COMMISSIONER OF INTERNAL REVENUE v. NEGROS SUGAR FARMERS MULTI-PURPOSE COOPERATIVE

REPUBLIC OF THE PHILIPPINES Court ofTax Appeals QUEZON CITY En Bane COMMISSIONER OF INTERNAL CTA EB CASE NO. 877 REVENUE, (CTA Case No. 7996) Petitioner, Present: Castaneda, Jr., Acting P.J. -versus- Bautista, Uy, Casanova, Fa bon-Victorino, Mindaro-Grulla, and Cotangco-Manalastas, JJ. NEGROSSUGARFARMERS Promulgated: f#<l ~~=- MULTI-PURPOSE COOPERATIVE, FEB 14 Z013 ~'/,S';Q,.~ Respondent. X--------------------------------------------------------------------------------------------X DECISION BAUTISTA, I.: Before the Court En Bane is a "Petition for Review" filed by petitioner Commissioner of Internal Revenue ("CIR") assailing the Decision1 dated November 9, 2011 of the First Division of this Court ("Court in Division"), which held that: "WHEREFORE, the instant Petition for Review is hereby PARTIALLY GRANTED. Accordingly, respondent Commissioner of Internal Revenue is hereby ORDERED TO REFUND in favor of petitioner Negros Sugar Farmers Multi-Purpose Cooperative the amount of Eight Million Eight Hundred Sixty Nine Thousand Three Hundred 1 Records, pp. 303-325, pe1med by Associa te Justice Erli.na P. Uy, with Presiding Justice Er.nesto D. Acos ta concurring; Associate Justice Espera.nza R. Fabo.n-Victori.no was on leave. I

DECISION CTA EB CASE NO. 877 (CTA Case No. 7996) Page 2 of22 Eight (P8,869,308.00) Pesos, representing erroneously paid advance VAT for taxable period covering November 16, 2007 to December 19,2008. SO ORDERED." The Court in Division also promulgated a Resolution2 dated February 22, 2012, denying petitioner's "Motion for Partial Reconsideration." The Parties Petitioner Co1nmissioner is the duly appointed Commissioner of the Bureau of Internal Revenue ("BIR"), vested with the authority to carry out all the functions, duties and responsibilities of the said office, including, inter alia, the power to decide, approve and grant refunds and tax credits of erroneously paid or illegally collected internal revenue taxes. She holds office at the BIR National Office Building, BIR Road, Diliman, Quezon City.3 Respondent Negros Sugar Farmers Multi-Purpose Cooperative ("Cooperative" or "Negros") is a multi-purpose agricultural cooperative duly organized and existing under Philippines Laws, particularly, Republic Act (RA) No. 6938 or the Cooperative Code of the Philippines as evidenced by the Cooperative Development Authority Certificate of Registration No. IL0-3513 dated October 18, 1999. Its office address is at the Ground Floor, Luxur Bldg., Magsaysay Avenue, Bacolod City, Philippines.4 The Facts The facts of the case, as narrated in the Decision5 dated November 9, 2011: "Petitioner Negros was issued a Certificate of Good Standing dated August 29, 2007 by the Cooperative Development Authority. It was granted tax exemption under Article 61 of Republic Act No. 6938 (Cooperative 2 /d., pp. 345-350. y 3 Records, Joint Stipulation of Facts and Issues, p . 17. ' /d., p. 173. 5 Note 1.

DECISION CTA EB CASE NO. 877 (CTA Case No. 7996) Code of the Philippines) and from VAT pursuant to Section 109(r) of RA No. 8424, as amended by RA No. 9337, as shown by the exemption ruling issued by the Revenue Commissioner, through then Deputy Commissioner, Legal and Enforcement Group, Sixto S. Esquivias. IV. Petitioner alleges that prior to November 2007, Rodita B. Galanto, Officer-in-Charge (OIC) Regional Director of BIR Region 12-Bacolod City, had been issuing the Authorization Allowing Release of Refined Sugar (AARRS) to petitioner without requiring it to pay an advance VAT. However, begim1ing November 2007, said OIC Regional Director Galanto began to require petitioner to pay an advance VAT before issuing the AARRS. This compelled petitioner to seek the legal opinion of the Legal Division of the BIR as to whether petitioner is considered [a] producer of the sugar produce of its members inasmuch as ore Regional Director Galanto would use the interpretation of the word 11producer'' to exclude agricultural cooperatives w hich do not till the land they own or lease. In a Ruling dated December 27, 2007, Assistant Commissioner for Legal Service, James H. Roldan, confirmed petitioner's opinion that the sales of sugar produce made by petitioner to its members as well as the sales to non-members are exempt from the payment of VAT. Upon receipt of the said Ruling issued by Assistant Commissioner Roldan, OIC Regional Director Galanto resumed issuing AARRS to petitioner. However, starting November 2008, OIC Regional Director Galanto again refused to release the AARRS of petitioner without payment of the advance VAT. Thus, petitioner was constrained to pay the advance VAT under protest to save it from incurring huge losses if it could not withdraw its refined sugar from the sugar refinery/ mill. On November 11, 2009, petitioner filed with respondent Commissioner the appropriate adn1inistrative claim for the refund of the total amount of P10,810,470.00, representing the advance VAT incurred by it on 105,985 LKG bags at P102.00 per bag of refined sugar for the taxable period covering November 16, 2007 to December 19, 2008. f

DECISION CTA EB CASE NO. 877 (CTA Case No. 7996) Page 4 of22 Due to respondent Commissioner's inaction on petitioner's claim for refund and in order to suspend the running of the two-year prescriptive period, petitioner filed this Petition for Review on November 16,2009. On December 23, 2009, respondents filed their Answer alleging the following defenses: '4. Petitioner's alleged claim for refund is subject to administrative routinary investigation by respondent Bureau of Internal Revenue (BIR). 5. The amount of Php10,810,470.00 being claimed by petitioner as allegedly overpayment of Value-Added Tax (VAT) which are erroneously, excessively and/ or illegally assessed, and collected by respondent is not properly documented. 6. Petitioner must prove that it has complied with the provisions of Section 229 in relation to 204(C) of the National Internal Revenue Code of 1997 (1997 Tax Code), as amended, on the prescriptive period for recovery of taxes erroneously or illegally collected. 7. Claims for refund must be in accordance with the provision of Section 229 of the National Internal Revenue Code (NIRC) of 1997, as amended, thus: 'SEC. 229. Recovery of Tax Erroneously or Illegally Collected. - [N]o suit or proceeding shall be maintained in any [c]ourt for the recovery of any national internal revenue tax [h]ereafter alleged to have [been] erroneously or illegally assessed or collected, or of any penalty claimed to have been excessively or in any manner wrongfully collected without r

DECISION CTA EB CASE NO. 877 (CTA Case No. 7996) 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. xxx xxx xxx'. (Underscoring supplied) 8. In an action for refund, the onus probandi is on the taxpayer to establish its right to refund, and failure to sustain the burden is fatal to the claim for refund. This is so because exemptions from taxation are highly disfavored in law and he who claims exemption must be able to justify his claim by the highest grant of organic or statutory law. An exemption from the common burden cannot be permitted to exist upon vague implications (ASIATIC PETROLEUM CO. (P.I.) VS. LLANES, 49 PHIL. 466, cited in [C]ollector of Internal Revenue vs. Manila Jockey Club, Inc., 98 Phil. 670). 9. Petitioner, in its petition, argues that respondent BIR Regional Director Rodita Galanto of BIR Revenue Region 12, Bacolod City 'capriciously' began to require petitioner Negros Sugar Farmers Multi- Purpose Cooperative (NSFMPC) to pay advance VAT beginning November, 2007 before issuing the Authorization Allowing Release of Refined Sugar (AARRS) on account of her 'myopic' interpretation of the term 'producer' to qualify for tax exemption, i.e., payment of the Advance VAT on refined sugar upon withdrawal of the same from the sugar mills. This argument is devoid of merit and should be set aside. In order to qualify for exemption from the payment of r

DECISION CTA EB CASE NO. 877 (CTA Case No. 7996) Advance VAT on the withdrawal of refined sugar, the cooperative has to meet the requirements set forth in Revenue Regulations No. 13-2008, or the consolidated Regulations on Advance Value Added Tax on the Sale of Refined Sugar; amending and/ or revoking all revenue issuances issued to this effect, and for other related purposes. This is pursuant to the provisions of Sections 6 and 244, in relation to [S]ections 106, 109, 110 and 111(b)(1) all of the National Internal Revenue [C]ode of 1977, as last amended by Republic Act No. 9337, in relation to Executive Order No. 18 dated May 28, 1986 (creating the Sugar Regulatory Administration {SRA}), Sugar Order No. 1 issued every crop year to allocate the volume of and classifying the cane sugar produced each production year, and Sugar Order No.4, series of 2006-2007 (Conversion of 'C' or Reserve Sugar into 'D' or World Market Sugar and the Revised Sugar [C]lassification and Percentage Allocation). 10. These regulations were promulgated (a) to prescribe the updated policies and procedures for the advance payment of value added tax (VAT) on the sale of refined sugar, including those made by a duly accredited and registered agricultural cooperative of good standing, (b) to prescribe policies and procedures for the recognition of classification of sugar and sugar products, (c) to provide for a monitoring system in the processing of raw sugar into refined sugar and the withdrawal thereof from the sugar refineries/mills, and (d) for other related purposes. Section 3 of said Regulations provides, to wit: 'Sec. 3 Requirement to pay in Advance VAT on Sale of Refined Sugar.- In general, the advance VAT on the sale of refined sugar provided r

DECISION CTA EB CASE NO. 877 (CTA Case No. 7996) Page 7 of22 for under Sec. 8 hereof, shall be paid in advance by the owner, seller before the refined sugar is withdrawn from any sugar refinery/ mill. Before the issuance of Certificate of Advance Payment of VAT (Annex 'E'), the owner/ seller shall file Declaration for Advance Payment on Refined Sugar ('Annex B-1') to the RD/RDO having jurisdiction over the place where the sugar mill is physically located and shall submit the following attachments: 1. Listing/ Abstract of official Warehouse Receipt Quedan (Annex 'B-2') in soft and hard copy; 2. Proof of Payment of Advance VAT on Sale of Refined Sugar. XXX XXX xxx'. 11. Upon the other hand, the same RR 13-2008 provides for instances wherein certain withdrawals of sugar from the refineries/ mills shall be exempt from the payment of Advance VAT. Section 4, thereof, provides thus: 'Sec. 4. Exemption from the Payment of the Advance VAT. Notwithstanding the provisions of the foregoing Section, the following withdrawals shall be exempt from the payment of the advance VAT: (a) Withdrawal of Refined Sugar by Duly Accredited and Registered Agricultural Producer Cooperative of Good Standing.- In the event the refined sugar is owned and withdrawn from the Sugar I

DECISION CIA EB CASE NO. 877 (CIA Case No. 7996) Page 8 of22 Refinery/ Mill by an agricultural cooperative of good standing duly Accredited and registered with the Cooperative Development Authority (CDA), which cooperative is the agricultural producer of the sugar cane that was refined into refined sugar, the withdrawal is not subject to the payment of advance VAT. xxx XXX XXX. XXX XXX XXX A cooperative is said to be the producer of the sugar if it is the tiller of the land it owns, or leases, incurs cost of agricultural production of the sugar and produces the sugar cane to be refined. XXX XXX XXX Thus, withdrawal of refined sugar by the Agricultural cooperative for sale to members is not subject to advance VAT whereas sale to non- members of said refined sugar is not subject to advance VAT only if the cooperative is the agricultural producer of the sugar cane that is the primary raw material in the manufacture of refined sugar. It is hereby made clear that if the refined sugar is owned and withdrawn from the Sugar Refinery/Mill by a duly accredited cooperative of good standing with the CDA, which cooperative is not the agricultural producer of the sugar cane, the withdrawal of the refined sugar shall, in all instances, be subject to advance payment of I VAT, unless the buyer who

DECISION CTA EB CASE NO. 877 (CTA Case No. 7996) withdraws the refined sugar from the Sugar Refinery/ Mill is a member of the cooperative. (underscoring and emphasis supplied) 12. A further perusal of the said Revenue Regulations, Section 7 thereof requires proof of exemption from the advance payment of VAT. If a duly accredited and registered agricultural producer cooperative of good standing is allowed to withdraw refined sugar without advance payment of VAT and said agricultural cooperative claims ownership of the refined sugar stocked in the sugar Refinery/Mill, the latter shall not release the said refined sugar unless an Authorization Allowing the Release of Refined Sugar is first secured from the concerned RD/RDO having jurisdiction over the owner of the refined sugar. In securing such authorization, the cooperative-owner shall, in addition to that of satisfying VAT- exemption requirements under RR No. 20- 2001, submit to the concerned RDO a Sworn Statement to the effect that: (a) The cooperative-owner of the refined sugar is an agricultural producer as defined in RR No. 13-2008; and (b) The refined sugar is the property of the cooperative at the time of removal and it will not charge advance VAT or any other tax to the future buyer. 13. Petitioner likewise anchors its arguments on a BIR ruling dated December 27, 2007 it has secured claiming exemption from the payment of the advance VAT on withdrawal of its refined sugar from the Sugar Refinery/Mill. Said ruling was issued on the basis of the facts as presented by petitioner, giving emphasis on the provision of Section jl 14 of RR No. 4-2007, implementing RA 9337,

DECISION CT A EB CASE NO. 877 (CTA Case No. 7996) and amending Section 4- 109-1(8)(1) of RR No. 16-2005 on VAT exempt transactions. It is worthy of emphasis that based on said ruling, an agricultural cooperative can only be exempted from VAT, more so on the payment of advance VAT on withdrawal of refined sugar, if the producer of the agricultural products sold is the cooperative itself. If the cooperative is not the producer (e.g., trader), then only those sales to its members shall be exempt from VAT. Moreover, the said ruling was issued on the basis of the facts as represented by petitioner and if, upon investigation, it shall be disclosed that the facts are different, it would result in the ruling being considered null and void. 14. It is in this context that respondent asserts that petitioner has failed miserably to prove that it is entitled to the exemption it now claims. Petitioner now assails the validity of RR No. 13-2008, stating that the same should not be allowed to enlarge or extend the law of RA 6938, otherwise known as the Cooperative Code of the Philippines, it has no legal basis and to give validity to it is to repeal a duly enacted law of Congress. However, petitioner also upheld its validity and clearly complied with said regulations by paying the advance VAT. It now adopts inconsistent postures by questioning the validity of said regulations in order to escape if not defeat its tax liabilities. 15. Moreover, issues not raised in the administrative level cannot be raised for the first time on appeal, as held in the case of Aguinaldo Industries Corporation Fishing Nets Division vs. Commissioner of Internal Revenue, et al., L-29790, February 25, 1982. t

DECISION CTA EB CASE NO. 877 (CTA Case No. 7996) 16. Anent the passage of Republic Act No. 9520, otherwise known as the 'PHILIPPINE COOPERATIVE CODE OF 2008,' again petitioner anchored its claim for refund on what it believes as the clarification of its exemption from the payment of advance VAT on its withdrawals of refined sugar which it incurred between the periods from November 16, 2007 to February 13, 2009. It is worthy of emphasis that the new law, RA 9520 was approved by Congress on 17 February 2009 and its effectivity was indicated as fifteen (15) days from its publication in a newspaper of general circulation. Otherwise stated, said law became effective only after the questioned payments of the advance VAT on refined sugar were made by petitioner. It follows therefore that since laws, as provided in Article 4 of the New Civil Code of the Philippines, have no retroactive effect as a rule unless the contrary is provided, petitioner cannot now claim its status of exemption under the new law. Nowhere in the text of RA 9520 does it contain a provision for retroactive applicability, to do so would have the effect of condoning the tax liability of petitioner. It would be unfair to the government if the Honorable Court would permit the application of a subsequent law in order to make petitioner's claim for tax exemption proper. Allowing such situation may give precedent to others [to] easily escape their liability or violation by merely invoking the retroactive application of a favorable act or law which the Honorable Court should not allow. Petitioner's allegations on the invalidity of RR 13-2008 are highly misplaced. The said regulations did not repeal a duly enacted law of Congress, the Cooperative Code of the Philippines. It merely provided the guidelines by which said law would be implemented. Neither did it enlarge or !

DECISION CTA EB CASE NO. 877 (CTA Case No. 7996) Page 12 of22 extend the law. It is well settled in this jurisdiction that: 'Laws are repealed only by subsequent ones, and their violation or non-observance shall not be excused by disuse, or custom or practice to the contrary. When the courts declared a law to be inconsistent with the Constitution, the former shall be void and the latter shall govern, Administrative or executive acts, orders and regulations shall be valid only when they are not contrary to the laws or the Constitution." (Article 7, New Civil Code of the Phils.) (Emphasis supplied) The burden of proving that a law or act is unconstitutional is reposed in the individual suitor or challenger because of the presumption of constitutionality of a law (Occena vs. Comelec, 104 SCRA 1, April 2, 1981). When Congress delegates its power, it can only delegate to others how the law may be enforced based on 'standards' but not the substantive matters (Eastern Shipping Lines, Inc. vs. POEA 166 SCRA 533). 17. Petitioner should have questioned and/ or assailed the validity of said RR 13-2008 before the proper forum, i.e., the Secretary of Finance; if it felt and believed that the same was prejudicial to its interests. This, petitioner did not do and instead paid the assailed advance VAT on its withdrawals of refined sugar. This act is tantamount to an admission on its part that the assailed regulations are valid. Petitioner should not be allowed to adopt inconsistent postures regarding said regulations and is estopped from denying or assailing its validity. I

DECISION CTA EB CASE NO. 877 (CTA Case No. 7996) Page 13 of22 18. Finally, the principle of strictissimi juris is applied in the interpretation of tax laws. The power of taxation is the prerogative of sovereignty. The relinquishment of the power to tax is never presumed. Any reduction or diminution thereof with respect to its mode or its rate 1nust be strictly construed and the same must be couched in clear and unmistakable terms. He who claims an exemption must be able to point out some provision of the law creating the right; it cannot be allowed to exist upon mere implication or inference (Floro Cement Corporation vs. Judge Gorospe and the Municipality of Lugait, 200 SCRA 480, 1991). Exemptions from taxation are highly disfavored in law and he who claims exemption must be able to justify his claim by the clearest grant of organic or statutory law. An exemption from the common burden cannot be permitted to exist upon vague implications (Asiatic Petroleum Co. (P.I.) vs. Llanes, 49 Phil. 466 cited in Collector of Internal Revenue vs. Manila Jockey Club, Inc., 98 Phil. 670).' During trial, petitioner presented its lone witness, its Tax Consultant, Jose V. Ramos to prove its claim. On the other hand, respondents, through counsel, manifested during the hearing held on December 2, 2010 that they are waiving their right to present evidence considering that this case involved legal issues for the determination and resolution of this Court. Thus, the Court directed the parties to submit their respective Memorandum within thirty (30) days from said date. On December 20, 2010, petitioner filed its Memorandum for Petitioner. On the other hand, on December 21, 2010, respondent Commissioner filed a Manifestation stating that she intends to adopt the relevant facts, proceedings, issues and discussions specifically declared in her Answer filed on December 23, 2009, as her /) f Memorandum in this case.

DECISION CTA EB CASE NO. 877 (CTA Case No. 7996) Page 14 of22 On July 15, 2011, this case was submitted for decision." 6 On November 9, 2011, the Court in Division resolved the case, allowing a partial refund amounting to Eight Million Eight Hundred Sixty Nine Thousand Three Hundred Eight (P8,869,308.00) Pesos, which was the properly substantiated VAT payments that were erroneously paid in advance for taxable period covering November 16, 2007 to December 19,2008.7 Petitioner CIR filed a Motion for Partial Reconsideration on December 2, 2011, raising the sole ground that the Court in Division erred in partially granting the Claim for Refund. Respondent Cooperative filed an Opposition to Motion for Reconsideration on Decetnber 22, 2011. The Court in Division resolved the Motion for Partial Reconsideration through a Resolution pron1ulgated on February 22, 2012,8 to wit: "WHEREFORE, pretnises considered, respondent's Motion for Partial Consideration is hereby DENIED for lack of merit. SO ORDERED." Not satisfied, petitioner CIR filed the present Petition for Review on March 28, 2012.9 Hence, this Decision. The Issues Based on the Petition for Review filed on March 28, 2012,10 petitioner CIR raises the following issues: "a) Whether or not petitioner is deemed a 'PRODUCER' to be entitled to exemption from payment of 6 Records, pp. 305-313. I 7 !d., p. 324. 8 No te 2. 9 Rollo, pp. 7-20. 10 /d.

DECISION CTA EB CASE N O. 877 (CTA Case No. 7996) Advance VAT for its sale to non-members of its refined sugar produce. b) Whether or not Sec. 4 of Revenue Regulation[s No.] 13-2008 requiring agricultural cooperatives to be the tiller of the land it owns or leases to be considered a 'PRODUCER' is legally valid. c) Whether or not Sec. 3 of RR 13-2008 requ1nng pay1nent of Advance VAT by the owner/seller before their refined sugar is withdrawn fron1 the Mill/Refinery is legally valid. d) Whether or not the Advance VAT paid 'UNDER PROTEST' by petitioner was erroneously and or illegally collected. e) Whether or not this Honorable Court has Jurisdiction over the instant petition for review."11 Both parties have raised issues that can be simplified into a single question to which the Court En Bane will now resolve: "Whether or not petitioner is entitled to a refund for its advance VAT on the 105,985 LKG bags of refined sugar erroneously paid or illegally collected for the taxable period covering November 16,2007 to December 19, 2008." The Ruling of the Court En Bane The Court En Bane finds no merit in the Petition for Review filed by the Commissioner of Internal Revenue. In essence, the CIR raises two points to support her claim: 1. That respondent failed to convincingly substantiate the claim that its sales of sugar produce to its members as well as to non- members is exempt from payment of VAT; and 2. That the validity of Revenue Regulation (RR) No. 13-2008 was not passed upon by the Court in Division, respondent is legally bound to comply with the said administrative law. I 11 /d ., pp. 10-11 .

D EC I S I O N CTA EB CASE NO. 877 (CTA Case No. 7996) These two points have already been thoroughly discussed in the Decision dated November 9, 2011,12 as well as the Resolution promulgated on February 22, 2012.13 In the issue of substantiating the fact that these transactions are indeed exempt from the payment of VAT, the Court in Division correctly points out that: "Section 109(r) of RA No. 8424, which is reproduced and renumbered as Section 109(L) by RA No. 9337, provides: 'SEC. 109. Exempt Transactions. - (1) Subject to the provisions of Subsection (2) hereof, the following transactions shall be exempt from the value-added tax: XXX XXX XXX (L) Sales by agricultural cooperatives duly registered with the Cooperative Development Authority to their members as well as sale of their produce, whether in its original state or processed form, to non- members; their importation of direct farm inputs, machineries and equipment, including spare parts thereof, to be used directly and exclusively in the production and/ or processing of their produce;' (Emphasis supplied) The phrase 'sale of their produce' under Section 109(L), as applied to petitioner's sale of refined sugar to non-members, is supposedly defined or interpreted under Section 4(a) of R.R. No. 13-2008, as follows: 12 Note 1. 'A cooperative is said to be the producer n Note 2. of the sugar if it is the tiller of the land it owns, or leases, incurs cost of agricultural production of the sugar and produces the sugar cane to be refined. f

DECISION CTA EB CASE NO. 877 (CTA Case No. 7996) Sale of sugar in its original form is always exempt from VAT regardless of who the seller is pursuant to Sec. 109 (A) of the Tax Code. On the other hand, sale of sugar, in its processed form, by a cooperative is exempt from VAT if the sale is made to members of the cooperative. Whereas, if the sale of sugar in its processed form is made by the cooperative to non- members, said sale is exempt from VAT only if the cooperative is an agricultural producer of the sugar cane that has been converted into refined sugar as herein defined and discussed. Thus, withdrawal of refined sugar by the agricultural cooperative for sale to members is not subject to advance VAT whereas sale to non-members of said refined sugar is not subject to advance VAT only if the cooperative is the agricultural producer of the sugar cane that is the primary raw material in the manufacture of refined sugar. It is hereby made clear that if the refined sugar is owned and withdrawn from the Sugar Refinery/Mill by a duly accredited cooperative of good standing with the CDA, which cooperative is not the agricultural producer of the sugar cane, the withdrawal of the refined sugar shall, in all instances, besubject to advance payment of VAT, unless the buyer who withdraws the refined sugar from the Sugar Refinery/Mill is a member of the cooperative.' (Emphasis supplied) The foregoing definition that '[A] cooperative is said to be the producer of the sugar if it is the tiller of the land it owns, or leases, incurs cost of agricultural production of the sugar and produces the sugar cane to be refined" does not mention whether the 'cooperative' refers to the juridical entity, or to the individual members. The definition is broad enough to include or cover bona fide individual members of the cooperative, which is deemed the co-producer of the sugar produced by the members. Besides, the actual 'tiller of the land' has to be a natural person, instead of a juridical

D ECISI O N CTA EB CASE N O. 877 (CTA Case No. 7996) person, for the reason that the latter's existence is merely a fiction of law. At any rate, even assuming that the individual members are not embraced by the meaning of 'cooperative' under Section 4(a) of R.R. No. 13-08, the same provision considers an agricultural cooperative a producer if, among others, it 'incurs cost of agricultural production of the sugar and produces the sugar cane to be refined.' This means that the cooperative need not be the tiller of the land it owns or leases for as long as it incurs production cost and produces the sugar cane to be refined. In the instant case, petitioner presented Certificate of Exemption dated November 3, 1999 and BIR Ruling dated December 27, 2007, affirming its status as a tax exempt agricultural cooperative. Based on the foregoing evidence, petitioner is 'considered as the actual producer of the members' sugarcane production because it primarily provided the various production inputs (fertilizers), capital, technology transfer and farm management.' There is no showing that the said Certificate of Exemption No. ECCP 007-99 dated November 3, 1999 and the BIR Ruling dated December 27, 2007, which exempt petitioner from the payment of advance VAT, have been revoked or nullified by respondent."14 As for the issue that respondent is still legally required to comply with RR No. 13-2008, the Court in Division in its Resolution ru led that: "Petitioner did not submit the documentary requirements mentioned under Section 3 of RR 13-2008, in support of its administrative claim before respondent on the ground that petitioner's claim was not anchored under Section 3 of RR 13-2008, which petitioner precisely contested, but under the provision of Article 61 of Republic Act (RA) 6938, and Section 109(R) of RA 8424, which was reproduced and renumbered as Section 109(L) of RA 9337. The non-submission of documentary requirements before respondent under Section 3 of RR 13-2008 was clearly not an issue in petitioner's claim. Be that as it may, it is worth emphasizing that Section 3 of RR 13-2008 provides for the jJ H Records, pp. 317-319. I

DECISION CTA EB CASE N O . 877 (CTA Case No. 7996) Page 19 of22 requirement to 'pay in advance Value Added Tax (VAT) on sale of refined sugar.' It also specified the documentary require1nents to be submitted or filed prior to the issuance of Certificate of Advance Payment of VAT. In the instant case, petitioner presented in evidence Exhibits 'T to 'X-3,' which include said Certificates. This implies that it had already previously submitted the documentary requirements before the issuance of said Certificates; otherwise, the said Certificates would not have been issued in its favor. On the other hand, Section 6 of RR 20-2001 provides for the documents to be attached to the letter-application for the issuance of tax exemption certificate, while Section 4 of RR 13-2008 provides for the exemption from the payment of the Advance VAT. In the instant case, respondent did not dispute that she had issued petitioner's Certificate of Exemption dated November 3, 1999 and the BIR Ruling dated December 27, 2007, affirming petitioner's status as tax exempt agricultural cooperative. Also, respondent failed to present evidence that petitioner ceased to be a tax exempt agricultural cooperative."lS Thus it is clear in this case that the Advance VAT was erroneously paid by respondent, and therefore the crux of the matter is whether or not respondent is entitled to a refund . Sections 204(C) and 229 of 1997 NIRC, as amended, deal with the claim for a tax refund of erroneously paid taxes, and it states: "SEC. 204. Authority of the Commissioner to Compromise, Abate and Refund or Credit Taxes. -The Commissioner may- XXX XXX XXX (C) Credit or refund taxes erroneously or illegally received or penalties imposed without authority, refund the value of internal revenue stamps when they are returned in good condition by the purchaser, and, in his discretion, redeem or change unused stamps that have been rendered unfit for use and refund their value upon proof of f

D ECISION CTA EB CASE NO. 877 (CTA Case No. 7996) Page 20 o�22 destruction. No credit or refund of taxes or penalties shall be allowed unless 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, That a return filed showing an overpayment shall be considered as a written claim for credit or refund." XXX XXX XXX "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 therefore, 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." The two-year prescriptive period is for both the administrative claim for refund, as well as instituting an action with the Court of Tax Appeals. Thus, to conform to this prescriptive period, both administrative and judicial actions must be filed before the lapse of the two year period, even if there is inaction by the Commissioner on the administrative claim for refund. In the present case, various payments were made between the period of November 16, 2007 to December 19, 2008, amounting to P10,810,470.00. On November 11, 2009 an administrative claim was filed with the Bureau of Internal Revenue, while the judicial claim with the Court ~

DECISION CTA EB CASE NO. 877 (CTA Case No. 7996) Page 21 o�22 Tax Appeals was filed on November 16, 2009. Thus, respondent was able to comply with the prescriptive periods allowed by law. That being said, the Court En Bane will not disturb the factual findings of the Court in Division, in relation to the substantiation of various payments made. WHEREFORE, premises considered, the Petition for Review filed by the Commissioner of Internal Revenue on March 28, 2012 is hereby DENIED. The Decision dated November 9, 2011 and the Resolution February 22,2012 are hereby AFFIRMED. SO ORDERED. TA WE CONCUR: ~a-u�tt-c.Q�--~ .Q j{JANITO C. CASTANED~qR.. � Acting Presiding Justice AEsR~;~au.stUicYe ~ CAESAR A. CASANOVA Associate Justice . ~N.M~~~ C~ FABON~VICTORINO CIELITO N. MINDARO~GRULLA Associate Justice AMELfAL~~~dTA~ Ncc~o-M-AN4 ALA~sTA-s Associate Justice

D EC I S I O N CTA EB CASE NO. 877 (CTA Case No. 7996) Page 22 o�22 CERTIFICATION Pursuant to Section 13 of 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 of this Court. ~a-.1~ c Q;l-~~ Q_ JtfANITO c. CASTANEDA,qR':" Acting Presiding Justice