G.R. No. 202534 . December 08, 2018
COMMISSIONER OF INTERNAL REVENUE, PETITIONER, V. SEMIRARA MINING CORPORATION, RESPONDENT.

FACTS

Respondent Semirara Mining Corporation (SMC) is a domestic corporation engaged in coal mining. It operates under a Coal Operating Contract (COC) with the Philippine Government, executed pursuant to Presidential Decree (P.D.) No. 972. Section 16 of P.D. No. 972 grants operators incentives, including “Exemption from all taxes except income tax.” This exemption was expressly incorporated into the COC. SMC sold coal to the National Power Corporation (NPC). Following the effectivity of Republic Act (R.A.) No. 9337, which amended the National Internal Revenue Code (NIRC), NPC began withholding a 5% final Value-Added Tax (VAT) on SMC’s coal billings. For January 2007, NPC withheld and remitted P15,292,054.93 to the Bureau of Internal Revenue (BIR).
SMC sought a ruling from petitioner Commissioner of Internal Revenue (CIR) confirming its VAT exemption. The CIR issued BIR Ruling No. 0006-2007, affirming that SMC’s sales to NPC were VAT-exempt. Subsequently, SMC filed an administrative claim for refund of the withheld VAT. Due to the CIR’s inaction, SMC filed a judicial claim with the Court of Tax Appeals (CTA) Division.

ISSUE

Whether the CTA erred in ruling that SMC is entitled to a tax refund for the final VAT withheld from its coal sales for January 2007.

RULING

The Supreme Court denied the petition and affirmed the CTA rulings, holding that SMC is entitled to the refund. The legal logic is anchored on the clear statutory exemption. Section 16 of P.D. No. 972 provides coal operators an exemption from all taxes except income tax. This special law exemption is expressly recognized and preserved under Section 109(K) of the NIRC, as amended by R.A. No. 9337 , which exempts from VAT “[t]ransactions which are exempt under international agreements to which the Philippines is a signatory or under special laws, except those under Presidential Decree No. 529.” P.D. No. 972 is a valid special law, and SMC’s sales pursuant to its COC fall squarely within this exemption.
The Court rejected the CIR’s procedural arguments. The claim that SMC failed to exhaust administrative remedies was unavailing, as the judicial claim was filed precisely due to the CIR’s inaction on the administrative claim for nearly two years. Furthermore, the CTA correctly conducts trials de novo; thus, the completeness of documents submitted at the administrative level is not determinative. The Court also emphasized that tax refunds grounded on unambiguous legal exemptions are matters of right, and the State must not unjustly enrich itself by withholding money clearly due to the taxpayer. The CTA’s factual findings and application of tax law, given its specialized expertise, were accorded respect and found to be without reversible error.