3Republic of tbe ~btlippines

~upreme <!Court
;!flffan ila

THIRD DIVISION

COMMISSIONER OF G.R. Nos. 255470-71

INTERNAL REVENUE,
Petitioner, Present:

CAGU1OA, J, Chairperson,
INTING,
GAERLAN,
- versus - DIMAAMPAO, and
SINGH,JJ

Promulgated:
CARGILL PIDLIPPINES, INC.,
Respondent. January 30, 2023
x- - - - - - - - - - - - - - - - - - - -~, ~~c.\Q...\\- ---------------------------------x

DECISION

DIMAAMPAO, J.:

Impugned in this Petition for Review on Certiorari 1 are the Decision2

and the Resolution3 of the Court of Tax Appeals (CTA) sitting En Banc, which
both denied the Petition for Review filed by the Commissioner of Internal
Revenue (petitioner) and the Motion for Reconsideration4 thereot:
respectively, in the consolidated cases docketed as CTA EB Nos. 1986 and
2001.

Cargill Philippines, Inc. (respondent), a value-added tax (VAT)-

registered entity with Tax Identification No./VAT Registration No . 000-110-

Rollo, pp. 10-28 & 103-121.

Id. at 34-53 & 127-146. The Decision dated June 30, 2020 was penned by Associate Justice Esperanza
R. Fabon-Victorino, with the concurrence of Presiding Justice Roman G. De l Rosario and Associate
Justices Juan ito C. Castaneda, Jr. , Erlinda P. Uy, Ma. Belen M. Ri ngpis-Liban, Catherine T. Manahan,
Jean Marie A. Bacorro-V illena and Maria Rowena G. Modesto-San Pedro.
Id. at 55-58 & 148-151. The Resolution dated January 28, 2021, was penned by Associate Justice Jean
Marie A . Bacorro-Vi llena, with the concurrence of Presiding Justice Roman G. Del Rosario and
Associate Justices Juanito C. Castaneda, Jr., Erlinda P. Uy, Ma. Belen M. Ringp is- Liban, Catherine T.

4
Manahan, and Maria Rowena G. Modesto-San Pedro.
Id. at152-162. q
_\ ,
Decision 2 G.R. Nos. 255470-71

659-000, is a domestic corporation whose primary purpose is "to own,

operate, run and manage plants and facilities for the production, crushing,
extracting or otherwise manufacturing and refining of coconut oil, coconut
meal, vegetable oil, lard, margarine, edible oil, and other articles of similar
nature and their by-products; to engage in research, breeding, developments,
production, culture, processing, importation and exportation, and sale by
wholesale of agricultural seeds/products of all kinds whatsoever and the
rendition of technical assistance and services related thereto; to engage in the
import and expmi business and to deal in all the goods produced and
manufactured by it and the by-products thereof at wholesale; to engage in the
buy and/or sell, export and/or import, acquisition, exchange, or otherwise
dealing in sugar and other related products by way of wholesale in the
domestic as well as expmi markets and to engage in all activities, including
the purchase or lease of machineries and equipment, necessary for the
operation thereof. " 5

For the period April l, 200 l to August 31, 2004, respondent filed its
quarterly VAT returns6 reflecting overpayments, as follows:

1. PHP 44,920,350.92 for the second quarter of calendar year

(CY) 2001 to the third quarter of fiscal year (FY) 2003, or
from April 1, 2001 to February 28, 2003; and
2. PHP 31,915,642.26 for the fomih quarter of FY 2003 to
the first quarter of FY 2005, or from March 1, 2003 to
August 31, 2004. 7

The overpayments were purpmiedly the result of its export sales of

coconut oil, which proceeds were paid for in acceptable foreign currency and
accounted for pursuant to Bangko Sentral ng Pilipinas rules and regulations.
And such, these were zero-rated for VAT purposes. 8

Consequently, on June 27, 2003, respondent filed its.first administrative

claim for refund of its unutilized input VAT in the amount of PHP
26,122,965.81 for the period covering April l, 2001 to February 28, 2003
before the Bureau of Internal Revenue (BIR). 9

Professing the BIR's inaction on its administrative claim, respondent

filed a judicial claim for refund on June 30, 2003, by way of a petition for
review before the CTA, docketed as CTA Case No. 6714. Subsequently, on
September 29, 2003, respondent filed a supplemental application with the BIR

Id. at 36.
6 Id.
Id at 37.
8
Id.
9
Id.
Decision ...
_) G.R. Nos. 255470-71

increasing its claim for refund of unutilized input VAT to PHP 27,847,897.72
for the same period. 10

On May 31, 2005, respondent filed with the BIR a second

administrative claim for refund of its unutilized input VAT in the amount of
PHP 22,194,446.67 for the period of March 1, 2003 to August 31, 2004. On
even date, a petition for review was lodged before the CTA, docketed as CTA
Case No . 7262. 11

Petitioner, for its part, asserted that the amounts which respondent was
claiming as unutilized input VAT in its first and second refund claims were
not properly documented, hence, should be denied.12

Ruling of the CTA Division

The two petitions were consolidated for having common questions of

law and facts. 13 Thereafter, the CTA Special First Division (CTA Division)
rendered a Decision 14 partially granting respondent's claim for refund of
unutilized input VAT and ordering petitioner to issue a tax credit certificate in
the reduced amount of PHP 3,053,469.99. 15 While respondent timely filed its
admini strative and judicial claims within the two-year prescriptive period, it,
however, failed to substantiate the remainder of its claims for refund of
unutilized input VAT, resulting in the partial denial thereof. 16

Petitioner and respondent both filed their respective motions for

reconsideration, with petitioner avouching that respondent's petitions were
prematurely filed since it failed to exhaust administrative remedies; anci
respondent, on the other hand, standing finn that it was entitled to the entire
amount being claimed for refund. 17

In an Amended Decision, the CTA Division denied the parties'

individual motions for reconsideration. 18 Additionally, it reversed its earlier
Decision granting in part respondent's claim for refund of unutilized input
VAT. Citing the case of Commissioner of Internal Revenue v. Aichi Forging
Company ofAsia, Inc. (Aichi), 19 it held that the 120-day period provided under

,o Id.
11
Id. at 38.
,2 Id.
13 Id.
14
Id. at 276-3 17 . The Dec ision dated August 24, 20 IO was penned by Associate Justice Caesar A.
Casanova, w ith the concu1Tence of Assoc iate Justice Lovel l R. Bautista. Then Pres id ing Justice Ernesto
D. Acosta ren dered a Concurring and D issenting Op ini on .
15
Id. at 38, 79 & 175 .
16
Id. at 79, 107.
17
Id. at 39 .
18
Id. , dated April 20, 201 1.
19
646 Phi l. 7 10 (20 I 0) (Per J. De l Casti ll o, First D ivision].
Decision 4 G.R. Nos. 255470-71

Section 112(D)20 of the National Internal Revenue Code (NIRC) must be

observed prior to the filing of a judicial claim for tax refund. 21 Considering
respondent's failure to comply therewith, the CTA Division, without ruling on
the merits, dismissed the consolidated cases for being prematurely filed. 22

Disgruntled, respondent filed a Petition for Review before the CTA En

Banc, 23 docketed as CTA EB Case No. 779.

The CTA En Banc Ruling

On June 18, 2012, the CTA En Banc affirmed the CTA Division's
decision amending its August 24, 2010 Decision, and reiterated that
respondent's premature filing of its claims divested the CTA of jurisdiction,
and perforce, warranted the dismissal of its petitions. 24

Ruling of the Court to Remand

With its subsequent motion for reconsideration having been denied by

the CTA En Banc, 25 respondent sought recourse before this Court via a
Petition for Review on Certiorari, docketed as G.R. No. 203774 and raffled
off to the First Division. 26

In partially granting respondent's petition remanding the case to the

CTA Division, 27 the Court ratiocinated in this wise:

In the landmark case of A ichi. it was held that the observance of the
120-day period is a mandatory and jurisdictional requisite to the filing of a
judicial claim for refund before the CTA. As such, its non-observance would

10
Section 112. Refunds or Tax Credits of Input Tax. -
XXX
(D) Period within which Refund or Tax Credit of Input Taxes shall be Made. - In proper cases, the
Commissioner shall grant a refund or issue the tax credit certificate for creditable input taxes within one
hundred twenty ( 120) days from the date of submission of complete documents in support of the
application filed in accordance with Subsections (A) and (B) hereof.
In case of full or partial denial of the claim for tax refund or tax credit, or the failure on the part of
the Commissioner to act on the application within the period prescribed above, the taxpayer affected
may, within thirty (30) days from the receipt of the decision denying the claim or after the
expiration of the one hundred twenty day-period, appeal the decision or the unacted claim with the
Court of Tax Appeals. [Emphasis supplied]
21
ld.at731.
22
Rollo, p. 39.
13 Id.
14
Cargi!f Philippines, Inc. v. Commissioner of Intern al Revenue, CTA EB Case No. 779, June 18, 2012
(Court of Tax Appeals, En Banc). This Decision was penned by Retired Associate Justice Cielito N.
Mindaro-Grulla with the concurrence of then Presiding Justice Ernesto D. Acosta and Associate Justices
Juanita C. Castaneda, Jr., Erlinda P. Uy, Caesar A. Casanova, Olga Palanca-Enriquez, Esperanza R.
Fabon-Victorino, and Amelia R. Cotangco-Manalastas. Associate Justice Lovell R. Bautista rendered a
Dissenting Opinion.
15
See Decision in Cargi!I Philippines, Inc. v. Commissioner of Internal Revenue, G .R. No. 203744, March
11 , 2015, 755 Phil. 820, 826(2015) [Per J. Perlas-Bernabe, First Division].
16 Id.
17
Id. at 83 I.
Decision 5 G.R. Nos. 255470-71

warrant the dismissal of the judicial claim for lack of jurisdiction. It was,
withal, delineated in Aichi that the two (2)-year prescriptive period would
only apply to administrative claims, and not to judicial claims. Accordingly,
once the administrative claim is filed within the two (2)-year prescriptive
period, the taxpayer-claimant must \Vait for the lapse of the 120-day period
and. thereafter, he has a 30-day period within which to file his judicial claim
before the CTA, even if said 120-day and 30-day periods would exceed the
aforementioned two (2)-year prescriptive period.

Neve11heless, the Court in the case of CIR v. San Roque Power

Corporation (San Roque), recognized an exception to the mandatory and
_jurisdictional nature of the 120-day period. San Roque enunciated that
BIR Ruling No. DA-489-03 dated December 10, 2003. which expressly
declared that the "taxpayer-claimant need not wait for the lapse of the 120-
day period before it could seek judicial relief with the CTA by way of
petition for review." provided a valid claim for equitable estoppel under
Section 246 of the NlRC.

In the more recent case of Taganito 1\lfining Corporation v. CIR , the

Comi reconciled the pronouncements in Aichi and San Roque, holding that
from December 10, 2003 to October 6, 2010 which refers to the
interregnum when BIR Ruling No. DA-489-03 was issued until the date of
promulgation of A ichi, taxpayer-claimants need not observe the
stringent 120-day period; but before and after said window period. the
mandatory and jurisdictional nature of the 120-day period remained in
force[ .] xx x

XXX

In this case, records disclose that anent [respondent's] first refund

claim, it filed its administrative claim with the BIR on June 27. 2003, and
its judicial claim before the CTA on June 30, 2003. or before the period
when BIR Ruling No. DA-489-03 was in effect, i.e. , from December 10,
2003 to October 6, 2010. As such, it was incumbent upon [respondent] to
wait for the lapse of the 120-day period before seeking relief with the CTA,
and considering that its judicial claim was filed only after three (3) days
later, the CTA En Banc. thus, correctly dismissed [respondent's] petition
in CTA Case No. 6714 for being prematurely filed.

In contrast, records show that with respect to [respndent's] second

refund claim, its administrative and judicial claims were both filed on May
31, 2005, or during the period of effectivity of BIR Ruling No. DA-489-
03. and, thus, fell within the exemption window period contemplated
in San Roque, i.e., when taxpayer-claimants need not wait for the expiration
of the 120-day period before seeking judicial relief. Verily, the CTA En
Banc erred when it outrightly dismissed CTA Case No . 7262 on the ground
of prematurity.

This notwithstanding, the Court finds that [respondent's] second

refund claim in the amount of PHP 22,194,446.67 which allegedly
represented unutilized input VAT covering the period March l, 2003 to
August 31 , 2004 should not be instantly granted. This is because the
determination of [respondent's] entitlement to such claim, if any, would
Decision 6 G.R. Nos . 2554 70-7 1

necessarily involve factual issues and, thus, are evidentiary in nature

which are beyond the pale of judicial review under a Rule 45 petition where
only pure questions of law, not of fact, may be resolved . Accordingly, the
prudent course of action is to remand CTA Case No. 7262 to the CTA
Division for resolution on the merits. consistent with the Court's ru ling
in Panay Power Cmporation v. CIR. 28 [Emphasis supplied]

Displeased, respondent moved for a reconsideration of the foregoing

adjudication, but its plea was denied in the Resolution dated July 8, 2015. 29
Accordingly, the CTA En Banc remanded CTA Case No. 7262 to the CTA
Division for resolution on the merits. 30

Amended Decision of the CTA Division and

Assailed Rulings of the CTA En Banc

The CTA Division thereafter rendered an Amended Decision31 partially

granting respondent's petition and ordering petitioner to refund/issue a tax
credit certificate in its favor in the reduced amount of PHP 1,779,377.16. This
amount represents the unutilized excess input VAT for the period covering
March 1, 2003 to August 31, 2004. Both paiiies' ensuing motions to
reconsider the Amended Decision were denied. 32

Unflinching, petitioner and respondent filed their respective petitions

for review, docketed as CTA EB No. 1986 and CTA EB No. 2001,
respectively. 33 The CTAEn Banc ordered the consolidation of these two cases
pursuant to Section 1, Rule 31 of the Rules of Court. 34

In CTA EB No. 1986, petitioner contended that only creditable input

taxes incmTed from purchases of goods that.form part of the.finished product
of the taxpayer or directly used in the chain of production are refundable.
Consequently, respondent had the burden of establishing the direct connection
of the purchase or input tax to the finished product, failing which the claim
for refund must be denied.35

Respondent, on the other hand, in CTA EB Case No. 2001, avouched

that the CTA Division erroneously excluded its input VAT carried forward
from the previous quaiier in the amount of PHP 1,274,092.82.36
28
Id. at 828 -83 1.
29
Rollo, p. 40.
30 Id.
31 Id. at 170- 182. The Amended Decision dated July 13, 2018 was penned by Associate Justice Caesar A.
Casanova, with the concurrence of Associate Justice Lovell R. Bautista.
32 Id. at 184- I 89. The Reso lution dated December 12, 20 I 8 was penned by Presiding Justice Roman G.
De l Rosario, with the concurrence of Assoc iate Justices Esperanza R. Fabon-Victori no and Catherine
T. Manahan.
33
Id. at 41.
34
Id. at 190- 19 l.
35
Id. at 42.
36
ld.at l 35.
Decision 7 G.R. Nos. 255470-71

As it happened, the CTAEn Barze rendered the June 30, 2020 impugned
Decision 37 denying both petitions and affirming the July 13, 2018 Amended
Decision of the CTA Division. Petitioner's plea for reconsideration thereof
likewise proved futile as it was denied.38

Taking the CTA En Bane's ruling with a grain of salt, petitioner now
turns to this Court for relief through the instant Petition,39 posing this solitary
issue for resolution:

Did the CTA En Banc err in finding that respondent is

entitled to its claim for refund notwithstanding the provision
of the NIRC which requires that input VAT subject of the claim
be directly attributable to zero-rated sales? 40

Contrastingly, with respect to CTA EB No. 2001, respondent no longer

filed an appeal of the CTAEn Banc Decision. 41 Meanwhile, in its Comment, 42
respondent asseverates that petitioner's stance involves a purely factual
issue 43 requiring a recalibration of evidence which is not within the scope of
a Rule 45 petition. Furthennore, it postulates that as early as August 24,2010,
the CTA Division had already explained how the input VAT subject of the
claim for refund was attributable to respondent's zero-rated sales.

RULING OF THE COURT

The Petition deserves short shrift.

The jugular legal issue cast in this instant Petition is whether or not
respondent, in its claim for refund of excess/unutilized input VAT, is required
by law to prove direct attributability of its purchases or the input VAT to its
zero-rated sales.

Petitioner posits that input VAT must be directly attributable to the zero-
rated sales of the respondent in order to be refundable. Along this grain, it
argues that the input VAT must come from purchases of goods that form part
of the fini shed product of the taxpayer or it must be directly used in the chain
of production.

Petitioner is clutching at straws.

37
Id. at 34-53 & 127- 146.
38
Id. at 57.
39
id. at 10-32.
40
Jd.atl8-23.
41
Id. at 323-327.
42
Id. at 264-274.
43
Id. at 265 -266.
Decision 8 G.R. Nos. 255470-71

Section l 12(A) of the Tax Code elucidates:

SECTION 112. Refimds or Tax Credits oflnput Tax. --

(A) Zero -rated or Effectively Zero -rated Sales .- Any VAT-

registered person, whose sales are zero-rated or effectively zero-rated
may , within two (2) years after the close of the taxable quarter when the
sales were made, apply for the issuance of a tax credit certificate or
refund of creditable input tax due or paid attributable to such sales,
except transitional input tax, to the extent that such input tax has not
been applied against output tax: x x x Provided, .fitrther, That where the
taxpayer is engaged in zero-rated or effectively zero-rated sale and also in
taxable or exempt sale of goods or properties or services. and the
amount of creditable input tax due or paid cannot be directly and entirely
attributed to any one of the transactions, it shall be allocated proportionately
on the basis of the volume of sales. [Emphasis supplied]

Evidently, contrary to petitioner's contention, the law does not require

direct attributability of the input VAT from the purchase of goods to the
finished product whose sale is zero-rated, in order for such input VAT to be
refundable. Ubi lex non distinguit nee nos distinguere debemos. When the law
has made no distinction, the courts ought not to recognize any distinction.

Thence, it suffices that the purchase of goods, prope11ies, or services

upon which the input VAT is based, can be attributed to the zero-rated sales.
This conclusion is further bolstered by Section llO(A)(l) of the Tax Code,
which explicitly sets forth the sources of creditable input VAT:

SECTION 110. Tax Credits .-

(A) Creditable Input Tax.-

(l) Any input tax evidenced by a VAT invoice or official receipt

issued in accordance with Section l 13 hereof on the following transactions
shall be creditable against the output tax:

(a) Purchase or importation of goods:

(i) For sale; or

(ii) For conversion into or intended to form part of a finished
product for sale including packaging materials; or
(iii) For use as supplies in the course of business; or
(iv) For use as materials supplied in the sale of service; or
(v) For use in trade or business for which deduction for
depreciation or amortization is allO\ved under this Code,
except automobiles, aircraft and yachts.

(b) Purchase of services on which a value-added tax has been

actuaily paid.
Decision 9 G.R. Nos . 255470-71

Verily, the law does not limit itself to purchases of goods which are to
be converted into or intended to fonn part of a finished product for sale, or to
be used in the chain of production.

In a last-ditch eff01i to convince this Comito rule in its favor, petitioner

zeroes in on its previous pronouncements in the 2007 44 and 20] 145 cases of
Atlas Consolidated Mining and Development Corporation v. Commissioner of
Internal Revenue-

The formal offer of evidence of the petitioner failed to include

photocopy of its export documents, as required. There is no way therefore,
in determining the kind of goods and actual amount of export sales it
allegedly made during the quarter involved. This finding is very crucial
when we try to relate it with the requirement of the aforementioned
regulations that the input tax being claimed for refund or tax credit must be
shown to be entirely attributable to the zero-rated transaction, in this case,
exp011 sales of goods. Without the export documents, the purchase
invoice/receipts submitted by the petitioner as proof of its input taxes caru10t
be verified as being directly attributable to the goods so exported. 46
[Emphasis supplied]

The foregoing cases, however, were decided on the basis of Revenue

Regulations No. 5-87, as amended by RR No. 3-88, which hmited the
amount of refund or tax credit to the amount of VAT paid directly and entirely
attributable to the zero-rated transaction during the period covered by the
application for credit or refund.

Nevertheless, the Secretary of Finance, upon the recommendation of

herein petitioner, issued Revenue Regulations No. 14-200547 on June 22,
2005, which was later superseded by Revenue Regulations No. 16-2005.48
This latter BIR issuance has undergone a series of amendments, the most
recent of which is Revenue Regulations No. 21-2021. 49

A meticulous study of these latter-day revenue regulations reveals that

the requirement for input VAT being claimed for refund to be directly and
entirely attributable to the zero-rated sales was not retained . The pertinent
portion of the relevant regulation, Revenue Regulations No. 16-2005, is plain
as day-

44 G.R. Nos. 141 !04 & 148763 , 551 Phil. 519 (2007) [Per J. Chico-Nazario, Third Division].
45
G.R. No. 159471 , 655 Phil. 499-512 (2011) [Per J. Peralta, Second Division].
46
Supra note 50 at 549; id.at 508 .
47
Subject: Implements Title IV of the Tax Code by prescribing the Conso lidated Value-Added Tax
Regulations of 2005, effective on July I , 2005.
48
Subject: Prescribes the Consolidated Value-Added Tax Regulations of 2005 superseding RR No. 14-
2005, effective on November I, 2005 .
49
Subject: Amends certain provisions of RR No. 16-2005, as amended by RR Nos. 4-2007, 13 -2018, 26-
2018 and 9-2021 to implement Sections 294 (E) and 295 (D), Title XIII of the NIRC of 1997, as amended
by RA No . 11534 (CREA TE Act), and Section 5, Rule 2 and Section 5, Rule 18 of the CREA TE Act
Implementing Rules and Regulations, issued on December 7, 202 1.
Decision 10 G.R. Nos. 255470-7 1

SEC. 4.106-5. Zero-Rated Sales of Goods or Properties. - A zero

rated sale of goods or properties (by a VAT-registered person) is a taxable
transaction for VAT purposes, but shall not result in any output tax.
However, the input tax on purchases of goods, properties, or services,
related to such zero-rated sale, shall be available as tax credit or refund in
accordance with these Regulations.

XXX

SEC. 4.108-5. Zero-Rated Sale of Services. -

(a) In general. - A zero-rated sale of service (by a VAT-registered

person) is a taxable transaction for VAT purposes, but shall not result in any
output tax . However, the input tax on purchases of goods, properties or
services related to such zero-rated sale shall be available as tax credit or
refund in accordance with these Regulations. 50 [Emphasis supplied)

This Court cannot be bound by Revenue Regulations No. 5-87, as

amended by Revenue Regulations No. 3-88, requiring direct attributability of
input VAT vis-a-vis zero-rated sales.

All told, the CTA En Banc committed no reversible error in affirming

the CTA Division's findings that respondent is entitled to the amount of
PHP 1,779,3 77. 16 representing its unutilized excess input VAT for the period
covering March 1, 2003 to August 31, 2004 attributable to its zero-rated sales
for the same period.

WHEREFORE, the Petition for Review on Certiorari is hereby

DENIED. The Decision dated June 30, 2020 and the Resolution dated January
28, 2021 of the Court of Tax Appeals En Banc, in the consolidated cases CTA
EB Nos. 1986 and 2001, are AFFIRMED.

SO ORDERED.

Associate Justice

50 Subject: Prescribes the Consol idated Va lue-Added Tax Regu lations of 2005 superseding RR No. 14-
2005. effective on November I, 2005.
Decision 11 G.R. Nos. 255470-71

WE CONCUR:

mrperson

HEN SAMU:L~
Associate Justice

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

ssoci e Justice
Cha person, Third Division
Decision 12 G.R. Nos. 255470-7 1

CERT I F I CAT I ON

Pursuant to Section 13, Article VIII of the Constitution and the Division
Chairperson's Attestation, l 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 this CoUJi.