I. Whether Hitachis failure to comply with the requirements prescribed under Section 4.108-1 of RR 7-95 is sufficient to invalidate Hitachis claim for VAT refund for taxable year 1999;

II. Whether Hitachi has sufficiently complied with the requirements for its claim for VAT refund for taxable year 1999; and

III. Whether the CTA En Banc erred when it denied Hitachis claim for VAT refund for taxable year 1999.

The Ruling of the Court

The petition has no merit.

Hitachi argues that Section 4.108-1 of RR 7-95 cannot expand the invoicing requirements prescribed by Section 113(A) of the NIRC, in relation to Sections 237 and 106(A)(2)(a)(1),¹²cra1aw by imposing the additional requirement of printing the word "zero-rated" on the invoices of a VAT registered taxpayer. Hitachi also submits that the non-observance of the requirements of (1) printing "zero-rated;" (2) BIR authority to print; (3) BIR permit number; and (4) registration of such receipts with the BIR cannot result in the outright invalidation of its claim for refund.

We already settled the issue of printing the word "zero-rated" on the sales invoices in Panasonic v. Commissioner of Internal Revenue.¹³cra1aw In that case, we denied Panasonics claim for refund of the VAT it paid as a zero-rated taxpayer on the ground that its sales invoices did not state on their face that its sales were "zero-rated." We said:chanroblesvirtualawlibrary

But when petitioner Panasonic made the export sales subject of this case, i.e., from April 1998 to March 1999, the rule that applied was Section 4.108-1 of RR 7-95, otherwise known as the Consolidated Value-Added Tax Regulations, which the Secretary of Finance issued on December 9, 1995 and took effect on January 1, 1996. It already required the printing of the word "zero-rated" on invoices covering zero-rated sales. When R.A. 9337 amended the 1997 NIRC on November 1, 2005, it made this particular revenue regulation a part of the tax code. This conversion from regulation to law did not diminish the binding force of such regulation with respect to acts committed prior to the enactment of that law.

Section 4.108-1 of RR 7-95 proceeds from the rule-making authority granted to the Secretary of Finance under Section 245 of the 1997 NIRC (Presidential Decree 1158) for the efficient enforcement of the tax code and of course its amendments. The requirement is reasonable and is in accord with the efficient collection of VAT from the covered sales of goods and services. As aptly explained by the CTAs First Division, the appearance of the word "zero-rated" on the face of the invoices covering zero-rated sales prevents buyers from falsely claiming input VAT from their purchases when no VAT was actually paid. If absent such word, a successful claim for input VAT is made, the government would be refunding money it did not collect. (Emphasis supplied)

Likewise, in this case, when Hitachi filed its claim for refund or tax credit, RR 7-95 was already in force. Section 4.108-1 of RR 7-95 specifically required the following to be reflected in the invoice:chanroblesvirtualawlibrary

Sec.4.108-1. Invoicing Requirements. - All VAT-registered persons shall, for every sale or lease of goods or properties or services, issue duly registered receipts or sales or commercial invoices which must show:chanroblesvirtualawlibrary

1. the name, TIN and address of seller;

2. date of transaction;

3. quantity, unit cost and description of merchandise or nature of service;

4. the name, TIN, business style, if any, and address of the VAT-registered purchaser, customer or client;

5. the word "zero-rated" imprinted on the invoice covering zero-rated sales; and

6. the invoice value or consideration.

x x x

Only VAT-registered persons are required to print their TIN followed by the word "VAT" in their invoices or receipts and this shall be considered as a "VAT invoice." All purchases covered by invoices other than a "VAT invoice" shall not give rise to any input tax. (Emphasis supplied)

Both the CTA First Division and the CTA En Banc found that Hitachis export sales invoices did not indicate Hitachis Tax Identification Number (TIN) followed by the word VAT. The word "zero-rated" was also not imprinted on the invoices. Moreover, both the CTA First Division and the CTA En Banc found that the invoices were not duly registered with the BIR.

Being a specialized court, the CTA has necessarily developed an expertise in the subject of taxation that this Court has recognized time and again.¹⁴cra1aw For this reason, the findings of fact of the CTA are generally conclusive on this Court absent grave abuse of discretion or palpable error, which are not present in this case.¹⁵chanroblesvirtuallawlibrary

Besides, tax refunds, like tax exemptions, are construed strictly against the taxpayer.¹⁶cra1aw The claimants have the burden of proof to establish the factual basis of their claim for refund or tax credit.¹⁷cra1aw In this case, Hitachi failed to establish the factual basis of its claim for refund or tax credit.

WHEREFORE, we DENY the petition. We AFFIRM the 22 March 2006 Decision and the 14 August 2006 Resolution of the Court of Tax Appeals En Banc in CTA EB No. 54.

SO ORDERED.

ANTONIO T. CARPIO
Associate Justice

WE CONCUR:

PRESBITERO J. VELASCO, JR.^*
Associate Justice

JOSE C. MENDOZA
Associate Justice

A T T E S T A T I O N

I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Courts Division.

ANTONIO T. CARPIO
Associate Justice
Chairperson

C E R T I F I C A T I O N

Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairpersons Attestation, I certify that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Courts Division.

RENATO C. CORONA
Chief Justice

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