SC affirms P443.5M tax refund to Korean power firm

Supreme Court facade. INQUIRER FILE PHOTO

The Supreme Court denied with finality the bid of the Bureau of Internal Revenue (BIR) to nullify a Court of Tax Appeals (CTA) decision awarding Korea Electric Power Corp. (Kepco) Ilijan Corp. a tax refund worth P443.5 million.

During Tuesday’s en banc session, the high court affirmed its June 21, 2016 decision that also ordered the Office of the Ombudsman to investigate the BIR to determine who should be held accountable for bungling the tax case against Kepco.

“The Court denied with finality the Motion for Reconsideration filed by the Commissioner of Internal Revenue from its Decision dated June 21, 2016. In said Decision, the Court had denied the petition for review filed by the Commissioner of Internal Revenue and affirmed the resolutions of the Court of Tax Appeals En Banc dated July 27, 2011 and November 15, 2011.”

“The questioned resolutions had denied the CIR’s petition to annul a judgment awarding respondent Kepco a refund in the amount of P443,447,184 representing unutilized input VAT paid on its domestic purchases and importation of capital goods for the first and second quarters of the year 2000,” the high court said.

The June 2016 ruling through Associate Justice Diosdado Peralta also ordered the BIR to come up with mechanisms and measures to effectively monitor the progress of cases being handled by its counsels to prevent similar incidents in the future.

“The Ombudsman is directed to conduct an in-depth investigation to determine who were responsible for the apparent mishandling of the present case that resulted in the loss of almost half-a-billion pesos, which the government could have used to finance its much needed infrastructure, livelihood projects, and other equally important projects,” the high court said.

The BIR urged the high court to set aside the CTA’s denial of its petition and order the tax court to reopen the case to allow the agency to submit its defense through a memoranda.

Former BIR Commissioner Kim Henares claimed that she learned only of the adverse decision and the subsequent issuance of the writ of execution on March 7, 2011 when the Office of the Deputy Commissioner for Legal and Inspection Group received a memorandum from the Appellate Division of the National Office recommending the issuance of a tax certificate in favor of Kepco in the amount of P443.4 million.

Kepco, however, opposed the petition saying that the BIR is not entitled to the annulment of judgment and that the CTA en banc has no jurisdiction to entertain annulment of judgment on the ground that the Rules of Court, Republic Act No. 9282 (An Act Expanding the Jurisdiction of the Court of Appeals ) and the Revised Rules of the Court of Tax Appeals do not provide such remedy.

The SC said the Revised Rules of the CTA and even the Rules of Court do not provide such recourse.

It added that even a direct petition for annulment of judgment of the CTA to the SC is not allowed.

Instead, the court said what the BIR should have filed was a petition for certiorari assailing the validity of the decision issued by the CTA First Division which granted Kepco’s tax refund.

But the court indicated that it was already too late for the BIR to file the proper petition considering that the period prescribed for the filing of an appeal had already lapsed. RAM