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Tax Case Digest: CIR V. Team Energy Corporation (formerly Mirant Pagbilao Corporation) G.R. No. 230412, March 27, 2019

CIR V. Team Energy Corporation (formerly Mirant Pagbilao Corporation)
G.R. No. 230412, March 27, 2019.

Second Division
J. REYES, JR., J.:

Lessons Applicable: VAT tax refund, judicial claim,
Laws Applicable: Section 108(B)(3) of NIRC, Section 4.108-1 of Revenue Regulations No. 7-95 (Consolidated Value Added Tax Regulations)

  • Team Energy Corporation (TEC) (formerly Mirant Pagbilao Corporation) is principally engaged in the business of power generation and the subsequent sale thereof to the National Power Corporation (NPC) under a Build, Operate, Transfer Scheme.  It is also a VAT taxpayer.
  • December 17, 2004: TEC filed with the BIR Audit Information, Tax Exemption and Incentives Division an Application for Effective Zero-Rate for the supply of electricity to the NPC for the period January 1, 2005 to December 31, 2005, which was subsequently approved.
  • December 20, 2006: TEC filed an administrative claim for cash refund or issuance of tax credit certificate corresponding to the input VAT reported in its Quarterly VAT Returns for the 1st 3 quarters of 2005 and Monthly VAT Declaration for October 2005 in the amount of P80,136,251.60
  • April 18, 2007: Due to inaction on its claim, TEC filed a Petition for Review before the CTA in Division
  • CTA in Division on July 13, 2010: Partially granted ordered to refund or in the alternative, issue a tax credit certificate in the amount of P79,185,617.33 representing unutilized input VAT, attributable to its effectively zero-rated sales of power generation services to NPC for the period covering January 1, 2005 to October 31, 2005.
  • Court in Division: Granted CIR’s Motion for Reconsideration, reversed and set aside the Decision dated July 13, 2010, and dismissed the Petition for Review for having been filed prematurely
  • CTA En Banc: denied the Petition for Review for lack of merit and denied tis MR
  • Supreme Court 3rd Division: Granted Motion to Admit Attached Petition for Review on Certiorari and granted the Certiorari remanded to the Court of Tax Appeals for the proper determination of the refundable amount.  It became final and executory on March 10, 2014 and was recorded in the Book of Entries of Judgments.
  • January 9, 2015: CIR filed a Manifestation with Motion for Reinstatement of the July 13, 2010 Decision of the Court of Tax Appeals
  • CTA En Banc: Petition for Review is denied.
  • CIR filed a petition for review on certiorari
1.    W/N the Certificate of Compliance (COC) issued by the Energy Regulation Commission (ERC) is indispensable in claiming a tax refund or tax credit.
2.    W/N judicial claim was prematurely filed for its failure to exhaust administrative remedies when it failed to submit complete supporting documents for its administrative claim

HELD:  Petition is denied.
1.    Yes.  But, considering that Team Energy's refund claim is premised on Section 108(B)(3) of the 1997 NIRC, in relation to Section 13 of the NPC Charter, as amended by Section 10 of P.D. No. 938, 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.
  • CIR v. Toledo Power Company (G.R. No. 196415, December 02, 2015)
    • requirements of the EPIRA must be complied with only if the claim for refund is based on EPIRA
    • 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.
  • Team Energy Corporation v. CIR (G.R. Nos. 197663 and 197770, March 14, 2018)
    • CIR that Team Energy is not entitled to tax refund or tax credit because it cannot qualify for VAT zero-rating for its failure to submit its ERC Registration and COC required under the EPIRA.
  • Effective zero-rating was intended to relieve the exempt entity from being burdened with the indirect tax which is or which will be shifted to it had there been no exemption. In this case, respondent is being exempted from paying VAT on its purchases to relieve NPC of the burden of additional costs that respondent may shift to NPC by adding to the cost of the electricity sold to the latter.
2.    No.  There is no showing that the CIR sent a written notice requiring respondent to submit additional documents — a process that is indispensable in computing the 120+30 day period.
  • Pilipinas Total Gas, Inc. v. Commissioner of Internal Revenue (GR No. 207112, December 08, 2015)
    • To summarize, for the just disposition of the subject controversy, the rule is that from the date an administrative claim for excess unutilized VAT is filed, a taxpayer has thirty (30) days within which to submit the documentary requirements sufficient to support his claim, unless given further extension by the CIR. Then, upon filing by the taxpayer of his complete documents to support his application, or expiration of the period given, the CIR has 120 days within which to decide the claim for tax credit or refund. Should the taxpayer, on the date of his filing, manifest that he no longer wishes to submit any other addition documents to complete his administrative claim, the 120-day period allowed to the CIR begins to run from the date of filing.