1. Nowhere does it appear in Sec. 112 (A) in relation to Sec.

106 (A)(2)
(a)(1) of the 1997 Tax Code that failure to issue invoices imprinted
with zero-rated will automatically result in the denial of a valid claim
for refund, and that failure to comply with invoicing requirements in
Sec. 113 and 237 renders the taxpayer accountable only for statutory
penalties under Sec. 264.
2. RR 7-951 and Revenue Memo Circ. 42-2003 conflict with the Tax
Code since the latter does not call for automatic denial of a valid
claim. Thus, they are invalid.
3. No prejudice can result to the government since its clients for its
zero-rated transactions were NRFCs not covered by VAT.
4. It has presented more than a mere preponderance of evidence,
despite the failure to comply with the invoicing requirements.

J.R.A PHILIPPINES, INC. vs. COMMISSIONER OF INTERNAL

REVENUE. | C.T.A EB No. 128 (C.T.A. Case No. 6454) | January 15,
2007 | EN BANC (MER)

CIR argues that:

1 In order for export sales to be considered zero-rated for VAT
purposes, JRA must establish that it has complied with the
substantiation requirements under Sec. 113 (A)2 in relation to Sec.
2373 of the Tax Code as well as Sec. 4.108-1 of RR 7-954. Failure to
do so is fatal to the claim for refund.

DOCTRINE:
To claim a tax refund on zero-rated sales, the claimant must comply with
all invoicing requirements to prove its sales are in fact zero-rated sales.
These include the requirements under the NIRC as well as those in its
RRs. Failure to do so is fatal to the claim for refund.

1 Consolidated VAT Regulations

2
xxx

Sec. 113. Invoicing and Accounting Requirements for VAT-Registered Persons. (A) Invoicing Requirements - A VAT-registered person shall, for every sale, issue and invoice or receipt. In addition to
the information required under Sec. 237, the following shall be indicated in the invoice or receipt:A statement that
the seller is a VAT-registered person, followed by his TIN;

Sec. 237. Issuance of Receipts of Sales of Commercial Invoices. - xxx

That where the purchaser is a VAT registered person, in addition to the information herein required, the invoice or receipt
shall further show the TIN of the purchases xxx

SUMMARY:
JRA, a VAT and PEZA registered domestic corporation, is claiming a
refund of their input VAT representing its domestic purchases of goods &
services allegedly directing attributable to its zero-rated sales. However,
it failed to issue invoices imprinted with the word zero-rated, a
statement that the seller is a VAT-registered person, and its TIN on the
invoices/receipts, as required by the NIRC and RR invoicing requirement
provisions. CTA held that such requirements are mandatory, and failure
to comply necessarily results in the denial of the claim for refund.

FACTS:
JRA is a domestic corporation licensed to engage in the business of
manufacturing and selling, on a wholesale basis, apparel of different
fabrics. JRA is also registered with the BIR as a VAT taxpayer as well as
with the PEZA.
For the taxable year 2000, JRA filed its VAT returns with a total input VAT
of P8, 228, 276.02 and is now claiming a refund of such, representing its
domestic purchases of goods & services allegedly directly attributable to
its zero-rated sales. The 2nd Division of the CTA denied its petition for
refund as well as its petition for review to suspend the running of the
prescriptive period and preserve its right to claim the refund.
The CIR 2nd Division held that JRA failed to substantiate its claim with
sufficient evidence, as its official receipts and invoices were in violation
of the requirements, since they did not have the imprinted words zerorated,VAT, and JRAs TIN. The invoices also had no authority to print
from the BIR, and so the said documents cannot be considered valid
proof of its zero-rated sales.
In the case at bar, JRA claims that:

Sec. 113) of the Tax Code, recognizing that there are other sources of
requirements, such as RRs.
The imprinting of the word zero-rated is necessary to distinguish sales
subject to 10% VAT, those that are subject to 0% VAT, and exempt sales.
Rationale of mandatory imprinting of zero-rated:
If the invoice or official receipt was not imprinted, there is a danger that
the purchaser of the goods or services may be able to claim input tax of
the sale to it by the taxpayer of the goods or services, notwithstanding
the fact that no VAT was actually paid on such since the taxpayer is
zero-rated.
Re: VAT and TIN:
The sales invoices issued by JRA do not show its being a VAT-registered
taxpayer due to the absence of TIN-V on some invoices. Sec. 113 clearly
requires such statement.
Taxpayers have the burden of proving compliance with the mandatory
provisions of the NIRC and its IRRs. Tax refunds are in the nature of tax
exemptions and as such, must be strictly construed against the claimant.
Since the sales invoices do not comply with the requirements, JRAs
claim cannot be granted because of failure to prove that its export sales
are indeed zero-rated.
Wherefore, the petition for review is denied for lack of merit.
CONCURRING AND DISSENTING OPINION: (Ernesto D. Acosta)
Acosta assents to the extent that the imprinting of the words TIN and
VAT is significant for validity. However, he dissents in that neglect to
imprint zero-rated on the invoices will outright render them invalid and
cause the denial of the refund.
From Sec. 113 and 237, TIN and VAT are required, but nowhere does
zero-rated appear in the requirements. The only provision that perhaps
requires it is Sec. 4.108.1 of RR 7-95, which is a mere regulation to
implement a very clear and specific law. Absence of zero-rated makes
JRA merely liable for penalties under Sec. 264. Further, sales invoices or
receipts are not the sole evidentiary requirement for a claim for refund,
as held in previous cases. Thus, failure to imprint zero-rated on
invoices will not cause the automatic rejection of JRAs claim, especially

5. No prejudice can result to the government does not excuse JRA from
complying.
6. Airway bills, export declarations and bank certifications of foreign
currency remittances alone are not sufficient to prove export sales.
They must come with duly-registered VAT invoices and receipts.
ISSUE/S - RULING:
WON JRA is entitled to refund - NO.
RATIO:
As a rule, all VAT-registered enterprises engaged in zero-rated
transactions are allowed to claim a refund of their creditable input tax
due, to the extent that such has not been applied against output tax
within a period of 2 years after the close of the taxable quarter pursuant
to Sec. 112 (A) of the 1997 Tax Code.
In Taganito Mining Corporation v. CIR, the CTA ruled that failure to issue
invoices with the imprint zero-rated and non-compliance with the
invoicing requirements will necessarily result in the denial for a claim
of refund, and the Court finds no reason to deviate from their ruling.
Re: zero-rated:
The 2nd Division has ruled that RR-7-95 implementing the NIRC
provision is mandatory, as the word shall is used.
The SC has also held in Atlas Consolidated Mining & Development
Corp. v. CIR that it is the duty of the seller to comply with the invoicing
and accounting requirements laid down in, among others, Sec. 108 (now

4
2.
3.
4.
1.
5.
xxx

Sec. 4.108-1. Invoicing Requirements. - All VAT-registered persons shall, for every sale or lease of goods or
properties or services, issue duly registered receipts or sales or commercial invoices which must show:the name,
TIN and address of seller;
the date of transaction;
quantity, unit cost and description of merchandise or nature of service;
the name, TIN, business style, if any, and address of the VAT-registered purchaser, customer or client;
the words zero-rated imprinted on the invoice covering zero-rated sales; and
the invoice value or consideration

if there are other pieces of evidence proving the transactions and VAT
status.