Case Summary (G.R. No. 181858)
Background Facts
On December 4, 2001, Kepco filed an application for zero-rated sales with Revenue District Office No. 54 of the Bureau of Internal Revenue (BIR), which was granted under VAT Ruling 64-01. Consequently, Kepco reported zero-rated sales for 2002 amounting to approximately ₱3.285 billion in its quarterly VAT returns. Alongside, it paid an input VAT of about ₱11.71 million, attributing this to its zero-rated sales.
Claim for Tax Refund
On April 20, 2004, Kepco submitted a claim for a refund concerning unutilized input VAT attributed to its zero-rated sales in 2002. Two days later, it also filed a petition for review before the CTA, which was docketed as CTA Case No. 6965.
Respondent's Position
The Commissioner of Internal Revenue (CIR) contended that tax refund claims require strict adherence to substantiation requirements and that the burden of proof lies with the taxpayer. The CIR argued that Kepco failed to prove its entitlement to a refund, resulting in the denial of a portion of its claim.
CTA Decisions
Initially, the CTA's Second Division found that Kepco substantiated only around 44.19% of its claimed zero-rated sales. This led to a partial grant of Kepco's claim for a refund, amounting to ₱2,890,005.96, while disallowing approximately ₱5.17 million due to insufficient documentation related to the invoices and receipts presented.
Issues on Appeal
Kepco, dissatisfied with the CTA's decision, sought a review from the CTA En Banc, arguing that further portions of its claimed refunds should be granted. The CTA En Banc upheld the Second Division's decision and reiterated that compliance with invoicing requirements under Revenue Regulations was essential for a valid refund claim.
Legal Framework
The applicable law includes provisions from the 1997 National Internal Revenue Code (NIRC) and related Revenue Regulations. A key consideration is whether the lack of certain wording on invoices constitutes valid grounds for the denial of a tax refund claim. Notably, Section 4.108-1 of Revenue Regulation No. 7-95 delineates the invoicing requirements for VAT purposes and stipulates that the word "zero-rated" must appear on relevant invoices.
Supreme Court's Ruling
The Supreme Court articulated that Kepco failed to comply with the invoicing requirements by not printing the term "zero-rated" on its VAT invoices. The Court reaffirmed the pivotal role of substantiation requirements in tax refund claims and aligned its decision with precedent established in previous rulings.
It was concluded that while tax refunds can be p
...continue readingCase Syllabus (G.R. No. 181858)
Case Overview
- The case concerns a petition for review on certiorari filed by KEPCO Philippines Corporation (Kepco) seeking to reverse the February 20, 2008 Decision of the Court of Tax Appeals En Banc (CTA).
- The CTA ruled that Kepco must comply with substantiation requirements under the appropriate Revenue Regulations to be entitled to a refund or issuance of a tax credit certificate for unutilized input VAT related to zero-rated sales for the taxable year 2002.
Parties Involved
- Petitioner: KEPCO Philippines Corporation (Kepco), a VAT-registered independent power producer selling electricity exclusively to the National Power Corporation (NPC).
- Respondent: Commissioner of Internal Revenue (CIR).
Background of the Case
- Kepco filed an application for zero-rated sales with the BIR, which was approved on December 4, 2001, under VAT Ruling 64-01.
- For the taxable year 2002, Kepco declared zero-rated sales amounting to P3,285,308,055.85 through four Quarterly VAT Returns.
- Kepco reported input VAT payments totaling P11,710,868.86 related to its zero-rated sales.
Claims and Filings
- On April 20, 2004, Kepco filed a claim for tax refund with the CIR for unutilized input VAT payments attributable to zero-rated transactions for 2002.
- Two days later, Kepco filed a petition for review with the CTA (C.T.A. Case No. 6965).
Respondent's Position
- The CIR contended that claims for refunds should be strictly construed against taxpayers, akin to tax exemptions.
- The CIR asserted that the burden of proof lies with the taxpayer (K