G.R. No. 181136 - Western Mindanao Power Corp. vs. Commissioner of Internal Revenue

Western Mindanao Power Corporation (WMPC) is a domestic corporation engaged in the production and sale of electricity.
WMPC sells electricity exclusively to the National Power Corporation (NPC), which is exempt from various taxes by virtue of Section 13 of R.A. No. 6395.
Based on Section 108(B) of the National Internal Revenue Code (NIRC), WMPC claimed that its power generation services for NPC were zero-rated.

WMPC, being a VAT-registered taxpayer, applied for a tax credit refund for its unutilized input VAT.
The applications were filed on 20 June 2000 and 13 June 2001 for the applicable taxable quarters of 1999 and 2000, amounting to P3,675,026.67 and P5,649,256.81 respectively.
Due to inaction by the Commissioner of Internal Revenue (CIR), WMPC filed a Petition for Review with the Court of Tax Appeals (CTA) on 28 September 2001 to secure its tax credit certificates.

The CIR contested WMPC’s claim on the ground that the official receipts issued did not contain the phrase “zero-rated” as mandated by Section 4.108-1 of Revenue Regulations No. 7-95 (RR 7-95).
WMPC argued that such invoicing and accounting requirements were mere procedural compliance and not indispensable to establishing the refund claim.
It further contended that the explicit requirement to print “zero-rated sale” came only after the amendment by R.A. 9337 effective 1 July 2005, and hence could not be applied retroactively.

The CTA Second Division dismissed WMPC’s petition on 1 September 2006, referencing that the Quarterly VAT Returns did not reflect any zero-rated (or effectively zero-rated) sales, and the official receipts lacked the requisite “zero-rated” marking.
WMPC’s motion for reconsideration was denied on 30 January 2007.
WMPC subsequently appealed to the CTA En Banc, which, on 15 November 2007, reaffirmed the dismissal citing insufficient evidence of zero-rated sales.
A Concurring and Dissenting Opinion by Presiding Justice Ernesto Acosta noted that while the absence of the “zero-rated” phrase might not affect validity in itself, the failure to adequately prove the input taxes paid rendered the claim unsubstantiated.

WMPC maintained that the invoicing requirements as set in RR 7-95 could not be construed as an absolute bar to refund claims, especially since the statutory provision for “zero-rated sale” on receipts appeared later in R.A. 9337.
The CIR and the lower courts maintained that compliance with the invoicing rules was essential for substantiating the claim for a tax refund or credit.

Whether the absence of the words “zero-rated” on the official receipts and VAT invoices constitutes a failure to satisfy the documentary and evidentiary requirements for a refund or tax credit claim under the NIRC and RR 7-95.
Whether RR 7-95’s mandatory requirement for printing “zero-rated sale” on the invoices, even if introduced earlier than the amendment in R.A. 9337, should be applied to refund claims filed before the effective date of R.A. 9337.
Whether WMPC is entitled to a refund or tax credit on its input VAT notwithstanding the alleged non-compliance with the specific invoicing and accounting requirements mandated by the revenue regulations.