Commissioner of Internal Revenue vs. Vestas Services Philippines, Inc.

A party who fails to object to a written formal offer of evidence within the period allowed by the Rules of Court waives the objection, and the CTA may admit such evidence to ascertain jurisdictional timeliness, consistent with the principle that proceedings before the tax court are not governed strictly by technical rules of evidence. For administrative VAT refund claims filed before June 11, 2014, the 120‑day period for the Commissioner to decide runs from the date the taxpayer submits complete supporting documents, which may be submitted within 30 days from filing the administrative claim pursuant to RMC No. 49‑2003; where the Commissioner issues a denial within that 120‑day period, the taxpayer’s 30‑day period to appeal to the CTA runs from receipt of such denial.

VSPI, a domestic corporation and VAT‑registered taxpayer, amended its primary purpose in 2013 to engage in installation and construction services for wind power systems. It entered into an Onshore Engineering, Procurement and Construction Contract with EDC Burgos Wind Power Corporation, an export‑oriented enterprise and registered renewable energy developer, for the Burgos Wind Farm Project. For the fourth quarter of 2013, VSPI declared zero‑rated sales of PHP 546,196,162.22 solely from services rendered to EDC Burgos, and claimed accumulated unutilized input VAT of PHP 41,659,221.63. On March 20, 2014, VSPI filed its quarterly VAT return and simultaneously filed an administrative claim for refund or issuance of a tax credit certificate with the BIR.

• Nature of Business and Transaction: VSPI amended its primary purpose on February 22, 2013 to engage in installation, construction, and subcontracting services for wind power systems. It contracted with EDC Burgos Wind Power Corporation, an export‑oriented enterprise and Board of Investments‑registered renewable energy developer, for the Burgos Wind Farm Project. All of VSPI’s sales for the fourth quarter of 2013 were made to EDC Burgos.

• Filing of Claims: On March 20, 2014, VSPI filed its Quarterly VAT Return for the fourth quarter of 2013 and simultaneously filed an administrative claim for refund or issuance of a tax credit certificate of PHP 41,659,221.63, representing alleged accumulated unutilized input VAT. On September 5, 2014, it filed a Petition for Review with the CTA (CTA Case No. 8888).

• Initial CTA Division Decision: The CTA Division dismissed the petition for lack of jurisdiction on May 26, 2017. It computed that, absent any other evidence, the 120‑day period for the CIR to decide ran from the March 20, 2014 filing, expiring on July 18, 2014, and the 30‑day period to appeal expired on August 18, 2014. The September 5, 2014 filing was deemed 18 days late.

• Motion for Reconsideration and Supplemental Evidence: VSPI moved for reconsideration, arguing that the timeliness issue was never raised by the CIR. It attached: (a) a Transmittal Letter dated April 11, 2014, showing it submitted complete documents to the BIR on that date; and (b) a Letter Denial from the BIR dated August 4, 2014, received by VSPI on August 6, 2014. VSPI also attached a letter‑request to the CIR for a certified true copy of the Transmittal Letter, the original having been lost. The CTA Division, in the interest of substantial justice, allowed VSPI to present additional evidence. VSPI presented the testimony of Mary Anne U. Murphy to establish the existence, loss, and diligent effort to retrieve the original letter, and then filed a Supplemental Formal Offer of Evidence. The CIR did not file any comment, objection, or memorandum despite opportunity.

• Amended Decision and Partial Grant: The CTA Division admitted the supplemental evidence, including the Transmittal Letter as secondary evidence. It computed the periods: complete documents submitted April 11, 2014; 120‑day period until August 9, 2014; BIR denial received August 6, 2014; 30‑day appeal period until September 5, 2014. The judicial claim filed on September 5, 2014 was thus timely. On the merits, the CTA Division found that only PHP 156,148,192.97 out of PHP 546,196,162.22 declared zero‑rated sales were properly substantiated with VAT zero‑rated official receipts, and only PHP 15,356,626.94 of the claimed input VAT was valid. Applying a proportional allocation, the allowable input VAT attributable to substantiated zero‑rated sales was PHP 4,390,198.45. No output VAT was offset. The court partially granted the refund in that amount.

• Error in Admitting Supplemental Evidence: The CIR argued that the CTA Division should not have admitted the Transmittal Letter because it was a mere photocopy, not newly discovered evidence, and VSPI’s motion for reconsideration did not comply with Sections 5 and 6, Rule 15 of the RRCTA—no affidavits attesting to the existence or due execution of the document were attached. The CIR maintained that its Opposition to the motion for reconsideration constituted a timely objection to the evidence.

• Untimeliness of Judicial Claim: The CIR contended that, without the improperly admitted evidence, VSPI failed to establish that its judicial claim was filed within the 30‑day period under Section 112(C) of the Tax Code, and the entire claim for refund should have been denied.

• Waiver of Objection to Evidence: VSPI countered that the CIR never objected to the Supplemental Formal Offer of Evidence when it was made, nor did the CIR file a supplemental memorandum. Any objection to the admission of the Transmittal Letter, including its admissibility as secondary evidence, was therefore waived.

• Timely Filing of Judicial Claim: VSPI argued that, based on the Transmittal Letter, complete documents were submitted on April 11, 2014—within the 30‑day period allowed by RMC No. 49‑2003. The BIR denial was received on August 6, 2014; hence, the September 5, 2014 judicial claim was well within the 30‑day period counted from receipt of the denial.

• Admission of Supplemental Evidence: Whether the CTA Division correctly admitted VSPI’s supplemental evidence, specifically the photocopy of the April 11, 2014 Transmittal Letter, to establish the timeliness of the judicial claim.

• Timeliness of Judicial Claim: Whether, on the basis of the admitted evidence, VSPI’s judicial claim for refund was filed within the 30‑day period under Section 112(C) of the National Internal Revenue Code, as amended prior to the TRAIN Law.

• Admission of Supplemental Evidence: The CTA Division’s admission of the supplemental evidence was affirmed. Objection to documentary evidence must be made at the time of its formal offer, not earlier. The CIR did not file any objection to VSPI’s Supplemental Formal Offer of Evidence within the three‑day period under Section 36, Rule 132 of the Rules of Court. The CIR’s earlier opposition to the motion for reconsideration could not substitute for a timely objection at the time the purpose of the evidence was disclosed. Moreover, proceedings before the CTA are not governed strictly by technical rules of evidence, and courts may admit evidence in the interest of substantial justice. The Transmittal Letter was properly admitted as secondary evidence because VSPI established the existence of the original, its loss, and diligent effort to secure a certified copy—the requisites for secondary evidence were satisfied. Even though the letter was not newly discovered, its admission was justified to ascertain the jurisdictional fact of timeliness.

• Timeliness of Judicial Claim: VSPI’s judicial claim was timely filed. For administrative claims filed prior to June 11, 2014, the taxpayer has 30 days from the filing of the administrative claim to submit complete supporting documents, per RMC No. 49‑2003. VSPI filed its administrative claim on March 20, 2014 and submitted complete documents on April 11, 2014, within that 30‑day window. No BIR notice requiring further documents was shown; thus, the 120‑day period for the CIR to decide commenced on April 11, 2014, expiring on August 9, 2014. Because the BIR issued a denial letter received by VSPI on August 6, 2014—before the 120‑day period lapsed—the 30‑day period to appeal to the CTA ran from that date of receipt. The 30th day fell on September 5, 2014. VSPI’s judicial claim, filed on September 5, 2014, was therefore within the prescribed period. The Court declined to revisit the CTA’s factual findings on the partial substantiation of the refund, as no compelling reason was shown.

• Waiver of Objection to Evidence — A party who fails to object to a written formal offer of evidence within three days from notice, as provided in Section 36, Rule 132 of the Rules of Court, waives the objection. The objection must be interposed at the time the evidence is formally offered, because only then is the purpose of the offer disclosed and ascertainable. An opposition to a motion that precedes the formal offer cannot substitute for a timely objection.

• Non‑Applicability of Strict Technical Rules in the CTA — Under Section 8 of Republic Act No. 1125, proceedings before the Court of Tax Appeals are not governed strictly by technical rules of evidence. The paramount consideration is the ascertainment of truth. The CTA may admit supplemental evidence, even if it is not newly discovered, to give a party a final opportunity to prove jurisdictional facts such as the timeliness of a judicial claim.

• Reckoning the 120‑Day Period for Pre‑June 11, 2014 VAT Refund Claims — For administrative claims for refund of unutilized input VAT filed before June 11, 2014, the taxpayer has 30 days from the filing of the administrative claim to submit complete supporting documents, as allowed by RMC No. 49‑2003. The 120‑day period for the Commissioner to act begins to run from the date the taxpayer submits such complete documents. If the taxpayer declares that no further documents will be submitted at the time of filing, the 120‑day period runs from the date of filing.

• Counting the 30‑Day Appeal Period When Denial Issues During the 120‑Day Period — Where the Commissioner issues a denial of a VAT refund claim before the expiration of the 120‑day decisional period, the taxpayer’s 30‑day period to appeal to the CTA under Section 112(C) of the Tax Code is counted from receipt of the denial, not from the expiration of the 120‑day period.

• Factual Nature of Substantiation — Finality of CTA Findings — The determination of whether a taxpayer has sufficiently substantiated its claim for refund of input VAT attributable to zero‑rated sales is a question of fact. Absent any showing of abuse of discretion, the factual findings of the CTA on this matter are accorded great weight and finality.

• “[T]he failure to object to the offered evidence renders it admissible, and the court cannot, on its own, disregard such evidence. … If a party desires the court to reject the evidence offered, it must so state in the form of a timely objection and it cannot raise the objection to the evidence for the first time on appeal.” (quoting Commissioner of Internal Revenue v. De La Salle University, Inc.)

• “[O]bjection to documentary evidence must be made at the time it is formally offered, not earlier, because at that time the purpose of the offer has already been disclosed and ascertained.” (citing Magsino v. Magsino)

• “[F]rom the date an administrative claim for excess unutilized VAT is filed, a taxpayer has thirty (30) days within which to submit the documentary requirements sufficient to support his claim, unless given further extension by the CIR. Then, upon filing by the taxpayer of his complete documents to support his application, or expiration of the period given, the CIR has 120 days within which to decide the claim for tax credit or refund.” ( Pilipinas Total Gas, Inc. v. Commissioner of Internal Revenue )

• Commissioner of Internal Revenue v. De La Salle University, Inc. , 799 Phil. 141 (2016) — Followed. Established that the CTA is not governed strictly by technical rules of evidence and that failure to timely object to a formal offer of evidence renders the evidence admissible.

• Pilipinas Total Gas, Inc. v. Commissioner of Internal Revenue , 774 Phil. 473 (2015) — Followed. Enunciated the rules for determining when the taxpayer is deemed to have submitted complete documents for reckoning the 120‑day period, applicable to claims filed before June 11, 2014.

• Magsino v. Magsino , G.R. No. 205333, February 18, 2019 — Cited for the rule that objection to documentary evidence must be made at the time of formal offer, not earlier.

• Commissioner of Internal Revenue v. Univation Motor Philippines, Inc. , G.R. No. 231581, April 10, 2019 — Cited for the principle that CTA proceedings are not governed strictly by technical rules of evidence.

• CE Luzon Geothermal Power Company, Inc. v. Commissioner of Internal Revenue , 814 Phil. 616 (2017) — Cited for the mandatory and jurisdictional character of the 120‑day and 30‑day periods under Section 112(C).

• Section 112(C), National Internal Revenue Code of 1997 (prior to TRAIN Law amendment) — Provided the 120‑day period for the Commissioner to decide a VAT refund claim and the 30‑day period for the taxpayer to appeal to the CTA. The Court applied its pre‑TRAIN wording, as VSPI’s claim was filed in 2014.

• Revenue Memorandum Circular No. 49‑2003 — Allowed the taxpayer a 30‑day period from the filing of the administrative claim to submit complete supporting documents. The Court used this to reckon the start of the 120‑day period from VSPI’s submission on April 11, 2014.

• Section 36, Rule 132, Rules of Court — Requires that an offer of evidence in writing be objected to within three days after notice of the offer. The Court applied it suppletorily to CTA proceedings to hold that the CIR waived its objection.

• Section 8, Republic Act No. 1125 (Court of Tax Appeals law) — States that proceedings before the CTA shall not be governed strictly by technical rules of evidence. Cited as basis for the CTA’s latitude to admit supplemental evidence in the interest of substantial justice.

• Chapter VII, Section 15(g), Republic Act No. 9513 (Renewable Energy Act of 2008) — Provides zero‑percent VAT for the local supply of goods and services to renewable energy developers. The CTA Division applied it in relation to Section 108(B)(3) of the Tax Code to treat VSPI’s services as zero‑rated; the Supreme Court did not disturb this application.

• Revenue Regulation No. 13‑2018, Section 2 — Clarified that VAT refund claims filed prior to January 1, 2018 are governed by the 120‑day processing period under the old Section 112(C).

Gesmundo, C.J. (Chairperson), Zalameda, and Marquez, JJ., concurred. Leonen, SAJ., was on official leave.