Commissioner of Internal Revenue v. Mirant Navotas Corp.

SECOND DIVISION [CA-G.R. SP No. 69114. June 27, 2002.] COMMISSIONER OF INTERNAL REVENUE , petitioner , vs . MIRANT NAVOTAS CORPORATION (formerly Southern Energy Navotas, Inc.) , respondent . D E C I S I O N VILLARAMA , JR. , J p : Before Us is a Petition for Review under Rule 43 of the 1997 Rules of Civil Procedure , as amended, seeking to annul and set aside the Decision dated January 16, 2002, rendered by the Court of Tax Appeals in C.T.A. Case Nos. 5936 & 5968, the dispositive portion of which reads as follows: "WHEREFORE, in view of the foregoing, the petitions for review are hereby partially GRANTED. Respondent is ORDERED to REFUND or ISSUE A TAX CREDIT CERTIFICATE in the amount of P493,244.23 in favor of Petitioner. "SO ORDERED." The facts as set forth in the Decision of the Court of Tax Appeals which we hereby adopt, are as follows: "Petitioner is a corporation duly existing under and by virtue of the laws of the Philippines with principal office address located at Suite 501, CTC Building, 2232 Roxas Boulevard, Pasay City. It is principally engaged in the business of power generation and subsequent sale thereof to the National Power Corporation (NPC) under the Build, Operate, Transfer (BOT) Scheme. It is registered with the Bureau of Internal Revenue as a VAT taxpayer with Certificate of Registration bearing RDO Control No. 96-051-005718 (Annex B). It was originally registered with the Securities and Exchange Commission under the name "Hopewell Energy (Philippines), Corp." and later was changed to "Southern Energy Navotas, Inc." (Exhibits A and A-1). "As early as March 1, 1996, Petitioner already filed with the BIR Revenue District Office No. 51 an Application for Effective Zero Rating with respect to its sales of services to National Power Corporation for the construction and operation of a gas turbine power station under the Build Operate Transfer (BOT) scheme (Exhibits B and B-1). This application remains unacted upon by the Revenue District Officer up to this time. "For the third and fourth quarters of 1997, Petitioner seasonably filed its quarterly Value-Added Tax Returns on October 20, 1997 and January 20, 1998 (Exhibits C, C-9, G and G-9). These VAT returns were simultaneously amended on October 8, 1999, reflecting total zero rated sales in the amount of P139,979,228.70 for the third and fourth quarters of 1997 with the corresponding aggregate input taxes in the sum of P529,010.56 for the same period (Exhibits E, E-1, E-3, E-5, I, I-1, I-3, and I-5). "On June 30, 1999, Petitioner filed its administrative claim for refund with RDO No. 51 of the Bureau of Internal Revenue believing that its sales of services to the NPC are subject to VAT at 0% hence it is entitled to the refund of unutilized input VAT attributable thereto (Exhibits N, N-1 and N-2). "The inaction of Respondent on its claim for refund compelled Petitioner to file the instant petitions for review on September 29, 1999 and December 6, 1999 in order to toll the running of the two-year prescriptive period under the law. The petition for review for the third quarter of 1997 was docketed as CTA Case No. 5936 while the petition for review for the fourth quarter of 1997 was docketed as CTA Case No. 5968." On January 16, 2002, the Court of Tax Appeals rendered the aforequoted decision granting the claim for refund in the reduced amount of P493,244.23. Hence, this petition. AISHcD The sole error which petitioner imputes on the Court of Tax Appeals is the grant of refund claimed by the respondent despite the latter's failure to present an approved application for effective zero-rating of its sale of services to the National Power Corporation (NPC, for brevity). In support of its position, petitioner invoked Section 4.107-1 (d) of Revenue Regulations 7-95, to wit: "Sec. 4.107-1. Registration of Value Added Taxpayers . (a) . . . (b) . . . (c) . . . (d) Application for effective zero-rating. Except for actual export sale, other cases of zero-rated sales in Sec. 4.100-3 and Sec. 4.102-2 (c) shall require prior application with the Revenue District Office for effective zero-rating. Without an approved application for effective zero-rating, the transaction otherwise entitled to zero-rating shall be considered exempt." Petitioner argued that since respondent failed to adduce an approved application for zero-rating to support its claim that its sales are zero-rated, its alleged sale of services to NPC should only be considered exempt from VAT, in accordance with the above-mentioned Revenue Regulation. Consequently, respondent is not entitled to any tax credit pursuant to Section 4.103.1 of Revenue Regulations No. 7-95, which reads in part: "Sec. 4.103-1. Exemptions . (A) In general . An exemption means that the sale of goods or properties and/or services and the use or lease of properties is not subject to VAT (output tax) and the seller is not allowed any tax credit on VAT (input tax) previously paid . . ." Petitioner also cited the case of ABB Power Generation Ltd. vs. Commissioner of Internal Revenue 1 where the Court of Tax Appeals ruled that "a VAT entity who failed to present an approved application for zero-rating as required by Section 8(d) of Revenue Regulations No. 5-87 will not be considered a zero-rated enterprise, hence, not entitled to the refund of its input taxes." The petition is without merit. There is no dispute that respondent failed to secure from the Bureau of Internal Revenue an approved application for effective zero-rating. The Court of Tax Appeals however found that as early as March 1, 1996, respondent had already filed with the Revenue District Office No. 51 of Pasay City an application for effective zero-rating regarding its sales of services to NPC. Unfortunately, said office failed to process the same and, hence, the application remained unacted upon. We find these factual findings of the Court of Tax Appeals sufficiently supported by evidence and are thus accorded respect and finality. As held by the Supreme Court in the case of Commissioner of Internal Revenue vs. B.F. Goodrich Phils., Inc., 2 "factual findings of the Court of Tax Appeals are generally not disturbed on appeal when supported by substantial evidence and in the absence of gross error or grave abuse of discretion." Likewise in the case of Commissioner of Internal Revenue vs. Court of Appeals, 3 it was held that "it has been the long standing policy and practice of the Supreme Court to respect conclusions arrived at by quasi-judicial agencies, especially the Court of Tax Appeals which, by the nature of its functions, is dedicated exclusively to the study and consideration of tax problems, and which has thus developed an expertise on the subject, unless an abuse or improvident exercise of its authority is shown." In the case at bar, the fact that respondent has filed an application for effective zero-rating as early as March 1, 1996 was duly established by evidence. Moreover, petitioner does not deny the existence of such application. It merely opposed the grant of refund on the ground that the application has not been approved. We agree with the Court of Tax Appeals that the inaction of the Revenue District Officer of RDO No. 51 of Pasay City, regarding respondent's application for effective zero-rating, should not prejudice the latter. After all, it appears that respondent has submitted the required documents for the approval of the registration. It is then the function and obligation of the Revenue District Officer to assess these documents with deliberate dispatch and accordingly deny or grant the application. However, more than six (6) years had already lapsed and the application remains unacted upon. No explanation whatsoever was given by petitioner for such unreasonable delay. To deny respondent's claim for refund solely on the ground that its application for effective zero-rating has yet to be approved by the Revenue District Officer, is to sanction such indolence and neglect on the part of said public officer. Had the application been promptly processed and passed upon within the said administrative level, the present controversy would not have arisen and the issue would have been resolved earlier. Petitioner's reliance in the case of ABB Power Generation Ltd. vs. Commissioner of Internal Revenue, supra, is misplaced. As correctly stated by the Court of Tax Appeals, the factual setting of the said case is simply different from the case at bar. In the ABB case, the taxpayer completely failed to file an application for effective zero-rating with the RDO having jurisdiction over it. There was absolutely no effort on the part of the taxpayer therein to secure the needed approval. This is not the case with herein respondent. The records reveal that as early as March 1, 1996 respondent had already filed with the RDO No. 51 of Pasay City an application for effective zero-rating, which fact, as earlier mentioned, has been admitted by petitioner. Unlike the taxpayer in the ABB case, therefore, respondent has exerted earnest efforts to comply with the requirements of Revenue Regulations No. 7-95. Thus, We quote with approval the Court of Tax Appeals' observation that: ". . . if Respondent had a valid ground to disapprove the application, he would have done so swiftly instead of "sitting on" the application for an interminable length of time to the detriment of the taxpayer's rights." Petitioner further contended that when tax exemption is claimed, it must be shown indubitably to exist, for every presumption is against it, and a well founded doubt is fatal to the claim. There is no dispute on this point raised by petitioner. Nonetheless, petitioner failed to realize that respondent has positively shown that it is entitled to a refund. As cited by the Court of Tax Appeals the matter regarding the exemption of NPC from all kinds of taxes whether direct or indirect has long been settled by the Supreme Court in the case of Maceda vs. Macaraig, Jr. 4 Moreover, no less than petitioner itself has acknowledged in its numerous VAT and BIR rulings that purchases of NPC of electricity from independent power producers are subject to VAT at zero rate (VAT Ruling Nos. 015-99, 022-99, 052-99, 067-99, 018-00, BIR Ruling Nos. DA-247-04-19-99, DA-632-11-10-99 and DA-209-04-04-99). Finally, it would serve petitioner well to be mindful of the Supreme Court's pronouncement in the case of Philex Mining Corporation vs. Commissioner of Internal Revenue , 5 to wit: "in no uncertain terms must We stress that every public employee or servant must strive to render service to the people with utmost diligence and efficiency. Insolence and delay have no place in government service. The Bureau of Internal Revenue, being the government collecting arm, must and should do no less. It simply cannot be apathetic and laggard in rendering service to the taxpayer if it wishes to remain true to its mission of hastening the country's development." WHEREFORE, premises considered, the present petition is hereby DENIED DUE COURSE, and accordingly DISMISSED, for lack of merit. The questioned Decision of the Court of Tax Appeals in CTA Case Nos. 5936 & 5968 dated January 16, 2002 is hereby AFFIRMED and UPHELD. No costs. SO ORDERED. De Guia-Salvador and Del Castillo, JJ . , concur. Footnotes 1. CTA Case No. 5270, March 3, 1999. 2. 303 SCRA 546. 3. 303 SCRA 508. 4. 197 SCRA 771. 5. 294 SCRA 687.