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SECOND DIVISION Claiming that the input VAT it paid remained

unutilized or unapplied, on March 12, 1999 and July 20,


1999 petitioner Panasonic filed with the Bureau of
Internal Revenue (BIR) two separate applications for
PANASONIC COMMUNICATIONS G.R. No. 178090 refund or tax credit of what it paid. When the BIR did
IMAGING CORPORATION OF THE not act on the same, Panasonic filed on December 16,
PHILIPPINES (formerly MATSUSHITA 1999 a petition for review with the CTA, averring
BUSINESS MACHINE CORPORATION the inaction of the respondent Commissioner of Intern
OF THE PHILIPPINES), al Revenue (CIR) on its applications.
Petitioner, Present:
Carpio, J., Chairperson, After trial or on August 22, 2006 the CTAs
- versus - Brion, First Division rendered judgment,[3] denying the petition
Del Castillo, for lack of merit. The First Division said that, while
Abad, and petitioner Panasonics export sales were subject to 0%
Perez, JJ. VAT under Section 106(A)(2)(a)(1) of the 1997 NIRC,
COMMISSIONER OF INTERNAL the same did not qualify for zero-rating because the
REVENUE, Promulgated: word zero-rated was not printed on Panasonics export
Respondent. invoices. This omission, said the First Division, violates
February 8, 2010 the invoicing requirements of Section 4.108-1 of
x --------------------------------------------------------------------- Revenue Regulations (RR) 7-95.[4]
------------------ x
Its motion for reconsideration having been
denied, on January 5, 2007 petitioner Panasonic
DECISION appealed the First Divisions decision to the CTA en
banc. On May 23, 2007 the CTA en banc upheld the
ABAD, J.: First Divisions decision and resolution and dismissed
the petition. Panasonic filed a motion for
reconsideration of the en banc decision but this was
This petition for review puts in issue the May denied. Thus, petitioner filed the present petition in
23, 2007 Decision[1] of the Court of Tax Appeals accordance with R.A. 9282.[5]
(CTA) en banc in CTA EB 239, entitled Panasonic
Communications Imaging Corporation of the The Issue Presented
Philippines v. Commissioner of Internal
Revenue, which affirmed the denial of petitioners claim The sole issue presented in this case is
for refund. whether or not the CTA en banc correctly denied
petitioner Panasonics claim for refund of the VAT it
paid as a zero-rated taxpayer on the ground that its
sales invoices did not state on their faces that its sales
The Facts and the Case were zero-rated.

Petitioner Panasonic Communications The Courts Ruling


Imaging Corporation of the Philippines (Panasonic)
produces and exports plain paper copiers and their The VAT is a tax on consumption, an indirect
sub-assemblies, parts, and components. It is tax that the provider of goods or services may pass on
registered with the Board of Investments as a preferred to his customers. Under the VAT method of taxation,
pioneer enterprise under the Omnibus Investments which is invoice-based, an entity can subtract from the
Code of 1987. It is also a registered value-added tax VAT charged on its sales or outputs the VAT it paid on
(VAT) enterprise. its purchases, inputs and imports.[6] For example, when
a seller charges VAT on its sale, it issues an invoice to
From April 1 to September 30, 1998 and the buyer, indicating the amount of VAT he
from October 1, 1998 to March 31, 1999, petitioner charged. For his part, if the buyer is also a seller
Panasonic generated export sales amounting to subjected to the payment of VAT on his sales, he can
US$12,819,475.15 and US$11,859,489.78, use the invoice issued to him by his supplier to get a
respectively, for a total of US$24,678,964.93. Believing reduction of his own VAT liability. The difference in tax
that these export sales were zero-rated for VAT under shown on invoices passed and invoices received is the
Section 106(A)(2)(a)(1) of the 1997 National Internal tax paid to the government. In case the tax on invoices
Revenue Code as amended by Republic Act (R.A.) received exceeds that on invoices passed, a tax refund
8424 (1997 NIRC),[2] Panasonic paid input VAT may be claimed.
of P4,980,254.26 and P4,388,228.14 for the two
periods or a total of P9,368,482.40 attributable to its Under the 1997 NIRC, if at the end of a
zero-rated sales. taxable quarter the seller charges output taxes [7] equal
to the input taxes[8] that his suppliers passed on to him,
no payment is required of him. It is when his output applicable. Moreover, the case
taxes exceed his input taxes that he has to pay the shall be referred by the
excess to the BIR. If the input taxes exceed the output processing office to the
taxes, however, the excess payment shall be carried concerned BIR office for
over to the succeeding quarter or quarters. Should the verification of other tax liabilities
input taxes result from zero-rated or effectively zero- of the taxpayer.
rated transactions or from the acquisition of capital
goods, any excess over the output taxes shall instead Petitioner Panasonic points out, however, that
be refunded to the taxpayer.[9] in requiring the printing on its sales invoices of the word
zero-rated, the Secretary of Finance unduly expanded,
Zero-rated transactions generally refer to the amended, and modified by a mere regulation (Section
export sale of goods and services. The tax rate in this 4.108-1 of RR 7-95) the letter and spirit of Sections 113
case is set at zero. When applied to the tax base or the and 237 of the 1997 NIRC, prior to their amendment by
selling price of the goods or services sold, such zero R.A. 9337.[12] Panasonic argues that the 1997 NIRC,
rate results in no tax chargeable against the foreign which applied to its paymentsspecifically Sections 113
buyer or customer. But, although the seller in such and 237required the VAT-registered taxpayers receipts
transactions charges no output tax, he can claim a or invoices to indicate only the following information:
refund of the VAT that his suppliers charged him. The
seller thus enjoys automatic zero rating, which allows (1) A statement that the
him to recover the input taxes he paid relating to the seller is a VAT-registered person,
export sales, making him internationally competitive.[10] followed by his taxpayer's
identification number (TIN);
For the effective zero rating of such
transactions, however, the taxpayer has to be VAT- (2) The total amount
registered and must comply with invoicing which the purchaser pays or is
requirements.[11] Interpreting these requirements, obligated to pay to the seller with
respondent CIR ruled that under Revenue the indication that such amount
Memorandum Circular (RMC) 42-2003, the taxpayers includes the value-added tax;
failure to comply with invoicing requirements will result
in the disallowance of his claim for refund. RMC 42- (3) The date of
2003 provides: transaction, quantity, unit cost
and description of the goods or
A-13. Failure by the properties or nature of the
supplier to comply with the service; and
invoicing requirements on the
documents supporting the sale of (4) The name, business
goods and services will result to style, if any, address and
the disallowance of the claim for taxpayers identification number
input tax by the purchaser- (TIN) of the purchaser, customer
claimant. or client.

If the claim for Petitioner Panasonic points out that Sections


refund/TCC is based on the 113 and 237 did not require the inclusion of the word
existence of zero-rated sales by zero-rated for zero-rated sales covered by its receipts
the taxpayer but it fails to comply or invoices. The BIR incorporated this requirement only
with the invoicing requirements in after the enactment of R.A. 9337 on November 1, 2005,
the issuance of sales invoices a law that did not yet exist at the time it issued its
(e.g., failure to indicate the TIN), invoices.
its claim for tax credit/refund of
VAT on its purchases shall be But when petitioner Panasonic made the
denied considering that the export sales subject of this case, i.e., from April 1998
invoice it is issuing to its to March 1999, the rule that applied was Section 4.108-
customers does not depict its 1 of RR 7-95, otherwise known as the Consolidated
being a VAT-registered taxpayer Value-Added Tax Regulations, which the Secretary of
whose sales are classified as Finance issued on December 9, 1995 and took effect
zero-rated sales. Nonetheless, on January 1, 1996. It already required the printing of
this treatment is without prejudice the word zero-rated on the invoices covering zero-rated
to the right of the taxpayer to sales. When R.A. 9337 amended the 1997 NIRC on
charge the input taxes to the November 1, 2005, it made this particular revenue
appropriate expense account or regulation a part of the tax code. This conversion from
asset account subject to regulation to law did not diminish the binding force of
depreciation, whichever is
such regulation with respect to acts committed prior to
the enactment of that law. This Court will not set aside lightly the
conclusions reached by the CTA which, by the very
Section 4.108-1 of RR 7-95 proceeds from the nature of its functions, is dedicated exclusively to the
rule-making authority granted to the Secretary of resolution of tax problems and has accordingly
Finance under Section 245 of the 1977 NIRC developed an expertise on the subject, unless there
(Presidential Decree 1158) for the efficient has been an abuse or improvident exercise of
enforcement of the tax code and of course its authority.[17] Besides, statutes that grant tax
amendments.[13] The requirement is reasonable and is exemptions are construed strictissimi juris against the
in accord with the efficient collection of VAT from the taxpayer and liberally in favor of the taxing
covered sales of goods and services. As aptly authority.Tax refunds in relation to the VAT are in the
explained by the CTAs First Division, the appearance nature of such exemptions. The general rule is that
of the word zero-rated on the face of invoices covering claimants of tax refunds bear the burden of proving the
zero-rated sales prevents buyers from falsely claiming factual basis of their claims. Taxes are the lifeblood of
input VAT from their purchases when no VAT was the nation.Therefore, statutes that allow exemptions
actually paid. If, absent such word, a successful claim are construed strictly against the grantee and liberally
for input VAT is made, the government would be in favor of the government.[18]
refunding money it did not collect.[14]
WHEREFORE, the petition is DENIED for
Further, the printing of the word zero-rated on lack of merit.
the invoice helps segregate sales that are subject to
10% (now 12%) VAT from those sales that are zero- Costs against petitioner.
rated.[15] Unable to submit the proper invoices,
petitioner Panasonic has been unable to substantiate SO ORDERED.
its claim for refund.
G.R. No. 179632 October 19, 2011
Petitioner Panasonics citation of Intel SOUTHERN PHILIPPINES POWER
Technology Philippines, Inc. v. Commissioner of CORPORATION, Petitioner,
Internal Revenue[16] is misplaced. Quite the contrary, it vs.
strengthens the position taken by respondent CIR. In COMMISSIONER OF INTERNAL
that case, the CIR denied the claim for tax refund on REVENUE, Respondent.
the ground of the taxpayers failure to indicate on its DECISION
invoices the BIR authority to print. But Sec. 4.108-1 ABAD, J.:
required only the following to be reflected on the The case is about the sufficiency of sales invoices
invoice: and receipts, which do not have the words "zero-
rated" imprinted on them, to evidence zero-rated
1. The name, taxpayers transactions, a requirement in taxpayer’s claim for tax
identification number (TIN) and credit or refund.
address of seller; The Facts and the Case
2. Date of transaction; Petitioner Southern Philippines Power Corporation
3. Quantity, unit cost and (SPP), a power company that generates and sells
description of merchandise or nature electricity to the National Power Corporation (NPC),
of service; applied with the Bureau of Internal Revenue (BIR) for
4. The name, TIN, zero-rating of its transactions under Section 108(B)(3)
business style, if any, and address of of the National Internal Revenue Code (NIRC). The
the VAT-registered purchaser, BIR approved the application for taxable years 1999
customer or client; and 2000.
5. The word zero-rated On June 20, 2000 SPP filed a claim with respondent
imprinted on the invoice covering Commissioner of Internal Revenue (CIR) for a
zero-rated sales; and ₱5,083,371.57 tax credit or refund for 1999. On July
6. The invoice value or 13, 2001 SPP filed a second claim of ₱6,221,078.44
consideration. in tax credit or refund for 2000. The amounts
represented unutilized input VAT attributable to SPP’s
This Court held that, since the BIR authority to zero-rated sale of electricity to NPC.
print is not one of the items required to be indicated on On September 29, 2001, before the lapse of the two-
the invoices or receipts, the BIR erred in denying the year prescriptive period for such actions, SPP filed
claim for refund. Here, however, the ground for denial with the Court of Tax Appeals (CTA) Second Division
of petitioner Panasonics claim for tax refundthe a petition for review covering its claims for refund or
absence of the word zero-rated on its invoicesis one tax credit. The petition claimed only the aggregate
which is specifically and precisely included in the above amount of ₱8,636,126.75 which covered the last two
enumeration. Consequently, the BIR correctly denied quarters of 1999 and the four quarters in 2000.
Panasonics claim for tax refund.
In his Comment on the petition, the CIR maintained (6) The input taxes claimed are attributable
that SPP is not entitled to tax credit or refund since (a) to zero-rated or effectively zero-rated sales;
the BIR was still examining SPP’s claims for the (7) For zero-rated sales under Section
same; (b) SPP failed to substantiate its payment of 106(A)(2)(1) and (2); 106(B); and 108(B)(1)
input VAT; (c) its right to claim refund already and (2), the acceptable foreign currency
prescribed, and (d) SPP has not shown compliance exchange proceeds have been duly
with Section 204(c) in relation to Section 229 of the accounted for in accordance with BSP rules
NIRC as amended and Revenue Regulation (RR) 5- and regulations;
87 as amended by RR 3-88. (8) Where there are both zero-rated or
effectively zero-rated sales and taxable or
In a Decision dated April 26, 2006, the Second exempt sales, and the input taxes cannot be
Division1 denied SPP’s claims, holding that its zero- directly and entirely attributable to any of
rated official receipts did not correspond to the these sales, the input taxes shall be
quarterly VAT returns, bearing a difference of proportionately allocated on the basis of
₱800,107,956.61. Those receipts only support the sales volume; and
amount of ₱118,945,643.88. Further, these receipts (9) The claim is filed within two years after
do not bear the words "zero-rated" in violation of RR the close of the taxable quarter when such
7-95. The Second Division denied SPP’s motion for sales were made.
reconsideration on August 15, 2006. While acknowledging that SPP’s sale of electricity to
On appeal, the CTA En Banc affirmed the Second NPC is a zero-rated transaction,4 the CTA En Banc
Division’s decision dated July 31, 2007.2 The CTA En ruled that SPP failed to establish that it made zero-
Banc rejected SPP’s contention that its sales invoices rated sales. True, SPP submitted official receipts and
reflected the words "zero-rated," pointing out that it is sales invoices stamped with the words "BIR VAT
on the official receipts that the law requires the Zero-Rate Application Number 419.2000" but the CTA
printing of such words. Moreover, SPP did not report En Banc held that these were not sufficient to prove
in the corresponding quarterly VAT return the sales the fact of sale.
subject of its zero-rated receipts. The CTA En Banc But NIRC Section 110 (A.1) provides that the input tax
denied SPP’s motion for reconsideration on subject of tax refund is to be evidenced by a VAT
September 19, 2007. invoice "or" official receipt issued in accordance with
The Issues Presented Section 113. Section 113 has been amended by
The case presents the following issues: Republic Act (R.A.) 9337 but it is the unamended
1. Whether or not the CTA En Banc correctly version that covers the period when the transactions
rejected the invoices that SPP presented in this case took place. It reads:
and, thus, ruled that it failed to prove the Section 113. Invoicing and Accounting Requirements
zero-rated or effectively zero-rated sales that for VAT-Registered Persons. –
it made; A. Invoicing Requirements. – A VAT-registered
2. Whether or not the CTA En Banc correctly person shall, for every sale, issue an invoice or
ruled that the words "BIR-VAT Zero Rate receipt. In addition to the information required under
Application Number 419.2000" imprinted on Section 237, the following information shall be
SPP’s invoices did not comply with RR 7-95; indicated in the invoice or receipt:
3. Whether or not the CTA En Banc correctly (1) A statement that the seller is a VAT-
held that SPP should have declared its zero- registered person, followed by his taxpayer’s
rated sales in its VAT returns for the subject identification number (TIN); and
period of the claim; and (2) The total amount which the purchaser
4. Whether or not the CTA En Banc correctly pays or is obligated to pay to the seller with
ruled that SPP was not entitled to a tax the indication that such amount includes the
refund or credit. value-added tax. (Emphasis supplied)
The Court’s Rulings The above does not distinguish between an invoice
One and Two. The Court reiterated in San Roque and a receipt when used as evidence of a zero-rated
Power Corporation v. Commissioner of Internal transaction. Consequently, the CTA should have
Revenue3 the following criteria governing claims for accepted either or both of these documents as
refund or tax credit under Section 112(A) of the NIRC: evidence of SPP’s zero-rated transactions.
(1) The taxpayer is VAT-registered; Section 237 of the NIRC also makes no distinction
(2) The taxpayer is engaged in zero-rated or between receipts and invoices as evidence of a
effectively zero-rated sales; commercial transaction:
(3) The input taxes are due or paid; SEC. 237. Issuance of Receipts or Sales or
(4) The input taxes are not transitional input Commercial Invoices.– All persons subject to an
taxes; internal revenue tax shall, for each sale or transfer of
(5) The input taxes have not been applied merchandise or for services rendered valued at
against output taxes during and in the Twenty-five pesos (₱25.00) or more, issue duly
succeeding quarters; registered receipts or sales or commercial invoices,
prepared at least in duplicate, showing the date of
transaction, quantity, unit cost and description of sales made from 1999 to 2000, what applies is
merchandise or nature of service: Provided, however, Section 4.108.1 above which refers only to invoices.
That in the case of sales, receipts or transfers in the A claim for tax credit or refund, arising out of zero-
amount of One hundred pesos (₱100.00) or more, or rated transactions, is essentially based on excess
regardless of the amount, where the sale or transfer is payment. In zero-rating a transaction, the purpose is
made by a person liable to value-added tax to another not to benefit the person legally liable to pay the tax,
person also liable to value-added tax; or where the like SPP, but to relieve exempt entities like NPC
receipt is issued to cover payment made as rentals, which supplies electricity to factories, offices, and
commissions, compensations or fees, receipts or homes, from having to shoulder the tax burden that
invoices shall be issued which shall show the name, ultimately would be passed to the public.
business style, if any, and address of the purchaser, The principle of solutio indebiti should govern this
customer or client: Provided, further, That where the case since the BIR received something that it was not
purchaser is a VAT-registered person, in addition to entitled to. Thus, it has to return the same. The
the information herein required, the invoice or receipt government should not use technicalities to hold on to
shall further show the Taxpayer Identification Number money that does not belong to it.6 Only a
(TIN) of the purchaser. preponderance of evidence is needed to grant a claim
The original of each receipt or invoice shall be issued for tax refund based on excess payment.7
to the purchaser, customer or client at the time the Notably, SPP does no other business except sell the
transaction is effected, who, if engaged in business or power it produces to NPC, a fact that the CIR did not
in the exercise of profession, shall keep and preserve contest in the parties’ joint stipulation of
the same in his place of business for a period of three facts.8 Consequently, the likelihood that SPP would
(3) years from the close of the taxable year in which claim input taxes paid on purchases attributed to
such invoice or receipt was issued, while the duplicate sales that are not zero-rated is close to nil.
shall be kept and preserved by the issuer, also in his Four. The Court finds that SPP failed to indicate its
place of business, for a like period. zero-rated sales in its VAT returns. But this is not
The Commissioner may, in meritorious cases, exempt sufficient reason to deny it its claim for tax credit or
any person subject to internal revenue tax from refund when there are other documents from which
compliance with the provisions of this Section. the CTA can determine the veracity of SPP’s
(Emphasis supplied) claim.1avvphi1
The Court held in Seaoil Petroleum Corporation v. Of course, such failure if partaking of a criminal act
Autocorp Group5 that business forms like sales under Section 255 of the NIRC could warrant the
invoices are recognized in the commercial world as criminal prosecution of the responsible person or
valid between the parties and serve as memorials of persons. But the omission does not furnish ground for
their business transactions. And such documents the outright denial of the claim for tax credit or refund
have probative value. if such claim is in fact justified.
Three. The CTA also did not accept SPP’s official Five. The CTA denied SPP’s claim outright for failure
receipts due to the absence of the words "zero-rated" to establish the existence of zero-rated sales,
on it. The omission, said that court, made the receipts disregarding SPP’s sales invoices and receipts which
non-compliant with RR 7-95, specifically Section evidence them. That court did not delve into the
4.108.1. But Section 4.108.1 requires the printing of question of SPP’s compliance with the other
the words "zero-rated" only on invoices, not on official requisites provided under Section 112 of the NIRC.
receipts: Consequently, even as the Court holds that SPP’s
Section 4.108-1. Invoicing Requirements. — All VAT- sales invoices and receipts would be sufficient to
registered persons shall, for every sale or lease of prove its zero-rated transactions, the case has to be
goods or properties or services, issue duly registered remanded to the CTA for determination of whether or
receipts or sales or commercial invoices which must not SPP has complied with the other requisites
show: mentioned. Such matter involves questions of fact and
1. The name, TIN and address of seller; entails the need to examine the records. The Court is
2. Date of transaction; not a trier of facts and the competence needed for
3. Quantity, unit cost and description of examining the relevant accounting books or records is
merchandise or nature of service; undoubtedly with the CTA.
4. The name, TIN, business style, if any, and WHEREFORE, the Court GRANTS the petition, SETS
address of the VAT-registered purchaser, ASIDE the Court of Tax Appeals En Banc decision
customer or client; dated July 31, 2007 and resolution dated September
5. The word "zero-rated" imprinted on the 19, 2007, and REMANDS the case to the Court of Tax
invoice covering zero-rated sales; and Appeals Second Division for further hearing as stated
6. The invoice value or consideration. above.
x x x x (Emphasis supplied) SO ORDERED.
Actually, it is R.A. 9337 that in 2005 required the
printing of the words "zero-rated" on receipts. But,
since the receipts and invoices in this case cover

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