G.R. Nos. 255470-71. January 30, 2023.
COMMISSIONER OF INTERNAL REVENUE, PETITIONER, VS. CARGILL PHILIPPINES, INC., RESPONDENT.

FACTS

Cargill Philippines, Inc. (respondent), a VAT-registered domestic corporation, filed administrative and judicial claims for refund/credit of unutilized input VAT for two periods: (1) April 1, 2001 to February 28, 2003 (first claim), and (2) March 1, 2003 to August 31, 2004 (second claim). The claims were based on its zero-rated export sales. For the first claim, respondent filed its administrative claim on June 27, 2003, and its judicial claim before the CTA on June 30, 2003, only three days later. For the second claim, respondent filed both its administrative and judicial claims on May 31, 2005. The CTA Division initially partially granted the second claim but, citing Commissioner of Internal Revenue v. Aichi Forging Company of Asia, Inc., later reversed itself in an Amended Decision and dismissed both consolidated cases for being prematurely filed for failure to observe the mandatory 120-day period under Section 112(D) of the NIRC before filing a judicial claim. The CTA En Banc affirmed this dismissal. On appeal, the Supreme Court, in G.R. No. 203774, ruled that the first judicial claim (filed in June 2003) was correctly dismissed as premature, as it was filed before the effectivity of BIR Ruling No. DA-489-03 (December 10, 2003). However, it held that the second judicial claim (filed in May 2005) was filed within the exemption window period established in Commissioner of Internal Revenue v. San Roque Power Corporation (from December 10, 2003 to October 6, 2010), during which the 120-day waiting period was not mandatory. The Supreme Court remanded CTA Case No. 7262 (the second claim) to the CTA Division for resolution on the merits. On remand, the CTA Division rendered an Amended Decision partially granting the second claim in the reduced amount of PHP 1,779,377.16. Both parties filed petitions for review with the CTA En Banc, which were consolidated. The CTA En Banc denied both petitions and affirmed the CTA Division’s Amended Decision. The Commissioner of Internal Revenue (petitioner) now appeals to the Supreme Court.

ISSUE

Whether the CTA En Banc erred in affirming the CTA Division’s grant of a tax refund/credit to respondent for its unutilized input VAT for the period March 1, 2003 to August 31, 2004.

RULING

The Supreme Court DENIED the petition and AFFIRMED the assailed Decision and Resolution of the CTA En Banc. The Court held that the findings of the CTA, a specialized court on tax matters, are accorded respect and will not be disturbed absent any clear showing of grave abuse of discretion. The petitioner failed to demonstrate that the CTA committed reversible error. The Court found that the CTA En Banc correctly ruled that the input VAT claimed by respondent was substantiated and directly attributable to its zero-rated export sales. The Court emphasized that for a VAT-registered taxpayer whose sales are zero-rated, the input tax on purchases of goods and services related to such zero-rated sales is refundable. The CTA meticulously examined the evidence, including summary lists of input VAT, invoices, and receipts, and found that respondent sufficiently proved the input VAT was incurred in the course of its trade or business and was directly attributable to its zero-rated transactions. The Court also upheld the CTA’s disallowance of certain claims due to lack of proper documentation or because they pertained to capital goods not yet amortized. The petitioner’s argument that only input taxes on purchases that form part of the finished product or are directly used in production are refundable was found unmeritorious, as the law allows a refund of input taxes “directly attributable” to zero-rated sales, which includes goods and services used in the business.