COMMISSIONER OF INTERNAL REVENUE, Petitioner, vs. MINDANAO II GEOTHERMAL PARTNERSHIP, Respondent. G.R. No. 191498; Janua !

1", #$14 SERENO, CJ: FACTS%

Mindanao II is a partnership registered with the SEC. It is engaged in the business of power generation and sale of electricity to the !P"C"R Mindanao II filed its #uarterly $!% Returns for the second, third and fourth &uarters of ta'able year ())* on the following dates+
5 ,

-ate filed #uarter "riginal (0 1uly ())* (( "ctober ())* (5 1anuary ())5 !/ended 2( 1uly ())5 2( 1uly ())5 2( 1uly ())5 (nd 3rd *th ())* ())* ())* %a'able .ear

"n 0 "ctober ())5, Mindanao II filed with the 4IR an application for the refund or credit of accu/ulated unutili5ed creditable input ta'es. In support of the ad/inistrative clai/ for refund or credit, Mindanao II alleged that it is registered with the 4IR as a value6added ta'payer and all its sales are 5ero6rated under the EPIR! law. It further stated that for the second, third, and fourth &uarters of ta'able year ())*, it paid input $!% in the aggregate a/ount of P7M8 which were directly attributable to the 5ero6rated sales. %he input ta'es had not been applied against output ta'.
2) 22

Pursuant to Section 22(9-: of IRC, CIR had a period of 2() days, or until 3 ;ebruary ())0, to act on the clai/. %he ad/inistrative clai/ re/ained unresolved on 3 ;ebruary ())0. <nder the sa/e provision, Mindanao II could treat the inaction of the CIR as a denial of its clai/, in which case, the for/er would have 3) days to file an appeal to the C%! 9on 5 March ())0:. Mindanao II did not file an appeal. Mindanao II believed that a =udicial clai/ /ust be filed within the two6year prescriptive period provided under Section 22(9!: and that such ti/e fra/e was to be rec>oned fro/ the filing of its #uarterly $!% Returns for the second, third, and fourth &uarters of ta'able year ())*. Mindanao II, clai/ing inaction on the part of the CIR and that the two6year prescriptive period was about to e'pire, filed a Petition for Review with the C%! ?hile the application for refund or credit of unutili5ed input $!% was pending before the C%!, this Court pro/ulgated A&'a( Con(o')*a&+* M)n)n, an* D+-+'o./+n& Co .o a&)on -. CIR 1A&'a(2 #$$3. A&'a( 4+'* &4a& &4+ &5o6!+a . +(7 ).&)-+ .+ )o* 8o &4+ 8)')n, o8 a 7'a)/ 8o an )n.u& VAT +8un* o 7 +*)& )( &o 9+ +7:on+* 8 o/ &4+ *a&+ o8 8)')n, o8 &4+ 7o +(.on*)n, ;ua &+ '! VAT +&u n an* .a!/+n& o8 &4+ &a<.
10

C%! ordered the CIR to grant a refund or a ta' credit certificate, but only the unutili5ed input $!% incurred for the second, third and fourth &uarters of ta'able year ())*. C%! held that Mindanao II co/plied with the twin re&uisites for $!% 5ero6rating under the EPIR! law+ first, it is a generation co/pany, and second, it derived sales fro/ power generation. It also ruled that Mindanao II satisfied the re&uire/ents for the grant of a refund@credit under Section 22( of the %a' Code+ 92: there /ust be 5ero6rated or effectively 5ero6rated salesA 9(: input ta'es /ust have been incurred or paidA 93: the creditable input ta' due or paid /ust be attributable to 5ero6rated sales or effectively 5ero6rated salesA 9*: the input $!% pay/ents /ust not have been applied against any output liabilityA and 95: the clai/ /ust be filed within the two6year prescriptive period. CIR filed a Motion for Partial Reconsideration 6 prescription had already set in, since the appeal to the C%! was filed only on (2 1uly ())0, which was way beyond the last day to appeal B 5 March ())0 6 Section 22(9-: of the 2CC7 %a' Code. "n 2( Septe/ber ()),, &4)( Cou & . o/u',a&+* CIR -. M) an& Pa,9)'ao Co .o a&)on 1M) an&2. M) an& 8)<+* &4+ +7:on)n, *a&+ o8 &4+ &5o6!+a . +(7 ).&)-+ .+ )o* 8o &4+ a..')7a&)on 8o +8un* o 7 +*)& o8 unu&)')=+* )n.u& VAT a& &4+ 7'o(+ o8 &4+ &a<a9'+ ;ua &+ 54+n &4+ +'+-an& (a'+( 5+ + /a*+, a( (&a&+* )n S+7&)on 11#1A2.
##

C%! denied the CIRDs Motion for Partial Reconsideration which denied the sa/e "n the &uestion whether the application for refund was ti/ely filed, it held that the C%! Second -ivision correctly applied the !tlas ruling. It reasoned that !tlas re/ained to be the controlling doctrine. Mirant was a new doctrine and, as such, the latter should not apply retroactively to Mindanao II who had relied on the old doctrine of !tlas and had acted on the faith thereof.
32 3(

CIR filed this Rule *5 Petition, hence this petition.

ISSUES 92: ?hether or not the application for refund or credit of unutili5ed input $!% was within the two6year prescriptive period for filing 9(: ?hether or not the C%! is correct 6 2()83) day period for filing an appeal with the C%! HELD% ?e deny Mindanao IIDs clai/ for refund or credit of unutili5ed input $!% on the ground that its =udicial clai/s were filed out of ti/e, even as we hold that its application for refund was filed on ti/e. I. MINDANAO II>S APPLICATION FOR REFUND ?AS FILED ON TIME ?+ 8)n* no + o )n &4+ 7on7'u()on o8 &4+ &a< 7ou &( &4a& &4+ a..')7a&)on 8o +8un* o 7 +*)& o8 unu&)')=+* )n.u& VAT 5a( &)/+'! 8)'+*. %he proble/ lies with their bases for the conclusion as to+ 92: what should be filed within the prescriptive periodA and 9(: the date fro/ which to rec>on the prescriptive period. A. T4+ Ju*)7)a' C'a)/ N++* No& @+ F)'+* ?)&4)n &4+ T5o6A+a P +(7 ).&)-+ P+ )o* 4oth the C%! Second -ivision and C%! En 4anc decisions held that the phrase Eapply for the issuance of a ta' credit certificate or refundE in Section 22(9!: is construed to refer to both the ad/inistrative clai/ filed with the CIR and the =udicial clai/ filed with the C%!. %his view, however, has no legal basis. In Co//issioner of Internal Revenue v. !ichi ;orging Co/pany of !sia, Inc. 9!ichi:, we dispelled the /isconception that both the ad/inistrative and =udicial clai/s /ust be filed within the two6year prescriptive period+
37

%here is nothing in Section 22( of the IRC to support respondentDs view. ' ' '. %he phrase Ewithin two 9(: years ' ' ' apply for the issuance of a ta' credit certificate or refundE refers to applications for refund@credit filed with the CIR and not to appeals /ade to the C%!. %his is apparent in the first paragraph of subsection 9-: of the sa/e provision, which states that the CIR has E2() days fro/ the sub/ission of co/plete docu/ents in support of the application filed in accordance with Subsections 9!: and 94:E within which to decide on the clai/. In fact, applying the two6year period to =udicial clai/s would render nugatory Section 22( 9-: of the IRC, which already provides for a specific period within which a ta'payer should appeal the decision or inaction of the CIR. %he second paragraph of Section 22( 9-: of the IRC envisions two scenarios+ 92: when a decision is issued by the CIR before the lapse of the 2()6 day periodA and 9(: when no decision is /ade after the 2()6day period. In both instances, the ta'payer has 3) days within which to file an appeal with the C%!. !s we see it then, the 2()6day period is crucial in filing an appeal with the C%!. %he /essage of !ichi is clear+ it is only the ad/inistrative clai/ that /ust be filed within the two6year prescriptive periodA the =udicial clai/ need not fall within the two6year prescriptive period. @. R+7:on)n, Da&+ )( &4+ C'o(+ o8 &4+ Ta<a9'+ Bua &+ ?4+n &4+ R+'+-an& Sa'+( ?+ + Ma*+. S+7&)on 11#1A2 )( &4+ A..')7a9'+ Ru'+ %he issue posed is not novel. In the recent case of Co//issioner of Internal Revenue v. San Ro&ue Power Corporation 9San Ro&ue:, this Court resolved the threshold &uestion of when to rec>on the two6year prescriptive period for filing an ad/inistrative clai/ for refund or credit of unutili5ed input $!% under the 2CC7 %a' Code in view of our pronounce/ents in !tlas and Mirant. In that case, we delineated the scope and effectivity of the !tlas and Mirant doctrines as follows+
**

;urther/ore, San Ro&ue distinguished between Section 22( and Section ((C of the 2CC7 %a' Code+

<nder Section 22)94: and Section 22(9!:, the prescriptive period for filing a =udicial clai/ for Ee'cessE input $!% is two years fro/ the close of the ta'able &uarter when the sale was /ade by the person legally liable to pay the output $!%. %his prescriptive period has no relation to the date of pay/ent of the Ee'cessE input $!%. %he Ee'cessE input $!% /ay have been paid for /ore than two years but this does not bar the filing of a =udicial clai/ for Ee'cessE $!% under Section 22(9!:, which has a different rec>oning period fro/ Section ((C. Moreover, the person clai/ing the refund or credit of the input $!% is not the person who legally paid the input $!%. Such person see>ing the $!% refund or credit does not clai/ that the input $!% was Ee'cessivelyE collected fro/ hi/, or that he paid an input $!% that is /ore than what is legally due. Fe is not the ta'payer who legally paid the input $!%. <nder Section 22)94:, a ta'payer can apply his input $!% only against his output $!%. %he only e'ception is when the ta'payer is e'pressly E5ero6rated or effectively 5ero6ratedE under the law, li>e co/panies generating power through renewable sources of energy. %hus, a non 5ero6rated $!%6registered ta'payer who has no output $!% because he has no sales cannot clai/ a ta' refund or credit of his unused input $!% under the $!% Syste/. Even if the ta'payer has sales but his input $!% e'ceeds his output $!%, he cannot see> a ta' refund or credit of his Ee'cessE input $!% under the $!% Syste/. Fe can only carry6over and apply his Ee'cessE input $!% against his future output $!%. If such Ee'cessE input $!% is an Ee'cessivelyE collected ta', the ta'payer should be able to see> a refund or credit for such Ee'cessE input $!% whether or not he has output $!%. %he $!% Syste/ does not allow such refund or credit. ' ' ' %wo things are clear fro/ the above &uoted San Ro&ue dis&uisitions. ;irst, when it co/es to recovery of unutili5ed input $!%, Section 22(, and not Section ((C of the 2CC7 %a' Code, is the governing law. Second, prior to , 1une ())7, the applicable rule is neither !tlas nor Mirant, but Section 22(9!:. ?e present the rules laid down by San Ro&ue in deter/ining the proper rec>oning date of the two6year prescriptive period through the following ti/eline+

%hus, the tas> at hand is to deter/ine the applicable period for this case. In this case, Mindanao II filed its ad/inistrative clai/s for refund or credit for the second, third and fourth &uarters of ())* on 0 "ctober ())5. %he case thus falls within the first period as indicated in the above ti/eline. In other words, it is covered by the rule prior to the advent of either !tlas or Mirant. !ccordingly, the proper rec>oning date in this case, as provided by Section 22(9!: of the 2CC7 %a' Code, is the close of the ta'able &uarter when the relevant sales were /ade. C. T4+ A*/)n)(& a&)-+ C'a)/( ?+ + T)/+'! F)'+* ?e su/ up our conclusions so far+ 92: it is only the ad/inistrative clai/ that /ust be filed within the two6year prescriptive periodA and 9(: the two6year prescriptive period begins to run fro/ the close of the ta'able &uarter when the relevant sales were /ade. 4earing these in /ind, we now proceed to deter/ine whether Mindanao IIGs ad/inistrative clai/s for the second, third, and fourth &uarters of ())* were ti/ely filed. S+7on* Bua &+

T4) * Bua &+

Fou &4 Bua &+

II. MINDANAO II>S JUDICIAL CLAIMS ?ERE FILED OUT OF TIME No&5)&4(&an*)n, &4+ &)/+'! 8)')n, o8 &4+ a*/)n)(& a&)-+ 7'a)/(, 5+ 8)n* &4a& &4+ CTA En @an7 + +* )n 4o'*)n, &4a& M)n*anao II>( Cu*)7)a' 7'a)/( 5+ + &)/+'! 8)'+*. A. 0$6Da! P+ )o* A'(o A..')+( &o A..+a'( 8 o/ Ina7&)on Section 22(9-: spea>s of two periods+ the period of 2() days, which serves as a waiting period to give ti/e for the CIR to act on the ad/inistrative clai/ for refund or credit, and the period of 3) days, which refers to the period for interposing an appeal with the C%!. It is with the 3)6day period that there is an issue in this case. %he C%! En 4ancDs holding ' ' ' %he =udicial clai/ is seasonably filed so long as it is filed after the lapse of the 2()6day waiting period but before the lapse of the two6year prescriptive period under Section 22(9!:.
*0

?e do not agree. %he 3)6day period applies not only to instances of actual denial by the CIR of the clai/ for refund or ta' credit, but to cases of inaction by the CIR as well. %his is the correct interpretation of the law, as held in San Ro&ue+
*7

Section 22(9C: also e'pressly grants the ta'payer a 3)6day period to appeal to the C%! the decision or inaction of the Co//issioner. %his law is clear, plain, and une&uivocal. ;ollowing the well6settled verba legis doctrine, this law should be applied e'actly as worded since it is clear, plain, and une&uivocal. !s this law states, the ta'payer /ay, if he wishes, appeal the decision of the Co//issioner to the C%! within 3) days fro/ receipt of the Co//issionerGs decision, or if the Co//issioner does not act on the ta'payerGs clai/ within the 2()6day period, the ta'payer /ay appeal to the C%! within 3) days fro/ the e'piration of the 2()6day period. 9E/phasis supplied:
*,

%he San Ro&ue pronounce/ent is clear. %he ta'payer can file the appeal in one of two ways+ 92: file the =udicial clai/ within thirty days after the Co//issioner denies the clai/ within the 2()6day period, or 9(: file the =udicial clai/ within thirty days fro/ the e'piration of the 2()6day period if the Co//issioner does not act within the 2()6day period. @. T4+ Ju*)7)a' C'a)/ ?a( @+'a&+*'! F)'+* Mindanao II, however, filed a Petition for Review only on (2 1uly ())0, 23, days after the lapse of the 3)6day period on 5 March ())0. %he =udicial clai/ was therefore filed late. 9See ti/eline below.:

C. T4+ 0$6Da! P+ )o* &o A..+a' )( Man*a&o ! an* Ju )(*)7&)ona' Fowever, what is up for debate is the nature of the 3)6day ti/e re&uire/ent. %he CIR posits that it is /andatory. Mindanao II contends that the re&uire/ent of =udicial recourse within 3) days is only directory and per/issive, as indicated by the use of the word E/ayE in Section 22(9-:.
*C

%he answer is found in San Ro&ue. %here, we declared that the 3)6day period to appeal is both /andatory and =urisdictional+ ' ' '' ?hen Section 22(9C: states that Ethe ta'payer affected /ay, within thirty 93): days fro/ receipt of the decision denying the clai/ or after the e'piration of the one hundred twenty6day period, appeal the decision or the unacted clai/ with the Court of %a' !ppeals,E the law does not /a>e the 2()83) day periods optional =ust because the law uses the word E /ay.E %he word E/ayE si/ply /eans that the ta'payer /ay or /ay not appeal the decision of the Co//issioner within 3) days fro/ receipt of the decision, or within 3) days fro/ the e'piration of the 2()6day period. ' ' '.
5)

D. E<7+.&)on &o &4+ /an*a&o ! an* Cu )(*)7&)ona' na&u + o8 &4+ 1#$D0$ *a! .+ )o* no& a..')7a9'+ evertheless, San Ro&ue provides an e'ception to the /andatory and =urisdictional nature of the 2()83) day period H 4IR Ruling o. -!6*,C6)3 dated 2) -ece/ber ())3. %he 4IR ruling declares that the Eta'payer6clai/ant need not wait for the lapse of the 2()6day period before it could see> =udicial relief with the C%! by way of Petition for Review.E %hus, in San Ro&ue, the Court applied this e'ception to %aganito Mining Corporation 9%aganito:, one of the ta'payers in San Ro&ue. %aganito filed its =udicial clai/ on 2* ;ebruary ())7, after the 4IR ruling too> effect on 2) -ece/ber ())3 and before the pro/ulgation of Mirant. %he Court stated+ %aganito, however, filed its =udicial clai/ with the C%! on 2* ;ebruary ())7, after the issuance of 4IR Ruling o. -!6*,C6)3 on 2) -ece/ber ())3. %ruly, %aganito can clai/ that in filing its =udicial clai/ pre/aturely without waiting for the 2()6day period to e'pire, it was /isled by 4IR Ruling o. -!6*,C6)3. %hus, %aganito can clai/ the benefit of 4IR Ruling o. -!6*,C6)3, which shields the filing of its =udicial clai/ fro/ the vice of pre/aturity.
5(

?e su/ up the rules established by San Ro&ue on the /andatory and =urisdictional nature of the 3)6day period to appeal through the following ti/eline+

4earing in /ind the foregoing rules for the ti/ely filing of a =udicial clai/ for refund or credit of unutili5ed input $!%, we rule on the present case of Mindanao II as follows+ !s /entioned above, Mindanao II filed its =udicial clai/ with the C%! on (2 1uly ())0. %his was after the issuance of 4IR Ruling o. -!6*,C6)3 on 2) -ece/ber ())3, but before its reversal on 5 "ctober ()2). Fowever, while the 4IR ruling was in effect when Mindanao II filed its =udicial clai/, the rule cannot be properly invo>ed. %he 4IR ruling, as discussed earlier, conte/plates pre/ature filing. %he situation of Mindanao II is one of late filing. %o repeat, its =udicial clai/ was filed on (2 1uly ())0 B long after 5 March ())0, the last day of the 3)6day period for appeal. In fact, it filed its =udicial clai/ 23, days after the lapse of the 3)6day period. 9See ti/eline below:

E. Un*+ (),n+* *)((+n&+* )n San Ro;u+ &o &4+ +& oa7&)-+ a..')7a&)on o8 &4+ /an*a&o ! an* Cu )(*)7&)ona' na&u + o8 &4+ 1#$D0$ *a! .+ )o*. It is worthy to note that in San Ro&ue, this ponente registered her dissent to the retroactive application of the /andatory and =urisdictional nature of the 2()83) day period provided under Section 22(9-: of the %a' Code which, in her view, is unfair to ta'payers. It has been the view of this ponente that the /andatory nature of 2()83) day period /ust be co/pletely applied prospectively or, at the earliest, only upon the finality of !ichi in order to create stability and consistency in our ta' laws. evertheless, this ponente is /indful of the fact that =udicial precedents cannot be ignored. Fence, the /a=ority view e'pressed in San Ro&ue /ust be applied. SUMMARA OF RULES ON PRESCRIPTIVE PERIODS FOR CLAIMING REFUND OR CREDIT OF INPUT VAT %he lessons of this case /ay be su//ed up as follows+ !. %wo6.ear Prescriptive Period 2. It is only the ad/inistrative clai/ that /ust be filed within the two6year prescriptive period. 9!ichi: (. %he proper rec>oning date for the two6year prescriptive period is the close of the ta'able &uarter when the relevant sales were /ade. 9San Ro&ue: 3. %he only other rule is the !tlas ruling, which applied only fro/ , 1une ())7 to 2( Septe/ber ()),. !tlas states that the two6year prescriptive period for filing a clai/ for ta' refund or credit of unutili5ed input $!% pay/ents should be counted fro/ the date of filing of the $!% return and pay/ent of the ta'. 9San Ro&ue: 4. 2()83) -ay Period 2. %he ta'payer can file an appeal in one of two ways+ 92: file the =udicial clai/ within thirty days after the Co//issioner denies the clai/ within the 2()6day period, or 9(: file the =udicial clai/ within thirty days fro/ the e'piration of the 2()6 day period if the Co//issioner does not act within the 2()6day period. (. %he 3)6day period always applies, whether there is a denial or inaction on the part of the CIR. 3. !s a general rule, the 3 )6day period to appeal is both /andatory and =urisdictional. 9!ichi and San Ro&ue: *. !s an e'ception to the general rule, pre/ature filing is allowed only if filed between 2) -ece/ber ())3 and 5 "ctober ()2), when 4IR Ruling o. -!6*,C6)3 was still in force. 9San Ro&ue: 5. Iate filing is absolutely prohibited, even during the ti/e when 4IR Ruling S<MM!R. ! - C" CI<SI" In su/, our finding is that the three ad/inistrative clai/s for the refund or credit of unutili5ed input $!% were all ti/ely filed, while the corresponding =udicial clai/s were belatedly filed. %he foregoing considered, the C% ! lost =urisdiction over Mindanao IlDs clai/s for refund or credit. %he C%! E4 erred in granting these clai/s.
1wphi1

o. -!6*,C6)3 was in force. 9San Ro&ue:

?HEREFORE, 5+ GRANT &4+ P+&)&)on. A n+5 u')n, )( +n&+ +* DENAING +(.on*+n& ( 7'a)/ 8o a &a< +8un* o 7 +*)& o8PE,391,84".#4.