G.R. No. 173120 - Spouses Yu Hwa Ping vs. Ayala Land, Inc.

The case is a petition for review on certiorari involving the Commissioner of Internal Revenue (petitioner) and Team Energy Corporation (respondent), formerly Mirant Pagbilao Corporation.
The dispute originates from a decision and subsequent resolutions by the Court of Tax Appeals (CTA) on the respondent’s claim for a refund or tax credit certificate for unutilized input VAT.
The chronological trajectory involves:

The initial CTA Decision issued on July 13, 2010 partially granting respondent’s petition and ordering the refund or issuance of a tax credit certificate amounting to P79,185,617.33.
A “Motion for Reconsideration” by petitioner resulting in an amended decision on November 26, 2010, which reversed the July 13, 2010 Decision and dismissed the petition for review as prematurely filed.
The filing of a Petition for Review before the CTA En Banc on December 17, 2010 by respondent, subsequent motions for reconsideration, and eventual resolutions by the CTA En Banc denying the respondent’s petition based on lack of merit.
The eventual intervention of the Supreme Court which granted respondent’s petition for review on certiorari on January 13, 2014, reversed the CTA En Banc’s decisions, and remanded the case for proper determination of the refundable amount.
The procedural furtherance that led to the CTA reinstating the July 13, 2010 Decision on May 29, 2015, followed by petitioner’s renewed motion for reconsideration, and the rendering of the CTA En Banc Decision on August 31, 2016, which denied the petitioner’s petition for review and affirmed the prior rulings.

Respondent is principally engaged in power generation and the sale of generated electricity to the National Power Corporation (NPC) under a Build, Operate, Transfer (BOT) scheme.
The respondent is registered as a VAT taxpayer and filed several VAT returns for the period covering January 1, 2005, to October 31, 2005, evidencing zero-rated sales for electricity supplied to NPC.
On December 20, 2006, petitioner (the CIR) filed an administrative claim for a cash refund or issuance of a tax credit certificate corresponding to the input VAT reported in those filings.
Alleged administrative deficiencies, such as non-submission of complete supporting documents, became a point of contention, with petitioner arguing that these failures rendered the judicial claim premature.

The respondent must secure a Certificate of Compliance (COC) from the Energy Regulatory Commission (ERC) before its sale of electricity can be considered zero-rated under the relevant law.
The absence of a COC disqualified the respondent from being classified as a generation company under the Electric Power Industry Reform Act (EPIRA), thereby precluding the VAT zero-rating benefit.
Furthermore, the respondent’s judicial claim for refund was premature as it did not exhaust its administrative remedies by failing to submit all the required supporting documents.

Its claim for refund is anchored on Section 108(B)(3) of the 1997 National Internal Revenue Code (NIRC), in relation to Section 13 of the NPC Charter, not on EPIRA.
Zero-rating of its electricity sales to NPC is justified solely on the basis of NPC’s tax-exempt status, rendering the regulatory requirements under EPIRA (including the issuance of a COC) inapplicable to its claim.
The administrative claim was effectively complete since the petitioner failed to notify it of any deficiency or require additional documents during the 120-day period allowed by law.

The respondent presented documentary and testimonial evidence in support of its claim, which included its VAT returns and supporting schedules reflecting zero-rated sales.
The petitioner, although having raised several defenses, did not effectuate a written notice requiring the submission of additional documents to substantiate administrative completeness.
The CTA En Banc and later the Supreme Court examined the procedural and substantive aspects of the claim, leading to varying decisions until the reinstatement of the July 13, 2010 Decision by the CTA and its affirmation by the CTA En Banc in the August 31, 2016 Decision.

Whether the respondent’s failure to present a Certificate of Compliance (COC) issued by the Energy Regulatory Commission (ERC) should disqualify its claim for a refund or issuance of a tax credit certificate for unutilized input VAT.

Is compliance with the ERC’s regulatory requirements under the Electric Power Industry Reform Act (EPIRA) a necessary prerequisite under Section 108(B)(3) of the Tax Code for VAT zero-rating?
Does the absence of a COC impact the qualification of the respondent’s electricity sales to NPC as zero-rated transactions given that NPC enjoys tax exemption?

Whether the judicial claim for refund filed by the respondent was premature due to its alleged failure to exhaust all administrative remedies, including the submission of all required supporting documents.

Did the Bureau of Internal Revenue (BIR) or petitioner provide the necessary written notice requiring the submission of additional documents for the administrative claim?
What is the effect of the petitioner’s inaction regarding the alleged incompleteness of the administrative documents on the validity of the judicial claim?

How should the provisions of Section 108(B)(3) of the Tax Code be interpreted in relation to the sales of electricity to an exempt entity (NPC) and the accompanying requirements for claiming a refund or tax credit?