CBK POWER COMPANY LIMITED v. COMMISSIONER OF INTERNAL REVENUE (Consolidated with Case No. 7814)

,-\;~ REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS ~() QUEZON CITY ~y THIRD DIVISION CBK POWER COMPANY LIMITED, CTA CASE NO. 7771 P etitio ner, -versus- COMMISSIONER OF INTERNAL REVENUE, Resp ondent. X- - - - - - - - - - - - - - - - - - - - - - - - - - - -X CBK POWER COMPANY LIMITED, Petitioner, CTA CASE NO. 7814 - versus- Present: BAUTISTA, Chairperson PALANCA-ENRIQUEZ, and COTANGCO-MANALASTAS, JJ. COMMISSIONER OF INTERNAL Promulgated: REVENUE, DEC 3 2010 Respondent. C;r>p:BT~~ - ~ - � ~.!'~ . ......... X----------- -------- ------- - ----- - ---------------- - ----- -- X DECISION COTANGCO-MANALASTAS, .1. : THE CASE Thi s reso lves the conso lidated Petitions fo r Review both fil ed by CBK Power Co mpany Limited on April 23, 200 8 and July 24, 2008 , pursuant to Section 11 oft - - 146

D E C JSI ON Page 2 of 28 CTACaseNos. 777 1 & 78 14 CBK POWER COMPANY LiMITED vs. ClR Republic Act No . 11 25 (R.A. l l 25), as amended by Section 9 of R.A. No. 9282, and Section 3(a), Rule 8 offh e 2005 Revised Rules ofth e Court ofTax App eals (RRCTA), praying for the issuance of tax credit certificates (TCCs) all egedl y representing its unutilized input Value Added Taxes (VAT). For CTA Case No. 7771 fil ed on April 23 , 2008 , the amount of SEVEN MILLION FIV E HUND RED FIFTY NINE THOUSAND NINE HUNDRED FORTY THREE AND 44/100 PESOS (P7,559,943.44) representing unutilized input VAT paid on its domesti c purchases of goods and serv ices, whi ch are attributable to zero-rated sales for the period January 1, 2006 to March 3 1, 2006;1 and fo r CTA Case No. 78 14 fil ed on Jul y 24, 2008 , the amount of T HIRTY SIX M ILLION TWO HUNDRED FORTY SIX THOUSAND SIX H UNDRED SIX AND 281100 PES OS (P36,246,606.28), representing unutilized input VAT paid on its domesti c purchases of goods and services, which are attributabl e to ze ro- rated sales fo r the peri od April 1, 2006 to December 3 1, 2006 .2 TilE PARTIES Petiti oner is a partnership duly organized and existing under and by virtue of the laws of the Philippines, w ith principal office at the N PC Compound, Kalayaan, Lag un a. Respondent, on the other hand, is the Commi ss ioner of Interna l Revenue, who is charged w ith the authority to ac t as such, including inter ali a, the power to decide and grant refund s or tax credi t or erroneously or ill egall y coll ected internal revenue taxes, as prov ided by law, with offi ce at the Bureau of Internal Revenue (BTR)~ 1 Rollo, pp . 1- 111, Petit ion fo r Review for CTA Case No . 777 I 2 Rollo, pp . 4 18-429, P etition for Review for CTA Case No. 781 4 14 7

DECISION Page 3 of 28 CTA Case Nos. 7771 & 78 14 CBK POWER COMPANY LJMJTED vs. C!R Nati onal Offi ce Building, Diliman, Q uezon City, where he may be served with summons and other court processes. 3 TilE FACTS The fac ts of the case, as culled from the reco rds, are as fo ll ows: Petiti oner is a special purpose entity, the sole purpose of whi ch is to engage in all aspects of (a) design, fi nancin g, co nstru ction, testin g, commi ssioning, operati on, maintenance, m anagement and owners hi p of Kalayaan II pumped-storage hydroelectric power pl ant, the new Caliraya Sp ill way, and other asse ts located in the Province of Laguna, and (b) rehabilitation, upgrade, expansion, testing, commi SSiomng, operati on, main tenance and management of the Caliraya, Botocan and Ka layaan I hydroelectric power plants and their re lated fac ilities, located in the Province of Lagun a. It generates electri city through its Caliraya, Botocan, and Kalayaan I hydroe lectric power p lants, as we ll as from the Kalayaan II hydroe lectri c power p lant. 4 Petitioner is registered as a VAT entity, with TIN/VAT No. 205-760-474-000 , 111 accord ance with th e Tax Code, as amended. It was issued BTR Certificate of Registrati o n OCN 1R C0000050243 , dated Ap ril 10, 2000, by BTR Revenue District Office No. 55 (San Pabl o City, Laguna), w hich was updated on M ay 11 , 200 5. As a consequence thereof, petitioner was issued BTR Certi ficate of Registrati on OCN 1R COOOO 195 40 5.5 Petiti oner was also issued by the Energy R egul atory Commi ssion the following Certi fica tes of Comp li ance: (1) COC No . 04-02-GXT49A-0050, dated,.L--- 3 Rollo, p. 230, Pars. I and 2, Facts Admi tted, Joint Sti pul ati on of Facts and Issues (J SF I) 4 Pars. 5 and 9, Facts Admitted , JSF I, Rollo, pp. 23 1-232 ) Par. 6, Facts Admitted, JSFT, Rollo, p. 23 1 14 8

DECIS ION Page 4 of 28 CTA Case Nos . 777 1 & 78 14 CBK POWER COMPA N Y LIMITED vs. CJR April 11 , 200 7; (2) COC No. 04-02-GXT49B-005 1, dated February 4, 2004 ; (3) COC No. 04-02-GXT49C-0052, dated February 4, 2004; and (4) COC No . 05-10-GN12- 13354- 13373 , dated April 11 , 2007 .6 On M arch 17, 2006, BIR iss ued BIR Ruling No . DA- 146-2006, confirming petiti oner' s c laim that as an enti ty engaged in hydropower generati on, its billings/fees for the sale of electri city to N PC are subj ect to VAT at zero percent (0%) rate, under Section 108 (B)(7) of the Tax Code of 199 7, as amended by Republic Act 933 7 (R .A. 9337)7 For the peri od January I , 2006 to December 3 1, 2006, petitioner fil ed with the BIR its M onthl y VAT Decl arati ons and Quarterl y VAT Return s. Petitioner filed its Ori ginal Quarterl y VAT Returns fo r the fi rs t, second , third , and fourth quarters of Calendar Year (CY) 2006 and Amended Quarterl y VAT Returns fo r the four quarters of CY 2006 on the followi ng dates: g -.,.,......,,., ~~~M~-;;~~ >a;m,�-aw''n�mwrw+�-lifm�" Mtil?w~wwwn m � � - � i""'""'''~"~~-~---�-�~~~�-�-��~"�~~�m�����n��-~��~~-�;���--nnnnnn-" � ��--�-'"''"''"'"'""''""""""'"''"-'"'""""''"'""m"''' '' ' ' " ' ' " ' ' ' ' " " " ' ' ' ' ' ' ' " ' " � � � � - �����-�" """" nn- --- ------�-�-�-"�'"' 2006 Amended VAT Retum L..,__. , J~~ble Q..!!!!!!!!..L..-*_ �-- -- 1-st � � -�-� --� ,.-.A1,p12ri~l J2sY�:�.2e.o!!ol,6.. ....... .., .... ~.Q~J!l e dl. _ _ .... ��-----�---��o~~;~~be t :� 2 8 :2�o o�7 �� March 3 1, 2008 2"d July 25, 2006 April 18, 2008 ...,rd Oc tober 20, 2006 May 7, 2008 .) tl th Janu ary 2tl , 2007 July 2 1, 2008 -~ 6 Par. I0, Facts Admitted, JSFI, Rollo, p. 232 7 Par. II , Facts Ad mitted, JSF I, Rollo, pp. 232-233 8 Pars . 7-8 , Facts Admitted , JSFI, Rollo, pp . 23 1-232 149

DE C IS I ON Page 5 of 28 CIA Case Nos. 777 1 & 78 14 CBK POWER COMPA N Y LiMi TED vs. CJR Petitioner's Amended Quarterl y VAT Returns for the four quarters of CY 2006 refl ected/reported the fo llowing input tax credits: 9 -�------~------�-----~----�-�-�-c:::r::,-;;;;.::::::::::.::::;;;:.;:.;.:o:=�-=z;:::-.;;;.::.;;=::;..~ -:;,::::,..~--:.:..-..;..:;,::.::.:::.:::::::z~--'.;;;.-:-:;:_--:;:.===':'.':;;;;::,;..;:::-.:;;:::.------ . --�----- - --- �------------ JnpUt T ax C r edits for th e pel"iod Janua 1�y 1 to December 31 ,2 006 P urchases ! of Goods Purchase of I Rendered T axa ble Capital l Other tha n ! Capital Services I by Non- Tax Credits Qua rte1� Goods I of Goods Other tha n exceeding ! R esid ents !1 P 1M illion l Ca pital I I I Goods : I ! 3 2,99 8;166. 11 I ,1\ 2 5,01 9. 73 810 ,9 0 6 .0 0 I 0,92 1,51\ 1.86 3 0-2,-6' 2-7-.-1-1\- + -16-,-1\'5-8-,-5-6'0�.-8-1\ - -1\'h- - - - - - . - ----�-- ---- +-..-.. -��� -------� - - - - � - �- -- +� .�. I I -�-t--3-4-4",3-77-.4-6 ! I TOTAL 6,55 9,893. 1o .1,620,670.63 '- -�6- 54��-,�7-63-.o-o -8-,5-86-,5-2~--8-.3-6-...1,6o8 ,644 .9o 12,814,984 .35 8~..I.L ~ -~~~p4. ?4 , ?2.~ : oo 29 , 4 ~2z.0 ~4_.7Q_Li 4, 0 ?_9..;~ 62 . 08 j __,~2t~!Zt~l~:2.2 . J l.l Also , based on the Amended Quarterly VAT returns fo r the Period January 1 to December 31, 2006, petitioner' s reported zero-rated sales during the period are as foll ows 10: l "in -M-w Pii"':o~~__.~-.J!ii~fMir-�1Xf'P'!Wwm Z ero-Rated Sales for th e period J anua ry 1 to Dece mb er 3l-, 2006 1------��������------------l-�� -� -----�-�--------�--------- ------ - -�"-----j! 2006 T axa ble Qua rte1� Zuo-Rated Sales/ Receipts 1 1s. ~5 8 3_, 3~~!1Q7 .1\ 6- - - - .. --2_ r id -~ ------- 3ra _1~4 8 , 74 8,033 ._5_2_ 1,599,882,354 .64 4th I,51\ 7, 858,529 .27 TOTAL 6,379,879,324.87 ' .. .. ... . . � .. ::~�. :::_: ~-- ::::..-.� ~�:. :. �:':~-~ ::: �;: :.�.:~ �:.'' :.;�'''�;:; _,....'�;'�;;;;;: ~-~-.-.~:~�::::~- �_.~ �;,. ~-:.�::::.':;:;~-~-:.:::::~'.'::.~::::~';:.�.-:.. Out of the total input tax reported in the Amended Quarterly VAT returns for the period January 1 to December 31,2006, amounting to P49,347,433.70, petitioner is seeking issuance of TCCs for a total amount of P43,806,549.72 (i.e. P 7,559,943.44 f or CTA Case No. 7771, and P36,246,606.28 f or CTA Case No . 7814) /--- 9 Exhibits " H- I" to " H- 10" 10 Supra No te 8 150

DECISION Page 6 of28 CTA Case Nos. 7771 & 7814 CBK POWER COMPANY LIMITED vs. CJR CTA Case No 7771 On March 31 , 2008, petitioner filed its administrative claim 11 with the BIR RDO No . 55 of Laguna for the issuance of a TCC in the total amount of P7,559,943.44, representing its unutili zed input taxes for the period January 1, 2006 to March 31, 2006, pursuant to Section 112 (A) of the NIRC of 1997, as amended by R.A. 933712 Since respondent has not issued its final deci sion on the above administrative claim , petitioner filed on April 23 , 2008 a Petition for Review 13 with this Court, docketed as CTA Case No . 7771, alleging inaction of respondent. 14 In his Answer 15 , respondent alleged by way of special and affirmative defenses that: "5. Petitioner's alleged claim for the issuance of a tax credit certificate is subject to administrative investigation /examination by respondent's Bureau; 6. Petitioner failed to demonstrate that the tax subject of the case at bar was erroneously or illegally collected ; 7. Taxes collected are presumed to be in accordance with laws and regulations ; 8. Petitioner's judicial claim for the issuance of a TAX CREDIT CERTIFICATE was prematurely filed in view of Section 112 (C) of the 1997 National Internal Revenue Code (1997 NIRC ), as amended, which provides that: ' Section 11 2. Refunds or Tax Credits of Input Tax - (C) Period within which Refund or Tax Credit 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 fi'om the date (~f submission ofcomplete documents in support of the application filed in accordance with Subsection (A) hereof. ~ 11 Exhibit "A" 12 Par. 12, Facts Admitted , JSFI , Rollo, p. 235 I( 13 Rollo, pp. 1- 1!J 14 Par. I!J , Facts Adl'nitted , JSFI , Rollo, p. 235 1 Rollo, pp. 156-162 ' 151

DEC lSJON Page 7 of28 CTA Case Nos. 777 1 & 78 14 CBK POWER COMPANY LIMITED vs. CfR In case of f ull or partial denial of the claim for tax refund or tax credit, or the fa ilure on the part of the Commissioner to act on the application within the period prescribed above, the tax payer affected may, vvilhin thirty (30) days from the receipt of the deci sion denying the claim or after the expirati on of the one hundred twenty day- period , appeal the decision or the unac ted claim with the Court of Tax A ppeals.' (Italics supplied) Hence, when the petitioner fil ed its administra tive claim for the issuance of a TAX CREDIT CERTIFICATE with the BIR Revenue District Offi ce No. 55 of Laguna on 3 1 March 2008 , respondent had 120 days within which to decide on petiti oner' s claim for the issuance of a TAX CREDiT CERTIFICATE. And in the case of full or partial denial of the cl aim or fa ilure of respondent to act on the application within the 120 day period, petitioner has 30 days to appeal the decision or inaction with the Court of Tax Appeals. Thus, respondent had to render a decision within 120 days from 3 1 March 2008 or until 29 July 2008 . In the event that respondent failed to act upon petiti oner's claim fo r the issuance of a tax credit certificate, petitioner has 30 days from 29 Jul y 2008 or until 28 August 2008 to appeal the unacted cl aim with the Co urt of Tax A ppeals. Petitioner fi led the instant Petition for Rev iew with the Court of Tax Appeals on 23 April 2008 , more than fo ur (4) months before the lapse of the period allowed by law to file the judicial claim for the issuance of a tax credit certificate with the Co urt of Tax Appeals. In the case at bar, petitioner seeks the iss uance of a tax credit certificate representing its all eged unutili zed input taxes. Thus, petitioner can appeal to this Honorable Court only after the expiration of the 120-day peri od granted by law or w ithin 30 days from the decision of respondent denying its claim for tax credit. This being so, thi s Honorable Court has no jurisdiction to act on the instant Petiti on for Rev iew. 9. Ass um ing in gratia argumen ti that petitioner' s judicial claim for the issuance of a tax credit certifi cate was not prematurely fi led, it is imperative for petitioner to prove compliance with the fo llowing, viz: a. The registration requirements of a value-added taxpayer under the pertinent provision of the 1997 N IRC, as amended, and its implementing revenue regulations; . b. The invo icing and accounting requirements for VAT registered persons, as we ll as the filin g and pay ment of VAT pursuant to the provisions of Secti on 11 3 and 11 4 of the 1997 N IRC, as amended. Failure to co mpl y w ith the invoicing requirements on the documents supporting the sale of goods and services will resul t in the di sallowance of the cl aim forAl-- 15 2

DECISION Page 8 of28 CTA Case Nos. 7771 & 7814 CBK POWER COMPANY LIMiTED vs. CJR input tax of the taxpayer claimant (Revenue Memorandum Circular No. 42-2003); c. The submission of complete documents in support of the administrative claim for refund pursuant to Section 11 2 (C) of the 1997 NIRC, as amended, otherwise, there wo uld be no sufficient compliance with regard to the filing of administrative claim for tax credit/refund which is a condition sine qua non prior to the filing of judicial claim in accordance with Section 229 of the 1997 NIRC , as amended ; d. That the input taxes of P7 ,559,943.44 allegedly representing unutilized input VAT from its local purchases and/or importation of goods and services and payments for services rendered by non-residents, other than capital goods, and purchases of capital goods, were: i. paid by the petitioner; ii . attributable to its zero-rated or effectively zero-rated sales; and iii. such input taxes paid should not have been applied against any output tax; e. That petitioner' s claim for tax credit or refund of the unutilized input tax (VAT) in the amount of P7,559,943.44 was filed within two (2) years after the close of the taxable quarter when the sales were made in accordance with Section 112 (A) ofthe 1997 NlRC, as amended; f. That petitioner has complied with the governing rules and regulations with reference to recovery of tax erroneously or illegally colleted as explicitly provided in Sections 11 2 (A) and 229 of the 1997 NTRC, as amended. I 0. Moreover, in an action for tax credit/refund, the burden of proof rests upon the taxpayer to establi sh by sufficient and competent evidence its entitlement to a claim for tax credit/refund; 11. Basic is the rule that tax refunds are in the nature of tax exemptions and are to be construed strictissimi juris against the entity claiming the same (Philippine Geothermal , Inc., vs. Commissioner of Internal Revenue, G.R. No. 154028, July 27, 2005). Moreover, statutes in derogation of sovereignty such as those containing exemption from taxation should be strictly construed in favor of the State. In this regard, taxation is the rule and exemption is the exception. The law does not look with favor on tax exemptions and that he who would seek to be thus privileged must justify it by words too plain to be mistaken and too categorical to be misinterpreted (Sea - Land Services, Inc. vs. Court ojAppeals, 35 7SCRA -144)~ 153

DE CISlO Page 9 of2 8 CTACaseNos. 777 1 & 781 4 CBK POWER COMPANY LiMITED vs. C!R CTA Case No. 78 14 On July 23, 2008 , petitioner fi led with the BIR RDO No. 55 of Laguna an admini strati ve claim 16 fo r the issuance of a TCC fo r the total amount of P36,246,606.2 8, represe nting its unutili zed input taxes for the period April 1, 2006 to December 31, 2006, pursuant to Section 1 12 (A) of the N IRC of 1997, as amended by R.A. 9337. 17 On Jul y 24, 200 8, petiti oner fil ed a Petiti on fo r Review 18 w ith thi s Court, docketed as CTA Case No. 7814, in order to toll the running of the two (2) year prescn.pt1.ve pen.od.19 In hi s Answer fil ed on September 18 , 2008 , respondent alleged by way of speci al and affirmati ve defenses that: "5. Petitioner's claim fo r tax refund is subj ect to adm ini strative investigation/examination by res pondent; 6. Taxes remitted to the BIR are presumed to have been made in the regular course of business and in acco rdance with the provision of law ; 7. To supp011 its cl aim , it is imperati ve for petitioner to prove the fo llowing, viz: a. The registration requirements of a value-added tax payer in compliance w ith the pertinent provision of the National Intern al Revenue Code of 1997 ( 1997 N IRC), as amended, and its implementing revenue regulations; b. The invoicing and accounting requirements for VAT- registered persons, as well as the filing and payment of VAT pursuant to the prov isio ns of Secti on I 13 and 114 of the 1997 NIRC, as amended; c. Proof of compliance with the submission of complete documents in support of th e admini strati ve claim for refund~ 16 Ex hibit "B" 17 Par. 13, Facts Admitted , JSF I, Rollo, p. 235 18 Rollo, pp. 11 18-1129 19 Par. 14, Facts Admi tted, JSF I, Rollo, p. 23 5 154

DECiSION Page 10 of28 CTA Case Nos . 777 1 & 78 14 CBK POWER COMPANY LIMITED I'S. CJR pursuant to Secti on 11 2 (C) of the 1997 NIRC, as amended, otherwise there \Vo uld be no sufficient compliance with the filing of admini strative claim for refund whi ch is a condition sine qua non prior to the filing of judicial claim in accordance with Secti on 229 of the 1997 NIRC, as amended. d. That the input taxes of Php36,246,606.28 representing unutilized input tax (VAT) from its local purchases and /or importati on of goods and services and payments for servi ces rendered by non-resid ents, other than capital goods for the peri od April I , 2006 to December 31, 2006 were: d.i paid by the petitioner; d.ii. attributable to its zero-rated or effectively zero- rated sales; and d.iii. such have not been applied against any o utput tax; e. That petitioner' s claim for tax credit or refund of the unutili zed input tax (VAT) was fil ed within two (2) years after the close of the taxable qumier when the sales were made in accord ance with Secti on 11 2 (A) of the 1997 NIRC , as am end ed ; f. That petitioner's domestic purchases and/or importation of goods and services, payment for services rendered by non- residents and capital goods were made in the course of its trade or business, properl y supported by VAT invo ices and/or offic ial receipts and other doc uments, such as subsidim�y purchase journal, showing that it actually paid VAT in accordance with Sections 11 0 (A) (2) and 11 3 of the 1997 N IRC, as amended and in pursuance to Section 4.1 04-S(a) & (b) of Revenue Regulati ons No. 7-95 (Re: Substantiation of Claims for Input Tax Credit); g. That petiti oner has complied the requirements as enumerated under Section 4. 104-2 of the Revenue Reg ulations 7-95 (Re: persons who can ava il of the Input Tax Credit). 8. In an ac ti on for refund, the burden of proof is on the taxpayer to establish its right to refund and fa ilure to sustain the burden is fatal to the claim for tax refund/credit. This is so because exempti ons from taxation are highly disfavored in law and he who claims exemptions must be able to justify hi s claim by the clearest grant of organic or statutory law. An exemption from common burden cannot be permitted to ex ist upon vague impli cations; 9. The cl aims for refund are construed strictl y aga inst the claimant for the same partakes the nature of exemption from taxation and liberally in favo r of the taxing authority.'Y" 155

DEC ISIO N Page ll of 28 CTA Case Nos . 777 1 & 78 14 CBK POWER COMPA NY LiMiTED vs. CJR On October 20, 2008, petitioner fi led a Motion fo r Consolidation of Cases2�0 praying for the consolidation ofCTA Case No. 781 4 wi th CTA Case No. 7771 , which the Court granted in a Resolution7 1 dated November 27, 2008 . The parties fil ed their Joint Stipulation of Facts and Issues?.? on February 2, 2009, which was approved by this Co urt in a Resolu tion dated February 9, 2009, thus the Pre-Trial was terminated and the parties were ordered to proceed with the trial on the merits. During the hearing held on April 1, 2009, Mr. Fernando J. Dela Paz, Chief Financial Officer of the petitioner, testified on direc t examination by way of affid avit, he affirmed the veracity of the declarations made in hi s affid av it and identification of Exhibits "A" to "E-3", inclusive of all submarkings. Considering the absence of the respondent 's counsel des pite notice, and as moved by petitioner 's counsel, the right of the respondent's co unsel to cross-examine Mr. DeJa Paz was declared by this Court as deemed waived. In the same hearing, the petitioner' s Motion to Commission Mr. Edwin F. Ra.n1os of Constantino Guadalquiver & Company, as the Independent Certified Public Acco untant (CPA) who will conduct the audit and verification of the aforesaid offi cial receipts, invoices and other pertinent doc uments, was granted. 73 On July 24, 2009, Mr. Edwin F. Ramos, commissioned Independent CPA to conduct the independent special audit and examination of petitioner's voluminous documents, submitted his Sworn Statemene 4 . The testimony of Mr. Ramos was taken during the hearing held on July 29, 2009 , where he affinned the veracity of his,..L. 20 Rollo, pp. 185- 188 2 1 Rollo, p. 19!1 22 Rollo, pp. 229-23 9 23 Minutes of th e hear in g held by the Second Division on April I, 2009; Rollo, p. 28 1 24 Rollo, pp . 302-3 ll 15 6

DECISION P age 12 of 28 CTA Case Nos. 777 1 & 78 14 CBK POWER COMPAN Y LJMJTED vs. CIR declarati ons in hi s Sworn Statement and identifi cation of Exhibits "G" to " W, " Y" and " AA", inclusive of all sub-markin gs .25 Petitioner fil ed its Formal Offer of Evidence26 on October 26, 2009, offerin g Ex hibits " A" to " BB-1 " , inclusive of all submarkin gs . The exhibits were all admitted by the Co urt in a Reso luti on27 dated November 25 , 2009. On April 2 1, 20 I 0, co un se l fo r respondent manifested that he will no longe r present any w itness and that he is resting hi s case, thus, the parties were ordered to fil e their respecti ve Memorand a, w ithin thirty (30) days or until May 2 1, 201 0; afterwhi ch, the cases shall be deemed submitted for decision.28 Co nsidering petiti oner's Memorandum 29 fil ed on May 17, 2010, and the Report30 of the Judici al Reco rd s Division dated June 3, 20 l 0 that respondent fail ed to fil e hi s memorandum despite due noti ce, the cases we re deemed submitted for decision on June 7, 2010.3 1 TilE ISSUES Fo llowing are the issues, as stipul ated upon by the parties, for thi s Court' s resoluti on: " 1. Whether or not Petitio ner's admini strati ve and judicial claims for the issuance of tax credit certificates were filed on time ; 2. Whether or not Petitioner is registered as a value-added taxpayer pursuant to the provisions of the 1997 N IRC, as amended; 3. Whether or not Petiti oner has comp lied w ith the invoicing and accounting requirements for VAT-registered persons, as well as the -L ,/ 25 Minutes of the hearin g he ld by th e Seco nd Divis ion o n Jul y 2 9, 2 009 ; Rollo, p. 3 12 26 Rollo, pp.32 3-335 27 Rollo, pp . 3119-35 0 28 Minutes o f the hearin g he ld by the Second Di v ision o n Ap ril 2 I, 2 0 I0 ; Rollo, p. 35 7 29 Rollo, pp. 360-!1 13 30 Rollo, p. !I l 3 1 Rollo, p. 4 17, R eso lution dated June 7, 20 l 0. 15 7

D E C I SI O N Page 13 of28 CIA Case Nos . 777 1 & 78 14 CBK POWER COMPANY LIMiTED vs. CJR filin g and pay ment of VAT pursuant to the provisions of Secti ons 11 3 and 11 4 of the 1997 N lRC, as amended; 4. Whether or not Petitioner has submitted complete documents in support of its administrati ve claims for the issuance of tax credit certifi cates pursuant to Section 11 2(C) of the 1997 NIRC, as amended; 5. Whether or not the alleged input taxes in the amo unt of P43,806,549.72 representing unutili zed input VAT from local purchases and/or importation of goods and services and payments for serv ices re ndered by non-res idents and purchases of capital goods were: i. paid or inc urred by Petitioner; ii . attributabl e to its zero-rated sales or effecti vely zero-rated sa les; iii . such input taxes paid or incurred should not have been applied against any output tax; 6. Whether or nol the inp ut taxes claimed were carried over to the succeeding quarter or quarters in Petiti oner's VAT returns; 7. Whether or not Petiti oner is entitled to the issuance of tax credit certificates in the amount of P43, 806,549.72 allegedly representing unutil ized input VAT from local purchases and/or importation of goods and services and payments for services rendered by non- residents and purchases of capital goods for the peri od January 1, 2006 to December 3 1, 2006. The above issues revo lve around the principal issue of whether petitioner is entitled to the issuance of TCCs in the total amount of P43,806,549.72, representing unuti lized input VAT on local purchases and/or importati on of goods and services and paym ents for serv ices rendered by non-residents and p urchases of capital goods attributabl e to its zero-rated sales fo r the period January I , 2006 to December 3 1, 2 00 6. A rguments o(Petitioner CBK Power Compan v Limitett12 In thi s present Petiti ons for Rev iew, petiti oner CBK Power Company Limited maintains that its admini strati ve and judicial claim s fo r the issuance of TCCs for tf--� 32 Memorandum for the Petitioner, Rollo, pp. 360-4 13 158

DEClS lON Page 14 of28 CTA Case Nos. 777 1 & 7814 CBK POWER COMP...J.NY LIMiTED vs. C/R unutili zed input taxes fo r the peri od January 1, 2006 to December 3 1, 2006, were seasonably fil ed citing Secti on 229 of the N IRC of 1997, as amended, which provides for the two-year peri od fo r judiciall y claiming tax refund/credit, and argued that the case of Atlas Consolidated Mining and Development C01poration v. Co mmissioner of Int ernal Revenue 33 ("A tlas case") is the appli cabl e j uri sprudence in the pending petiti ons. Considering that the Atlas case was the prevailing jurisprudence at the time 'the subj ect administrati ve and judi cial cl aims were fil ed, petiti oner fo ll owed in good faith the doctrine enunciated therein that the two-year presc rip ti ve period for filin g a claim fo r refund/credit of input VAT on ze ro-rated sales and input tax on capital goods should be counted from the date of filin g of the VAT re turn and payment of the tax due. The case of Commissioner of Internal Revenue v. Mirant Pagbilao Corporation (Formerly Southern Energy Quezon, Inc./_, (" Mirant case") should be give n prospecti ve appli catio n fo llowing the principl e of prospecti v ity of statutes. With regard to the seco nd issue, petitioner contends that it is a value-added tax payer pursuant to the prov isions of the Tax Code of 1997 , as amended. In the Joint Stipul ati on of Facts and Issues (JSFI)35 fil ed by both parti es o n February 2, 2009, respondent had admitted that petitioner is registered as a VAT entity in accordance with the Tax Code of 1997 . As regard s the remaining issues, whi ch all boil down to the issue of whether or not petiti oner is entitl ed to the issuance of TCCs, petiti oner asserts that it had sufficientl y proven and substanti ated that it has complied with all the basic requirements in ord er to be entitl ed to the issuance of TCCs in the amount of P43,806,549.72 represe nting unutili zed input VAT from local purchases and/o ~ 33 G. R. Nos. 111 11 011 & 111 8763 , Jun e 8, 2007 ,' 4 G.R. No . 172 129, September 12, 2008 3 R oll o, pp. 22 9-238 ) 159

DECISION Page 15 of28 CTA Case Nos. 777 1 & 7814 CBK POWER COMPANY LIMi TED vs. CiR importation of goods and services and payments fo r services rendered by non- residents and purchases of capital goods for the peri od January 1, 2006 to December 3 1, 2006. A rguments o(R espondent Commissioner o{1nterna/ Revenue Respondent CIR strongly contends that petiti oner's judicial claims for the issuance of TCCs were prematurely fil ed in view of Section 11 2(C) of the NIRC of 1997, as amended by R.A. 933 7, whi ch essenti ally prov ides that the Commi ssioner shall grant a refund or issue the tax credit certificate fo r creditable input taxes within 120 days from the date of submi ssion of complete documents in support of the applicati on. Hence, the petiti oner can elevate hi s cl aim before thi s Court onl y after the expiration of the 120-day peri od granted by law or w ithin 30 days from the decision of the respondent denying its claim fo r tax credi t. TilE RULING OF TilE COURT Secti on 11 2(A) of the N IRC of 1997, as amended, provi des for the refund or tax credit of unutilized input VAT attributable to zero rated or effecti ve!?' zero-rated sales, to w it: SEC . 11 2. Refimds or Tax Credits ofinput Tax. - (A) Zero-Rated or Effectively Zero -Rated Sales. - A ny V AT- reg iste red perso n, w hose sal es are zero- rated o r effec ti ve ly zero-rated may, wi thin two (2) years after th e c lose of th e taxa bl e quarte r when the sa les were m ade, ap ply fo r the issuance of a tax credit certificate o r refund of creditabl e input tax due o r pa id attributabl e to such sa les, except trans iti o na l input tax, to th e exte nt that suc h input tax has not been applied aga inst o utput tax: Provided, however, T hat in the case of zero-rated sales und er Sect ion 106(A)(2 )(a)(l ), (2) and (b) a nd Sec ti o n I 08 (B)( I) and (2), th e acce ptabl e fo re ign c urre ncy exchange proceeds thereof had been duly accounted fo r in accordance w ith the rules and regulati o ns of th e B a ngko Sentral ng Pilipinas (BSP): Provided, further, T hat w he re th e taxpayer is e ngaged in zero-rated or effecti ve ly zero-rated sa le a nd a lso in taxable or exempt sa le of goods of pro pe11i es or services, a nd the~ 160

DEC ISIO N Page 16 of28 CTA Case Nos. 777 1 & 7814 CBK POWER COMPANY LJM!TEU \'S. CIR a mo unt of c redi tabl e input tax due o r paid ca nn o t be direct ly and e ntire ly attributed to any o ne of the tran sac ti o ns, it s ha ll be a ll ocated proportionate ly o n the basis of the volume of sa les: Provided. fina lly, That for a person 111aking sa les that are zero -rated und er Sec ti o n 108 (8)(6), the input taxes sha ll be a ll ocated ratab ly be twee n hi s ze ro-rated all(lu o n-ze ro-ra ted sales . Based on the afore-quoted proviSIOn and se ttl ed jurisprudence, a taxpayer engaged in zero-rated or effectively zero -rated transactions may ap pl y for tax refund or issuance of TCC for unutilized input VAT provided, the following requisites are satisfied: ( 1) the tax payer is VAT regis tered; (2) the tax payer is engaged in ze ro-rated o r effec tively zero-ra ted sales ; (3) the input taxes were incurred or paid ; (4) the input taxes hav e not been app lied against o utput taxes durin g and in the succeed ing quarters; (5) the input taxes claimed are attributable to zero-rated or effectively zero- rated sales; (6) the claim was applied/filed within the period prescribed in Section 11 2(A) and (C) of the N lRC of 1997. as amended. Timelin ess of Pet itio n er's administrative and judicial claims for th e issuan ce of tax credit certificates. Before this Court proceeds to determine pe titioner ' s compliance with the 1st to 5th requisites for ta x refund and issuance ofTCCs, the Court deems it appropriate and opts to first elwell on th e 6111 requi site, which is in fact the first ( l 51 iss ue in this ) case, pertaining to the tim eliness of pe titi oner ' s adminis trativ e and judicial claims for the ISS uanc e of TCC s, seem g that tl1e resolution of this controversy#- 161

DEClSlON Page 17 of28 CTACaseNos. 777 1 & 78 14 CBK POWER COMPANY LJMJTED vs. CJR is the determining factor on whether thi s Court should proceed with the di squi sition of the other issues in thi s case. On the foll owing dates, petitioner fil ed its Ori ginal and Amended Quarterl y VAT Returns,36 and its admini strati ve37 and judicial c laims fo r the issuance ofTCCs: !!:~.!..A?? __'!(_,'!"�_ ______ ��-- ...-- "'?.?!!&' tLYLE~?.t:~.?.!J.!'}!~�!!':!'i!~?::.:::.f.!'~."'-':"l.!:'!'_~ ""~ ~ :&. ~:!: ~~~---~m~- __}10!'_...u... 1 ' :��':!.'. !! w~?.: w __ '*!.?Y"'�1'!:�_ -s-1 2006 Original VAT Amended Administrative Petition for Taxable . Return . VAT Return Claim Review 1 Quarter ' (Date tiled) i (Date filed) ~\�:~~~.~d)~:"'"'""'{12!te filedlJ c&w�m;t�wz� ,,. -.~...~wifii�wctrrrwer� -~ M'e!Wf' tt''-'~.o:v~w-e- W*Z<'i?itm: ,~ . I st .,- April 2S, 2006 Dece mb- e r 28, Ma rc h 3 1, 2008 April 23 , 2008 � 2007 March 3 1, 2008 2 nd Jul y 25,2 006 April 18,2008 Jul y 23, 2 008 Jul y 2!J , 2008 3rd October 20, May 7, 2008 2 00 6 !J th Ja nuary 2tl, July 2 1, 2008 2007 Respondent, Commissioner of Internal Revenue, contends that petitioner's judicial claims for the issuance of TCCs were prematurely fil ed in view of Section 11 2(C) of the NIRC of 1997 , as amended by R.A. 933 7, which provides that: SEC. 11 2. Refonds or Tax Credits ofInput Tax. - (C) Period within which Refund or Tax Credit of inp ut Taxes shall be Made. - In proper cases, the Co mmiss ioner shall grant a refund or iss ue the tax creclit ce11ifi cate for credita ble input taxes w ithin one hundred twe nty ( 120) days fro m th e date of submi ss ion o f co mpl ete documents in support of the applicati on fi led in accord ance with Sub section (A) he reof. In case of full or pa rti al denia l of the cla im fo r tax refund or tax credit, or th e fa ilure on th e pa11 o f th e Commi ss ioner to act on th e appli cati on w ith in th e period prescribed a bove, th e taxpayer affected may, within thirty (3 0) days from th e receipt of the dec ision de ny in g the c laim or afte r th e expiratio n of th e one hundred twenty day- r peri od, appea l th e dec ision or th e un acted c la im w ith th e Court of Tax Appeal s. 36 Pars. 7-8, Facts Admitted, JSF I, Rollo, pp . 23 1-232 31 Pars. 12-1 3, Facts Admi tted, JSFI, Rollo, p. 23 5 16~

DECISION Page 18of 28 CTACase Nos. 777 1 & 78 14 CBK POWER COMPANY LIMiTED \'S. CIR Respondent posits th at petiti oner can appeal to thi s Honora bl e Court onl y after the expirati o n of the 120-day peri od granted by law or w ithin 30 days from the decision of the respondent denying its claim for tax credi t. T hi s being so, acco rdin g to the responde nt, thi s Court has no j uri sd icti on to act on th e Peti tions for Review. T he issue concernin g the timeliness of petiti oner's admini strati ve and judicial cl aims, fo r input tax refund or the issuance of TCCs, brought fo rth di vergent views on the fo ll owing: First, reckon ing of the 2-year peri od fo r fi ling/claiming refund or issuance of TCC prov ided unde r Secti on 11 2(A) of the N IRC of 1997, as amended by R.A. 933 7; Second, w heth er the 2-year peri od manda ted und er Secti on 11 2(A) of the N IRC of 1997, os omended by R.A. 933 7, refers to the filin g of both ad mini strati ve and j udicia l claim . T hird, w hether the non-o bservance of the 120-day peri od and 30-day peri od under Secti on ll 2(C) of the N IRC of 1997 , as omended by R.A. 9337, pri or to the filin g of Peti tion fo r Review amounts to non-exhaustion of admini strati ve remedy and thereby results to lack of j uri sd icti on of thi s Court. However, the Supreme Co urt finall y put to rest the co ntroversies as above- menti oned w hen it rul ed in the case of Commissioner of Internal Revenue v. A ichi Forging Company ofAsia, Inc., G.R. No . 184823 ("Aichi case") on October 6, 2010, as fo ll ows: First, the recko ning of the 2-year period fo r fi ling/claiming refund or iss uance of TCC as expressly prov ided for unde r Secti on 11 2(A) of the N IRC of 1997 , as amended by R.A. 933 7, is fi-om the close of the quarter when such?- 16 3

DECISION Page 19 of28 CTACaseNos. 777 1 & 7814 CBK POWER COMPANY LJA!lTED I'S. C!R sales were made . In th e Aichi case, the Supreme Court adhered to the princip le enunciated in th e lvfirant case notwithstanding the fact that the claim for refund was fil ed on September 30, 2004, approximately 4 yea rs before the Mirant case was promulgated , effecti vely gtv mg the Mirant doctrine a retroactive application . Second, the phrase "l�l'ithin two (2) years x x x appfy_/or the issuance of a tax credit cert!ficate or refimd' refers to app li cations for refund/credit filed with the CIR and not to a ppeals made to th e CTA. This is apparent in the first paragraph of subsection (C) of th e same provi sion, which states that the CIR has "120 days Fom th e submission of co mplete documents in support of lhe application .filed in accordance 11'ith S ubsections (A) and (B)" within which to dec ide on the claim .3!l Third , compli ance with the "120-30 day period" under Section 11 2 (C) of the NIRC of 1997, os amended ofR.A. 933 7, is crucial in filing a judicial claim . He nce, applying th e afo rem entioned jurisprud enti a l principle with the prevailing circumstances in thi s case, thi s Court is constrained to DENY petitioner's claim for iss uance of T CCs. The Co urt in Divi sion find s the Petitions to be devoid of merit and the arguments of the respond ent to be in orde;,L- 38 Commissioner of Int ernal Revenue ,. Air.:hi Forg ing Company ol Asia, In c., G.R. No. 1811823 , October 6, 20 tO. 164

DEClSlON Page 20 o f 28 CTA Case Nos . 777 1 & 78 14 CBK POWER COMPANY LiMITED vs. CJR in Di vision find s the Petiti ons to be devoid of merit and the arguments of the respondent to be in ord er. Administrative claims 1-'Vere filed on time Apropos the admini strative cl aim for refund or issuance of tax credit certifi cate for unutili zed input tax, germ ane is the provision of Section 11 2(A) of the NIRC of 1997, as amended by R.A. 933 7, which prescribes the reckoning of the 2- year peri od within whi ch to make a claim fo r refund or tax credit, i.e., from the cl ose of the taxable quarter when the sales were made. By a pl ain reading of the fo rego ing pro visio n, the 2-year prescripti ve period for filin g the applicati on for refund/credit of input tax on zero-rated sales shall be determined from the close of the quarter when such sales we re made. T he Supreme Court, in the A ichi case, reinfo rced the doctrine laid down in the Mirant case, that the 2-year prescripti ve peri od is reckoned from the close of the taxable quarter when the relevant sales or transacti ons were made, and significantl y gave the said doctrine a retroacti ve appli cati on cons idering that the Hi gh Court appli ed the same to the A ichi case notwithstanding the fact that the claim fo r refund was fi led on September 30, 2004, approximately 4 years before the Miranl case was p romul gated . In the A ichi case39, the Supreme Co urt expl ained as fo ll ows: XXX The pivotal question of when to reckon the running of the two- year prescriptive period, however, has already been resolved in Commissioner of Internal Revenue v. Miranl Pagbilao Corporation, where we ruled that Section 11 2(A) of the NIRC is the applicable provision in detem1ining the stm1 of the two-yem� period for claiming a refund/credit of Lmutilized input VAT, and that Sections 204(C) and 229 of the NIRC are inapplicable as "both provisions apply only t<V- 39 Supra note 38 165

DEC ISION Page21 of 28 CTA Case Nos . 7771 & 78 14 CBK POWER COMPA N Y LiMITED vs. CIR instances of enoneous payment or illegal collection of intemal revenue taxes." We explained that: The above proviso [Section 11 2 (A) of the NlRC] clearly provides in no tmcertain tenns that unutilized input VAT payments not othenvise used for any internal revenue tax due the taxpayer must be claimed within two years reckoned from the close of the taxable quat�ter when the relevant sales were made pertaining to the input VAT regardless of whether said tax was paid or not. As the CA aptly puts it, albeit it enoneously applied the aforequoted Sec. 112 (A), "[P]rescriptive period commences fi:om the close of the taxable quarter when the sales were made and not fi:om the time the input VAT was paid nor from the time the official receipt was issued ." Thus, when a zero-rated VAT taxpayer pays its input VAT a year after the pertinent transaction, said taxpayer only has a year to file a claim for refund or tax credit of the W1utilized creditable input VAT. The reckoning 11-ame would always be the end of the quatter when the pertinent sales or transaction was made, regardless when the input VAT was paid. Be that as it may, and given that the last credi table input VAT due for the petiod cove1ing the progress billing of September 6, 1996 is the third quru1er of 1996 ending on September 30, 1996, any claim for tmutilized creditable input VAT refund or tax credit for said quruter prescribed two years after September 30, 1996 or, to be precise, on September 30, 1998. Consequently, MPC ' s claim for refund or tax credit fi led on December 10, 1999 had already prescribed. R eckoning for prescriptive period under Sees. 204((} and 229 oftlte NIR Cinapplicable To be sure, MPC cannot avail itself of the provisions of either Sec. 204(C) or 229 of the NIRC which, for the pmpose of refund, presc1ibes a different starting point for the two-year prescriptive limit for the filing of a claim therefor. Sees. 204(C) and 229 respectively provide: Sec. 204. Authority of the Commissioner to Compromise, .Abate and Refund or Credit Taxes. - TI1e Commissioner may - xxxx (c) Credit or refund taxes erroneously or illegally received or penalties imposed without authority, refund the value of intemal revenue stamps when they ru�e returned in good condition by the purchaser, and, in his discretion, redeem or chru1ge unused strunps that have been rendered tulfit for use and re:ft.md their val ue upon proof o~ 166

DECISION Page 22 of28 CTA Case Nos. 7771 & 7814 CBK POWER COMPANY LIMITED vs. CJR destmction. No credit or refund of taxes or penalties shall be allowed mlless the taxpayer files in writing with the Commissioner a claim for credit or refund within two (2) years after the payment of the tax or penalty: Provided, however, 1l1at a retum filed showing an overpayment shall be considered as a Wlitten claim for credit or re.fimd. xxxx Sec. 229. Recovery of Tax Erroneously or Illegally Collected. - No suit or proceeding shall be maintained in any court for the recovety 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 authmity, of any sum alleged to have been excessively or in any manner wrongfully collected without authmity, or of any sum alleged to have been excessively or in any manner Wl�ongfully collected, Lmtil a claim for refimd 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 Lmder protest or dmess. ln any case, no such suit or proceeding shall be filed after the expiration of two (2) years f1-om the date of payment of the tax or penalty regardless of any supervening cause that may mise after payment: Provided, however, That the Commissioner may, even without a w1itten claim therefor, refi.md 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. Notably, the above prOVISIOns also set a two-year prescriptive period, reckoned from date of payment of the tax or penalty, for the filing of a claim of refund or tax credit. Notably too, both provisions apply only to ins tances of erroneous payment or illegal collection of internal revenue taxes. MPC's creditable input VAT not erroneously paid For perspective, under Sec. 105 of the NIRC, creditable input VAT is an indirect tax which cm1 be shifted or passed on to the buyer, transferee, or lessee of the goods, propet1ies, or services of the taxpayer. The fact that the subsequent sale or trat1saction involves a wholly-tax exempt client, resulting in a zero-rated or effectively zero-rated t:rat1Saction, does not, standing alone, deprive the taxpayer of its 1ight to a refi.md for any unutilized creditable input VAT, albeit the enoneous, illegal, or Wl�ongful payment at1gle does not enter the equation.r 167

DEC ISION Page 23 of2 8 CTACaseNos. 777 1 & 7814 CBK POWER COMPANY LiMITED vs. CJR xxxx Considering the foregoing discussion, it is clear that Sec. 112 (A) of the NIRC, providing a two-year prescriptive period reckoned from the close of the taxable quarter when the relevant sales or transactions were made pertaining to the creditable input VAT, applies to the instant case, and not to the other actions which refer to erroneous payment of taxes. (Emphasis suppli ed. ) In view of the foregoing, we flnd that the CTA En Bane erroneously applied Sections 114(A) and 229 of the NlRC in computing the two-year presctiptive period for claiming refi.mcl/credit of unutilized input VAT. To be clear, Section 11 2 of the NIRC is the pertinent provision for the refund/credit of input VAT. Thus, the two-year period should be reckoned from the close ofthe taxable quarter when the sales were made. XXX Petitioner fi led its admini strative40 claims fo r the iss uance of TCCs on the following dates : .-..��;,A"'iJY.IncM =f�i...;';U= 'wo:w�v�dd 'H"'ili ~u;wf& *""'l'l�'i,V"Wi�'i:a�.-:r~.tW;-W'~'� i'P ib;u-�'*P'W"t':"~-mti>W- 2006 Close o r the Las t D ay to F ile D a te Taxable Qua rter Administn 1tive Adminis tra tive ----=-- __ Qua1�1u 1!!!~'P!""['"R~ 1Sl '~!.�!_____!~- i Claim i C laim F iled __'it'~*!!:_ �-----...--L"?:.:J..___ r&t ~_!~Ai1~~(~- �_�wsi&dM"P *-~---- !.!"'*_"'![!'"flfrd M arch 3 1, 2006 March 31, 2008 M arch 3 1, 2008 2"d June 30, 2006 June 30, 2008 Ju ly 23, 2008 --.rd - �-�-- �-- - - .) September 30, 2006 September 30, 2008 !I th Decembe r 3 1, 2006 December 3 1, 2008 Clearly, applying the ex plicit provision of Section 11 2(A) of the NlRC of 1997, as amended by R.A. 933 7, as bolstered in the cases of M irant and Aichi, the administrative claims were fi led by the petitioner within the 2-year prescriptive , a - period, except for the peri od covering the 2nd quarter of 2006. For the 211d quarter of 40 Pars. 12- 13, Facts Ad mitted , JSFI, Rollo, p. 23 5 168

~ DECISION CTA Case Nos. 777 1 & 78 14 CBK POWER COMPANY LIMiTED vs_ C IR Page 24 of28 2006, the ma ndated las t day of tiling of an admini strati ve c laim was set by law on June 30, 200 8, however, pet itioner fi led its admini strati ve c laim on Jul y 23, 2008 , whi ch is clearl y beyond the 2-year prescripti ve peri od under Secti on 11 2(A) of the NIRC of 1997 , as amended by R A 933 7. The Oling o[the judicial claim 1vas premature Regardin g the judicial claim fo r refund , Secti on 11 2(C) of the N IRC of 1997, as amended by R.A. 933 7, is th e relevant prov is ion , viz: "(C) Period within which Refund or Tax Credit q{ input Taxes shall be Made . - In proper cases, the Commi ssioner shall grant a refund or iss ue the tax credit certifica te fo r creditable input taxes w ithin one hundred twe nty ( 120) days from the date of submi ssion of complete documents in s upport of the appl ication fi led in accordance w ith Subsecti on (A) hereof. " "ln case of full or partial denial of the claim for tax refund or tax credit, or the fa ilure on the part of the Commi ss ioner to ac t on the application within the period prescribed above, the taxpayer affected may, w ithin thirty (30) days from the rece ipt of the decision denying the claim or aft er the expiration of the one hundred twenty day- period, appeal the decision or the unacted claim w ith the Com1 of Tax Appeals." Section 11 2(C) of the NlRC clearl y prov ides that the CIR has " 120 days from the date of the subrnission of the complete doc uments in support of the application [for tax refund/credit] ," withi n which to grant or deny the claim . In case of full or partial denial by the ClR, the taxpayer's recourse is to fi le an appeal before the Court of Tax A ppeals (CTA) wi thin 30 days from receipt of the decision of the CIR. However, if aft er the 120-day period the CIR fa ils to act on the application fo~_ 169

DEClS.LON Page 25 of 28 CTA Case Nos . 777 1 & 78 14 CBK POWER COk!PANV Ll/11/ TED 1�s. C IR tax refund/credit, th e remedy of th e taxpaye r is to appeal th e inac ti on of the CIR to the CTA w ithin 30 days. 111 In thi s case, record s reveal th at: w;;.;~~-�_.f_tii"'d,..~:;!;~~.;~~.;;.;: f!'~;:;�;!~~~;..~._:.~~.......i:.~~..::.~-y., 'i"i+ro:...:o ~ r- .. g_~ ~- �� g;w 6'' '1 'i'&..,._rl':J! CTA Case Adm inistrati ve End of 120 Days Date Judicial C la im 1<' iled fo�� th e B1R Claim Filed Commissione�� to Decide the Claim ~~~..:�-�~~~~.::. �~~l~~:~.:.:;-;:J.'~-"..:::�'-~-'"-~~::!!'t~~-,~�~*:;:x~�'-'~--..:tL.�'- !'f"illi CTA Case No. M a rch 3 I , 200 8 July 29, 2008 April 23, 2008 777 1 CTA Case No. July 23 , 2008 Nove mber 20, July 24, 2008 781 4 2008 Veril y, in both petiti ons, pe titi oner did not wait fo r the deci sion of the CIR or the lapse of th e 120-day peri od before filin g its appeal to thi s Court. For thi s reason, thi s Court fi nds th e filing of the j udi cial claims fo r issuance of T CCs for unutili zed input VA T, premature. Also, it is significant to note that, as cl arifi ed by th e Supreme Court in the Aichi case'12, the aforementi oned 2-year peri od refers to appli cati ons fo r refund/credit fil ed w ith th e CIR and not to appeals made to thi s Court (CTA). T he Supreme Court rati oc inated in thi s w ise: XXX Respondent' s asse1tion that the non-observance of the 120-day petiod is not fatal to the fi ling of a judicial claim as long as both the administrative and the judicial claims are filed within the two-year prescriptive period has no legal basis. There is nothing in Section 11 2 ofthe NIRC to support respondent's view. Subsection (A) of the said provision states that "any VAT-registered person, whose sales are zero-rated or effectively zero-rated may, within two year s after the close of the taxable qumter when the sales were made, apply for the issuance of a tax credit certificate or refund of creditable input tax due or paid atnibutable to such sales." The phrase "within two (2) years x x x apply for the issuance of a tax credit certificate or refund " reters to applicati ons fo r re11md/credit tiled with the CIR and not to~ 41 Supra note 38 4.1- Supra note 38 170

D.EC I SJON Page 26 of28 CTACaseNos. 777 1 & 78 14 CBK POWER COMPA NY LIMITED l'S. CIR appeals made to the CTA This is apparent in the first parab'Taph of subsection (D) of the same provision, which states that the CIR has " 120 days fi�om the submission of complete documents in supp011 of the applica tion fil ed in accordance with S ubsections (A) and (B)" within which to decide on the claim. ln fact, applying the two-year period to judicial claims would render nugatory Section 11 2(0) of the NIRC, which already provides for a specific period within which a ta..'<.payer should appeal the decision or inaction of the CIR. The second paragraph of Section 11 2(0 ) of the N IRC envisions two scenarios: (1) when a decision is issued by tl1e ClR before the lapse of the 120-day period; and (2) w hen no decision is made after the 120-day period. In both instances, the taxpayer has 30 days \Vithi.n which to fil e an appeal with the CTA. As we see it then, the 120-day period is crucial in filing an appeal witl1 the CTA. With regard to Commissioner qf internal Revenue v. Victorias Milling, Co., Inc. relied upon by respondent, we find the same inapplicable as the tax provision involved in that case is Section 306, nmv Section 229 of the NIRC. And as already discussed, Section 229 does not apply to refunds/credits of input VAT, such as tl1e instant case. ln fine, the premature filing of respondent's clai.J.r1 for refund/credit of input VAT before the CTA warrants a dismissal inasmuch as no jmisdi.ction was acq uired by the CTA XXX Thi s Court ad heres to th e rulin g of th e Supreme Court in the case of Commissioner of lnlemal RePen ue v. Aichi Forging Company ofAsia, Inc., G.R. No . 184823, October 6, 20 I0. T hi s is in keeping w ith th e tim e- honored rul e that the Supreme Co urt, by trad iti on and in our system of judicial ad mini strat ion, has the last word o n what the law is. It is the fina l arbiter of any justici able controversy.'13 All courts m_ust take the ir bearings fi�o m the dec isio ns of thi s Court. '1 ~ 43 Donie Nacuray, et. a!. vs. Notional Lohor Relations Commission ; G.R . Nos. 11 119211 -27; 27 0 SCRA 9 44 Systra Philippines, Inc. vs. Co mmissioner of !nrerno/ Reven ue, G.R. No. 176290 , Reso luti on dated September 2 1, 2007 , 533 SCRA 776, 78 1. 171

DECISION Page 27 of28 CTA Case Nos. 7771 & 7814 CBK POWER COMPANY LIMiTED vs. CJR To hold otherwise would not only offend the above-cited principles, but wou ld altogether undermine the very foundations upon which the afore-cited principles were pronounced by the Supreme Court in the afo rementioned deci sions. Under the principle of stare decisis et non quieta movere, past judicial precedents should be followed in subsequent cases by all courts in the land.45 Hence, the cases of Mirant-16 and A ichi-17 constitute as stare decisis to the case at bar. WHEREFORE , premises considered , the instant Petitions for Review are hereby DISMISSED for hav ing been prematurely filed . ~~-~~~/'~ AMELIA R. COTANGCO- MANALASTAS Associate Justice WE CONCUR: se;ying Opinion) b~~EZ ~�JI.J R. BAUTISTA Associate Justice 45 Gregorio Cas tillo v. Sandiganhayan, G.R. No. 13823 1,377 SCRA 509 46 G .R. No. 172 129; 565 SCRA 1511, 17 1 4'/ Supra note 38 172

D ECISIO N Page 28 of28 CTA Case Nos . 777 1 & 78 14 CBK POWER COMPANY LIMITED vs. CIR ATTESTATION 1 attest that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court's Division. CEH.TIFICATION Pursuant to Section 13 , Article VIII of the Constitution and the Division Chairperson's Attestation, it is hereby certified that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court. L v. o~ ERNESTO D. ACOSTA Presiding Justice 17 3