Case Summary (G.R. No. 25375)
Procedural History
The CTA Division denied the refund on March 10, 2008, citing Section 106(A)(2)(a)(5) of the 1997 NIRC, Article 77(2) of the Omnibus Investment Code, the Cross Border Doctrine, Toshiba Information Equipment (Phils.) Inc. v. CIR, and RMC No. 42-03. Both the CTA Division and En Banc denied subsequent motions for reconsideration, leading to the Supreme Court appeal.
Jurisdiction Over Premature Filing
Despite the petitioner’s failure to await the 120-day BIR action period under NIRC Section 112(D), the petition was entertained based on BIR Ruling No. DA-489-03 (2003), which permitted CTA invocation within the two-year refund‐claim window. This exception, reaffirmed in Silicon Philippines Inc. v. CIR, conferred jurisdiction despite the premature filing.
Issue
Whether a VAT‐registered enterprise located within an Ecozone may claim input tax refunds for purchases made prior to its PEZA registration.
VAT Treatment of PEZA Enterprises Before RMC 74-99
Prior to October 1999, VAT liability of PEZA‐registered enterprises hinged on chosen fiscal incentives under RA 7916: electing the 5% gross‐income tax rate rendered the enterprise VAT‐exempt; availing the income tax holiday under EO 226 imposed 10% VAT (now 12%). Under that regime, Toshiba allowed input VAT refunds for a PEZA‐registered claimant.
RMC 74-99 and the Cross Border Doctrine
RMC 74-99 (Oct. 15, 1999) abolished the old incentive‐based distinction, declaring zero‐percent VAT on sales by VAT‐registered suppliers from the Customs Territory to any Ecozone enterprise. Section 8 of RA 7916 treats Ecozones as separate customs territories, invoking the Cross Border Doctrine and Destination Principle: transactions from customs territory into an Ecozone are exports subject to 0% VAT, precluding input tax accrual.
Application to Petitioner’s Claim
Coral Bay’s plant, situated within the Rio Tuba Ecozone, constituted a separate customs territory. Its domestic purchases destined for use inside the Ecozone were deemed zero‐rated exports; no input VAT was payable or refundable against the Government. Under RMC 42-03, any output VAT wrongly
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Antecedents
- Petitioner is a domestic corporation engaged in the manufacture of nickel and cobalt mixed sulphide, VAT-registered with the Bureau of Internal Revenue (BIR).
- On December 27, 2002, it secured PEZA Certificate of Registration as an Ecozone Export Enterprise at the Rio Tuba Export Processing Zone.
- August 5, 2003: Filed Amended VAT Return declaring P50,124,086.75 of unutilized input tax for the third and fourth quarters of 2002.
- June 14, 2004: Submitted Application for Tax Credits/Refund (BIR Form 1914) to Revenue District Office No. 36 in Palawan with supporting documents.
- July 8, 2004: Elevated claim to the Court of Tax Appeals (CTA Division, Case No. 7022) for alleged inaction by the Commissioner.
- March 10, 2008: CTA Division denied the refund, citing NIRC Section 106(A)(2)(a)(5), Omnibus Investment Code Article 77(2), the Cross Border Doctrine, CIR v. Toshiba Information Equipment (Phils.) Inc., and RMC No. 42-03.
- July 2, 2008: Motion for Reconsideration denied by CTA Division.
- May 29, 2009: CTA En Banc (EB Case No. 403) likewise denied the petition;