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DECISION
On November 13, 2002, Team Energy filed with the BIR "an Application for
Effective Zero-Rate of its supply of electricity to the NPC, which was
subsequently approved."
On December 17, 2004, Team Energy filed a claim for refund of unutilized
input VAT in the amount of P83,465,353.50, for the four quarters of taxable
year 2003. On April 22, 2005, Team Energy appealed before the CTA its
2003 first quarter VAT claim of P15,085,320.31.
Government:
Team Energy must prove its compliance with the registration requirements
of a VAT taxpayer; the invoicing and accounting requirements for VAT-
registered persons; and the checklist of requirements for a VAT refund
under Revenue Memorandum Order No. 53-98. Team Energy's
administrative and judicial claims for the first and second quarters were
filed beyond the two (2)-year period prescribed in Section 112(A) of the
1997 NIRC. Additionally, she averred that Team Energy's judicial claims for
the second, third, and fourth quarters of 2003 were filed beyond the 30-day
period to appeal under Section 112 of the 1997 NIRC.
Team Energy's administrative claim and judicial claims were well within the
two (2)-year prescriptive period.
Taxpayer: Appealed its VAT refund claims for the second to fourth quarters
of 2003 with the CTA.
Issues:
1. Whether or not the Team Energy Corporation's claim for tax refund of
its unutilized input VAT for the second to fourth quarters of 2003 be
disallowed on the ground of lack of jurisdiction;
Taxpayer:
1. Revenue Regulations No. 7-95 did not require a specific number of
days after the 60-day, now 120-day, period given to the
Commissioner to decide on the claim within which to appeal to the
CTA. To deny its claim of P70,700,533.01 duly proven before the CTA
First Division "would result to unjust enrichment on the part of the
government."
2. At the time when the unutilized input VAT [was] incurred in 2003, the
applicable NIRC provisions did not create a distinction between an
official receipt and an invoice in substantiating a claim for refund.
Section 113, prior to its amendment by Republic Act No. 9337, must
be applied to its input VAT incurred in 2003, and that the disallowed
amount of P258,874.55 supported by VAT invoice or official receipts
should be allowed.
Government:
Team Energy is not entitled to any tax refund or credit because it cannot
qualify for VAT zero-rating under Republic Act No. 9136 or the Electrical
Power Industry Reform Act (EPIRA) Law for failure to submit its ERC
Registration and Certificate of Compliance. To operate a generation facility,
Team Energy must have a duly issued ERC Certificate of Compliance,
without which an entity cannot be considered a power generation company
and its sales of generated power will not qualify for VAT zero-rating. The
CTA should have determined Team Energy's compliance with Republic Act
No. 9136 or the EPIRA Law because the burden lies on the taxpayer to
prove its entitlement to a refund.
Ruling:
A claim for input VAT refund or credit is construed strictly against the
taxpayer. Accordingly, there must be strict compliance with the
prescriptive periods and substantive requirements set by law before a
claim for tax refund or credit may prosper. The mere fact that Team
Energy has proved its excess input VAT does not entitle it as a matter
of right to a tax refund or credit. The 120+30-day periods in Section
112 is not a mere procedural technicality that can be set aside if the
claim is otherwise meritorious. It is a mandatory and jurisdictional
condition imposed by law. Team Energy's failure to comply with the
prescriptive periods is, thus, fatal to its claim.
2. Claimants of tax refunds have the burden to prove their entitlement to
the claim under substantive law and the factual basis of their claim.
Moreover, in claims for VAT refund/credit, applicants must satisfy the
substantiation and invoicing requirements under the NIRC and other
implementing rules and regulations.
Under Section 110(A)(1) of the 1997 NIRC, creditable input tax must
be evidenced by a VAT invoice or official receipt, which must in turn
reflect the information required in Sections 113 and 237 of the Code.
It should be noted that the seller will only become liable to pay the output
VAT upon receipt of payment from the purchaser. If we are to use sales
invoice in the sale of services, an absurd situation will arise when the
purchaser of the service can claim tax credit representing input VAT even
before there is payment of the output VAT by the seller on the sale
pertaining to the same transaction. As a matter of fact, if the seller is not
paid on the transaction, the seller of service would legally not have to pay
output tax while the purchaser may legally claim input tax credit thereon.
The government ends up refunding a tax which has not been paid at all.
Hence, to avoid this, VAT official receipt for the sale of services is an
absolute requirement.
Thus, the CTA properly disallowed the input VAT of P258,874.55 for Team
Energy's failure to comply with the invoicing requirements.
3. Indeed, the requirements of the EPIRA law would apply to claims for
refund filed under the EPIRA. In such case, the taxpayer must prove that it
has been duly authorized by the ERC to operate a generation facility and
that it derives its sales from power generation.