G.R. No. 181858 - Kepco Philippines Corp. vs. Commissioner of Internal Revenue

Petitioner: KEPCO Philippines Corporation (Kepco), a VAT-registered independent power producer engaged in the business of generating electricity.
Respondent: Commissioner of Internal Revenue (CIR).

Kepco exclusively sold electricity to the National Power Corporation (NPC), an entity exempt from taxes under Section 13 of RA No. 6395.
On December 4, 2001, Kepco filed an application for zero-rated sales with the RDO No. 54 of the BIR, which was approved under VAT Ruling 64-01.
For taxable year 2002, Kepco filed four Quarterly VAT Returns declaring zero-rated sales totaling P3,285,308,055.85.

In the course of its transactions with NPC, Kepco claimed input VAT on its purchases, amounting to P11,710,868.86, attributing such tax to its zero-rated sales.
Kepco provided detailed documentation, including invoices, official receipts, and vouchers as evidence.
A court-commissioned Independent Certified Public Accountant (CPA) audited the bulk of documentary evidence to support the claim.

On April 20, 2004, Kepco filed a claim for tax refund before the CIR covering unutilized input VAT.
Two days later, on April 22, 2004, Kepco initiated a petition for review before the Court of Tax Appeals (CTA), docketed as C.T.A. Case No. 6965.
The CIR, in its Answer, argued that the refund claim was akin to a tax exemption and stressed that the substantiation of such claims rests on the taxpayer.

On February 26, 2007, the CTA Second Division ruled that only P1,451,788,865.52 out of the total declared zero-rated sales were properly substantiated.
Consequently, only 44.19% of the validly supported input VAT payments could be considered, leading to an allowable input VAT amount of P2,890,005.96.
The CTA Second Division disallowed a portion of the claimed input VAT (P5,170,914.20) on the ground that invoices or receipts lacked the proper “TIN-VAT” printed format, as mandated by the substantiation requirements.
Kepco’s move for partial reconsideration was denied on June 28, 2007.
On appeal to the CTA En Banc, Kepco argued for an additional refundable credit of P8,691,873.81 but the petition was dismissed on February 20, 2008, confirming that non-compliance with the invoicing substantiation requirements could not justify an increase in the refund.

The dispute centered on whether failure to have proper printed invoicing indicators (e.g., “TIN-VAT” and “zero-rated”) automatically invalidates a claim for input VAT refund.
The decision also reviewed the administrative rules and Revenue Regulations (specifically RR No. 7-95) and their relation to Sections 113 and 237 of the 1997 NIRC.
The Court referred to previous jurisprudence including the Panasonic Communications Imaging Corporation case and J.R.A. Philippines, Inc. v. Commissioner, clarifying the necessity of proper invoice/receipt formats.

Whether Kepco’s petition for review on certiorari under Rule 45 properly raised jurisdictional errors when its assignment of errors imputed grave abuse of discretion related to jurisdiction—an issue normally brought under a Rule 65 petition for certiorari.

Whether the failure to have invoices/official receipts printed with “TIN-VAT” and, by extension, the omission of “zero-rated” from such documents, violates the substantiation requirements necessary to claim a refund on unutilized input VAT.
Whether administrative regulations, specifically Section 4.108-1 of RR No. 7-95, unduly expand or modify the invoicing provisions of Sections 113 and 237 of the 1997 NIRC.

Whether the denial of refunds due to non-compliance with invoicing requirements is proper, given that tax refunds are in nature tax exemptions that, if loosely construed, could lead to a loss of government revenue.