G.R. No. 183880 - Commissioner of Internal Revenue vs. Toledo Power, Inc.

Toledo Power, Inc. (TPI) is a general partnership duly organized under Philippine laws, engaged primarily in power generation and sales.
TPI’s principal office is located in Sangi, Toledo City, Cebu, and it is registered with the Bureau of Internal Revenue (BIR) as a Value Added Tax (VAT) taxpayer with the TIN 003-883-626-VAT.
The company’s sales involve zero-rated transactions with several government and private entities such as the National Power Corporation (NPC), Cebu Electric Cooperative III (CEBECO), Atlas Consolidated Mining and Development Corporation, Atlas Fertilizer Corporation, and Cebu Industrial Park Development, Inc.

For the third quarter of 2001, TPI originally filed a Quarterly VAT Return on October 25, 2001, with declared figures that included:

Zero-rated Sales/Receipts of P143,000,032.37
Taxable Sales – Sale of Scrap/Others amounting to P378,651.74
Output Tax of P34,422.89
Input Tax on Domestic Purchases and Importation aggregating to Total Available Input Tax of P6,008,250.58
An Excess Input Tax & Overpayment of P5,973,827.69

An amended Quarterly VAT Return for the third quarter, filed on November 22, 2001, revised the input tax credit to reflect unutilized input VAT of P5,909,588.96.
For the fourth quarter of 2001, TPI filed a VAT Return on January 25, 2002, reflecting:

Thus, the aggregate unutilized input VAT for the two quarters amounted to P9,129,370.27, attributable to TPI’s zero-rated sales.

On September 30, 2003, TPI filed an administrative claim for refund or for the issuance of a tax credit certificate with the appropriate BIR Revenue District Office.
The claim covered both the third and fourth quarters of 2001, seeking the total unutilized input VAT credits amounting to P9,129,370.27.
In order to preserve its right to a judicial remedy (given the running two-year prescriptive period under Section 112(D) of the NIRC and corresponding Revenue Regulations), TPI elevated its claim by filing a Petition for Review.
Separate petitions were filed for the refund claims: one on October 24, 2003 (covering the third quarter) and another on January 22, 2004 (covering the fourth quarter).
TPI subsequently filed a Motion for Consolidation of these cases (CTA Case Nos. 6805 and 6851), which was granted, thereby merging the circumstances and issues for adjudication.

TPI presented testimonial and documentary evidence, including the relevant VAT invoices/official receipts marked with the word “zero-rated.”
The CIR, on the other hand, did not produce any evidence and later filed motions for reconsideration which were denied.
The CTA First Division initially granted TPI’s refund claim, computing the refundable input VAT at P8,553,050.44 after adjustments for disallowed input VAT and proportional allocation based on substantiated zero-rated sales.
On appeal, the CTA En Banc modified this decision—after re-examining the records—to recognize only P248,989,191.87 as fully substantiated zero-rated sales (from an alleged total amount of P270,259,752.81).
Consequently, the refund was recalculated at P8,088,151.07, and the petition for review en banc was denied for lack of merit regarding the third quarter, while the fourth quarter claim was partially granted.

TPI’s submitted VAT invoices bore the words “zero-rated” (though merely stamped rather than pre-printed), which was central to establishing its compliance with the invoicing requirements under Sections 113(A) and 237 of the Tax Code as well as Revenue Regulations No. 7-95.
The CTA’s findings, which upheld that such stamping was sufficient to comply with the mandatory requirements for zero-rated sales documentation, played an important role in the final determination.

Whether TPI complied with the mandatory two-part (120-day administrative decision period plus a subsequent 30-day judicial appeal period) requirements under Section 112(C) of the Tax Code for claiming a refund or issuance of a tax credit certificate.
Whether the filing of TPI’s judicial claims before the expiry of the 120-day period constituted a premature or invalid filing, particularly for the refund claim related to the third quarter of 2001.

Whether TPI sufficiently complied with the requisite invoicing requirements under the Tax Code (Sections 113(A), 237 and the applicable Revenue Regulations) by having its official receipts/invoices marked with “zero-rated.”
Whether the manner in which TPI’s VAT invoices were marked (stamped rather than pre-printed) affected its eligibility to claim the unutilized input VAT.

The correct computation of the refund or tax credit certificate, particularly the proportional allocation based on substantiated zero-rated sales versus total zero-rated sales.
How the re-examination of records by the CTA En Banc, resulting in a revised substantiated zero-rated sales amount, impacted the final calculation of the refund.

Whether the CTA (both the First Division and En Banc) properly exercised its jurisdiction in reviewing TPI’s administrative claim for refund or issuance of a tax credit certificate.
Whether the CTA erred in its decision by allowing or disallowing portions of TPI’s claim based on the procedural and documentary requirements established by law.