Commissioner of Internal Revenue v. Mirant Pagbilao Corp.

TWELFTH DIVISION [CA-G.R. SP No. 69843. February 27, 2004.] COMMISSIONER OF INTERNAL REVENUE , petitioner , vs . MIRANT PAGBILAO CORPORATION (formerly Southern Energy Quezon, Inc.) , respondents . D E C I S I O N BRAWNER , J p : In this Petition for Review from the Decision of the Court of Tax Appeals in CTA Case No. 6041, petitioner Commissioner of Internal Revenue comes to Us for succor, claiming that the Court of Tax Appeals (CTA for brevity) erred in granting the tax refund to respondent Mirant Pagbilao Corporation (Mirant for brevity) despite Mirant's failure to present an approved application for zero-rating of its sale of services to the National Power Corporation. The impugned Decision goes in this wise: DTAaCE "WHEREFORE, in view all of the foregoing, the instant Petition for Review is hereby GRANTED. Accordingly, Respondent is hereby ORDERED to REFUND or in the alternative, to ISSUE a Tax Credit Certificate in the amount of P8,942,679.07, in favor of the Petitioner representing unutilized input taxes for the third and fourth quarters of 1997." 1 The facts of the case, as found by the CTA, follows: "Petitioner is a corporation and existing under and by virtue of the laws of the Philippines. On March 23, 1999, Petitioner amended its Articles of Incorporation to effect a change in its corporate name to Southern Energy Quezon, Inc., which was approved by the SEC under Certificate of Filing Amended Articles of Incorporation issued by the SEC dated September 22, 1999. It is primarily engaged in the business of power generation and subsequent sale thereof to the NPC under a Build, Operate and Transfer scheme . . . . It is also registered as a Value-Added Taxpayer . . . . "In its amended quarterly VAT return for the first quarter of 1998 filed on November 25, 1999, Petitioner reflected the amounts of P89,741,608.12 and P8,974,159.66 as total domestic purchases of goods and input taxes, respectively . . . . On even date, Petitioner filed its amended quarterly VAT return for the second quarter of 1998 . . . reflecting therein input taxes from domestic purchases of goods and services for the second quarter of 1998 in the amount of P148,003,047.62. cHaADC "Likewise, on November 25, 1999, Petitioner filed its amended quarterly VAT return for the third and fourth quarters of 1998 reflecting therein input taxes in the amounts of P17,958,855.99 . . . and P57,768,570.62, respectively. "Relying on Republic Act No. 6395 (NPC Charter) and on the pronouncement of the Supreme Court in the case of Maceda vs. Macaraig , G.R. No. 88291, May 31, 1999, declaring the NPC as exempt from the payment of both direct and indirect taxes, Petitioner concludes that its sale of power generation services to NPC is zero rated for VAT purposes. "Moreover, to support its stance, Petitioner cited Section 108 of the National Internal Revenue Code as its basis in its action for refund of alleged unutilized input taxes. "Considering that it has no output VAT liability in the first quarter and in the succeeding quarters, Petitioner asseverates that its input VAT on its domestic purchases of goods and services for the first quarter of 1998 remained unutilized. "On December 20, 1999, Petitioner filed an administrative claim for refund of its alleged unutilized input taxes for the first quarter of 1998 with the Bureau of Internal Revenue. To toll the running of the prescriptive period within which to file a claim for refund, Petitioner elevated its case to this Court on March 31, 2000, via Petition for Review." 2 On 05 March 2002, the CTA promulgated its assailed decision. Rebuffed, petitioner elevated the case to Us via a Petition for Review on the following assignment of error, thus: CaSAcH "THE TAX COURT ERRED IN GRANTING THE REFUND DESPITE RESPONDENT'S FAILURE TO PRESENT AN APPROVED APPLICATION FOR ZERO-RATING OF ITS SALE OF SERVICES TO THE NATIONAL POWER CORPORATION." 3 The issue that calls for Our resolution is this: Whether or not the CTA erred in granting the refund of P8,942,679.07 in favor of Mirant. The petition is bereft of merit; We therefore vote to deny it. Petitioner advances the argument that Mirant's failure to adduce an approved application for zero-rating is fatal to its claim for refund. As its legal mooring, it cited Section 4.107-1 (d) of Revenue Regulations 7-95, which provides: "Registration of Value Added Taxpayers. xxx xxx xxx (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." CSHDTE The logical conclusion therefore, according to petitioner, is that, pursuant to the aforementioned rule, and Section 4.103.1 of Revenue Regulations No. 7-95, 4 Mirant is only VAT exempt, and therefore, not entitled to tax credit or refund on VAT previously paid. Petitioner then faulted Mirant for not availing of the remedy of mandamus to compel the Revenue District Officer to act upon its application for zero-rating, on account of which it lost its entitlement to a refund. It broached the cases of ABB Power Generation Ltd. vs. Commissioner of Internal Revenue 5 and Southern Energy Navotas, Inc. vs. Commissioner of Internal Revenue 6 in support of its refusal to refund. The argument does not wash. It is significant to note that petitioner anchors its refusal to grant refund solely on the absence of an approved application for zero-rating by Mirant. Petitioner, however, disputes not Mirant's assertion that its inability to present an approved application was attributable to the Revenue District Officer's delay in giving due course to its application despite compliance with all the requisites necessary for its grant. On this score, Our ruling in Commissioner of Internal Revenue vs. Want Navotas Corporation 7 , where We gave our judicial imprimatur to the CTA's award of refund, finds application, thus AICEDc "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 elapsed 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." CSEHcT This ruling was echoed by this Court in a case of more recent vintage: "Still and all, this Court resolves to grant Mirant its refund. Just as the government is entitled to expect taxpayers to pay their taxes promptly, taxpayers are similarly entitled to expect that the government, through the BIR, shall also act promptly and expeditiously on their pending applications or papers. Respondent CIR's inaction or undue delay in approving petitioner Mirant's application cannot prejudice the latter's right to earned input VAT to which it is already entitled having already complied with the requirements set forth by law. "Such a ruling is not only consistent with this Court's ruling in the aforementioned case of CIR vs. Mirant Navotas Corporation , docketed as CA-GR SP No. 69114, but also with the prevailing stance of the court of tax Appeals on this subject matter. In that case, the facts involved are practically identical to this case except that the Court of Tax Appeals at that time ruled to grant petitioner Mirant's claim for fund of its input VAT for the third and fourth quarter of 1997. This Court concurs with the Court of Tax Appeals' pronouncement, which was later affirmed by this Court's Special Seventh Division, that to deny petitioner Mirant'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 indolence and neglect on the part of said public officer." Furthermore, it said that the CIR's reliance on the case of ABB, supra , is misplaced because in that case, the taxpayer completely failed to file an application for zero-rating. Considering that the decision of the Court of Tax Appeals in that case was rendered only on January 16, 2002 while the decision and resolution subject of the instance petition were rendered way back on March 1, 2001, it is reasonable to assume that the Court of Tax Appeals has abandoned its old ruling and the rationale behind it. 8 It may not be amiss to state that in a long line of cases, the Supreme Court has ruled that the findings and conclusions of the Court of Tax Appeals which, by the nature of its functions; is dedicated exclusively to the study and consideration of tax problems and has necessarily developed an expertise on the subject, may not be disturbed upon appeal unless there had been abuse or improvident exercise of its authority. 9 It therefore behooves upon petitioner to prove abuse or imprudent exercise of authority on the part of the Court of Tax Appeals to warrant reversal of its decision. ACTISD In fine, We therefore find, and so hold, that the CTA did not commit error in granting Mirant's claim for refund of its unutilized input of VAT for the first quarter of 1998. WHEREFORE, the appeal is hereby DENIED. SO ORDERED. De Guia-Salvador and Reyes, JJ .,concur. Footnotes 1. Decision, p. 11; Rollo , p. 31. 2. Decision, p. 3; Rollo , pp. 2123. 3. Petition for Review, p. 5; Rollo , p. 11. 4. "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 . . . ." 5. CTA Case No. 5270. 6. CTA Case No. 5814, 04 May 2001. 7. CA-G.R. SP No. 69114, 27 June 2002. 8. Mirant (Navotas 11) Corporation v. Commissioner of Internal Revenue , CA-G.R. CV No. 64811, 09 October 2002. 9. Reyes v. Commissioner of Internal Revenue , 24 SCRA 199; Commissioner of Customs et al., vs. Honorable court of Tax Appeals, et al ., G.R. No. 82618, 16 March 1989; Commissioner of Internal Revenue vs. Court of Tax Appeals , G.R. No. 115349, 18 April 1997.