VAT CLAIM FOR REFUND Also, the CA held that the petitioner timely moved for reconsideration of the

the CA held that the petitioner timely moved for reconsideration of the Court of
Appeals decision, but the motion was denied.
G.R. No. 151135 July 2, 2004
ISSUE:
CONTEX CORPORATION, petitioner,
vs. Whether or not the court of tax appeals correctly held that petitioner is entitled to a
HON. COMMISSIONER OF INTERNAL REVENUE, respondent tax credit or refund of the vat paid on its purchases of supplies and raw materials for
the years 1997 and 1998
FACTS: Petitioner is a domestic corporation engaged in the business of
manufacturing hospital textiles and garments and other hospital supplies for export.
RULING: No, the CTA is not correct in ruling that the petitioner is entitled to a
It is duly registered with the Subic Bay Metropolitan Authority (SBMA) as a Subic
tax credit or refund.
Bay Freeport Enterprise, pursuant to the provisions of Republic Act No. 7227. As an
SBMA-registered firm, petitioner is exempt from all local and national internal
It may not be amiss to re-emphasize that the petitioner is registered as a NON-VAT
revenue taxes except for the preferential. Petitioner also registered with the Bureau
taxpayer and thus, is exempt from VAT. As an exempt VAT taxpayer, it is not allowed
of Internal Revenue (BIR) as a non-VAT taxpayer.
any tax credit on VAT (input tax) previously paid. In fine, even if we are to assume
The suppliers of the materials purchased by petitioners from Jan 1, 1997 to that exemption from the burden of VAT on petitioner’s purchases did exist, petitioner
December 31, 1998 shifted unto petitioner the 10% VAT on the purchased items, is still not entitled to any tax credit or refund on the input tax previously paid as
petitioner is an exempt VAT taxpayer.
which led the petitioner to pay input taxes in the amounts of P539,411.88
and P504,057.49 for 1997 and 1998. Petitioner filed two applications for tax refund
or credit for the VAT it paid. When the first letter was denied, the petitioner filed the Rather, it is the petitioner’s suppliers who are the proper parties to claim the tax
credit and accordingly refund the petitioner of the VAT erroneously passed on to the
same application to the regional director of BIR Revenue Region No. 4. The second
latter.
letter sought a refund or issuance of a tax credit certificate in the amount
of P1,108,307.72, representing erroneously paid input VAT for the period January
Accordingly, we find that the Court of Appeals did not commit any reversible error of
1, 1997 to November 30, 1998.
law in holding that petitioner’s VAT exemption under Rep. Act No. 7227 is limited to
the VAT on which it is directly liable as a seller and hence, it cannot claim any refund
RULING OF THE CTA: or exemption for any input VAT it paid, if any, on its purchases of raw materials and
supplies.
The CTA partially granted the petition of Contex and ordered refund or tax credit in
favor of the petitioner. The CTA also disallowed all refunds of input VAT paid by the
petitioner prior to June 29, 1997 for being barred by the two-year prescriptive period
under Section 229 of the Tax Code. The tax court also limited the refund only to the
input VAT paid by the petitioner on the supplies and materials directly used by the
petitioner in the manufacture of its goods.

RULING OF THE CA:

In reversing the CTA, the Court of Appeals held that the exemption from duties and
taxes on the importation of raw materials, capital, and equipment of SBFZ-registered
enterprises under Rep. Act No. 7227 and its implementing rules covers only "the
VAT imposable under Section 107 of the [Tax Code], which is a direct liability of the
importer, and in no way includes the value-added tax of the seller-exporter the
burden of which was passed on to the importer as an additional costs of the goods.
VAT CLAIM FOR REFUND- PRESCRIPTIVE PERIOD
G.R. Nos. 141104 & 148763 June 8, 2007
ATLAS CONSOLIDATED MINING AND DEVELOPMENT
CORPORATION, petitioner,
vs.
COMMISSIONER OF INTERNAL REVENUE, respondent.
FACTS:
This is a consolidated case involving the unsuccessful claims of herein petitioner
Atlas Consolidated Mining and Development Corporation for the refund/credit of the
input Value Added Tax (VAT) on its purchases of capital goods and on its zero-rated
sales in the taxable quarters of the years 1990 and 1992.
Atlas is engaged in the business of mining, production, and sale of various mineral
products. It is a VAT-registered taxpayer. It was initially issued VAT Registration, but
it had to register anew with the appropriate revenue district office when it moved its
principal place of business, and it was re-issued VAT Registration.
G.R. No. 141104
Atlas filed application for the refund/credit of its input VAT for the first quarter of
1992 on its purchases of capital goods and on its zero-rated sales in the amount
of P26,030,460.00 but was denied on the ground of prescription, insufficiency of
evidence and failure to comply with Section 230 of the Tax Code.
G.R. No. 148763
G.R. No. 148763 involves almost the same set of facts as in G.R. No. 141104
presented above, except that it relates to the claims of petitioner corporation for
refund/credit of input VAT on its purchases of capital goods and on its zero-rated
sales made in the last three taxable quarters of 1990. It submitted separate
applications to the BIR for the refund/credit of the input VAT paid on its purchases
of capital goods and on its zero-rated sales. The CTA dismissed Atlas petition on
the ground that the prescriptive periods for filing the same had expired.
ISSUE:
Whether or not the period for filing an application for tax refund/credit of input VAT
on zero-rated sales made in 1990 and 1992 has prescribed
RULING:
All were filed within the prescriptive period except for the input VAT on its zero-
rated sales for the first quarter of 1992.
The prescriptive period for filing an application for tax refund/credit of input VAT on
zero-rated sales made in 1990 and 1992 was governed by Section 106(b) and (c) of
the Tax Code of 1977, as amended, which provided that –
SEC. 106. Refunds or tax credits of input tax. – x x x.
(b) Zero-rated or effectively zero-rated sales. – Any person, except those
covered by paragraph (a) above, whose sales are zero-rated may, within
two years after the close of the quarter when such sales were made, apply
for the issuance of a tax credit certificate or refund of the input taxes
attributable to such sales to the extent that such input tax has not been
applied against output tax.
xxxx
(e) Period within which refund of input taxes may be made by the
Commissioner. – The Commissioner shall refund input taxes within 60 days
from the date the application for refund was filed with him or his duly
authorized representative. No refund of input taxes shall be allowed unless
the VAT-registered person files an application for refund within the period
prescribed in paragraphs (a), (b) and (c) as the case may be.
It is true that unlike corporate income tax, which is reported and paid on installment
every quarter, but is eventually subjected to a final adjustment at the end of the
taxable year, VAT is computed and paid on a purely quarterly basis without need for
a final adjustment at the end of the taxable year. However, it is also equally true that
until and unless the VAT-registered taxpayer prepares and submits to the BIR its
quarterly VAT return, there is no way of knowing with certainty just how much input
VAT the taxpayer may apply against its output VAT; how much output VAT it is due
to pay for the quarter or how much excess input VAT it may carry-over to the
following quarter; or how much of its input VAT it may claim as refund/credit. It should
be recalled that not only may a VAT-registered taxpayer directly apply against his
output VAT due the input VAT it had paid on its importation or local purchases of
goods and services during the quarter; the taxpayer is also given the option to either
(1) carry over any excess input VAT to the succeeding quarters for application
against its future output VAT liabilities, or (2) file an application for refund or issuance
of a tax credit certificate covering the amount of such input VAT.18 Hence, even in
the absence of a final adjustment return, the determination of any output VAT
payable necessarily requires that the VAT-registered taxpayer make adjustments in
its VAT return every quarter, taking into consideration the input VAT which are
creditable for the present quarter or had been carried over from the previous
quarters.
Moreover, when claiming refund/credit, the VAT-registered taxpayer must be able
to establish that it does have refundable or creditable input VAT, and the same has
not been applied against its output VAT liabilities – information which are supposed
to be reflected in the taxpayer's VAT returns. Thus, an application for refund/credit
must be accompanied by copies of the taxpayer's VAT return/s for the taxable
quarter/s concerned.
Tax Code of 1977, as amended, explicitly provided that no refund of input VAT shall
be allowed unless the VAT-registered taxpayer filed an application for refund with
respondent Commissioner within the two-year prescriptive period. The application
of petitioner corporation for refund/credit of its input VAT for the first quarter of 1992
was not only unsigned by its supposed authorized representative, Ma. Paz R.
Semilla, Manager-Finance and Treasury, but it was not dated, stamped, and initialed
by the BIR official who purportedly received the same.

Lastly, although the taxpayer's refundable or creditable input VAT may not be
considered as illegally or erroneously collected, its refund/credit is a privilege
extended to qualified and registered taxpayers by the very VAT system adopted by
the Legislature. Such input VAT, the same as any illegally or erroneously collected
national internal revenue tax, consists of monetary amounts which are currently in
the hands of the government but must rightfully be returned to the taxpayer.
Therefore, whether claiming refund/credit of illegally or erroneously collected
national internal revenue tax, or input VAT, the taxpayer must be given equal
opportunity for filing and pursuing its claim.

For the foregoing reasons, it is more practical and reasonable to count the two-year
prescriptive period for filing a claim for refund/credit of input VAT on zero-rated sales
from the date of filing of the return and payment of the tax due which, according to
the law then existing, should be made within 20 days from the end of each quarter.

As shown above, Atlas filed its claim for input VAT on its zero-rated sales for the last
three quarters of 1990 were all filed within the prescriptive period, however, the
same cannot be said for the claim of petitioner corporation for refund of its input VAT
on its zero-rated sales for the first quarter of 1992. Even though it may seem that
petitioner corporation filed in time its judicial claim with the CTA, there is no showing
that it had previously filed an administrative claim with the BIR. Section 106(e) of the
VAT CLAIM FOR REFUND- PRESCRIPTIVE PERIOD
COMMISSIONER OF INTERNAL REVENUE, petitioner,
vs.
MIRANT PAGBILAO CORPORATION, respondent
FACTS:
MPC, formerly Southern Energy Quezon, Inc., and also formerly known as Hopewell
(Phil.) Corporation, is a domestic firm engaged in the generation of power which it
sells to the National Power Corporation (NPC). For the construction of the electrical
and mechanical equipment portion of its Pagbilao, Quezon plant, which appears to
have been undertaken from 1993 to 1996, MPC secured the services of Mitsubishi
Corporation (Mitsubishi) of Japan. Under Section 13 of Republic Act No. (RA) 6395,
the NPC’s revised charter, NPC is exempt from all taxes.
MPC, on the belief that its sale of power generation services to NPC is, pursuant to
Sec. 108(B)(3) of the Tax Code, zero-rated for VAT purposes, filed on December 1,
1997 with Revenue District Office (RDO) No. 60 in Lucena City an Application for
Effective Zero Rating. The application covered the construction and operation of its
Pagbilao power station under a Build, Operate, and Transfer scheme.
The Commissioner of Internal Revenue issued VAT Ruling No. 052-99, stating that
"the supply of electricity by Hopewell Phil. to the NPC, shall be subject to the zero
percent (0%) VAT, pursuant to Section 108 (B) (3) of the National Internal Revenue
Code of 1997. Because of this, the MPC opted not to pay the VAT component of the
progress billings from Mitsubishi for the period covering April 1993 to September
1996. This prompted Mitsubishi to advance the VAT component as this serves as
its output VAT which is essential for the determination of its VAT payment.
Apparently, it was only on April 14, 1998 that MPC paid Mitsubishi the VAT
component for the progress billings from April 1993 to September 1996, and for
which Mitsubishi issued Official Receipt (OR) No. 0189 in the aggregate amount of
PhP 135,993,570.
On August 25, 1998, MPC, while awaiting approval of its application aforestated,
filed its quarterly VAT return for the second quarter of 1998. MPC, then, filed on
December 20, 1999 an administrative claim for refund of unutilized input VAT in the
amount of PhP 148,003,047.62.
Answering the petition, the BIR Commissioner, citing Kumagai-Gumi Co. Ltd. v. CIR,
asserted that MPC’s claim for refund cannot be granted for this main reason: MPC’s
sale of electricity to NPC is not zero-rated for its failure to secure an approved
application for zero-rating.
ISSUE:
Whether or not respondent [MPC] is entitled to the refund of its input VAT payments
made from 1993 to 1996 amounting to [PhP] 146,760,509.48
RULING:
No, on the ground that the claim had prescribed
The claim for refund or tax credit for the creditable input VAT payment made by MPC
embodied in OR No. 0189 was filed beyond the period provided by law for such
claim. Sec. 112(A) of the NIRC pertinently reads:
(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: x x x. (Emphasis ours.)
The above proviso clearly provides in no uncertain terms that unutilized input VAT
payments not otherwise used for any internal revenue tax due the taxpayer must be
claimed within two years reckoned from the close of the taxable quarter when
the relevant sales were made pertaining to the input VAT regardless of
whether said tax was paid or not. As the CA aptly puts it, albeit it erroneously
applied the aforequoted Sec. 112(A), "[P]rescriptive period commences from the
close of the taxable quarter when the sales were made and not from the time the
input VAT was paid nor from the time the official receipt was issued." Thus, when a
zero-rated VAT taxpayer pays its input VAT a year after the pertinent transaction,
said taxpayer only has a year to file a claim for refund or tax credit of the unutilized
creditable input VAT. The reckoning frame would always be the end of the quarter
when the pertinent sales or transaction was made, regardless when the input VAT
was paid. Be that as it may, and given that the last creditable input VAT due for the
period covering the progress billing of September 6, 1996 is the third quarter of 1996
ending on September 30, 1996, any claim for unutilized creditable input VAT refund
or tax credit for said quarter prescribed two years after September 30, 1996 or, to
be precise, on September 30, 1998. Consequently, MPC’s claim for refund or tax
credit filed on December 10, 1999 had already prescribed.
To be sure, MPC cannot avail itself of the provisions of either Sec. 204(C) or 229 of
the NIRC which, for the purpose of refund, prescribes a different starting point for
the two-year prescriptive limit for the filing of a claim therefor. Secs. 204(C) and 229
respectively provide:

Sec. 204. Authority of the Commissioner to Compromise, Abate and Refund or

Credit Taxes.— The Commissioner may –

xxxx

(c) Credit or refund taxes erroneously or illegally received or penalties imposed

without authority, refund the value of internal revenue stamps when they are
returned in good condition by the purchaser, and, in his discretion, redeem or
change unused stamps that have been rendered unfit for use and refund their value
upon proof of destruction. No credit or refund of taxes or penalties shall be
allowed unless the taxpayer files in writing with the Commissioner a claim for
credit or refund within two (2) years after the payment of the tax or penalty:
Provided, however, That a return filed showing an overpayment shall be considered
as a written claim for credit or refund.

xxxx

Sec. 229. Recovery of Tax Erroneously or Illegally Collected.— No suit or

proceeding shall be maintained in any court for the recovery of any national internal
revenue tax hereafter alleged to have been erroneously or illegally assessed or
collected, or of any penalty claimed to have been collected without authority, of any
sum alleged to have been excessively or in any manner wrongfully collected without
authority, or of any sum alleged to have been excessively or in any manner
wrongfully collected, until a claim for refund or credit has been duly filed with the
Commissioner; but such suit or proceeding may be maintained, whether or not such
tax, penalty, or sum has been paid under protest or duress.

In any case, no such suit or proceeding shall be filed after the expiration of two
(2) years from the date of payment of the tax or penalty regardless of any
supervening cause that may arise after payment: Provided, however, That the
Commissioner may, even without a written claim therefor, refund or credit any tax,
where on the face of the return upon which payment was made, such payment
appears clearly to have been erroneously paid. (Emphasis ours.)

Notably, the above provisions also set a two-year prescriptive period, reckoned from
date of payment of the tax or penalty, for the filing of a claim of refund or tax credit.
Notably too, both provisions apply only to instances of erroneous payment or illegal
collection of internal revenue taxes.
VAT CLAIM FOR REFUND- PRESCRIPTIVE PERIOD quarter when the sales were made and not from the close of the taxable quarter
when the sales were made and not from the time the input VAT was paid nor from
CTA CASE NO. 7257 the time the official receipt was issued.' Thus, when a zero-rated VAT taxpayer pays
its input VAT a year after the pertinent transaction, said taxpayer only has a year to
NORTHERN MINI HYDRO CORP., Petitioners, file a claim for refund or tax credit of the unutilized creditable input VAT. The
reckoning frame would always be the end of the quarter when the pertinent sales or
vs.
COMMISSIONER OF INTERNAL REVENUE, Respondent. transaction was made, regardless when the input VAT was paid." (Emphasis
supplied)
FACTS:
It can be gleaned from the foregoing Decision that the two-year prescriptive period
under Section 112(A) of the NIRC of 1997 for the recovery of creditable input VAT
Northern Mini Hydro Corporation is a domestic corporation registered as a VAT due or paid attributable to zero-rated or effectively zero-rated sales is to be counted
taxpayer with BIR under Revenue District No. 9 - Cordillera Administrative Region. "from the close of the taxable quarter when the relevant sales were made pertaining
On March 41 20041 petitioner filed its Quarterly VAT Returns for the second, third to the input VAT regardless of whether said tax was paid or not." Here, considering
and fourth quarters of taxable year 2003. However, on March 21 2005 petitioner filed the amount of the subject claim refers to the declared input VAT for the fourth quarter
once again the same set of returns, having exactly the same information and figures. of taxable year 2003, the two-year prescriptive period should be counted from the
On March 31 2005 petitioner filed an administrative claim for refund. close of the said taxable quarter on December 31, 2003 and shall end on December
31, 2005. And since the subject administrative claim was filed on March 31, 2005,
ISSUE: while the instant judicial claim was filed on May 26, 2005; both the administrative
and judicial claims of petitioner were filed well within the said two-year prescriptive
Whether or not petitioner filed its claim for refund within the two (2) year prescriptive period under the law. Such being the case, prescription has definitely not set in.
period

RULING:

Section 112 of the National Internal Revenue Code (NIRC) of 1997 provides as
follows:

"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: xxx" In
Commissioner of Internal Revenue vs. Mirant Pagbilao Corporation (Formerly
Southern Energy Quezon, Inc.), the Supreme Court made the following
pronouncement:

"The above proviso clearly provides in no uncertain terms that unutilized input VAT
payments not otherwise used for any internal revenue tax due the taxpayer must be
claimed within two years reckoned from the close of the taxable quarter when the
relevant sales were made pertaining to the input VAT regardless of whether said tax
was paid or not. As the CA aptly puts it, albeit it erroneously applied the aforequoted
Section 112(A), '[P]rescriptive period commences from the close of the taxable