GR 250479; (July, 2022) (Digest)
G.R. No. 250479 . July 18, 2022.
MAIBARARA GEOTHERMAL, INC., PETITIONER, VS. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.
FACTS
Maibarara Geothermal, Inc. (MGI), a registered Renewable Energy Developer, filed its quarterly Value-Added Tax (VAT) returns for 2011. It subsequently filed separate administrative claims for refund or tax credit of its unutilized input VAT for all four quarters of that year, asserting its entitlement under Section 112 of the National Internal Revenue Code (NIRC). The Commissioner of Internal Revenue failed to act on these claims. Consequently, MGI filed petitions for review before the Court of Tax Appeals (CTA).
The CTA First Division denied MGI’s consolidated petitions. It ruled that MGI failed to prove that its geothermal power generation project was a “zero-rated” sale under the NIRC, a prerequisite for claiming a refund of unutilized input VAT. The CTA En Banc affirmed this decision, prompting MGI to elevate the case to the Supreme Court via a Petition for Review on Certiorari.
ISSUE
Whether petitioner Maibarara Geothermal, Inc. is entitled to a refund or tax credit of its unutilized input VAT for the taxable year 2011.
RULING
The Supreme Court denied the petition and affirmed the rulings of the CTA. The legal logic centers on the fundamental nature of VAT as an indirect tax and the specific conditions for claiming a refund of input tax. A VAT-registered person can only claim a refund or credit for unutilized input VAT under two conditions: first, when the input tax is attributable to zero-rated or effectively zero-rated sales; or second, when the input tax exceeds the output tax for any taxable quarter where the taxpayer is engaged in zero-rated or effectively zero-rated transactions. The burden of proving entitlement to this statutory privilege rests solely on the claimant.
MGI failed to discharge this burden. It did not substantiate its claim that its sales of generated power were zero-rated under Section 108(B)(3) of the NIRC, which pertains to the sale of power or fuel generated through renewable sources. The Court emphasized that tax refunds, being in the nature of tax exemptions, are construed strictly against the taxpayer. MGI’s mere registration as a Renewable Energy Developer and its filing of VAT returns, without concrete evidence that its specific sales transactions qualified as zero-rated, were insufficient. Since MGI did not establish that its input VAT was attributable to zero-rated sales, it had no legal basis to claim a refund. The CTA’s findings of fact, which are accorded great weight and respect, were thus upheld.