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CIR v. MIRANT PAGBILAO CORPORATION

FACTS:

Mirant Pagbilao Corporation (MPC) filed a claim for refund/tax credit of its unutilized input value-added tax (VAT) payments for the second quarter of 1998. The Bureau of Internal Revenue (BIR) denied the claim, prompting MPC to file an appeal with the Court of Tax Appeals (CTA). The CTA disallowed over PhP 137 million of the claimed input VAT, stating that most of MPC's purchases, upon which it based its claims, were not adequately substantiated by necessary documents. The CTA found PhP 252,447.45 of the claimed input VAT to be unsupported and should be disallowed. The CTA also cast doubt on the veracity of MPC's claimed input VAT of PhP 135,993,570 on services purchased from Mitsubishi Corporation, as it was substantiated by a VAT OR with a different exchange rate and pertained to services rendered from 1993 to 1996. MPC appealed the CTA's decision to the Court of Appeals (CA), which granted most of its claims for refund or tax credit. The CA modified the CTA's decision and ordered the BIR Commissioner to refund or issue a tax credit certificate in favor of MPC for its unutilized input VAT payments. The BIR Commissioner filed a petition before the Supreme Court, disputing MPC's entitlement to the refund of its input VAT payments.

ISSUES:

  1. Whether OR No. 0189 sufficiently proves the alleged unutilized input VAT claimed by MPC.

  2. Whether the claim for tax refund was filed within the two-year prescriptive period.

  3. Whether OR No. 0189 constitutes sufficient proof of payment of creditable input VAT for the progress billings from Mitsubishi for the period covering April 7, 1993 to September 6, 1996.

  4. Whether MPC is entitled to a refund or a tax credit for the unutilized input VAT covered by OR No. 0189.

  5. Whether the claim for refund or tax credit of the unutilized creditable input VAT filed by the taxpayer has already prescribed.

  6. Whether the provisions of Secs. 204(C) and 229 of the NIRC, which prescribe a different starting point for the two-year prescriptive limit for the filing of a claim for refund, are applicable.

  7. Whether the taxpayer is entitled to a refund of its unutilized creditable input VAT.

  8. Whether Section 112(A) of the National Internal Revenue Code (NIRC), providing a two-year prescriptive period from the close of the taxable quarter, applies to claims for refund or tax credit of input value-added tax (VAT) payments.

  9. Whether the claim for tax refund or credit based on input VAT payments had already prescribed.

RULING:

  1. The Court can review issues of fact where there are divergent findings by the trial and appellate courts. The Court evaluated OR No. 0189 and the surrounding factual antecedents and determined that it is doubtful and insufficient to prove the input VAT payment by MPC. The Court noted that the CTA doubted the veracity of OR No. 0189 and did not appreciate it as evidence to support MPC's claim for tax refund or credit.

  2. The claim for tax refund filed by MPC on December 20, 1999, was filed beyond the two-year prescriptive period set in Sec. 112 of the NIRC. Therefore, the claim for tax refund was not filed within the prescribed period.

  3. OR No. 0189 constitutes sufficient proof of payment of creditable input VAT for the progress billings from Mitsubishi for the period covering April 7, 1993 to September 6, 1996, in accordance with Sec. 110(A)(1)(B) of the NIRC. A duly-executed VAT invoice or official receipt, such as OR No. 0189, is considered sufficient evidence to support a claim for input tax credit.

  4. MPC is not entitled to a refund or tax credit for the unutilized input VAT covered by OR No. 0189 since the claim was filed beyond the two-year period provided by law. Sec. 112(A) of the NIRC states that unutilized input VAT payments must be claimed within two years from the close of the taxable quarter when the relevant sales were made, regardless of whether the tax was paid or not.

  5. The claim for refund or tax credit filed by the taxpayer has already prescribed. The two-year prescriptive period for filing such claim begins to run from the end of the quarter when the pertinent sales or transaction was made, regardless of when the input VAT was paid. In this case, the claim for the third quarter of 1996 prescribed on September 30, 1998, while MPC's claim was filed on December 10, 1999.

  6. The provisions of Secs. 204(C) and 229 of the NIRC, which prescribe a two-year prescriptive period from the date of payment of the tax or penalty for filing a claim of refund or tax credit, are inapplicable to the taxpayer's claim. These provisions apply only to instances of erroneous payment or illegal collection of internal revenue taxes.

  7. The taxpayer is entitled to a refund of its unutilized creditable input VAT. 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 deprive the taxpayer of its right to a refund for any unutilized creditable input VAT.

  8. Section 112(A) of the NIRC applies to claims for refund or tax credit of input VAT payments. It provides that any excess input VAT credits over output taxes shall be refunded or credited against other internal revenue taxes. Zero-rated transactions, which include the export sale of goods and supply of services, allow sellers to claim a refund or a tax credit certificate for the VAT previously charged by suppliers.

  9. The claim for tax refund or credit based on input VAT payments had already prescribed. The two-year prescriptive period under Section 112(A) of the NIRC is reckoned from the close of the taxable quarter when the relevant sales or transactions were made. In this case, the claim had already prescribed and was therefore denied.

PRINCIPLES:

A claim for tax refund must be supported by sufficient evidence and must be filed within the prescribed period. The burden of proof rests on the taxpayer to clearly establish their entitlement to the refund, and the claim is subject to strict interpretation against the taxpayer.

  • A duly-executed VAT invoice or official receipt is considered sufficient evidence to support a claim for input tax credit.

  • Unutilized input VAT payments must be claimed within two years from the close of the taxable quarter when the relevant sales were made, regardless of whether the tax was paid or not.

  • The prescriptive period for filing a claim for refund or tax credit of unutilized creditable input VAT begins to run from the end of the quarter when the pertinent sales or transaction was made, regardless of when the input VAT was paid.

  • The provisions of Secs. 204(C) and 229 of the NIRC, which prescribe a two-year prescriptive period from the date of payment of the tax or penalty for filing a claim of refund or tax credit, apply only to instances of erroneous payment or illegal collection of internal revenue taxes.

  • The subsequent sale or transaction involving a wholly-tax exempt client, resulting in a zero-rated or effectively zero-rated transaction, does not deprive the taxpayer of its right to a refund for any unutilized creditable input VAT.

  • Section 112(A) of the NIRC applies to claims for refund or tax credit of input VAT payments.

  • Zero-rated transactions refer to the export sale of goods and supply of services, where the tax rate is set at zero and sellers can claim a refund or tax credit certificate for the VAT previously charged by suppliers.

  • The prescriptive period for claims for refund or tax credit of input VAT payments is two years from the close of the taxable quarter when the relevant sales or transactions were made.