Commissioner of Internal Revenue v. Vestas Services Philippines
REITERATIONFacts
The Antecedents: Respondent Vestas Services Philippines, Inc. (VSPI) filed a claim for refund or issuance of a tax credit certificate amounting to PHP 41,659,221.63, representing its alleged accumulated and unutilized input Value-Added Tax (VAT) for the fourth quarter of calendar year (CY) 2013. VSPI, a domestic corporation engaged in installation and construction services, entered into an Onshore Engineering, Procurement and Construction Contract with EDC Burgos Wind Power Corporation (EDC Burgos), an export-oriented enterprise. VSPI filed its Quarterly VAT Return on March 20, 2014, and on the same date, filed a letter-request for refund/tax credit certificate with the Bureau of Internal Revenue (BIR). On September 5, 2014, VSPI filed a Petition for Review with the Court of Tax Appeals (CTA) Division, claiming PHP 41,659,221.63 in unutilized input VAT for the fourth quarter of CY 2013, alleging it had PHP 546,196,162.22 in gross receipts from EDC Burgos and accumulated input VAT of PHP 41,659,221.63, which were not utilized against output VAT liability. Procedural History: The CTA Division initially dismissed VSPI's claim for lack of jurisdiction, finding the judicial claim belatedly filed. VSPI moved for reconsideration, arguing the timeliness issue was not raised by the Commissioner of Internal Revenue (CIR) and attached a Transmittal Letter showing submission of complete documents on April 11, 2014, and a BIR Letter Denial dated August 4, 2014, received August 6, 2014. The CTA Division granted VSPI's motion, admitting the additional evidence in the interest of substantial justice. In an Amended Decision dated August 31, 2018, the CTA Division partially granted VSPI's claim, ordering a refund or tax credit of PHP 4,390,198.45. The CTA Division found VSPI's administrative and judicial claims timely filed, and that VSPI's services to EDC Burgos qualified for zero-rating under the Renewable Energy Act of 2008 and the Tax Code. However, only a portion of VSPI's declared zero-rated sales and input VAT were substantiated. The CIR's motion for reconsideration was denied. The CIR appealed to the CTA En Banc, arguing the supplemental evidence should not have been admitted and the judicial claim was untimely. The CTA En Banc affirmed the CTA Division's decision. The Petition: The CIR, through the Office of the Solicitor General, appealed to the Supreme Court, raising the sole issue of whether VSPI's judicial claim for refund was timely filed with the CTA.
Issue(s)
Whether VSPI's judicial claim for refund was timely filed with the Court of Tax Appeals (CTA), pursuant to Section 112(C) of the Tax Code, as amended. Whether the CTA Division erred in admitting VSPI's supplemental evidence.
Ruling
The petition is denied. The July 20, 2020 Decision and the November 24, 2020 Resolution of the Court of Tax Appeals En Banc in CTA EB No. 2007 are affirmed in toto. VSPI's judicial claim for refund was timely filed, and the CTA Division did not err in admitting the supplemental evidence.
Ratio Decidendi
On the timeliness of the judicial claim: The Court affirmed the CTA's finding that VSPI's judicial claim was timely filed. VSPI filed its administrative claim on March 20, 2014. It submitted complete supporting documents on April 11, 2014, within the 30-day period allowed by Revenue Memorandum Circular (RMC) No. 49-2003 and within the two-year period under Section 112(A) of the Tax Code. Since no request for additional documents was shown to have been sent by the BIR, the 120-day period for the BIR to act commenced on April 11, 2014, expiring on August 9, 2014. Although the BIR issued a denial on August 4, 2014, which was received by VSPI on August 6, 2014, the 30-day period to file a judicial claim should be counted from the receipt of the denial. Thus, VSPI had until September 5, 2014, to file its appeal, which it did on the same date. The Court reiterated that the 120-day and 30-day periods are mandatory and jurisdictional. On the admission of supplemental evidence: The Court upheld the CTA's admission of VSPI's supplemental evidence, specifically the Transmittal Letter. The CTA is not strictly governed by technical rules of evidence, and the admission of such evidence was in the interest of substantial justice. The CIR failed to timely object to VSPI's Supplemental Formal Offer of Evidence. The Court cited Commissioner of Internal Revenue v. De La Salle University, Inc., emphasizing that failure to object to offered evidence renders it admissible, and objections must be made at the time of formal offer. The CIR's opposition prior to the formal offer did not satisfy the requirement. Furthermore, VSPI established the basis for the admission of secondary evidence (photocopy of the Transmittal Letter) by showing the existence and subsequent loss of the original, and efforts made to secure a copy. The Court found that procedural rules should not hamper the CTA from fully appreciating the facts and ascertaining the truth to arrive at a just determination.
Main Doctrine
The Court of Tax Appeals (CTA) is not strictly governed by technical rules of evidence, and may admit supplemental evidence in the interest of substantial justice, provided that the opposing party is given an opportunity to object and fails to do so timely. The timeliness of a judicial claim for refund of input VAT is determined by the periods prescribed under Section 112(C) of the Tax Code, as amended, considering the date of submission of complete documents and the receipt of the denial or expiration of the BIR's 120-day period to act.