Court of Tax Appeals · First Division

Team Energy Corporation vs. Commissioner of Internal Revenue

CTA Case No. 7461 January 5, 2010 BAUTISTA

REPUBLIC OF THE PHILIPPINES

COURT OF TAX APPEALS

QUEZON CITY

FIRST DIVISION

*************

TEAM ENERGY CORPORATION

(formerly

Mirant

Pagbilao

Corporation

and

Southern

Energy

Quezon,

Inc.),

Petitioner,

-versus-

COMMISSIONER OF INTERNAL

REVENUE,

Respondent.

C.T.A. CASE NO. 7461

Members:

ACOSTA, Chairperson

BAUTISTA, and

CASANOVA, JJ.

Promulgated:

X - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

DECISION

BAUTISTA, J.:

This is a Petition for Review filed by petitioner on April 21, 2006, to seek the refund or issuance of tax credit certificate in the total amount of P114,379,790.80, allegedly representing unutilized input value-added tax (VAT) paid on , its domestic purchases of capital goods, domestic purchases of goods other than capital goods, domestic purchases of services, services rendered by non-residents, importation of capital goods, and importation of goods other than capital goods, attributable to petitioner's zero-rated sales to National Power Corporation for the four quarters of taxable year 2004.

I

) 101

TeaM Energy Corporation (Petitioner) is a domestic corporation organized and existing under and by virtue of Philippine Laws, with principal office at Pagbilao Grande Island, Pagbilao, Quezon. It is registered with the Bureau of Internal Revenue (BIR) as a VAT taxpayer in accordance with Section 107 of the 1977 Tax Code (now Section 236 of the National Internal Revenue Code of 1997), with BIR Certificate of Registration bearing ROO Control No. 96-600-00248 and Taxpayer Identification No. 001-726-870. It is principally engaged in the business of power generation and the subsequent sale thereof to the National Power Corporation (NPC) under a Build, Operate, Transfer scheme. 1 Petitioner was originally registered with the Securities and Exchange Commission (SEC) under the name "Hopewell Power (Philippines), Corporation," which was subsequently changed to "Southern Energy Quezon, Inc." on September 22, 1999.2 On June 28, 2001, the SEC issued another Certificate of Filing of Amended Articles of Incorporation, approving the application of herein petitioner for a change of its corporate name to "Mirant Pagbilao Corporation"3, which was thereafter changed to "TeaM Energy Corporation" on July 23, 20074 • Respondent is the Commissioner of the Bureau of Internal Revenue who is duly appointed and empowered to perform the duties of his office, including, among others, the duty to act on and approve claims for refund or issuance of tax credit certificate of overpaid internal revenue taxes as provided by law. He holds office at the BIR National Office Building, Agham Road, Diliman, Quezon City. On December 19, 2003, petitioner filed with the BIR Audit Information, Tax Exemption and Incentives Division an Application for Effective Zero-Rate for the supply 1 Pars. 1, 2, and 4, Jointly Stipulated Facts, Joint Stipulation of Facts and Issues (JSFI), docket, pp. 434-435 2 Par. 5, Jointly Stipulated Facts, JSFI, docket, p. 435 3 Par. 6, Jointly Stipulated Facts, JSFI, docket, p. 435 4 Annex "A", Supplemental Formal Offer of Evidence with Motion to Change Caption, docket, p. 970 I 10 2 of electricity to NPC for the period covering January 1, 2004 to December 31, 2004, which was subsequently approved by the BIR. 5 On April 26, 2004, July 26, 2004, October 25, 2004, and January 25, 2005, petitioner filed its Quarterly VAT Returns6 for the four quarters of 2004 and its Amended Quarterly VAT Return for the fourth quarter on April 25, 20057, showing excess input VAT paid on domestic purchases and importations of taxable goods and services attributable to its zero-rated sales of power generation services to NPC in the amount of P114,379,790.83, detailed as follows: Exh.

Year 2004

Zero-Rated Sales

Taxable Sales

Output VAT

Input VAT

QQ

1st Qtr p 3,139,226,564.73 p 830.46 p 83.05 p 13,773,439.14

RR

2nd Qtr 3,095,243,127.54 2,370.76 237.08 27,011,754.10 ss 3rd Qtr 3,097,41 1 '778.69 726,791.35 72,679.13 34,332,257.36

TT

4th Qtr 3,120,591 ,238.44 - - 39,262,340.23

Total

P12,452,472, 709.40 p 729,992.57 p 72,999.26 P114,379, 790.83 On December 19, 2005, petitioner instituted an administrative claim for refund before the BIR in the amount of P114,379,790.80 for the four quarters of taxable year 2004.8 However, due to respondent's inaction on the administrative claim for refund, petitioner instituted the present action on April 21, 2006. In his Answer9, respondent interposed the following Special and Affirmative

Defense:

"5. The Petition is prematurely filed. Under Section 112 of the NIRC of 1997, respondent has 120 days from the submission of complete documents in support of the application for refund within which to grant or deny the claim. In a Memorandum dated May 17, 2006, Revenue District Officer Muriel P. Flores, Revenue District No. 60, Lucena City, stated that petitioner submitted the documents in support of its claim for refund only on May 15, 2006. Petitioner filed this Petition on April 21, 2006.

Clearly, petitioner filed this judicial claim for refund before the expiration of the 120-day period granted

5 Par. 7, Jointly Stipulated Facts, JSFI, docket, p. 435

6 Pars. 8, 9, 10, and 11, Jointly Stipulated Facts, JSFI, docket, pp. 435-436

7 Par. 11, Jointly Stipulated Facts, Joint Stipulation of Facts and Issues (JSFI), docket, p. 436

8 Exhibit "B"; Annex "K", Petition for Review, docket, p. 379

9 Docket, pp. 396-397 lO J

to respondent to process the administrative claim for refund. Thus, this Honorable Court is without jurisdiction to even entertain this claim for refund, much more, grant the same. " The case was set for Pre-Trial Conference on July 7, 2006. 10

Petitioner and

respondent filed their Pre-Trial Briefs on June 30, 200611 and July 5, 200612, respectively. On August 8, 2006, the parties filed their Joint Stipulation of Facts and During trial, petitioner was able to present and formally offer its documentary and testimonial evidence; while respondent manifested that he is waiving his right to present evidence.

On October 3, 2008, a Resolution 14 was issued by this Court as per motion of petitioner, changing the caption of this case from "Mirant Pagbilao Corporation (formerly Southern Energy Quezon, Inc.) vs. Commissioner of Internal Revenue" to "TeaM Energy Corporation (formerly 'Mirant Pagbilao Corporation' and 'Southern Energy Quezon, Inc.') vs. Commissioner of Internal Revenue". The case was submitted for decision on January 12, 2009, taking into consideration petitioner's "Memorandum" filed on November 18, 2008 and respondent's "Memorandum" filed on January 8, 2009. 15 The parties submitted the following issues16 for this Court's disposition: "1. Whether or not the power generation services rendered by Petitioner to NPC are subject to zero percent (0%) VAT pursuant to Section 108(8)(3) of the Tax Code;

2. Whether or not Petitioner has unutilized creditable input VAT for the four quarters of CY 2004 arising from its domestic purchases of goods and services and importation of goods amounting to

10 Docket, p. 400

11 Docket, pp. 401-410

12 Docket, pp. 411-419

13 Docket, pp. 431-437

14 Docket, pp. 983-984

15 Docket, p. 1057

16 Jointly Stipulated Issues, JSFI, docket, pp. 436-437

Php114,379,790.80 that can be a proper object of a claim for refund pursuant to Sections 108(8)(3) and 112(A) of the Tax Code;

3. Whether or not the unutilized creditable input taxes for the four quarters CY 2004 are substantiated by proper invoices and official receipts;

4. Whether or not the unutilized creditable input VAT payments for the four quarters of CY 2004 were carried over to and utilized in the succeeding taxable quarter(s) or applied against any of the output VAT liability of the Petitioner;

Whether or not Petitioner is entitled to a refund and/or issuance of tax credit certificate for the unutilized input VAT payments in the amount of Php114,379,790.80; and,

6. Whether or not Petitioner had given Respondent the 120-day period to grant or deny the administrative claim for refund before filing the subject judicial claim for refund."

In addressing the first stipulated issue, this Court hereby quotes the provisions of Section 108(8)(3) of the NIRC of 1997, as amended, in relation to Section 13 of Republic Act No. 6395 (NPC Charter), the pertinent portions of which provide as follows:

"SEC. 108. Value-added Tax on Sale of Services and Use or Lease of Properties. -

XXX

(B) Transactions Subject to Zero Percent (0°/o) Rate. - The following services performed in the Philippines by VAT-registered persons shall be subject to zero percent (0%) rate:

XXX

(3) Services rendered to persons or entities whose exemption under special laws or international agreements to which the Philippines is a signatory effectively subjects the supply of such services to zero percent (0%) rate."

"SECTION 13. Non-profit Character of the Corporation 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,

I

10 5 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." Petitioner claims that its sale of electricity to NPC is effectively zero-rated for VAT purposes pursuant to the above-mentioned provisions of law. The Court agrees with petitioner.

NPC is an entity with a special charter. Its charter, which is Republic Act No. 6395, as amended, categorically makes it exempt from payment of all taxes, whether direct or indirect, including VAT. Accordingly, the said exemption provided for under NPC's Charter necessarily makes the services rendered by a VAT-registered entity, like herein petitioner to NPC, effectively subject to zero percent (0%) VAT, in accordance with Section 108(B)(3) of the NIRC of 1997. Moreover, NPC's tax-exempt status was confirmed by the Supreme Court in the case of Ernesto M. Maceda vs. Catalina Macaraig, Jr., et a/.17, in the following manner:

"The NPC is a non-profit public corporation created for the general good and welfare, wholly owned by the government of the Republic of the Philippines. From the very beginning of its corporate existence, the NPC enjoyed preferential tax treatment, to enable the Corporation to pay the indebtedness and obligation and in furtherance and effective implementation of the policy enunciated in Section one of Republic Act No. 6395 ...

XXX

It is noted that in the earlier law, R.A. No. 358 the exemption was worded in general terms, as to cover 'all taxes, duties, fees, imposts, charges, etc ... '. However, the amendment under Republic Act No. 6395 enumerated the details covered by the exemptions. Subsequently, P.D. No. 380, made even more specific the details of the exemption of NPC

17 197 SCRA 771

I

lO 'J to cover, among others, both direct and indirect taxes on all petroleum products used in its operation. Presidential Decree No. 938 amended the tax exemption by simplifying the same law in general terms. It succinctly exempts NPC from '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.' The use of the phrase 'all forms' of taxes demonstrate the intention of the law to give NPC all the tax exemptions it has been enjoying before. The rationale for this exemption is that being non- profit the NPC 'shall devote all its returns from its capital investment as well as excess revenues from its operation, for expansion ...

XXX

It is evident from the provisions of P.D. No. 938 that its purpose is to maintain the tax exemption of NPC from all forms of taxes including indirect taxes as provided for under R.A. No. 6395 and P.D. No. 380 if it is to attain its goals."

Equally noteworthy is the fact that it was respondent himself who approved petitioner's application for zero-rating of its sales to NPC, covering the period from January 1, 2004 to December 31, 2004/8 thus, petitioner's sale of electricity to NPC is indeed effectively zero-rated for VAT purposes. Now as to the remaining issues, it may be gleaned that the same are mainly factual issues evolving from the crux of the controversy in this case, which is petitioner's entitlement to a refund.

The same may be resolved by ascertaining petitioner's compliance with Section 112(A) of the National Internal Revenue Code (NIRC) of 1997, as amended, to wit:

"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

18 Exhibit "A"

10 7 been applied against output tax: Provided, however, That in the case of zero-rated sales under Section 106(A)(2)(a)(l), (2) and (B) and Section 108(B)(l) 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."

From the foregoing provision, petitioner must comply with the following requisites to be entitled to a refund:

1. that there must be zero-rated or effectively zero-rated sales;

2. that input taxes were incurred or paid;

3. that such input taxes are attributable to zero-rated sales or effectively zero-rated sales;

4. that the input taxes were not applied against any output VAT liability; and

5. that the claim for refund was filed within the two-year prescriptive period.

As to the first requisite, this Court finds that petitioner was able to establish that it actually generated gross receipts from sale of power generation services to NPC for the four quarters of 2004, as substantiated by various invoices and official receipts it issued to NPC19, in the total amount of P12,452,472,709.40, which was reflected in its Quarterly VAT Returns as follows:

Exhibit

Year( 2004)

Zero-rated

Sales/ Receipts

QQ

1st Quarter p 3 139 226 564.73

RR

2nd Quarter 3 095 243 127.54 55 3rd Quarter 3 097,411,778.69

TT

4thQuarter 3 120 591 238.44

TOTAL

P12 452,472 709.40 After establishing that petitioner's gross receipts from sale of power generation services to NPC in the amount of P12,452,472.709.40 qualify for VAT zero-rating, this Court shall now determine the amount of input VAT attributable thereto. 19 Exhibits " MM-1" to "MM-10b", "NN-1" to " NN-llb", "00-1" to "00-9b", and " PP-1" to "PP-9d" I 10 8

In order to substantiate its claim, petitioner presented its Schedules of Input VAT20 and the related suppliers' invoices and official receipts, Bureau of Customs (BOC) Import Entries and Internal Revenue Declarations (IEIRDs), BOC official receipts, bank debit advices, and other documents21 in support of the P114,379,790.83 input VAT reflected in its Quarterly VAT Returns for the four quarters of 2004 as follows:

Exhibit

Year2004

Input VAT

QQ

1st Quarter p 13,773,439.14

RR

2ndQuarter 27,011,754.10 ss 3rd Quarter 34,332,257.36

TT

4th Quarter 39,262,340.23

Total

p 114,379,790.83 After verification of the aforesaid documents,

the Court-commissioned

Independent Certified Public Accountant (CPA)22 found that only the input VAT claim of P110,853,504.19, detailed below, was properly substantiated: 23

FIRST QUARTER

Amount

Input VAT on domestic purchases of services supported by VAT ORs p 6,698,257.75 Input VAT on domestic purchases of goods supported by VAT Invoices 2,561 '199 06 Input VAT on Importation of goods supported by SOC IEIRDs and ORs issued by BOC 2,538,043.00 Input VAT on Importation of goods supported by SOC IEIRDs and ORs issued by_ Banks 1,660,367.00 Input VAT on Importation of goods supported by SOC IEIRD only 4,120.00 Input VAT on Importation of goods supported by ORs issued by BOC 18,398.00 Input VAT on Importation of goods supported by ORs issued by Banks 9,517.00

Subtotal

p 13,489,901.81

SECOND QUARTER

Input VAT on domestic purchases of services supported by VAT ORs 16,726,111 .79 Input VAT on domestic purchases of goods supported by VAT Invoices 3,681,562.39 Input VAT on services rendered by non resident supported by documents other than ORs 570,550.91 Input VAT on Importation of goods supported by BOC IEIRD's and ORs issued by SOC 1,654,443.00 Input VAT on Importation of goods supported by BOC IEIRD's and ORs issued by Banks 3,883,440.00 Input VAT on Importation of goods supported by SOC IEIRD's only 47,363.00 Input VAT on Importation of goods supported by ORs issued by BOC 29,155.00 Input VAT on Importation of goods supported by ORs issued by Banks 52,848.00

Subtotal

p 26,645,474.09

20 Exhibits "U" "V" "W" and "X"

21 Exhibits "Y-l" to,"Y-1l70", "Z-1" to "Z-1769", "AA-1" to "AA-1945", and "BB-11" to "BB-2451" 22 Mr. Emmanuel Y. Mendoza, Partner of Mendoza Querida & Co. 23 Exhibit "W", page 4 and Exhibit "W -2" Exh. W-2

Annex A-1

Annex A-2

Annex A-10

Annex A-11

Annex A-12

AnnexA-13

Annex A-14

Annex A-17

Annex A-18

Annex A-20

Annex A-30

Annex A-31

Annex A-32

Annex A-33

Annex A-34

I

•n n .1 u >:J

THIRD QUARTER

Input VAT on domestic purchases of services supported by VAT ORs Input VAT on domestic purchases of goods supported by VAT Invoices Input VAT on Importation of goods supported by BOC IEIRD's and ORs issued by BOC Input VAT on Importation of goods supported by BOC IEIRD's and ORs issued by Banks Input VAT on Importation of goods supported by BOC IEIRD's only Input VAT on Importation of goods supported by ORs issued by BOC Input VAT on Importation of goods supported by ORs issued by Banks

Subtotal

FOURTH QUARTER

Subtotal

TOTAL

p 12,143,092.02

Annex A-37

3,990,654.55

Annex A-38

12,608,801 .00

Annex A-43

4,565,181 .00

Annex A-44

131 .00

Annex A-45

37,320.00

Annex A-46

28,907.00

Annex A-47

p 33,374,086.57 18,426,892.22

Annex A-49

6,810,600.50

Annex A-50

4,365,596.00

Annex A-59

7,655,011 .00

Annex A-60

1,877.00

Annex A-61

84,065.00

Annex A-62

p 37,344,041 .72 P11 0,853,504.19 As regards the remaining input VAT of P3,526,286.44, the Independent CPA made the following observations24:

Amount

Exh. VV-2

Annexes A-

1.)

Input VAT on domestic purchases of services supported by 19, A-39 & documents other than ORs p 1,840,044.80

A-51

Annexes A-

2.)

Input VAT on domestic purchases of goods supported by 3, A-21 , A- documents other than invoices 124,571 .89

40 & A-52

3.)

Input VAT on domestic purchases of services supported by ORs with no BIR authori1y to print 17,500.00

Annex A-22

4.)

Input VAT on domestic purchases of services supported by ORs

Annexes A-4

with preprinted "TIN" and "NON VAT/NV" 17,693.22

& A-53

5.)

Input VAT on domestic purchases of goods supported by invoices with preprinted "TIN" and "NON VAT/NV" 1,471 .96

Annex A-23

6.)

Input VAT on domestic purchases of services supported by ORs with preprinted "TIN" only 20,872.73

Annex A-24

7.)

Input VAT on domestic purchases of goods supported by invoices with preprinted "TIN" only 954.55

Annex A-25

8.)

Input VAT on domestic purchases of services supported by ORs with stamped "TIN VAT" 909.09

Annex A-5

9.)

Input VAT on domestic purchases of goods supported by invoices with stamped "TIN VAT" 17,772.70

Annex A-54

10.)

Input VAT on domestic purchases of services supported by ORs with preprinted "TAN VAT" 652.50

Annex A-55

24 Exhibit "W", pages 5-8

I

ll rJ . .

11 .)

Input VAT on domestic purchases of services supported by photocopied ORs 12.)

Input VAT on domestic purchases of goods supported by photocopied invoices 13.)

Input VAT on domestic purchases of goods supported by invoices dated before the taxable year of claim 14.)

Input VAT on domestic purchases of services supported by ORs dated after the taxable year of claim 15.)

Input VAT on domestic purchases of services supported by ORs with stamped TIN only 16.)

Input VAT on domestic purchases of services and goods with no available supporting documents presented to us 17.)

Input VAT on importation of goods with no available supporting documents presented to us

TOTAL

21,432.04

Annexes A-

Exhibit

Claim

Exhibit VV-2

1.)

Input VAT on importation of goods supported only by SOC IEIRD which does not reflect an entry date and/or machine validation for the amount of customs duties and taxes paid 1st Quarter

Y-1161

p 4,120.00

Annex A-12

Z-1737 to

2nd Quarter

Z-1750

47,363.00

Annex A-32

3rd Quarter

AA-1923

131.00

Annex A-45

4th Quarter

SS-2271

1,877.00

Annex A-61

2.)

Input VAT on importation of goods supported by soc OR with no date indicated or that the date shown does not include the year 2nd Quarter

Z-1760

2,955.00

Annex A-33

Z-1761

2,068.00

Annex A-33

Z-1764

2,065.00

Annex A-33

3rd Quarter

AA-1927

923.00

Annex A-46

I

4th Quarter 3.)

Input VAT claim on importation of goods is not separately indicated in the supporting bank OR (2nd Quarter) 4.)

Input VAT on importation of goods supported by IEIRD and BOC OR but the payment shown in both the IEIRD and

BOC

OR

pertains to

Final

Duties

amounting to P336,063.00 and not the claimed input VAT of P 1 ,060,115.00 (3rd

Quarter)

5.)

Input VAT on services rendered by non- residents supported merely by invoices.

Pursuant to Sections 4 and 6 of Revenue

Regulations No. 04-02, these input taxes must be supported by

Monthly

Remittance Return of VAT and Other

Percentage Taxes Withheld (BIR Form

No. 1600) 6.)

Input VAT supported by invoices or ORs with preprinted TIN-V/Non-VAT instead of TIN-VAT as required under Section 4.108-1 of Revenue Regulations No. 7- 95 1st Quarter

Fleet Maintenance Consultancy

Ansul Technologies Products

2nd Quarter

Cotta Builders Construction

Health Safety Environmental Mgt

New Ro-bel Trading

Romulo Mabanta

1,060,115.00

Annex A-44

Tetra Tech

Unidynamics Philippines Corporation

Ansul Technologies Products

Valley Technologies Inc.

4th Quarter

Cotta Builders Construction

MOF Company Subic, Inc.

Skyclimber Corporation

7.)

Overclaimed Input VAT (2nd Quarter)

TOTAL

Z-405

Z-406

Z-407

Z-408

Z-409

AA-114

AA-136

AA-318

AA-397

AA-436

AA-437

AA-438

AA-496

AA-497

AA-498

AA-499

AA-1661

AA-1662

AA-1663

AA-1664

AA-1665

AA-1666

AA-1667

AA-1668

BB-112

BB-200

BB-201

In sum, petitioner's valid input VAT for the four quarters of 2004 amounted only to P107,260,401.03, computed as follows:

Input VAT Claim

P114,379,790.80

Less:

Disallowances

Per !CPA's Report p 3,526,286.44 Per this Court's further verification 3,593,103.16 7,119,389.60 Discrepancy in the input VAT claim

Per Petition for Review

P114,379,790.80

Per Schedule of Input VAT

114,379,790.63 0.17

Valid Input VAT

P1 07,260,401.03 A portion of the substantiated input VAT of P107,260,401.03 shall be applied against petitioner's reported output VAT liability of P72,999.2625• Hence, only the remaining input VAT of P107,187,401.77, as computed below, can be attributed to petitioner's zero-rated sales for the four quarters of 2004 in the amount of P12,452,4 72,709.40.

Valid Input VAT

P107,260,401 .03

Less: Output VAT

72,999.26 Input VAT attributable to zero-rated sales P107, 187,401.77 Although petitioner carried over the subject claim to the succeeding quarters until the fourth quarter of 200526, the same was not applied against any output VAT. Moreover, the subject claim was included in the amount of P194,516,042.40 deducted

as "Any VAT Refund/TCC Claimed"27

from the total available input tax of P209,644,368.4928 as of the fourth quarter of 2005. In other words, the subject claim no longer formed part of the excess input VAT of P5,570,968.2929 as of the fourth quarter of 2005 which was carried over to the succeeding first quarter of 2006 as

"Transitional Input Tax"

30 •

I

25 Exhibits "QQ", "RR", and "55" 26 Exhibits "J" "K" " L" and " N" 27 Exhibit "N",' line,23D and Exhibit "0 ", page 6 28 Exhibit "N" line 22 29 Exhibit " N"; line 29 30 Exhibit "YY", line 20C 11 4

As to the last requisite, petitioner's claim was timely filed within the two-year prescriptive period. The reckoning of the two-year prescriptive period for the filing of a claim for VAT refund starts from the date of filing of the corresponding Quarterly VAT Return31 • The earliest quarter covered by the subject claim is the quarter ending March 31, 2004 for which petitioner filed its VAT Return on April 26, 2004. 32 Counting from this date, petitioner had until April 26, 2006 within which to file its claim administratively and judicially.

Thus, the administrative claim filed on December 19, 200533 as well as the Petition for Review filed on April 21, 2006 fall within the two-year prescriptive period.

Moreover, respondent's contention that this Court has no jurisdiction to take cognizance of the instant case due to petitioner's filing of the petition before the lapse of the one hundred twenty (120) days provided under Section 112(D) of the NIRC of 1997, as amended, is bereft of merit. Section 112(D) of the NIRC of 1997, as amended, providing for the 120-day period must be read in conjunction with Section 229 of the same law, which are hereunder quoted for ready reference:

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

XXX

(D) 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 Subsections (A) and (B) 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 31 Atlas Consolidated Mining and Development Corporation vs. Commissioner of Internal Revenue, G.R. Nos. 141104 and 148763, June 8, 2007

I

32 Exhibit "G-1"

33 Exhibit " B-1"

11 ~ may, within thirty (30) days from the receipt of the decision denying the claim or after the expiration of the one hundred twenty-day period, appeal the decision or the unacted claim with the Court of Tax Appeals. II (Emphasis supplied) "SEC. 229. Recovery of Tax Erroneously or Illegally Collected. -

XXX

In any case, no such suit or proceedings shall be filed after the expiration of two (2) years from the date of payment of the tax or penalty regardless of any supervening cause that may arise after payment;

Provide~

however,

That

the Commissioner may, even without a written claim therefor, refund or credit any tax, where on the face of the return upon which payment was made, such payment appears clearly to have been erroneously paid. II (Emphasis supplied) When the two-year period is about to prescribe and the claim for refund with the Commissioner of Internal Revenue has not been acted upon, the taxpayer should file a Petition for Review with the Court of Tax Appeals within the said two-year period; otherwise, if the decision of the Commissioner is adverse to the taxpayer and it was made after the 2-year period, he can no longer appeal the same to the Court of Tax Appeals. 34 Clearly, the 120 days given to the Commissioner within which to act upon the application, and the thirty (30) days within which to elevate the case to this Court, must be made within the two-year prescriptive period. Therefore, as long as petitioner's administrative claim is filed prior to the filing of its judicial case, and both within the two-year prescriptive period, this Court has jurisdiction to take cognizance of the claim.

WHEREFORE, premises considered, petitioner's claim for refund or issuance of tax credit certificate is hereby PARTIALLY GRANTED. Accordingly, respondent is 34 Commissioner of Internal Revenue vs. Dash Engineering Philippines, Inc., CTA EB Case No. 357, July 17, 2008, citing Commissioner of Internal Revenue vs. Hitachi Computer Products (Asia) Corporation, CA-G.R. SP No. 63340, febru''Y 7, 2002

I

115 hereby ORDERED TO REFUND or TO ISSUE A TAX CREDIT CERTIFICATE in favor of petitioner in the reduced amount of P107,187,401.77, representing unutilized excess input VAT attributable to its effectively zero-rated sales to NPC for the four quarters of taxable year 2004.

SO ORDERED.

WE CONCUR:

( With Concurring and Dissenting Opinion )

ERNESTO D. ACOSTA

Presiding Justice

CAESA~OVA

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 assigned to the writer of the opinion of the Court's Division. L- ~ . o~ ERNESTO D. ACOSTA

Presiding Justice

Chairperson, First Division 117