G.R. No. 222428 , February 19, 2018
Coca-Cola Bottlers Philippines, Inc., Petitioner vs. Commissioner of Internal Revenue, Respondent

FACTS

Petitioner Coca-Cola Bottlers Philippines, Inc., a VAT-registered corporation, filed its Quarterly VAT Return for the first quarter of 2008. It later filed an administrative and subsequently a judicial claim for refund or tax credit amounting to ₱123,459,647.70, representing alleged overpaid VAT. Petitioner claimed this amount constituted undeclared input VAT that was inadvertently not credited against its output VAT for the period, attributing the omission to employee error and the complete destruction of its physical invoices and receipts, though it reconstructed the data through its computerized accounting system.
The Court of Tax Appeals (CTA) Division and later the CTA En Banc denied the claim. The tax courts ruled that the claim did not fall under the statutory provisions for refund. They held that Sections 110(B) and 112(A) of the National Internal Revenue Code (NIRC) govern refunds of “excess” input VAT, which was not the situation here, as the amount was simply undeclared. The CTA further found that Section 229 of the NIRC, which allows recovery of tax erroneously or illegally collected, was inapplicable because the output VAT paid was correctly computed based on the return filed; the error was petitioner’s failure to claim an available credit, not an erroneous payment to the government.

ISSUE

Whether petitioner is entitled to a refund or tax credit of the undeclared input VAT under Section 229 of the NIRC, in relation to Section 204(C), on the ground of erroneous payment.

RULING

No. The Supreme Court denied the petition and affirmed the CTA En Banc’s ruling. The legal logic is anchored on the distinct nature of a claim for refund of “excess” input VAT under Sections 110(B)/112(A) versus a claim for recovery of “erroneously or illegally collected” tax under Section 229. The Court explained that for a refund under Section 229 to prosper, the tax must have been erroneously or illegally collected from the taxpayer. In this case, the output VAT petitioner paid was the correct amount legally due based on its filed return. The alleged overpayment arose not from an error in collection by the BIR, but from petitioner’s own failure to properly declare and apply its input tax credits in its VAT computation. This is a failure to claim a credit, not a payment of an incorrect tax liability.
The Court emphasized that input VAT credits are permissive, not automatic; they must be claimed in the quarterly VAT return to be utilized. Petitioner’s omission to report the input VAT in its return meant it was not credited against its output VAT liability for that quarter. Consequently, the output VAT paid was the precise amount due per its own declaration. The government collected nothing in excess of what was legally assessed based on petitioner’s return. Therefore, there was no erroneous collection to warrant a refund under Section 229. The proper remedy would have been to amend the VAT return within the allowable period, but petitioner was barred from doing so as a Letter of Authority had already been issued. The claim, being in the nature of a tax refund, is construed strictly against the taxpayer, and petitioner failed to satisfy the legal requirements for recovery under the invoked provisions.