CASE DIGEST: NORTHERN MINDANAO POWER CORPORATION VS. COMMISSIONER OF INTERNAL REVENUE GR NO. 185115. FEBRUARY 18, 2015

FACTS: 

Petitioner is engaged in the production sale of electricity as an independent power producer and sells electricity to NPC. It allegedly incurred input VAT on its domestic purchases of goods and services that were used in its production and sale of electricity to NPC.

Petitioner filed an administrative claim for refund on June 20, 2000, for the 3rd and the 4th quarters of taxable year 1999, and on July 25, 2001 for taxable year 2000.

Thereafter, Petitioner filed a petition with the CTA on September 28, 2001 but the latter denied such petition as well as petitioner's motion for reconsideration. Appeal to the CTA En Banc was likewise denied. 

TAXPAYER'S ARGUMENTS: 

Petitioner contends that claim for refund must not be denied on the basis that the "zero-rated" word was not imprinted on the face of the receipt or invoice. Petitioner avers that Section 4. 108-1 of the RR 7-95 which expanded the statutory requirements for the issuance of official receipts and invoices found in Sec. 113 of the Tax Code by providing for the additional requirement of the imprinting of the terms "zero-rated" is unconstitutional. Petitioner further argues that the company invoices are sufficient to substantiate petitioner's claim for refund.

GOVERNMENT'S ARGUMENTS : 

Petitioners failed to substantiate its claim for a refund and to strictly comply with the invoicing requirements of the law issuing tax regulations. It further argued that the requirement of issuing duly registered VAT official receipts with the term "zero-rated" imprinted is mandatory under the law and cannot be substituted, especially for input VAT refund purposes.

ISSUES : 

1. Whether the requirement of imprinting the word "zero-rated" on the receipt or invoices is valid.

2. Whether company invoice is enough or sufficient to prove sales or services to NPC.

3. Whether the petitioner's judicial claim is timely filed.

RULING : 

1. The imprinting of the term "zero-rated" on the receipts or invoices is valid.

RR 7-95 proceeds from the rule making authority granted to the secretary of finance by the NIRC for the efficient enforcement of the tax code and its amendments. The subsequent incorporation of the RR in section 113 (B) (2)(c) of RA 9337 actually confirmed the validity of the imprinting requirement on VAT invoices or official receipts - a case falling under the principle of legislative approval of administrative interpretation by reenactment.

2. The Petitioner's contention that company invoice is sufficient to prove the sales of services is without legal basis. 

Under section 113 of the NIRC of 1997,  a VAT invoice is necessary for every sale, barter or exchange of goods or properties; as well as to every sale, barter or exchange of services.

A VAT invoice is the seller's best proof of the sale of goods or services to the buyer while a VAT receipt is the buyer's best evidence of the payment of goods or services received from the seller. A VAT invoice and a VAT receipt should not be confused and make to refer to one and the same thing. 

3. Although petitioner timely filed its administrative claim within the two year period from the close of the taxable quarter when the zero-rated sales were made, however, its judicial claim was prematurely filed with CTA for failure to observe the 120--day waiting period. Thus CTA acquires no jurisdiction over the claims. At the time when petitioner filed its judicial claim to CTA, DA-489-03 had not yet been issued. The BIR ruling DA-489-03 is one of the exceptions in observing the 120-day mandatory period. Hence, Petitioner has no excuse for not observing the mandatory 120+30 day period.

PERSONAL END NOTE : 

As provided for under section 113 of the 1997 NIRC, a VAT invoice is necessary for every sale, Barter or exchange of goods or properties. A VAT receipt on the otherhand, pertains to every lease of goods or properties; as well as to every sale, barter or exchange of services.

As for the seller, A VAT invoice is a best evidence to prove that sale of goods or services are made to the buyer while as for the buyer, a VAT receipt is his best evidence to prove payment to the seller.

However, when the sale involves "zero-rated" sales, the latter term must be imprinted on the invoice or receipt in able for the taxpayer to claim refund or tax credit. The word "zero-rated" is mandatory to be printed in the invoice or receipt, otherwise, claims for refund or credit may not be granted.

This rule of imprinting the term "zero-rated" is a valid act by the secretary of finance in pursuant to his rule-making power.