VAT CASES

Atty. Conde.

1. CIR V. CA (GR NO. 125355)

even a non-stock, non-profit, organization or government entity, is liable to pay VAT

on the sale of goods or services. VAT is a tax on transactions, imposed at every stage of
the distribution process on the sale, barter, exchange of goods or property, and on the
performance of services, even in the absence of profit attributable thereto. The term "in
the course of trade or business" requires the regular conduct or pursuit of a commercial
or an economic activity regardless of whether or not the entity is profit-oriented.

Hence, it is immaterial whether the primary purpose of a corporation indicates that it

receives payments for services rendered to its affiliates on a reimbursement-on-cost
basis only, without realizing profit, for purposes of determining liability for VAT on
services rendered. As long as the entity provides service for a fee, remuneration or
consideration, then the service rendered is subject to VAT.

2. CONTEX CORP V. CIR (GR NO. 151135)

- At this juncture, it must be stressed that the VAT is an indirect tax. As such, the amount
of tax paid on the goods, properties or services bought, transferred, or leased may be shifted
or passed on by the seller, transferor, or lessor to the buyer, transferee or lessee.[17] Unlike a
direct tax, such as the income tax, which primarily taxes an individuals ability to pay based on
his income or net wealth, an indirect tax, such as the VAT, is a tax on consumption of goods,
services, or certain transactions involving the same. The VAT, thus, forms a substantial
portion of consumer expenditures.
Further, in indirect taxation, there is a need to distinguish between the liability for the tax
and the burden of the tax. As earlier pointed out, the amount of tax paid may be shifted or
passed on by the seller to the buyer. What is transferred in such instances is not the liability
for the tax, but the tax burden. In adding or including the VAT due to the selling price, the
seller remains the person primarily and legally liable for the payment of the tax. What is
shifted only to the intermediate buyer and ultimately to the final purchaser is the burden of the
tax.[18]Stated differently, a seller who is directly and legally liable for payment of an indirect
tax, such as the VAT on goods or services is not necessarily the person who ultimately bears
the burden of the same tax. It is the final purchaser or consumer of such goods or services
who, although not directly and legally liable for the payment thereof, ultimately bears the
burden of the tax.[19]

- Exemptions from VAT are granted by express provision of the Tax Code or special
laws. Under VAT, the transaction can have preferential treatment in the following ways:

(a) VAT Exemption. An exemption means that the sale of goods or properties and/or services
and the use or lease of properties is not subject to VAT (output tax) and the seller is not
allowed any tax credit on VAT (input tax) previously paid. [20] This is a case wherein the VAT is
removed at the exempt stage (i.e., at the point of the sale, barter or exchange of the goods or
properties).

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The person making the exempt sale of goods, properties or services shall not bill any output
tax to his customers because the said transaction is not subject to VAT. On the other hand, a
VAT-registered purchaser of VAT-exempt goods/properties or services which are exempt
from VAT is not entitled to any input tax on such purchase despite the issuance of a VAT
invoice or receipt.[21]

(b) Zero-rated Sales. These are sales by VAT-registered persons which are subject to 0%
rate, meaning the tax burden is not passed on to the purchaser. A zero-rated sale by a VAT-
registered person, which is a taxable transaction for VAT purposes, shall not result in any
output tax. However, the input tax on his purchases of goods, properties or services related to
such zero-rated sale shall be available as tax credit or refund in accordance with these
regulations.[22]

- it may not be amiss to re-emphasize that the petitioner is registered as a NON-VAT

taxpayer and thus, is exempt from VAT. As an exempt VAT taxpayer, it is not allowed any tax
credit on VAT (input tax) previously paid. In fine, even if we are to assume that exemption
from the burden of VAT on petitioners purchases did exist, petitioner is still not entitled to any
tax credit or refund on the input tax previously paid as petitioner is an exempt VAT taxpayer.

3. CIR V. SONY PHIL., INC., (GR NO. 178697)

- Thus, there must be a sale, barter or exchange of goods or properties before any
VAT may be levied. Certainly, there was no such sale, barter or exchange in the subsidy
given by SIS to Sony. It was but a dole out by SIS and not in payment for goods or properties
sold, bartered or exchanged by Sony.

In the case of CIR v. Court of Appeals (CA),[23] the Court had the occasion to rule that
services rendered for a fee even on reimbursement-on-cost basis only and without realizing
profit are also subject to VAT. The case, however, is not applicable to the present case. In
that case, COMASERCO rendered service to its affiliates and, in turn, the affiliates paid the
former reimbursement-on-cost which means that it was paid the cost or expense that it
incurred although without profit. This is not true in the present case.
------------ Sony did not render any service to SIS at all. The services rendered by the
advertising companies, paid for by Sony using SIS dole-out, were for Sony and not SIS. SIS
just gave assistance to Sony in the amount equivalent to the latters advertising expense but
never received any goods, properties or service from Sony.

4. DIAZ V. SECRETARY OF FINANCE (GR NO. 193007)

- May toll fees collected by tollway operators be subjected to value-added tax?

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 - Yes. When a tollway operator takes a toll fee from a motorist, the fee is in effect for the
latter's use of the tollway facilities over which the operator enjoys private proprietary rights
that its contract and the law recognize. In this sense, the tollway operator is no different from
the service providers under Section108 who allow others to use their properties or facilities for
a fee.

Tollway operators are franchise grantees and they do not belong to exceptions that
Section 119 spares from the payment of VAT. The word "franchise" broadly covers
government grants of a special right to do an act or series of acts of public concern. Tollway
operators are, owing to the nature and object of their business, "franchise grantees." The
construction, operation, and maintenance of toll facilities on public improvements are activities
of public consequence that necessarily require a special grant of authority from the state. A
tax is imposed under the taxing power of the government principally for the purpose of raising
revenues to fund public expenditures. Toll fees, on the other hand, are collected by private
tollway operators as reimbursement for the costs and expenses incurred in the construction,
maintenance and operation of the tollways, as well as to assure them a reasonable margin of
income. Although toll fees are charged for the use of public facilities, therefore, they are not
government exactions that can be properly treated as a tax. Taxes may be imposed only by
the government under its sovereign authority, toll fees may be demanded by either the
government or private individuals or entities, as an attribute of ownership.

5. ATLAS CONSOLIDATED MINING V. CIR (GR NO. 134467)

- Petitioner insists that while Section 108 of the Tax Code lists the information necessary
for VAT Invoices, it is silent on the withholding of input tax credits for purchases that are not
subjects to VAT.

We disagree. It is clear that a VAT invoice can be used only for the sale of goods and
services that are subject to VAT. The corresponding taxes thereon shall be allowed as input
tax credits for those subject to VAT. Section 108 expressly provides the invoicing and
accounting entries required from VAT-registered persons. On the other hand, Section 111 of
the Tax Code empowers the commissioner to suspend the business operations of VAT-
registered persons for the specific violations listed therein

Corollary thereto, punishment for other types of violations similar to but other than those
listed in Section 111 are provided for in Section 263 of the Tax Code

- Furthermore, we agree with respondent's position that the computation of the output
VAT of the seller should be based on the selling price appearing on its own VAT invoice, not
on the selling price appearing on that of the customer. Indeed, it is the duty of the seller to
comply with the invoicing and accounting requirements laid down in, among others, Section
108 of the Tax Code.

- However, this Court's ruling on the validity of Section 21 of Revenue Regulation 5-87
must be taken in conjunction with its pronouncement regarding the zero-rating given to the

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sales which petitioner made to Philphos and PASAR. As explained above, such sales are
subject to zero-rating, as that rating was definitely approved by the respondent commissioner.
His approval indubitably signified that petitioner had already complied with the requirements,
invoicing or otherwise, necessary for the zero-rating of petitioner's sales of raw materials to
Philphos and PASAR.

6. CIR V. SM PRIME HOLDINGS, INC. (GR NO. 1835050)

- Whether or not the gross receipts derived by operators or proprietors of cinema/theater

houses from admission tickets are subject to VAT.

- No. The enumeration of services subject to VAT under Section 108 of the NIRC is not
exhaustive.

- Since the activity of showing motion pictures, films or movies by cinema/ theater
operators or proprietors is not included in the enumeration, it is incumbent upon the court to
the determine whether such activity falls under the phrase "similar services." The intent of the
legislature must therefore be ascertained.

The legislature never intended operators or proprietors of cinema/theater houses to be

covered by VAT. When the VAT law was implemented, it exempted persons subject to
amusement tax under the NIRC from the coverage of VAT. When the Local Tax Code was
repealed by the LGC of 1991, the local government continued to impose amusement tax on
admission tickets from theaters, cinematographs, concert halls, circuses and other places of
amusements.

The repeal of the Local Tax Code by the LGC of 1991 is not a legal basis for the imposition of
VAT on the gross receipts of cinema/theater operators or proprietors derived from admission
tickets. The removal of the prohibition under the Local Tax Code did not grant nor restore to
the national government the power to impose amusement tax on cinema/theater operators or
proprietors. Neither did it expand the coverage of VAT. Since the imposition of a tax is a
burden on the taxpayer, it cannot be presumed nor can it be extended by implication. A law
will not be construed as imposing a tax unless it does so clearly, expressly, and
unambiguously. As it is, the power to impose amusement tax on cinema/theater operators or
proprietors remains with the local government.

7. CIR V. BURMEISTER AND WAIN SACNDINAVIONA (GR NO. 153205)

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 - In insisting that its services should be zero-rated, respondent claims that it complied
with the requirements of the Tax Code for zero rating under the second paragraph of Section
102(b). Respondent asserts that (1) the payment of its service fees was in acceptable foreign
currency, (2) there was inward remittance of the foreign currency into the Philippines, and (3)
accounting of such remittance was in accordance with BSP rules. Moreover, respondent
contends that its services which constitute the actual operation and management of two (2)
power barges in Mindanao are not even remotely similar to project studies, information
services and engineering and architectural designs under Section 4.102-2(b)(2) of Revenue
Regulations No. 5-96. As such, respondents services need not be destined to be consumed
abroad in order to be VAT zero-rated.

Respondent is mistaken.

The Tax Code not only requires that the services be other than processing,
manufacturing or repacking of goods and that payment for such services be in acceptable
foreign currency accounted for in accordance with BSP rules. Another essential condition for
qualification to zero-rating under Section 102(b)(2) is that the recipient of such services is
doing business outside the Philippines. While this requirement is not expressly stated in
the second paragraph of Section 102(b), this is clearly provided in the first paragraph of
Section 102(b) where the listed services must be for other persons doing business
outside the Philippines. The phrase for other persons doing business outside the
Philippines not only refers to the services enumerated in the first paragraph of Section 102(b),
but also pertains to the general term services appearing in the second paragraph of Section
102(b). In short, services other than processing, manufacturing, or repacking of goods must
likewise be performed for persons doing business outside the Philippines.
This can only be the logical interpretation of Section 102(b)(2). If the provider and
recipient of the other services are both doing business in the Philippines, the payment of
foreign currency is irrelevant. Otherwise, those subject to the regular VAT under Section
102(a) can avoid paying the VAT by simply stipulating payment in foreign currency inwardly
remitted by the recipient of services. To interpret Section 102(b)(2) to apply to a payer-
recipient of services doing business in the Philippines is to make the payment of the regular
VAT under Section 102(a) dependent on the generosity of the taxpayer. The provider of
services can choose to pay the regular VAT or avoid it by stipulating payment in foreign
currency inwardly remitted by the payer-recipient. Such interpretation removes Section 102(a)
as a tax measure in the Tax Code, an interpretation this Court cannot sanction. A tax is a
mandatory exaction, not a voluntary contribution.

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 When Section 102(b)(2) stipulates payment in acceptable foreign currency under BSP
rules, the law clearly envisions the payer-recipient of services to be doing business outside
the Philippines. Only those not doing business in the Philippines can be required under BSP
rules[20] to pay in acceptable foreign currency for their purchase of goods or services from the
Philippines. In a domestic transaction, where the provider and recipient of services are both
doing business in the Philippines, the BSP cannot require any party to make payment in
foreign currency.

Services covered by Section 102(b) (1) and (2) are in the nature of export sales since
the payer-recipient of services is doing business outside the Philippines. Under BSP
rules,[21] the proceeds of export sales must be reported to
the Bangko Sentral ng Pilipinas. Thus, there is reason to require the provider of services
under Section 102(b) (1) and (2) to account for the foreign currency proceeds to the BSP. The
same rationale does not apply if the provider and recipient of the services are both doing
business in the Philippines since their transaction is not in the nature of an export sale even if
payment is denominated in foreign currency.

Further, when the provider and recipient of services are both doing business in the
Philippines, their transaction falls squarely under Section 102(a) governing domesticsale or
exchange of services. Indeed, this is a purely local sale or exchange of services subject to the
regular VAT, unless of course the transaction falls under the other provisions of Section
102(b).

Thus, when Section 102(b)(2) speaks of [s]ervices other than those mentioned in
the preceding subparagraph, the legislative intent is that only the services are different
between subparagraphs 1 and 2. The requirements for zero-rating, including the essential
condition that the recipient of services is doing business outside the Philippines, remain the
same under both subparagraphs.
Significantly, the amended Section 108(b)[22] [previously Section 102(b)] of the present Tax
Code clarifies this legislative intent. Expressly included among the transactions subject to 0%
VAT are [s]ervices other than those mentioned in the [first] paragraph [of Section 108(b)]
rendered to a person engaged in business conducted outside the Philippines or to a
nonresident person not engaged in business who is outside the Philippines when the
services are performed, the consideration for which is paid for in acceptable foreign currency
and accounted for in accordance with the rules and regulations of the BSP.

- In this case, the payer-recipient of respondents services is the Consortium which is a

joint-venture doing business in the Philippines. While the Consortiums principal members are

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non-resident foreign corporations, the Consortium itself is doing business in the
Philippines.

Considering this length of time, the Consortiums operation and

maintenance of NAPOCORs power barges cannot be classified as a single or isolated
transaction. The Consortium does not fall under Section 102(b)(2) which requires that the
recipient of the services must be a person doing business outside the Philippines. Therefore,
respondents services to the Consortium, not being supplied to a person doing business
outside the Philippines, cannot legally qualify for 0% VAT.

Respondent, as subcontractor of the Consortium, operates and maintains NAPOCORs power

barges in the Philippines. NAPOCOR pays the Consortium, through its non-resident partners,
partly in foreign currency outwardly remitted. In turn, the Consortium pays respondent also in
foreign currency inwardly remitted and accounted for in accordance with BSP rules. This
payment scheme does not entitle respondent to 0% VAT. As the Court held in Commissioner
of Internal Revenue v. American Express International, Inc. (Philippine Branch),[24] the place
of payment is immaterial, much less is the place where the output of the service is ultimately
used. An essential condition for entitlement to 0% VAT under Section 102(b)(1) and (2) is that
the recipient of the services is a person doing business outside the Philippines. In this case,
the recipient of the services is the Consortium, which is doing business not outside,
but within the Philippines because it has a 15-year contract to operate and
maintain NAPOCORs two 100-megawatt power barges in Mindanao.

The Court recognizes the rule that the VAT system generally follows the destination
principle (exports are zero-rated whereas imports are taxed). However, as the Court stated
in American Express, there is an exception to this rule.[25] This exception refers to the 0% VAT
on services enumerated in Section 102 and performed in the Philippines. For services
covered by Section 102(b)(1) and (2), the recipient of the services must be a person doing
business outside the Philippines. Thus, to be exempt from the destination principle under
Section 102(b)(1) and (2), the services must be (a) performed in the Philippines; (b) for a
person doing business outside the Philippines; and (c) paid in acceptable foreign currency
accounted for in accordance with BSP rules.

8. CIR V. AMERICAN EXPRESS INTERNATIONAL, INC., (GR NO. 152609)

- As a general rule, the value-added tax (VAT) system uses the destination principle.
However, our VAT law itself provides for a clear exception, under which the supply of service

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shall be zero-rated when the following requirements are met: (1) the service is performed in
the Philippines; (2) the service falls under any of the categories provided in Section 102(b) of
the Tax Code; and (3) it is paid for in acceptable foreign currency that is accounted for in
accordance with the regulations of the Bangko Sentral ng Pilipinas. Since respondents
services meet these requirements, they are zero-rated. Petitioners Revenue Regulations that
alter or revoke the above requirements are ultra vires and invalid.

Zero Rating of
Other Services

The law is very clear. Under the last paragraph quoted above, services performed by VAT-
registered persons in the Philippines (other than the processing, manufacturing or repacking
of goods for persons doing business outside the Philippines), when paid in acceptable foreign
currency and accounted for in accordance with the rules and regulations of the BSP, are zero-
rated.
Respondent is a VAT-registered person that facilitates the collection and payment of
receivables belonging to its non-resident foreign client, for which it gets paid in acceptable
foreign currency inwardly remitted and accounted for in conformity with BSP rules and
regulations. Certainly, the service it renders in the Philippines is not in the same category as
processing, manufacturing or repacking of goods and should, therefore, be zero-rated. In
reply to a query of respondent, the BIR opined in VAT Ruling No. 080-89 that the income
respondent earned from its parent companys regional operating centers (ROCs) was
automatically zero-rated effective January 1, 1988.[12]

Service has been defined as the art of doing something useful for a person or company for a
fee[13] or useful labor or work rendered or to be rendered by one person to another.[14] For
facilitating in the Philippines the collection and payment of receivables belonging to its Hong
Kong-based foreign client, and getting paid for it in duly accounted acceptable foreign
currency, respondent renders service falling under the category of zero rating. Pursuant to the
Tax Code, a VAT of zero percent should, therefore, be levied upon the supply of that
service.[15]

VAT Requirements for

the Supply of Service

The VAT is a tax on consumption[41] expressed as a percentage of the value added to goods
or services[42] purchased by the producer or taxpayer.[43] As an indirect tax[44] on
services,[45] its main object is the transaction[46] itself or, more concretely, the performance of
all kinds of services[47] conducted in the course of trade or business in the
Philippines.[48] These services must be regularly conducted in this country; undertaken in
pursuit of a commercial or an economic activity; [49] for a valuable consideration; and not
exempt under the Tax Code, other special laws, or any international agreement. [50]

Without doubt, the transactions respondent entered into with its Hong Kong-based client meet
all these requirements.

Services Subject to
Zero VAT

As a general rule, the VAT system uses the destination principle as a basis for the
jurisdictional reach of the tax.[51] Goods and services are taxed only in the country where they
are consumed. Thus, exports are zero-rated, while imports are taxed.

Confusion in zero rating arises because petitioner equates the performance of a particular
type of service with the consumption of its output abroad. In the present case, the facilitation
of the collection of receivables is different from the utilization or consumption of the
outcome of such service. While the facilitation is done in the Philippines, the consumption is
not. Respondent renders assistance to its foreign clients -- the ROCs outside the country -- by
receiving the bills of service establishments located here in the country and forwarding them
to the ROCs abroad. The consumption contemplated by law, contrary to petitioners

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administrative interpretation,[52] does not imply that the service be done abroad in order to be
zero-rated.

Consumption is the use of a thing in a way that thereby exhausts it. [53] Applied to services, the
term means the performance or successful completion of a contractual duty, usually resulting
in the performers release from any past or future liability x x x. [54] The services rendered by
respondent are performed or successfully completed upon its sending to its foreign client the
drafts and bills it has gathered from service establishments here. Its services, having been
performed in the Philippines, are therefore also consumed in the Philippines.

Unlike goods, services cannot be physically used in or bound for a specific place when their
destination is determined. Instead, there can only be a predetermined end of a
course[55] when determining the service location or position x x x for legal
purposes.[56] Respondents facilitation service has no physical existence, yet takes place upon
rendition, and therefore upon consumption, in the Philippines. Under the destination principle,
as petitioner asserts, such service is subject to VAT at the rate of 10 percent.

Respondents Services Exempt

from the Destination Principle

However, the law clearly provides for an exception to the destination principle; that is, for a
zero percent VAT rate for services that are performed in the Philippines, paid for in
acceptable foreign currency and accounted for in accordance with the rules and regulations of
the [BSP].[57] Thus, for the supply of service to be zero-rated as an exception, the law merely
requires that first, the service be performed in the Philippines; second, the service fall under
any of the categories in Section 102(b) of the Tax Code; and, third, it be paid in acceptable
foreign currency accounted for in accordance with BSP rules and regulations.

Tax Situs of a
Zero-Rated Service

The law neither makes a qualification nor adds a condition in determining the tax situs of a
zero-rated service. Under this criterion, the place where the service is rendered determines
the jurisdiction[60] to impose the VAT.[61] Performed in the Philippines, such service is
necessarily subject to its jurisdiction,[62] for the State necessarily has to have a substantial
connection[63] to it, in order to enforce a zero rate.[64] The place of payment is
immaterial;[65] much less is the place where the output of the service will be further or
ultimately used.

9. CIR V AICHI FORGING., (GR NO. 184823)

- A taxpayer is entitled to a refund either by authority of a statute expressly granting such

right, privilege, or incentive in his favor, or under the principle of solutio indebiti requiring the
return of taxes erroneously or illegally collected. In both cases, a taxpayer must prove not
only his entitlement to a refund but also his compliance with the procedural due process as
non-observance of the prescriptive periods within which to file the administrative and the
judicial claims would result in the denial of his claim.

- Unutilized input VAT must be claimed within two years after the close of the taxable
quarter when the sales were made

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 In computing the two-year prescriptive period for claiming a refund/credit of unutilized
input VAT, the Second Division of the CTA applied Section 112(A) of the NIRC

he pivotal question of when to reckon the running of the two-year prescriptive period,
however, has already been resolved in Commissioner of Internal Revenue v. Mirant Pagbilao
Corporation,44 where we ruled that Section 112(A) of the NIRC is the applicable provision in
determining the start of the two-year period for claiming a refund/credit of unutilized input
VAT, and that Sections 204(C) and 229 of the NIRC are inapplicable as "both provisions
apply only to instances of erroneous payment or illegal collection of internal revenue
taxes."45 We explained that:

- The above proviso [Section 112 (A) of the NIRC] clearly provides in no uncertain terms
that unutilized input VAT payments not otherwise used for any internal revenue tax due
the taxpayer must be claimed within two years reckoned from the close of the taxable
quarter when the relevant sales were made pertaining to the input VAT regardless of
whether said tax was paid or not. As the CA aptly puts it, albeit it erroneously applied the
aforequoted Sec. 112 (A), "[P]rescriptive period commences from the close of the taxable
quarter when the sales were made and not from the time the input VAT was paid nor from the
time the official receipt was issued." Thus, when a zero-rated VAT taxpayer pays its input
VAT a year after the pertinent transaction, said taxpayer only has a year to file a claim for
refund or tax credit of the unutilized creditable input VAT. The reckoning frame would always
be the end of the quarter when the pertinent sales or transaction was made, regardless when
the input VAT was paid. Be that as it may, and given that the last creditable input VAT due for
the period covering the progress billing of September 6, 1996 is the third quarter of 1996
ending on September 30, 1996, any claim for unutilized creditable input VAT refund or tax
credit for said quarter prescribed two years after September 30, 1996 or, to be precise, on
September 30, 1998. Consequently, MPC’s claim for refund or tax credit filed on December
10, 1999 had already prescribed.

- For perspective, under Sec. 105 of the NIRC, creditable input VAT is an indirect tax
which can be shifted or passed on to the buyer, transferee, or lessee of the goods, properties,
or services of the taxpayer. The fact that the subsequent sale or transaction involves a wholly-
tax exempt client, resulting in a zero-rated or effectively zero-rated transaction, does not,
standing alone, deprive the taxpayer of its right to a refund for any unutilized creditable input
VAT, albeit the erroneous, illegal, or wrongful payment angle does not enter the equation.

- Respondent’s assertion that the non-observance of the 120-day period is not fatal to
the filing of a judicial claim as long as both the administrative and the judicial claims are filed
within the two-year prescriptive period52 has no legal basis.

There is nothing in Section 112 of the NIRC to support respondent’s view. Subsection (A) of
the said provision states that "any VAT-registered person, whose sales are zero-rated or
effectively zero-rated may, within two years after the close of the taxable quarter when the
sales were made, apply for the issuance of a tax credit certificate or refund of creditable input
tax due or paid attributable to such sales." The phrase "within two (2) years x x x apply for the
issuance of a tax credit certificate or refund" refers to applications for refund/credit filed with
the CIR and not to appeals made to the CTA. This is apparent in the first paragraph of
subsection (D) of the same provision, which states that the CIR has "120 days from the
submission of complete documents in support of the application filed in accordance with
Subsections (A) and (B)" within which to decide on the claim.

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In fact, applying the two-year period to judicial claims would render nugatory Section 112(D)
of the NIRC, which already provides for a specific period within which a taxpayer should
appeal the decision or inaction of the CIR. The second paragraph of Section 112(D) of the
NIRC envisions two scenarios: (1) when a decision is issued by the CIR before the lapse of
the 120-day period; and (2) when no decision is made after the 120-day period. In both
instances, the taxpayer has 30 days within which to file an appeal with the CTA. As we see it
then, the 120-day period is crucial in filing an appeal with the CTA.

With regard to Commissioner of Internal Revenue v. Victorias Milling, Co., Inc.53 relied upon
by respondent, we find the same inapplicable as the tax provision involved in that case is
Section 306, now Section 229 of the NIRC. And as already discussed, Section 229 does not
apply to refunds/credits of input VAT, such as the instant case.

In fine, the premature filing of respondent’s claim for refund/credit of input VAT before the
CTA warrants a dismissal inasmuch as no jurisdiction was acquired by the CTA.

10. KEPCO PHILS. V. CIR (GR NO. 179961)

- There is no doubt that NPC is an entity with a special charter and exempt from
payment of all forms of taxes, including VAT. As such, services rendered by any VAT-
registered person/entity, like Kepco, to NPC are effectively subject to zero percent (0%) rate.

For the effective zero rating of such services, however, the VAT-registered taxpayer
must comply with invoicing requirements under Sections 113 and 237 of the 1997 NIRC as
implemented by Section 4.108-1 of R.R. No. 7-95

Note: Zero-Rated Sales must be indicated in the invoice/receipt.[12]

- Indeed, it is the duty of Kepco to comply with the requirements, including the
imprinting of the words zero-rated in its VAT official receipts and invoices in order for its sales
of electricity to NPC to qualify for zero-rating.

It must be emphasized that the requirement of imprinting the word zero-rated on the
invoices or receipts under Section 4.108-1 of R.R. No. 7-95 is mandatory as ruled by the
CTA En Banc, citing Tropitek International, Inc. v. Commissioner of Internal
Revenue.[13] In Kepco Philippines Corporation v. Commissioner of Internal Revenue,[14]

- Records disclose, as correctly found by the CTA that Kepco failed to substantiate
the claimed zero-rated sales of P10,514,023.92. The wordings zero-rated sales were not
imprinted on the VAT official receipts presented by Kepco (marked as Exhibits S to S-11) for
taxable year 1999, in clear violation of Section 4.108-1 of R.R. No. 7-95 and the condition
imposed under its approved Application/Certificate for Zero-rate as well.

Kepcos claim that Section 4.108-1 of R.R. 7-95 expanded the letter and spirit of
Section 113 of 1997 Tax Code, is unavailing. Indubitably, said revenue regulation is merely a
precautionary measure to ensure the effective implementation of the Tax Code. It was not
used by the CTA to expound the meaning of Sections 113 and 237 of the NIRC. As a matter
of fact, the provision of Section 4.108-1 of R.R. 7-95 was incorporated in Section 113 (B)(2)(c)
of R.A. No. 9337,[15] which states that if the sale is subject to zero percent (0%) value-added
tax, the term zero-rated sale shall be written or printed prominently on the invoice or
receipt. This, in effect, and as correctly concluded by the CIR, confirms the validity of the
imprinting requirement on VAT invoices or official receipts even prior to the enactment of R.A.
No. 9337 under the principle of legislative approval of administrative interpretation by
reenactment.

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 - To bolster its claim for tax refund or credit, Kepco cites the case of Intel Technology
Philippines, Inc. v. Commissioner of Internal Revenue.[17] Kepcos reliance on the said case is
misplaced because the factual milieu there is quite different from that of the case at bench. In
the Intel case, the claim for tax refund or issuance of a tax credit certificate was denied due to
the taxpayers failure to reflect or indicate in the sales invoices the BIR authority to print. The
Court held that the BIR authority to print was not one of the items required by law or BIR
regulation to be indicated or reflected in the invoices or receipts, hence, the BIR erred in
denying the claim for refund. In the present case, however, the principal ground for the denial
was the absence of the word zero-rated on the invoices, in clear violation of the invoicing
requirements under Section 108(B)(3) of the 1997 NIRC, in conjunction with Section 4.108-1
of R.R. No. 7-95.
Regarding Kepcos contention, that non-compliance with the requirement of invoicing
would only subject the non-complying taxpayer to penalties of fine and imprisonment under
Section 264 of the Tax Code, and not to the outright denial of the claim for tax refund or
credit, must likewise fail. Section 264 categorically provides for penalties in case of Failure or
Refusal to Issue Receipts or Sales or Commercial Invoices, Violations related to the Printing
of such Receipts or Invoices and Other Violations, but not to penalties for failure to comply
with the requirement of invoicing. As recently held in Kepco Philippines Corporation v.
Commissioner of Internal Revenue,[18] Section 264 of the 1997 NIRC was not intended to
excuse the compliance of the substantive invoicing requirement needed to justify a claim for
refund on input VAT payments.

Thus, for Kepcos failure to substantiate its effectively zero-rated sales for the taxable
year 1999, the claimed P10,527,202.54 input VAT cannot be refunded.

- Contrary to Kepcos view, the denial of its claim for refund of input tax is not a harsh
penalty. The invoicing requirement is reasonable and must be strictly complied with, as it is
the only way to determine the veracity of its claim.

11. TAMBUNTING PAWNSHOP, INC. V. CIR (GR NO. 179085)

- With the Court's ruling in Lhuillier, pawnshops were then treated as VAT-able
enterprises under the general classification of "sale or exchange of services" under Section
108 (A) of the Tax Code of 1997, as amended. R.A. No. 9238 [which was passed in 2004]
finally classified pawnshops as Other Non-bank Financial Intermediaries.

The Court finds that pawnshops should have been treated as non-bank financial
intermediaries from the very beginning, subject to the appropriate taxes provided by law.

At the time of the disputed assessment, that is, for the year 2000, pawnshops were not
subject to 10% VAT under the general provision on "sale or exchange of services" as defined
under Section 108 (A) of the Tax Code of 1997. Instead, due to the specific nature of its
business, pawnshops were then subject to 10% VAT under the category of non-bank financial
intermediaries.

Since petitioner is a non-bank financial intermediary, it is subject to 10% VAT for the tax
years 1996 to 2002; however, with the levy, assessment and collection of VAT from non-bank
financial intermediaries being specifically deferred by law, then petitioner is not liable for VAT
during these tax years. But with the full implementation of the VAT system on non-bank
financial intermediaries starting January 1, 2003, petitioner is liable for 10% VAT for said tax
year. And beginning 2004 up to the present, by virtue of R.A. No. 9238, petitioner is no longer
liable for VAT but it is subject to percentage tax on gross receipts from 0% to 5%, as the case
may be.

12
In light of the foregoing ruling, since the imposition of VAT on pawnshops, which are non-
bank financial intermediaries, was deferred for the tax years 1996 to 2002, petitioner is not
liable for VAT for the tax year 1999.

12. PHILIPPINE PHOSPATE FERTILIZER V. CIR (GR NO. 141873)

- The general rule is that claimants of tax refunds bear the burden of proving the factual
basis of their claims.[43] This is because tax refunds are in the nature of tax exemptions, the
statutes of which are construed strictissimi juris against the taxpayer and liberally in favor of
the taxing authority.[44] Taxes are the lifeblood of the nation, therefore statutes that allow
exemptions are construed strictly against the grantee and liberally in favor of the
government.[45]
In this case, there is no dispute that petitioner is entitled to exemption from the payment
of excise taxes by virtue of its being an EPZA registered enterprise.[46] As stated by the CTA,
the only thing left to be determined is whether or not petitioner is entitled to
the amount claimed for refund.[47]
Petitioners entire claim for refund, however, was denied for petitioners failure to present
invoices allegedly in violation of CTA Circular No. 1-95. But nowhere in said Circular is it
stated that invoices are required to be presented in claiming refunds. What the Circular states
is that:

1. The party who desires to introduce as evidence such voluminous documents must
present: (a) Summary containing the total amount/s of the tax account or tax paid for the
period involved and a chronological or numerical list of the numbers, dates and amounts
covered by the invoices or receipts; and (b) a Certification of an independent Certified Public
Accountant attesting to the correctness of the contents of the summary after making an
examination and evaluation of the voluminous receipts and invoices. Such summary and
certification must properly be identified by a competent witness from the accounting
firm. (Emphasis supplied)

The CTA in denying petitioners motion for reconsideration, also mentioned for the first
time that petitioners failure to present a certification of an independent CPA is another ground
that justified the denial of its claim for refund.
Again, we find such reasoning to be erroneous. The certification of an independent CPA
is not another mandatory requirement under the Circular which petitioner failed to comply
with. It is rather a requirement that must accompany the invoices should one decide to
present invoices under the Circular. Since petitioner did not present invoices, on the
assumption that such were not necessary in this case, it logically did not present a
certification because there was nothing to certify.
- The CTA also could not deny that in its previous decisions involving petitioners claims
for refund, invoices were not deemed necessary to grant such claims. It merely said that in
said decisions, CTA Circular No. 1-95 was not yet in effect.[48] Since CTA Circular No. 1-95
did not make it mandatory to present invoices, coupled with the previous cases of petitioner
where the certifications issued by Petron sufficed, it is understandable that petitioner did not
think it necessary to present invoices and the accompanying certifications when it filed the
present case for refund before the CTA.

13. CIR V. SAN ROQUE (GR NO. 187485)

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II. Prescriptive Periods under Section 112(A) and (C)

There are three compelling reasons why the 30-day period need not necessarily fall within the
two-year prescriptive period, as long as the administrative claim is filed within the two-year
prescriptive period.

First, Section 112(A) clearly, plainly, and unequivocally provides that the taxpayer
"may, within two (2) years after the close of the taxable quarter when the sales were
made, apply for the issuance of a tax credit certificate or refund of the creditable
input tax due or paid to such sales." In short, the law states that the taxpayer may
apply with the Commissioner for a refund or credit "within two (2) years," which
means at anytime within two years. Thus, the application for refund or credit may
be filed by the taxpayer with the Commissioner on the last day of the two-year
prescriptive period and it will still strictly comply with the law. The twoyear prescriptive
period is a grace period in favor of the taxpayer and he can avail of the full period
before his right to apply for a tax refund or credit is barred by prescription.

Second, Section 112(C) provides that the Commissioner shall decide the application
for refund or credit "within one hundred twenty (120) days from the date of
submission of complete documents in support of the application filed in accordance
with Subsection (A)." The reference in Section 112(C) of the submission of
documents "in support of the application filed in accordance with Subsection A"
means that the application in Section 112(A) is the administrative claim that the
Commissioner must decide within the 120-day period. In short, the two-year
prescriptive period in Section 112(A) refers to the period within which the taxpayer
can file an administrative claim for tax refund or credit. Stated otherwise, the two-
year prescriptive period does not refer to the filing of the judicial claim with the
CTA but to the filing of the administrative claim with the Commissioner. As held
in Aichi, the "phrase ‘within two years x x x apply for the issuance of a tax credit or
refund’ refers to applications for refund/credit with the CIR and not to appeals
made to the CTA."

Third, if the 30-day period, or any part of it, is required to fall within the two-year
prescriptive period (equivalent to 730 days 60), then the taxpayer must file his
administrative claim for refund or credit within the first 610 days of the two-year
prescriptive period. Otherwise, the filing of the administrative claim beyond the
first 610 days will result in the appeal to the CTA being filed beyond the two-
year prescriptive period. Thus, if the taxpayer files his administrative claim on the
611th day, the Commissioner, with his 120-day period, will have until the 731st day to
decide the claim. If the Commissioner decides only on the 731st day, or does not
decide at all, the taxpayer can no longer file his judicial claim with the CTA because
the two-year prescriptive period (equivalent to 730 days) has lapsed. The 30-day
period granted by law to the taxpayer to file an appeal before the CTA becomes
utterly useless, even if the taxpayer complied with the law by filing his administrative
claim within the two-year prescriptive period.

The theory that the 30-day period must fall within the two-year prescriptive period adds a
condition that is not found in the law. It results in truncating 120 days from the 730 days that
the law grants the taxpayer for filing his administrative claim with the Commissioner. This
Court cannot interpret a law to defeat, wholly or even partly, a remedy that the law expressly
grants in clear, plain, and unequivocal language.

Section 112(A) and (C) must be interpreted according to its clear, plain, and unequivocal
language. The taxpayer can file his administrative claim for refund or credit at anytime within
the two-year prescriptive period. If he files his claim on the last day of the two-year
prescriptive period, his claim is still filed on time. The Commissioner will have 120 days from
such filing to decide the claim. If the Commissioner decides the claim on the 120th day, or
does not decide it on that day, the taxpayer still has 30 days to file his judicial claim with the

14
CTA. This is not only the plain meaning but also the only logical interpretation of Section
112(A) and (C).

III. "Excess" Input VAT and "Excessively" Collected Tax

The input VAT is not "excessively" collected as understood under Section 229 because at
the time the input VAT is collected the amount paid is correct and proper. The input
VAT is a tax liability of, and legally paid by, a VAT-registered seller61 of goods, properties or
services used as input by another VAT-registered person in the sale of his own goods,
properties, or services. This tax liability is true even if the seller passes on the input VAT to
the buyer as part of the purchase price. The second VAT-registered person, who is not legally
liable for the input VAT, is the one who applies the input VAT as credit for his own output
VAT.62 If the input VAT is in fact "excessively" collected as understood under Section 229,
then it is the first VAT-registered person - the taxpayer who is legally liable and who is
deemed to have legally paid for the input VAT - who can ask for a tax refund or credit under
Section 229 as an ordinary refund or credit outside of the VAT System. In such event, the
second VAT-registered taxpayer will have no input VAT to offset against his own output VAT.

In a claim for refund or credit of "excess" input VAT under Section 110(B) and Section 112(A),
the input VAT is not "excessively" collected as understood under Section 229. At the time of
payment of the input VAT the amount paid is the correct and proper amount. Under the VAT
System, there is no claim or issue that the input VAT is "excessively" collected, that is, that
the input VAT paid is more than what is legally due. The person legally liable for the input
VAT cannot claim that he overpaid the input VAT by the mere existence of an "excess" input
VAT. The term "excess" input VAT simply means that the input VAT available as credit
exceeds the output VAT, not that the input VAT is excessively collected because it is more
than what is legally due. Thus, the taxpayer who legally paid the input VAT cannot claim for
refund or credit of the input VAT as "excessively" collected under Section 229.

Under Section 229, the prescriptive period for filing a judicial claim for refund is two years
from the date of payment of the tax "erroneously, x x x illegally, x x x excessively or in any
manner wrongfully collected." The prescriptive period is reckoned from the date the person
liable for the tax pays the tax. Thus, if the input VAT is in fact "excessively" collected, that is,
the person liable for the tax actually pays more than what is legally due, the taxpayer must file
a judicial claim for refund within two years from his date of payment. Only the person legally
liable to pay the tax can file the judicial claim for refund. The person to whom the tax is
passed on as part of the purchase price has no personality to file the judicial claim
under Section 229.63

Under Section 110(B) and Section 112(A), the prescriptive period for filing a judicial claim for
"excess" input VAT is two years from the close of the taxable quarter when the sale was
made by the person legally liable to pay theoutput VAT. This prescriptive period has no
relation to the date of payment of the "excess" input VAT. The "excess" input VAT may have
been paid for more than two years but this does not bar the filing of a judicial claim for
"excess" VAT under Section 112(A), which has a different reckoning period from Section 229.
Moreover, the person claiming the refund or credit of the input VAT is not the person who
legally paid the input VAT. Such person seeking the VAT refund or credit does not claim that
the input VAT was "excessively" collected from him, or that he paid an input VAT that is more
than what is legally due. He is not the taxpayer who legally paid the input VAT.

As its name implies, the Value-Added Tax system is a tax on the value added by the taxpayer
in the chain of transactions. For simplicity and efficiency in tax collection, the VAT is imposed
not just on the value added by the taxpayer, but on the entire selling price of his goods,
properties or services. However, the taxpayer is allowed a refund or credit on the VAT
previously paid by those who sold him the inputs for his goods, properties, or services. The
net effect is that the taxpayer pays the VAT only on the value that he adds to the goods,
properties, or services that he actually sells.

15
Under Section 110(B), a taxpayer can apply his input VAT only against his output VAT. The
only exception is when the taxpayer is expressly "zero-rated or effectively zero-rated" under
the law, like companies generating power through renewable sources of energy. 64 Thus,
a non zero-rated VAT-registered taxpayer who has no output VAT because he has no sales
cannot claim a tax refund or credit of his unused input VAT under the VAT System. Even if
the taxpayer has sales but his input VAT exceeds his output VAT, he cannot seek a tax
refund or credit of his "excess" input VAT under the VAT System. He can only carry-over
and apply his "excess" input VAT against his future output VAT. If such "excess" input
VAT is an "excessively" collected tax, the taxpayer should be able to seek a refund or credit
for such "excess" input VAT whether or not he has output VAT. The VAT System does not
allow such refund or credit. Such "excess" input VAT is not an "excessively" collected tax
under Section 229. The "excess" input VAT is a correctly and properly collected tax. However,
such "excess" input VAT can be applied against the output VAT because the VAT is a tax
imposed only on the value added by the taxpayer. If the input VAT is in fact "excessively"
collected under Section 229, then it is the person legally liable to pay the input VAT, not the
person to whom the tax was passed on as part of the purchase price and claiming credit for
the input VAT under the VAT System, who can file the judicial claim under Section 229.

Any suggestion that the "excess" input VAT under the VAT System is an "excessively"
collected tax under Section 229 may lead taxpayers to file a claim for refund or credit for such
"excess" input VAT under Section 229 as an ordinary tax refund or credit outside of the VAT
System. Under Section 229, mere payment of a tax beyond what is legally due can be
claimed as a refund or credit. There is no requirement under Section 229 for an output VAT or
subsequent sale of goods, properties, or services using materials subject to input VAT.

From the plain text of Section 229, it is clear that what can be refunded or credited is a tax
that is "erroneously, x x x illegally, x x x excessively or in any manner wrongfully collected."
In short, there must be a wrongful payment because what is paid, or part of it, is not legally
due. As the Court held in Mirant, Section 229 should "apply only to instances of erroneous
payment or illegal collection of internal revenue taxes." Erroneous or wrongful payment
includes excessive payment because they all refer to payment of taxes not legally due.
Under the VAT System, there is no claim or issue that the "excess" input VAT is "excessively
or in any manner wrongfully collected." In fact, if the "excess" input VAT is an "excessively"
collected tax under Section 229, then the taxpayer claiming to apply such "excessively"
collected input VAT to offset his output VAT may have no legal basis to make such offsetting.
The person legally liable to pay the input VAT can claim a refund or credit for such
"excessively" collected tax, and thus there will no longer be any "excess" input VAT. This will
upend the present VAT System as we know it.

VII. Existing Jurisprudence

There is no basis whatsoever to the claim that in five cases this Court had already made a
ruling that the filing dates of the administrative and judicial claims are inconsequential, as long
as they are within the two-year prescriptive period. The effect of the claim of the dissenting
opinions is that San Roque’s failure to wait for the 120-day mandatory period to lapse is
inconsequential, thus allowing San Roque to claim the tax refund or credit. However, the five
cases cited by the dissenting opinions do not support even remotely the claim that this Court
had already made such a ruling. None of these five cases mention, cite, discuss, rule or
even hint that compliance with the 120-day mandatory period is inconsequential as
long as the administrative and judicial claims are filed within the two-year prescriptive
period.

In CIR v. Toshiba Information Equipment (Phils.), Inc.,71 the issue was whether any output
VAT was actually passed on to Toshiba that it could claim as input VAT subject to tax credit
or refund. The Commissioner argued that "although Toshiba may be a VAT-registered
taxpayer, it is not engaged in a VAT-taxable business." The Commissioner cited Section
4.106-1 of Revenue Regulations No. 75 that "refund of input taxes on capital goods shall be

16
allowed only to the extent that such capital goods are used in VAT-taxable business." In the
words of the Court, "Ultimately, however, the issue still to be resolved herein shall be whether
respondent Toshiba is entitled to the tax credit/refund of its input VAT on its purchases of
capital goods and services, to which this Court answers in the affirmative." Nowhere in this
case did the Court discuss, state, or rule that the filing dates of the administrative and judicial
claims are inconsequential, as long as they are within the two-year prescriptive period.

In Intel Technology Philippines, Inc. v. CIR,72 the Court stated: "The issues to be resolved in
the instant case are (1) whether the absence of the BIR authority to print or the absence of
the TIN-V in petitioner’s export sales invoices operates to forfeit its entitlement to a tax
refund/credit of its unutilized input VAT attributable to its zero-rated sales; and (2) whether
petitioner’s failure to indicate "TIN-V" in its sales invoices automatically invalidates its claim
for a tax credit certification." Again, nowhere in this case did the Court discuss, state, or rule
that the filing dates of the administrative and judicial claims are inconsequential, as long as
they are within the two-year prescriptive period.

In AT&T Communications Services Philippines, Inc. v. CIR,73 the Court stated: "x x x the CTA
First Division, conceding that petitioner’s transactions fall under the classification of zero-rated
sales, nevertheless denied petitioner’s claim ‘for lack of substantiation,’ x x x." The Court
quoted the ruling of the First Division that "valid VAT official receipts, and not mere sale
invoices, should have been submitted" by petitioner to substantiate its claim. The Court
further stated: "x x x the CTA En Banc, x x x affirmed x x x the CTA First Division," and
"petitioner’s motion for reconsideration having been denied x x x, the present petition for
review was filed." Clearly, the sole issue in this case is whether petitioner complied with the
substantiation requirements in claiming for tax refund or credit. Again, nowhere in this case
did the Court discuss, state, or rule that the filing dates of the administrative and judicial
claims are inconsequential, as long as they are within the two-year prescriptive period.

In CIR v. Ironcon Builders and Development Corporation,74 the Court put the issue in this
manner: "Simply put, the sole issue the petition raises is whether or not the CTA erred in
granting respondent Ironcon’s application for refund of its excess creditable VAT withheld."
The Commissioner argued that "since the NIRC does not specifically grant taxpayers the
option to refund excess creditable VAT withheld, it follows that such refund cannot be
allowed." Thus, this case is solely about whether the taxpayer has the right under the NIRC to
ask for a cash refund of excess creditable VAT withheld. Again, nowhere in this case did the
Court discuss, state, or rule that the filing dates of the administrative and judicial claims are
inconsequential, as long as they are within the two-year prescriptive period.

In CIR v. Cebu Toyo Corporation,75 the issue was whether Cebu Toyo was exempt or subject
to VAT. Compliance with the 120-day period was never an issue in Cebu Toyo. As the Court
explained:

Both the Commissioner of Internal Revenue and the Office of the Solicitor General argue that
respondent Cebu Toyo Corporation, as a PEZA-registered enterprise, is exempt from
national and local taxes, including VAT, under Section 24 of Rep. Act No. 7916 and
Section 109 of the NIRC. Thus, they contend that respondent Cebu Toyo Corporation is not
entitled to any refund or credit on input taxes it previously paid as provided under Section
4.103-1 of Revenue Regulations No. 7-95, notwithstanding its registration as a VAT taxpayer.
For petitioner claims that said registration was erroneous and did not confer upon the
respondent any right to claim recognition of the input tax credit.

The respondent counters that it availed of the income tax holiday under E.O. No. 226 for four
years from August 7, 1995 making it exempt from income tax but not from other taxes such as
VAT. Hence, according to respondent, its export sales are not exempt from VAT,
contrary to petitioner’s claim, but its export sales is subject to 0% VAT. Moreover, it
argues that it was able to establish through a report certified by an independent Certified
Public Accountant that the input taxes it incurred from April 1, 1996 to December 31, 1997
were directly attributable to its export sales. Since it did not have any output tax against which

17
said input taxes may be offset, it had the option to file a claim for refund/tax credit of its
unutilized input taxes.

Considering the submission of the parties and the evidence on record, we find the petition
bereft of merit.

Petitioner’s contention that respondent is not entitled to refund for being exempt from
VAT is untenable. This argument turns a blind eye to the fiscal incentives granted to PEZA-
registered enterprises under Section 23 of Rep. Act No. 7916. Note that under said statute,
the respondent had two options with respect to its tax burden. It could avail of an income tax
holiday pursuant to provisions of E.O. No. 226, thus exempt it from income taxes for a
number of years but not from other internal revenue taxes such as VAT; or it could avail of the
tax exemptions on all taxes, including VAT under P.D. No. 66 and pay only the preferential
tax rate of 5% under Rep. Act No. 7916. Both the Court of Appeals and the Court of Tax
Appeals found that respondent availed of the income tax holiday for four (4) years starting
from August 7, 1995, as clearly reflected in its 1996 and 1997 Annual Corporate Income Tax
Returns, where respondent specified that it was availing of the tax relief under E.O. No.
226. Hence, respondent is not exempt from VAT and it correctly registered itself as a
VAT taxpayer. In fine, it is engaged in taxable rather than exempt transactions.
(Emphasis supplied)

Clearly, the issue in Cebu Toyo was whether the taxpayer was exempt from VAT or
subject to VAT at 0% tax rate. If subject to 0% VAT rate, the taxpayer could claim a refund
or credit of its input VAT. Again, nowhere in this case did the Court discuss, state, or rule that
the filing dates of the administrative and judicial claims are inconsequential, as long as they
are within the two-year prescriptive period.

While this Court stated in the narration of facts in Cebu Toyo that the taxpayer "did not bother
to wait for the Resolution of its (administrative) claim by the CIR" before filing its judicial claim
with the CTA, this issue was not raised before the Court. Certainly, this statement of the Court
is not a binding precedent that the taxpayer need not wait for the 120-day period to lapse.

Any issue, whether raised or not by the parties, but not passed upon by the
Court, does not have any value as precedent. As this Court has explained as early as
1926:

It is contended, however, that the question before us was answered and resolved against the
contention of the appellant in the case of Bautista vs. Fajardo (38 Phil. 624). In that case no
question was raised nor was it even suggested that said section 216 did not apply to a public
officer. That question was not discussed nor referred to by any of the parties interested in that
case. It has been frequently decided that the fact that a statute has been accepted as valid,
and invoked and applied for many years in cases where its validity was not raised or passed
on, does not prevent a court from later passing on its validity, where that question is squarely
and properly raised and presented. Where a question passes the Court sub silentio, the
case in which the question was so passed is not binding on the Court (McGirr vs.
Hamilton and Abreu, 30 Phil. 563), nor should it be considered as a precedent. (U.S. vs.
Noriega and Tobias, 31 Phil. 310; Chicote vs. Acasio, 31 Phil. 401; U.S. vs. More, 3 Cranch
[U.S.] 159, 172; U.S. vs. Sanges, 144 U.S. 310, 319; Cross vs. Burke, 146 U.S. 82.) For the
reasons given in the case of McGirr vs. Hamilton and Abreu, supra, the decision in the case
of Bautista vs. Fajardo, supra, can have no binding force in the interpretation of the question
presented here.76 (Emphasis supplied)

In Cebu Toyo, the nature of the 120-day period, whether it is mandatory or optional, was not
even raised as an issue by any of the parties. The Court never passed upon this issue.
Thus, Cebu Toyo does not constitute binding precedent on the nature of the 120-day period.

There is also the claim that there are numerous CTA decisions allegedly supporting the
argument that the filing dates of the administrative and judicial claims are inconsequential, as

18
long as they are within the two-year prescriptive period. Suffice it to state that CTA decisions
do not constitute precedents, and do not bind this Court or the public. That is why CTA
decisions are appealable to this Court, which may affirm, reverse or modify the CTA decisions
as the facts and the law may warrant. Only decisions of this Court constitute binding
precedents, forming part of the Philippine legal system.77 As held by this Court in The
Philippine Veterans Affairs Office v. Segundo:78

x x x Let it be admonished that decisions of the Supreme Court "applying or interpreting the
laws or the Constitution . . . form part of the legal system of the Philippines," and, as it were,
"laws" by their own right because they interpret what the laws say or mean. Unlike rulings of
the lower courts, which bind the parties to specific cases alone, our judgments are
universal in their scope and application, and equally mandatory in character. Let it be
warned that to defy our decisions is to court contempt. (Emphasis supplied)

The same basic doctrine was reiterated by this Court in De Mesa v. Pepsi Cola Products
Phils., Inc.:79

The principle of stare decisis et non quieta movere is entrenched in Article 8 of the Civil Code,
to wit:

ART. 8. Judicial decisions applying or interpreting the laws or the Constitution shall form a
part of the legal system of the Philippines.

It enjoins adherence to judicial precedents. It requires our courts to follow a rule already
established in a final decision of the Supreme Court. That decision becomes a judicial
precedent to be followed in subsequent cases by all courts in the land. The doctrine of stare
decisis is based on the principle that once a question of law has been examined and decided,
it should be deemed settled and closed to further argument. (Emphasis supplied)

14. CIR V. DASH ENGINEERING (GR NO. 184145)

- Court made a lengthy disquisition on the nature of excess input VAT, clarifying that
"input VAT is not ‘excessively’ collected as understood under Section 229 because at the time
the input VAT is collected the amount paid is correct and proper."22 Hence, respondent
cannot advance its position by referring to Section 229 because Section 112 is the more
specific and appropriate provision of law for claims for excess input VAT.

- Petitioner is entirely correct in its assertion that compliance with the periods provided
for in the abovequoted provision is indeed mandatory and jurisdictional, as affirmed in this
Court’s ruling in San Roque, where the Court En Banc settled the controversy surrounding the
application of the 120+30-day period provided for in Section 112 of the NIRC and reiterated
the Aichi doctrine that the 120+30-day period is mandatory and jurisdictional. Nonetheless,
the Court took into account the issuance by the Bureau of Internal Revenue (BIR) of BIR
Ruling No. DA-489-03 which misled taxpayers by explicity stating that taxpayers may file a
petition for review with the CTA even before the expiration of the 120-day period given to the
CIR to decide the administrative claim for refund. Even though observance of the periods in
Section 112 is compulsory and failure to do so will deprive the CTA of jurisdiction to hear the
case, such a strict application will be made from the effectivity of the Tax Reform Act of 1997
on January 1, 1998 until the present, except for the period from December 10, 2003 (the

19
issuance of the erroneous BIR ruling) to October 6, 2010 (the promulgation of Aichi), during
which taxpayers need not wait for the lapse of the 120+30- day period before filing their
judicial claim for refund.

The case at bench, however, does not involve the issue of premature filing of the petition for
review with the CTA. Rather, this petition seeks the denial of DEPI’s claim for refund for
having been filed late or after the expiration of the 30-day period from the denial by the CIR or
failure of the CIR to make a decision within 120 days from the submission of the documents in
support of respondent’s administrative claim.

- Therefore, in accordance with San Roque, respondent's judicial claim for refund must be
denied for having been filed late. Although respondent filed its administrative claim with the
BIR on August 9, 2004 before the expiration of the two-year period in Section l 12(A), it
undoubtedly failed to comply with the 120+ 30-day period in Section l l 2(D) (now
subparagraph C) which requires that upon the inaction of the CIR for 120 days after the
submission of the documents in support of the claim, the taxpayer has to file its judicial claim
within 30 days after the lapse of the said period. The 120 days granted to the CIR to decide
the case ended on December 7, 2004. Thus, DEPI had 30 days therefrom, or until January 6,
2005, to file a petition for review with the CTA. Unfortunately, DEPI only sought judicial relief
on May 5, 2005 when it belatedly filed its petition to the CT A, despite having had ample time
to file the same, almost four months after the period allowed by law. As a consequence of
DEPI's late filing, the CTA did not properly acquire jurisdiction over the claim.

15. CIR V. CEBU TOYO CORPORATION (GR NO. 149073)

- Taxable transactions are those transactions which are subject to value-added tax either
at the rate of ten percent (10%) or zero percent (0%). In taxable transactions, the seller shall
be entitled to tax credit for the value-added tax paid on purchases and leases of goods,
properties or services.23

An exemption means that the sale of goods, properties or services and the use or lease of
properties is not subject to VAT (output tax) and the seller is not allowed any tax credit on
VAT (input tax) previously paid. The person making the exempt sale of goods, properties or
services shall not bill any output tax to his customers because the said transaction is not
subject to VAT. Thus, a VAT-registered purchaser of goods, properties or services that are
VAT-exempt, is not entitled to any input tax on such purchases despite the issuance of a VAT
invoice or receipt.24

- In principle, the purpose of applying a zero percent (0%) rate on a taxable transaction is to
exempt the transaction completely from VAT previously collected on inputs. It is thus the only
true way to ensure that goods are provided free of VAT. While the zero rating and the
exemption are computationally the same, they actually differ in several aspects, to wit:

(a) A zero-rated sale is a taxable transaction but does not result in an output
tax while an exempted transaction is not subject to the output tax;

(b) The input VAT on the purchases of a VAT-registered person with zero-
rated sales may be allowed as tax credits or refunded while the seller in an
exempt transaction is not entitled to any input tax on his purchases despite
the issuance of a VAT invoice or receipt.

20
 (c) Persons engaged in transactions which are zero-rated, being subject to
VAT, are required to register while registration is optional for VAT-exempt
persons.

In this case, it is undisputed that respondent is engaged in the export business and is
registered as a VAT taxpayer per Certificate of Registration of the BIR.27 Further, the records
show that the respondent is subject to VAT as it availed of the income tax holiday under E.O.
No. 226. Perforce, respondent is subject to VAT at 0% rate and is entitled to a refund or credit
of the unutilized input taxes, which the Court of Tax Appeals computed at ₱2,158,714.46, but
which we find—after recomputation—should be ₱2,158,714.52.

16. SILICON PHIL., INC. V. CIR (GR NO. 172378)

Before us are two types of input VAT credits. One is a credit/refund of input VAT attributable
to zero-rated sales under Section 112 (A) of the NIRC, and the other is a credit/refund of input
VAT on capital goods pursuant to Section 112 (B) of the same Code.

1. No. In a claim for credit/refund of input VAT attributable to zero-rated sales, Section 112
(A)43 of the NIRC lays down four requisites, to wit:
1) the taxpayer must be VAT-registered;
2) the taxpayer must be engaged in sales which are zero-rated or effectively zero-
rated;
3) the claim must be filed within two years after the close of the taxable quarter when
such sales were made; and
4) the creditable input tax due or paid must be attributable to such sales, except the
transitional input tax, to the extent that such input tax has not been applied against
the output tax.

To prove that it is engaged in zero-rated sales, petitioner presented export sales invoices,
certifications of inward remittance, export declarations, and airway bills of lading for the fourth
quarter of 1998. The CTA Division, however, found the export sales invoices of no probative
value in establishing petitioner’s zero-rated sales for the purpose of claiming credit/refund of
input VAT because petitioner failed to show that it has an ATP from the BIR and to indicate
the ATP and the word "zero-rated" in its export sales invoices.

We partly agree with the CTA.

Printing the ATP on the invoices or receipts is not required.

But while there is no law requiring the ATP to be printed on the invoices or receipts, Section
238 of the NIRC expressly requires persons engaged in business to secure an ATP from the
BIR prior to printing invoices or receipts. Failure to do so makes the person liable under
Section 264 of the NIRC.

Under Section 112 (A) of the NIRC, a claimant must be engaged in sales which are zero-
rated or effectively zero-rated. To prove this, duly registered invoices or receipts evidencing
zero-rated sales must be presented. However, since the ATP is not indicated in the invoices
or receipts, the only way to verify whether the invoices or receipts are duly registered is by
requiring the claimant to present its ATP from the BIR. Without this proof, the invoices or
receipts would have no probative value for the purpose of refund.

21
All told, the non-presentation of the ATP and the failure to indicate the word "zero-rated" in
the invoices or receipts are fatal to a claim for credit/refund of input VAT on zero-rated sales.
The failure to indicate the ATP in the sales invoices or receipts, on the other hand, is not. In
this case, petitioner failed to present its ATP and to print the word "zero-rated" on its export
sales invoices. Thus, we find no error on the part of the CTA in denying outright petitioner’s
claim for credit/refund of input VAT attributable to its zero-rated sales.

2. No. Capital goods are defined under Section 4.106-1(b) of RR No. 7-95.

To claim a refund of input VAT on capital goods, Section 112 (B)56 of the NIRC requires that:
1. the claimant must be a VAT registered person;
2. the input taxes claimed must have been paid on capital goods;
3. the input taxes must not have been applied against any output tax liability; and
4. the administrative claim for refund must have been filed within two (2) years after
the close of the taxable quarter when the importation or purchase was made.

"Capital goods or properties" refer to goods or properties with estimated useful life greater
that one year and which are treated as depreciable assets under Section 29 (f), used directly
or indirectly in the production or sale of taxable goods or services.

Based on the foregoing definition, we find no reason to deviate from the findings of the CTA
that training materials, office supplies, posters, banners, T-shirts, books, and the other similar
items reflected in petitioner’s Summary of Importation of Goods are not capital goods. A
reduction in the refundable input VAT on capital goods from P15,170,082.00 to
P9,898,867.00 is therefore in order. The Petition is hereby DENIED.

17. WESTERN MINDANAO POWER CORP. V. CIR (181136)

- Thus, a taxpayer engaged in zero-rated or effectively zero-rated sale may apply for the
issuance of a tax credit certificate, or refund of creditable input tax due or paid, attributable to
the sale.

In a claim for tax refund or tax credit, the applicant must prove not only entitlement to
the grant of the claim under substantive law. It must also show satisfaction of all the
documentary and evidentiary requirements for an administrative claim for a refund or tax
credit.[15] Hence, the mere fact that petitioners application for zero-rating has been approved
by the CIR does not, by itself, justify the grant of a refund or tax credit. The taxpayer claiming
the refund must further comply with the invoicing and accounting requirements mandated by
the NIRC, as well as by revenue regulations implementing them. [16]

Under the NIRC, a creditable input tax should be evidenced by a VAT invoice or
official receipt,[17] which may only be considered as such when it complies with the
requirements of RR 7-95, particularly Section 4.108-1. This section requires, among others,
that (i)f the sale is subject to zero percent (0%) value-added tax, the term zero-rated
sale shall be written or printed prominently on the invoice or receipt.

22
 - In fact, this Court has consistently held as fatal the failure to print the word zero-
rated on the VAT invoices or official receipts in claims for a refund or credit of input VAT on
zero-rated sales, even if the claims were made prior to the effectivity of R.A. 9337. [20] Clearly
then, the present Petition must be denied.

18. PANASONIC COMMUNICATIONS IMAGING CORP. OF THE PHIL. V.

CIR (GR NO. 178090)

- The VAT is a tax on consumption, an indirect tax that the provider of goods or
services may pass on to his customers. Under the VAT method of taxation, which is invoice-
based, an entity can subtract from the VAT charged on its sales or outputs the VAT it paid on
its purchases, inputs and imports.[6] For example, when a seller charges VAT on its sale, it
issues an invoice to the buyer, indicating the amount of VAT he charged. For his part, if the
buyer is also a seller subjected to the payment of VAT on his sales, he can use the invoice
issued to him by his supplier to get a reduction of his own VAT liability. The difference in tax
shown on invoices passed and invoices received is the tax paid to the government. In case
the tax on invoices received exceeds that on invoices passed, a tax refund may be claimed.

Under the 1997 NIRC, if at the end of a 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 taxes exceed his input taxes that he has to pay the excess to the
BIR. If the input taxes exceed the output taxes, however, the excess payment shall be carried
over to the succeeding quarter or quarters. Should the input taxes result from zero-rated or
effectively zero-rated transactions or from the acquisition of capital goods, any excess over
the output taxes shall instead be refunded to the taxpayer.[9]

Zero-rated transactions generally refer to the export sale of goods and services. The
tax rate in this case is set at zero. When applied to the tax base or the selling price of the
goods or services sold, such zero rate results in no tax chargeable against the foreign buyer
or customer. But, although the seller in such transactions charges no output tax, he can claim
a refund of the VAT that his suppliers charged him. The seller thus enjoys automatic zero
rating, which allows him to recover the input taxes he paid relating to the export sales, making
him internationally competitive.[10]

For the effective zero rating of such transactions, however, the taxpayer has to be
VAT-registered and must comply with invoicing requirements. [11] Interpreting these
requirements, respondent CIR ruled that under Revenue Memorandum Circular (RMC) 42-
2003, the taxpayers failure to comply with invoicing requirements will result in the
disallowance of his claim for refund. RMC 42-2003 provides:

A-13. Failure by the supplier to comply with the invoicing

requirements on the documents supporting the sale of goods and
services will result to the disallowance of the claim for input tax by the
purchaser-claimant.

If the claim for refund/TCC is based on the existence of zero-

rated sales by the taxpayer but it fails to comply with the invoicing
requirements in the issuance of sales invoices (e.g., failure to indicate
the TIN), its claim for tax credit/refund of VAT on its purchases shall be
denied considering that the invoice it is issuing to its customers does
not depict its being a VAT-registered taxpayer whose sales are
classified as zero-rated sales. Nonetheless, this treatment is without
prejudice to the right of the taxpayer to charge the input taxes to the
appropriate expense account or asset account subject to depreciation,
whichever is applicable. Moreover, the case shall be referred by the
processing office to the concerned BIR office for verification of other
tax liabilities of the taxpayer.

23
 - Further, the printing of the word zero-rated on the invoice helps segregate sales that
are subject to 10% (now 12%) VAT from those sales that are zero-rated.[15] Unable to submit
the proper invoices, petitioner Panasonic has been unable to substantiate its claim for refund.

Petitioner Panasonics citation of Intel Technology Philippines, Inc. v. Commissioner of

Internal Revenue[16] is misplaced. Quite the contrary, it strengthens the position taken by
respondent CIR. In that case, the CIR denied the claim for tax refund on the ground of the
taxpayers failure to indicate on its invoices the BIR authority to print. But Sec. 4.108-1
required only the following to be reflected on the invoice:

1. The name, taxpayers identification number (TIN) and address of

seller;
2. Date of transaction;
3. Quantity, unit cost and description of merchandise or nature of
service;
4. The name, TIN, business style, if any, and address of the VAT-
registered purchaser, customer or client;
5. The word zero-rated imprinted on the invoice covering zero-rated
sales; and
6. The invoice value or consideration.

This Court held that, since the BIR authority to print is not one of the items required to
be indicated on the invoices or receipts, the BIR erred in denying the claim for refund. Here,
however, the ground for denial of petitioner Panasonics claim for tax refundthe absence of the
word zero-rated on its invoicesis one which is specifically and precisely included in the above
enumeration. Consequently, the BIR correctly denied Panasonics claim for tax refund.

19. CIR V. THE INSULAR LIFE ASSURANCE CO. LTD., (GR NO. 197192)

---- CDS MAN ANG TOPIC NIYA

- PAKI DOUBLE CHECK NYA…

20. ROHM APOLLO V. CIR (GR NO. 168950)

- Section 112(D) of the 1997 Tax Code states the time requirements for filing a judicial
claim for the refund or tax credit of input VAT. The legal provision speaks of two periods: the
period of 120 days, which serves as a waiting period to give time for the CIR to act on the
administrative claim for a refund or credit; and the period of 30 days, which refers to the
period for filing a judicial claim with the CTA. It is the 30-day period that is at issue in this
case.

The landmark case of Commissioner of Internal Revenue v. San Roque Power

Corporation21 has interpreted Section 112 (D). The Court held that the taxpayer can file an
appeal in one of two ways: (1) file the judicial claim within 30 days after the Commissioner

24
denies the claim within the 120-day waiting period, or (2) file the judicial claim within 30 days
from the expiration of the 120-day period if the Commissioner does not act within that period.

- The error of the taxpayer lies in the fact that it had mistakenly believed that a judicial
claim need not be filed within 30 days from the lapse of the 120-day period. It had believed
that the only requirement is that the judicial claim must be filed withinthe two-year period
under Sections 112(A) and (B) of the 1997 Tax Code. In other words, Rohm Apollo
erroneously thought that the 30-day period does not apply to cases of the CIR’s inaction after
the lapse of the 120-day waiting period, and that a judicial claim is seasonably filed so long as
it is done within the two year period. Thus, it filed the Petition for Review with the CTA only on
11 September 2002.

- Justice Antonio Carpio, writing for the Court in San Roque, explained that the 30-day
period is a 1997 Tax Code innovation that does away with the old rule where the taxpayer
could file a judicial claim when there is inaction on the part of the CIR and the two-year statute
of limitations is about to expire. Justice Carpio stated:

The old rule that the taxpayer may file the judicial claim, without waiting for the
Commissioner's decision if the two-year prescriptive period is about to expire, cannot apply
because that rule was adopted before the enactment of the 30-day period. The 30-day period
was adopted precisely to do away with the old rule, so that under the VAT System the
taxpayer will always have 30 days to file the judicial claim even if the Commissioner acts only
on the 120th day, or does not act at all during the 120-day period.With the 30-day period
always available to the taxpayer, the taxpayer can no longer file a judicial claim for refund or
credit of input VAT without waiting for the Commissioner to decide until the expiration of the
120-day period.25 (Emphases supplied) The 30-day period to appeal is mandatory and
jurisdictional.

As a general rule, the 30-day period to appeal is both mandatory and jurisdictional. The
only exception to the general rule is when BIR Ruling No. DA-489-03 was still in force, thatis,
between 10 December 2003 and 5 October 2010, The BIR Ruling excused premature filing,
declaring that the taxpayer-claimant need not wait for the lapse of the 120-day period before it
could seek judicial relief with the CTA by way of Petition for Review. In San Roque, the High
Court explained boththe general rule and the exception:

To repeat, a claim for tax refund or credit, like a claim for tax exemption, is construed
strictly against the taxpayer.1âwphi1One of the conditions for a judicial claim of refund or
credit under the VAT System is with the 120+30 day mandatory and jurisdictional periods.
Thus, strict compliance with the 120+30 day periods is necessary for such a claim to prosper,
whether before, during, or after the effectivity of the Atlas doctrine, except for the period from
the issuance of BIR Ruling No. DA-489-03 on 10 December 2003 to 6 October 2010 when the
Aichidoctrine was adopted, which again reinstated the 120+30 day periods as mandatory and
jurisdictional.26

San Roque likewise ruled out the application of the BIR ruling to cases of late filing. The
Court held that the BIR ruling, as an exception to the mandatory and jurisdictional nature of
the 120+30 day periods, is limited to premature filing and does not extend to the late filing of a
judicial claim.27

In sum, premature filing is allowed for cases falling during the time when BIR Ruling No. DA-
489-03 was in force; nevertheless, late filing is absolutely prohibited even for cases falling
within that period.

25
21. PANAY POWER CORP. V. CIR (GR NO. 203351)

- In the Aichi case cited by both the CTA Division and the CTA En Banc, the Court held
that the observance of the 120-day period is a mandatory and jurisdictional requisite to the
filing of a judicial claim for refund before the CTA. Consequently, its non-observance would
lead to the dismissal of the judicial claim on the ground of lack of jurisdiction. Aichi also
clarified that the two (2)-year prescriptive period applies only to administrative claims and not
to judicial claims.29 Succinctly put, once the administrative claim is filed within the two (2)-year
prescriptive period, the claimant must wait for the 120-day period to end and, thereafter, he is
given a 30-day period to file his judicial claim before the CTA, even if said 120-day and 30-
day periods would exceedthe aforementioned two (2)-year prescriptive period.30

However, in CIR v. San Roque Power Corporation(San Roque),31 the Court recognized
an exception to the mandatory and jurisdictional nature of the 120-day period. It ruled that BIR
Ruling No. DA-489-03 dated December 10, 2003 provided a valid claim for equitable
estoppelunder Section 24632 of the NIRC. In essence, the aforesaid BIR Ruling stated that the
"taxpayer-claimant need not wait for the lapse of the 120-day period before it could seek
judicial relief with the CTA by way of Petition for Review."33

Recently, in Taganito Mining Corporation v. CIR,34 the Court reconciled the

pronouncements in the Aichi and San Roque cases in the following manner:

Reconciling the pronouncements in the Aichi and San Roque cases, the rule must
therefore be that during the period December 10, 2003 (when BIR Ruling No. DA-489-03 was
issued) to October 6, 2010 (when the Aichi case was promulgated), taxpayers-claimants need
not observe the 120-day period before it could file a judicial claim for refund of excess input
VAT before the CT A. Before and after the aforementioned period (i.e., December 10, 2003 to
October 6, 2010), the observance of the 120-dal period is mandatory and jurisdictional to the
filing of such claim.35(Emphases and underscoring supplied)

22. NIPPON EXPRESS CORP., (GR NO. 185115)

- In Commissioner of Internal Revenue v. San Roque Power Corporation, Taganito

Mining Corporation v. Commissioner of Internal Revenue, and Philex Mining Corporation v.
Commissioner of Internal Revenue (San Roque case),[19] this Court has finally settled the
issue on proper observance of the prescriptive periods in claiming for refund of creditable
input tax due or paid attributable to any zero-rated or effectively zero-rates sales. In view of
the foregoing jurisprudential pronouncements, there appears to be an imperious need for this
Court to review the factual findings of the CTA in order to attain a complete determination of
the issue presented.

- Certainly, it is evident from the foregoing jurisprudential pronouncements that a

taxpayer-claimant only had a limited period of thirty (30) days from the expiration of the one
hundred twenty (120)-day period of inaction of the Commissioner of Internal Revenue (CIR) to
file its judicial claim with the CTA, with the exception of claims made during the effectivity of
Bureau of Internal Revenue (BIR) Ruling No. DA-489-03 (from 10 December 2003 to 5
October 2010).[30] Failure to do so, the judicial claim shall prescribe or be considered as
filed out of time.

26
 - It must be emphasized that jurisdiction over the subject matter or nature of an action is
fundamental for a court to act on a given controversy,[33] and is conferred only by law and
not by the consent or waiver upon a court which, otherwise, would have no jurisdiction over
the subject matter or nature of an action. Lack of jurisdiction of the court over an action or the
subject matter of an action cannot be cured by the silence, acquiescence, or even by express
consent of the parties.[34] If the court has no jurisdiction over the nature of an action, its only
jurisdiction is to dismiss the case. The court could not decide the case on the merits.[35]

The CTA, even if vested with special jurisdiction, is, as courts of general jurisdiction can only
take cognizance of such matters as are clearly within its statutory authority.[36] Relative
thereto, when it appears from the pleadings or the evidence on record that the court has no
jurisdiction over the subject matter, the court shall dismiss the claim.[37]

Finally for academic discussion, as regards the substantiation requirements, it is worthy to

mention that in Kepco Philippines Corporation v. Commissioner of Internal Revenue,[38] the
High Court ruled that under the law, a VAT invoice is necessary for every sale, barter or
exchange of goods or properties while a VAT official receipt properly pertains to every lease
of goods or properties, and every sale, barter or exchange of services. In other words, the
VAT invoice is the seller's best proof of the sale of the goods or services to the buyer while
the VAT receipt is the buyer's best evidence of the payment of goods or services received
from the seller. Thus, the High Court concluded that VAT invoice and VAT receipt should not
be confused as referring to one and the same thing. Certainly, neither does the law intend
the two to be used interchangeably.

23. CARGILL PHILS., V. CIR (GR NO. 203774)

- In the landmark case of Aichi, it was held that the observance of the 120-day period is a
mandatory and jurisdictional requisite to the filing of a judicial claim for refund before the CTA.
As such, its non-observance would warrant the dismissal of the judicial claim for lack of
jurisdiction. It was, withal, delineated in Aichi that the two (2)-year prescriptive period would
only apply to administrative claims, and not to judicial claims.36 Accordingly, once the
administrative claim is filed within the two (2)-year prescriptive period, the taxpayer-claimant
must wait for the lapse of the 120- day period and, thereafter, he has a 30-day period within
which to file his judicial claim before the CTA, even if said 120-day and 30-day periods would
exceed the aforementioned two (2)-year prescriptive period.37

Nevertheless, the Court, in the case of CIR v. San Roque Power Corporation38 (San Roque),
recognized an exception to the mandatory and jurisdictional nature of the 120-day period. San
Roque enunciated that BIR Ruling No. DA-489-03 dated December 10, 2003, which expressly
declared that the "taxpayer-claimant need not wait for the lapse of the 120-day period before
it could seek judicial relief with the CTA by way of petition for review," provided a valid claim
for equitable estoppel under Section 24639 of the NIRC.40

In the more recent case of Taganito Mining Corporation v. CIR,41 the Court reconciled the
pronouncements in Aichi and San Roque, holding that from December 10, 2003 to October 6,
2010 which refers to the interregnum when BIR Ruling No. DA-489-03 was issued until the
date of promulgation of Aichi, taxpayer-claimants need not observe the stringent 120-day

27
period; but before and after said window period, the mandatory and jurisdictional nature of the
120-day period remained in force, viz.:

Reconciling the pronouncements in the Aichi and San Roque cases, the rule must therefore
be that during the period December 10, 2003 (when BIR Ruling No. DA-489-03 was issued)
to October 6, 2010 (when the Aichi case was promulgated), taxpayers-claimants need not
observe the 120-day period before it could file a judicial claim for refund of excess input VAT
before the CTA. Before and after the aforementioned period (i.e., December 10, 2003 to
October 6, 2010), the observance of the 120-day period is mandatory and jurisdictional to the
filing of such claim.42(Emphases and underscoring supplied)

28