WESTERN MINDANAO POWER CORPORATION, v COMMISSIONER OF INTERNAL REVENUE, G. R. No.

181136 FACTS: Petitioner WMPC is a domestic corporation engaged in the production and sale of electricity. It is registered with the Bureau of Internal Revenue (BIR) as a VAT taxpayer. Petitioner alleges that it sells electricity solely to the National Power Corporation (NPC), which is in turn exempt from the payment of all forms [2] of taxes, duties, fees and imposts, pursuant to Section 13 of Republic Act (R.A.) No. 6395 (An Act Revising the Charter of the National Power Corporation). In view thereof and pursuant to Section 108(B) (3) of the National Internal Revenue [3] Code (NIRC), petitioners power generation services to NPC is zero -rated. [4] Under Section 112(A) of the NIRC, a VAT-registered taxpayer may, within two years after the close of the taxable quarter, apply for the issuance of a tax credit or refund of creditable input tax due or paid and attributable to zerorated or effectively zero-rated sales. Hence, on 20 June 2000 and 13 June 2001, WMPC filed with the Commissioner of Internal Revenue (CIR) applications for a tax credit certificate of its input VAT covering the taxable rd th [5] 3 and 4 quarters of 1999 (amounting to 3,675,026.67) and all the taxable [6] quarters of 2000 (amounting to 5,649,256.81). WMPC on 28 September 2001 filed with the Court of Tax Appeals (CTA) in Division a Petition for Review The CIR filed its Comment on the CTA Petition, arguing that WMPC was not entitled to the latters claim for a tax refund in view of its failure to comply with the invoicing requirements under Section 113 of the NIRC in relation to Section 4.108-1 of RR 7-95, which provides: SECTION 4.108-1. Invoicing Requirements All VATregistered persons shall, for every sale or lease of goods or properties or services, issue duly registered receipts or sales or commercial invoices which must show: 1. the name, 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. Only VAT-registered persons are required to print their TIN followed by the word VAT in their invoice or receipts and

this shall be considered as a VAT Invoice. All purchases covered by invoices other than VAT Invoice" shall not give rise to any input tax. WMPC countered that the invoicing and accounting requirements laid down in RR 7-95 were merely compliance requirements, which were not indispensable to establish the claim for refund of excess and unutilized input VAT. Also, Section 113 of the NIRC prevailing at the time the sales transactions were made did not expressly state that failure to comply with all the invoicing requirements would result in the disallowance of a tax credit refund. The express requirement that the term zero-rated sale shall be written or printed prominently on the VAT invoice or official receipt for sales subject to zero percent (0%) VAT appeared in Section 113 of the NIRC only after it was amended by Section 11 of R.A. [8] 9337. This amendment cannot be applied retroactively, considering that it took effect only on 1 July 2005, or long after petitioner filed its claim for a tax refund, and considering further that the RR 7-95 is punitive in nature. CTA Second Division Decision CTA Second Division dismissed the Petition. It held that while petitioner submitted in evidence its Quarterly VAT Returns for the periods applied for, the same do not reflect any zero-rated or effectively zero-rated sales allegedly incurred during said periods. The spaces provided for such amounts were left blank, which only shows that there existed no zero-rated or effectively zero-rated rd th sales for the 3 and 4 quarters of 1999 and the four quarters of 2000. Moreover, it found that petitioners VAT Invoices and Official CTA En Banc Decision It dismissed the appeal and affirming the CTA ruling. The CTA En Banc held that the receipts and evidence presented by petitioner failed to fully substantiate the existence of the latters effectively zero-rated sales to NPC for rd th the 3 and 4 quarters of taxable year 1999 and the four quarters of taxable year 2000. Issue Whether the CTA En Banc seriously erred in dismissing the claim of petitioner for a refund or tax credit on input tax on the ground that the latters Official Receipts do not contain the phrase zero-rated Ruling We deny the Petition. Being a derogation of the sovereign authority, a statute granting tax exemption is strictly construed against the person or entity claiming the exemption. 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 [15] administrative claim for a refund or tax credit. 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 [16] by the NIRC, as well as by revenue regulations implementing them. Under the NIRC, a creditable input tax should be evidenced by a VAT [17] invoice or official receipt, 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. RR 7-95, which took effect on 1 January 1996, proceeds from the rulemaking authority granted to the Secretary of Finance by the NIRC for the efficient enforcement of the same Tax Code and its amendments. 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.

HITACHI GLOBAL STORAGE TECHNOLOGIES PHILIPPINES CORP. v. COMMISSIONER OF INTERNAL REVENUE, G.R. No. 174212 FACTS: Hitachi is a domestic corporation engaged in the business of manufacturing and exporting computer products. Hitachi is registered with the Bureau of Internal Revenue (BIR) as a Value-added Tax (VAT) taxpayer, Hitachi is also registered with the Export Processing Zone Authority as an Ecozone Export Enterprise. On 4 August 2000, Hitachi filed an administrative claim for refund or [6] issuance of a tax credit certificate before the BIR. The claim involved P25,023,471.84 representing excess input VAT attributable to Hitachis zero-rated export sales for the four taxable quarters of 1999. The CTA First Division denied the claim for tax refund The CTA First Division denied Hitachis claim for refund or tax credi t because of Hitachis failure to comply with the mandatory invoicing requirements. According to the CTA First Division, Hitachis export sales invoices did not have pre-printed taxpayers identification number (TIN) followed by the word VAT nor did the in voices bear the imprinted word zero-rated as required [9] in Section 113(A) of the National Internal Revenue Code (NIRC) and Section [10] 4.108-1 of Revenue Regulation No. 7-95 (RR 7-95). The CTA First Division also found that Hitachis export sales invoices were not duly registered with the BIR as [11] required under Section 237 of the NIRC and there was no BIR authority to print the invoices or BIR permit number indicated in the invoices. Therefore, the CTA First Division did not consider Hitachis export sales invoices as valid evidence of zero-rated sales of goods for VAT purposes and, consequently, denied Hitachis claim for a refund or tax credit. Issues: Whether Hitachis failure to comply with the requirements prescribed under Section 4.108-1 of RR 7-95 is sufficient to invalidate Hitachis claim for VAT refund for taxable year 1999; Ruling: The petition has no merit. Hitachi argues that Section 4.108-1 of RR 7-95 cannot expand the invoicing requirements prescribed by Section 113(A) of the NIRC, in relation to [12] Sections 237 and 106(A)(2)(a)(1), by imposing the additional requirement of printing the word zero-rated on the invoices of a VAT registered taxpayer. Hitachi also submits that the non-observance of the requirements of (1) printing zero-rated; (2) BIR authority to print; (3) BIR permit number; and

(4) registration of such receipts with the BIR cannot result in the outright invalidation of its claim for refund. In this case, when Hitachi filed its claim for refund or tax credit, RR 7-95 was already in force. Section 4.108-1 of RR 7-95 specifically required the following to be reflected in the invoice: Sec.4.108-1. Invoicing Requirements. - All VAT-registered persons shall, for every sale or lease of goods or properties or services, issue duly registered receipts or sales or commercial invoices which must show: 1. the name, 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. xxxx Only VAT-registered persons are required to print their TIN followed by the word VAT in their invoices or receipts and this shall be considered as a VAT invoice. All purchases covered by invoices other than a VAT invoice shall not give rise to any input tax. (Emphasis supplied) Both the CTA First Division and the CTA En Banc found that Hitachis export sales invoices did not indicate Hitachis Tax Identification Number (TIN) followed by the word VAT. The word zero -rated was also not imprinted on the invoices. Moreover, both the CTA First Division and the CTA En Banc found that the invoices were not duly registered with the BIR.

SILICON PHILIPPINES, INC., (Formerly INTEL PHILIPPINES MANUFACTURING, INC.), v. COMMISSIONER OF INTERNAL REVENUE, G.R. No. 172378 FACTS: Petitioner Silicon Philippines, Inc., is engaged in the business of designing, developing, manufacturing and exporting advance and large-scale integrated circuit components or ICs. Petitioner is registered with the Bureau of Internal Revenue (BIR) as a Value Added Tax (VAT) taxpayer and with the Board of Investments (BOI) as a preferred pioneer enterprise. On May 21, 1999, petitioner filed with CIR an application for credit/refund of unutilized input VAT for the period October 1, 1998 to December 31, 1998 in the amount of P31,902,507.50. th Petitioner alleged that for the 4 quarter of 1998, it generated and recorded zero-rated export sales in the amount of P3,027,880,818.42, paid to petitioner in acceptable foreign currency and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas and that for the said period, petitioner paid input VAT in the total amount of P31,902,507.50, which have not been applied to any output VAT. On November 18, 2003, the CTA Division rendered a Decision partially granting petitioners claim for refund of unutilized input VAT on capital goods. Out of the amount ofP15,170,082.00, only P9,898,867.00 was allowed to be refunded because training materials, office supplies, posters, banners, T-shirts, books, and other similar items purchased by petitioner were not considered capital goods under Section 4.106-1(b) of Revenue Regulations (RR) No. 7-95. With regard to petitioners claim for credit/refund of input VAT attributable to its zero-rated export sales, the CTA Division denied the same because petitioner failed to present an Authority to Print (ATP) from the BIR; neither did it print on its export sales invoices the ATP and the word zero-rated. Petitioner claimed that it is not required to secure an ATP since it has a Permit to Adopt Computerized Accounting Documents such as Sales Invoice and Official Receipts from the BIR. Petitioner further argued that because all its finished products are exported to its mother company, Intel Corporation, a non-resident corporation and a nonVAT registered entity, the printing of the word zero-rated on its export sales invoices is not necessary. The CTA Division denied the motions. It noted that [P]etitioners request for Permit to Adopt Computerized Accounting Documents such as Sales Invoice and Official Receipt was approved on August 31, 2001 while the period involved in this case was October 31, 1998 to December 31, 1998 x x x. While it appears that petitioner was previously issued a permit by the BIR Makati Branch, such permit was only limited to the use of computerized books of account x x x. It was only on August 31, 2001 that petitioner was permitted to generate computerized sales invoices and official receipts [provided that the BIR Permit Number is printed] in the header of the document x x x.

On September 30, 2005, the CTA En Banc issued the assailed Decision the petition for lack of merit. Pertinent portions of the Decision read:

[25]

denying

With regard to the first assigned error, this Court reiterates that, the requirement of [printing] the BIR permit to print on the face of the sales invoices and official receipts is a control mechanism adopted by the Bureau of Internal Revenue to safeguard the interest of the government. This requirement is clearly mandated under Section 238 of the 1997 National Internal Revenue Code, which provides that: SEC. 238. Printing of Receipts or Sales or Commercial Invoice. All persons who are engaged in business shall secure from the Bureau of Internal Revenue an authority to print receipts or sales or commercial invoices before a printer can print the same. And what better way to prove that the required permit to print was secured from the Bureau of Internal Revenue than to show or print the same on the face of the invoices. There can be no other valid proof of compliance with the above provision than to show the Authority to Print Permit number [printed] on the sales invoices and official receipts. With regard to petitioners failure to print the word zerorated on the face of its export sales invoices, it must be emphasized that Section 4.108-1 of Revenue Regulations No. 7-95 specifically requires that all value-added tax registered persons shall, for every sale or lease of goods or properties or services, issue duly registered invoices which must show the word zero-rated *printed+ on the invoices covering zero-rated sales. Issues (1) whether the CTA En Banc erred in denying petitioners claim for credit/ refund of input VAT attributable to its zero-rated sales in the amount of P16,732,425.00 due to its failure: (a) to show that it secured an ATP from the BIR and to indicate the same in its export sales invoices; and Petitioners Arguments

Petitioner posits that the denial by the CTA En Banc of its claim for refund of input VAT attributable to its zero-rated sales has no legal basis because the printing of the ATP and the word zero-rated on the export sales invoices are not required under Sections 113 and 237 of the National Internal Revenue Code (NIRC). And since there is no law requiring the ATP and the word zero-rated to be indicated on the sales invoices, the absence of such information in the sales invoices should not invalidate the petition nor result in the outright denial of a claim for tax credit/refund. Respondents Arguments To refute petitioners arguments, respondent asserts that the printing of the ATP on the export sales invoices, which serves as a control mechanism for the BIR, is mandated by Section 238 of the NIRC; while the printing of the word zero-rated on the export sales invoices, which seeks to prevent purchasers of zero-rated sales or services from claiming non-existent input VAT credit/refund, is required under RR No. 7-95, promulgated pursuant to Section 244 of the NIRC. With regard to the unutilized input VAT on capital goods, respondent counters that petitioner failed to show that the goods it purchased/imported are capital goods as defined in Section 4.106-1 of RR No. 7-95. Ruling: The petition is bereft of merit. This involves 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. Credit/refund of input VAT on zero-rated sales In a claim for credit/refund of input VAT attributable to zero-rated sales, Section 112 (A) 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.

has an ATP from the BIR and to indicate the ATP and the word zero-rated in its export sales invoices. ATP must be secured from the BI 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. This brings us to the question of whether a claimant for unutilized input VAT on zero-rated sales is required to present proof that it has secured an ATP from the BIR prior to the printing of its invoices or receipts. We rule in the affirmative. 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. In the case of Intel, we emphasized that: Failure to print the word zero-rated on the sales invoices is fatal to a claim for refund of input VAT Similarly, failure to print the word zero-rated on the sales invoices or receipts is fatal to a claim for credit/refund of input VAT on zero-rated sales. 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 petitioners claim for credit/refund of input VAT attributable to its zerorated sales. Credit/refund of input VAT on capital goods Capital goods are defined under Section 4.106-1(b) of RR No. 7-95 [56] To claim a refund of input VAT on capital goods, Section 112 (B) of the NIRC requires that: 1. the claimant must be a VAT registered person;

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 petitioners zero-rated sales for the purpose of claiming credit/refund of input VAT because petitioner failed to show that it

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. Corollarily, Section 4.106-1 (b) of RR No. 7-95 defines capital goods as follows: Capital goods or properties refer to goods or properties with estimated useful life greater that one year and which are treated as [57] 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 petitioners 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.