G.R. No.

191495

NIPPON EXPRESS (PHILIPPINES) CORPORATION, Petitioner vs.

COMMISSIONER OF INTERNAL REVENUE, Respondent

MARTIRES, J.:

In a claim for refund under Section 112 of the National Internal Revenue Code (N/RC), the claimant must show
that: (1) it is engaged in zero-rated sales of goods or services; and (2) it paid input VAT that are attributable to such
zero-rated sales. Otherwise stated, the claimant must prove that it made a purchase of taxable goods or services for
which it paid VAT (input), and later on engaged in the sale of goods or services subject to VAT (output) but at zero
rate. There is a refundable sum when the amount of input (VAT (attributable to zero-rated sale) is higher than the
claimant's output VAT during one taxable period (quarter).

The issue in the present petition Cl1ncerns the proof that the claimant, petitioner Nippon Express (Philippines)
Corporation (Nippon Express), is engaged in zero-rated sales of services (not goods or properties).

THE FACTS

Petitioner Nippon Express repaired to the Court via its petition for review on certiorari under Rule 45 of the Rules of
Court to assail the 15 December 2009 Decision of the Court of Tax Appeals (CTA) En Banc in CTA EB No. 492. The
CTA En Banc affirmed the ruling of the CTA Second Division in CTA Case No. 7429 denying the refund claim of
Nippon Express.

The present controversy stemmed from an application for the issuance of a tax credit certificate (TCC) of Nippon
Express' excess or unutilized input tax attributable to its zero-rated sales for all four taxable quarters in 2004 pursuant
to Section 112 of the National Internal Revenue Code (NIRC).

The Antecedents

Nippon Express is a domestic corporation registered with the Large Taxpayer District Office  (LTDO) of the Bureau of
Internal Revenue (BIR). Revenue Region No. 8-Makati, as a Value Added Tax (VAT) taxpayer. 1

On 30 March 2005, Nippon Express filed with the LTDO, Revenue Region No. 8, an application for tax credit of its
excess/unused input taxes attributable to zero-rated sales for the taxable year 2004 in the total amount of
₱27,828,748.95.

By reason of the inaction by the BIR, Nippon Express filed a Petition for Review before the CTA on  31 March 2006.2In
its Answer, respondent Commissioner of Internal Revenue (CIR) interposed the defense, among others, that Nippon
Express' excess input VAT paid for its domestic purchases of goods and services attributable to zero-rated sales for
the four quarters of taxable year 2004 was not fully substantiated by proper documents. 3

The Ruling of the CTA Division

After trial, the CTA Division (the court) found that Nippon Express' evidentiary proof of its zero-rated sale of services to
PEZA-registered entities consisted of documents other than official receipts. Invoking Section 113 of the NIRC, as
amended by Section 11 of Republic Act (R.A.) No. 9337, the court held the view that the law provided for invoicing
requirements of VAT-registered persons to issue a VAT invoice for every sale, barter or exchange of goods or
properties, and a VAT official receipt for every lease of goods or properties, and for every sale, barter or exchange of
services. Noting that Nippon Express is engaged in the business of providing services, the court denied the latter's
claim for failure to submit the required VAT official receipts as proof of zero-rated sales. The dispositive portion of the
CTA Division's Decision, dated 5 December 2008, reads:

WHEREFORE, premises considered, the instant Petition for Review is hereby DENIED DUE COURSE, and
accordingly, DISMISSED for lack of merit.

SO ORDERED.4

Aggrieved, Nippon Express moved for reconsideration or new trial but was rebuffed by the CTA Division in its
Resolution5 of 5 May 2009. Hence, Nippon Express filed on 10 June 2009 a petition for review with the CTA En Banc.

The Petition for Review before

the CTA En Banc

In its appeal before the CTA En Banc, Nippon Express alleged that it had fully complied with the invoicing
requirements when it submitted sales invoices to support its claim of zero-rated sales. Nippon argued that there is
nothing in the tax laws and regulations that requires the sale of goods or properties to be supported only by sales
invoices, or the sale of services by official receipts only. Thus, as Nippon Express put it, the CTA Division erred in
holding that the sales invoices and their supporting documents are insufficient to prove Nippon Express' zero-rated
sales.

The Ruling of the CTA En Banc

As stated at the outset, the CTA En Banc affirmed the decision of the CTA Division. The CTA En Banc disposed as
follows:
"WHEREFORE, the Petition for Review is DISMISSED. Accordingly, the impugned Decision of the Court in Division
dated December 5, 2008 and its Resolution promulgated on May 5, 2009 in CTA Case No. 7429 are AFFIRMED.

SO ORDERED."6

Worth mentioning is the lone dissent registered by Presiding Justice (PJ) Ernesto D. Acosta who opined that an official
receipt is not the only acceptable evidence to prove zero-rated sales of services. He ratiocinated:

Sections 113 and 237 of the 1997 National Internal Revenue Code (NIRC) x x x made use of the disjunctive term "or"
which connotes that either act qualifies as two different evidences of input VAT. X x x It is indicative of the intention of
the lawmakers to use the same interchangeably in the sale of goods or services.

This is bolstered by the fact that Section 113 of the 1997 NIRC has been amended by Section 11 of Republic Act (RA)
No. 9337, wherein the amendatory provisions of the law categorically required that VAT invoice shall be issued for
sale of goods while VAT official receipt for the sale of services, which is absent in the amended law. Since this
amendment took effect on July L 2005, the same cannot be applied in the instant case which involves a claim for
refund for taxable year 2004. RA 9337 cannot apply retroactively to the prejudice of petitioner given the well-
entrenched principle that statutes, including administrative rules and regulations operate prospectively only, unless the
legislative intent to the contrary is manifest by express terms or by necessary implication.

Equally relevant are Section 110 of the 1997 NIRC and Section 4.106-5 of Revenue Regulations No. 7-95. x x x A
reading of both provisions would show the intention to accept other evidence to substantiate claims for VAT refund,
particularly the use of either a VAT invoice or official receipt.7

Nippon Express opted to forego the filing of a motion for reconsideration; hence, the direct appeal before the Court.

The Present Petition for Review

In its petition, Nippon Express reiterated its stance that nowhere is it expressly stated in the laws or implementing
regulations that only official receipts can support the sale of services, or that only sales invoices can support the sale
of goods or properties. Nippon Express also adopted at length the dissenting opinion of PJ Acosta, viz the use of the
disjunctive term "or" in Section 237 of the NIRC connoting the interchangeable nature of either VAT invoice or official
receipt as evidence of sale of goods or services; the lack of any statutory basis for the exclusivity of official receipts as
proof of sale of service; and the non-retroactivity of R.A. No. 9337, enacted in 2005, to the petitioner's case.

In addition, Nippon Express posed the query on whether it may still be allowed to submit official receipts, in addition to
those already produced during trial, in order to prove the existence of its zero-rated sales.

By way of Comment,8 the CIR impugns the petition as it essentially seeks the re-evaluation of the evidence presented
during trial which cannot be done in a petition for review under Rule 45. Likewise, the CIR argues that the evidence of
the sale of service, as the CT A held, is none other than an official receipt. In contrast, the sales invoice is the
evidence of a sale of goods. Since the petitioner's transactions involve sales of services, they should have been
properly supported by official receipts and not merely by sales invoices.

THE COURT'S RULING

We deny the petition.

I.

The judicial claim of Nippon

Express was belatedly filed.
The thirty (30)-day period of
appeal is mandatory
and jurisdictional, hence,
the CTA did not acquire
jurisdiction over Nippon
Express' judicial claim.

First, we observe that much of the CT A's discussion in the assailed decision dwelt on the substantiation of the
petitioner's claim for refund of unutilized creditable input VAT. It did not touch on the subject of the court's jurisdiction
over the petition for review filed before it by Nippon Express. Neither did the CIR bring the matter to the attention of the
court a quo.

Nonetheless, even if not raised in the present petition, the Court is not prevented from considering the issue on the
court's jurisdiction consistent with the well-settled principle that when a case is on appeal, the Court has the authority
to review matters not specifically raised or assigned as error if their consideration is necessary in reaching a just
conclusion of the case.9 The matter of jurisdiction cannot be waived because it is conferred by law and is not
dependent on the consent or objection or the acts or omissions of the parties or any one of them. 10 Besides, courts
have the power to motu proprio dismiss an action over which it has no jurisdiction pursuant to Section 1, Rule 9 of the
Revised Rules of Court.11

Concerning the claim for refund of excess or unutilized creditable input VAT attributable to zero-rated sales, the
pertinent law is Section 112 of the NIRC 12 which reads:

SEC. 112. Refunds or Tax Credits of Input Tax. –

(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:

xxxx

(D) Period within which Refund or Tax Credit of Input Taxes shall be Made. - In proper cases, the Commissioner shall
grant a refund or issue the tax credit certificate for creditable input taxes within one hundred twenty (120) days from
the date of submission of complete documents in support of the application filed in accordance with Subsections (A)
and (B) hereof.

In case of full or partial denial of the claim for tax refund or tax credit, or the failure on the part of the Commissioner to
act on the application within the period prescribed above, the taxpayer affected may, within thirty (30) days from the
receipt of the decision denying the claim or after the expiration of the one hundred twenty-day period, appeal the
decision or the unacted claim with the Court of Tax Appeals. (emphases supplied)

Under the aforequoted provision, a VAT-registered taxpayer who has excess and unutilized creditable input VAT
attributable to zero-rated sales may file an application for cash refund or issuance of TCC (administrative claim) before
the CIR who has primary jurisdiction to decide such application. 13 The period within which to file the administrative
claim is two (2) years reckoned from the close of the taxable quarter when the pertinent zero-rated sales were made.

From the submission of complete documents to support the administrative claim, the CIR is given a 120-day period to
decide. In case of whole or partial denial of or inaction on the administrative claim, the taxpayer may bring his judicial
claim, through a petition for review, before the CTA who has exclusive and appellate jurisdiction. 14 The period to
appeal is thirty (30) days counted from the receipt of the decision or inaction by the CIR.

The 30-day period is further emphasized in Section 11 of R.A. No. 1125, as amended by R.A. No. 9282, or the CTA
charter, which reads:

SEC. 11. Who May Appeal; Mode of Appeal; Effect of Appeal. - Any party adversely affected by a decision, ruling or
inaction of the Commissioner of Internal Revenue, the Commissioner of Customs, the Secretary of Finance, the
Secretary of Trade and Industry or the Secretary of Agriculture or the Central Board of Assessment Appeals or the
Regional Trial Courts may file an appeal with the CTA within thirty (30) days after the receipt of such decision or ruling
or after the expiration of the period fixed by law for action as referred to in Section 7(a)(2) herein. (emphases supplied)

In the seminal cases of Commissioner of Internal Revenue (Commissioner) v. Aichi Forging Company of Asia,
Inc. 15 and Commissioner v. San Roque Power Corporation/Taganito Mining Corporation v. Commissioner/Philex
Mining Corporation v. Commissioner (San Roque), 16 the Court interpreted the 30-day period of appeal
as mandatory and jurisdictional. Thus, noncompliance with the mandatory 30-day period renders the petition before
the CTA void. The ruling in said cases as to the mandatory and jurisdictional character of the 30-day period of appeal
was reiterated in a litany of cases thereafter.

Pertinently, the CTA law expressly provides that when the CIR fails to take action on the administrative claim, the
"inaction shall be deemed a denial" of the application for tax refund or credit. The taxpayer-claimant must strictly
comply with the mandatory period by filing an appeal with the CTA within thirty days from such inaction, otherwise, the
court cannot validly acquire jurisdiction over it.

In this case, Nippon Express timely filed its administrative claim on 30 March 2005, or within the two-year prescriptive
period. Counted from such date of submission of the claim with supporting documents, the CIR had 120 days, or until
28 July 2005, the last day of the 120-day period, to decide the claim. As the records reveal, the CIR did not act on the
application of Nippon Express. Thus, in accordance with law and the cited jurisprudence, the claimant, Nippon
Express, had thirty days from such inaction "deemed a denial," or until 27 August 2005, the last day of the 30- day
period, within which to appeal to the CTA.

However, Nippon Express filed its petition for review with the CTA only on 31 March 2006, or two hundred forty-six
(246) days from the inaction by the CIR. In other words, the petition of Nippon Express was belatedly filed with the
CTA and, following the doctrine above, the court ought to have dismissed it for lack of jurisdiction.

The present case is similar to the case of Philex Mining Corporation (Philex) in the consolidated cases of San
Roque. In that case, Philex: (1) filed on 21 October 2005 its original VAT return for the third quarter of taxable year
2005; (2) filed on 20 March 2006 its administrative claim for refund or credit; (3) filed on 17 October 2007, its petition
for review with the CTA. 17 As in this case, the CIR did not act on Philex's claim.

The Court considered Philex to have timely filed its administrative claim on 20 March 2006, or within the two-year
period; but, its petition for review with the CTA on 1 7 October 2007, was late by 426 days. Thus, the Court ruled that
the CTA Division did not acquire jurisdiction.

Due to the lack of jurisdiction of the CTA over the Nippon Express petition before it, all the proceedings held in that
court must be void. The rule is that where there is want of jurisdiction over a subject matter, the judgment is rendered
null and void. 18 It follows that the decision and the resolution of the CTA Division, as well as the decision rendered by
the CTA En Banc on appeal, should be vacated orset aside.

As noted previously, Nippon Express asked leave from this Court to allow it to submit in evidence the official receipts
of its zero-rated sales in addition to the sales invoices and other documents already presented before the CTA.
Considering our finding as to the CTA's lack of jurisdiction, it is thus futile to even consider or allow such official
receipts of Nippon Express.

II.

In view of the lack of jurisdiction of the CTA, we shall clarify and resolve, if only for academic purposes, the focal issue
presented in this petition, i.e., whether the sales invoices and documents other than official receipts are proper in
substantiating zero-rated sales of services in connection with a claim for refund under Section 112 of the NIRC.

Substantiation requirements
to be entitled to refund or tax
credit under Sec. 112, NIRC

As stated in our introduction, the burden of a claimant who seeks a refund of his excess or unutilized creditable input
VAT pursuant to Section 112 of the NIRC is two-fold: (1) prove payment of input VAT to suppliers; and (2) prove zero-
rated sales to purchasers. Additionally, the taxpayer-claimant has to show that the VAT payment made, called input
VAT, is attributable to his zero-rated sales.

Be it noted that under the law on VAT, as contained in Title IV of the NIRC, there are three known taxable
transactions, namely: (i) sale of goods or properties (Section 106); (ii) importation (Section 107); and (iii) sale of
services and lease of properties (Section 108). Both sale transactions in Section 106 and 108 are qualified by the
phrase 'in the course of trade or business,' whereas importation in Section 107 is not.

At this juncture, it is imperative to point out that the law had set apart the sale of goods or properties, as contained in
Section 106, from the sale of services in Section 108.

In establishing the fact that taxable transactions like sale of goods or properties or sale of services were made, the law
provided for invoicing and accounting requirements, to wit:

Section 113. Invoicing and Accounting Requirements fhr VAT-Registered Persons. –

(A) Invoicing Requirements. - A VAT-registered person shall, for every sale, issue an invoice or receipt. In addition to
the information required under Section 23 7, the following information shall be indicated in the invoice or receipt:

(1) A statement that the seller is a VAT-registered person, followed by his taxpayer's identification number (TIN); and

(2) The total amount which the purchaser pays or is obligated to pay to the seller with the indication that such amount
includes the value-added tax.

(B) Accounting Requirements. -- Notwithstanding the provisions of Section 233, all persons subject to the value-added
tax under Sections 106 and 108 shall, in addition to the regular accounting records required, maintain a subsidiary
sales journal and subsidiary purchase journal on which the daily sales and purchases are recorded. The subsidiary
journals shall contain such information as may be required by the Secretary of Finance.

xxxx

Section 237. Issuance of Receipts or Sales or Commercial Invoices. - All persons subject to an internal revenue tax
shall, for each sale or transfer of merchandise or for services rendered valued at Twenty-five pesos (1!25.00) or more,
issue duly registered receipts or sales or commercial invoices, prepared at least in duplicate, showing the date of
transaction, quantity, unit cost and description of merchandise or nature of service: Provided, however, That in the
case of sales, receipts or transfers in the amount of One hundred pesos (₱100.00) or more, or regardless of the
amount, where the sale or transfer is made by a person liable to value-added tax to another person also liable to
value-added tax; or where the receipt is issued to cover payment made as rentals, commissions, compensations or
fees, receipts or invoices shall be issued which shall show the name, business style, if any, and address of the
purchaser, customer or client: Provided, further, That where the purchaser is a VAT-registered person, in addition to
the information herein required, the invoice or receipt shall further show the Taxpayer Identification Number (TIN) of
the purchaser.

The original of each receipt or invoice shall be issued to the purchaser, customer or client at the time the transaction is
effected, who, if engaged in business or in the exercise of profession, shall keep and preserve the same in his place of
business for a period of three (3) years from the close of the taxable year in which such invoice or receipt was issued,
while the duplicate shall be kept and preserved by the issuer, also in his place of business, for a like period.
(emphases supplied)

The CTA En Banc held the view that while Sections 113 and 23 7 used the disjunctive term "or," it must not be
interpreted as giving a taxpayer an unconfined choice to select between issuing an invoice or an official receipt.  19 To
the court a quo, sales invoices must support sales of goods or properties while official receipts must support sales of
services.20

We agree.

Actually, the issue is no longer novel.

In AT&T Communications Services Philippines, Inc. v. Commissioner (AT&T), 21 we interpreted Sections 106 and 108
in conjunction with Sections 113 and 23 7 of the NIRC relative to the significance of the difference between a sales
invoice and an official receipt as evidence for zero-rated transactions. For better appreciation, we simply quote the
pertinent discussion, viz:
Although it appears under [Section 113] that there is no clear distinction on the evidentiary value of an invoice or
official receipt, it is worthy to note that the said provision is a general provision which covers all sales of a VAT
registered person, whether sale of goods or services. It does not necessarily follow that the legislature intended to use
the same interchangeably. The Court therefore cannot conclude that the general provision of Section 113 of the NIRC
of 1997, as amended, intended that the invoice and official receipt can be used for either sale of goods or services,
because there are specific provisions of the Tax Code which clearly delineates the difference between the two
transactions.

In this instance, Section l 08 of the NIRC of 1997, as amended, provides:

SEC. 108. Value-added Tax on Sale of Services and Use or Lease of Properties.-

xxxx

(C) Determination of the Tax -The tax shall be computed by multiplying the total amount indicated in the official
receipt by one-eleventh (emphases supplied)

Comparatively, Section 106 of the same Code covers sale of goods, thus:

SEC. 106. Value-added Tax on Sale of Goods or Properties.-

xxxx

(D) Determination of the Tax. - The tax shall be computed by multiplying the total amount indicated in the  invoice by
one-eleventh (1/11). (emphases supplied)

Apparently, the construction of the statute shows that the legislature intended to distinguish the use of an invoice from
an official receipt. It is more logical therefore to conclude that subsections of a statute under the same heading should
be construed as having relevance to its heading. The legislature separately categorized VAT on sale of goods from
VAT on sale of services, not only by its treatment with regard to tax but also with respect to substantiation
requirements. Having been grouped under Section 108, its subparagraphs, (A) to (C), and Section 106, its
subparagraphs (A) to (0), have significant relations with each other.

xxxx

Settled is the rule that every part of the statute must be considered with the other parts.  Accordingly, the whole of
Section 108 should be read in conj unction with Sections 113 and 237 so as to give life to all the provisions intended
for the sale of services. There is no conflict between the provisions of the law that cover sale of services that are
subject to zero rated sales; thus, it should be read altogether to reveal the true legislative intent. 22

Contrary to the petitioner's position, invoices and official receipts are not used interchangeably for purposes of
substantiating input V AT;23 or, for that matter, output VAT. Nippon Express cites Commissioner v. Manila Mining
Corporation (Manila Mining)24as its authority in arguing that the law made no distinction between an invoice and an
official receipt. We have read said case and therein found just quite the opposite. The Manila Mining case in fact
recognized a difference between the two, to wit:

A "sales or commercial invoice" is a written account of goods sold or services rendered indicating the prices charged
therefor or a list by whatever name it is known which is used in the ordinary course of business evidencing sale and
transfer or agreement to sell or transfer goods and services.

A "receipt" on the other hand is a written acknowledgment of the fact of payment in money or other settlement
between seller and buyer of goods, debtor or creditor, or person rendering services and client or customer. 25

At this point, it is worth mentioning that the VAT law at issue in Manila Mining was Presidential Decree No. 1158
(National Internal Revenue Code of 1977). That a distinction between an invoice and receipt was recognized even as
against the NIRC of 1977 as the legal backdrop is authority enough to dispel any notion harbored by the petitioner that
a distinction between the two, with the legal effects that follow, arose only after the enactment of R.A. No. 9337. For
emphasis, even prior to the enactment of R.A. No. 9337, which clearly delineates the invoice and official receipt, our
Tax Code has already made the distinction.26

The Manila Mining case proceeded to state –

These sales invoices or receipts issued by the supplier are necessary to substantiate the actual amount or quantity of
goods sold and their selling price, and taken collectively are the best means to prove the input VAT payments. 27

While the words "invoice" and "receipt" in said decision are seemingly used without distinction, it cannot be rightfully
interpreted as allowing either document as substantiation for any kind of taxable sale, whether of goods/properties or
of services. A closer reading of Manila Mining indeed shows that the question on whether an invoice is the proper
documentary proof of a sale of goods or properties to the exclusion of an official receipt, and vice versa, official receipt
as the proof of sale of services to the exclusion of an invoice, was not the pivotal issue.

It was in Kepco Philippines Corporation v. Commissioner (Kepco)28that the Court was directly confronted with the
adequacy of a sales invoice as proof of the purchase of services and official receipt as evidence of the purchase of
goods. The Court initially cited the distinction between an invoice and an official receipt as expressed in the  Manila
Mining case. We then declared for the first time that a VAT invoice is necessary for every sale, barter or exchange of
goods or properties while a VAT official receipt properly pertains to every lease of goods or properties, and for every
sale, barter or exchange of services. Thus, we held that a VAT invoice and a VAT receipt should not be confused as
referring to one and the same thing; the law did not intend the two to be used alternatively. We stated:

[T]he VAT invoice is the seller's best proof of the sale of the goods or services to the buyer while the VAT receipt is the
buyer's best evidence of the payment of goods or services received from the seller. Even though VAT invoices and
receipts are normally issued by the supplier/seller alone, the said invoices and receipts, taken collectively, are
necessary to substantiate the actual amount or quantity of goods sold and their selling price (proof of transaction), and
the best means to prove the input VAT payments (proof of payment). Hence, VAT invoice and VAT receipt should not
be confused as referring to one and the same thing. Certainly, neither does the law intend the two to be used
alternatively. 29

In Kepco, the taxpayer tried to substantiate its input VAT on purchases of goods with official receipts and on
purchases of services with invoices. The claim was appropriately denied for not complying with the required standard
of substantiation. The Court reasoned that the invoicing and substantiation requirements should be followed because it
is the only way to determine the veracity of the taxpayer's claims. Unmistakably, the indispensability of an official
receipt to substantiate a sale of service had already been illustrated jurisprudentially as early as Kepco.

The doctrinal teaching in Kepco was further reiterated and applied in subsequent cases.

Thus, in Luzon Hydro Corp. v. Commissioner,30 the claim for refund/tax credit was denied because the proof for the
zero-rated sale consisted of secondary evidence like financial statements.

Subsequently, in AT&T, 31 the Court rejected the petitioner's assertion that there is no distinction in the evidentiary
value of the supporting documents; hence, invoices or receipts may be used interchangeably to substantiate VAT.
Apparently, the taxpayer-claimant presented a number of bank credit advice in lieu of valid VAT official receipts to
demonstrate its zero-rated sales of services. The CT A denied the claim; we sustained the denial.

Then, in Takenaka Corporation-Philippine Branch v. Commissioner,32 the proofs for zero-rated sales of services were
sales invoices. The claim was likewise denied.

Most recently, in Team Energy Corporation v. Commissioner of Internal Revenue/Republic of the Philippines v. Team
Energy Corporation,33 we sustained the CTA En Bane's disallowance of the petitioner's claim for input taxes after
finding that the claimed input taxes on local purchase of goods were supported by documents other than VAT
invoices; and, similarly, on local purchase of services, by documents other than VAT official receipts.

Irrefutably, when a VAT-taxpayer claims to have zero-rated sales of services, it must substantiate the same through
valid VAT official receipts, not any other document, not even a sales invoice which properly pertains to a sale of goods
or properties.

In this case, the documentary proofs presented by Nippon Express to substantiate its zero-rated sales of services
consisted of sales invoices and other secondary evidence like transfer slips, credit memos, cargo manifests, and credit
notes.34 It is very clear that these are inadequate to support the petitioner's sales of services. Consequently, the CT
A, albeit without jurisdiction, correctly ruled that Nippon Express is not entitled to its claim.

In sum, the CTA did not acquire jurisdiction over Nippon Express' judicial claim considering that its petition was filed
beyond the mandatory 30-day period of appeal. Logically, there is no reason to allow the petitioner to submit further
evidence by way of official receipts to substantiate its zero-rated sales of services. Likewise, there is no need to pass
upon the issue on whether sales invoices or documents other than official receipts can support a sale of service
considering the CTA's lack of jurisdiction. Even so, we find that VAT official receipts are indispensable to prove sales
of services by a VAT-registered taxpayer. Consequently, the petitioner is not entitled to the claimed refund or TCC.

WHEREFORE, for lack of jurisdiction, the 5 December 2008 Decision and 5 May 2009 Resolution of the Court of Tax
Appeals Second Division in CTA Case No. 7429, and the 15 December 2009 Decision of the Court of Tax Appeals En
Banc in CT A-EB Case No. 492, are hereby VACATED and SET ASIDE.

SO ORDERED.
G.R. No. 188260               November 13, 2013

LUZON HYDRO CORPORATION, Petitioner,

vs.
COMMISSIONER OF INTERNAL REVENUE, Respondent.

BERSAMIN, J.:

This case involves a claim for refund or tax credit to cover petitioner Luzon Hydro Corporation's unutilized Input Value-
Added Tax (VAT) worth 1 2,920,665 .16 corresponding to the four quarters of taxable year 2001.

The Case

The petitioner brought this action in the Court of Tax Appeals (CTA) after the Commissioner of Internal Revenue
(respondent) did not act on the claim (CTA Case No. 6669). The CTA 2nd Division denied the claim on May 2, 2008
on the ground that the petitioner did not prove that it had zero-rated sales for the four quarters of 2001. 1 The CT A En
Banc denied the petitioner's motion for reconsideration, and affirmed the decision of the CTA 2nd Division through its
decision dated May 5, 2009.2 Hence, the petitioner appeals the decision of the CTA En Banc.

Antecedents

The petitioner, a corporation duly organized under the laws of the Philippines, has been registered with the Bureau of
Internal Revenue (BIR) as a VAT taxpayer under Taxpayer Identification No. 004-266-526. It was formed as a
consortium of several corporations, namely: Northern Mini Hydro Corporation, Aboitiz Equity Ventures, Inc., Ever
Electrical Manufacturing, Inc. and Pacific Hydro Limited.

Pursuant to the Power Purchase Agreement entered into with the National Power Corporation (NPC), the electricity
produced by the petitioner from its operation of the Bakun Hydroelectric Power Plant was to be sold exclusively to
NPC.3 Relative to its sale to NPC, the petitioner was granted by the BIR a certificate for Zero Rate for VAT purposes
in the periods from January 1, 2000 to December 31, 2000; February 1, 2000 to December 31, 2000 (Certificate No. Z-
162-2000); and from January 2, 2001 to December 31, 2001 (Certificate No. 2001-269).4

The petitioner alleged herein that it had incurred input VAT in the amount of ₱9,795,427.89 on its domestic purchases
of goods and services used in its generation and sales of electricity to NPC in the four quarters of 2001; 5 and that it
had declared the input VAT of ₱9,795,427.89 in its amended VAT returns for the four quarters on 2001, as follows:6

Exhibit Date Filed Period Covered Input VAT (P)

F May 25, 2001 1st quarter – 2001 1,903,443.96

I July 23, 2001 2nd quarter – 2001 2,166,051.96

L July 23, 2002 3rd quarter –2001 1,598,482.39

O July 24, 2002 4th quarter – 2001 4,127,449.58

Total 9,795,427.89

On November 26, 2001, the petitioner filed a written claim for refund or tax credit relative to its unutilized input VAT for
the period from October 1999 to October 2001 aggregating ₱14,557,004.38.7 Subsequently, on July 24, 2002, it
amended the claim for refund or tax credit to cover the period from October 1999 to May 2002 for ₱20,609,047.56.8

The BIR, through Revenue Examiner Felicidad Mangabat of Revenue District Office No. 2 in Vigan City, concluded an
investigation, and made a recommendation in its report dated August 19, 2002 favorable to the petitioner’s claim for
the period from January 1, 2001 to December 31, 2001.9

Respondent Commissioner of Internal Revenue (Commissioner) did not ultimately act on the petitioner’s claim despite
the favorable recommendation. Hence, on April 14, 2003, the petitioner filed its petition for review in the CTA, praying
for the refund or tax credit certificate (TCC) corresponding to the unutilized input VAT paid for the four quarters of 2001
totalling ₱9,795,427.88.10

Answering on May 29, 2003,11 the Commissioner denied the claim, and raised the following special and affirmative
defenses, to wit:

xxxx

7. The petitioner has failed to demonstrate that the taxes sought to be refunded were erroneously or illegally collected;
8. In an action for tax refund, the burden is upon the taxpayer to prove that he is entitled thereto, and failure to sustain
the same is fatal to the action for tax refund;

9. It is incumbent upon petitioner to show compliance with the provisions of Section 112 and Section 229, both of the
National Internal Revenue Code, as amended;

10. Claims for refund are construed strictly against the claimant for the same partakes the nature of exemption from
taxation (Commissioner of Internal Revenue vs. Ledesma, G.R. No. L-13509, January 30, 1970, 31 SCRA 95) and as
such they are looked upon [with] disfavor (Western Minolco Corp. vs. Commissioner of Internal Revenue, 124 SCRA
121);

11. Taxes paid and collected are presumed to have been made in accordance with the law and regulations, hence, not
refundable.12

xxxx

On October 30, 2003, the parties submitted a Joint Stipulation of Facts and Issues,13 which the CTA in Division
approved on November 10, 2003. The issues to be resolved were consequently the following:

1. Whether or not the input value added tax being claimed by petitioner is supported by sufficient documentary
evidence;

2. Whether petitioner has excess and unutilized input VAT from its purchases of domestic goods and services,
including capital goods in the amount of ₱9,795,427.88;

3. Whether or not the input VAT being claimed by petitioner is attributable to its zero-rated sale of electricity to the
NPC;

4.Whether or not the operation of the Bakun Hydroelectric Power Plant is directly connected and attributable to the
generation and sale of electricity to NPC, the sole business of petitioner; and 5. Whether or not the claim filed by the
petitioner was filed within the reglementary period provided by law.14

While the case was pending hearing, the Commissioner, through the Assistant Commissioner for Assessment
Services, informed the petitioner by the letter dated March 3, 2005 that its claim had been granted in the amount of
₱6,874,762.72, net of disallowances of ₱2,920,665.16. Accompanying the letter was the TCC for ₱6,874,762.72 (TCC
No. 00002618).15

On May 3, 2005, the petitioner filed a Motion for Leave of Court to Amend Petition for Review in consideration of the
partial grant of the claim through TCC No. 00002618. The CTA in Division granted the motion on May 11, 2005, and
admitted the Amended Petition for Review, whereby the petitioner sought the refund or tax credit in the reduced
amount of ₱2,920,665.16. The CTA in Division also directed the respondent to file a supplemental answer within ten
days from notice.16

When no supplemental answer was filed within the period thus allowed, the CTA in Division treated the answer filed on
May 16, 2003 as the Commissioner’s answer to the Amended Petition for Review.17

Thereafter, the petitioner presented testimonial and documentary evidence to support its claim. On the other hand, the
Commissioner submitted the case for decision based on the pleadings.18 On May 2, 2007, the case was submitted for
decision without the memorandum of the Commissioner.19

Ruling of the CTA in Division

The CTA in Division promulgated its decision in favor of the respondent denying the petition for review, viz:

In petitioner’s VAT returns for the four quarters of 2001, no amount of zero-rated sales was declared. Likewise,
petitioner did not submit any VAT official receipt of payments for services rendered to NPC. The only proof submitted
by petitioner is a letter from Regional Director Rene Q. Aguas, Revenue Region No. 1, stating that the financial
statements and annual income tax return constitute sufficient secondary proof of effectively zero-rated and that based
on their examination and evaluation of the financial statements and annual income tax return of petitioner for taxable
year 2000, it had annual gross receipts of Ph₱187,992,524.00. This Court cannot give credence to the said letter as it
refers to taxable year 2000, while the instant case refers to taxable year 2001.

Without zero-rated sales for the four quarters of 2001, the input VAT payments of Ph₱9,795,427.88 (including the
present claim of Ph₱2,920,665.16) allegedly attributable thereto cannot be refunded. It is clear under Section 112 (A)
of the NIRC of 1997 that the refund/tax credit of unutilized input VAT is premised on the existence of zero-rated or
effectively zero-rated sales.

xxxx

For petitioner’s non-compliance with the first requisite of proving that it had effectively zero-rated sales for the four
quarters of 2001, the claimed unutilized input VAT payments of Ph₱2,920,665.16 cannot be granted.

WHEREFORE, the instant Petition for Review is hereby DENIED for lack of merit.

SO ORDERED.20

On May 21, 2008, the petitioner moved to reconsider the decision of the CTA in Division.21 However, the CTA in
Division denied the petitioner’s motion for reconsideration on September 5, 2008.22
Decision of the CTA En Banc

On October 17, 2008, the petitioner filed a petition for review in the CTA En Banc (CTA E.B No. 420), posing the main
issue whether or not the CTA in Division erred in denying its claim for refund or tax credit upon a finding that it had not
established its having effectively zero-rated sales for the four quarters of 2001.

On May 5, 2009, the CTA En Banc promulgated the assailed decision affirming the Division, and denying the claim for
refund or tax credit, stating:

The other argument of petitioner that even if the tax credit certificate will not be used as evidence, it was able to prove
that it has zero-rated sale as shown in its financial statements and income tax returns quoting the letter opinion of
Regional Director Rene Q. Aguas that the statements and the return are considered sufficient to establish that it
generated zero-rated sale of electricity is bereft of merit. As found by the Court a quo, the letter opinion refers to
taxable year 2000, while the instant case covers taxable year 2001; hence, cannot be given credence. Even assuming
for the sake of argument that the financial statements, the return and the letter opinion relates to 2001, the same could
not be taken plainly as it is because there is still a need to produce the supporting documents proving the existence of
such zero-rated sales, which is wanting in this case. Considering that there are no zero-rated sales to speak of for
taxable year 2001, petitioner is, therefore, not entitled to a refund of Ph₱2,920,665.16 input tax allegedly attributable
thereto since it is basic requirement under Section 112 (A) of the NIRC that there should exists a zero-rated sales in
order to be entitled to a refund of unutilized input tax.

It is settled that tax refunds, like tax exemptions, are construed strictly against the taxpayer and that the claimant has
the burden of proof to establish the factual basis of its claim for tax credit or refund. Failure in this regard, petitioner’s
claim must therefore, fail.

WHEREFORE, the instant Petition for Review is hereby DENIED for lack of merit.

SO ORDERED.23

On June 10, 2009, the CTA En Banc also denied the petitioner’s motion for reconsideration.24

Issue

Aggrieved, the petitioner has appealed, urging as the lone issue: –

WHETHER THE CTA EN BANC COMMITTED A REVERSIBLE ERROR IN AFFIRMING THE DECISION OF THE
CTA.

In its August 3, 2009 petition for review,25 the petitioner has argued as follows:

(1) Its sale of electricity to NPC was automatically zero-rated pursuant to Republic Act No. 9136 (EPIRA Law); hence,
it need not prove that it had zero-rated sales in the period from January 1, 2001 to December 31, 2001 by the
presentation of VAT official receipts that would contain all the necessary information required under Section 113 of the
National Internal Revenue Code of 1997, as implemented by Section 4.108-1 of Revenue Regulations No. 7-95.
Evidence of sale of electricity to NPC other than official receipts could prove zero-rated sales.

(2) The TCC, once issued, constituted an administrative opinion that deserved consideration and respect by the CTA
En Banc.

(3) The CTA En Banc was devoid of any authority to determine the existence of the petitioner’s zero-rated sales,
inasmuch as that would constitute an encroachment on the powers granted to an administrative agency having
expertise on the matter.

(4) The CTA En Banc manifestly overlooked evidence not disputed by the parties and which, if properly considered,
would justify a different conclusion.26

The petitioner has prayed for the reversal of the decision of the CTA En Banc, and for the remand of the case to the
CTA for the reception of its VAT official receipts as newly discovered evidence. It has supported the latter relief prayed
for by representing that the VAT official receipts had been misplaced by Edwin Tapay, its former Finance and
Accounting Manager, but had been found only after the CTA En Banc has already affirmed the decision of the CTA in
Division. In the alternative, it has asked that the Commissioner allow the claim for refund or tax credit of
₱2,920,665.16.

In the comment submitted on December 3, 2009,27 the Commissioner has insisted that the petitioner’s claim cannot
be granted because it did not incur any zero-rated sale; that its failure to comply with the invoicing requirements on the
documents supporting the sale of services to NPC resulted in the disallowance of its claim for the input tax; and the
claim should also be denied for not being substantiated by appropriate and sufficient evidence.

In its reply filed on February 4, 2010,28 the petitioner reiterated its contention that it had established its claim for
refund or tax credit; and that it should be allowed to present the official receipts in a new trial.

Ruling of the Court

The petition is without merit.

Section 112 of the National Internal Revenue Code 1997 provides:

SEC. 112. Refunds or Tax Credits of Input Tax.—

(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.

xxxx

A claim for refund or tax credit for unutilized input VAT may be allowed only if the following requisites concur, namely:
(a) the taxpayer is VAT-registered; (b) the taxpayer is engaged in zero-rated or effectively zero-rated sales; (c) the
input taxes are due or paid; (d) the input taxes are not transitional input taxes; (e) the input taxes have not been
applied against output taxes during and in the succeeding quarters; (f) the input taxes claimed are attributable to zero-
rated or effectively zero-rated sales; (g) 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 the
rules and regulations of the Bangko Sentral ng Pilipinas; (h) 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 (i) the claim is filed within
two years after the close of the taxable quarter when such sales were made.29

The petitioner did not competently establish its claim for refund or tax credit. We agree with the CTA En Banc that the
petitioner did not produce evidence showing that it had zero-rated sales for the four quarters of taxable year 2001. As
the CTA En Banc precisely found, the petitioner did not reflect any zero-rated sales from its power generation in its
four quarterly VAT returns, which indicated that it had not made any sale of electricity. Had there been zero-rated
sales, it would have reported them in the returns. Indeed, it carried the burden not only that it was entitled under the
substantive law to the allowance of its claim for refund or tax credit but also that it met all the requirements for
evidentiary substantiation of its claim before the administrative official concerned, or in the de novo litigation before the
CTA in Division.30

Although the petitioner has correctly contended here that the sale of electricity by a power generation company like it
should be subject to zero-rated VAT under Republic Act No. 9136,31 its assertion that it need not prove its having
actually made zero-rated sales of electricity by presenting the VAT official receipts and VAT returns cannot be upheld.
It ought to be reminded that it could not be permitted to substitute such vital and material documents with secondary
evidence like financial statements.

We further find to be lacking in substance and bereft of merit the petitioner’s insistence that the CTA En Banc should
not have disregarded the letter opinion by BIR Regional Director Rene Q. Aguas to the effect that its financial
statements and its return were sufficient to establish that it had generated zero-rated sale of electricity. To recall, the
CTA En Banc rejected the insistence because, firstly, the letter opinion referred to taxable year 2000 but this case
related to taxable year 2001, and, secondly, even assuming for the sake of argument that the financial statements, the
return and the letter opinion had related to taxable year 2001, they still could not be taken at face value for the purpose
of approving the claim for refund or tax credit due to the need to produce the supporting documents proving the
existence of the zero-rated sales, which did not happen here. In that respect, the CTA En Banc properly disregarded
the letter opinion as irrelevant to the present claim of the petitioner.

We further see no reason to grant the prayer of the petitioner for the remand of this case to enable it to present before
the CTA newly discovered evidence consisting in VAT official receipts.

Ordinarily, the concept of newly discovered evidence is applicable to litigations in which a litigant seeks a new trial or
the re-opening of the case in the trial court. Seldom is the concept appropriate when the litigation is already on appeal,
particularly in this Court. The absence of a specific rule on newly discovered evidence at this late stage of the
proceedings is not without reason. The propriety of remanding the case for the purpose of enabling the CTA to receive
newly discovered evidence would undo the decision already on appeal and require the examination of the pieces of
newly discovered evidence, an act that the Court could not do by virtue of its not being a trier of facts. Verily, the Court
has emphasized in Atlas Consolidated Mining and Development Corporation v. Commissioner of Internal
Revenue32 that a judicial claim for tax refund or tax credit brought to the CTA is by no means an original action but an
appeal by way of a petition for review of the taxpayer’s unsuccessful administrative claim; hence, the taxpayer has to
convince the CTA that the quasi-judicial agency a quo should not have denied the claim, and to do so the taxpayer
should prove every minute aspect of its case by presenting, formally offering and submitting its evidence to the CTA,
including whatever was required for the successful prosecution of the administrative claim as the means of
demonstrating to the CTA that its administrative claim should have been granted in the first place.

Nonetheless, on the proposition that we may relax the stringent rules of procedure for the sake of rendering justice, we
still hold that the concept of newly discovered evidence may not apply herein. In order that newly discovered evidence
may be a ground for allowing a new trial, it must be fairly shown that: (a) the evidence is discovered after the trial; (b)
such evidence could not have been discovered and produced at the trial even with the exercise of reasonable
diligence; (c) such evidence is material, not merely cumulative, corroborative, or impeaching; and (d) such evidence is
of such weight that it would probably change the judgment if admitted.33
The first two requisites are not attendant. To start with, the proposed evidence was plainly not newly discovered
considering the petitioner s admission that its former Finance and Accounting Manager had misplaced the VAT official
receipts. If that was true, the misplaced receipts were forgotten evidence. And, secondly, the receipts, had they truly
existed, could have been sooner discovered and easily produced at the trial with the exercise of reasonable diligence.
But the petitioner made no convincing demonstration that it had exercised reasonable diligence. The Court cannot
accept its tender of such receipts and return now, for, indeed, the non-production of documents as vital and material
as such receipts and return were to the success of its claim for refund or tax credit was improbable, as it goes against
the sound business practice of safekeeping relevant documents precisely to ensure their future use to support an
eventual substantial claim for refund or tax credit.

WHEREFORE, the Court DENIES the petition for review on certiorari for its lack of merit; AFFIRMS the decision dated
May 5, 2009 of the Court of Tax Appeals En Bane; and ORDERS the petitioner to pay the costs of suit.

SO ORDERED.
G.R. No. 197663, March 14, 2018

TEAM ENERGY CORPORATION (FORMERLY: MIRANT PAGBILAO CORPORATION AND SOUTHERN ENERGY
QUEZON, INC.), Petitioner, v. COMMISSIONER OF INTERNAL REVENUE, Respondent.

G.R. No. 197770, March 14, 2018

REPUBLIC OF THE PHILIPPINES REP. BY THE BUREAU OF INTERNAL REVENUE, Petitioner, v. TEAM ENERGY

CORPORATION, Respondent.

DECISION

LEONEN, J.:

For a judicial claim for Value Added Tax (VAT) refund to prosper, the claim must not only be filed within the mandatory
120+30-day periods. The taxpayer must also prove the factual basis of its claim and comply with the 1997 National
Internal Revenue Code (NIRC) invoicing requirements and other appropriate revenue regulations. Input VAT
payments on local purchases of goods or services must be substantiated with VAT invoices or official receipts,
respectively.

The Petitions for Review in G.R. Nos. 197663 and 197770 seek to reverse and set aside the April 8, 2011
Decision1 and July 7, 2011 Resolution2 of the Court of Tax Appeals En Banc in CTA EB No. 603. The assailed
Decision affirmed with modification the October 5, 2009 Decision3 and February 23, 2010 Resolution4 of the Court of
Tax Appeals in Division, granting Team Energy Corporation (Team Energy) a tax refund/credit in the reduced amount
of P11,161,392.67, representing unutilized input VAT attributable to zero-rated sales for the taxable year 2003. The
assailed Resolution denied the respective motions for reconsideration filed by Team Energy and the Commissioner of
Internal Revenue (Commissioner).

Team Energy is a VAT-registered entity with Certificate of Registration No. 96-600-002498. It is engaged in power
generation and electricity sale to National Power Corporation (NPC) under a Build, Operate, and Transfer scheme.5

On November 13, 2002, Team Energy filed with the Bureau of Internal Revenue (BIR) "an Application for Effective
Zero-Rate of its supply of electricity to the NPC, which was subsequently approved."6

For the year 2003, Team Energy filed its Original and Amended Quarterly VAT Returns on the following dates and with
the following details:

Quarter Original Return Amended Return Zero-rated Sales Input VAT

1st April 25, 2003 July 25, 2003 P3,170,914,604.24 P15,085,320.31

2nd July 25, 2003 October 27, 2003 3,034,739,252.93 15,898,643.56

3rd October 27, 2003 - 2,983,478,607.66 21,151,308.57

4th January 24, 2004 July 26, 20047 3,019,672,908.84 31,330,081.06

Total P12,208,805,373.678 P83,465,353.509

On December 17, 2004, Team Energy filed with the Revenue District Office No. 60 in Lucena City a claim for refund of
unutilized input VAT in the amount of P83,465,353.50, for the first to fourth quarters of taxable year 2003.10

On April 22, 2005, Team Energy appealed before the Court of Tax Appeals its 2003 first quarter VAT claim of PI
5,085,320.31. The appeal was docketed as CTA Case No. 7229.11

Opposing the appeal, the Commissioner averred that the amount claimed by Team Energy was not properly
documented and that NPC's exemption from taxes did not extend to its electricity supplier such as Team Energy.12

On July 22, 2005, Team Energy appealed its VAT refund claims for the second to fourth quarters of 2003 in the
amount of P68,380,033.19, docketed as CTA Case No. 7298.13

As special and affirmative defenses, the Commissioner alleged that it was imperative upon Team Energy to 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. Furthermore, the Commissioner contended that Team Energy must prove that the claims were filed within the
prescriptive periods and that the input taxes being claimed had not been applied against any output tax liability or were
not carried over in the succeeding quarters.14

On October 12, 2005, the two (2) cases were consolidated.15

The Court of Tax Appeals First Division partially granted Team Energy's petition.16 It held that NPC's exemption from
direct and indirect taxes had long been resolved by this Court.17 Consequently, NPC's electricity purchases from
independent power producers, such as Team Energy, were subject to 0% VAT pursuant to Section 108(B)(3) of the
1997 NIRC.18

The Court of Tax Appeals First Division further ruled that P20,986,302.67 out of the reported zero-rated sales of
P12,208,805,373.67 must be excluded for Team Energy's failure to submit the corresponding official receipts, leaving
a balance of P12,187,819,071.00 as substantiated zero-rated sales.19 Consequently, only 99.83%20 of the validly
supported input VAT payments being claimed could be considered.

The Court of Tax Appeals First Division likewise disallowed P12,642,304.32 of Team Energy's claimed input VAT for
its failure to meet the substantiation requirements under Sections 110(A) and 113(A) of the 1997 NIRC and Sections
4.104-1, 4.104-5, and 4.108-1 of Revenue Regulations No. 7-95 or the Consolidated Value Added Tax
Regulations.21 Team Energy's reported output VAT liability of P776.36 in its Quarterly VAT Return for the third quarter
of 2003 was further deducted from the substantiated input VAT.22 The Court of Tax Appeals used the following
computation in determining Team Energy's total allowable input VAT:

Substantiated Input VAT P70,823,049.18

Less: Output VAT 776.36

Excess: Input VAT 70,822,272.82

Multiply by rate of substantiated zero-rated sales 99.83%

Excess input VAT attributable to substantiated zero-rated sales P70,700,533.0123

Finally, on the issue of prescription, the Court of Tax Appeals First Division held that "[t]he reckoning of the two-year
prescriptive period for the filing of a claim for input VAT refund starts from the date of filing of the corresponding
quarterly VAT return."24 It explained that this Court's ruling in Commissioner of Internal Revenue v. Mirant Pagbilao
Corporation,25 to the effect that "the two-year prescriptive period for the filing of a claim for input VAT refund starts
from the close of the taxable quarter when the relevant sales were made,"26 must be applied to cases filed after the
promulgation of Mirant. Accordingly, Team Energy's administrative claim filed on December 17, 2004, and judicial
claims filed on April 22, 2005 and July 22, 2005 were well within the two (2)-year prescriptive period.27

The dispositive portion of the October 5, 2009 Decision provided:

WHEREFORE, in view of the foregoing, the instant Petition for Review is hereby PARTIALLY GRANTED. [The
Commissioner of Internal Revenue] is hereby ORDERED to REFUND or ISSUE a tax credit certificate to [Team
Energy] in the amount of P70,700,533.01.

SO ORDERED.28 (Emphasis in the original)

Upon the denial of her Motion for Reconsideration, the Commissioner filed on March 31, 2010 a Petition for Review
with the Court of Tax Appeals En Banc.29 She argued that the Court of Tax Appeals First Division erred in allowing
the tax refund/credit as 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.30  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.31 Team Energy filed its Comment/Opposition to the Petition.32

On April 8, 2011, the Court of Tax Appeals En Banc promulgated its Decision, partially granting Team Energy's
petition. It held that Team Energy's judicial claim for refund for the second, third, and fourth quarters of 2003 was filed
only on July 22, 2005 or beyond the 30-day period prescribed under Section 112(D)33 of the 1997 NIRC.
Consequently, the claim for these quarters must be denied for lack of jurisdiction. Furthermore, the Court of Tax
Appeals En Banc found Team Energy entitled to a refund in the reduced amount of P11,161,392.67, representing
unutilized input VAT attributable to its zero-rated sales for the first quarter of 2003.

The dispositive portion of the Court of Tax Appeals En Banc April 8, 2011 Decision read:

WHEREFORE, on the basis of the foregoing considerations, the Petition for Review ... is PARTIALLY GRANTED. The
assailed Decision and Resolution of the First Division dated October 5, 2009 and February 23, 2010, respectively, are
hereby MODIFIED. Accordingly, [the Commissioner] is ORDERED to refund in favor of [Team Energy] the reduced
amount of Eleven Million One Hundred Sixty[-]One Thousand Three Hundred Ninety[-]Two [Pesos] and Sixty[-]Seven
Centavos (P11,161,392.67) representing unutilized input value-added tax (VAT) paid on its domestic purchases of
goods and services and importation of goods attributable to its zero-rated sales for the first quarter of taxable year
2003.

SO ORDERED.34 (Emphasis in the original)

The separate partial motions for reconsideration of Team Energy and the Commissioner were denied in the Court of
Tax Appeals En Banc July 7, 2011 Resolution.35

Team Energy and the Commissioner filed their separate Petitions for Review before this Court, docketed as G.R. Nos.
19766336 and 197770,37 respectively.

After the parties have filed their respective comments to the petitions and replies to these comments, this Court
directed them to submit their respective memoranda in its July 1, 2013 Resolution.38

Team Energy filed its Consolidated Memorandum39 while the Commissioner filed a Manifestation,40 stating that she
was adopting her Comment dated February 21, 201241 as her Memorandum.

The issues for this Court's resolution are as follows:

First, whether or not the Court of Tax Appeals erred in disallowing Team Energy Corporation's claim for tax refund of
its unutilized input VAT for the second to fourth quarters of 2003 on the ground of lack of jurisdiction;

Second, whether or not the Court of Tax Appeals erred in failing to recognize the interchangeability of VAT invoices
and VAT official receipts to comply with the substantiation requirements for refunds of excess or unutilized input tax
under Sections 110 and 113 of the 1997 National Internal Revenue Code, resulting in the disallowance of
P258,874.55; and

Finally, whether or not Team Energy Corporation's failure to submit the Registration and Certificate of Compliance
issued by the Energy Regulatory Commission (ERC) disqualifies it from claiming a tax refund/credit.

The prescriptive periods regarding judicial claims for refunds or tax credits of input VAT are explicitly set forth in
Section 112(D)42 of the 1997 NIRC:

Section 112. Refunds or Tax Credits of Input Tax. —

….

(D) Period within which Refund or Tax Credit, of Input Taxes shall be Made. — In proper cases, the Commissioner
shall grant a refund or issue the tax credit certificate for creditable input taxes within one hundred twenty (120) days
from the date of submission of complete documents in support of the application filed in accordance with Subsections
(A) and (B) hereof.

In case of full or partial denial of the claim for tax refund or tax credit, or the failure on the part of the Commissioner to
act on the application within the period prescribed above, the taxpayer affected may, within thirty (30) days from the
receipt of the decision denying the claim or after the expiration of the one hundred twenty day-period, appeal the
decision or the unacted claim with the Court of Tax Appeals. (Emphasis supplied)

The text of the law is clear that resort to an appeal with the Court of Tax Appeals should be made within 30 days either
from receipt of the decision denying the claim or the expiration of the 120-day period given to the Commissioner to
decide the claim.

It was in Commissioner of Internal Revenue v. Aichi Forging Company of Asia, Inc.43 where this Court first
pronounced that observance of the 120+30-day periods in Section 112(D)44 is crucial in filing an appeal with the Court
of Tax Appeals. This was further emphasized in Commissioner of Internal Revenue v. San Roque Power
Corporation45 where this Court categorically held that compliance with the 120+30-day periods under Section 112 of
the 1997 NIRC is mandatory and jurisdictional. Exempted from this are VAT refund cases that are prematurely filed
before the Court of Tax Appeals or before the lapse of the 120-day period between December 10, 2003, when the BIR
issued Ruling No. DA-489-03, and October 6, 2010, when this Court promulgated Aichi.46

Section 112(D)47 is consistent with Section 11 of Republic Act No. 1125, as amended by Section 9 of Republic Act
No. 9282 (2004), which provides a 30-day period of appeal either from receipt of the adverse decision of the
Commissioner or from the lapse of the period fixed by law for action:

Section 11. Who May Appeal; Mode of Appeal; Effect of Appeal. -Any party adversely affected by a decision, ruling or
inaction of the Commissioner of Internal Revenue, . . . may file an appeal with the CTA within thirty (30) days after the
receipt of such decision or ruling or after the expiration of the period fixed by law for action  as referred to in Section
7(a)(2)48 herein.

Appeal shall be made by filing a petition for review under a procedure analogous to that provided for under Rule 42 of
the 1997 Rules of Civil Procedure with the CTA within thirty (30) days from the receipt of the decision or ruling or in the
case of inaction as herein provided, from the expiration of the period fixed by law to act thereon. (Emphasis supplied)

In this case, Team Energy's judicial claim was filed beyond the 30-day period required in Section 112(D). The
administrative claim for refund was filed on December 17, 2004.49 Thus, BIR had 120 days to act on the claim, or until
April 16, 2005. Team Energy, in turn, had until May 16, 2005 to file a petition with the Court of Tax Appeals but filed its
appeal only on July 22, 2005, or 67 days late. Thus, the Court of Tax Appeals En Banc correctly denied its claim for
refund due to prescription.

Team Energy argues, however, that the application of the Aichi doctrine to its claim would violate the rule on non-
retroactivity of judicial decisions.50 Team Energy adds that when it filed its claims for refund with the BIR and the
Court of Tax Appeals, both the administrative and judicial claims for refund must be filed within the two (2)-year
prescriptive period.51 Moreover, 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 Court of Tax
Appeals.52 Team Energy contends that to deny its claim of P70,700,533.01 duly proven before the Court of Tax
Appeals First Division "would result to unjust enrichment on the part of the government."53

This Court is not persuaded.

When Team Energy filed its refund claim in 2004, the 1997 NIRC was already in effect, which clearly provided for: (a)
120 days for the Commissioner to act on a taxpayer's claim; and (b) 30 days for the taxpayer to appeal either from the
Commissioner's decision or from the expiration of the 120-day period, in case of the Commissioner's inaction.

"Rules and regulations [including Revenue Regulations No. 7-95] or parts [of them] which are contrary to or
inconsistent with [the NIRC] are . . . amended or modified accordingly."54

This Court, in construing the law, merely declares what a particular provision has always meant. It does not create
new legal obligations. This Court does not have the power to legislate. Interpretations of law made by courts
necessarily always have a "retroactive" effect.55

In Aichi, where the issue on prematurity of a judicial claim was first raised and passed upon, this Court applied outright
its interpretation of the 1997 NIRC's language on the mandatory character of the 120+30-day periods. Consequently, it
ordered the dismissal of Aichi's appeal due to premature filing of its claim for refund/credit of input VAT. The
administrative and judicial claims in Aichi were filed on September 30, 2004, even prior to the filing of Team Energy's
claims.

San Roque dealt with judicial claims which were either prematurely filed or had already prescribed. That case,
specifically in G.R. No. 197156, Philex Mining Corporation v. Commissioner of Internal Revenue, involved the filing of
a judicial claim beyond the 30-day period to appeal as in this case. Then and there, this Court rejected Philex Mining
Corporation's (Philex) judicial claim because of late filing:

Unlike San Roque and Taganito, Philex's case is not one of premature filing but of late filing. Philex did not file any
petition with the CTA within the 120-day period. Philex did not also file any petition with the CTA within 30 days after
the expiration of the 120-day period. Philex filed its judicial claim long after the expiration of the 120-day period, in fact
426 days after the lapse of the 120-day period. In any event, whether governed by jurisprudence before, during, or
after the Atlas case, Philex's judicial claim will have to be rejected because of late filing. Whether the two-year
prescriptive period is counted from the date of payment of the output VAT following the Atlas doctrine, or from the
close of the taxable quarter when the sales attributable to the input VAT were made following
the Mirant and Aichi doctrines, Philex's judicial claim was indisputably filed late.

The Atlas doctrine cannot save Philex from the late filing of its judicial claim. The inaction of the Commissioner on
Philex's claim during the 120-day period is, by express provision of law, "deemed a denial" of Philex's claim. Philex
had 30 days from the expiration of the 120-day period to file its judicial claim with the CTA. Philex's failure to do so
rendered the "deemed a denial" decision of the Commissioner final and inappealable. The right to appeal to the CTA
from a decision or "deemed a denial" decision of the Commissioner is merely a statutory privilege, not a constitutional
right. The exercise of such statutory privilege requires strict compliance with the conditions attached by the statute for
its exercise. Philex failed to comply with the statutory conditions and must thus bear the consequences.56  (Emphasis
supplied, citation omitted)

Philex filed its judicial claim on October 17, 2007, before Aichi was promulgated.

The proper application of the mandatory and jurisdictional nature of the 120+30-day periods, whether prospective or
retroactive, was, in fact, at the heart of this Court en banc's debates in San Roque.

Some justices were of the view that the mandatory and jurisdictional nature of the 120+30-day periods must be applied
prospectively, or at the earliest upon the effectivity of Revenue Regulations No. 16-2005,57 or upon the finality
of Aichi.58 Still others59 argued for retroactive application to all undecided VAT refund cases regardless of the period
when the claim for refund was made.

The majority held that the 120+30-day mandatory periods were already in the 1997 NIRC when the taxpayers filed
their judicial claims. The law is clear, plain, and unequivocal and must be applied exactly as worded. However, the
majority considered as an exception, for equitable reasons, BIR Ruling No. DA-489-03, which expressly stated that
taxpayers need not wait for the lapse of the 120-day period before seeking judicial relief. Thus, judicial claims filed
from December 10, 2003, when BIR Ruling No. DA-489-03 was issued, to October 6, 2010, when the  Aichi doctrine
was adopted, were excepted from the strict application of the 120+30-day mandatory and jurisdictional periods.

San Roque Power Corporation (San Roque) filed a motion for reconsideration and supplemental motion for
reconsideration in G.R. No. 187485, arguing for the prospective application of the 120+30-day mandatory and
jurisdictional periods. This Court denied San Roque with finality on October 8, 2013.60

In Commissioner of Internal Revenue v. Mindanao II Geothermal Partnership,61 Mindanao II Geothermal Partnership

(Mindanao II) filed its administrative and judicial claims on October 6, 2005 and July 21, 2006, respectively, prior to the
promulgation of Aichi and San Roque. While its administrative claim was found to have been timely filed, this Court
nevertheless denied its refund claim because the judicial claim was filed late or only 138 days after the lapse of the
120+30-day periods. This Court held that the 30-day period to appeal was mandatory and jurisdictional, applying the
ruling in San Roque. It further emphasized that late filing was absolutely prohibited.
Since then, the 120+30-day periods have been applied to pending cases,62 resulting in denial of taxpayers' claims
due to late filing. This Court finds no reason to except this case.

Further, the Commissioner's inaction on Team Energy's claim during the 120-day period is "deemed a denial,"
pursuant to Section 7(a)(2)63 of Republic Act No. 1125, as amended by Section 7 of Republic Act No. 9282. Team
Energy had 30 days from the expiration of the 120-day period to file its judicial claim with the Court of Tax Appeals. Its
failure to do so rendered the Commissioner's "deemed a denial" decision as final and inappealable.

Team Energy's contention that denial of its duly proven refund claim would constitute unjust enrichment on the part of
the government is misplaced.

"Excess input tax is not an excessively, erroneously, or illegally collected tax."64 A claim for refund of this tax is in the
nature of a tax exemption, which is based on Sections 110(B) and 112(A) of 1997 NIRC, allowing VAT-registered
persons to recover the excess input taxes they have paid in relation to their zero-rated sales. "The term 'excess' input
VAT simply means that the input VAT available as [refund] credit exceeds the output VAT, not that the input VAT is
excessively collected because it is more than what is legally due."65 Accordingly, claims for tax refund/credit of excess
input tax are governed not by Section 229 but only by Section 112 of the NIRC.

A claim for input VAT refund or credit is construed strictly against the taxpayer.66  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.67 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.

II

On the disallowance of some of its input VAT claims, Team Energy submits that "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."68 Section 113 of the 1997 NIRC, prior to its amendment by Republic
Act No. 9337 in 2005, provides:

Section 113. Invoicing and Accounting Requirements for VAT-Registered Persons. —

(A) Invoicing Requirements. - A VAT-registered person shall, for every sale, issue an invoice or receipt. In addition
to the information required under Section 237, the following information shall be indicated in the invoice or
receipt:

(1) A statement that the seller is a VAT-registered person, followed by his taxpayer's identification number
(TIN); and

(2) The total amount which the purchaser pays or is obligated to pay to the seller with the indication that
such amount includes the value-added tax.

Team Energy posits that 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.

Team Energy's contention is untenable.

Claimants of tax refunds have the burden to prove their entitlement to the claim under substantive law and the factual
basis of their claim.69 Moreover, in claims for VAT refund/credit, applicants must satisfy the substantiation and
invoicing requirements under the NIRC and other implementing rules and regulations.70

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, viz:

Section 113. Invoicing and Accounting Requirements for VAT-Registered Persons. —

(A) Invoicing Requirements. — A VAT-registered person shall, for every sale, issue an invoice or receipt. In addition to
the information required under Section 237, the following information shall be indicated in the invoice or receipt:

(1) A statement that the seller is a VAT-registered person, followed by his taxpayer's identification number (TIN); and

(2) The total amount which the purchaser pays or is obligated to pay to the seller with the indication that such amount
includes the value- added tax.

....

Section 237. Issuance of Receipts or Sales or Commercial Invoices. — All persons subject to an internal revenue
tax shall, for each sale or transfer of merchandise or for services rendered valued at Twenty-five pesos (P25.00) or
more, issue duly registered receipts or sales or commercial invoices, prepared at least in duplicate, showing the date
of transaction, quantity, unit cost and description of merchandise or nature of service: Provided, however, That in the
case of sales, receipts or transfers in the amount of One hundred pesos (P100.00) or more, or regardless of
amount, where the sale or transfer is made by a person liable to value-added tax to another person also liable to
value-added tax; or where the receipt is issued to cover payment made as rentals, commissions, compensations or
fees, receipts or invoices shall be issued which shall show the name, business style, if any, and address of the
purchaser, customer or client: Provided, further, That where the purchaser is a VAT-registered person, in addition to
the information herein required, the invoice or receipt shall further show the Taxpayer Identification Number (TIN) of
the purchaser. (Emphasis supplied)

Section 4.108-1 of Revenue Regulations No. 7-95 summarizes the information that must be contained in a VAT
invoice and a VAT official receipt:

Section 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:

the name, TIN and address of seller;

date of transaction;

quantity, unit cost and description of merchandise or nature of service;

the name, TIN, business style, if any, and address of the VAT- registered purchaser, customer or client;

the word "zero rated" imprinted on the invoice covering zero- rated sales; and

the invoice value or consideration.

In the case of sale of real property subject to VAT and where the zonal or market value is higher than the actual
consideration, the VAT shall be separately indicated in the invoice or receipt.

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.

If the taxable person is also engaged in exempt operations, he should issue separate invoices or receipts for the
taxable and exempt operations. A "VAT Invoice" shall be issued only for sales of goods, properties or services subject
to VAT imposed in Sections 100 and 102 [now Sections 106 and 108] of the Code.

The invoice or receipt shall be prepared at least in duplicate, the original to be given to the buyer and the duplicate to
be retained by the seller as part of his accounting records. (Emphasis supplied)

In this case, the Court of Tax Appeals disallowed Team Energy's input VAT of P258,874.55, which consisted of:

Input taxes of P78,134.65 claimed on local purchase of goods supported by documents other than VAT
invoices;71 and

Input taxes of P180,739.90 claimed on local purchase of services supported by documents other than VAT official
receipts.72

Team Energy submits that the disallowances "essentially result from the non-recognition [by] the [Court of Tax
Appeals] En Banc of the interchangeability of VAT invoices and VAT [official receipts] in a claim for refund of excess or
unutilized input tax."73

In AT&T Communications Services Philippines, Inc. v. Commissioner of Internal Revenue,74 this Court was
confronted with the same issue on the substantiation of the taxpayer-applicant's zero-rated sales of services. In that
case, AT&T Communications Services Philippines, Inc. (AT&T) applied for tax refund and/or tax credit of its
excess/unutilized input VAT from zero-rated sales of services for calendar year 2002. The Court of Tax Appeals First
Division, as affirmed by the En Banc, denied AT&T's claim "for lack of substantiation" on the ground that:

[Considering that the subject revenues pertain to gross receipts from services rendered by petitioner, valid VAT official
receipts and not mere sales invoices should have been submitted in support thereof. Without proper VAT official
receipts, the foreign currency payments received by petitioner from services rendered for the four (4) quarters of
taxable year 2002 in the sum of US$1,102,315.48 with the peso equivalent of P56,898,744.05 cannot qualify for zero-
rating for VAT purposes.75 (Emphasis in the original)

Reversing the Court of Tax Appeals, this Court held that since Section 113 did not distinguish between a sales invoice
and an official receipt, the sales invoices presented by AT&T would suffice provided that the requirements under
Sections 113 and 237 of the Tax Code were met. It further explained:

Sales invoices are recognized commercial documents to facilitate trade or credit transactions. They are proofs that a
business transaction has been concluded, hence, should not be considered bereft of probative value. Only the
preponderance of evidence threshold as applied in ordinary civil cases is needed to substantiate a claim for tax refund
proper.76 (Citations omitted)

However, in a subsequent claim for tax refund or credit of input VAT filed by AT&T for the calendar year 2003, the
same issue on the interchangeability of invoice and official receipt was raised. This time in AT&T Communications
Services Phils., Inc. v. Commissioner of Internal Revenue,77 this Court held that there was a clear delineation
between official receipts and invoices and that these two (2) documents could not be used interchangeably. According
to this Court, Section 113 on invoicing requirements must be read in conjunction with Sections 106 and 108, which
specifically delineates sales invoices for sales of goods and official receipts for sales of services.
Although it appears under [Section 113 of the 1997 NIRC] that there is no clear distinction on the evidentiary value of
an invoice or official receipt, it is worthy to note that the said provision is a general provision which covers all sales of a
VAT[-]registered person, whether sale of goods or services. It does not necessarily follow that the legislature intended
to use the same interchangeably. The Court therefore cannot conclude that the general provision of Section 113 of the
NIRC of 1997, as amended, intended that the invoice and official receipt can be used for either sale of goods or
services, because there are specific provisions of the Tax Code which clearly delineates the difference between the
two transactions.

In this instance, Section 108 of the NIRC of 1997, as amended, provides:

SEC. 108. Value-added Tax on Sale of Services and Use or Lease of Properties. —

....

(C) Determination of the Tax — The tax shall be computed by multiplying the total amount indicated in the  official
receipt by one-eleventh (1/11).

Comparatively, Section 106 of the same Code covers sale of goods, thus:

SEC. 106. Value-added Tax on Sale of Goods or Properties. —

....

(D) Determination of the Tax. — The tax shall be computed by multiplying the total amount indicated in the  invoice by
one-eleventh (1/11).

Apparently, the construction of the statute shows that the legislature intended to distinguish the use of an invoice from
an official receipt. It is more logical therefore to conclude that subsections of a statute under the same heading should
be construed as having relevance to its heading. The legislature separately categorized VAT on sale of goods from
VAT on sale of services, not only by its treatment with regard to tax but also with respect to substantiation
requirements. Having been grouped under Section 108, its subparagraphs, (A) to (C), and Section 106, its
subparagraphs (A) to (D), have significant relations with each other.

Legislative intent must be ascertained from a consideration of the statute as a whole and not of an isolated part or a
particular provision alone. This is a cardinal rule in statutory construction. For taken in the abstract, a word or phrase
might easily convey a meaning quite different from the one actually intended and evident when the word or phrase is
considered with those with which it is associated. Thus, an apparently general provision may have a limited application
if viewed together with the other provisions.78 (Emphasis supplied, citation omitted)

This Court reiterates that to claim a refund of unutilized or excess input VAT, purchase of goods or properties must be
supported by VAT invoices, while purchase of services must be supported by VAT official receipts.

For context, VAT is a tax imposed on each sale of goods or services in the course of trade or business, or importation
of goods "as they pass along the production and distribution chain."79 It is an indirect tax, which "may be shifted or
passed on to the buyer, transferee or lessee of the goods, properties or services."80 The output tax81 due from VAT-
registered sellers becomes the input tax82 paid by VAT-registered purchasers on local purchase of goods or services,
which the latter in turn may credit against their output tax liabilities. On the other hand, for a non-VAT purchaser, the
VAT shifted forms part of the cost of goods, properties, and services purchased, which may be deductible as an
expense for income tax purposes.83

Panasonic Communications Imaging Corp. v. Commissioner of Internal Revenue84 explained the concept of VAT and
its collection through the tax credit method:

The VAT is a tax on consumption, an indirect tax that the provider of goods or services may pass on to his customers.
Under the VAT method of taxation, which is invoice-based, an entity can subtract from the VAT charged on its sales or
outputs the VAT it paid on its purchases, inputs and imports. For example, when a seller charges VAT on its sale, it
issues an invoice to the buyer, indicating the amount of VAT he charged. For his part, if the buyer is also a seller
subjected to the payment of VAT on his sales, he can use the invoice issued to him by his supplier to get a reduction
of his own VAT liability. The difference in tax shown on invoices passed and invoices received is the tax paid to the
government. In case the tax on invoices received exceeds that on invoices passed, a tax refund may be claimed.

Under the 1997 NIRC, if at the end of a taxable quarter the seller charges output taxes equal to the input taxes that his
suppliers passed on to him, no payment is required of him. It is when his output taxes exceed his input taxes that he
has to pay the excess to the BIR. If the input taxes exceed the output taxes, however, the excess payment shall be
earned over to the succeeding quarter or quarters. Should the input taxes result from zero-rated or effectively zero-
rated transactions or from the acquisition of capital goods, any excess over the output taxes shall instead be refunded
to the taxpayer.85 (Citations omitted)

Our VAT system is invoice-based, i.e. taxation relies on sales invoices or official receipts. A VAT-registered entity is
liable to VAT, or the output tax at the rate of 0% or 10% (now 12%) on the gross selling price86 of goods or gross
receipts87 realized from the sale of services. Sections 106(D) and 108(C) of the Tax Code expressly provide that VAT
is computed at 1/11 of the total amount indicated in the invoice for sale of goods or official receipt for sale of
services.88 This tax shall also be recognized as input tax credit to the purchaser of the goods or services.

Under Section 11089 of the 1997 NIRC, the input tax on purchase of goods or properties, or services is creditable:
(a) To the purchaser upon consummation of sale and on importation of goods or properties;

(b) To the importer upon payment of the VAT prior to the release of the goods from the custody of the Bureau of
Customs; and

[(c)] [T]o the purchaser [of services], lessee [of property] or licensee upon payment of the compensation, rental, royalty
or fee.

A VAT-registered person may opt, however, to apply for tax refund or credit certificate of VAT paid corresponding to
the zero-rated sales of goods, properties, or services to the extent that this input tax has not been applied against the
output tax.

Strict compliance with substantiation and invoicing requirements is necessary considering VAT's nature and VAT
system's tax credit method, where tax payments are based on output and input taxes and where the seller's output tax
becomes the buyer's input tax that is available as tax credit or refund in the same transaction. It ensures the proper
collection of taxes at all stages of distribution, facilitates computation of tax credits, and provides accurate audit trail or
evidence for BIR monitoring purposes.

The Court of Tax Appeals further pointed out that the noninterchangeability between VAT official receipts and VAT
invoices avoids having the government refund a tax that was not even paid.

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.90

In conjunction with this rule, Revenue Memorandum Circular No. 42-0391 expressly provides that an "invoice is the
supporting document for the claim of input tax on purchase of goods whereas official receipt is the supporting
document for the claim of input tax on purchase of services." It further states that a taxpayer's failure to comply with
the invoicing requirements will result to the disallowance of the claim for input tax. Pertinent portions of this circular
provide:

A-13: Failure by the supplier to comply with the invoicing requirements on the documents supporting the sale of goods
and services will result to the disallowance of the claim for input tax by the purchaser-claimant.

If the claim for refund/[tax credit certificate] is based on the existence of zero-rated sales by the taxpayer but it fails to
comply with the invoicing requirements in the issuance of sales invoices (e.g. failure to indicate the TIN), its claim for
tax credit/refund of VAT on its purchases shall be denied considering that the invoice it is issuing to its customers does
not depict its being a VAT-registered taxpayer whose sales are classified as zero-rated sales. Nonetheless, this
treatment is without prejudice to the right of the taxpayer to charge the input taxes to the appropriate expense account
or asset account subject to depreciation, whichever is applicable. Moreover, the case shall be referred by the
processing office to the concerned BIR office for verification of other tax liabilities of the taxpayer.

Pursuant to Sections 106(D) and 108(C) in relation to Section 110 of the 1997 NIRC, the output or input tax on the
sale or purchase of goods is determined by the total amount indicated in the VAT invoice, while the output or input tax
on the sale or purchase of services is determined by the total amount indicated in the VAT official receipt.

Thus, the Court of Tax Appeals properly disallowed the input VAT of P258,874.55 for Team Energy's failure to comply
with the invoicing requirements.

III

The Commissioner submits that the Court of Tax Appeals En Banc erred in granting Team Energy a tax refund/credit
of P11,161,392.67, representing unutilized input VAT attributable to zero-rated sales of electricity to NPC.92  She
maintains that Team Energy is not entitled to any tax refund or credit because it cannot qualify for VAT zero-rating
under Republic Act No. 913693 or the Electrical Power Industry Reform Act (EPIRA) Law for failure to submit its ERC
Registration and Certificate of Compliance.94 She avers that 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.95

The Court of Tax Appeals rejected this argument on the ground that the issue was raised for the first time in a motion
for partial reconsideration, viz:

[The Commissioner] raised the issue of [Team Energy's] failure to submit the Registration and Certificate of
Compliance (COC) issued by ERC for the first time in the instant Motion for Partial Reconsideration. The said issue
was neither raised in the Court a quo nor in the Petition for Review with the Court En Banc. The rule is well settled that
no question will be considered by the appellate court which has not been raised in the court below. When a party
deliberately adopts a certain theory, and the case is tried and decided upon the theory in the court below, he will not
be permitted to change his theory on appeal, because to permit him to do so would be unfair to the adverse party.
Thus, a judgment that goes beyond the issues and purports to adjudicate something on which the court did not hear
the parties, is not only irregular but also extrajudicial and invalid. In the case of Rizal Commercial Banking Corporation
vs. Commissioner of Internal Revenue,96 the Supreme Court said:
The rule is well-settled that points of law, theories, issues and arguments not adequately brought to the attention of the
lower court need not be considered by the reviewing court as they cannot be raised for the first time on appeal, much
more in a motion for reconsideration as in this case, because this would be offensive to the basic rules of fair play,
justice and due process. This last ditch effort to shift to a new theory and raise a new matter in the hope of a favorable
result is a pernicious practice that has consistently been rejected.

Also, both parties stipulated and recognized in the Joint Stipulation of Facts and Issues that [Team Energy] is
principally engaged in the business of power generation. Moreover, [the Commissioner] acknowledged [Team
Energy's] sale of electricity to the NPC as zero-rated evidence[d] by the approved Application for VAT zero-rating.97

The Commissioner now asserts that her counsel's mistake in belatedly raising the issue should not prejudice the State,
as it is not bound by the errors of its officers or agents.98 She adds that despite the Stipulation of Facts, the Court of
Tax Appeals 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.99

The Commissioner's argument is misplaced.

Team Energy's claim for unutilized or excess input VAT was anchored not on the EPIRA Law but on Section 108(B)
(3)100 of the 1997 NIRC, in relation to Section 13 of Republic Act No. 6395101 or the NPC's charter,102 before its
repeal by Republic Act No. 9337. One of the issues presented before the Court of Tax Appeals First Division was
"[w]hether or not the power generation services rendered by [Team Energy] to NPC are subject to zero percent (0%)
VAT pursuant to Section 108(B)(3)."103 Otherwise stated, the Court of Tax Appeals First Division was confronted with
the legal issue of whether NPC's tax exemption privilege includes the indirect tax of VAT to entitle Team Energy to 0%
VAT rate. The Court of Tax Appeals aptly resolved the issue in the affirmative, consistent with this Court's
pronouncements104 that NPC is exempt from all taxes, both direct and indirect, and services rendered by any VAT-
registered person or entity to NPC are effectively subject to 0% rate.

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. This was the thrust of this Court's ruling in Commissioner of Internal Revenue v. Toledo
Power Company (TPC).105

In Toledo, the Court of Tax Appeals granted Toledo Power Company's (TPC) claim for refund of unutilized input VAT
attributable to sales of electricity to NPC, but denied refund of input VAT related to sales of electricity to other
entities106 for failure of TPC to prove that it was a generation company under the EPIRA. This Court held that TPC's
failure to submit its ERC Certificate of Compliance renders its sales of generated power not qualified for VAT zero-
rating. This Court, in affirming the Court of Tax Appeals, held:

Section 6 of the EPIRA provides that the sale of generated power by generation companies shall be zero-rated.
Section 4 (x) of the same law states that a generation company "refers to any person or entity authorized by the ERC
to operate facilities used in the generation of electricity." Corollarily, to be entitled to a refund or credit of unutilized
input VAT attributable to the sale of electricity under the EPIRA, a taxpayer must establish: (1) that it is a generation
company, and (2) that it derived sales from power generation.

....

In this case, when the EPIRA took effect in 2001, TPC was an existing generation facility. And at the time the sales of
electricity to CEBECO, ACMDC, and AFC were made in 2002, TPC was not yet a generation company under EPIRA.
Although it filed an application for a COC on June 20, 2002, it did not automatically become a generation company. It
was only on June 23, 2005, when the ERC issued a COC in favor of TPC, that it became a generation company under
EPIRA. Consequently, TPC's sales of electricity to CEBECO, ACMDC, and AFC cannot qualify for VAT zero-rating
under the EPIRA.107 (Emphasis supplied)

Here, considering that Team Energy's refund claim is premised on Section 108(B)(3) of the 1997 NIRC, in relation to
NPC's charter, the requirements under the EPIRA are inapplicable. To qualify its electricity sale to NPC as zero-rated,
Team Energy needs only to show that it is a VAT-registered entity and that it has complied with the invoicing
requirements under Section 108(B)(3) of the 1997 NIRC, in conjunction with Section 4.108-1 of Revenue Regulations
No. 7-95.108

Finally, the Commissioner is bound by her admission in the Joint Stipulation of Facts and Issues,109  concerning the
prior approval of Team Energy's 2002 Application for Effective Zero-Rate of its supply of electricity to the
NPC.110 Thus, she is estopped from asserting that Team Energy's transactions cannot be effectively considered zero-
rated.

In sum, the Court of Tax Appeals En Banc found proper the refund of P11,161,392.67, representing unutilized input
VAT attributable to Team Energy's zero-rated sales for the first quarter of 2003.111  This Court accords the highest
respect to the factual findings of the Court of Tax Appeals112 considering its developed expertise on the subject,
unless there is showing of abuse in the exercise of its authority.113 This Court finds no reason to overturn the factual
findings of the Court of Tax Appeals on the amounts allowed for refund.

WHEREFORE, the Petitions are DENIED. The April 8, 2011 Decision and July 7, 2011 Resolution of the Court of Tax
Appeals En Banc in CTA EB No. 603 are AFFIRMED.

SO ORDERED.