Title
Sitel Philippines Corp. vs. Commissioner of Internal Revenue
Case
G.R. No. 201326
Decision Date
Feb 8, 2017
Sitel sought a VAT refund for 2004; court reinstated P11.1M refund but denied additional claims due to insufficient proof of zero-rated sales and non-compliant invoices.
call center service provider
claim for refund
invoicing requirements
A

Case Summary (G.R. No. 201326)

Factual Background

Sitel is a Philippine corporation engaged in providing call center services to domestic and offshore clients and was registered as a VAT taxpayer and as a pioneer IT service firm with the Board of Investments. For taxable year 2004 Sitel filed its quarterly VAT returns for the four quarters on April 26, July 26, October 25, 2004 and January 25, 2005, respectively, and later filed amended returns. Sitel claimed unutilized input VAT attributable to zero-rated sales and to purchases or importations of capital goods for 2004 in the aggregate amount of P23,093,899.59. Sitel filed formal administrative claims for refund or issuance of tax credit with the One-Stop Shop Inter-Agency Tax Credit and Duty Drawback Center on March 28, 2006 and filed a judicial claim before the CTA on March 30, 2006.

Proceedings Before the CTA Division

The CTA First Division conducted trial and on October 21, 2009 rendered a Decision partially granting Sitel’s claim. The Division ordered refund or issuance of a tax credit certificate in the reduced amount of P11,155,276.59, representing unutilized input VAT on purchases/importations of capital goods after disallowing certain amounts. The Division denied Sitel’s P7,170,276.02 claim for input VAT attributable to zero-rated sales for failure to prove that the recipients of its services were doing business outside the Philippines, relying on Burmeister. The Division also disallowed P2,668,852.55 as input VAT on capital goods for noncompliance with invoicing requirements, specifically the absence of printed TIN-VAT on supporting invoices and receipts. Sitel’s motions for reconsideration were denied and Sitel appealed to the CTA En Banc.

Ruling of the CTA En Banc

The CTA En Banc reversed the Division and dismissed Sitel’s petition as prematurely filed. Citing Aichi, the En Banc held that the 120-day period afforded the CIR to act on an administrative claim under Section 112 is mandatory and jurisdictional; a judicial claim filed before the lapse of that period deprived the CTA of jurisdiction. Because Sitel filed its judicial claim without awaiting the expiration of the 120-day period, the En Banc ruled that no decision or inaction of the CIR had occurred and denied the refund claim in full as premature. Sitel’s motion for reconsideration before the CTA En Banc was denied.

Issues Presented to the Supreme Court

Sitel principally raised whether Aichi may be applied retroactively to its 2004 claim; whether the CTA En Banc could validly revoke the portion of the refund already granted by the Division after trial and without appeal by the CIR; and whether Sitel was entitled to refund or tax credit of unutilized input VAT for the disputed amounts aggregating P20,994,405.16, including the portions denied by the Division.

Parties’ Contentions in the Supreme Court

Sitel contended that its judicial claim was timely filed under this Court’s subsequent rulings in San Roque and related authorities because it filed during the period when BIR Ruling No. DA-489-03 permitted premature judicial filing, and thus the CTA En Banc erred in dismissing the petition. Sitel further argued that the Division’s award of P11,155,276.59 was final and executory, that the En Banc lacked power to withdraw that portion not appealed, and that the Court should resolve on the merits the remaining disallowed amounts and grant additional refund in the amount of P9,839,128.57. The CIR filed a comment in opposition.

Supreme Court’s Analysis on Timeliness and Jurisdiction

The Court analyzed Section 112(C) and the jurisprudence. It reaffirmed that under Aichi the 120-day period for the CIR to act on an administrative claim is mandatory and jurisdictional, and that filing a judicial claim before the lapse of that period is generally premature. The Court then applied the exception recognized in San Roque: where the CIR, through a general interpretative ruling such as BIR Ruling No. DA-489-03, misled taxpayers into prematurely filing judicial claims, equitable estoppel precludes the CIR from later challenging CTA jurisdiction for those prematurely filed claims filed between December 10, 2003 and October 6, 2010. Because Sitel filed its administrative and judicial claims on March 28 and March 30, 2006, respectively, the Court held that Sitel’s judicial claim fell within the San Roque exception and was therefore deemed timely. The CTA En Banc therefore erred in dismissing the petition as premature.

Reinstatement of the CTA Division’s Award

Because the Division’s October 21, 2009 Decision granting refund in the amount of P11,155,276.59 was not appealed by the CIR to the CTA En Banc, the Supreme Court treated that portion as final and beyond fresh review. The Court reinstated the Division’s decision insofar as it ordered refund or issuance of a tax credit certificate in favor of Sitel in the amount of P11,155,276.59 representing unutilized input VAT on purchases/importations of capital goods for taxable year 2004.

Supreme Court’s Analysis on Zero-Rating Proof

The Court addressed the CTA Division’s denial of P7,170,276.02 for input VAT attributable to zero-rated sales. It reaffirmed the rule in Burmeister and Accenture that a taxpayer claiming zero-rating under Section 108(B)(2) must prove that the service recipient is not only a foreign corporation but is a nonresident foreign corporation doing business outside the Philippines. The Court observed that documentary evidence presented by Sitel — certifications, agreements, and evidence of inward remittances — established that clients were foreign but did not specifically prove continuity of commercial dealings or that those clients were doing business outside the Philippines. The Court therefore found no reason to disturb the Division’s factual finding and affirmed the denial of the P7,170,276.02 portion of the claim.

Supreme Court’s Analysis on Invoicing and Input Tax Requirements

The Court reviewed the Division’s disallowance of P2,668,852.55 as input VAT on capital goods for lack of VAT-compliant invoices. It reiterated that an input tax claim must be supported by a VAT invoice or official receipt issued in accordance with Section 113 and that Section 4.108-1 of RR 7-95 requires VAT-registered persons to print their TIN followed by the word “VAT” on invoices and receipts. Citing Western Mindanao Power Corp. and Kepco, the Court held that invoices or receipts not imprinted with TIN-VAT are not VAT invoices and do not give rise to creditable input VAT. Because Sitel’s supporting invoices bore pre-printed TIN-V instead of printed TIN-VAT and therefore did not strictly comply with the invoicing

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