620 Phil. 554
CHICO-NAZARIO, J.:
SEC. 112. Refunds or Tax Credits of Input Tax. -On the other hand, petitioner is a domestic corporation organized under the corporate laws of the Republic of the Philippines. On 14 October 1997, it was incorporated for the sole purpose of building and operating the San Roque Multipurpose Project in San Manuel, Pangasinan, which is an indivisible project consisting of the power station, the dam, spillway, and other related facilities.[4] It is registered with the Board of Investments (BOI) on a preferred pioneer status to engage in the design, construction, erection, assembly, as well as own, commission, and operate electric power-generating plants and related activities, for which it was issued the Certificate of Registration No. 97-356 dated 11 February 1998.[5] As a seller of services, petitioner is registered with the BIR as a VAT taxpayer under Certificate of Registration No. OCN-98-006-007394.[6]
(A) Zero-rated or Effectively Zero-rated Sales--Any VAT-registered person, whose sales are zero-rated or effectively zero-rated 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 creditable input tax due or paid attributable to such sales, except transitional input tax, to the extent that such input tax has not been applied against output tax: Provided, however, That in the case of zero-rated sales under Section 106(A)(2)(a)(1), (2) and (B) and Section 108 (B)(1) and (2), the acceptable foreign currency exchange proceeds thereof had been duly accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP): Provided, further, That where the taxpayer is engaged in zero-rated or effectively zero-rated sale and also in taxable or exempt sale of goods or properties or services, and the amount of creditable input tax due or paid cannot be directly and entirely attributed to any one of the transactions, it shall be allocated proportionately on the basis of the volume of sales.
(B) Capital Goods--A VAT-registered person may apply for the issuance of a tax credit certificate or refund of input taxes paid on capital goods imported or locally purchased, to the extent the such input taxes have not been applied against output taxes. The application may be made only within two (2) years after the close of the taxable quarter when the importation or purchase was made.
Period Covered | Date Filed | Particulars | Amount |
1st Quarter (January 1, 2002 | April 20, 2002 | Tax Due for the Quarter (Box 13C) | P 26,247.27 |
Input Tax carried over from previous qtr (22B) | 296,124,429.21 | ||
Input VAT on Domestic Purchases for the Qtr | | ||
(22D) | 95,003,348.91 | ||
Input VAT on Importation of Goods for the Qtr | | ||
(22F) | 20,758,668.00 | ||
Total Available Input tax (23) | 411,886,446.12 | ||
VAT Refund/TCC Claimed (24A) | 173,909,435.66 | ||
Net Creditable Input Tax (25) | 237,977,010.46 | ||
VAT payable (Excess Input Tax) (26) | (237,950,763.19) | ||
Tax Payable (overpayment) (28) | (237,950,763.19) |
2nd Quarter (April 1, 2002 to June 30, 2002) | July 24, 2002 | Tax Due for the Quarter (Box 13C) | P blank |
Input Tax carried over from previous qtr (22B) | 237,950,763.19 | ||
Input VAT on Domestic Purchases for the Qtr | | ||
(22D) | 65,206,499.83 | ||
Input VAT on Importation of Goods for the Qtr | | ||
(22F) | 18,485,758.00 | ||
Total Available Input tax (23) | 321,643,021.02 | ||
VAT Refund/TCC Claimed (24A) | 237,950,763.19 | ||
Net Creditable Input Tax (25) | 83,692,257.83 | ||
VAT payable (Excess Input Tax) (26) | (83,692,257.83) | ||
Tax Payable (overpayment) (28) | (83,692,257.83) |
3rd Quarter (July 1, 2002 to September 30, 2002) | October 25, 2002 | Tax Due for the Quarter (Box 13C) | P blank |
Input Tax carried over from previous qtr (22B) | 199,428,027.47 | ||
Input VAT on Domestic Purchases for the Qtr | | ||
(22D) | 28,924,020.79 | ||
Input VAT on Importation of Goods for the Qtr | | ||
(22F) | 1,465,875.00 | ||
Total Available Input tax (23) | 229,817,923.26 | ||
VAT Refund/TCC Claimed (24A) | Blank | ||
Net Creditable Input Tax (25) | 229,817,923.26 | ||
VAT payable (Excess Input Tax) (26) | (229,817,923.26) | ||
Tax Payable (overpayment) (28) | (229,817,923.26) |
4th Quarter (October 1, 2002 | January 23, 2003 | Tax Due for the Quarter (Box 13C) | P 34,996.36 |
Input Tax carried over from previous qtr (22B) | 114,082,153.62 | ||
Input VAT on Domestic Purchases for the Qtr | | ||
(22D) | 18,166,330.54 | ||
Input VAT on Importation of Goods for the Qtr | | ||
(22F) | 2,308,837.00 | ||
Total Available Input tax (23) | 134,557,321.16 | ||
VAT Refund/TCC Claimed (24A) | 83,692,257.83 | ||
Net Creditable Input Tax (25) | 50,865,063.33 | ||
VAT payable (Excess Input Tax) (26) | (50,830,066.97) | ||
Tax Payable (overpayment) (28) | (50,830,066.97) |
Qtr Involved | Output Tax | Input Tax | ||
| | Domestic Purchases | Importations | Excess Input Tax |
| (A) | (B) | (C) | (D) = (B) + (C) -(A) |
1st | P 26,247.27 | P95,003,348.91 | P20,758,668.00 | P115,735,769.84 |
2nd | - | 65,206,499.83 | 18,485,758.00 | 83,692,257.83 |
3rd | - | 28,924,020.79 | 1,465,875.00 | 30,389,895.79 |
4th | 34,996.36 | 18,166,330.54 | 2,308,837.00 | 20,440,171.18 |
| P61,243.63 | P207,300,200.07 | P43,019,138.00 | P250,258,094.44 |
Period Covered | Date Filed | Particulars | Amount |
1st Quarter (January 1, 2002 | April 24, 2003 | Tax Due for the Quarter (Box 13C) | P 26,247.27 |
Input Tax carried over from previous qtr (22B) | 297,719,296.25 | ||
Input VAT on Domestic Purchases for the Qtr | | ||
(22D) | 95,126,981.69 | ||
(22F) | 20,758,668.00 | ||
Total Available Input tax (23) | 413,604,945.94 | ||
VAT Refund/TCC Claimed (24A) | 175,544,002.27 | ||
Net Creditable Input Tax (25) | 175,544,002.27 | ||
VAT payable (Excess Input Tax) (26) | (238,060,943.67) | ||
Tax Payable (overpayment) (28) | (238,034,696.40) |
2nd Quarter (April 1, 2002 to June 30, 2002) | April 24, 2003 | Tax Due for the Quarter (Box 13C) | P blank |
Input Tax carried over from previous qtr (22B) | 238,034,696.40 | ||
Input VAT on Domestic Purchases for the Qtr | | ||
(22D) | 65,206,499.83 | ||
Input VAT on Importation of Goods for the Qtr | | ||
(22F) | 18,485,758.00 | ||
Total Available Input tax (23) | 321,643,021.02 | ||
VAT Refund/TCC Claimed (24A) | 237,950,763.19 | ||
Net Creditable Input Tax (25) | 83,692,257.83 | ||
VAT payable (Excess Input Tax) (26) | (83,692,257.83) | ||
Tax Payable (overpayment) (28) | (83,692,257.83) |
3rd Quarter (July 1, 2002 to September 30, 2002) | October 25, 2002 | Tax Due for the Quarter (Box 13C) | P blank |
Input Tax carried over from previous qtr (22B) | 83,692,257.83 | ||
Input VAT on Domestic Purchases for the Qtr | | ||
(22D) | 28,924,020.79 | ||
Input VAT on Importation of Goods for the Qtr | | ||
(22F) | 1,465,875.00 | ||
Total Available Input tax (23) | 114,082,153.62 | ||
VAT Refund/TCC Claimed (24A) | Blank | ||
Net Creditable Input Tax (25) | 114,082,153.62 | ||
VAT payable (Excess Input Tax) (26) | (114,082,153.62) | ||
Tax Payable (overpayment) (28) | (114,082,153.62) |
4th Quarter (October 1, 2002 to December 31, 2002) | January 23, 2003 | Tax Due for the Quarter (Box 13C) | P 34,996.36 |
Input Tax carried over from previous qtr (22B) | 114,082,153.62 | ||
Input VAT on Domestic Purchases for the Qtr | | ||
(22D) | 17,918,056.50 | ||
Input VAT on Importation of Goods for the Qtr | | ||
(22F) | 1,573,004.00 | ||
Total Available Input tax (23) | 133,573,214.12 | ||
VAT Refund/TCC Claimed (24A) | 83,692,257.83 | ||
Net Creditable Input Tax (25) | 49,880,956.29 | ||
VAT payable (Excess Input Tax) (26) | (49,845,959.93) | ||
Tax Payable (overpayment) (28) | (49,845,959.93) |
Qtr Involved | Date Filed | Output Tax | Input Tax | ||
| | | Domestic Purchases | Importations | Excess Input Tax |
| | (A) | (B) | (C) | (D) = (B) + (C) -(A) |
1st | 30-May-03 | P 26,247.27 | P95,126,981.69 | P20,758,668.00 | P115,859,402.42 |
2nd | 25-Oct-02 | - | 65,206,499.83 | 18,185,758.00 | 83,692,257.83 |
3rd | 27-Feb-03 | - | 28,924,920.79 | 1,465,875,00 | 30,389,895.79 |
4th | 31-Jul-03 | 34,996.36 | 17,918,056.50 | 1,573,004.00 | 19,456,064.14 |
| | P61,243.63 | P207,175,558.81 | P42,283,305.00 | P249,397,620.18 |
Simply put, the issue is: whether or not petitioner is entitled to refund or tax credit in the amount of P249,397,620.18 representing its unutilized input VAT paid on importation and purchases of capital and other taxable goods and services from January 1 to December 31, 2002.
- Whether or not petitioner's sales are subject to value-added taxes at effectively zero percent (0%) rate;
- Whether or not petitioner incurred input taxes which are attributable to its effectively zero-rated transactions;
- Whether or not petitioner's importation and purchases of capital goods and related services are within the scope and meaning of "capital goods" under Revenue Regulations No. 7-95;
- Whether or not petitioner's input taxes are sufficiently substantiated with VAT invoices or official receipts;
- Whether or not the VAT input taxes being claimed for refund/tax credit by petitioner (had) been credited or utilized against any output taxes or (had) been carried forward to the succeeding quarter or quarters; and
- Whether or not petitioner is entitled to a refund of VAT input taxes it paid from January 1, 2002 to December 31, 2002 in the total amount of Two Hundred Forty Nine Million Three Hundred Ninety Seven Thousand Six Hundred Twenty and 18/100 Pesos (P249,397,620.18).
WHEREFORE, the instant Petition for Review is DENIED for lack of merit.[17]Not satisfied with the foregoing Decision dated 23 March 2006, petitioner filed a Motion for Reconsideration which was denied by the CTA Second Division in a Resolution dated 4 January 2007.[18]
WHEREFORE, premises considered, the instant petition is hereby DISMISSED. Accordingly, the assailed Decision and Resolution are hereby AFFIRMED.[20]The CTA En Banc denied petitioner's Motion for Reconsideration in a Resolution dated 22 October 2007.[21]
The present Petition is meritorious.I
THE COURT OF TAX APPEALS EN BANC COMMITTED SERIOUS ERROR AND ACTED WITH GRAVE ABUSE OF DISCRETION TANTAMOUNT TO LACK OR EXCESS OF JURISDICTION IN FAILING OR REFUSING TO APPRECIATE THE OVERWHELMING AND UNCONTROVERTED EVIDENCE SUBMITTED BY THE PETITIONER, THUS DEPRIVING PETITIONER OF ITS PROPERTY WITHOUT DUE PROCESS; ANDII
THE COURT OF TAX APPEALS COMMITTED SERIOUS ERROR AND ACTED WITH GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION IN RULING THAT THE ABSENCE OF ZERO-RATED SALES BY PETITIONER DURING THE YEAR COVERED BY THE CLAIM FOR REFUND DOES NOT ENTITLE PETITIONER TO A REFUND OF ITS EXCESS VAT INPUT TAXES ATTRIBUTABLE TO ZERO-RATED SALES, CONTRARY TO PROVISIONS OF LAW.[22]
(A) Zero-rated or Effectively Zero-rated Sales--Any VAT-registered person, whose sales are zero-rated or effectively zero-rated 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 creditable input tax due or paid attributable to such sales, except transitional input tax, to the extent that such input tax has not been applied against output tax: Provided, however, That in the case of zero-rated sales under Section 106(A)(2)(a)(1), (2) and (B) and Section 108(B)(1) and (2), the acceptable foreign currency exchange proceeds thereof had been duly accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP): Provided, further, That where the taxpayer is engaged in zero-rated or effectively zero-rated sale and also in taxable or exempt sale of goods or properties or services, and the amount of creditable input tax due or paid cannot be directly and entirely attributed to any one of the transactions, it shall be allocated proportionately on the basis of the volume of sales.To claim refund or tax credit under Section 112(A), petitioner must comply with the following criteria: (1) the taxpayer is VAT registered; (2) the taxpayer is engaged in zero-rated or effectively zero-rated sales; (3) the input taxes are due or paid; (4) the input taxes are not transitional input taxes; (5) the input taxes have not been applied against output taxes during and in the succeeding quarters; (6) the input taxes claimed are attributable to zero-rated or effectively zero-rated sales; (7) for zero-rated sales under Section 106(A)(2)(1) and (2); 106(B); and 108(B)(1) and (2), the acceptable foreign currency exchange proceeds have been duly accounted for in accordance with BSP rules and regulations; (8) where there are both zero-rated or effectively zero-rated sales and taxable or exempt sales, and the input taxes cannot be directly and entirely attributable to any of these sales, the input taxes shall be proportionately allocated on the basis of sales volume; and (9) the claim is filed within two years after the close of the taxable quarter when such sales were made.[24]
In performing the procedures referred under the Procedures Performed section of this report, no matters came to our attention that cause us to believe that the amount of input VAT applied for as tax credit certificate/refund of P249,397,620.18 for the period January 1, 2002 to December 31, 2002 should be adjusted except for input VAT claimed with incomplete documentation, those with various and other exceptions on the supporting documents and those with errors in computation totaling P3,266,009.78, as discussed in the Findings and Results of the Agreed-Upon Audit Procedures Performed sections of this report. We have also ascertained that the input VAT claimed are properly recorded in the books and, except as specifically identified in the Findings and Results of the Agreed-Upon Audit Procedures Performed sections of this report, are properly supported by original and appropriate suppliers' VAT invoices and/or official receipts.[25]Fourthly, the input taxes claimed, which consisted of local purchases and importations made in 2002, are not transitional input taxes, which Section 111 of the NIRC defines as input taxes allowed on the beginning inventory of goods, materials and supplies.[26] Fifthly, the audit report of Aguilar affirms that the input VAT being claimed for tax refund or credit is net of the input VAT that was already offset against output VAT amounting to P26,247.27 for the first quarter of 2002 and P34,996.36 for the fourth quarter of 2002,[27] as reflected in the Quarterly VAT Returns.[28]
A: San Roque Power Corporation has had no sale yet during 2002. The P42,500,000.00 which was paid to us by Napocor was something similar to a more cost recovery scheme. The pre-agreed amount would be about equal to our costs for producing the electricity during the testing period and we just reflected this in our 4th quarter return as a zero-rated sale. x x x.The Court is not unmindful of the fact that the transaction described hereinabove was not a commercial sale. In granting the tax benefit to VAT-registered zero-rated or effectively zero-rated taxpayers, Section 112(A) of the NIRC does not limit the definition of "sale" to commercial transactions in the normal course of business. Conspicuously, Section 106(B) of the NIRC, which deals with the imposition of the VAT, does not limit the term "sale" to commercial sales, rather it extends the term to transactions that are "deemed" sale, which are thus enumerated:
SEC 106. Value-Added Tax on Sale of Goods or Properties.After carefully examining this provision, this Court finds it an equitable construction of the law that when the term "sale" is made to include certain transactions for the purpose of imposing a tax, these same transactions should be included in the term "sale" when considering the availability of an exemption or tax benefit from the same revenue measures. It is undisputed that during the fourth quarter of 2002, petitioner transferred to NPC all the electricity that was produced during the trial period. The fact that it was not transferred through a commercial sale or in the normal course of business does not deflect from the fact that such transaction is deemed as a sale under the law.
x x x x
(B) Transactions Deemed Sale.--The following transactions shall be deemed sale:
(1) Transfer, use or consumption not in the course of business of goods or properties originally intended for sale or for use in the course of business;
(2) Distribution or transfer to:
(a) Shareholders or investors as share in the profits of the VAT-registered persons; or
(b) Creditors in payment of debt;
(3) Consignment of goods if actual sale is not made within sixty (60) days following the date such goods were consigned; and
(4) Retirement from or cessation of business, with respect to inventories of taxable goods existing as of such retirement or cessation. (Our emphasis.)
Substantial justice, equity and fair play are on the side of petitioner. Technicalities and legalisms, however exalted, should not be misused by the government to keep money not belonging to it, thereby enriching itself at the expense of its law-abiding citizens. Under the principle of solutio indebiti provided in Art. 2154, Civil Code, the BIR received something "when there [was] no right to demand it," and thus, it has the obligation to return it. Heavily militating against respondent Commissioner is the ancient principle that no one, not even the State, shall enrich oneself at the expense of another. Indeed, simple justice requires the speedy refund of the wrongly held taxes.[35]It bears emphasis that effective zero-rating is not intended as a benefit to the person legally liable to pay the tax, such as petitioner, but to relieve certain exempt entities, such as the NPC, from the burden of indirect tax so as to encourage the development of particular industries. Before, as well as after, the adoption of the VAT, certain special laws were enacted for the benefit of various entities and international agreements were entered into by the Philippines with foreign governments and institutions exempting sale of goods or supply of services from indirect taxes at the level of their suppliers. Effective zero-rating was intended to relieve the exempt entity from being burdened with the indirect tax which is or which will be shifted to it had there been no exemption. In this case, petitioner is being exempted from paying VAT on its purchases to relieve NPC of the burden of additional costs that petitioner may shift to NPC by adding to the cost of the electricity sold to the latter.[36]
Sec. 13. Non-profit Character of the Corporation; Exemption from all Taxes, Duties, Fees, Imposts and Other Charges by Government and Governmental Instrumentalities. - The corporation shall be non-profit and shall devote all its returns from its capital investment, as well as excess revenues from its operation, for expansion. To enable the corporation to pay its indebtedness and obligations and in furtherance and effective implementation of the policy enunciated in Section 1 of this Act, the corporation is hereby declared exempt:To limit the exemption granted to the NPC to direct taxes, notwithstanding the general and broad language of the statute will be to thwart the legislative intention in giving exemption from all forms of taxes and impositions, without distinguishing between those that are direct and those that are not.[37]
(a) From the payment of all taxes, duties, fees, imposts, charges, costs and service fees in any court or administrative proceedings in which it may be a party, restrictions and duties to the Republic of the Philippines, its provinces, cities, municipalities, and other government agencies and instrumentalities;
(b) From all income taxes, franchise taxes, and realty taxes to be paid to the National Government, its provinces, cities, municipalities and other government agencies and instrumentalities;
(c) From all import duties, compensating taxes and advanced sales tax and wharfage fees on import of foreign goods, required for its operations and projects; and
(d) From all taxes, duties, fees, imposts, and all other charges imposed by the Republic of the Philippines, its provinces, cities, municipalities and other government agencies and instrumentalities, on all petroleum products used by the corporation in the generation, transmission, utilization, and sale of electric power.
Section 1. Declaration of Policy. Congress hereby declares that (1) the comprehensive development, utilization and conservation of Philippine water resources for all beneficial uses, including power generation, and (2) the total electrification of the Philippines through the development of power from all sources to meet the needs of industrial development and dispersal and the needs of rural electrification are primary objectives of the nation which shall be pursued coordinately and supported by all instrumentalities and agencies of government, including its financial institutions.The ability of the NPC to provide sufficient and affordable electricity throughout the country greatly affects our industrial and rural development. Erroneously and unjustly depriving industries that generate electrical power of tax benefits that the law clearly grants will have an immediate effect on consumers of electricity and long term effects on our economy.