LUZON HYDRO CORPORATION v. COMMISSIONER OF INTERNAL REVENUE

( "� REPUBLIC OF THE PHILIPPINES COURT OFTAX APPEALS LV QUEZON CITY ~� THIRD DIVISION r LUZON HYDRO CORPORATION, Petitioner, CTA CASE NO. 7810 -versus- Present: BAUTISTA, Chairperson PALANCA-ENRIQUEZ, and COTANGCO-MANALASTAS, JJ COMMISSIONER OF INTERNAL Promulgated: REVENUE, NOV 2 Lt 2010 Respondent. ~~~---eo(. IJ.'..r&JO�-. X--------------------------------------------------------- X DECISION COTANGCO-MANALASTAS, J. : THE CASE Before this Court is a Petition for Review filed by Luzon Hydro Corporation on July 18, 2008, pursuant to Secfion 11 qf Republic Act No. 1125 (R.A.ll25), as amended by Section 9 ofR.A. No. 9282, and Section 3(a), Rule 8 of the 2005 Revised Rules qf th e Court of Tax Appeals (RRCTA), seeking for refund or issuance of a tax credit certificate (TCC) in the amount of FOUR MILLION ONE HUNDRED FlJ?'fY ONE THOUSAND EIGHT HU NDRED FIVfY TWO AND 39/100 PESOS (P4,151,852.39) , allegedly representing its Lmutilized input Value Added Tax? 111

DECISION Page 2 of3 0 CTA Case No. 78 10 L UZON HYDRO CORPORATJONvs. CIR (VAT) paid on domestic purchases of goods and services, which are attributable to zero-rated sales for the period June to September 2006. 1 TilE PARTIES Petitioner is a domestic corporation dul y organized and existing under and by virtue of the laws of the Philippines, w ith principal office address at Poblacion Alilem, !locos Sur. Respondent, on the other hand , is the Commissioner of Internal Revenue (CIR), who is charged w ith the authority to perform the duties of hi s office, including inter ali a, the power to decide and grant refunds or tax credit or erroneously or illegall y co ll ected internal revenue taxes, as provided by law, with office address at the Bureau of Internal Revenue (BIR) National Offi ce Building, BIR Road, Diliman, Quezon City.2 TilE FACTS The relevant antecedents, as culled from the reco rds, and as agreed upon by the parties in their Joint Stip ulation of Facts and Issues3 (JSFI) fil ed on October 30, 2008 , are as fo llows: Petitioner is regi s tered ~ with the BIR as a VAT taxpayer under taxpayer identi fication number (TIN) 004-266-526 and is dul y registered with the Securities and Exchange Commi ssion whi ch primary p urpose state: "To deve lop, construct, own, lease and operate a hydro power plant; to engage in build-operate-transfer arrangements with the govenm1ent, its branches, age nci es and instrumentalities, and any non-government ?--- 1 Rollo, pp. 1-9, Petiti on fo r Revi ew 2 Pars. I and 2, Summary ofAdm itted Facts, Jo in t Sti pul ation of Facts and Issues (JSF I), Rollo, p. 270, 3 Rollo, pp. 269-276 4 Exh ibit " C" to "C-2, Certificate of Registration Iss ued by the BIR 11 2

DECISION Page 3 of30 CTA Case No. 7810 LUZON HYDRO CORPORATION vs. CJR entity; act as consultants, contractors or principals in the business of developing, constructing, operating, repairing and maintaining of hydro power plants and systems and other power-generating or converting stations and in the manufacture, operation and repair of associated mechanical and electrical equipment; to carry on the general business of manufacture, generation, and/or transmission of electric power in accoi�dance with existing laws, rules and regulations, and to carry on all business necessary or incident to all the foregoing." On November 24, 1996, a Power Purchase Agreement 5 (PPA) with the NA TIONAL POWER CORPORATION (NPC) was entered into by The Consortium of NORTHERN MINI� HYDRO CORPORATION; EVER ELECTRICAL MANUFACTURING, IN C ; ABOITJZ EQUITY VENTURES, INCORPORATED; PACIFIC HYDRO LIMITED6. The PPA was executed for the development of the Bakun AB and C small hydroelectric facilities located at the Bakun River in Benguet and !locos Sur provinces on a build-operate-transfer (BOT) basis. 7 The said consortium, in accordance with the tender documents and its bid, has caused the formation of the petitioner, Luzon Hydro Corporation, for the purpose of performing the undertakings in respect of the Project pmsuant to and under the terms and conditions of the Accession Undertaking. 8 Petitioner was issued Certificate of Accreditation No. 97-03-31 9 by the Department of Energy, as a hydroelectric powerhouse. Also, petitioner is registered with the Board of Investments as an operator of Power Generating Plants with Certificate of Registration No. 96-262.10 Records show that petitioner filed the fo llowing VAT returns, stan1p receive4C-- by the BlR: 5 Exhibit " 8 " 6 Exhibits " 8 - 1-a" to " 8 - 1-e" 7 Exhibit " 8 -2-a" 8 Rollo, p. 395, Power Purchase Agreement 9 Exhibit " 0 " 10 Exhibit " E" 11 3

DECISION Page 4 of30 CTA Case No . 7810 LUZON HYDRO CORPORATiON vs. CIR ~......~ ...-n--~!!='}@?.4!.-~.--...- .........!!!!~-----~....._.... ?.E. 12 �m --~..!3?.5.LJa ....._ ...........~~!:......_............._. -�-- ........... ..........---...-- .._..., - _!!= Month Original VAT Amended VAT Amount Return Return - -. (Date fil ed) (Date fil ed) June - - ....:!itlY 21_ 2006 April 19, 2007 1,252,183.09 April 19, 2007 1,051,474. 12 - -- -- July September 1, 2006 - � - - - -- ---~---- August September April 19, 2007 765,937.45 15 , 2 006 ---- -- - - - - - ----- ----~-�-�--� - - - � - - -~--- September October 2006 Apri l 19, 2007 1,082,257.73 TOTAL 4,151,852.39 The following, among others, were admitted by respondent subject to petitioner' s presentation of the original or certified true copies of the necessary documents: 11 XXX 5.1. The genuineness and due execution of the October 2006 Monthly VAT return. 6. The existence of the following laws and provisions: 6.1. Chapter II, paragraph 5 ofRepublic Act 9136 "Pursuant to the objective of lowering electricity rates to end-users, sales of generated power by generation companies shall be value-added tCL'C zero-rated. " 6. 2. Section 108(B)(7) ofRepublic Act 933 7 " Section 108. (B) Transactions Subject to Zero Percent (0%) Rate. - The following services performed in the Phil ippines by VAT-registered persons shall be subject to zero percent (0%) rate: (7) Sale of power or fuel generated through renewable sources of energy such as, but not limited to, biomass, solar, wind , hydropower, geothermal , ocean energy, and other emerging energy sources using teclmologies such as fue l cell s and hydrogen fuels." y 11 Pars. 5.7, 6 to 6.6(b), Summary of Admitted facts, JSFI, Rollo, pp. 272-275 114

DECISION Page 5 of30 CTA Case No. 7810 LUZON HYDRO CORPORATION vs. CIR 6.3. Revenue Regulations 14-05 (4.108-3)(/) "Revenue Regulation 14-05 (4.108-3) (f) Sale of electricity by generation, transmission, and distribution companies shall be subject to 10% VAT on their gross receipts; Provided, That sale of power or fuel generated through renewable sources of energy such as, but not limited to, biomass, solar, wind, hydropower, geothermal, ocean energy, and other emerging energy sources using technologies such as fuel cells and hydrogen fuels shall be subject to 0% VAT." 6.4. Section 4.1 08-5(b)(7) of Revenue Regulations No. 16-2005 "Section 4.108-5. Zero-Rated Sale of Services. - (b) Transactions Subject to Zero Percent (0%) VAT Rate. - The fo ll owing services performed in the Philippines by a VAT-registered person shall be subject to zero percent (0%) VAT rate: (7) Sale of power or fuel generated through renewable . sources of energy such as, but not limited to , biomass, solar, wind, hydropower, geothermal and steam, ocean energy, and other emerging sources using technologies such as fuel ce ll s and hydrogen fuels; Provided, however, that zero-rating shall apply strictly to the sale of power or fue l generated through renewab le sources of energy, and shall not extend to the sale of services related to the maintenance or operation of plants generating said power. " 6.5 . Revenue Memorandum Circular 61 -2005 "Q18 - What transaction is subject to zero percent (0%)? A18 �� Sale of electricity generated from renewable sources like hydropower, geothermal, solar, wind, and other similar sources of energy." 6. 6. B!R Ruling No. 025-2005 rendered on December 28, 2005 "(a) The fees payable under PPA for sale of electricity by Luzon Hydro Corporation to NPC, which is generated tlu�ough a renewable source of energy, particularly hydropower energy, continues to be subjectp?--- 115

DECISION Page 6 of30 CTA Case No. 7810 LUZON HYDRO CORPORATION vs. CJR of automatic zero percent (0%) VAT rate pursuant to ., Section 108 (B) (7) of the Tax Code, as amended by RA 9337. (b) Any input tax on its purchases of properties like replacement parts of the machineries and equipment, goods, supplies and services which are used in or related to the generation of electricity by power plant shall be available as tax credit or refund pursuant to Section 11 2 of the same Tax code, as amended by RA 9337." XXX On April 30, 2007, petitioner filed an administrative claim I?. with the BlR RDO No. 2 of Vigan, !locos Sur for reftmd in the total amount of P4,151 ,85 2.3 9, representing its tmutilized input VAT allegedly incurred and paid on domestic purchase of goods and services for the period covering June to September 2006. According to the petitioner, since the two-year period granted by law is about to lapse without its claim for refund being acted upon by respondent, petitioner elevated its claim to this Court by filing a Petition for Review on July 18, 2008 . On September 8, 2008 , respondent filed his Answer 13 and alleged by way of special and affirmative defense, that: XXX "6. Petitiorier's alleged claim for refund is subject to administrative routinary investi gation/examination by the Bureau of Internal Revenue. 7. A claim for refund partakes of the nature of an exemption which cannot be allowed unless granted in the most categorical language. These claims are construed strictly against the petitioner and liberally in favor �of the taxing authority. (Commissioner of Internal Revenue v. Manila Mining Corp., 468 SCRA 571). This being so, the claim for refund of creditable Value Added Tax input ta.".Ces in the amount of Php4,151 ,852.39 for the months of June to September 2006 must be strictly construed and petitioner has the burden of proving that the following requirements were met or r complied with: 12 Exhibits "F" to " F-3" "G" to "G-3" " H" to " H-3" " I" to " 1-3" 13 Rollo, pp . 2 14-22 0 ' ' ' 11 6

DECISION Page 7 of30 CIA Case No. 7810 LUZON HYDRO CORPORATION vs. CIR a. The registration requirements of a value-added taxpayer in compliance with Section 9.236-1 (a) of Revenue Regulations No. I6- 2005, and Section 236 of the National Internal Revenue Code of 1997 (NIRC of 1997), as amended; b. The invoicing and accounting requirements for VAT- registered persons as well as the filing and payment of VAT in compliance with the provisions of Section 113 and 114 of the NIRC of 1997, as amended; c. Proof of compliance with the prescribed checklist of requirements to be submitted involving claim for VAT refund in pursuance with Section 9.236-l(a) of Revenue Regulations No. 16- 2005, Revenue Memorandum Order No. 53-98. Otherwise, there would be no sufficient compliance with the filing of administrative claim for refund which is a condition sine qua non prior to the filing of judicial claim in accordance with the provision of Section 229 of the NIRC of 1997, as amended. It is worthy of emphasis that Section 11 2(D) [sic] of the NIRC of 1997, as amended, requires the submission of complete documents in support of the application filed with the Bureau of Internal Revenue before the 120-day audit period shall apply and before the taxpayer could avail of judicial remedies as provided for in the law. l-Ienee, petitioner's failure to submit proof of compliance with the above-stated stated [sic] requirements warrants the dismissal of the petition for review; and d. That petitioner's administrative and judicial claims for tax refund was filed within two (2) years after the close of the taxable quarter when the sales were made in accordance with Sections 112 (A) and (D) [sic] and 229 of the NIRC of 1997, as amended. 7. [sic] Petitioner failed to show proof of compliance with the above requirements. l-Ienee, the petition should be denied. 8. [sic] Moreover, petitioner did not give respondent ample time to resolve its administrative claim for refund based on Section 11 2 (C) of the NIRC of 1997, which states: "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 of submission qf complete documents in support of the application filed in accordance with Subsection (A) hereof~ 11 7

DECISION Page 8 of30 CTA Case No. 7810 LUZON HYDRO CORPORATION vs. CIR 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 act on the application within the period prescribed above, the taxpayer affected may, within thirty (30) days from the receipt of the decision denying the claim or after the expiration of the one hw1dred twenty day-period, appeal the decision or the unacted claim with the Court of Tax Appeals." (Italics ours) � 9. [sic] l-Ienee, when petitioner filed its administrative claim for tax refund on 30 April 2007, respondent had 120 days within which to decide on petitioner's claim for tax refund. And in case of full or partial denial of the claim or failure 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 30 April 2007 or until 27 August 2007. In the event that respondent failed to act upon petitioner's claim for tax refw1d, petitioner has 30 days from 27 August 2007 or until 26 September 2007 to appeal the unacted claim with the Court of Tax Appeals. 10. [sic] Petitioner filed the instant petition for review with the Court of Tax Appeals only on 18 July 2008, almost a year after the lapse of the period allowed by law to file the judicial claim for tax refund with the Cowi of Tax Appeals. Clearly, the instant petition for review was filed out of time. 11. [sic] The above-mentioned periods are clearly given for strict comp liance as a prerequisite before seeking redress in a competent court. Such statutory periods are set to prevent delays as well as enhance the orderly and speedy discharge of judicial functions (Agpalo, Statutory Construction, Third Edition 1995, pa. 266). For this reason, the courts construe these provisions of statutes as mandatory (ibid. , citing Alvero vs. DelaRosa, 76 PHIL. 428, 434). 12. [sic] In an action for refund, the burden of proof is on the taxpayer to establish its right to refund and failure to sustain the burden is fatal to the claim for tax refund/credit. 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 clearest grant of organic or statutory law. An exemption from the common burden cannot be permitted to exist upon vague implications. (Asiatic Petroleum Co. v. Llanes, 49 PHIL 466). 13. Taxes paid and collected by the Bureau oflnternal Revenue are presumed to have been made in accordance with the law and the rules and regulations, and the burden to prove otherwise is upon the petitioner." f!.-/ XXX 11 8

DECISION Page 9 of3 0 CTA Case No. 7810 LUZON HYDRO CORPORATiON vs. CJR On October 30, 200 8, the parti es fil ed their Joint Stipulation of Facts and Issues. 1'1 A Motion fo r the Appointment of an Independent Auditor 15 was fil ed by petiti oner praying that M r. Luis A. Cafiete of the firm Lui s Cafiete and Company be commiss ioned as Independent Auditor to co nduct the independent special audit and examination of petitioner' s vo luminous documents submitted. On November 11 , 200 8, Mr. Lui s A. Cafi ete was commi ssioned as the Independent Certified Public Acco untant (CPA). 16 During the hearing held on January 20, 2009, the Independent CPA affirm ed the veracity of hi s Judicial Affid avit executed on January 5, 2009 and the Audit Report dated December 8, 200 8, as well as the signatures thereon. He also identified the Summaries of unutilized input VAT as well as the other supporting doc um ents. 17 On April 1, 2009, petitioner fil ed its Fom1al Offe r of Evidence requesting for the admiss ion of Exhibits "A" to "U- 1" inclusive of all submarkings. In a Reso lutio n18 dated June 4, 2009, the exhibits we re adm itted subj ect to thi s Court 's appreciation of their purposes, materiality, relevancy, and probati ve value to the issues invo lved in thi s case. During the hearing 19 held on September 1, 2009, counsel for respondent manifested that, in v iew of the non-submission of Audit Report by the Revenue Offi cer who conducted the inves ti gati on, respondent is waiving hi s ri ght to present ev idence, thus, respondent was granted a period of thirty (3 0) days to fil e hi~ 14 Rollo, pp. 269 -27 6 15 Rollo , pp. 28 1-288 16 Minutes of the Hea ring he ld 0 11 Novembe r II , 2008 , Rollo, p. 289 17 Min utes of th e Hearin g he ld on Jan uary 20,2009 , Rollo, p. 33 8 18 Rollo, pp. 602-603 19 Min utes of the Hearing held on September 1, 2009, Rollo, p . 6 15 119

DECISION Page 10 of30 CTA Case No. 7810 LUZON HYDRO CORPORATION vs. CJR Memorandum, likewi se, petitioner was required to file its Memorandum within fifteen (15) days from receipt of this Resolution, afterwhich the case shall be submitted for deci sion. Taking into consideration the Memorandum (for the Petitioner),20 filed on September 24, 2009, and the Memorandum (for the Respondent), 21 posted on December 1, 2009, the case was submitted for decision on December 14, 2009. TilE ISSUES The parties, in their Joint Stipulation of Facts and Issues22 filed on October 30, 2008, submitted the following issues23 for this Court's resolution, to wit: " 1. Whether or not Petitioner's sale of electricity through renewable somces of energy such as hydropower is zero-rated. 2. Whether or not the input value added tax being claimed by Petitioner is supported by sufficient documentary evidence. 3. Whether or� not Petitioner complied with the invoicing and accounting requirement to establish zero-rated sale of electricity. 4. Whether or not Petitioner has excess and unutilized input VAT from its purchases of domestic goods and services in the amount of fo ur million one hun dred fifty on e thousand eight hundred fi fty two pesos and thirty nin e centavos (Php 4,151,852.39) representing alleged unutilized input VAT incurred for the months of June to September 2006. 5. Whether or not the input VAT being claimed by Petitioner IS attributable to its alleged zero-rated sale of electricity. 6. Whether or not the administrative and judicial claim were filed within the reglementary period allowed by law./ - ' 20 Rollo, pp . 618-63 7 2 1 Rollo, pp. 651 -669 22 JSFl , Rollo, pp . 269-276 23 JSFI, Rollo, p. 275 1 20

DECISION Page 11 of30 CIA Case No. 7810 LUZON HYDRO CORPORATION vs. CJR Arguments o(Petitioner Luzon llvdro Corporation24 Petitioner, Luzon Hydro Corporation, asseverates that its hydropower generated electricity is from renewable sources of energy and, thus, its sale is zero- rated. Petitioner' s argument concerning the first issue is mainly grounded on the provision of RA 9136 entitled "An Act Ordaining Reforms in the Electric Power Industry, Amending for the purpose Certain Laws and For other Purposes" (otherwise known as the EPIRA Law) , which took effect on June 26, 2001 and provides that "sales o.lgenerated power by a Generation Company shall, fi'om the effectivity ofthis Act, be zero-ratedfor the pwpose ofimposition ofvalue-added tax." It is undisputed that Petitioner was formed by a consortium of four corporations pursuant to a Power Purchase Agreement with NPC, and the electricity produced by Luzon Hydro Corporation in its operation of Bakun Plant by harnessing hydropower of the river will be sold solely to the NPC. Petitioner likewise asserts that: it has proven by testimonial and documentary evidence, that the unutilized creditable input VAT for the second and third quarters of 2006 in the total amount of Php 4, 151 ,852.39 is duly supported by official receipts, invoices and other relevant documents and that these suppOiiing documents were verified by the court appointed Independent CPA. Further, petitioner maintains that it has established the existence of unutilized input VAT of Php4, 151 ,852.39 from the purchases of domestic goods and services attributable to its zero-rated sal es to NPC. Since the petitioner's only purchaser of electricity is NPC, it is without doubt that the input VAT generated during the second?- 24 Memorandum (for the Petitioner), Rollo, pp. 618-637 121

DECISION Page 12 of 30 CTA Case No. 781 0 LUZON HYDRO CORPORATION vs. CJR and third quarters of 2006 in the total amount of Php4, 15 1,852.3 9 are attributable to petitioner's zero-rated sal e of electri c power to NPC. Lastl y, petitioner posits that: the administrative and judicial claims were fi led w ithin the reglementary peri od; the written claim for refund/credit of its unutilized input VAT for the 2nd and 3rd quarters of 2006 were fi led on April 30, 2007 and that the judicial claim for refund was fil ed w ith the Honorable Court of Tax Appeals on Jul y 18, 2008, clearl y, both the admini strati ve and j udi cial claims were fil ed w ithin the 2 year prescriptive peri od from the filin g of the quarterl y VAT returns. A rguments o(Respondent Commissioner o(/nternal R evenue In respondent CIR's Me morandum 25� posted on December 1, 2009, CIR contends that thi s Court is bereft of jurisdiction over petiti oner' s claim for refund or issuance of tax credit certi ficate citing Secti on 112(D) [novv Section 11 2(C)} of the NIRC of 1997, in relation to Section 11 2(A) of the NIRC of 1997. On the basis of the afo rementi oned provisions of law, respondent is given an opportunity to act on the administrative claim w ithiri the 120-day peri od from the submission of all relevant documents in support of the claim, upon the other hand, petiti oner is given the ri ght to elevate the case before thi s Court w ithin 30 days after the receipt of the denial of the claim or after the expirati on of the 120-day period. Respondent argues that the claim for refund/credit of unutilized input VAT will only be ripe fo r judicial determination w ithin the said 30-day period and that said requirement is jurisdictional, failure to do so wo uld depri ve thi s co urt of jurisd iction to try and decide on the case. ~ 25 Rollo, pp. 65 1-669 l l2.

DECISION Page l3 of3 0 CTACaseNo. 781 0 LUZON HYDRO CORPORATION vs. GR CIR narrated that petiti oner fil ed its admini strati ve claim for refund on April 30, 2007 coverin g the peri od June to September 2006 without however attaching any document in support of the claim. Subsequentl y, petiti oner submitted a Certification issued on September 7, 2007 duly signed by Imeld a A. Bueno, Revenue Di strict Offi cer of RDO No. 2, Vigan, Ilocos Sur stating that the VAT returns and the corresponding attachments for the period of June 2005 to December 2006 were rece ived by Revenue Offi cers Lawrence Timbreza and Fremarie L. Aquino , thus, it is safe to assume the date of September 7, 2007 as the reckoning point in counting the 120-day period within whi ch respondent is given an opportunity to act on the matter. Ergo , counting from September 7, 2007, respondent had until January 5, 2008 within which to act on the admini strati ve claim fo r refund by petitioner, and petitioner is given a period of 30 days from January 5, 2008 or until February 4, 2008 within which to elevate the same before thi s Court. Therefore, according to respondent, on acco unt of petiti oner' s fa ilure to appeal the case w ithin 30 days from January 5, 2008 or until February 4, 200 8, this Court no longer has jurisdiction to try and hear the instant case. Moreover, respondent posits that: petitioner fa iled to prove by concrete and suffic ient evidence that it is entitled to the cl aim for refund; petitioner failed to comply with the requisites fo r refund of input tax under the pertinent provision of NIRC of 1997, as amended, and other rul es and regulations governing the application for the cl aim of tax refund or issuance of tax credit certificate, for one, according to respondent, petiti oner failed to prove that the substantiated input VAT is entirely attributabl e to the reported zero-rated rece ipts/transactions of petitioner; the report of the Independent CPA is not suffi cient to entitle petitioner to lay a claim on the refun~ 12 3

DECISION Page 14 of 30 CIA Case No. 78 10 LUZON H YDRO CORPORATION vs. CIR or tax credit, and because of the limitations/restrictions imposed on the Independent CPA ass igned responsibiliti es, he cannot categorically answer whether the input taxes being cl aimed on account of the domestic purchases of goods and services are directly or indirectl y attributabl e to the zero-rated transactions of petitioner. Finally, respondent stated that tax refunds are regarded as tax exemptions which are in derogation of the sovereign authority and are to be construed strictissimi juris against the perso n or entity claiming the exemption. The burden of proof is upon him who claims the exemption and he must be able to justify his claim by the clearest grant under Constitutional or statutory law and he cannot be permitted to rely upon vague impli cations. TilE RULING OF THE COURT Section 11 2(A) of the NIRC of 1997, as amended by RA 9337, provides for the refund or tax credit of unutilized input VAT attributable to zero rated or effecti vely zero-rated sales, viz: SEC. I 12. Refunds or Tax Credits ofInput Tax. - (A) Zero-Rated or Ejj(?ctively Zero -Rated Sales. - Any VAT- registered perso n, whose sales are zero- rated or effecti ve ly zero-rated may, within two (2) years after th e close of th e taxable quarter wh en the sales were made, apply for the iss uance of a tax credit certificate or refund of creditable input tax du e or paid attributabl e to such sales, exce pt transi ti onal input tax, to th e extent th at 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)(l ), (2) and (b) and Secti on I08 (B)( I) and (2), th e acceptable foreign currency exchange . proceeds thereof had been duly accounted for in accord ance with the rules and regulations of the Bangko Sentral ng Pilipinas (BS P): Provided, f urther, That where th e taxpayer is r engaged in zero- rated or effecti ve ly zero-rated sal e and al so in taxable or exempt sale of goods of properties or services, and the 12 4

DECISION Page 15 ofJO CIA Case No. 7810 LUZON HYDRO CORPORATJON vs. CJR amo unt of creditab le input tax due or paid cann ot be directly and entire ly attributed to any one of th e transactions, it shall be allocated prop011ionately on the basis of the volume of sales: Provided, finally, That for a person making sales that are zero-rated und er Section 108 (8)(6), the input taxes shall be a ll ocated ratably between his zero-rated and non-zero-rated sales. As can be culled from the afore-quoted provision and numerous jurisprudence, a taxpayer engaged in zero-rated or effectively zero-rated transactions may apply for tax reftmd or issuance� of TCC for tmutilized input VAT provided, the following requisites are satisfied: (1) the taxpayer is VAT registered; (2) the taxpayer is engaged in zero-rated or effectively zero-rated sales; (3) the input taxes were incurred or paid; (4) the input taxes have not been applied against output taxes during and in the succeeding 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 NIRC of 1997, as amended. Timeliness of Petitioner's administrative and judicial claims for refund or the issuance of tax credit certificate. In resolving the instant petition, the Court in Division deems it necessary to first resolve the issue on the timeliness of petitioner' s claim for refund/tax credit as the resolution of said issue is pivotal to the resolution of the other issues raised in this petition. } / 125

DECISION Page 16 of30 CTA Case No. 7810 LUZON HYDRO CORPORATJON vs. CIR The records of this case show that, petitioner filed its Original and Amended Quarterly VAT Returns,26 and its admin istrative and judicial claims for refund or the issuance ofTCC on the fo ll owing dates: 27 Pe.-iod Original VAT Amend ed A dmini s trati ve Petition for (June to Return VAT Return Claim Review ! September (Da te fil ed) (Da te til ed) (Date fil ed) (Date fil ed) 2006 July 21 ,2006 April19, Ap ril 30, 2007 July 18, 2008 June 2007 April1 9, 2007 ~-�------~---j September October 2006 Petitioner insists that the administrative and judicial claims were filed within the reglementary period, i.e. within the 2 year prescriptive period from the filing of the quarterly VAT returns. In contrast, respondent adheres to the strict app li cation of Section 11 2(C) of the NIRC of 1997, as amended by RA 933 7, arguing that respondent is granted by law a period of 120 days from the submission of all relevant documents in support of the claim to act on the administrative claim , and that petitioner is given the right to elevate the case before this Court w ithin a period of 30 days after the receipt of the denial of the claim or after the expiration of the 120-day period. Respondent emphas ized that said requirement is jurisdictional, failure to do so would deprive this j . - court ofjurisdiction to try and decide on the case. 26 Paragraph 5.6, Summary of Admitted Facts, JSFI , Rollo, p. 272 n Paragraphs 3 & 4, Sununary of Admitted Facts, JSFI, Rollo, p. 270 12G

DECISION Page 17 of30 CIA Case No. 7810 LUZON HYDRO CORPORATIONvs. CIR In determining whether Luzon Hydro Corporation complied with the period prescribed for claiming a refund/tax credit of unutilized input VAT, Section 112(A) of the NIRC of 1997, as amended by RA 9337, must be taken in conjunction with Section 11 2(C) which provides for the period within which refund or tax credit of input taxes shall be made, said provision is quoted hereunder for ready reference: SEC. I 12. Refund~ or Tax Credits ofInput Tax. - XXX (C) Period 1vithin 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 creditab le 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 c laim for tax refund or tax credit, or the failure on the pati of the Commissioner to act on the application w ithin th e period prescribed above, the taxpayer affected may, within thirty (30) days from the receipt of the decision denying the c laim or after th e expiration of the one hundred twenty day- period, appeal the decision or the unacted claim with the Court of Tax Appeals. XXX The instant Petition for Review must fail. The foregoing conclusion was reached by this Court in accordance with the explicit provision of Section 11 2(A), in relation to paragraph (C) of the NIRC of 1997, as amended by RA 933 7, and the recent case of Commissioner ofInternal Revenue v. Aichi Forging Company of Asia, Inc., G.R. No. 184823, promulgated on October 6, 2010 ("Aichi case"), where the Supreme Court finally put to rest the controversies surrounding the prescdptive period for applying or claiming refund/tax credit of unutilized input VAT, i.e. reckoning of the 2-year period for filing/claiming refund or issuance of TCC; whether the 2-year period applies to both administrative and~ 127

DECISION Page 18 of30 CTA Case No . 78 10 LUZON HYDRO CORPORATJONvs. CJR judicial claims; and whether the 120-day period and 30-day period must be strictl y observed. In sum , the Hi gh Court essentially reso lved the controversies, as follows : First, the reckoning of the 2-year period for filing/claiming refund or issuance of TCC as expressly provided for under Section 11 2(A) of the N IRC of 1997, as amended by R.A. 933 7, is from the close of the qum:ter when such sales were made. In the A ichi case, the Supreme Co urt ad hered to the principle enunciated in the Mirant 28 case notwithstanding the fact that the claim for refund was filed on September 30, 2004, approximately 4 years before the Mirant case was promulgated, effectively g1vmg the Mirant doctrine a retroactive app lication. Second, the phrase "within two (2) years x x x apply for the issuance ofa tax credit certificate or rejimcf' refers to appli cations for refund/credit filed with the CIR and not to appeals made to the Court of Tax Appeals (CTA) . This is apparent in the first paragraph of subsection (C) of the same provision, which states that the CIR has "1 20 days ji-om the submission of complete documents in support of the application filed in accordance �with Subsections (A) and (B)"29 within which to dec ide on the claim. Third, compliance with the " 120-3 0 day period" under Section 11 2 (C) of the N IRC of 1997, as amended of R.A . 933 7, is crucial in filing ajudicial claim . ~ 28 Commissioner ofInt ernal Revenue v. Mirant Pagbilao Corporation (Form erly Southern Energy Quezon, /nc.), G.R. No . l 72 129, September 12, 2008 29 Commiss ioner of Internal Revenue v. Aichi Forging Company of Asia, Inc., G. R. No. 1811823 , October 6, 2010 . 128

DECISION Page 19 ofJ O CTACaseNo. 78 10 LUZON HYDRO CORPORATION vs. CJR App lying, therefore, the forego ing provision and doctrine laid down in the A ;chi case w ith the prevailing circumstances in this case, We conclude that, while the administrati ve claim was fi led within the reglementary period of 2 years from the cl ose of the taxable quarter, the j udicial claim was fil ed beyo nd the period mandated under Section 11 2(C) of the N IRC of 1997, as amended by RA 9337; thus, the Court is constrained to D ENY the petiti oner's claim for refund or issuance of TCC. The fo ll owing discussions fur ther elucidate thi s Co urt's standpoint. Administrative claim vvas filed on time. The re levant provision for the admini strati ve claim fo r refund or issuance of tax credi t certifi cate of unutili zed input tax is Section 11 2(A) of the NIRC of 1997, as amended by R.A. 933 7, which prescri bes the reckoning of the 2-year period within which to make a claim fo r refund or tax credit, i.e., from the cl ose of the taxable quarter w hen the sales were made. The Supreme Court, in the Aichi30 case, fortified the doctrine laid down in the Miran t31 case, that the 2-year prescrip ti ve period is reckoned from the close of the taxable quarter w hen the relevant sales or transactions were made, and significantly gave the said doctri ne a retroactive appli cation consid ering that the High Court applied the same to the Aichi case notw ithstanding the fac t that the cl aim for refund was fi led on September 30, 2004, approximately 4 years before the Mirant case was promul gated. In the A ichi case, the Sup reme Court explained as fo llows: 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. Mirant Pagbilaoc::t- 30 Supra note 29 31 Supra note 28 12 9

DECISION Page 20 of30 CIA Case No. 7810 LUZON HYDRO CORPORATiON vs. CJR C01poration, where we ruled that Section 112(A) of the NTRC is the applicable provision in determining the start of the two-year period for claiming a refund/credit of unutilized input VAT, and that Sections 204(C) and 229 of the NTRC are inapplicable as "both provisions apply only to instances of erroneous payment or illegal collection of internal revenue taxes." We explained that: The above proviso [Section 112 (A) of the NTRC] clearly provides in no LUlcertain tenns that unutilized input VAT payments not otherwise used for any internal r evenue tax due the taxpayer must be claimed within two years reckoned from the close of the taxable quarter 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 etToneously applied the aforequoted Sec. 112 (A), " [P]rescriptive period commences from 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 tl1e official receipt was issued." Thus, when a zero-rated VAT ta'Cpayer 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 tl1e w1utilized creditable input VAT. The reckoning frame would always be the end of the quarter when the pet1inent sales or transaction was made, regardless when tl1e input VAT was paid. Be that as it may, and given that the last creditable input VAT due for the period covering the progress billing of September 6, 1996 is the third quarter of 1996 ending on September 30, 1996, any claim for unutilized creditable input VAT refw1d or tax credit for said quarter presctibed two years after September 30, 1996 or, to be precise, on September 30, 1998. Consequently, MPC 's claim for ref�und or tax credit filed on December 10, 1999 had already prescribed. Reclwning f or p rescriptive p eriod under Sees. 204(C) and 229 of the NIR C inapplicable To be sure, MPC cannot avail itself of the provisions of eitl1er Sec. 204(C) or 229 of the NIRC which, for the purpose of refund, prescribes 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 R~fimd or Credit Taxes. - The?- Commissioner may - xxxx 13 0

" DECISION CTA Case No . 78 10 LUZON H YDRO CORPORA710N vs. CJR Page 21 of J O (c) Credit or ref�und taxes erroneously or illegally received or penalties imposed without authority, refund the value of internal revenue stamps when they are retumed in good condition by the purchaser, and, in his discretion, redeem or change unused stamps that have been rendered LUifi.t for use and refimd their value upon proof of destruction. No credit or refimd of taxes or penalties shall be allowed LUl..less the taxpayer files in writing with the Commissioner a claim for credit or refund within two (2) years after the payment of the ta'\. or penalty: Provided, however, That a return fi led showing an overpayment shall be considered as a wtitten claim for credit or refimd. x x xx Sec. 229. Recovery of Tax Erroneo usly or lllegally Collected. - No suit or proceeding shall be maintained in any court for the recove1y of any national intemal revenue tax hereafter alleged to have been eJToneously or illegally assessed or collected, or of any penalty claimed to have been collected without auth01ity, of any sum alleged to have been excessively or in any manner wt-ongfully collected without authori ty, or of any sum alleged to have been excessively or in any mrumer wt�ongfully collected, tmtil a claim for refund or credit has been duly fi led with the Commissioner; but such suit or proceeding may be maintained, whether or not such tax, penally, or sum has been paid tmder protest or dmess. ln ru1y case, no such suit or proceeding shall be filed after the expiration of two (2) years fium the date of payment of the tax or penalty regru�dless of any supervening cause that may arise after payment: Provided, however, That the Commissioner may, even without a wti.tten claim therefor, refund or credit any tax, where on the face of the retmn upon which payment was made, such payment appears clearly to have been erroneously paid. Notably, the above provisions also set a two-year prescripti ve period, reckoned fi:om date of payment of the tax or penalty , fo r the fi ling of a claim of ref�und or tax credit. Notably too, both provisions apply only to instances of erroneous payment or illegal collection of intern al revenue taxes. MPC's creditable input VA T not erroneously paid ror perspective, under Sec. l05 of the NIRC, creditable input VAT is a.n indirect Lax which can be shifted or passed on to the buyer, tTansferee, or lessee of the goods, prope1ties, or services of th~ 131

D E C I SI O N Page 22 of30 CTA Case No. 7810 L UZON HYDRO CORPORATION vs. CJR taxpayer. The fact that the subsequent sale or transaction involves a wholly-t:a'C exempt client, resulting in a zero-rated or effectively zero-rated transaction, does not, standing alone, deprive the taxpayer of its right to a ref1.md for any mmtilized creditable input VAT, albeit the enoneous, illegal, or wrongful payment angle does not enter the equation. 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 r elevant sales or tmnsactions were made pertaining to the c1�editable input VAT, applies to the instant case, and not to the other actions which refer to erroneous payment of taxes. (Emphasis supplied.) ln view of the foregoing, we find that the CTA En Bane erroneously applied Sections 114(A) and 229 of the NlRC in computing the two-year prescriptive period for clai.J.11ing refund/credit of Lmutilized input VAT. To be clear, Section 11 2 of the NlRC is the pertinent provision for the refi.mcl/credit of input VAT. Thus, the two-year period should be reckoned fi:om the close of the taxable quarter when the sales were made. XXX Petitioner filed its administrative claim for refund or issuance of TCC on April 30, 2007 for the period covering June to September 2006. Clearly, applying the explicit provision of Section 11 2(A) of the NIRC of 1997, as amended by R.A. 933 7, as solidified by the Supreme Comt in the cases of Mirant and Aichi, the administrative claim was filed by the petitioner within the 2-year prescriptive perio~ 13 2

DE CISION Page 23 of3 0 CTA Case No . 78 10 LUZON HYDRO CORPORATION vs. CJR The judicial claim (or re[und/tax credit was _Oled beyond the 30-day period prescribed under Section 11 2(C) o[ the NIR C o[ 199 7, as amended. Secti on 11 2(C) of the N IRC of 1997, as amended by RA 933 7, clearl y prov ides that the CIR has " 120 days, from the date of the submission of the complete documents in support of the application [for tax refund/credit]," within which to grant or deny the claim . In case of full or partial denial by the CIR, the taxpayer' s reco urse is to fil e an appeal before the CTA within 30 days from receipt of the decision of the CIR. However, if after the 120-day period the CIR fails to act on the app lication for tax refund/credit, the remedy of the taxpayer is to appeal the inaction of the CIR to CTA within 30 days .32 1n thi s case, reco rds reveal that: Date ' S ubmission of E nd of 120 Eml of 30 Days ! Dat;J udicial j Administra- Rel evant Days for the tive Claim for the i Claim Filed ! Documents BIR Petitionet� to : Fil ed (Reckoning of Commissioner Appeal the . to Decide the Decision/lnacti ! the 120-day __ _ ___p~~�iod) Claim i on A pril 30, 2007 Septem ber 7, January 5, 2008 February !J , Jul y 18, 2008 ���-- ----'---- 2008 2 00 7 �-�- - - - - - - - - � As can be culled from the records at hand, petitioner fi led its administrative claim fo r refund on April 30, 2007 covering the period of June to September 2006. Thereafter, to prove the submission of all the necessary documents with the BIR fo r the app roval of its admi ni strative claim for refund/tax credi t, petitioner submitted a Certificati on33 issued on September 7, 2007 and dul y signed by Imelda A. Bueno, Revenue Di strict Offi cer of RDO No . 2, Vi gan, Ilocos Sur stating that the VAT~ 32 Supra note 29 33 Exhibit "0 ", Formal Offer of Evidence, Rollo, p. 37J 13J

DECISION Page 24 of30 CTA Case No. 7810 LUZON HYDRO CORPORATIONvs. CJR returns and the corresponding attachments for the period of June 2005 to December 2006 were received by Revenue Officers Lawrence Timbreza and Fremarie L. Aquino, thus, it may be fairly inferred that the date of September 7, 2007 is the reckoning point in counting the 120-day period within which respondent is given an opportunity to act on the matter. Therefore, counting from September 7, 2007, respondent had unti l Janua ry 5, 2008 within which to act on the administrative claim for refund by petitioner and conversely, petitioner is given a period of 30 days hom January 5, 2008 or unti l February 4, 2008 within which to elevate the same before this Court. Noticeably, it is at this particular point that the petitioner failed considering the fact that petitioner filed its judicial claim only on July 18, 2008, which is actuall y 165 days late or beyond the 30-day period provided under Section 112(C) of the NIRC of 1997, as amended by RA 933 7. Hence, for petitioner' s failure to appeal the case within 30 days from January 5, 2008 or until February 4, 2008 , We are convinced that this Court has no jurisdiction over the instant Petition for Review. Perfection of an appeal in the manner and within the period laid down by law is not only mandatory but also jurisdictional. Relative thereto, in the case of Yao vs. Court ojAppeals,34 the Supreme Court had the occasion to say that: The right to appeal is not a constitutional, natural or inherent right. It is a statutory privilege of statutory origin and, therefore, available only if granted or provided by statute. Since the right to appeal is not a natural right nor a part of due process, it may be exercised onl y in the manner and in accordance with the provisions of law. Corollarily, its requirements must be strictly complied with.?- 34 G .R. No . 132112 8, October 211 , 2000 citing Aris, Phil. Inc. v. NLRC, 2 00 SC RA 2116, 253 [1991] ; Pedrosa v. Hill, 257 SCRA 373, 378 19961 , citing Bello v. Fernandez, 11 SCRA 138 ; Ortiz v. Court of Appeals , 299 SCRA 708 [ 1998] ; Almeda v. Court ofAppeal.~, 292 SCRA 58 7 [ 1998]; a lso Asuncion v. NLRC 273 SC RA 1198 [ 1997]; Mabuhay Development Industries v. NLRC, 288 SCRA I [ 1998] ; Rosewood Processing; Inc. v. NLRC, 290 SCRA 1108 [ 1998] ; Laza v. Court of Appeals, 269 SCRA 6511 [ 1997]; Uy v. Court of Appeals, 286 SC RA 311 3 [ 1998] ; Pascual v. Court of Appeals, 300 SCRA 2111 [ 1998). 134

DECISION Page 25 of30 CTA Case No. 7810 LUZON HYDRO CORPORATION vs. CJR That an appeal must be perfected in the manner and within the period fixed by law is not only mandatory but jurisdictional. Non- compliance wi th such legal requirements is fatal, for it renders the decision sought to be appealed final and executory, with the end res ult that no court can exercise appellate jurisdiction to review the decision. lt is significant to note that in the recent case of Commissioner of Internal Revenue vs. Fort Bonifacio Development Corporation,3j although it does not mainly pertain to the 30-day period to file petition or appeal tmder Sec. 112(C) of the NIRC of 1997, as amended by RA 933 7, the Supreme Court reaffirmed the principle that the right to appeal is not a natural right, but merely a statutory privilege exercised only in the marmer and in accordance with the provisions of law, and thus, held as follows: The right to appeal is not a natural right. lt is also not part of due process. It is merely a statutory privilege and may be exercised only in the ma.tmer and in accorda.t1ce with the provisions of law. Thus, one who seeks to avail of the right to appeal must comply with the requirements of the Rules. Failme to do so often leads to the loss of the right to appeal. The fai lure to timely perfect an appeal canriot simply be dismissed as a mere technicality, for it is jurisdictional. Thus: Nor carl petitioner invoke the doctrine that rules of technicality must yield to the broader interest of substantial justice. While every litigru1t must be given the amplest opportunity for the proper a.t1d just determination of his cause, free from the constraints of technicalities, the failure _tQ perfect a.t1 appeal vvithin the regh~n~entary pe~ioc1_i~U:!9_t_�: mere technicality. It raises a jurisdictional problem as it deprives the appellate co urt of jurisdiction over the appeal. The failure to file the notice of appeal within the reglementary period is akin to the failure to pay the appeal fee within the prescribed period. In both cases, the appeal i s not perfected in due time. [Emphases supplied] As to the claim that the government would suffer loss of substa.t1tial amount if not allowed to recover the tax refw1d in the amount of more than P15M, the Court is of the view that said problem has been caused by petitioner's own doing or undoing. While We understand its counsel' s predicament of being burdened with a heavy ;{.- 35 G.R. No. 167606, August 11 , 20 10 c itin g Neypes v. Court ofAppeals, 506 Phil. 6 13, 62 1 (2005); NuPiez v. GSIS Family Bank, G.R. No. 163988, November 17, 200 5, !1 75 SCRA 305 , 320; Republic v. Court ofAppeals, 379 Phi I. 92, 100- 101 (2000); In the matter of the Heirship (Intestate Estate.\) of the late Hermogenes Rodriquez v. Robles, G.R. No. J82645 , December 4, 2009 , 607 SCRA 770. 13 5

DECISION Page 26 of30 CIA Case No. 7810 LUZON HYDRO CORPORATIONvs. CJR case load, We cannot always rule in favor of the Government. In this case, petitioner even failed to sufficiently explain its failure to observe the Rules. Petitioner merely pointed out that due to plain oversight, the motions for extension of time and the petition for review that it filed were erroneously titled as "Fort Bonifacio Development Corporation v. Comm.issioner of Internal Revenue" when it should have been "Commissioner of Internal Revenue v. Fort Bonifacio Development Corporation;" that "on the assumption that it was respondent which filed the motion, the Court of Appeals, in its Resolution dated January 29, 2002, denied the motion for extension of time to file petition for review on the ground of failure to pay docket and other legal fees;" that respondent filed a manifestation stating that the case was incorrectly titled as it was not the one who appealed the CTA decision to the CA; and that in order to rectify the error, petitioner filed an Amended Petition for Review. To recognize the foregoing statements would render the mandatory rule on appeals meaningless and nugatory. The point of reference of Our discussion is not the CA's Resolution dated January 29, 2002 but its January 27, 2003 Resolution. Records bear out that the assailed January 27, 2003 Resolution reiterated the dismissal of the petition for review and thus denied the admission of the amended petition but NOT on the basis of the earlier (January 29, 2002) resolution dismissing the petition for non-payment of docket and other legal fees as there was clearly an error in the designation of FBDC as petitioner in the first motion for extension of time filed by the CIR. Indeed, the CIR is exempted from payment of docket and other legal fees, as a government official representing the BIR. It bears emphasizing that the dismissal of the petition for review and the denial of the amended petition were premised rather on: (1) the late filing of the original petition for review by the CIR; (2) the absence of a motion for reconsideration of the January 29, 2002 Resolution; and (3) lack of authority of Atty. Alberto R. Bomediano, Jr. , legal officer of the BIR Region 8, Makati City, to pursue the case on behalf of petitioner CIR. It has been ruled that perfection of an appeal in the mmmer and within the period laid down by law is not only mandatory but also jurisdictionaL The failure to perfect an appeal as required by the rules has the effect of defeating tl1e _right tQ appeal _of 9: IJarty .~!14 precluding the appellate court from acquiring jurisdiction over the ca�e. At the risk of being repetitio us, We declare that the right to appeal is not a natural right nor a part of due process. It is merely a y statutory privilege, and may be exercised only in the manner and in accordance with the provisions of the law. 136

DECISION Page 27 of30 CTA Case No. 7810 LUZON HYDRO CORPORATJON vs. C1R Public policy and sound practice demand that judgments of courts should become final and irrevocable at some definite time fixed by law. Such rules are necessary incidents to the proper, efficient and orderly discharge of judicial functions. Just as a losing party has the privilege to file an appeal within the prescribed period, so does the winner also have the correlative right to enjoy the fruits of his victory. Failme to meet the requirements of an appeal deprives the appellate court of jurisdiction to entertain any appeal. Undeniably, there are exceptions to this rule. Petitioner, however, did not present any circumstances that would justify the re laxation of said rule. It need not be overemphasized that it is the responsibility of the counsel to check and keep track of the period of time left to file an appeal. He cannot escape from the inflexible observance of this rule which is jurisdictional. The rules, particularly on the statutory requirement for perfecting an appeal within the r eglem entary period provided, must be strictly follow ed. If an appeal is not taken within the period prescribed ther efor, the judgment becomes final and the court loses all jurisdiction over the case. [Emphasis supplied] Petitioner' s assertion that the prescriptive period for the filing of administrative and judicial claims for refund should be counted from the date of fi ling of the corresponding Quarterly VAT Return, 36 thus, both the administrative and judicial claims were filed within two (2) years from the period prescribed for the fi ling of the quarterly VAT,37 is misplaced. The ruling of the Supreme Court in the Aichi case 38 is so clear and unmistakable, that anyone who honestly desires to enforce its principles would know that the Supreme Court, in the said case, hails and upho lds the strict compliance with the " 120-30 day period" provided under Section 112(C) of the NIRC of 1997, as amended by RA 933 7. As held in the Aichi case, the aforementioned 2-year period refers to applications for refund/tax credit filed with the CIR and not to appeals made to this Court. The Supreme Court ratiocinated in this wise~ 36 Rollo, p. 63;1 137 37 Rollo, p. 633 33 Supra note 29

DECISION Page 28 of30 CIA Case No. 7810 LUZON HYDRO CORPORATION vs. CJR XXX Respondent's asse1tion that the non-observance of the 120-day period is not fatal to the filing of a judicial claim as long as both the adm inistrative and the judicial claims are filed within the two-year prescriptive period has no legal basis. There is nothing in Section 112 of the 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 years after the close of the taxab le quarter when the sales were made, apply for the �issuance of a tax credit certificate or refund of creditable input tax due or paid attributable to such sales." The phrase " within two (2) years x x x apply for the issuance of a tax credit certificate or refund" refers to applications for refund/credit filed with the CIR and not to appeals made to the CTA. Tllis is apparent in the first paragraph of subsection (D) of the same provision, which states that the CIR has " 120 days from the subnlission of complete documents in supp01t of the application filed in accordance with Subsections (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(D) of the NIRC, which already provides for a specific period witilin wllich a ta'<payer should appeal ti1e decision or inaction of ti1e CIR. The second paragraph of Section 112(D) of the NIRC envisions two scenarios: (1) when a decision is issued by the ClR before the lapse of the 120-day peliod; and (2) when no decision is made after the 120-day period. In boti1 instances, the taxpayer has 30 days within wllich to file an appeal with the CTA. As we see it then, the 120-day period is cmcial in filing an appeal witi1 the CTA. Witi1 regard to Commissioner qf Internal Revenue v. Victoria'i Milling, Co. , Inc. relied upon by respondent, we find the san1e inapplicable as ti1e tax provision involved in that case is Section 306, now Section 229 of the NlRC. And as already discussed, Section 229 does not apply to re:fi.mds/credits of input VAT, such as the instant case. In fme, the prematme filing of respondent's claim for ref1.md/credit of input VAT before the CTA warrants a dismissal inasmuch as no 0 jmisdiction was acquired by t.he CTA. XXX 138

DECISION Page 29 of3 0 CTA Case No. 78 10 LUZON HYDRO CORPORATIONvs. CIR The principle laid down in the forego ing decisions is indicia of how entrenched the rul e mandating stri ct compli ance with the statutory requirements for perfecting an appeal is today. Knowledge of these statutory requirements, which make the right to appeal available, is crucial to one' s judicial claim for refund/tax credit of unutili zed inp ut VAT. Taxpayers should be aware of these statutory requirements, specifically the prescripti ve periods in making an appeal , otherwise, they w ill run the risk of losing their statutory ri ght to appeal refund/tax credit cases with thi s Court. In view of the forego ing, thi s Court find s no need to di scuss the other issues raised by the parti es, for being moot and academi c. WHEREFORE , premi ses considered, the instant Petiti on for Review is hereby DISMISSED for having been fil ed beyond the 30-day peri od provided under Section 11 2(C) of the NTRC of 1997, as amended by RA 933 7. rt~J-r.~?- AMELIA R. COTANGCO- MANALASTAS Associate Justice WE CONCUR: ~ -~~~ OLGA PALANCA-ENRIQUEZ Associate Justice 139.

DECISION Page 30 of30 CTA Case No. 7810 LUZON HYDRO CORPORATION vs. C'IR ATTESTATION I attest that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer ofthe opinion of the Court' s Division. CE RTIFI CA TIO N Pmsuant 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._..x: /J. � o___. ERNESTO D. ACOSTA Presiding Justice 140