VAT CLAIM FOR REFUND - Northern Mini Hydro Vs CIR

NORTHERN MINI HYDRO VS.
CIR
CTA Case No. 7257, May 28, 2009
Ponente: Bautista, J. / Digester: De Vera, Gladys C.
Subject Matter: VAT CLAIM FOR REFUND
Summary: This case involves a claim for refund or issuance of tax credit certificate of unutilized input value-
added tax (VAT) in the amount of ONE MILLION ONE HUNDRED SEVENTY-FOUR THOUSAND SEVEN HUNDRED
EIGHT AND 46/100 (P1,174,708.46) from January to December 2003, allegedly arising from petitioner s domestic
purchases of goods and services which are attributable to its VAT zero-rated sales of power generation services
to the National Power Corporation NPC).
Doctrines:
Petitioner/s: Northern Mini Hydro Corporation

Parties
Respondent/s: Commissioner on Internal Revenue
Facts:
1. Northern Mini Hydro Corporation (Petitioner) is a domestic corporation duly organized and existing
under and by virtue of the laws the Philippines, with principal office in La Trinidad, Benguet. It is
registered as VAT taxpayer with the Bureau of Internal Revenue (BIR).
2. Respondent is the Commissioner of the BIR who is duly appointed and empowered to perform the
duties of his officer including/ among others/ the duty to ac and approve claims for refund or tax credit
as provided by law.
3. On March 4, 2004 petitioner filed its Quarterly VAT Returns for the second third and fourth quarters of
taxable year 2003. However/ on March 21, 2005 petitioner wittingly or unwittingly filed once again the
same set of returns, having exactly the same information and figures as that which were filed earlier. On
March 31, 2005 petitioner filed an administrative claim for refund.
4. On May 26, 2005 the instant Petition for Review was filed before this Court seeking refund or issuance
of tax credit certificate of alleged unutilized input VAT payments for taxable year 2003 in the sum of P1,
174, 708.46. In 2006, Regional Director Norberta D. Vitug, partially granted the said claim by issuing a
tax credit certificate with serial number 006402 1 in the amount of P457, 678.17 in favor of petitioner.
5. By virtue of such development, on August 9, 2006, petitioner filed a Motion to for Leave Court to File
Supplemental Petition for Review.
Issue/s:
1. Whether or not petitioner is entitled to VAT claim for refund.
Ratio:
 Petitioner is not entitled to the refund ts alleged unutilized input VAT - It is explicit from the provisions
of Sections 113 and 237 of the NIRC of 1997 in relation to Section 4.108 of Revenue Regulations No. 7-
95, that a VAT-registered person like herein petitioner must issue a duly registered VAT invoice or
receipt for every sale transaction. Such VAT invoice or receipt must show the taxpayer's identification
number (TIN) followed by the word “VAT”, printer's BIR permit number and the word zero rated
imprinted on the invoice or receipt covering a zero-rated sale.
 Accordingly, the zero-rated sales of services referred to under Section 108(8)(3) of the NIRC of 1997 as
subject to zero percent (0%) VAT are those covered by duly registered VAT official receipts bearing all
the required information.
 A scrutiny of the supporting documents submitted by petitioner shows that all the Charge Invoices and
Official Receipts issued by the Company, which support the foregoing sales, are not imprinted/stamped
with the word zero-rated.
 The law and regulations are explicit in emphasizing strict compliance with the invoicing requirements
because for the same transactions the output VAT of the seller becomes the input VAT of the purchaser.
Pursuant to Sections 106 D) l), 108 C), and 110 of the NIRC of 1997, as amended, the output or input tax
on the sale or purchase of goods is determined by the total amount indicated in the invoice, while the
output or input tax on the sale or purchase of services is determined by the total amount indicated in
the official receipt. In the case of zero-rated sales transactions, the regulations further require that the
word zero-rated be imprinted on the face of the covering invoices or official receipts. The rationale for
the requirement of imprinting the word zero rated on the face of the covering invoice or official receipt
of the seller is for the buyer or purchaser not to claim any input VAT from such purchase.
 The imprinting of zero-rated is necessary to distinguish sales subject to 10% VAT, those that are subject
to 0% VAT zero-rated) and exempt sales, to enable the Bureau of Internal Revenue to properly
implement and enforce the other provisions of the NIRC of 1997 on VAT.
Dispositive:
Without valid VAT official receipts, petitioner's alleged sales of electricity to NPC for taxable year 2003 cannot
qualify for VAT zero-rating under Section 108(8)(3) of the NIRC of 1997. Consequently, the claimed unutilized
input VAT attributable thereto in the amount of P717, 030. 29 cannot be granted. It is clear from the provisions
in the NIRC of 1997 that there must be zero-rated or effectively zero-rated sales in order for refund claim of
input VAT could prosper.
Others/Notes
Petitioner’s administrative and juicial claims for refund were timely filed - The two-year prescriptive period
under Section 112(A) of the NIRC of 1997 for the recovery of creditable input VAT due or paid attributable to
zero-rated or effectively zero-rated sales is to be counted 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. Here,
considering the amount of the subject claim refers to the declared input VAT for the fourth quarter of taxable
year 2003, the two-year prescriptive period should be counted from the close of the said taxable quarter on
December 31, 2003 and shall end on December 3, 2005. And since the subject administrative claim was filed on
March 31, 2005, while the instant judicial claim was filed on May 26, 2005; both the administrative and judicial
claims petitioner were filed well within the said two-year prescriptive period under the law. Such being the case,
prescription has definitely not set in.
Petitioner’s sale electricity to NPC is effectively zero rate - The sale electricity to NPC is zero-rated for VAT
purposes pursuant to Section 108(8)(3) the NIRC 1997, as amended, in relation to Section 13 Republic Act No.
6395, otherwise known as the NPC Charter. This Court has consistently he d that NPC is an entity with a special
charter, which categorically makes it exempt from payment all taxes, whether direct or indirect, including VAT.
Therefore, by virtue of the said charter, services rendered by a VAT-registered entity like herein petitioner to
NPC are effectively subject to zero percent (0%) VAT.

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NORTHERN MINI HYDRO VS.

Subject Matter: VAT CLAIM FOR REFUND

Petitioner/s: Northern Mini Hydro Corporation

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