reflecting the information required in Sections 113 and 237. Section 4.108-1 of Revenue Regulations No. 7-95 summarizes the information required in a VAT invoice and a VAT official receipt. The Court distinguished AT&T Communications Services Philippines, Inc. vs. Commissioner of Internal Revenue (2010), which held that sales invoices would suffice for services, from the subsequent AT&T Communications Services Phils., Inc. vs. Commissioner of Internal Revenue (2014), which held that there is a clear delineation between official receipts and invoices. Section 108(C) provides that VAT on sale of services is computed by multiplying the total amount indicated in the official receipt by one-eleventh, while Section 106(D) provides that VAT on sale of goods is computed by multiplying the total amount indicated in the invoice by one-eleventh. The Court held that the legislature intended to distinguish the use of an invoice from an official receipt, and that to claim a refund of unutilized or excess input VAT, purchase of goods must be supported by VAT invoices, while purchase of services must be supported by VAT official receipts. Revenue Memorandum Circular No. 42-03 expressly provides that an invoice is the supporting document for the claim of input tax on purchase of goods, whereas an official receipt is the supporting document for the claim of input tax on purchase of services. The Court of Tax Appeals properly disallowed the input VAT of P258,874.55 for failure to comply with the invoicing requirements.

• EPIRA Compliance: The Court of Tax Appeals rejected the Commissioner's EPIRA argument because it was raised for the first time in a motion for partial reconsideration, and the rule is well settled that no question will be considered by the appellate court which has not been raised in the court below. Both parties stipulated in the Joint Stipulation of Facts and Issues that Team Energy is principally engaged in the business of power generation, and the Commissioner acknowledged Team Energy's sale of electricity to NPC as zero-rated, evidenced by the approved Application for VAT zero-rating. The Court held that Team Energy's claim was anchored not on the EPIRA law but on Section 108(B)(3) of the 1997 NIRC in relation to Section 13 of Republic Act No. 6395 (NPC's charter). The requirements of the EPIRA law would apply only to claims for refund filed under the EPIRA, as in Commissioner of Internal Revenue vs. Toledo Power Company, where the taxpayer had to establish that it was a generation company and that it derived sales from power generation. Here, to qualify its electricity sale to NPC as zero-rated, Team Energy needed only to show that it is a VAT-registered entity and that it has complied with the invoicing requirements under Section 108(B)(3) in conjunction with Section 4.108-1 of Revenue Regulations No. 7-95. The Commissioner was bound by her admission in the Joint Stipulation of Facts and Issues and was estopped from asserting that Team Energy's transactions cannot be effectively considered zero-rated.

• Mandatory and Jurisdictional Nature of the 120+30-Day Periods — Under Section 112(D) of the 1997 NIRC, the Commissioner has 120 days from the submission of complete documents to act on a claim for refund or tax credit of input VAT, and the taxpayer has 30 days from receipt of the denial or from the expiration of the 120-day period to appeal to the Court of Tax Appeals. Compliance with these periods is mandatory and jurisdictional; failure to comply renders the Commissioner's "deemed a denial" decision final and inappealable. The only exception is for prematurely filed claims between December 10, 2003 (when BIR Ruling No. DA-489-03 was issued) and October 6, 2010 (when Aichi was promulgated). The Court applied this doctrine to deny Team Energy's judicial claim for the second to fourth quarters of 2003, which was filed 67 days late.

• Non-Interchangeability of VAT Invoices and VAT Official Receipts — Under Sections 106(D) and 108(C) of the 1997 NIRC, VAT on sale of goods is computed based on the total amount indicated in the invoice, while VAT on sale of services is computed based on the total amount indicated in the official receipt. Consequently, to claim a refund of unutilized or excess input VAT, purchase of goods or properties must be supported by VAT invoices, while purchase of services must be supported by VAT official receipts. The Court applied this doctrine to disallow P258,874.55 in input VAT claimed by Team Energy, consisting of P78,134.65 on local purchase of goods supported by documents other than VAT invoices and P180,739.90 on local purchase of services supported by documents other than VAT official receipts.

• Strict Construction of Tax Refund Claims — A claim for input VAT refund or credit is construed strictly against the taxpayer, and there must be strict compliance with the prescriptive periods and substantive requirements set by law before a claim for tax refund or credit may prosper. The mere fact that a taxpayer has proved its excess input VAT does not entitle it as a matter of right to a tax refund or credit. The Court applied this doctrine to reject Team Energy's unjust enrichment argument, holding that the 120+30-day periods are not a mere procedural technicality that can be set aside if the claim is otherwise meritorious.

• Estoppel by Judicial Admission and the Rule Against Raising New Issues on Appeal — Points of law, theories, issues, and arguments not adequately brought to the attention of the lower court need not be considered by the reviewing court, as they cannot be raised for the first time on appeal, much more in a motion for reconsideration. A party is bound by its admissions in a Joint Stipulation of Facts and Issues. The Court applied this doctrine to reject the Commissioner's EPIRA argument, which was raised for the first time in a motion for partial reconsideration and contradicted her stipulation that Team Energy's sale of electricity to NPC was zero-rated.

• "For a judicial claim for Value Added Tax (VAT) refund to prosper, the claim must not only be filed within the mandatory 120+30-day periods. The taxpayer must also prove the factual basis of its claim and comply with the 1997 National Internal Revenue Code (NIRC) invoicing requirements and other appropriate revenue regulations. Input VAT payments on local purchases of goods or services must be substantiated with VAT invoices or official receipts, respectively." — This opening passage states the core ratio decidendi of the decision, synthesizing the three main issues: the mandatory prescriptive periods, the burden of proof, and the invoicing requirements.

• "The text of the law is clear that resort to an appeal with the Court of Tax Appeals should be made within 30 days either from receipt of the decision denying the claim or the expiration of the 120-day period given to the Commissioner to decide the claim." — This passage articulates the plain-meaning interpretation of Section 112(D) of the 1997 NIRC, which the Court applied to deny Team Energy's claims for the second to fourth quarters of 2003.

• "This Court reiterates that to claim a refund of unutilized or excess input VAT, purchase of goods or properties must be supported by VAT invoices, while purchase of services must be supported by VAT official receipts." — This passage states the canonical formulation of the non-interchangeability doctrine, which the Court applied to disallow P258,874.55 in input VAT.

• "A claim for input VAT refund or credit is construed strictly against the taxpayer. Accordingly, there must be strict compliance with the prescriptive periods and substantive requirements set by law before a claim for tax refund or credit may prosper." — This passage articulates the strict construction doctrine applied to tax refund claims, which the Court used to reject Team Energy's unjust enrichment argument.

• Commissioner of Internal Revenue vs. Aichi Forging Company of Asia, Inc., 646 Phil. 710 (2010) — Controlling precedent where the Court first pronounced that observance of the 120+30-day periods in Section 112(D) is crucial in filing an appeal with the Court of Tax Appeals; applied to deny Team Energy's late-filed judicial claims.
• Commissioner of Internal Revenue vs. San Roque Power Corporation, 703 Phil. 310 (2013) — Controlling precedent where the Court categorically held that compliance with the 120+30-day periods is mandatory and jurisdictional, with an exception for prematurely filed claims between December 10, 2003 and October 6, 2010; applied to reject Team Energy's non-retroactivity argument.
• Commissioner of Internal Revenue vs. Mindanao II Geothermal Partnership, 724 Phil. 534 (2014) — Followed; held that the 30-day period to appeal is mandatory and jurisdictional and that late filing is absolutely prohibited, applied to pending cases.
• AT&T Communications Services Philippines, Inc. vs. Commissioner of Internal Revenue, 640 Phil. 613 (2010) — Distinguished; held that sales invoices would suffice for services since Section 113 did not distinguish between a sales invoice and an official receipt, but was superseded by the 2014 ruling.
• AT&T Communications Services Phils., Inc. vs. Commissioner of Internal Revenue, 747 Phil. 337 (2014) — Controlling precedent; held that there is a clear delineation between official receipts and invoices and that these two documents cannot be used interchangeably, applied to disallow Team Energy's input VAT claims.
• Commissioner of Internal Revenue vs. Toledo Power Company, 774 Phil. 92 (2015) — Distinguished; held that EPIRA requirements apply to claims for refund filed under the EPIRA, where the taxpayer must establish that it is a generation company and that it derived sales from power generation; held inapplicable to Team Energy's claim anchored on Section 108(B)(3) and the NPC charter.
• Commissioner of Internal Revenue vs. Mirant Pagbilao Corporation, 586 Phil. 712 (2008) — Followed on the reckoning of the two-year prescriptive period from the close of the taxable quarter, applied by the Court of Tax Appeals First Division to Team Energy's claims.

• Section 112(D), 1997 National Internal Revenue Code — Provides the period within which refund or tax credit of input taxes shall be made: 120 days for the Commissioner to act, and 30 days for the taxpayer to appeal to the Court of Tax Appeals from receipt of the denial or from the expiration of the 120-day period. Applied to deny Team Energy's judicial claims for the second to fourth quarters of 2003 for late filing.
• Section 110(A)(1), 1997 National Internal Revenue Code — Provides that any input tax evidenced by a VAT invoice or official receipt issued in accordance with Section 113 is creditable against the output tax. Applied to require substantiation of Team Energy's input VAT claims.
• Section 113(A), 1997 National Internal Revenue Code — Provides the invoicing requirements for VAT-registered persons, requiring a statement that the seller is a VAT-registered person followed by its TIN, and the total amount paid with an indication that it includes VAT. Applied to assess the sufficiency of Team Energy's supporting documents.
• Section 106(D), 1997 National Internal Revenue Code — Provides that VAT on sale of goods or properties is computed by multiplying the total amount indicated in the invoice by one-eleventh. Applied to establish that VAT invoices are required for purchases of goods.
• Section 108(C), 1997 National Internal Revenue Code — Provides that VAT on sale of services is computed by multiplying the total amount indicated in the official receipt by one-eleventh. Applied to establish that VAT official receipts are required for purchases of services.
• Section 108(B)(3), 1997 National Internal Revenue Code — Provides that services rendered to persons or entities whose exemption under special laws effectively subjects the supply of such services to 0% rate are subject to zero percent rate. Applied as the basis of Team Energy's zero-rated sales to NPC.
• Section 13, Republic Act No. 6395 (NPC Charter) — Declares the NPC exempt from all taxes, duties, fees, imposts, and other charges. Applied to establish that services rendered to NPC are subject to 0% VAT.
• Section 6, Republic Act No. 9136 (EPIRA) — Provides that sales of generated power by generation companies shall be VAT zero-rated. Held inapplicable to Team Energy's claim, which was anchored on Section 108(B)(3) and the NPC charter.
• Section 7(a)(2), Republic Act No. 1125, as amended by Republic Act No. 9282 — Provides that inaction by the Commissioner in cases involving refunds of internal revenue taxes where the NIRC provides a specific period of action shall be deemed a denial. Applied to hold that the Commissioner's inaction on Team Energy's claim was deemed a denial, and Team Energy's failure to appeal within 30 days rendered it final and inappealable.
• Section 4.108-1, Revenue Regulations No. 7-95 — Summarizes the information that must be contained in a VAT invoice and a VAT official receipt. Applied to assess the sufficiency of Team Energy's substantiation documents.
• Revenue Memorandum Circular No. 42-03 — Provides that an invoice is the supporting document for the claim of input tax on purchase of goods, whereas an official receipt is the supporting document for the claim of input tax on purchase of services. Applied to disallow Team Energy's input VAT claims supported by the wrong document type.

• Velasco, Jr. (Chairperson), Bersamin, Martires, and Gesmundo, JJ., concurred in the decision.

N/A — The decision does not recount any dissenting opinion in the Supreme Court. The Court of Tax Appeals En Banc had a concurring and dissenting opinion from Presiding Justice Ernesto D. Acosta and a dissent from Associate Justice Lovell R. Bautista, but their reasoning is not summarized in the text.