CASE DIGEST: WESTERN MINDANAO POWER CORPORATION vs. CIR. G.R. No. 181136. June 13, 2012

FACTS:

WMPC,  a VAT taxpayer sells electricity to NPC, which is exempt from the payment of all forms od taxes, duties, fees, and imposts pursuant to Sec. 13 of RA 6395, In view thereof and pursuant to Sec. 108 (13)(3) of the NIRC, WMPC's power generation services to NPC is zero rated. Hence, pursuant also to Sec. 112 (A) of the NIRC, WMPC filed with CIR an application for a tax credit certificate (TCC) of its input VAT covering the taxable 3rd and 4th quarters of 1999 and all taxable quarters of 2000. The claim for TCC reaches the CTA en banc but it was denied by the latter.

TAXPAYER's ARGUMENTS:

WMPC argues that the invoicing and accounting requirements laid down in RR 7-95 were merely compliance requirements, which were not indispensable to establish the claim for refund of excess and utilized input VAT. Sec. 113 of the NIRC prevailing at that time that the sales transactions were made did not expressly state that failure to comply with all the invoicing requirement would result in the disallowance of a tax credit refund and that the express requirement appeared in Sec. 113 after it was amended by Sec. 11 of RA 4337 cannot be applied retroactively.

GOVERNMENT's ARGUMENTS:

CIR argues that WMPC was not entitled to the claim for a tax refund in view of its failure to comply with the invoicing requirements under Sec. 113 of the NIRC in relation to RR 7-95 which provides that the word zero-rated must be imprinted on the invoice or official receipt.

ISSUE:

Whether WMPC's claim for refund tax credit may be denied by failure to show the zero-rated word imprinted on the receipt.

RULING:

Yes. A taxpayer engaged in zero-rated or effectively zero-rated sale may apply for the issuance of a tax credit certificate, or refund of charitable input tax due or paid, attributable to the sale. In a claim for tax refund or tax credit, the applicant must prove not only entitlement to the grant of the claim under substantive law. It must also show satisfaction of all the documentary and evidentiary requirements for an administrative claim for a refund or credit. The taxpayer claiming must further comply with the invoicing requirements mandated by NIRC as well as by Regulation implementing them. 

Under the NIRC, a creditable input tax should be evidenced by a VAT invoice or official receipt which may only be considered as such when it complies with the requirements of RR 7-95 particularly Section 4.108-1. This section requires, among others, that if the sale is subject to 0% VAT, the term zero-rated sale shall be written or printed prominently on the invoice or receipt. Further, the subsequent incorporation of Sec. 4.108-1 of RR 7-95 in Sec. 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 re-enactment.