Case Summary (G.R. No. 196028)
Procedural History
Respondent filed quarterly VAT returns and administrative claims for refund or issuance of tax credit certificate for unutilized input Value-Added Tax (VAT) attributable to its zero-rated sales to the National Irrigation Administration (NIA) for 2008. The administrative claims, covering all four quarters, totaled PHP 20,063,676.24. Petitioner, as CIR, did not act on these claims within the statutory period, prompting respondent to file two consolidated petitions for review with the Court of Tax Appeals (CTA). The CTA Second Division partially granted the claim in the amount of PHP 19,219,165.31. The CTA En Banc affirmed this decision and denied the Commissioner's Motion for Reconsideration. The petitioner then appealed to the Supreme Court via petition for review on certiorari.
Taxability of Respondent’s Sales
The CTA held that the sales of electricity generated by the respondent through renewable energy sources to the National Irrigation Administration are VAT zero-rated under Section 108(B)(7) of the Tax Code, as amended. Respondent’s operations and sales fell squarely within the category of zero-rated transactions, which the petitioner did not contest.
Timeliness of Administrative and Judicial Claims
Under Section 112 of the Tax Code (pre-TRAIN Law amendments), a VAT-registered person with zero-rated sales must:
- File a claim for refund or tax credit within two years after the close of the taxable quarter the sales were made.
- The Commissioner of Internal Revenue has 120 days from the submission of complete documents to decide on the claim.
- In case of denial or inaction by the Commissioner, the taxpayer may appeal to the CTA within 30 days from receipt of decision or expiration of the 120-day period.
Respondent filed its administrative claims within the two-year prescribed period. The 120-day period was duly counted from the dates the administrative claims were filed, not from the submission of every document demanded by the BIR. Respondent also timely filed the judicial claims within 30 days after the lapse of the Commissioner’s 120-day review period.
Definition of “Complete Documents” and Commencement of the 120-Day Period
The petitioner argued that the 120-day period for the Commissioner’s action only commences after the taxpayer submits all supporting documents required under Revenue Memorandum Order No. 53-98, which petitioner contended respondent failed to do, rendering the judicial claim premature.
The Supreme Court clarified that the “complete documents” refer to those documents the taxpayer deems necessary to support its claim, not an exhaustive list dictated by the BIR. The CTA jurisprudence, cited and adopted by the Supreme Court, establishes that:
- The submission of documents lies within the discretion of the taxpayer.
- The 120-day period to act on the refund claim starts from the filing of the application itself as determined by the taxpayer’s submission, not from the completion of every document a BIR official may request.
- This interpretation prevents the BIR from indefinitely delaying action and prejudicing taxpayers.
Petitioner’s insistence on rigid adherence to RMO 53-98 requirements as a precondition to starting the 120-day period was rejected due to its procedural and practical unfairness.
Effect of Amended Claim on the 120-Day Period
Respondent amended and slightly reduced its claim but used the same supporting documents as in the original filing. Such a reduction was not considered a new claim requiring the resetting of the 120-day period. Therefore, the original submission date controlled.
Presentation of Evidence Before the Court of Tax Appeals
The tax law allows the CTA to entertain new or additional evidence not submitted during the administrative claim with the BIR, since judicial claims before the CTA are de novo proceedings. This prevents taxpayer claims from becoming futile if the BIR fails to act or denies claims without proper resolution.
In this case, the petitioner did not require respondent to submit further documentation nor did it issue a formal decision denying the administrative claims. As such, respondent’s elevation of the case to the CTA was proper and timely.
Effect of BIR Ruling No. DA-489-03 on Prematurity Doctrine
Even if respondent had not complied strictly with the 120-day waiting period, the claim would not be premature given the jurisprudential exception established by the Supreme Court in Commissioner of Internal Revenue v. San Roque and applied in CE Luzon Geothermal Power Co. v. CIR. The BIR Ruling No. DA-489-03 encouraged taxpayers to file judicial claims before lapse of the 120-day period, an erroneous interpretation later reversed by the Court. Taxpayers who filed relying on this ruling are shielded from dismissal due to prematurity.
Factual Findings on Claim Substantiation
Whether respondent sufficiently substantiated its claim for refund is a question of fact. The CTA, as the specialized court for tax matters, found that respondent adequately proved its entitlement to refund or issuance of a tax credit certificate for input VAT amounting to PHP 19,219,165.31. Its factual
Case Syllabus (G.R. No. 196028)
Background and Parties Involved
- The petitioner is the Commissioner of Internal Revenue (CIR), who holds the authority to act on claims for refund or issuance of tax credit certificates as provided by law.
- The respondent, CE Casecnan Water and Energy Company, Inc., is a domestic corporation incorporated on September 21, 1994, engaged primarily in the design, development, construction, financing, ownership, and operation of a combined irrigation and hydroelectric power project in Central Luzon.
- The respondent is an accredited Private Sector Generation Facility by the Department of Energy with DOE Certificate No. 95-07-12 and holds a Certificate of Compliance from the Energy Regulatory Commission.
- The respondent is registered with the Bureau of Internal Revenue (BIR) as a Value-Added Tax (VAT) taxpayer.
Procedural History and Claims
- The respondent filed quarterly VAT returns for the taxable year 2008 and later filed administrative claims for refund or issuance of a tax credit certificate for unutilized input VAT payments attributable to zero-rated sales to the National Irrigation Administration (NIA).
- The total amount claimed for refund was PHP 20,063,676.24, with initial administrative claims filed in November 2009 and February 2010.
- After alleged inaction by the CIR on these claims, the respondent filed separate petitions for review with the Court of Tax Appeals (CTA) Division, later consolidated.
- The CTA Second Division partially granted the refund in the amount of PHP 19,219,165.31.
- The Commissioner of Internal Revenue filed a motion for reconsideration, which was denied.
- The CTA En Banc affirmed the decision and resolution in toto.
- The petition before the Supreme Court followed, questioning procedural and substantive issues regarding the refund claims and the sufficiency of documents.
Legal Issues Presented
- Whether the petition filed by the CIR suffers from a technical defect that warrants outright dismissal.
- Whether the CTA En Banc committed reversible error in affirming the CTA Division’s decision granting partial refund.
- Whether respondent’s judicial claims for refund were prematurely filed due to alleged insufficiency of supporting documents and alleged failure to observe the 120-day period under Section 112(C) of the Tax Code.
- Whether the sale of generated power by respondent to NIA qualifies as zero-rated under the VAT provisions.
- The proper interpretation and computation of the 120-day period for the BIR Commissioner to act on refund claims under Section 112(C) of the Tax Code.
- The impact of failure to submit complete documents during the administrative claim on the timeliness and jurisdictional aspects of judicial claims.
- Whether the respondent duly substantiated its claim to the refund.
- The applicability of the doctrine in Commissioner of Internal Revenue v. San Roque exempting taxpayers from the strict observance of the 120-day rule when relying on BIR Ruling No. DA-489-03.
Facts as Established by the CTA
- Respondent is engaged in the generation and sale of power to NIA under an amended agreement.
- Respondent filed all administrative and judicial claims within the statutory two-year period after the close of the taxable quarters covered.
- The 120-day period for the BIR Commissioner to act on refund claims runs from the filing of the administrative claim, irrespective of whether all documentary requirements enumerated in Revenue Memorandu