CE LUZON GEOTHERMAL POWER COMPANY, INC. v. COMMISSIONER OF INTERNAL REVENUE (consolidated with EB 628)

Republic of th e Philippines COURT OF TAX APPEALS Quezo n City EN BANC CE LUZON GEOTHERMAL POWER CTA EB Case No. 591 COMPANY , INC ., (CTA Case No. 7558 ) Petitioner, -versus- Fo r: Refund or Issuance of a Tax Credit Certificate COMMISSIONER OF INTERNAL REVENUE , CTA EB Case No. 628 (CTA Case No. 7558) Respondent. X-----------------------------------------------X Present: COMMISSIONER OF INTERNAL REVENUE , ACOSTA, P.J. , CASTANEDA, JR. Petitioner, BAUTISTA -versus- UY CE LUZON GEOTHERMAL POWER CASANOVA COMPANY, INC., P A L A N C A - ENRIQUEZ FABON-VICTORINO Respondent. MINDARO-G RULLA COTANGCO-MANALASTAS , JJ. Promulgated: ?4*-rt~~ ?,'ev ~l. Hv r OCT 0 4 2011 X--------------------------------------------------------------------------------------X DECISION MINDARO -GRULLA, J.: Submitte d for decision are two (2) co nso lidated Pe titions for Review b e fore th e Court En Bane, sepa rate ly fil e d by lh e respective(

CE Luzon Geo th e rmal Power Company, Inc. v. CIR , Page 2 o f 22 C TA EB Case No. 59 1; & CIR v. CE Luzon Geo lhe rmol Power Co mpany , CTA EB Case No. 628 (CTA Case No. 7558 ) DECISION parti es on February 24,2010 1 and May 12, 2010 2 under Section 2(a)(l), Rule 4, in re lation to Sec tion 4(b) , Rule 8 of th e 2005 Re vised Rules of th e Court o f Tax Appeals, as amended, of th e Decision 3 and Am e nd e d Dec ision -1 date d Jun e 24, 2009 and January 19, 2010, respectively, rendere d by the Former Seco nd Division of thi s Court. CE Lu zo n Geoth e rmal Powe r Company, Inc. ("CE Luzon " ) prays for th e Court e n ban e to reverse and to se t a sid e th e Am e nd e d Decision dated January 19, 2010 inso far as th e Court a quo disa llowe d th e unutilized input VAT in th e am o unt of P3,268,066.40; and to is sue a Decisio n gran ting in full its cla im for re fund o r issua nce o f a TCC for its unutilized input VAT for th e fou r (4) quarters o f CY 2005 in th e total amount of P20,546 ,004 .87. On th e o th e r hand , th e Commission e r o f Interna l Revenue ("CIR") prays for th e Court e n bane to reverse and to se t asid e th e Amend e d Decisio n dated January 19 , 2010 and Resolution dated April 22, 201 0~ 1 Filed by CE Luzo n Geo th e rmal Power Company, Inc. w ilhin th e ex te nded p e riod of lim e gronled by En Bone in o Resolution doled February 10, 20 10, docketed as CTA EB No. 59 1. 2 Filed by Commissione r o f lnlernol Revenue, docketed as CT A EB No. 628. 3 Penned by Associa te Justi ce O lga Po lanco-Enriquez and concu rred in by Associate Justi ces Juonito C. Cas taneda, Jr. and Erlindo P. Uy, CT A EB No. 59 1, Docke t, pp. 59 - 83. 4 Pen ned by Associate Jus ti ce O lga Po lanco-Enriqu ez and concu rred in by Associa te Juslices Juonilo C. Cos lonedo , Jr. and Erlindo P. Uy, CTA EB No. 59 1, Docke l , pp . 85- 103.

C E Luzo n G e o th e rm a l Pow e r Co m pany, Inc. v . Cl l~ , Page 3 o f 22 CT A EB Case No. 59 1; & CIR v. CE Luzon Geo thermal Power Com pa ny, CTA EB Case No. 628 (CTA Case No . 7558 ) DECISION and to 1ss ue anoth e r Decisio n d e nying CE Lu zo n' s e ntire claim for re fund . Th e antece d e nt fa c ts a s c ulle d fro m th e Decision o f th e Court a quo dote d Jun e 24, 2009 ore a s fo ll o w s: "THE PARTIES Petiti o ne r is a corpora ti o n duly o rg a nized a nd exis tin g und e r and b y virtu e o f th e lows o f th e Repu blic o f th e Philippin es, w ith p rin c ipa l o ffice at th e 241t1 Floor, 6750 Ay a la Ave nue, Ma koti City. Respo nd e nt, o n th e o ther han d , is th e d uly a pp oi nt e d Co mm issio ne r o f Inte rn al Reve nue, vested w ith au th o rity to o c t as suc h, in c ludin g, am ong o th e rs, th e p owe r to d ec id e, a pprove a nd gra nt refu nds o r tax c redits of e rroneously o r excessive ly paid ta xes . He m ay b e serve d w ith summ o ns, pl e adin gs and oth e r le gal processes at his o ffi ce at the BIR No tiona l O ffi ce Buil di ng, BIR Rood , Dilimon, Q uezon C ity. THE FACTS The an tece d e nt fac ts o f th e case ore as fo ll ows: Petitio ne r is eng a ged in the busin ess o f power ge ne rati o n fo r w hich it was acc red ited an d certified to as suc h b y the De portme nt o f Energy, as evidenced by its DOE Ce rti fic ate o f Acc re dita ti o n (OSAC9 4- 12) issue d on Ju ne 15, 199 4 (Ex hibit "B") . Petiti o ne r is a reg istered va lue ad d ed l ox (VAT) ta xpayer w ith th e Bure au o f Inte rnal Reve nu e evide nce d b y its C e rtifi c ate of Regis trati o n w ith Ta x Ide ntifi ca ti on Nu mbe r 003-924-356-000 (Ex hibit " C " ) . On th e fo ll owin g do tes , pe titi o ne r fil e d wi th th e BIR its Orig inal Qu arte rl y VAT Re turn s fo r th e first to fou rth qu arte rs o f 2005, respec ti ve ly : Taxable Quarter Date of Filing of Original Return Apri l 25, 2005 July 25, 2005 O c lob er 25, 2005 JanL,Jory 25"--2006

CE Lu zon Geo th ermal Power Company, Inc. v. CIR, Page 4 of 22 CTA EB Case No. 591; & CIR v. CE Lu zon Geo th ermal Power Company, CTA EB Case No. 628 (CTA Case No . 7558) DECISION On the following dotes, petitioner filed wi th the BIR its Amended Quarterly VAT Returns for the first to fourth quarters of 2005, refle c ting excess or unutilized VAT c redits arising from petitioner's domestic purc hases of non-capitol goods and services, services rendered by non-residents and importation of non-capitol goods: ?OO~J Do le o il ilin(J ol I xc:css/Unulili;ccj VA I C:rccjil s - loxotJic Rei urn l)orncs lie Dorneslic Services lrnporlol ion lolol (P) Ouorlcr .Jonuory I?. ?006 l'urct1oscs l'urct10SCS J.lcncjcrcd Co ods Goods O lhcr Services (P) /,I ?B,862.84 ,,, !han Copil o l by Non 0 It1C:r Ihan ~.9~J/, I ~?.09 Residcnls Copilol Goods WJ (_!:') Gos~P L ~34.~J0/.06 1/6,{:,84.00 .Jonuory I?, ?006 l ,? l :l.~J9?BI ?, I/9Sl9 BO :30. 4/1.40 :319,?-2-?.00 :l./4?,826 .0 I ?,690,93EU I 0 ~>.088,86 l .28 .Jonuory I?, 2006 1,091,1??.9/ 2.~ 14 ,421.72 1,:306,800.00 April I0, 2006 I :3,:342,05 1.9? :3:3/,660.21 4 1h �- /6/,4 11.00 4,585, 454.74 96~.139~.81 ---- � -- l olol --- - 1133.00 -2-0,5 46,004.87 3,130~J. I I 13.6~> -- On Nov e mbe r 30, 2006, petitioner fil e d its administrative claim fo r re fund of unutilized input VAT for th e fou r quarte rs of taxable year 2005. In view of respondent's inaction , on January 3, 2007, petitioner filed its judicial c laim fo r refu nd with this Court. docke te d as C.T.A. Case No. 7558. In his Answer, respondent all eged by way of specia l and affirmative defenses: '4. Petitioner's c laim for refu nd is subject to administrative inv es ligotion/e xominotion by the Bureau; 5. The amount of P20,5 46,004.87 being claimed by petitioner as alleged unutilize d input VAT from its dom es ti c purchas es of non-c apitol goods and servi ces, servi ces ren d e re d by no n-res id ents and imp o rtation of no n-c apitol goods for th e first to fourth quarters of taxable year 2005 was not properly documented; (

CE Luzon Geo th e rmal Power Compa ny , Inc. v. CIR, Page 5 o f 22 CT A EB Case No . 591; & CIR v. CE Luzon Geo th e rmal Power Company, CTA EB Case No. 628 (CTA Case No. 7558 ) DECISION 6. In on action for re fund , th e burd e n of proof is on the taxpayer to establi sh its right to refund , and failure to sus tain th e burden is fatal to the claim fo r re fund /c red it; 7. To support its claim, it is imperative fo r petitioner to prove, th e fo ll owing , viz: a. The reg istration requirements of a va lu e - added taxpa yer in co mplian ce with Sec ti o n 6(o) and (b) of th e Revenue Regulations No . 6-97 in relation to Section 4.107-1 (a) of Revenue Regulations No . 7-95, and Sec tion 236 of th e Notional Internal Reve nu e Code o f 1997 (NIRC of 1997); b. The 1nvo 1c 1ng and a ccou nting re quire m e nts fo r VAT regi ste red p e rs o ns, as well os th e filing and paym en ts of VAT in compliance w ith the provisions of Sections 113 and 114 of the NIRC of 1997; c . Proof of compliance w ith th e prescribed c hec kli st o f re quire m e nts to be sub mitted involving c laim for VA T refu nd in pursua nce to Reve nu e Memorandum O rd er No. 53-98, ot herwise, there would be no sufficien t co mplian ce wi th th e filin g of administrative claim for re fund which is a co nditi on si ne quo non prior to th e filing of judi c ial c laim in accordance with th e provision of Sectio n 229 of th e Tax Code, os amended. It is worth y o f emphasis that Section 11 2 (D) of the Ta x Code, os amended, requires th e subm ission of complete d ocuments in support of th e application fil ed with th e Bureau of Inte rnal Revenue before th e 120-doy audit period shall apply, and before th e ta xpayer could avail of judic ial remedies os prov id ed for in the low. Hence, petitioner's failure to submit proof of compliance with the above-stated requ irem en ts warrants immediate dismissal of th e petition fo r review; d. Thai the input taxes of P20,5 46,004.87 allegedly paid by the petitioner on its(

CE Luzon Geo th e rmal Power Company . Inc. v . CIR. Page 6 of 22 CTA EB Case No . 59 1; & CIR v . CE Luzon Geo th e rmal Power Co mpany, CTA EB Case No. 628 (C TA Case No. 7558 ) DECISION purchases of non -ca pitol goods and servi ces, se rvices re nd e red by no n-resid e nts and importation o f non-ca pitol good s for the first to fourth quarters of 2005 were attributable to its zero-rated sol es and such hove not b ee n appli e d against any output tax and were not carri e d over in th e succeed ing taxable quarter or quarters; e. That p e tition e r's administrative and judicial claims for tax credit or re fund of the unutilized input ta x (VAT) was fil ed wit hin two (2) years after th e c lose of the taxabl e quarter when the so les were mode in a ccordan ce with Sec tions 11 2 (A) and (D) of the NIRC of 1997; f. That petitioner's domestic purchases o f goods and services were mode in th e course of its trad e o r business, properly supported by VAT in voices and/or offi c ial rece ipts and o th e r doc um e nts, suc h as subsid iary pu rchase journal. showing that it actually paid VAT in a ccordanc e with Sections 110 (A) (2) and 113 of th e NI RC o f 1997, and in pu rsuance to Sectio n 4.104-5 (a) and (b) of Revenue Regula tion s No . 7-95 (R e: Su bstantiation of C laims of Input Tax Cre dit) ; g. The re quire m en ts as enumerated und e r Sec ti o n 4.104-2 of the Revenue Regulations 7- 95 (R e: Persons who con avail o f the Input Tax C re dits); 8. The petition for review is premature. Sin ce p e tition e r did not submit comp le te documents in support o f its administrative claim fo r refund as indi ca ted under Sec ti on 112 (D) of th e NIRC of 1997, th e 120-doy p e ri o d starts to run on 30 Nove mbe r 2006, th e dote when it fil e d its administrative c laim fo r refund. Th e said period is ye t to expire on 10 Marc h 2007. Hence, th e 30- doy p e ri od within which to file the petition fo r rev iew before thi s Honorable Court is yet to expire on 9 April 2007 . This being so, this Honorable CouriJ:

CE Luzon Geo th erma l Power Company , Inc. v. CIR , Page 7 of 22 CTA EB Case No. 591; & CIR v. CE Luzon Geo th e rmal Power Company, CTA EB Case No. 628 (CTA Case No. 7558 ) DECISION has no jurisdic ti on to oc t o n the instant petition for review . 9. C laims for re fund ore co nstrued strictly against the claimant for the some partake the nature of exe mpti o n fro m ta xation (Commissioner of Internal Revenue vs. Ledesma, 3 1 SCRA 95) and suc h, th ey were looke d upon with disfavor (Western Min o lco Corp ., vs. Commissioner of Internal Revenue, 124 SCRA 12 11). ' Petition e r presented Lei loh Yosmin E. Alpod and Jerome Antonio B. Co nstantin o, as witnesses, and documentary evi d e nce, marked as Exh ibits "A" to "AAA", in clusive of their sub morkings, which were all admitted by th e Cou rt . O n th e other hand , respo nd e nt' s coun se l manifested that he w ill not be presenting evidence and submitted th e case for decision. Thereafter, both parties were ordered to fil e th e ir simultaneous memoranda , within thirty (30) days from notice, ofterwhich the case shall be deemed submitted for decision . Both parti es ha vi ng complied th ere to, the petition was d eemed submitted fo r d ecision on Jul y 25, 2008. However, on August 29, 2008, petitioner fil ed a "Motion to Adm it Reply Memorandum " and its "Reply Memorandum (To Respo nd en t' s M emorandum doted July 18, 2008", which th e Cou rt g rant ed in a Reso luti on doted Septem b e r 4, 2008 ." ~' On Jun e 24, 2009, th e Form e r Second Division of this Court re nd e red a Dec ision 6 partially g rantin g CE Luzon's cla im for unutilize d input VAT re fund/credit in th e re duc e d amount of P14,879 ,312.65 for the four (4) quarte rs of calendar year 2005. In partially granting th e petition, Ihe Court a quo he ld !hoi CE Lu zo n su ffi c ie ntly co mplie d with C 5 CTA EB No. 591, Docket, pp. 60-65. 6 Supra note 3.

CE Luzon Geo th e rm a l Power Compa ny, In c. v . CIR, Page 8 o f 22 CTA EB Case No. 59 1; & CIR v. CE Luzon Geo th e rmal Powe r Company , CTA EB Case No. 628 (CT A Case No. 7558 ) D EC ISION th e requisites under Sec ti ons 11 O(B) and 112(A) of th e National Internal Re ve nu e Code (NIRC) of 1997, a s am e nd e d , th e dispositive portion of whic h re ads: "WHEREFORE, pre mises co nsidered, th e prese nt Petition for Review is PARTLY GRANTED . According ly, respondent is hereby ORDERED TO REFUND OR ISSUE A TAX CREDIT CERTIFICATE in favor of petitioner in th e reduced amount o f FOURTEEN MILLION EIGHT HUNDRED SEVENTY NINE THOUSAND THREE HUNDRED TWELVE AND 65 / 100 (P14,879,312 .65) , representing unutilized input VAT paid on its d o m esti c purchases of non- ca pital goods and services rendered by non-resid e nts and imp ortati on of non-c apitol goods which ore attributabl e to zero - rated so les for ca lendar year 2005. SO ORDERED ." Bo th parti es fi le d th e ir Mo tions for Partial Reconsid e ration dated Ju ly 14, 2009 1 and July 16, 200913, res p ec tiv e ly. In an Am e nded Decision 9 dated January 19, 2010, the Former Secon d Divisi o n of thi s Court d e nie d for lack of m e rit CIR's Motion for Partial Reco nsideration; while CE Lu zo n's Motion for Partial Reconsid e rati o n wa s partly granted in so far as it has sufficiently proven its e ntitl e m en t to additional input VAT in th e amount o f P2,398,625.82 . Th e dispositive portion of th e said Am e nded Decision re ads: "WHEREFORE , pre mises co nsid e re d: ( 7 Fil e d by Commi ssio ne r o f Int e rnal Re ve nu e . a Filed by CE Luzon Geo th e rmal Power Company, Inc. 9 Supra no te 4.

CE Luzon Geotherma l Power Company , Inc. v. CIR , Page 9 of 22 CT A EB Case No. 59 1; & CIR v. CE Lu zo n Geo th e rm a l Power Compa ny , CTA EB Case No. 628 (CTA Case No. 7558 ) DECISION l) As regards petitioner CE Luzon Geotherma l Power Company, Inc.'s "Motion for Partial Reconsideration"- th e so me is he re by PARTLY GRANTED . Accordingly, th e dispositive portion o f ou r Decision date d June 24, 2009 is hereby AMENDED to rea d , as follows: "WHEREFORE , premises co nsid ered, the present Pe titi o n fo r Review is PARTLY GRANTED . Accordin g ly, responden t is hereby ORDERED TO REFUND OR TO ISSUE A TAX CREDIT CERTIFICATE in fa vor of petitioner the reduced amount of SEVENTEEN MILLION TWO HUNDRED SEVENTY SEVEN THOUSAND NINE HUNDRED THIRTY EIGHT and 47/ 100 PESOS (P17,277,938.47) , representing unu tilized inpu t VAT pa id on its domes ti c purchases of goods and services wh ich ore attributable to ze ro-rate d sol es for ca le ndar year 2005. SO ORDERED .'; and 2) As regards responden t Comm issioner o f Inte rnal Revenue's " M otio n fo r Partial Reconsideration" th e som e 1s he re b y DENIED for lock of merit. SO ORDERED ." Undaunte d , CIR fil ed a Motion for Partial Reco nsid e ration 10 o f the aforesaid Amend e d Decision; whil e CE Lu zo n fil e d a Petition for Review 11 b e fore th e Court En Bane. In a Re solution dote d April 22, 2010 ,12 th e Court a quo denied CIR's Motion for Partial Reco n sid e rati o n for lo c k of m e rit. Th e re aft e r, CIR fi le d a Pe titi on for Re vi e w l:l b e fore th e Court En Bane.{. 10 Doled Febru a ry 9, 20 10 . 11 Do led Fe bruary 24,20 10. 12 CTA EB No . 628, Dock e t. pp . 40-4 I . 13 Do te d May 12, 20 I 0.

CE Luzon Geo th erma l Power Company, Inc. v. CIR, Page 10 of 22 CT A EB Case No. 591; & CIR v. CE Luzon Geothermal Power Company, CTA EB Case No. 628 (CT A Case No. 7558) DECISION He nce, these consolidated Petitions fo r Review. CE Luzon submits the issues, as follows: 1. The CT A-Division erred when it foiled to consider in evidence petitioner's documents supporting input VAT on payments to non-resident supp li ers of services; 2. The CT A-D ivision e rred when it foiled to cons id er in eviden ce the certified true copies of the official receipts and invoices issued by petitioner's suppliers; 3. The CTA-Division erred when it ruled that some of petitioner's official receipts and invoices supporting its unutilized input VAT did not comp ly with the invoicing requirements of th e Notional Internal Revenue Code of 1997 (the "Tax Code") . The CT A-Division foiled to appreciate the legal ramifications of Intel relative to the rules on substantiation of input VAT; 4. The CTA-Division erred when it foiled to consider that respondent was deemed to hove wa ived or abandoned any objection with respect to the alleged failure of petitioner's supporting docum e nts to comply with invoicing requirements. Respondent foiled to raise such issue during trial ; 5. The CTA-Division erred when it increased the burden of proof in civil cases from a mere preponderance of evidence to a much higher stondord. 1 ~ On th e other hand , th e CIR proffers th e so le issu e, which states: The Former Second Division e rred in granting respondent's claim for refund in th e reduced amount of P17,277,938.47 allegedly representing unutilized input VAT paid on its domestic purchases of non-capitol goods and services rendered by non-residents and importation of non-capitol goods which ore attributable to zero-rated so les for calendar year 2005 because respondent has not sufficiently proved itsc 14 CTA EB No . 59 1, Docke l , pp. 19-20.

CE Luzo n Geo th e rmal Po w e r Com pa ny, In c. v. Cl l~, Page 11 o f 22 CTA EB Case No. 59 1; & CIR v . CE Luzon Geo l hermal Power Company, CTA EB Case No. 628 (CTA Case No. 7558) DECISION e ntitl e m e nt to re fund and that th e c laim was no t filed in accord a nce w ith th e p rocedure presc rib e d by law. 1s Ba se d o n th e fore g o ing iss ues rai se d , th e principal is sue is wh e th e r o r not CE Lu zon is e ntitl e d to its claim for re fund/ c redit in th e am o unt o f P20,546 ,004.87, re prese ntin g un u tilize d input VAT paid o n its d o m es ti c purc ha ses of no n-c apitol good s and servi ces re nd e re d by no n-resid e nts and impo rtati o n o f non-c apitol good s whi c h are a ttributa bl e to ze ro -rate d sol es for c al e ndar ye ar 2005. Ho w e ve r, th e C o urt shall first rul e o n th e iss ue o f pre mature filin g o f th e p e tition fo r re vi e w rai se d by th e CIR. Th e CIR vigorou sly argu es, am o ng oth e rs , that CE Lu zon's p e tition fo r re vi e w fil e d b e fo re th e Co urt a q uo wa s pre mature fo r failure to adh e re with th e on e hundre d twe nty (120) -day p e ri o d provid e d und e r Sec tion 112(0) o f th e NIRC o f 199 7, a s am e nd e d. Th e CIR maintain s that CE Lu zo n ca n o nly app e al b e fo re thi s Co urt within thirty (30) days rec ko ne d from th e e xpirati o n o f th e 120-doy p e ri o d grante d by low or fro m receipt o f th e d ec isio n d e nyin g th e cl aim for re fund. He nce, in vi ew o f C E Luzo n 's failure to submit th e co mpl e te d oc um e nt s in support o f its admini strativ e claim fo r re fund , th e 120-doy p e ri o d start e d to run(. 1s CTA EB No. 628, Docke t, p . 4.

CE Luzon Geo th e rmal Power Company, Inc. v. CIR, Pag e 12 o f 22 CT A EB Case No. 591; & CIR v. CE Luzon Geo lhe rmal Power Co m pany, CTA EB Case No. 628 (CT A Case No . 7558) DECISION on th e dat e o f its filing o f admini strativ e claim , i. e . No ve mbe r 30, 2006 , a nd to expire o n Marc h 10, 2007. Thu s, th e ju d ic ial appe al may b e resorte d to o nly within 30 days from Marc h 10, 2007 or until April 9, 2007. Co nsid e rin g that C E Lu zo n fil ed its judic ial app e al o n January 3, 2007, th e CIR co nc lud es that th e C o urt ha s no jurisdic ti o n o ve r th e in stant c a se, pursuant to Sec ti o n 11 2 (D) o f th e 1997 NIRC. In o pp osition , CE Lu zo n a sserts that Sec ti o n 112 (D) o f NIRC o f 199 7, a s am e nd e d , does no t re quire that th e CIR should b e give n th e full 120-day p e ri o d within whi c h to d ecid e o n th e admini strative claim for re fund b e fo re a taxpaye r c an see k judi c ial re m e dy. Inste ad , CE Lu zo n av e rs that th e pre vailin g jurisprud e nce at th e tim e it fil e d its judic ia l cla im fo r re fund is that a taxpaye r has a full two (2)-ye ar p e ri o d rec ko ne d from the date of paym e nt o f tax within whi c h to fil e b o th its administrativ e and judic ial cl aim s fo r VAT re fund . He nce, it should no t b e fa ulte d for adh e rin g to lh e pro vi sio ns o f law, a s w e ll a s pre vailin g jurisprud e nce on th e matte r. We rul e in fav o r o f CIR . Suffice it to say that th e afore -m e ntio ne d issue rai se d by th e CIR is no lo ng e r nove l as th e sam e wa s square ly rai se d and pa ssed upo n in c th e rece nt c a se of Commissioner of Internal Revenue v. Aichi Forging

CE Luzon Geo th e rmal Power Company, In c . v. CIR, Pag e 13 of 22 CTA EB Case No. 591; & CIR v. CE Luzon Geo th e rmal Power Company, CTA EB Case No. 628 (CTA Case No. 7558 ) DECISION Company of Asia, /nc. l6 (the "A ic hi Case"), wherein the Supreme Court finally laid to rest the issue of prescription insofar as the filing of on administrative c laim for unutilized input VAT refund/credit before the CIR and its subsequent judicial appeal b e fore the CTA pursuant to Section 112 of NIRC of 1997, as omendedY Th e pertinent portion of the said dec ision reads : "The pivotal question of when to reckon the running of the two-year prescriptive p eriod, however, has already been resolved in Commissioner of Internal Revenue v. Miront Pogbiloo Corporation [G .R. No. 172129, Sep tember 12, 2008, 565 SCRA 154), where we ruled that Section 112(A) o f the NIRC is the applicable provision in determining th e start of the two-year period for claiming a refund/credit of unutilized input VAT, and that Sections 204 (C) and 229 o f the NIRC ore inapplicable as "both provisions apply only to instances of erroneous payment or illegal collection of internal revenue taxes. XXX x x x To be c lear, Section 112 of the NIRC is the pertinent provision for the refund/credit of input VAT. Thus, the two-year period should be reckoned from the close of the taxable quarter when the sales were made. XXX Respondent's assertion that th e non-observance of the 120- doy period is not fatal to the filing of a judicial claim as long as both the administrative and the judicial claims ore filed w ithin the two-year prescriptive period has no legal basis. There is nothing in Section 112 of the NIRC to support respondent's view. Subsec tion A] of the said Qrovision states that "on VAT-re istered erson whose soles ore zero-rated or effective! zero-rated may, within two years after th e close of th e taxable uorter when the soles were mode a I for the issuance of a tax ( 16 G.R. No. 184823, Oc lober6, 20 10. 17 In o Resolulion doted December 6, 20 10, Ihe Firs I Division o f Ihe Su pre m e Court d e nie d with finolily lh e Motio n fo r Recons id erati o n fil ed by Aichi Forging Company of Asia , Inc. in th e case e ntitl e d: Commi ssio ner o f Int ernal Revenue v. Aichi Forging Company o f Asia, In c, supra nol e 16.

CE Luzon Geo th e rmal Powe r Company, Inc. v. CIR, Page 14 of 22 CT A EB Case No. 591; & CIR v. CE Luzon Geothermal Power Company , CTA EB Case No. 628 (CTA Case No. 7558) DE C ISION credit certificate or refund of creditable input tax due or paid attributable to such soles." 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. This is apparent in th e first paragraph of subsection (D) of th e some provision, which states that the CIR has " 120 days from th e submission of complete documents in support of the application filed in accordance with Subsections (A) and (B)" within which to d ecide on the claim. In fa c t, applying the two-year period to judicial cl aims would re nde r nugatory Section 11 2(0) of th e NIRC, which already provides for a specific period within which a taxpayer should appeal the d ecision or inaction of the CIR. The second paragraph of Section 112(0) of the NIRC envisions two scenarios: (1) when a decision is issued by the Cl R before the lapse of the 120-day period ; and (2) when no decision is made after the 120-day period. In both instances, the taxpayer has 30 days within which to file an appeal with the CTA. As we see it then, the 120-day period is crucial in filing an appeal with the CTA. With regard to Commissioner of Internal Revenue v. Victorias Milling, Co., Inc. [ 130 Phil. 12 ( 1968)] relied upon by respond ent, we find the some inapplicable as th e tax provision involved in that case is Sec1ion 306, now Section 229 of the NIRC. And as already discussed, Section 229 does not apply to re funds/credits of input VAT, such as the instant case. In fine, the premature filing of respondent's claim for refund / credit of input VAT before the CTA warrants a dismissal inasmuch as no jurisdiction was acquired by the CTA. " [Emphasis supplied.] Sign ifican tl y, it is e mphasize d that th e Supreme Cou rt, in interpre ting Section 112 of NIRC of 1997, as amended, distinguished the prescriptive period fo r fi lin g an admin istrative c la im for unutilized inpu t VAT refund/ c re dit before th e CIR from th e co nse qu e nt judicial appea l before this Court. To recapitu late, the fili ng of an administra ti ve cla im(

CE Luzon Geo therma l Power Compa ny , Inc. v. CIR, Page 15 o f 22 CTA EB Case No. 59 1; & CIR v. CE Lu zo n Geo th e rmal Power Company, CTA EB Case No. 628 (CTA Case No. 7558) D E CISION for unutilize d input VAT re fund/ c redit b e fore th e CIR must b e mad e within two (2) years after th e c lose o f th e taxable quarter whe n th e sales w ere made pursuant to Section 112(A) of NIRC of 1997, as amended; w while th e filin g o f a Pe tition for Review with this Court must b e mad e within thirty (30) days reckoned from e ith e r the receipt of th e CIR 's decision d e nying the claim o r afte r th e expiration of th e 120 day-pe riod for th e CIR to act on th e c laim in a cco rdan ce with Section 112(0) o f th e NIRC o f 1997, as amended. 19 Th e Supreme Court clearly and ca tegorica lly rul ed that failure on th e part o f th e taxpaye r to adhere with th e 120-day period under( 18 SEC. 11 2 (A) . Zero-rated or Effective ly Zero-rated Soles. - Any VAT-reg iste red p e rs o n, whose so les ore ze ro -rol ed o r e ffec ti ve ly zero-rat ed may, wi thin lwo (2) years ofler lh e close of lhe taxabl e quarte r when th e so les were mode, apply for lhe issua nce of o tax c red it ce rtifi co l e o r re fund o f cred itable input lox due o r paid o tl ributoble to such soles, excep t trans itiona l in pu t lox, to th e exten t !hot such input tax has not b een applie d against ou tput tax: x x x 19 SEC. 112 (D). Period within which Refund or Tax Credit of Input Taxes shall be Mode. In proper cases, the Commissioner shall grant a refund or issue the tax credit certificate for creditable input taxes within one hundred twenty ( 120) days from the date of submission of complete documents in support of the application fil ed in accordance wilh Subsec tion (A) he reo f. In case o f full or partial den ial o f lhe c laim for lox refund o r lox c redit , or the fai lure on the pori of lhe Commissioner lo ocl on lh e application w ithin lhe 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 hundred twenty -day period , appeal the decision or the unacted claim with the Court of Tax Appeals . [Emphas is supp lied.]

CE Luzon Geo th e rm a l Power Company, Inc. v. CIR, Page 16 o f 22 CT A EB Case No. 59 1; & CIR v. CE Luzon Geo th e rma l Power Com pa ny, C TA EB Case No . 628 (CTA Case No. 7558) DECISION Sec ti o n 11 2(0) o f th e NIRC o f 1997, a s am e nd e d , is c ru c ial in filing his/h e r judic ial app e al b e fore thi s C o urt and th e re fo re warrants a dismissal of th e p e tition . Simply put, "the premature filing of taxpayer's claim for refund/credit of input VAT before the CTA warrants a dismissal inasmuch as no jurisdiction was acquired by the CTA. "2D Applying th e fo re g o in g prece pts 1n th e in stant c a se, it is undisputabl e that CE Lu zo n tim e ly fil e d its admini strativ e claim for unutilize d input VAT re fund/ c re dit for th e fo ur (4) quarte rs of c al e ndar ye ar 2005 b e fo re th e CIR o n No ve mbe r 30 , 2006 a s th e som e wa s fi le d within two (2) ye ars rec ko ne d from th e close o f th e taxable quarter whe n the soles w ere mode pursuant to Sectio n 11 2(A) o f the NIRC of 1997, as am e nded. Ho w e ve r, a s to th e tim e lin ess o f CE Lu zo n 's filing o f judic ial app e al , record s disclo se d that it pre mature ly fil e d its Pe tition for Re vi e w b e fo re thi s C o urt o n January 3, 200 7 o r m e re ly 34 days afte r it fil e d its a ppli ca ti o n fo r re fund b e fo re th e CIR. Cl e arly th e n, CE Lu zo n foil e d to heed o n th e mandatory p e riod o f 120 days, whi c h is c ru c ial in filin g on app ea l with th e CTA, a s he ld in th e Aic hi C a se. He nce, th e filing o f CE Lu zo n 's claim for unutilized input VAT re fund/ c re dit b e fore th e C o urt a quo wa s pre mature as th e re wosC �2 Commissioner o f ln lerna l Revenue v. Aichi Forg ing Compa ny o f Asia, Inc, supra , emphasis supp lied .

CE Luzon Geo th e rma l Power Company, Inc . v. CIR , Pag e 17 o f 22 C TA EB Case No. 59 1; & CIR v. CE Luzo n Geothe rm a l Powe r Com pa ny , CTA EB Case No. 628 (CTA Case No. 7558) DECISION ye t no d ec isio n o f th e CIR fo r thi s C o urt to re vi e w nor wa s th e re ina c ti o n o n th e port o f th e CIR afte r th e lapse o f th e 120-doy p e ri o d provid e d und e r Sec ti o n 112(0) o f th e NIRC o f 199 7, as am e nd e d. Th e re fore, fo ll o win g th e rul e laid d o wn in Aic hi C a se, th e p e titi o n fo r re vi e w fil e d b e fo re this C o urt warrants a dismi ss al ina smu c h a s no jurisdic tio n was ac quire d by th e C o urt a q uo to lake cog nizan ce o f th e c a se. Time and again , jurisprud e nce is re pl e te with c a ses holding that t he Co urt o f Tax Appe al s is a co urt o f speci al juri sdic ti o n a nd c on o nly to ke cog n1zo nce o f suc h matte rs as ore c lea rly within its jurisdic ti o n .7 1 Pursuant to Sec tio n 7 o f Re p ublic Ac t (R.A.) No . 9282, a m e nd in g R.A. No . 11 25, o th e rwise kn o wn as th e La w C re atin g th e Co urt o f Tax A pp e als, and Sec tio n 3, Rule 4 an d Sec tio n 3 (a) , Rule 8 o f th e Re vised Rules o f th e Co urt o f Tax Appe als, it is e vid e ntly cl e ar that " th e jurisdic ti o n o f th e C o urt of Tax App e al s has b ee n expand e d to in clu d e no t o nly d ec isio ns o r rulin gs but in ac ti o n as w e ll of th e Com missio ne r o f Inte rnal Re ve nu e ." ?? M ore importantly, " th e d ecisions, rulin gs or ina c tio n o f th e Co mmissio n er o re necessary in order to ves t th e Co urt o f Ta x Appe als with jurisdic tio n to e nte rtain th e appe al," 23 p ro vi ded it is fil e d within 30 days afte r th e receipt o f suc h d ecisio n or( 21 Rizo l Co mm e rc ial Bonking C o rp . vs. Co mmissio ne r o f Inf e rno/ Re ve nue, G. R. No . 168 498 , April 24, 2007 , 522 SCRA 144. 22 fd . 23 fd .

CE Luzon Geo lh e rmal Power Compa ny, Inc . v. CIR, Page 18 of 22 CTA EB Case No. 591; & CIR v. CE Luzon Geo th ermal Power Company, CTA EB Case No. 628 (CT A Case No. 7558 ) DECISION ruling , or within 30 days afte r th e expiration of th e 120-day period prescribed und e r Section 11 2 (D) o f th e NIRC of 1997 for th e Commissioner to act on th e c laim for tax re fund/ c redit. 711 Anent CE Luzo n 's re lian ce on Atlas Consolidated Mining Development Corp o ration v. Commissioner o f Internal Revenue 7~) (the " Atlas Case" ) where th e Supre m e Court, in reso lvin g a c laim for re fund/ c red it o f unuti lize d input VAT on its purchases of c apital goods and o n its ze ro-rat ed sa les cove rin g th e ta xab le years 1990 and 1992, harmonized th e provisions und e r Sections 106 and 230 of th e 1977 Tax Code, as amended, (n o w Sections 11 2 and 229 of NIRC of 1997, as amended) and he ld that " it is m o re practical and reaso nable to count th e two-year prescriptiv e period for filing a c laim fo r re fund/credit of input VAT o n zero-rated soles from th e dote o f filing o f the re turn and payment o f th e tax due xxx" 76 is misplaced. A ca reful ana lysis of the Atlas Case revea ls that th e doc trin e set forth th e re in is not applicab le in th e in sta nt case as it was an inte rpre tation by th e Supre m e Court o f th e provisions und e r th e NIRC o f( 24 See Co mmissioner of Inte rn a l Revenue v. Aichi Forging Co mpany o f Asia, In c ., supra. 25 G.R. Nos . 14 11 04 & 148763, Jun e 8, 2007. 26 1d .

CE Lu zon G e ol he rma l Power Company , Inc . v . CIR , Pag e 19 o f 22 C TA EB C as e No . 59 1; & CIR v. CE Lu zon Geo the rmal Powe r C o m pany , C TA EB C as e No . 628 (C TA C ase No. 7558) DE C ISION 1977, as am e nd e d , pnor to its am e ndme nt by R.A. No. 77 1627 whic h substa ntia lly a m e nde d severa l pro v1 s1o ns o f th e NIRC of 1977, a s am e nd e d , including Se ction 106 th e reo f. No tably, it must b e und e rscore d that prior to th e pa ss a ge o f R.A. 7716, th e re wa s no sp ec ific pro vi sio n o n judic ial cla im for unutilized input VAT re fund/ c re dit und e r Sec tio n 106 o f the 197 7 NIRC , a s am e nd e d . He nce, this e xplain s th e ra ti o na le for th e nee d by th e Supre m e Court in th e Atlas C a se to harm o nize th e p ro vi sio ns o n Re fund s or Tax Credits of Input Ta x und e r Sec ti o n 106 (n o w Sec tion 112) with th e two-ye ar pre sc riptiv e p e ri o d for in stitutin g a suit or proceedin g fo r th e Recovery o f Tax Erro neo usly or Ill eg ally Collec te d und e r Sec ti o n 230 (n o w Sec ti o n 229) o f th e NIRC o f 1977, a s am e nd e d . Accordin g ly, with the pa ss a ge o f R.A. No. 77 16, a s am e nd e d by R.A. No. 8424713 and R.A. No. 933 779, wh e re b y th e Leg isla ture c le arly and sp ecific al ly p ro vid e d fo r th e presc ripti ve peri od 1n fi lin g on admi nistra tiv e cl aim and a judic ia l a pp e al fo r unuti lize d input V A T~ 27 An Ac l Re slruc luring the Va lue -Add e d Tax (Val) Syste m , Wid e ning its Tax Bas e and Enhanc ing ils Admin istra lio n , And For Th ese Purposes Am e nding and Re p e a li ng Th e Re le van l Provisio ns of the Na lio na l lnl e rnal Re ve nue Co d e, as Am e nd e d , and for O ther Purpos e s. 28 An Ac t Am e nding The Na ti onal Inte rn a l Re ve nue C od e, As Am e nded , And For O lhe r Purp o ses. 29 An Ac t Am e nding Sec ti o ns 27, 28, 34 , I 06 , 107, 108, 109 , 110, 11 I , 11 2, 113, 11 4, 116, 11 7, 11 9, 12 1, 148, 15 1, 23 6, 237 and 288 o f Ihe Na lio na l ln le rnal Re ve nue Cod e o f 199 7, As Am e nd ed, and For O th e r Purposes .

CE Luzon Geo th ermal Power Company, Inc. v. CIR, Page 20 of 22 CTA EB Case No. 59 1; & CIR v. CE Luzon Geot he rmal Power Com pany, CTA EB Case No. 628 (CTA Case No. 7558) DECISION refund/credit under Section 11 2 of the 199 7 NIRC , as amended, th e need to harmonize th e provi sions under Sections 112 and 229 of the NIRC of 1997, as amended , (form e rly Sections 106 and 230) is no long er applicable. As to G ibbs v. Co llec tor o f Inte rnal Revenue 3o and College o f Ora l & Dental Surg ery v. Court of Tax Appeals, et a/.3 1 similarly relied upon by CE Luzo n, We find th e same equa lly inapplicab le as th e tax provision invo lved in th ose cases is Section 306 o f the NIRC (n ow Section 229 of the NIRC of 1997, as am e nd ed ). Th e Supre m e Court he ld in the Aichi Case that Section 229 of the NIRC of 1997, as amended, does not apply to cla im s for re funds/credits o f unutilized input VAT under Sec ti on 11 2 of th e NIR C of 1997, as amended. Settled is the rul e that "tax refunds are 1n th e nature of tax exemp ti ons which are cons tru ed strictissimi juris against th e taxpaye r and libe rally in favor of th e government." J? He nce, strict co mplian ce with ta x laws, specifica lly with the requisit es set forth under Section 112 (D) o f th e NIRC o f 199 7, should be applied in thi s jurisdiction ,( 30 G.R. No. L- 13453, Fe bruary 29, 1960. 31 G.R . No. L- 10446, January 28, 1958. 32 Comm issioner o f Internal Revenue v. Acosta, G.R. No. 154068, August 3, 2007.

CE Luzon Geotherma l Power Company, Inc. v. CIR , Page 2 1 of 22 C TA EB Case No. 59 1; & CIR v. CE Luzon Geo th e rmal Power Company, CTA EB Case No . 628 (CTA Case No . 7558) D E CISION co nsid e rin g that taxes ore th e life bl oo d of th e governmen t and th e pri ce w e pay for c ivilization. In vi e w o f thi s Court 's finding that th e Court a quo acquired no jurisdic ti on over th e in stant case, We find no cogen t reason to further disc uss th e o th e r issues rai se d by both pa rti es in their respective Pe titions for Re vi e w. WHEREFORE , premis es co nsid e re d , th e Pe titi on for Re view fil e d by th e Commission e r of Inte rnal Reve nu e is he re by GRANTED ; whil e th e Petition for Review fi led by CE Lu zon Geothermal Power Company, Inc. is he reb y DENIED . According ly, th e Decision dote d Jun e 24, 2009 and th e Am e nd e d Dec ision dote d January 19, 20 10 ore he reby SET ASIDE . Th e Pe tition for Review docketed as CTA Case No. 7558 is hereby DISMISSED for having b ee n pre mature ly fil ed. SO ORDERED . WE CONCUR: ~ N.M~ . C~ CIELITO N. MINDARO -GRULLA Associ ate Justice ~ ~ ~' 0---.~-- (with Concurring and Dissenting Opinio n) ERNESTO D. ACOSTA Presiding Justice

CE Lu zon Geo the rma l Powe r C ompany , In c. v . CIR , Pag e 22 o f 22 CTA EB C ase No . 59 1; & CIR v . CE Luzo n Geo the rmal Po w er Co mpany , CT A EB C ase No. 628 (CTA Case No . 7558 ) D E CISION ~c. C'J-~~ /Q., . (with Se p qU ANITO -C . CASTANEDA, JR ~ LOVELL Associa te Ju sti ce A ssoc i � ~ AsEsRo~ L~~~sUtiYce CAESAR A. CASANOVA ~~ OLGA PALANCA - ENRIQUEZ Associate Justi ce (c~~rrf(fs;-:i::;:Losto) AMELIA R. COTANGCO -MANALASTAS Associate Ju sti ce CERTIFICATION Pursua nt to Article VIII , Sec tio n 13 o f th e Co nstit u ti o n, it is he reby ce rtified th a t th e co nc lusio ns in the a b ov e Reso lutio n were reac he d in co nsu ltati o n am o ng th e m e m bers o f the Co urt En Bone b e fore th e c a se w a s assig ne d to th e write r o f th e o pini o n o f th e Co urt En Bone. L~;o. ~~L-.--,r... ERNESTO D. ACOSTA Presiding Ju stic e

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY EN BANC CE LUZON GEOTHERMAL POWER CTA EB NO. 591 COMPANY, INC. (CTA Case No. 7558) Petitioner, -versus- COMMISSIONER OF INTERNAL REVENUE, Respondent. X ------------------------------------------- X. COMMISSIONER OF INTERNAL CTA EB NO. 628 REVENUE, (CTA Case No_. 7558) Petitioner, Present: -versus- ACOSTA, PJ. CASTANEDA, Jr., BAUTISTA, UY, CASANOVA, PALANCA-ENRIQUEZ, FABON-VICTORINO, MINDARO-GRULLA, COTANGCO-MANALASTAS,JJ. CE LUZON GEOTHERMAL POWER Promulgated: /. .... ~XJftn~~ COMPANY, INC. Respondent. OCT 0 4 2011 1.1PV P 1 n" , x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x CONCURRING AND DISSENTING OPINION Acosta, PJ: Although I concur in the final disposition of the case, I respectfully dissent to the ground relied upon by the majority Decision, penned by the Honorable Justice Cielito N. Mindaro-Grulla, in granting the Commissioner Internal Revenue's (CIR)

Conct~rring and DiSJenling Opinion C I"A EB Nos. 591 and 628 Page 2 of9 Petition for Review; consequently, denying the one filed by CE Luzon Geothermal Power Company, Inc. (CE Luzon). With all due respect to my esteemed colleagues, I cannot subscribe to their position that the Court has no jurisdiction over a prematurely filed judicial claim for a refund covering unutilized input Value Added Tax (VAT) attributable to zero-rated or effectively zero-rated sales under Section 112 of the National Internal Revenue Code (NIRC). It is my humble opinion that this Court has jurisdiction to entertain such a refund case for excessjunutilized input VAT albeit prematurely elevated from the administrative level. Be that as it may, I vote in favor of the CIR's petition mainly due to the fact that CE Luzon failed to establish that it is a VAT-registered person, whose sales are zero-rated or effectively zero-rated, and is thus entitled to a refund or tax credit of its unutilized input VAT under Section 112 of the NIRC. As found by the Court in Division, CE Luzon is a corporation duly organized and existing under and by virtue of the laws of the Republic of the Philippines. It is engaged in the business of power generation and is registered as a VAT taxpayer with the Bureau of Internal Revenue (BIR). It anchors its VAT-zero rating status on paragraph, Section 6 of the Electric Power Industry Reform Act of 2001 (EPIRA). Said Section reads: SEC. 6. Generation Sector. - Generation of electric power, a business affected with public interest, shall be competitive and open. Upon the effectivity of this Act, any new generation company shall, before it operates, secure from the Energy Regulatory Commission (ERC) a certificate of compliance pursuant to the standards set forth in this Act, as well as health, safety and environmental clearances from the appropriate government agencies under existing laws. Any law to the contrary notwithstanding, power generation shall not be considered a public utility operation. For this purpose, any person or entity

CnnC11ning and Dissenting Opinion CTA EB Nos. 591 and 628 Page 3 of9 engaged or which shall engage in power generation and supply of electricity shall not be required to secure a national franchise. Upon implementation of retail competition and open access, the prices charged by a generation company for the supply of electricity shall not be subject to regulation by the ERC except as otherwise provided in this Act. Pursuant to the objective of lowering electricity rates to end-users, sales of generated power by generation companies shall be value added tax zero-rated. The ERC shall, in determining the existence of market power abuse or anti- competitive behavior, require from generation companies the submission of their financial statements. (Underscoring supplied.) Under the EPIRA, clearly, the VAT-zero rating not only attaches to the product sold but also to the nature of the taxpayer. In order for sales of generated power to be VAT zero-rated, the sale should be effected by a generation company. Although CE Luzon, by virtue of a Certification of Accreditation from the Department of Energy (DOE), has been engaged in the business of power generation even prior to the effectivity of the EPIRA on 26 June 2001, it must first be considered a "generation company' under the law and its implementing rules in order for it to qualify for the VAT zero-rating under the aforequoted section of the EPIRA. Per the EPIRA and its implementing rules, a generation company refers to any person or entity authorized by the Energy Regulatory Commission (ERC) to operate facilities used in the generation of electricity. Section 4, Rule 5 of the law's Implementing Rules and Regulations also provides that- Section 4. Obligations of a Generation Company (a) A [Certificate of Compliance (COC)] shall be secured from the ERC before commercial operation of a new Generation Facility. The COC shall stipulate all obligations of a Generation Company consistent with this Section and such other operating guidelines as ERC may establish. The ERC shall establish and publish the standards and requirements for issuance of a COC. A COC shall be issued upon compliance with such standards and requirements.

ConC11rring and Dissenting Opini011 CTA EB Nos. 591 and 628 Page+ of9 (i) A Person owning an existing Generation Facility or a Generation Facility under construction, shall submit within ninety (90) days from effectivity of these Rules to ERC. when applicable a certificate of DOE/NPC accreditation, a three (3) year operational history, a general company profile and other information that ERC may require. Upon making a complete submission to the ERC. such Person shall be issued a COC by the ERC to operate such existing Generation Facility. (ii) A Generation Facility which has been previously issued a COC shall not be required to secure a COC even if acquired by a new owner: Provided, That such new owner shall register with the ERC as specified above. Upon registration, such Person shall be deemed authorized to operate such Generation Facility. XXX (Underscoring supplied.) Thus it is essential for CE Luzon to have first secured a COC under the implementing rules and regulations of the EPIRA before it can be considered a generation company and entitled to the VAT zero-rating. Based from the facts of the case, CE Luzon only has the certification from the DOE, which is merely one of the requirements, as stated in the aforequoted section above, for a COC from the ERC. It is not the COC required by the rules. The VAT therefore attributable to the sale of generated power by CE Luzon cannot be considered as zero-rated or effectively zero-rated under the EPIRA and Section 112 of the NIRC; and thus any input VAT due therefrom can only be credited against output tax, or any excess thereof be carried over to the succeeding quarter or quarters, as provided under Section 1101 of the NIRC. Consequently, a claim for refund, administrative or judicial, cannot prosper. 1 Section 110. Tax Credits. - A. Creditable Input Tax - (1) Any input tax evidenced by a VAT invoice or official receipt issued in accordance with Section 113 hereof on the following transactions shall be creditable against the output tax: XXX

ConC11rring and Dissenling Opinion CTA EB Nos. 591 aJI(/628 Page5 of9 Nonetheless, I maintain this position only for CE Luzon 's claim covering the first three quarters and a portion of the last quarter of 2005. For the said period, CE Luzon cannot refund its excess input VAT because its sales were not qualified for VAT zero-rating under the EPIRA. For the last quarter of the year 2005, particularly after 01 November 2005, when the NIRC was amended by Republic Act No. 9337, whereas I still vote for the denial of the refund claim, I do so however on the ground that the claim failed to state a cause of action, the judicial claim having been prematurely filed. In view of the promulgation of Republic Act No. 9337 on 01 November 2005, which expressly repealed 2 the VAT zero-rating for generation companies and instead placed the VAT zero-rating on the sale of power or fuel generated through renewable sources of energy, under the NIRC 3 , a portion of CE Luzon's fourth quarter sales for 2005 of generated power thus became zero-rated. B. Excess Output or Input Tax - If at the end of any taxable quarter the output tax exceeds the input tax, the excess shall be paid by the Vat-registered person . If the input tax exceeds the output tax, the excess shall be carried over to the succeeding quarter or quarters. any input tax attributable to the purchase of capital goods or to zero-rated sales by a VAT-registered person may at his option be refunded or credited against other internal revenue taxes, subject to the provisions of Section 112. 2 SEC. 24. Repealing Clause. - The following laws or provisions of laws are hereby repealed and the persons and/or transactions affected herein are made subject to the value-added tax subject to the provisions of Title IV of the National Internal Revenue Code of 1997, as amended : ...(B) Section 6, fifth paragraph of R.A. No. 9136 on the zero VAT rate imposed on the sales of generated power by generation companies; and XXX . 3 SEC. 108. Value-added Tax on Sale ofServices and Use or Lease ofProperties. - XXX (B) Transactions Subject to Zero Percent (0%) Rate.- The following services performed in the Philippines by VAT-registered persons shall be subject to zero percent (0% ) rate XXX (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 technologies such as fuel cells and hydrogen fuels .

ConCIIrring and Dissenting Opinion CTA EB Nos. 591 and 628 Page 6 of9 All the same, this portion of CE Luzon's petition should still be dismissed as its Petition for Review was prematurely filed per Section 112 (C). CE Luzon's failure to exhaust the administrative remedy available thereto is fatal to its claim before this Court. The Petition for Review before the Court in Division was filed on 03 January 2007, thirty four days after its timely administrative claim with the SIR on 30 November 2006. From the bare facts, it is evident that the judicial claim was filed before the issuance of an adverse decision by the SIR, or the lapse of the one hundred twenty (120) day period mandated by Section 112 (C) of the NIRC, which covers refund claims of this nature, viz. SEC. 112. Refunds or Tax Credits ofInput Tax. - ...(C) Period within which Refund or Tax Credit ofInput Taxes shall be Made. - In proper cases, the Commissioner shall grant a refund or issue the tax credit certificate for creditable input taxes within one hundred twenty (120) days from the date of submission of complete documents in support of the application filed in accordance with Subsection (A) hereof. In case of full or partial denial of the claim for tax refund or tax credit, or the failure on the part of the Commissioner to 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 hundred twenty day-period, appeal the decision or the unacted claim with the Court of Tax Appeals. XXX (Underscoring supplied.) In not joining the majority in this matter, I advance the view that the failure of petitioner to comply with the above subsection does not rob this Court of jurisdiction over the claim for refund as such merely constitutes a violation of the doctrine of exhaustion of administrative remedies .

Conmmng and Dissenting Opinion CTA EB Nos. 591 and 628 Page 7 of9 The rule on exhaustion of administrative remedies before resorting to the courts means that there should be an orderly procedure which favors a preliminary administrative sifting process, particularly with respect to matters peculiar within the competence of the administrative agency, avoidance of interference with functions of such administrative agency by withholding judicial action until the administrative process has run its course, and prevention of attempts to swamp the courts by a resort to them in the first instance. 4 A party seeking an administrative remedy must not merely initiate the prescribed administrative procedure to obtain relief, but also pursue it to its appropriate conclusion before seeking judicial intervention in order to give the administrative agency an opportunity to decide the matter itself correctly and prevent unnecessary and premature resort to court action. 5 The non-exhaustion of administrative remedies is however not at all times fatalto the claimant. In the case of Castro vs. Gloria, GR No. 132174, 20 August 2001, the Supreme Court, citing the case of Vidad vs. RTC of Negros Oriental, Branch 42 6, declared that- Non-exhaustion of administrative remedies implies absence of cause of action. Where a remedy is available within the administrative machinery, this should be resorted to before recourse can be made to the courts. The doctrine of primary jurisdiction does not warrant a court to arrogate unto itself the authority to resolve a controversy the jurisdiction over which is initially lodged with an administrative body of special competence. (Underscoring supplied.) The failure to exhaust available administrative remedies will not rob the courts of its jurisdiction over a case as the same is tantamount only to a judicial 4 Abe-Abe vs. Manta, L-4827, 31 May 1979. 5 Commissioner ofInternal Revenue vs. Rosemarie Acosta, GR No. 154068, 03 August 2007. 6 227 SCRA 221 .

ConC71ning and Dissenling Opinion CTA EB Nos. 591 and 628 Page 8 of9 petition lacking a cause of action. In our jurisdiction, the defense of lack of cause of action is not jurisdictional in nature and may be deemed waived if not timely raised in a Motion to Dismiss or in the Answer. 7 In the case of Iloilo City Zoning Board of Adjustment and Appeals vs. Gegato Abecia Funeral Homes, Inc., GR No. 157118, 08 December 2003, the Supreme Court established that the premature invocation of the court's intervention is thus only fatal to one's cause of action. The case though is susceptible of dismissal for such failure to state a cause of action absent any finding of waiver or estoppel, viz. The settled rule is that before a party is allowed to seek the intervention of the court, it is a pre-condition that he should have availed of all the means of administrative processes afforded him. Hence, if a remedy within the administrative machinery can still be resorted to by giving the administrative officer concerned every opportunity to decide on a matter that comes within his jurisdiction, then such remedy should be exhausted first before the court's judicial power can be sought. The premature invocation of the court's intervention is fatal to one's cause of action. Accordingly, absent any finding of waiver or estoppels the case is susceptible of dismissal for failure to state a cause of action. This doctrine of exhaustion of administrative remedies is not without practical and legal reasons, for one thing, availment of administrative remedy entails lesser expenses and provides for a speedier disposition of controversies. It is no less true to state that courts of justice for reasons of comity and convenience will shy away from a dispute until the system of administrative redress has been completed and complied with so as to give the administrative agency concerned every opportunity to correct its error and to dispose of the case. 8 Notably, in the instant case, there was the absence of waiver by respondent of the defense of non-exhaustion of administrative remedies or the lack of a cause of action, as she raised the issue of petitioner's premature filing of the Petition for Review in her Special and Administrative Defenses contained in her Answer, viz. 7 Sec. 1, Rule 9 of the Rules of Court. 8 Citing Paat v. Court ofAppeals, 334 Phil. 146, 152-153 (1997)

Conmrring and Dissenting Opinion crA EB Nos. 591 and 628 Page 9 of9 ...(8) The petition for review is premature. Since petitioner did not submit complete documents in support of its administrative claim for refund as indicated under Section 112(0) of the NIRC of 1997, the 120-day period starts to run on 30 November 2006, the date when it filed its administrative claim for refund. The said period is yet to expire on 10 March 2007. Hence the 30-day period within which to file the petition for review before this Honorable Court is yet to expire on 9 April 2007. This being so, this Honorable Court has no jurisdiction to act on the instant petition for review. Without touching on this Court's jurisdiction, the premature filing of the Petition for Review exposes it to an attack that it lacks or fails to state a cause of action, which defense is waivable at the election of the opposing party. Upon a finding that there was no waiver of said defense or estoppel, the petition is susceptible of dismissal. Since there was clearly no waiver or estoppel in the instant case, the portion of the petition, covering claims after 01 November 2005, should likewise be properly dismissed on the ground that it states no cause of action. We concur: Ll�;'. oz:--,;<-_ ERNESTO D. ACOSTA Presiding Justice L.,;./=>/f-~4~ A~~~~OTANGCO-MANALASTAS Associate Justice

REPUBLIC OF THE PHILIPPINES. ... ~ COURT OF TAX APPEALS QUEZON CITY ENBANC CE LUZON GEOTHERMAL CTA EB NO. 591 POWER COMPANY, INC., (CTA Case No. 7558) Petitioner, -versu s- COMMISSIONER OF INTERNAL CTA EB NO. 628 REVENUE, (CTA Case No. 7558) Resp ondent. x----------------------------------------------x COMMISSIONER OF INTERNAL REVENUE, Pe tition er, -versu s- Present: Acosta, P.J. Castaneda, Jr., Bautista, Uy, Casanov a, Palanca-Enriquez, Fabon-Victorino, Mindaro-Grulla, and Cotangco-Manalastas, JJ. CE LUZON GEOTHERMAL Promulgated : POWER COMPANY, INC., ft~Ar!t>-1~ Resp ondent. rr 'Y\. , c , ~~-=.....-:....:..-........,__ ___L � ~ .t'(. r X-------------------------------------------------------------------------------------------------------------X SEPARATE OPINION BAUTISTA, [.: While I am in h armon y with the Court in granting the Petition for Review filed by the Commission er of Internal Revenue, and thus dismissing the Pe tition for Review filed by CE Luzon Geothermal Power Company, Inc., I am compelled to vary from the basis of the said opinion of the Court.

Separate Opinion CTA EB Nos. 59 1 & 628 (CTA Case No. 7558) Settled is the rule that a claim for refund is in the nature of a claim for exemption; hence, it should be construed in strictissimi juris against the taxpayer.1 Therefore before any claim for refund is allowed, a taxpayer must sufficiently prove that it has complied with all the requirements. Pursuant to Section 112(A) of the 1997 NIRC, CE Luzon must comply with the following requisites to be entitled to a refund of its input tax, viz.: 1. That there must be zero-rated or effectively zero-rated sales; 2. That input taxes were incurred or paid; 3. That such input VAT payments are directly attributable to zero-rated sales or effectively zero-rated sales; 4. That the input VAT payments were not applied against any output VAT liability; and 5. That the claim for refund was filed within the two-year prescriptive period. Following the above-enumerated requirements, a determination must be made whether the generation services rendered by CE Luzon to Philippine National Oil Company - Energy Development Corporation ("PNOC-EDC") for the four quarters of 2005 qualified for VAT zero-rating. Once a court acquires jurisdiction over a case, it has wide discretion to look upon matters which, although not raised as an issue, would give life and meaning to the law.2 In light of the foregoing, this Court has the authority to revisit the issue of whether or not petitioner's sales qualify for zero-rated VAT h�ansaction. 1 Commiss ioner of In ternal Revenue v. Tokyo Sh ippin g Co., Ltd ., eta/. , G.R. No. L-68252 May 26, 1995 , 244 SCRA 332 . 2 Com ilan g v. Burcena, G .R. No. 146853 , Fe bruary 13, 2006, 482 SCRA 342 .

Sep ara te Opinion CTA EB Nos. 59 1 & 628 (CIA Case No. 7558) By CE Luzon's own disclosure, it is in the business of power generation for which it has the requisite Department of Energy ("DOE") Certification of Accreditation.3 In order for its sale of electricity as a power generation company qualify for VAT zero-rating, it must fall under Section 6 of Republic Act ("R.A." ) No. 9136, also known as the "Electric Power Industry Reform Act of 2001," (" EPIRA"), which s t a tes: SEC. 6. Generation Sector. - Generation of elech�ic power, a busin ess affected with public interest shall be competitive and open. Upon the effectivity of this Act, any new generation company shall, before it operates, secure from the Energy Regulatory Commission (ERC) a certificate of compliance pursuant to the standards set forth in. this Act, as well as health, safety and environmental clearances from the appropriate government agencies under existing laws. Any law to the conh�ary notwithstanding, power generation shall not be considered a public utility operation. For this purpose, any person or entity engaged or which shall engage in power generation and supply of electricity shall not be required to secure a national franchise. Upon the implementation of retail competition and open access, the prices charged by a generation company for the supply of elech�icity shall not be subject to regulation by the ERC except as otherwise provided in this Act. Pursuant to the objective of lowering elech�icity rates to end- users, sales of generated power by generation companies shall be value added tax zero-rated. In the case of Mindanao I Geothermal Partnership v. Commissioner of Internal Revenue,4 this Court, in applying the provisions of R.A. No. 9136, specified the conditions to qualify for VAT zero-rating of power generating companies, viz: 3 Exhibit "B. " I

Separa te Opinion CTA EB Nos. 59 1 & 628 (CTA Case No. 7558) xxx it is undisputed that Republic Act No. 9136 otherwise known as the "Elech�ic Power Indush�y Reform Act of 2001" provided for VAT zero-ratin g of sales of generated power by generation companies begimling June 26, 2001. Thus, the pertinent provisions of the National Internal Revenue Code of 1997 are deemed amended by the provisions of R.A. No. 9136 by modifying the VAT rate applicable to sales of generated power by generation companies from ten (10 %) percent to zero (0 %) percent. To qualify for VAT zero-rating under R.A. No. 9136, petitioner must prove that: 1) it is a generation company and 2) it derived sales from power generation. (Boldfacing supplied) From the above quoted decision, for a power gen eration company to qualify for VAT zero-rating in accordance with R.A. No. 9136, petitioner must prove the twin requirements of being a generation company and of deriving its sales from power generation. Notwithstanding the repeal of RA 9136 under RA 9337, which took effect on November 1, 2005, petitioner's sale of generated power continu ed to be VAT zero- rated under Section 108(B)(7) of the 1997 NIRC, as amended by RA 9337. 4 CTA Case 6788 , October 13, 2005. I

Separa te Opinion CT A EB Nos. 59 1 & 628 (CT A Case No . 7558) According to the records, CE Luzon owns and operates a 180-megawatt power plant facility located in Mahanagdong, Province of Leyte, which has been accredited by the Department of Energy, as a Block Power Production Facility (BPPF), since June 15, 1994. It is engaged in the business of power generation and the subsequent sale of generated power to PNOC-EDC. Before the Court can conclude that CE Luzon is a generation company based upon the above cited case and provision of law, a comprehensive study of the entire law and its implementing rules and regulation must be conducted. Under Section 4(x) of the EPIRA, the term" generation company" is defined as follows: Section 4. Definition of Terms.- XXX XXX XXX (x) "Generation Company" refers to any person or entity authorized by the ERC5 to operate facilities used in the generation of elech�icity; xxx Corollary thereto, Section 4 of Rule 5 of the Implementing Rules and Regulations ("IRR") of the EPIRA provides the following: Section 4. Obligations ofa Generation Company. (a) A COC6 shall be secured from the ERC before commercial operation of a new Generation Facility. The COC shall stipulate all obligations of a Generation Company consistent with this Section and such other operating guidelines as ERC may establish. The ERC shall establish and publish the standards and requirements for issuance of a COC. A COC shall be issued upon compliance with such standards and requirements. 5 Energy Regul atory Commi ss ion. 6 Certificate of Compli ance .

Separate Opinion CTA EB Nos . 591 & 628 (CfA Case No. 7558) (i) A Person owning an existing Generation Facility or a Generation Facility under consh�uction, shall submit within ninety (90) days from effectivity of these Rules to ERC, when applicable, a certificate of DOE/NPC accreditation, a three (3) year operation history, a general company profile and other information that ERC may require. Upon making a complete submission to the ERC, such Person shall be issued a COC by ERC to operate such existing Generation Facility. Under the EPIRA, part of the obligations of a "generation company" includes the submission within the period ninety (90) days from the effectivity of the Rules to ERC, when applicable, a certificate of DOP/NPCS accreditation, a three (3) year operation history, a general company profile and other information that ERC may require. Upon completion of these requirements, the said generation company shall be issued a COC by ERC to operate such existing generation facility. Thus, the authority to operate a generation facility as a generation company referred to in the preceding provisions pertains to the duly issued COC which must be secured by both a new generation company and an existing generation company to operate a new and existing generation facility, respectively. In the case of Toledo Power Company v. Commissioner of Internal Revenue,9 the Court ruled that failure of the claimant to submit proof of its approved COC will lead to the disqualification for VAT zero-rating of its sales of generated power under the EPIRA. 7 Department of Energy. 8 National Power Corporation. 9 CTA Case No. 696 1, November II , 2009

Separate Opinio n CTA EB Nos. 59 1 & 628 (CT A Case No. 7558) Again in GBH Power Resources, Inc. [Formerly: Mirant (Philippines) Island Generation Corporation] v . Commissioner of Internal Revenue,10 the Court held that GBH failed to establish that it was a generation company under Section 4(x) in relation to Section 6 of the Elech�ic Power Industry Reform Act of 2001. Petitioner therein failed to submit its ERC registration and Certificate of Compliance, thus it cannot qualify for VAT zero-rating under the EPIRA. Based on the records of the case, CE Luzon has been accredited and certified by the DOE, as evidenced by its Certificate of Accreditation (OSAC94-12) issued on June 15, 199411 . The Court, however, finds the said certificate to be insufficient. The DOE Certificate of Accreditation is merely one of the requirements mentioned earlier in order to obtain the necessary COC for CE Luzon's sales to qualify for VAT zero-rating. CE Luzon in its Prefatory Statement itself invokes the provisions of the EPIRA Law. It is asking the Court to recognize that its sale transactions are zero-rated, based on the fact that it has a DOE Certification of Accreditation in accordance with the said law. It would only be logical to determine the eligibility of the said sales h�ansactions based on the requirements set in the EPIRA Law itself. Petitioner must comply with Section 4(a)(i) of Rule 5 of the IRR of the same law, which particularly provides for the required COC to be considered a generation company. Therefore, for failure to present or even secure a COC duly issued by the ERC, petitioner's sale of generated power cannot qualify for VAT zero-rating under the �1 CTA Case No. 7462, March 26, 20 10 I 11 Exhibit "B."

Separa te Opinion CTA EB Nos. 591 & 628 (CTA Case No. 7558) EPIRA Law.12 Th e burden of proof to present this particular document lies w ithin the responsibility of the p etitioner to successfully support its claim for refund. Where the taxp ayer claims a refund, the Court as a court of record is required to conduct a formal trial (trial de novo) to prove every minute asp ect of the claim.13 In addition, the rule is that the best evidence under the circumstan ce must be adduced to prove the allegations in a complaint, p e tition, or protest. Considering that there is no record showing that CE Luzon h as been duly issu ed w ith a COC by the ERC, the Court En Bane find s it unnecessary to further discu ss the other issu es raised CE Luzon, and the issu es raised by the CIR in its Petition for Review. In sum, I have no recourse but to deny CE Luzon's claim for refund / tax credit, and therefore, grant the prayer of the CIR. Accordingly, I vo te to GRANT the Petition for Review filed by the Commission er of Internal Revenue, and thus, DENY the Petition for Review filed by CE Luzon Geothermal Power Company, Inc. LO ISTA 12 Toledo Power Company v. Commiss ioner of Internal Revenue, CTA Case Nos . 7233 & 7294, December 15, 2009. " Commiss ioner of internal Revenue v. Manil a Mining Corporati on, G .R. No. 153204, August 3 1, 2005 , 469 SCRA 57 1.