Remedial Law

CIR v. Mirant Pagbilao Corporation, G.R. No. 159593, October 12, 2006 Liberal Interpretation and Application of Procedural Rules


MPC is a domestic corporation licensed by the SEC to principally engage in the business of power generation and subsequent sale thereof. It is registered with the BIR as a VAT registered entity.

For the period April 1, 1996 to December 31, 1996, [MPC] seasonably filed its Quarterly VAT Returns reflecting accumulated input taxes in the amount of P39,330,500.85, allegedly paid by [MPC] to the suppliers of capital goods and services for the construction and development of the power generating plant and other related facilities in Pagbilao, Quezon.

[MPC] filed an application for tax credit or refund of the aforementioned unutilized VAT paid on capital goods.

Without waiting for an answer from the [BIR Commissioner], [MPC] filed the instant petition for review, in order to toll the running of the two-year prescriptive period for claiming a refund under the law.

In answer to the Petition, [the BIR Commissioner] advanced as special and affirmative defenses that “[MPC]’s claim for refund is still pending investigation and consideration before the office of [the BIR Commissioner] accordingly, the filing of the present petition is premature; well-settled is the doctrine that provisions in tax refund and credit are construed strictly against the taxpayer as they are in the nature of a tax exemption; in an action for refund or tax credit, the taxpayer has the burden to show that the taxes paid were erroneously or illegally paid and failure to sustain the said burden is fatal to the action for refund; it is incumbent upon [MPC] to show that the claim for tax credit has been filed within the prescriptive period under the Tax Code; and the taxes allegedly paid by [MPC] are presumed to have been collected and received in accordance with law and revenue regulations.[“]

After investigation of MPC’s application for tax credit or refund of input taxes, a memorandum report was submitted recommending a favorable action but in a reduced amount of P49,616.40 representing unapplied input taxes on capital goods.

A verification of the accuracy of [MPC]’s summary of input taxes revealed that out of the total claimed input taxes of P39,330,500.85, only the sum of P28,745,502.40 was properly supported by valid invoices and/or official receipts.

The CTA ruled in favor of MPC. However, it reduced the amount of refund to which MPC was entitled.

The  BIR Commissioner filed a Motion for Reconsideration which was subsequently denied.

Aggrieved, the BIR Commissioner filed with the CA a Petition for Review.

The CA dismissed the Petition for lack of merit.

Hence, the instant petition.

Before the CTA, the BIR Commissioner admitted that the MPC is a VAT-registered taxpayer, but charged it with the burden of proving its entitlement to refund. 

However, before the CA, the BIR Commissioner, in effect denied that the MPC is subject to VAT, making an affirmative allegation that it is a public utility liable, instead, for franchise tax. 

The BIR Commissioner raised for the first time on appeal questions of both fact and law not taken up before the tax court, but he argues that he should be allowed to do so as an exception to the technical rules of procedure and in the interest of substantial justice.


Whether or not there is sufficient cause to warrant the relaxation of technical or procedural rules in the instant case.


The BIR Commissioner is invoking a suspension of the general rules of procedure or an exception thereto, thus, it is incumbent upon him to present sufficient cause or justifiable circumstance that would qualify his case for such a suspension or exception. 

That this Court had previously allowed in another case such suspension of or exception to technical or procedural rules does not necessarily mean that the same shall also be allowed in the present case. 

The BIR Commissioner has the burden of persuading this Court that the same causes or circumstances that justified the suspension of or exception to the technical or procedural rules in the other case are also present in the case at bar.

The BIR Commissioner apparently forgets that there are specific reasons why technical or procedural rules are imposed upon the courts, and that compliance with these rules, should still be the general course of action. Hence, this Court has expounded that –

Procedural rules, we must stress, should be treated with utmost respect and due regard since they are designed to facilitate the adjudication of cases to remedy the worsening problem of delay in the resolution of rival claims and in the administration of justice. 

The requirement is in pursuance to the bill of rights inscribed in the Constitution which guarantees that “all persons shall have a right to the speedy disposition of their cases before all judicial, quasi-judicial and administrative bodies.” The adjudicatory bodies and the parties to a case are thus enjoined to abide strictly by the rules. 

While it is true that a litigation is not a game of technicalities, it is equally true that every case must be prosecuted in accordance with the prescribed procedure to ensure an orderly and speedy administration of justice. There have been some instances wherein this Court allowed a relaxation in the application of the rules, but this flexibility was “never intended to forge a bastion for erring litigants to violate the rules with impunity.” 

A liberal interpretation and application of the rules of procedure can be resorted to only in proper cases and under justifiable causes and circumstances.

The courts have the power to relax or suspend technical or procedural rules or to except a case from their operation when compelling reasons so warrant or when the purpose of justice requires it. 

What constitutes good and sufficient cause that would merit suspension of the rules is discretionary upon the courts.

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