MINDANAO II GEOTHERMAL PARTNERSHIP v. COMMISSIONER OF INTERNAL REVENUE

REPUBLIC OF TilE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY ENBANC MINDANAO II GEOTHERMAL CTA EB No. 750 PARTNERSHIP, (CTA Case Nos. 8082 & 8106) Petitioner, -versus- Present: Acosta, PJ, Castaiieda,J r., Bautista, Uy, Casanova, Palanca-Enriquez, Fa bon- Victorino, Mindaro-Grulla, and Cotangco-Manalastas, JJ COMMISSIONER OF INTERNAL Promulgated: 1#4~~~ REVENUE, j _Ul 05 Z01Z "1"/t;~rv ~~"' "/k, Respo ndent . X- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - X DECISION COTANGCO-MANALASTAS, J.: On appeal before the Court En Bane is the Resolution of the Second Division, dated January 20, 2011 , granting respond ent' s Motion to Di smiss, as well as the Resolution, dated March 15, 2011 , denying petitioner' s Motion for Reconsideration. Said Resolutions dismissed petiti oner's claim fo r refund of excess input VAT for the 1st quarter of2008 amounting to PI ,624,603.33 . The Assailed Resolutions di sposed of the case, as fo ll ows: V " WH EREFOR E, pre mi ses cons ide red, respond e nt ' s Moti on to Dismi ss is hereby G RAN TE D o n th e g ro und th at th e in sta nt Petiti o n fo r Rev iew was fil ed pre mature ly. " 1 ***** 1 Rollo, C.T.A. EB Case No. 75 0, p. l47.

DECISION Page 2 of8 CTA EB No. 750 (C.T.A. Case Nos. 8082 & 8 106) Mindanao II Geothermal Partnership vs. Co mmi ssio ner of In terna l Reve nue " WHEREFORE, premi ses consid ered, petiti oner' s " Moti on for Recon sideration" is hereby DENI ED fo r lack of merit. "2 The Facts3 Petitioner was a partnership dul y registered with the Securities and Exchange Commission, with registered principal address at Barangay Ilomavis, Kidapawan City, North Cotabato. Respondent is the dul y appointed Commiss ioner of the Bureau of Internal Revenue (BIR) empowered to perform the duties of her offic e, including, among others, the duty to act upon and approve claims for refund or tax credit as provided by law, with office address at Bureau of Internal Revenue, Agham Road, Diliman, Quezon City. On March 11 , 1997, petiti oner entered into a Build-Operate-Transfer Contract with the Philippine National Oil Company- Energy Deve lopment Corporation (PNOC- EDC) for the finance , engineering, suppl y, install ati on, testing, commissioning, operation and maintenance of a 48 .25 megawatt geothermal power plant provided that PNOC-EDC shall supply and deli ver steam to petitioner at no cost. In turn, petitioner shall convert the steam into electric capac ity and energy for PNOC-EDC and shall deliver the same to the National Power Corporation (N PC) fo r and in behalf of PNOC-EDC. Petitioner' s 48.25 megawatt geothermal power plant proj ect has been accredited by the Department of Energy (DOE) as a Bl ock Power Production Facility, pursuant to the provisions of Executi ve Order No . 2 15. ~ 2 Rollo, p. 149. 3 As culled from the records, Rollo, pp. I07- 117.

DEC IS ION Page 3 of8 CTA EB No. 750 (C.T.A. Case Nos. 8082 & 81 06) Mindanao II Geothermal Partnership vs . Commi ssioner of Interna l Revenue Petitioner has been issued by the Energy Regul atory Commission (ERC) a Certificate of Compliance No. 03-1 O-GXT25 -0025 on October 2003 and Certificate of Compliance No. 08-1 2-GXT25-0025 on December 2008. Petitioner is registered with the Revenue District Office No. 108, Kidapawan City with Tax Identification No. (TIN) 004-766-953 as a Value-Added Tax (VAT) entity, among others, with generati on, co llection and distribution of electricity as its registered line of business. The sale of generated power and delivery of electric capacity and energy of petitioner to the NPC for and in behalf of PNOC-EDC pursuant to the BOT contract is petitioner's primary revenue generating activity. Petitioner also generates minimal and incidental revenue for which it reports output taxes. In the course of its operation , petitioner makes domestic purchases of goods other than capital goods and services from which transactions it accumulates creditable input taxes which remained unutilized . Petitioner filed its Quarterl y VAT Returns for four qumiers of 2008 on April 24, 2008; July 25 , 2008 ; October 24, 2008; and January 2, 2009 resulting to the unapplied creditable input taxes amo unting to P6, 149,256.25. On December 28, 2009, petitioner filed its admi ni strati ve claim with the RDO No. 108, Kidapawan City of the BIR for refund or tax cred it of its unapplied and unutilized input taxes for the year 2008 in the total amount of P6 ,149,256.25. Petitioner then filed Petitions for Review with thi s Court on March 30, 2010, docketed as CTA Case No . 8082; and on May 27, 20 10, docketed as CTA Case No. 8106. These were later consolidated pursuant to a Resolution of the 3rd Division dated V August 9, 2010.

DECISION Page 4 of8 CTA EB No. 750 (C.T.A. Case Nos. 8082 & 81 06) Mindanao ll Geothermal Partnership vs . Commissioner of Internal Revenue On December 7, 2010, respondent filed its Motion to Dismiss CTA Case No 8082 for being prematurely filed. The Motion to Dismiss was granted in the Assailed Resolution dated January 20, 2011. Petitioner's Motion for Reconsideration was likewise denied. Hence, this petition. The Issues4 Petitioner ra1ses the following grounds for the reversal of the assailed resolutions : I. At the time petitioner filed its petition for review in CTA Case No. 8082, it relied in good faith on the then settled rulings of thi s Honorable Court that a tax payer is not bound by the 120-day period but by the two- year prescriptive period. II. At the time petitioner filed its petition for review, it also relied in good faith on the interpretation of this Honorable Court (and of the Supreme Co urt) of the word " may". III. The Aichi Ruling cannot be app lied retroactively in the present case as it would impair vested ri ghts and produce substantial ineq uitabl e results and grave injustice to petitioner. Ruling of the Court Petitioner's arguments deal ma inl y with the app li cation of Section 11 2(A) in relation to Section 11 2(C) of the Nationa l Internal Revenue Code (NIRC) of 1997, as amended. Section 112(A) and (C) of the N IRC of 1997. as amended, are very clear and categorical in stating periods for the administrative and judicial claims for refund. Thus, there is no need for a judicial interpretation of the law considering that a clear ~ 4 Rollo, p. 117.

DECISION Page 5 of8 CTA EB No. 750 (C.T.A. Case Nos. 8082 & 8 106) Mindanao II Geothermal Partnership vs. Commissioner of Interna l Revenue and "to the letter" application of the law is possible. In other words, where a provision of law speaks categorically, the need for interpretation is obviated, no plausible pretense being entertained to justi fy non-com pliance. All that has to be done is to apply it in every case that falls within its terms.5 It should be emphasized that the Aichi Ruling 6 deals specifically with the application of Section 112 of the NIRC of 1997, as amended, and the importance of the 120-day period. Before the Aichi Ruling, the Co urt only determ ined the proper period to start the reckoning point of the prescripti ve period. This was found to be the close of the taxable quarter when the sale or transaction was made as held in the Mirant Rulinl . Clearly, even without the Aichi and Miran l Rulings, a straightforward application of Section 112(A) and (C) will produce the same result. Adm inistrative claims for refund of unutilized input VAT must be filed withi n two years from the close of the taxable quarter when the sales were made. Judi cial claims must be filed within thirty (30) days from receipt of the CIR's decis ion denying the claim or after the expiration of the 120-day period. Petitioner also argues that the wo rd " may" has always been interpreted as being merely permissive and not mandatory . In the instant case, while petitioner 1s correct that the word " may" is permissive, we do not agree that it relates to the peri od within which an appeal may V be taken to this Court. For clarity, we quote the provision below: 5 Luzon Stevedoring Corporation vs. Court of' Tax Appeals, G.R. No. 30232, July 29, 1988 citing Allied Brokerage Corporation vs. Commissioner of Customs, G.R. No. L-2764 1, August 3 1, 1971 . 6 Commissioner of Internal Revenue vs. Aichi Forp, ing Company of' Asia, Inc., G.R. No. 184823, October 6, 20 I0. 7 Commissioner of Internal Revenue vs. Mirant Pap, bilao Corporation (formerly Southern Energy Quezon, Inc.), G.R. No. 172 129, September 12,2008.

DECISION Page 6 of8 CTA EB No. 750 (C.T.A. Case Nos. 8082 & 81 06) Mindanao II Geothermal Partnership vs. Co mmi ss ioner of Intern al Revenu e " Section 112 . Refund s or Ta x Credits of Input Tax . - XXX (C) Period within whi ch refund or ta x credit of input taxes shall be made. - XXX In case of ful l or partial denial of th e claim for tax refund or tax credit, or the failure on th e part o f th e Commi ss ioner to act on the app lication within th e period presc ribed above, th e taxpayer affected may, within 30 daxs from th e rece iQ.t Qf th e dectision denying the claim or after the expiration o f_th ~ one hundred twenty-day period, appeal the decision or the un ac ted claim w ith the Court of Tax Appeals ." As the provision is phrased , the word " may" relates to the taxpayer' s option to appeal or not to appeal , upon the deni al of its claim for refund or after the expiration of the 120-day period. However, if the tax paye r opts to appeal , such claim must be filed within the 30-day period given from receipt of the denial or the expiration of the 120-day period. Thus, it is the option to appeal which is permissive, however, the period to appeal must be mandatorily compli ed with. Finally, as to petitioner's argument that the Co ut1 ' s ruling has impaired its vested rights, basic is the rule that no ves ted ri ghts are acquired on procedural rules.8 Furthermore, the right to appeal is neither a natural ri ght nor a part of due process. It is merely a statutory privilege, and may be exerci sed onl y in the manner and in accordance with the provisions of the law.9 Thus, when petitioner' s admini strati ve claim for refund was filed on December 28 , 2009, respondent had 120 days within which to act on the same, or until April 27, 2010. However, even pri or to the expiration of the 120-day period, on V March 30, 2010, petitioner alread y fil ed its judi cial claim for the 151 quarter of year 8 Teotimo Billones, Celso Val/ecer, e/ a/. vs. The Co urt of Industrial Relations, et a!. , G.R. No. L- 17566, July 30, 1965 and Salvador Vi/lardo. Eulogio V Mala, el a/. vs. The Court of Industrial Relations, eta!. , G.R. No. L-1 7567, July 30, 1965 . 9 Commiss ioner of Internal Revenue vs. Fort Bonifacio Development Corporation, G.R. No. 167606, August II , 2010.

DECISION Page 7 of8 CTA EB No. 750 (C.T.A. Case Nos. 8082 & 8 106) Mindanao II Geothermal Partnership vs. Commissioner of Internal Revenue 2008. Based on the fore go ing, there is no reason to reverse the CTA Second Division's resolution that CTA Case No. 8082 was prematurely filed on March 30, 2010. WHEREFORE, prem1ses considered, the instant Petition for Review IS hereby DISMISSED for lack of merit. SO ORDERED. AMEI~~O;;t;,t~S Assoc iate Justice WE CONCUR: l_clP. (4 - ERNESTO D. ACOSTA Pres iding Justice ~fc.~A~1~ ~ CAESA~SANOVA Associate Justice Associate Justice AE:~~Pst.iUceY ~f,u::- ~ . OLGA PALANCA-ENRIQUEZ Associate Justice ~...._ N .M~~ .. G~ CIELITO N. MINDARO-GRlJLLA Associate Justice

DECIS IO N Page 8 of8 CTA EB No. 750 (C.T.A. Case Nos. 8082 & 81 06) Mindanao II Geothermal Partnership vs. Com mi ss ioner of Intern al Revenue CERTIFICATION Pursuant to Section 13 , Article VIII of the Constitution, it is hereby certified that the above Decision has been reached in consultation with the members of the Court En Bane before the case was assigned to the writer of the opinion ofthe Court. ~ ~ - (I~ ERNESTO D. ACOSTA Presiding Justice

REPUBLIC OF THE PHILIPPINES Court ofTax Appeals QUEZON CITY En Bane MINDANAO II GEOTHERMAL CTA EB CASE NO. 750 PARTNERSHIP, (CTA Case Nos. 8082 and 8106) Petitioner, Present: -versus- Acosta, P.J. Castaneda, Jr., Bautista, Uy, Casanova, Palanca-Enriquez, Fa bon-Victorino, Mindaro-Grulla, and Cotangco-Manalastas, JJ. COMMISSIONER OF INTERNAL Promulgated: REVENUE, fl;p1U,..r.A:dvtrV'vtA'-\~ JUL 05 2012 //,!en>~ .. �Jh. ... Respondent. X----------------------------------------------------------------------------------------------------X DISSENTING OPINION BAUTISTA, I.: While the Court sitting En Bane dismissed the Petition for Review for lack of merit; still it is my considered view that the factual circumstances present in the case at bench supports the application of the then prevailing jurisprudence at the time the claim was made, thus, I find the Petitions for Review, docketed as CTA Case Nos. 8082 and 8106, respectively, filed in accordance with the 1997 National Internal Revenue Code, as amended.

DISSENTING OPINION CTA EB CASE No. 750 (CTA Case Nos. 8082 and 8106) In the case of Magtoto v. Manguera, et al.,l the Supreme Court sitting En Bane made the following pronouncement: The final authority of this Court rests upon public respect for its decisions. That public respect is based upon an image which represents this Court as declaring legal principles with an authority and certainty that the people may place upon it their bona fide reliance and reasonable expectations. To hold now that public officers, who have acted in justifiable reliance on Our aforecited doctrines, have transgressed the Constitution, would certainly not strengthen public respect on the authority of Our judgments. Where there has been justifiable reliance on Our decisions, and those who have so relied may be substantially harmed if retroactive effect is given, where the purpose of the new rule can be adequately effectuated without giving it retroactive operation, or where retroactive operation might greatly burden the administration of justice, then it is Our duty to apply the new rule prospectively. The factual and textual bases for a contrary rule, are at best, less than compelling. Relevant is the Court's duty to assess the consequences of its action. More than the human dignity of the accused in these cases is involved. There is the compelling realization that substantial interests of society may be prejudiced by a retrospective application of the new exclusionary rule. Thus, the values reflected transcend the individual interests of the herein accused, and involve the general security of society. The unusual force of the countervailing considerations strengthens my conclusion in favor of prospective application. xxx (Boldfacing supplied.) It need not be stated that the Supreme Court, being the court of last resort, is the final arbiter of all legal questions properly brought before it, and that its decision in any given case constitutes the law of that particular case. Once its judgment become final it is binding on all inferior courts, and hence beyond their power and authority to alter or modify.2 1 G.R. Nos. L-37201-02, L-37424, and L-38929, March 3, 1975, 63 SCRA 4, Concurring Opinion penned by Justice Felix Q. Antonio, with Justices Antonio P. Barredo and Cecilia Muf\oz-Palrna, concurring. 2 Jose Kabigting v. The Acting Director of Prisons, G.R. No. L-15548, October 30, 1962.

DISSENTING OPINION CTA EB CASE N o. 750 (CTA Case Nos. 8082 and 8106) However, the Court's decisions should not be, as to a given period of time, upon the same or similar facts and under the same or similar circumstances, as fluctuating as to engender the phenomenon described by Mr. Justice Thompson of the Supreme Court of Virginia as ignisfatuus.3 Thus, with the foregoing doctrines in mind, as well as, the factual milieu present in the case at bench, the reckoning of the prescriptive period - from the close of the taxable quarter when the sales were made- should apply. In addition, a plain reading of Section 112(C) of the 1997 National Internal Revenue Code ("NIRC"),4 as amended,s will show that the provision use the word "may," which as settled in statutory construction connotes permissiveness, rather than of a restrictive or mandatory in nature. Consistent with the aforementioned provision's permissive nature, the judicial recourse to this Court within thirty (30) days after the lapse of the one hundred twenty (120)-day period, therefore, is merely directory, and not mandatory nor jurisdictional; subject only to the period provided under Sections 112(A)6 and 2297of the same Code. 3 Ramon Torres v. Tan Chim, G .R. No. L-46593, February 3, 1940, 69 Phil. 518, citing Perkins v. Clemente et al., 1 Pat and (Va.) 153. 4 (C) Period within which Refund or Tax Credi t of Input Taxes shall be Made. - In proper cases, the Commissioner shall grant a refund or issue the tax credit certificate for creditable input taxes within one hundred twenty (120) days from the date of submission of complete documents in support of the application filed in accordance with Subsection (A) hereof. In case of full or partial denial of the claim for tax refund or tax credit, or the failure on the part of the Commissioner to ac t on the application within the period prescribed above, the tax payer affected may, within thirty (30) days from the receipt of the decision denying the claim or after the expiration of the one hundred twenty day-period, appeal the decision or the unac ted claim with the Court of Tax Appeals. '"'I s As amended by Republic Act No. 9337. 6 SEC. 112. Refunds or Tax Credits of Inpu t Tax. - (A) Zero-rated or Effectively Zero-ra ted Sales. - Any VAT-registered person, whose sales are zero-rated or effectively zero-rated may, within two (2) years after the close of the taxable quarter when the sales were made, apply fo< the "'"=" of a tax m dit cedUkate O<<efund of <reditable input tax due o< paid attdbutable to

DISSENTING OPINION CfA EB CASE No. 750 (CfA Case Nos. 8082 and 8106) Page4 of 5 Therefore, if the two (2)-year prescriptive period is about to expire, there is no need to wait for the denial of the claim by the Commissioner of Internal Revenue or its inaction after the expiration of the one hundred twenty (120)-day period before the taxpayer can lodge its appeal with this Court.8 The administrative and judicial claims must be both filed within the two (2)- year period,9 otherwise, the Court will be deprived of jurisdiction to entertain the case.IO Counting two (2) years from the close of the respective taxable quarters of the year 2008, the administrative claim filed on December 28, 2009, and the judicial claims filed on March 30, 2010, and May 27, 2010, were, thus, made within their respective prescribed periods. Applying the above disquisitions, I find the administrative and judicial claims filed within the prescribed period. sales, except transitional input tax, to the extent that such input tax has not been applied against output tax: Provided, however, That in the case of zero-rated sales under Section 106(A)(2)(a)(1),(2) and (B) and Section 108 (B)(1) and (2), the acceptable foreign currency exchange proceeds thereof had been duly accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP): Provided, further, That where the taxpayer is engaged in zero-rated or effectively zero-rated sale and also in taxable or exempt sale of goods or properties or services, and the amount of creditable input tax due or paid cannot be directly and entirely attributed to any one of the transactions, it shall be allocated proportionately on the basis of the volume of sales. 7 SEC. 229. Recovery of Tax Erroneously or Illegally Collected. - No suit or proceeding shall be maintained in any court for the recovery of any national internal revenue tax hereafter alleged to have been erroneously or illegally assessed or collected, or of any penalty claimed to have been collected without authority, or of any sum alleged to have been excessively or in any manner wrongfully collected, until a claim for refund or credit has been duly filed with the Commissioner; but such suit or proceeding may be maintained, whether or not such tax, penalty, or sum has been paid under protest or duress. In any case, no such suit or proceeding shall be filed after the expiration of two (2) years from the date of payment of the tax or penalty regardless of any supervening cause that may arise after payment: Provided, however, That the Commissioner may, even without a written claim therefor, refund or credit any tax, where on the face of the return upon which payment was made, such payment appears clearly to have been erroneously paid . s Commissioner of Internal Revenue v. CE Cebu Geothermal Power Company, Inc., CfA EB No. 426, May 29, 2009. 20091 9 Commissioner of Internal Revenue v. Victorias Milling Co., Inc., No. L-24108, January 3, 1968, 22 SCRA 12. w Conuru..,ion<' of Intem�l Rev~oe v. Accentu~, Inc" CTA EB No. 410 (CTA c:a.e No. 7387), Me<ch 18,

.. DISSENTING OPINION CTA EB CASE No. 750 (CT A Case Nos. 8082 and 8106) Accordingly, I vote that the Petition for Review be GIVEN DUE COURSE.