Taxation II - Cases

TAXATION II - ATTY.
VILLARUBIA
G.R. No. 190872 - October 17, 2013
REPUBLIC OF THE PHILIPPINES represented by
Revenue, Petitioner, vs. GST PHILIPPINES, INC., Respondent.
the
Commissioner
of
Internal
PERLAS-BERNABE, J.:
It is true that every citizen has a civic responsibility nay an obligation to honestly pay the right taxes as a
contribution to the government in order to keep and maintain a civilized society. Corollarily, the government
is expected to implement tax laws in good faith; to discharge its duty to collect what is due to it; and
consistent with the principles of fair play and equity to justly return what has been erroneously and
excessively given to it after careful verification but without infringing upon the fundamental rights of the
taxpayer.
In this Petition for Review on Certiorari1 under Rule 45 of the 1997 Rules of Civil Procedure, petitioner
Republic of the Philippines, represented by the Commissioner of Internal Revenue (CIR), assails the
October 30, 2009 Decision2 and January 5, 2010 Resolution 3 of the Court of Tax Appeals (CTA) En Banc in
C.T.A. EB No. 484, granting respondent GST Philippines, Inc. (GST) a refund of its unutilized excess input
value added tax (VAT) attributable to zero-rated sales for the four quarters of taxable year 2004 and the
first three quarters of taxable year 2005.
The facts: GST is a corporation duly organized and existing under the laws of the Philippines, and primarily
engaged in the business of manufacturing, processing, selling, and dealing in all kinds of iron, steel or other
metals.4 It is a duly registered VAT enterprise with taxpayer identification number 000-155-645-000,5 which
deals with companies registered with (1) the Board of Investments (BOI) pursuant to Executive Order No.
(EO) 226,6 whose manufactured products are 100% exported to foreign countries; and (2) the Philippine
Economic Zone Authority (PEZA).7 Sales made by a VAT-registered person to a PEZA-registered entity are
considered exports to a foreign country subject to a zero rate. 8
During the taxable years 2004 and 2005, GST filed Quarterly VAT Returns showing its zero-rated sales, as
follows:9
Period
Date of Filing
Zero-Rated Sales
1st Quarter of year 2004
April 16, 2004
P 77,687,420.54
2nd Quarter of year 2004
July 15, 2004
53,737,063.05
3rd Quarter of year 2004
October 15, 2004
74,280,682.00
4th Quarter of year 2004
January 11, 2005
104,633,604.23
April 25, 2005
37,742,969.02
July 19, 2005
56,133,761.00
October 26, 2005
51,147,677.80
Claiming unutilized excess input VAT in the total amount of P32,722,109.68 attributable to the foregoing
zero-rated sales,10 GST filed before the Bureau of Internal Revenue (BIR) separate claims for refund on the
following dates:11
Period
Date of Filing of
Administrative Claim
For Refund
June 9, 2004
TAXATION II (Saturday- Atty. Villarubia) EUNICE 1
August 12, 2004
February 18, 2005
4th Quarter of year 2004
February 18, 2005
May 11, 2005
November 18, 2005
November 18, 2005
For failure of the CIR to act on its administrative claims, GST filed a petition for review before the CTA on
March 17, 2006. After due proceedings, the CTA First Division rendered a Decision 12 on January 27, 2009
granting GSTs claims for refund but at the reduced amount of P27,369,114.36. The CIR was also ordered
to issue the corresponding tax credit certificate. 13
The CIR moved for reconsideration, which was denied 14 by the CTA First Division for lack of merit, thus,
prompting the elevation of the case to the CTA En Banc via a petition for review. 15
The CIR raised therein the failure of GST to substantiate its entitlement to a refund, 16 and argued that the
judicial appeal to the CTA was filed beyond the reglementary periods prescribed in Section 112 of RA
842417 (Tax Code).18
On October 30, 2009, the CTA En Banc affirmed 19 the Decision of the CTA First Division finding GSTs
administrative and judicial claims for refund to have been filed well within the prescribed periods provided in
the Tax Code.20 The CIRs motion for reconsideration was denied by the CTA En Banc in its
Resolution21 dated January 5, 2010.
Hence, the instant petition.
The Issue
The CIR no longer raises the alleged failure of GST to comply with the substantiation requirements for the
questioned claims for refund nor questions the reduced award granted by the CTA En Banc in the amount
ofP27,369,114.36. Thus, the lone issue for resolution is whether GSTs action for refund has complied with
the prescriptive periods under the Tax Code.
The
Ruling
Laws
Providing
Credit of Unutilized Excess Input VAT
of
Refunds
the
or
Court
Tax
Refund or tax credit of unutilized excess input VAT has been allowed as early as in the Original VAT Law
EO 273.22 This was later amended by RA 7716 23 and RA 8424, and further amended by RA 933724 which
took effect on November 1, 2005. 25 Since GSTs claims for refund covered the periods before the effectivity
of RA 9337, the old provision on VAT refund, specifically Section 112, as amended by RA 8424, shall
apply.26 It reads:
Section 112. Refunds or Tax Credits of Input 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. (Emphasis supplied)
xxxx
(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)
The CIR, adopting the dissenting opinion 27 of CTA Presiding Justice Ernesto D. Acosta to the CTA En Banc
Decision dated October 30, 2009, maintains that the two-year prescriptive period under Section 112 (A) of
the Tax Code reckoned from the close of the taxable quarter involved is limited only to the filing of an
administrative not judicial claim.28 In turn, under paragraph (D) of the same Section, the CIR has 120
days to decide on the claim counted from the date of the submission of complete documents and not from
the mere filing of the administrative claim. The taxpayer then has 30 days from receipt of the adverse
decision, or from the expiration of the 120-day period without the CIR acting upon the claim, to institute his
judicial claim before the CTA.29
Thus, in the present case, the claims filed for the four quarters of taxable year 2004, as well as the first
quarter of taxable year 2005, had already prescribed. While those of the second and third quarters of
taxable year 2005 were prematurely filed, as summarized in the table presented by Justice Acosta, to wit:
Applying the above discourse in the case at bar, a table is prepared for easy reference:
Filing
of 120th
day 30th day Section
Administrative Section
112 112 (D), 2nd par.,
Claim
(D), NIRC of NIRC of 1997
1997
Filing
of
the Remarks
Petition before the
First Division of
this Court
June 9, 2004
March 17, 2006
Prescribed
March 17, 2006
Prescribed
July 18, 2005
March 17, 2006
Prescribed
8, October 8, 2005
March 17, 2006
Prescribed
March 17, 2006
Prescribed
October 7, 2004 November 6, 2004
August 12, 2004 December

2004
February
2005
18, June 18, 2005
May 11, 2005

November
2005
10, January 9, 2005
September
2005
18, March 18, 2006
April 17, 2006
Based on the above, the filing of the Petition for Review before the First Division has already prescribed
with respect to the administrative claim filed on June 9, 2004; August 12, 2004; February 18, 2005; and
May 11, 2005 for being filed beyond the 30th day provided under the second paragraph of Section 112 (D)
of the NIRC of 1997. The petition is therefore dismissible for being out of time.
Anent the administrative claim filed on November 18, 2005, the filing of the petition before the First Division
is premature for failure of respondent to wait for the 120-day period to expire. It failed to exhaust the
available administrative remedies. Hence, the instant petition is likewise dismissible for lack of cause of
action.30
For its part, GST asserts that under Section 112 (A) of the Tax Code, the prescriptive period is complied
with if both the administrative and judicial claims are filed within the two-year prescriptive period;31 and that
compliance with the 120-day and 30-day periods under Section 112 (D) of the Tax Code is not
mandatory.32 It explained that the 30-day period only refers to a case where a decision is rendered by the
CIR and not when the claim for refund is not acted upon, in which case, the taxpayer may appeal to the
CTA anytime even prior to or after the expiration of the 120-day period as long as it is within the two-year
prescriptive period. On the other hand, the CIR may still choose to resolve the administrative claim even
beyond the 120-day period. In any case, compliance with the 120-day and 30-day periods is merely
directory and permissive, not mandatory nor jurisdictional. 33
The
120+30
mandatory and jurisdictional.
day
periods
are
The Court had already clarified in the case of CIR v. Aichi Forging Company of Asia, Inc.
(Aichi),34 promulgated on October 6, 2010, that the two-year prescriptive period applies only to
administrative claims and not to judicial claims. Morever, it was ruled that the 120-day and 30-day periods
are not merely directory but mandatory. Accordingly, the judicial claim of Aichi, which was simultaneously
filed with its administrative claim, was found to be premature. The Court held:
In fact, applying the two-year period to judicial claims would render nugatory Section 112(D) [now Section
112 (C)] of the NIRC, which already provides for a specific period within which a taxpayer should appeal
the decision or inaction of the CIR.
The second paragraph of Section 112(D) [now Section 112 (C)] of the NIRC envisions two scenarios: (1)
when a decision is issued by the CIR before the lapse of the 120-day period; and (2) when no decision is
made after the 120-day period. In both instances, the taxpayer has 30 days within which to file an appeal
with the CTA. As we see it then, the 120-day period is crucial in filing an appeal with the CTA. 35 (Emphasis
supplied)
The taxpayer will always have 30 days to file the judicial claim even if the Commissioner acts only on the
120th day, or does not act at all during the 120-day period. With the 30-day period always available to the
taxpayer, the taxpayer can no longer file a judicial claim for refund or tax credit of unutilized excess input
VAT without waiting for the Commissioner to decide until the expiration of the 120-day period.36 Failure to
comply with the 120-day waiting period violates the doctrine of exhaustion of administrative remedies and
renders the petition premature and thus without a cause of action, with the effect that the CTA does not
acquire jurisdiction over the taxpayers petition. 37
San Roque case provides exception to the strict compliance with the 120-day period
While the Court En Banc reiterated in the recent consolidated cases of CIR v. San Roque Power
Corporation ( San Roque ),38 promulgated on February 12, 2013, that the 120-day period is mandatory and
jurisdictional, however, it categorically held that BIR Ruling No. DA-489-03 dated December 10, 2003
provided a valid claim for equitable estoppel under Section 246 39 of the Tax Code. BIR Ruling No. DA-48903 expressly states 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." 40 Speaking through Associate Justice
Antonio T. Carpio, the Court ratiocinated as follows:
There is no dispute that the 120-day period is mandatory and jurisdictional, and that the CTA does not
acquire jurisdiction over a judicial claim that is filed before the expiration of the 120-day period. There are,
however, two exceptions to this rule. The first exception is if the Commissioner, through a specific ruling,
misleads a particular taxpayer to prematurely file a judicial claim with the CTA. Such specific ruling is
applicable only to such particular taxpayer. The second exception is where the Commissioner, through a
general interpretative rule issued under Section 4 of the Tax Code, misleads all taxpayers into filing
prematurely judicial claims with the CTA. In these cases, the Commissioner cannot be allowed to later on
question the CTA's assumption of jurisdiction over such claim since equitable estoppel has set in as
expressly authorized under Section 246 of the Tax Code.
Section 4 of the Tax Code, a new provision introduced by RA 8424, expressly grants to the Commissioner
the power to interpret tax laws, thus:
Sec. 4. Power of the Commissioner To Interpret Tax Laws and To Decide Tax Cases. The power to
interpret the provisions of this Code and other tax laws shall be under the exclusive and original jurisdiction
of the Commissioner, subject to review by the Secretary of Finance.
The power to decide disputed assessments, refunds of internal revenue taxes, fees or other charges,
penalties imposed in relation thereto, or other matters arising under this Code or other laws or portions
thereof administered by the Bureau of Internal Revenue is vested in the Commissioner, subject to the
exclusive appellate jurisdiction of the Court of Tax Appeals.
Since the Commissioner has exclusive and original jurisdiction to interpret tax laws, taxpayers acting in
good faith should not be made to suffer for adhering to general interpretative rules of the Commissioner
interpreting tax laws, should such interpretation later turn out to be erroneous and be reversed by the
Commissioner or this Court. Indeed, Section 246 of the Tax Code expressly provides that a reversal of a
BIR regulation or ruling cannot adversely prejudice a taxpayer who in good faith relied on the BIR
regulation or ruling prior to its reversal. x x x.41
BIR Ruling No. DA-489-03 was classified in San Roque as a general interpretative rule having been made
in response to a query by a government agency tasked with processing tax refunds and credits the One
Stop Shop Inter-Agency Tax Credit and Drawback Center of the Department of Finance. As such, all
taxpayers can rely on said ruling from the time of its issuance on December 10, 2003 up to its reversal by
this Court in Aichi on October 6, 2010, where it was held that the 120+30 day periods are mandatory and
jurisdictional.42
Therefore, GST can benefit from BIR Ruling No. DA-489-03 with respect to its claims for refund of
unutilized excess input VAT for the second and third quarters of taxable year 2005 which were filed before
the CIR on November 18, 2005 but elevated to the CTA on March 17, 2006 before the expiration of the
120-day period (March 18, 2006 being the 120th day). BIR Ruling No. DA-489-03 effectively shielded the
filing of GST's judicial claim from the vice of prematurity. 43
GST's claims, however, for the four quarters of taxable year 2004 and the first quarter of taxable year 2005
should be denied for late filing of the petition for review before the CTA. GST filed its VAT Return for the
first quarter of 2004 on April 16, 2004. Reckoned from the close of the first taxable quarter of 2004 on
March 31, 2004, the administrative claim filed on June 9, 2004 was well within the required two-year
prescriptive period from the close of the taxable quarter, the last day of filing being March 31, 2006. The
CIR then had 120 days from June 9, 2004, or until October 7, 2004, to decide the claim. Since the
Commissioner did not act on the claim within the said period, GST had 30 days from October 7, 2004, or
until November 6, 2004, to file its judicial claim. However, GST filed its petition for review before the CTA
only on March 17, 2006, or 496 days after the last day of filing. In short, GST was late by one year and 131
days in filing its judicial claim.
For the second quarter of taxable year 2004, GST filed its administrative claim on August 12, 2004. The
120-day period from the filing of such claim ended on December 10, 2004, and the 30th day within which to
file a judicial claim fell on January 9, 2005. However, GST filed its petition for review before the CTA only
on March 17, 2006, or 432 days after the last day of filing.
GST was late by one year and 67 days in filing its judicial claim.
For the third and fourth quarters of taxable year 2004, GST filed its administrative claims on February 18,
2005. The 120th day, or June 18, 2005, lapsed without any action from the CIR. Thus, GST had 30 days
therefrom, or until July 18, 2005, to file its judicial claim, but it did so only on March 17, 2006, or 242 days
after the last day of filing. GST was late by 242 days in filing its judicial claim.
Finally, for the first quarter of taxable year 2005, GST filed its administrative claim on May 11,
2005.1wphi1 The 120-day period ended on September 8, 2005, again with no action from the CIR.
Nonetheless, GST failed to elevate its claim to the CTA within 30 days, or until October 8, 2005. The
petition for review filed by GST on March 17, 2006, or 160 days after the last day of filing was, therefore,
late.
Following is a tabular summation of the relevant dates of GST's administrative and judicial claims, and the
corresponding action on said claims:
1wphi1
120th
day 30th
day
Filing
of [Section
[Section
Filing of
Taxable
Administrative 112(D),
112(D),
Judicia Remarks
Period
claim
NIRC
of NIRC
of lClaim
1997]
1997]
1st
Quarter
2004
2nd
Quarter
2004
3rd
Quarter
2004
4th
Quarter
2004
October
2004
7, November
6, 2004
June 9, 2004
December
10, 2004
August
2004
February
2005
February
2005
January
2005
12,
Action
Claim
on
March
17,
2006
Field late
DENY
pursuant to
Section
112
(C),
NIRC
of
1997
9, March
17,
2006
Field late
DENY
pursuant to
Section
112
(C),
NIRC
of
1997
June
2005
18, July
2005
18, March
17,
2006
Field late
DENY
pursuant to
Section
112
(C),
NIRC
of
1997
June
2005
18, July
2005
18, March
17,
2006
Field late
DENY
pursuant to
Section
112
(C),
NIRC
of
1997
8, March
17,
2006
Field late
18,
18,
September
8,
2005
October
2005
DENY
pursuant to
Section
112
(C),
NIRC
of
1997
1st
Quarter
2005
May 11, 2005
2nd
Quarter
2005
November 18, March

2005
2006
18, April
2006
17, March
17,
2006
GRANT
Prematurely pursuant to
filed
BIR Ruling
No.
DA489-03
3rd
Quarter
2005
November 18, March

2005
2006
18, April
2006
17, March
17,
2006
GRANT
Prematurely pursuant to
filed
BIR Ruling
No.
DA489-03
As may be observed from the Court's application of the 120+30 day periods to GST's claims, the 120-day
period is uniformly reckoned from the date of the filing of the administrative claims. The CIR
insists,44 however, that the filing of the administrative claim was not necessarily the same time when the
complete supporting documents were submitted to the Commissioner.
The Court agrees. However, this issue is not determinative of the resolution of this case for failure of the
CIR to show that GST further submitted supporting documents subsequent to the filing of its administrative
claims. Thus, the reckoning date of the 120-day period commenced simultaneously45 with the filing of the
administrative claims when GST was presumed to have attached the relevant documents to support its
applications for refund or tax credit.
As a final note, it is incumbent on the Court to emphasize that tax refunds partake of the nature of tax
exemptions which are a derogation of the power of taxation of the State. Consequently, they are construed
strictly against a taxpayer and liberally in favor of the State. 46 Thus, as emphasized in Aichi, a taxpayer
must prove not only its entitlement to a refund but also its compliance with prescribed procedures. 47
WHEREFORE, the petition is PARTLY GRANTED. The Decision dated October 30, 2009 of the Court of
Tax Appeals En Banc in C.T.A. EB No. 484, affirming the Decision dated January 27, 2009 of the CTA First
Division in C.T.A. Case No. 7419, is AFFIRMED with MODIFICATION. The claims of respondent GST
Philippines, Inc. for refund or tax credit for unutilized excess input VAT for the four quarters of taxable year
2004, as well as the first quarter of taxable year 2005 are hereby DENIED for being filed beyond the
prescriptive period, while the claims for refund for the second and third quarters of taxable year 2005 are
GRANTED. Accordingly, the Commissioner of Internal Revenue is ordered to refund or, in the alternative,
to issue a tax credit certificate to respondent GST Philippines, Inc. corresponding only to the amount
representing unutilized excess input VAT for the second and third quarters of taxable year 2005 out of the
total amount of P27,369,114.36 awarded by the CTA.
SO ORDERED.
G.R. No. 184145
December 11, 2013
COMMISSIONER
OF
INTERNAL
vs.
DASH ENGINEERING PHILIPPINES, INC., Respondent.
REVENUE, Petitioner,
DECISION
MENDOZA, J.:
Before the Court is a Petition for Review on Certiorari under Rule 45 of the 1997 Revised Rules of Civil
Procedure, assailing the July 17, 2008 Decision 1 and the August 12, 2008 Resolution 2 of the Court of Tax
Appeals(CTA) En Banc in C.T.A. EB No. 357 (C.T.A. Case No. 7243) entitled "Commissioner of Internal
Revenue v. Dash Engineering Philippines, inc."
The Facts
Respondent Dash Engineering Philippines, Inc. (DEPJ) is a corporation duly registered with the Securities
and Exchange Commission, authorized to do business in the Philippines and listed with the Philippine
Economic Zone Authority as an ecozone IT export enterprise. 3 It is also a VAT-registered entity engaged in
the export sales of computer-aided engineering and design. 4
Respondent filed its monthly and quarterly value-added tax (VAT) returns for the period from January 1,
2003 to June 30, 2003.5 On August 9, 2004, it filed a claim for tax credit or refund in the amount of P
2,149,684.88 representing unutilized input VAT attributable to its zero-rated sales.6 Because petitioner
Commissioner of Internal Revenue (CIR) failed to act upon the said claim, respondent was compelled to file
a petition for review with the CTA on May 5, 2005.7
On October 4, 2007, the Second Division of the CTA rendered its Decision 8 partially granting respondents
claim for refund or issuance of a tax credit certificate in the reduced amount of P 1,147,683.78. On the
matter of the timeliness of the filing of the judicial claim, the Tax Court found that respondents claims for
refund for the first and second quarters of 2003 were filed within the two-year prescriptive period which is
counted from the date of filing of the return and payment of the tax due. Because DEPI filed its amended
quarterly VAT returns for the first and second quarters of 2003 on July 24, 2004, it had until July 24, 2006
to file its judicial claim. As such, its filing of a petition for review with the CTA on April 26, 2005 9 was within
the prescriptive period.10 Petitioner moved for reconsideration but the same was denied in a Resolution
dated January 3, 2008.11
Aggrieved, petitioner elevated the case to the CTA En Banc, where it argued that respondent failed to show
that (1) its purchases of goods and services were made in the course of its trade and business, (2) the said
purchases were properly supported by VAT invoices and/or official receipts and other documents, and (3)
that the claimed input VAT payments were directly attributable to its zero-rated sales. Petitioner also
averred that the petition for review was filed out of time. 12
The CTA En Banc in its Decision,13 dated July 17, 2008, upheld the decision of the CTA Second Division,
ruling that the judicial claim was filed on time because the use of the word "may" in Section 112(D) (now
subparagraph C) of the National Internal Revenue Code (NIRC) indicates that judicial recourse within thirty
(30) days after the lapse of the 120-day period is only directory and permissive and not mandatory and
jurisdictional, as long as the petition was filed within the two-year prescriptive period. The Tax Court further
reiterated that the two-year prescriptive period applies to both the administrative and judicial claims.
Petitioners motion for reconsideration was denied in the August 12, 2008 Resolution of the CTA. 14
Hence, this petition.
The Issues
Petitioner raises the following grounds for the allowance of the petition:
I
The Court of Tax Appeals En Banc erred in holding that respondents judicial claim for refund was
filed within the prescriptive period provided under the Tax Code.
II
The Court of Tax Appeals En Banc erred in partially granting respondents claim for refund despite
the failure of the latter to substantiate its claim by sufficient documentary proof.15
The Courts Ruling
As to the first issue, petitioner argues that the judicial claim was filed out of time because respondent failed
to comply with the 30-day period referred to in Section 112(D) (now subparagraph C) of the NIRC, citing
the case ofCommissioner of Internal Revenue v. Aichi16 where the Court categorically held that compliance
with the prescribed periods in Section 112 is mandatory and jurisdictional. Respondent filed its
administrative claim for refund on August 9, 2004. The 120-day period within which the CIR should act on
the claim expired on December 7, 2004 without any action on the part of petitioner. Thus, respondent only
had 30 days from the lapse of the said period, or until January 6, 2005, to file a petition for review with the
CTA. The petition, however, was filed only on May 5, 2005.17 Petitioner further posits that the 30-day period
within which to file an appeal with the CTA is jurisdictional and failure to comply therewith would bar the
appeal and deprive the CTA of its jurisdiction to entertain the same. 18
Conversely, respondent DEPI asserts that its petition was seasonably filed before the CTA in keeping with
the two-year prescriptive period provided for in Sections 204(c) and 229 of the NIRC. 19 DEPI interprets
Section 112, in relation to Section 229, to mean that the 120-day period is the time given to the CIR to
decide the case. The taxpayer, on the other hand, has the option of either appealing to the CTA the denial
by the CIR of the claim for refund within thirty (30) days from receipt of such denial and within the two-year
prescriptive period, or appealing an unacted claim to the CTA anytime after the expiration of the 120-day
period given to the CIR to resolve the administrative claim for as long as the judicial claim is made within
the two-year prescriptive period.20 Following respondents reasoning, its filing of the judicial claim on April
26, 2005 was filed on time because it was made after the lapse of the 120-day period and within the twoyear period referred to in Section 229.
The petition is meritorious.
Sec. 229 is inapplicable; two-year period in
Sec. 112 refers only to administrative claims

Sections 204 and 229 of the NIRC pertain to the refund of erroneously or illegally collected taxes:
Sec. 204. Authority of the Commissioner to Compromise, Abate, and Refund or Credit Taxes. The
Commissioner may
xxx
(C) Credit or refund taxes erroneously or illegally received or penalties imposed without authority, refund
the value of internal revenue stamps when they are returned in good condition by the purchaser, and, in his
discretion, redeem or change unused stamps that have been rendered unfit for use and refund their value
upon proof of destruction. No credit or refund of taxes or penalties shall be allowed unless the
taxpayer files in writing with the Commissioner a claim for credit or refund within two (2) years after
the payment of the tax or penalty: Provided, however, That a return filed showing an overpayment shall
be considered as a written claim for credit or refund.
Sec. 229. Recovery of Tax Erroneously or Illegally Collected. No suit or proceeding shall be maintained in
any court for the recovery of any national internal revenue tax hereafter alleged to have been erroneously
or illegally assessed or collected, or of any penalty claimed to have been collected without authority, or of
any sum alleged to have been excessively or in any manner wrongfully collected, until a claim for refund or
credit has been duly filed with the Commissioner; but such suit or proceeding may be maintained, whether
or not such tax, penalty, or sum has been paid under protest or duress.
In any case, no such suit or proceeding shall be filed after the expiration of two (2) years from the
date of payment of the tax or penalty regardless of any supervening cause that may arise after payment
xxx. (Emphases supplied)
This Court has previously made a pronouncement as to the inapplicability of Section 229 of the NIRC to
claims for excess input VAT. In the recently decided case of Commissioner of Internal Revenue v. San
Roque Power Corporation,21 the Court made a lengthy disquisition on the nature of excess input VAT,
clarifying that "input VAT is not excessively collected as understood under Section 229 because at the
time the input VAT is collected the amount paid is correct and proper." 22 Hence, respondent cannot
advance its position by referring to Section 229 because Section 112 is the more specific and appropriate
provision of law for claims for excess input VAT.
Section 112(A) also provides for a two-year period for filing a claim for refund, to wit:
Sec. 112. Refunds or Tax Credits of Input Tax.
(A) Zero-rated or Effectively Zero-rated Sales. Any VATregistered person, whose sales are zero-rated or
effectively zerorated may, within two (2) years after the close of the taxable quarter when the sales were
applied against output tax
xxx
As explained in San Roque, however, the two-year prescriptive period referred to in Section 112(A) applies
only to the filing of administrative claims with the CIR and not to the filing of judicial claims with the CTA. In
other words, for as long as the administrative claim is filed with the CIR within the two-year prescriptive
period, the 30-day period given to the taxpayer to file a judicial claim with the CTA need not fall in the same
two-year period.
At any rate, respondents compliance with the two-year prescriptive period under Section 112(A) is not an
issue. What is being questioned in this case is DEPIs failure to observe the requisite 120+30-day period as
mandated by Section 112(C) of the NIRC.
120+30 day period under Sec. 112 is mandatory and jurisdictional

Section 112(D) (now subparagraph C) of the NIRC provides that:
Sec. 112. Refunds or Tax Credits of Input Tax
xxx
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)
Petitioner is entirely correct in its assertion that compliance with the periods provided for in the
abovequoted provision is indeed mandatory and jurisdictional, as affirmed in this Courts ruling in San
Roque, where the CourtEn Banc settled the controversy surrounding the application of the 120+30-day
period provided for in Section 112 of the NIRC and reiterated the Aichi doctrine that the 120+30-day period
is mandatory and jurisdictional. Nonetheless, the Court took into account the issuance by the Bureau of
Internal Revenue (BIR) of BIR Ruling No. DA-489-03 which misled taxpayers by explicity stating that
taxpayers may file a petition for review with the CTA even before the expiration of the 120-day period given
to the CIR to decide the administrative claim for refund. Even though observance of the periods in Section
112 is compulsory and failure to do so will deprive the CTA of jurisdiction to hear the case, such a strict
application will be made from the effectivity of the Tax Reform Act of 1997 on January 1, 1998 until the
present, except for the period from December 10, 2003 (the issuance of the erroneous BIR ruling) to
October 6, 2010 (the promulgation of Aichi), during which taxpayers need not wait for the lapse of the
120+30- day period before filing their judicial claim for refund.
The case at bench, however, does not involve the issue of premature filing of the petition for review with the
CTA. Rather, this petition seeks the denial of DEPIs claim for refund for having been filed late or after the
expiration of the 30-day period from the denial by the CIR or failure of the CIR to make a decision within
120 days from the submission of the documents in support of respondents administrative claim.
In San Roque, one of the respondents similarly filed its petition for review with the CTA well after the
120+30-day period. In denying the taxpayers claim for refund, this Court explained that:
Unlike San Roque and Taganito, Philexs case is not one of premature filing but of late
filing.1wphi1 Philex did not file any petition with the CTA within the 120-day period. Philex did not
also file any petition with the CTA within 30 days after the expiration of the 120-day period. Philex
filed its judicial claim long after the expiration of the 120-day period, in fact 426 days after the lapse
of the 120-day period. In any event, whether governed by jurisprudence before, during or after
the Atlas case, Philexs judicial claim will have to be rejected because of late filing. Whether the two-year
prescriptive period is counted from the date of payment of the output VAT following the Atlas doctrine, or
from the close of the taxable quarter when the sales attributable to the input VAT were made following
the Mirant and Aichi doctrines, Philexs judicial claim was indisputably filed late.
The Atlas doctrine cannot save Philex from the late filing of its judicial claim. The inaction of the
Commissioner on Philexs claim during the 120-day period is, by express provision of law, "deemed
a denial" of Philexs claim. Philex had 30 days from the expiration of the 120-day period to file its
judicial claim with the CTA. Philexs failure to do so rendered the "deemed a denial" decision of the
Commissioner final and inappealable. The right to appeal to the CTA from a decision or "deemed a
denial" decision of the Commissioner is merely a statutory privilege, not a constitutional right. The exercise
of such statutory privilege requires strict compliance with the conditions attached by the statute for
its exercise. Philex failed to comply with the statutory conditions and must thus bear the
consequences.23 (Emphases supplied)
Therefore, in accordance with San Roque, respondent's judicial claim for refund must be denied for having
been filed late. Although respondent filed its administrative claim with the BIR on August 9, 2004 before the
expiration of the two-year period in Section l 12(A), it undoubtedly failed to comply with the 120+ 30-day
period in Section l l 2(D) (now subparagraph C) which requires that upon the inaction of the CIR for 120
days after the submission of the documents in support of the claim, the taxpayer has to file its judicial claim
within 30 days after the lapse of the said period. The 120 days granted to the CIR to decide the case ended
on December 7, 2004. Thus, DEPI had 30 days therefrom, or until January 6, 2005, to file a petition for
review with the CTA. Unfortunately, DEPI only sought judicial relief on May 5, 2005 when it belatedly filed
its petition to the CT A, despite having had ample time to file the same, almost four months after the period
allowed by law. As a consequence of DEPI's late filing, the CTA did not properly acquire jurisdiction over
the claim.
The Court has held time and again that taxes are the lifeblood of the government and, consequently, tax
laws must be faithfully and strictly implemented as they are not intended to be liberally construed. 24 Hence,
We are left with no other recourse but to deny respondent's judicial claim for refund for non-compliance with
the provisions of Section 112 of the NIRC.
WHEREFORE, the petition is GRANTED. The July 17, 2008 Decision and the August 12, 2008 Resolution
of the CTA En Banc in C.T.A. EB No. 357 (C.T.A. Case No. 7243) are hereby REVERSED and SET
ASIDE. Respondent DEPI's judicial claim for refund or tax credit through its petition for review before the
CTA is DENIED.
SO ORDERED.
G.R. No. 181276
November 11, 2013
THE COMMISSIONER OF INTERNAL REVENUE, Petitioner, vs. VISAYAS GEOTHERMAL POWER

COMPANY, INC., Respondent.
MENDOZA, J.:
Before the Court is a Petition for Review on Certiorari under Rule 45 or the 1907 Revised Rules of Civil
Procedure assailing the November 20, 2007 Decision 1 and the January 9, 2008 Resolution 2 of the Court of
Tax Appeals (CTA) En Banc in C.T.A. EB No. 282 (C.T.A. Case Nos. 6790 and 6838) entitled
"Commissioner of Infernal Revenue vs. Visayas Geothermal Power Company, Inc."
THE FACTS
Respondent Visayas Geothermal Power Company, Inc. (VGPCI), a corporation authorized by the
Department of Energy to own and operate a power plant facility in Malibog, Leyte, is engaged in the
business of generation and sale of electricity. In the course of its business operations, VGPCI incurred
input value added tax ofP20,213,044.50 on its domestic purchase of goods and services and importation of
goods used in its business for the third and fourth quarter of 2001 and for the entire year of 2002. 3 Due to
the enactment of Republic Act (R.A.) No. 9136, 4 which became effective on June 26, 2001, VGPCIs sales
of generated power became zero-rated and were no longer subject to VAT at 10%. 5
On June 26, 2003, VGPCI filed before the Bureau of Internal Revenue (BIR) Revenue District No. 89 of
Ormoc City a claim for refund of unutilized input VAT payment in the amount of P1,142,666.32 for the third
quarter of 2001. On December 18, 2003, another claim was filed in the amount of P19,070,378.18 for the
last quarter of 2001 and the four quarters of 2002. For failure of the BIR to act upon said claims, VGPCI
filed separate petitions for review before the CTA on September 30, 2003 and December 19, 2003, praying
for a refund on the issuance of a tax credit certificate in the amount of P1,142,666.32 covering the period
from July to September 2001 andP19,070,378.18 for the period from October 2001 to December 2002,
CTA Case Nos. 6790 and 6838, respectively. 6
In its Decision7 dated January 18, 2007, the First Division of the CTA partially granted the consolidated
petitions for review and ordered petitioner Commissioner of Internal Revenue (CIR) to refund or to issue a
tax credit certificate to VGPCI in the amount of P16,355,749.74 representing unutilized input VAT incurred
from September 1, 2001 to December 31, 2002. 8
Aggrieved, the CIR elevated the case to the CTA En Banc alleging that the First Division erred in ruling in
favor of VGPCI because: (1) VGPCI did not submit evidence of its compliance with the VAT registration
requirements; (2) its purchases of goods and services were not undertaken in the course of its trade or
business and were not duly substantiated by VAT invoices or receipts; (3) it failed to file an application for a
VAT tax credit or refund before the Revenue District Office of the city or municipality where the principal
place of business was located; (4) it did not file its administrative claim for refund prior to the filing of its
petition before the CTA; and (5) it was unable to prove that its claimed input VAT payments were directly
attributable to its zero-rated sales.9
On November 20, 2007, the CTA En Banc promulgated its Decision dismissing the petition and affirming
the decision of the CTA First Division, the dispositive portion of which reads:
WHEREFORE, premises considered, the Petition is hereby DISMISSED for lack of merit. The assailed
Decision dated January 18, 2007 and the Resolution dated May 17, 2007 are AFFIRMED.
SO ORDERED.10
The tax court ruled that: (1) the law does not require the submission by a taxpayer of its VAT registration
documents in order to be able to claim for a refund of unutilized input VAT; (2) VGCPI was able to show, by
submitting its VAT invoices and official receipts, that its purchases of goods and services were incurred in
the course of its trade and business; (3) VGCPI sufficiently proved that its claimed input VAT was directly
attributable to its zero-rated sales or sales of power generation services to PNOC-EDC; and (4) the petition
was timely filed before the CTA because the taxpayer was not bound by the 120-day audit period but by the
two-year prescriptive period. As explained by the tax court, when the two-year period is about to lapse, the
taxpayer may, without awaiting the verdict of the CIR, file its claim for refund before the CTA.
The CIR subsequently filed its Motion for Reconsideration but the same was denied by the CTA En Banc in
its Resolution dated January 9, 2008. 11
Hence, this petition.
THE ISSUES
The CIR raises only one ground for the allowance of the petition:
The Court of Tax Appeals erred in assuming jurisdiction and giving due course to VGPCIs petition despite
the latters failure to file an application for refund in due course before the BIR and observe the proper
prescriptive period provided by law before filing an appeal before the CTA. 12
The pivotal question in this case then is whether VGPCI failed to observe the proper prescriptive period
required by law for the filing of an appeal before the CTA because it filed its petition before the end of the
120-day period granted to the CIR to decide its claim for refund under Section 112(D) of the National
Internal Revenue Code (NIRC).
THE COURTS RULING
The CIR insists that VGPCI should have waited for the decision of the CIR or the lapse of the 120-day
period from the date of submission of complete documents in support of the application for refund as
provided in Section 112(D) of the NIRC. 13 The filing by VGPCI of its petition for review before the CTA
almost immediately after filing its administrative claim for refund is premature.
On the other hand, VGPCI, in its Memorandum 14 defends the decision of the CTA En Banc and puts forth
the following arguments: (1) Section 112(D) of the NIRC is not a limitation imposed on the taxpayer; rather,
it is a mandate addressed to the CIR, requiring it to decide claims for refund within 120 days from
submission by the taxpayer of complete documents in support thereof;15 (2) Section 229 of the NIRC is the
more specific provision with respect to the prescriptive period for the filing of an appeal because it
expressly requires that no suit in court can be maintained for the recovery of taxes after two years from the
date of payment of the taxes, while Section 112(D) deals only with VAT and the periods within which the
CIR shall grant a refund or a tax credit and does not discuss the period within which a taxpayer can go to
court;16 (3) pursuant to the cases of Gibbs v. Collector of Internal Revenue 17 and College of Oral & Dental
Surgery v. Court of Tax Appeals,18 when the two-year prescriptive period is about to expire, the taxpayer
need not wait for the decision of the BIR before filing a petition for review with the CTA because the filing of
a judicial claim beyond the two-year period bars the recovery of the tax paid, and (4) the CIR has not been
denied due process in evaluating VGPCIs claim for refund because the filing of the judicial claim does not
preclude the CIR from continuing the processing of VGPCI administrative claim. The latter insists that it is
imperative and jurisdictional that both the administrative and the judicial claims for refund be filed within the
two-year prescriptive period, regardless of the length of time during which the administrative claim has
been pending with the CIR. It concludes that had it waited for the end of the 120-day period, it would have
lost its right to file a petition for review with the CTA. 19
The petition is partly meritorious.
Section 229 is not applicable
VGPCIs reliance on Gibbs and College of Oral & Dental Surgery is misplaced. Of note is the fact that at
the time of the promulgation by this Court of the said cases, there was no provision yet in the NIRC in force
(Commonwealth Act No. 466,20 as amended) similar to Section 112. Therefore, the said cases hold no
sway over the case at bench.
VGPCI is also mistaken to argue that Section 229 is the more relevant provision of law. A simple reading of
Section 229 reveals that it only pertains to taxes erroneously or illegally collected:
SEC. 229. Recovery of Tax Erroneously or Illegally Collected. - No suit or proceeding shall be maintained
in any court for the recovery of any national internal revenue tax hereafter alleged to have been
erroneously or illegally assessed or collected or of any penalty claimed to have been collected without
authority, or of any sum alleged to have been excessively or in any manner wrongfully collected, until a
claim for refund or credit has been duly filed with the Commissioner; but such suit or proceeding may be
maintained, whether or not such tax, penalty, or sum has been paid under protest or duress.
In any case, no such suit or proceeding shall be filed after the expiration of two (2) years from the date of
payment of the tax or penalty regardless of any supervening cause that may arise after payment: Provided,
however, That the Commissioner may, even without a written claim therefor, refund or credit any tax, where
on the face of the return upon which payment was made, such payment appears clearly to have been
erroneously paid. [Emphases supplied]
The applicable provision of the NIRC is undoubtedly Section 112, which deals specifically with creditable
input tax:
SEC. 112. Refunds or Tax Credits of Input Tax.
(A) Zero-rated or Effectively Zero-rated Sales. any VAT-registered person, whose sales are zero-rated or
applied against output tax: Provided, however, That in the case of zero-rated sales under Section
106(A)(2)(a)(1), (2) and (B) and Section 108 (B)(1) and (2), the acceptable foreign currency exchange
proceeds thereof had been duly accounted for in accordance with the rules and regulations of the Bangko
Sentral ng Pilipinas (BSP): Provided, further, 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.
xxxx
(D) Period Within Which Refund or Tax Credit of Input Taxes Shall be Made. - In proper cases, the
[Emphases supplied]
The Court, in earlier cases, had the opportunity to decide which provision of the NIRC was applicable to
claims for refund or tax credit for creditable input VAT. In the case of
Commissioner of Internal Revenue v. Mirant Pagbilao Corporation (formerly Southern Energy Quezon,
Inc.),21 it was held that Section 229 of the NIRC, which provides for a two-year period, reckoned from the
date of payment of the tax or penalty, for the filing of a claim of refund or tax credit, is only pertinent to the
recovery of taxes erroneously or illegally assessed or collected; and that the relevant provision of the NIRC
for claiming a refund or a tax credit for the unutilized creditable input VAT is Section 112(A):
To be sure, MPC cannot avail itself of the provisions of either Sec. 204(C) or 229 of the NIRC which, for the
purpose of refund, prescribes a different starting point for the two-year prescriptive limit for the filing of a
claim therefor. Secs. 204(C) and 229 respectively provide:
xxxx
Notably, the above provisions also set a two-year prescriptive period, reckoned from date of payment of the
tax or penalty, for the filing of a claim of refund or tax credit. Notably too, both provisions apply o nly to
instances of erroneous payment or illegal collection of internal revenue taxes
xxxx
Considering the foregoing discussion, it is clear that Sec. 112(A) of the NIRC, providing a two-year
prescriptive period reckoned from the close of the taxable quarter when the relevant sales or transactions
were made pertaining to the creditable input VAT, applies to the instant case, and not to the other actions
which refer to erroneous payment of taxes. 22
This ruling was later reiterated in Commissioner of Internal Revenue v. Aichi Forging Company of Asia,
Inc.,23where this Court upheld the ruling in Mirant that the appropriate provision for determining the
prescriptive period for claiming a refund or a tax credit for unutilized input VAT is Section 112(A), and not
Section 229, of the NIRC.24
Finally, the recent pronouncement of the Court En Banc should put an end to any question as to whether
Section 229 may apply to claims for refund of unutilized input VAT. In the case of
Commissioner of Internal Revenue v. San Roque Power Corporation, 25 this Court categorically stated that
the "input VAT is not excessively collected as understood under Section 229 because at the time the input
VAT is collected the amount paid is correct and proper." 26
As such, it is now clear and indisputable that it is Section 112, and not 229, of the Tax Code which is
applicable to all cases involving an application for the issuance of a tax credit certificate or refund of
unutilized input VAT.
Judicial claim was prematurely filed;
120+30 day period is mandatory and jurisdictional
The Court in Aichi further made a significant pronouncement on the importance of the 120-day period
granted to the CIR to act on applications for tax refunds or tax credits under Section 112(D):
Section 112(D) of the NIRC clearly provides that the CIR has "120 days, from the date of the submission of
the complete documents in support of the application [for tax refund/credit]," within which to grant or deny
the claim. In case of full or partial denial by the CIR, the taxpayers recourse is to file an appeal before the
CTA within 30 days from receipt of the decision of the CIR. However, if after the 120-day period the CIR
fails to act on the application for tax refund/credit, the remedy of the taxpayer is to appeal the inaction of the
CIR to CTA within 30 days.
In this case, the administrative and the judicial claims were simultaneously filed on September 30, 2004.
Obviously, respondent did not wait for the decision of the CIR or the lapse of the 120-day period. For this
reason, we find the filing of the judicial claim with the CTA premature. Respondents assertion that the nonobservance of the 120-day period is not fatal to the filing of a judicial claim as long as both the
administrative and the judicial claims are filed within the two- year prescriptive period has no legal basis.
There is nothing in Section 112 of the NIRC to support respondents view. Subsection (A) of the said
provision states that "any VAT-registered person, whose sales are zero-rated or effectively zero-rated may,
within two 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." The phrase
"within two (2) years x x x apply for the issuance of a tax credit certificate or refund" refers to applications
for refund/credit filed with the CIR and not to appeals made to the CTA. This is apparent in the first
paragraph of subsection (D) of the same provision, which states that the CIR has "120 days from the
submission of complete documents in support of the application filed in accordance with Subsections (A)
and (B)" within which to decide on the claim.
In fact, applying the two-year period to judicial claims would render nugatory Section 112(D) of the NIRC,
which already provides for a specific period within which a taxpayer should appeal the decision or inaction
of the CIR. The second paragraph of Section 112(D) of the NIRC envisions two scenarios: (1) when a
decision is issued by the CIR before the lapse of the 120-day period; and (2) when no decision is made
after the 120-day period. In both instances, the taxpayer has 30 days within which to file an appeal with the
CTA. As we see it then, the 120-day period is crucial in filing an appeal with the CTA.27 [Emphases
supplied]
Moreover, it is imperative that the Court take a look at the jurisdiction of the CTA as a guide in the
resolution of this case. Section 7 of R.A. No. 1125,28 as amended by R.A. No. 9282,29 states that:
Sec. 7. Jurisdiction. - The CTA shall exercise:
a. Exclusive appellate jurisdiction to review by appeal, as herein provided:
1. Decisions of the Commissioner of Internal Revenue in cases involving disputed assessments,
refunds of internal revenue taxes, fees or other charges, penalties in relation thereto, or other
matters arising under the National Internal Revenue or other laws administered by the Bureau of
Internal Revenue;
2. Inaction by the Commissioner of Internal Revenue in cases involving disputed assessments,
refunds of internal revenue taxes, fees or other charges, penalties in relations thereto, or other
matters arising under the National Internal Revenue Code or other laws administered by the Bureau
of Internal Revenue, where the National Internal Revenue Code provides a specific period of action,
in which case the inaction shall be deemed a denial; (emphases supplied)
xxxx
It cannot be stressed enough that the jurisdiction of the CTA over the decisions or inaction of the CIR is
only appellate in nature. Thus, it necessarily requires the prior filing of an administrative case before the
CIR. The CTA can only validly acquire jurisdiction over a case after the CIR has rendered its decision or,
should the CIR fail to act, after the lapse of the period of action provided in the Tax Code, in which case the
inaction of the CIR is considered a denial.
The application of the 30-day period from receipt of the decision of the CIR or from the lapse of the 120-day
period (the "120+30 day period") given to the taxpayer within which to file a petition for review with the CTA,
as provided for in Section 112(D) of the Tax Code, was further explained in San Roque, 30 which affirmed
the Aichi doctrine and explicitly ruled that "the 120-day waiting period is mandatory and jurisdictional."
However, the court also took into account the issuance by the BIR of Ruling No. DA-489-03 dated
December 10, 2003 which allowed for the filing of a judicial claim without waiting for the end of the 120-day
period granted to the CIR to decide on the application for refund:
BIR Ruling No. DA-489-03 does provide a valid claim for equitable estoppel under Section 246 of the Tax
Code. BIR Ruling No. DA-489-03 expressly states 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." Prior to
this ruling, the BIR held, as shown by its position in the Court of Appeals, that the expiration of the 120-day
period is mandatory and jurisdictional before a judicial claim can be filed.
xxxx
Clearly, BIR Ruling No. DA-489-03 is a general interpretative rule. Thus, all taxpayers can rely on BIR
Ruling No. DA-489-03 from the time of its issuance on 10 December 2003 up to its reversal by this Court in
Aichi on 6 October 2010, where this Court held that the 120+30 day periods are mandatory and
jurisdictional.31
Therefore, although the 120+30 day period in Section 112(D) is mandatory and jurisdictional and must be
applied from the effectivity of the 1997 Tax Code on January 1, 1998, an exception shall be made for
judicial claims filed from the issuance of BIR Ruling No. DA 489-03 on December 10, 2003 until the
promulgation of Aichi on October 6, 2010. During the said period, a judicial claim for refund may be filed
with the CTA even before the lapse of the 120-day period given to the BIR to decide on the administrative
case.
In sum, based on the foregoing discussion, the rules for the filing of a claim for refund or tax credit of
unutilized input credit VAT are as follows:
1. The taxpayer has two (2) years after the close of the taxable quarter when the relevant sales
were made within which to file an administrative claim before the CIR for a refund of the creditable
input tax or the issuance of a tax credit certificate, regardless of when the input VAT was paid,
according to Section 112(A) of the NIRC and Mirant.
2. The CIR is given 120 days, from the date of the submission of the complete documents in support
of the application for tax refund or tax credit, to act on the said application.
3. If the CIR fully or partially denies the application or fails to act on the same within the required
120-day period, the taxpayer is allowed to appeal the decision or inaction of the CIR to the CTA. For
this reason, the taxpayer has 30 days from his receipt of the decision of the CIR or from the lapse of
the 120-day period, within which to file a petition for review with the CTA. In no case shall a petition
for review be filed with the CTA before the expiration of the 120-day period. The judicial claim need
not be filed within the two-year prescriptive period referred to in Section 112(A), which only pertains
to administrative claims.
4. The two-year period referred to in Section 229 of the NLRC does not apply to appeals filed before
the CTA, in relation to claims for refund or issuance of tax credits made pursuant to Section 112.
Consequently, an appeal may be maintained with the CTA for so long as it observes the
abovementioned period for filing the appeal.
5. Following San Roque, the 120+30 day period is mandatory and jurisdictional from January 1,
1998 (the effectivity of the 1997 Tax Code). However, from December 10, 2003 (the date BIR Ruling
No. DA 489-03 was issued) until October 6, 2010 (the promulgation of Aichi), judicial claims need
not follow the 120+30 day period. Thereafter, Aichi shall be the controlling rule for all claims filed
with the CTA and the 120+30 day period must be observed.
Applying the abovementioned rules to the case at bench, the judicial claim filed on September 30, 2003
(CTA Case No. 6790) was prematurely filed and cannot be taken cognizance of because respondent failed
to wait for the requisite 120 days after the filing of its claim for refund with the BIR before elevating the case
to the CTA. However, the judicial claim filed on December 19, 2003 (CTA Case No. 6838), which was made
after the issuance of BIR Ruling DA-480-03, can be considered by the CTA despite its hasty filing only one
day after the application for refund was first lodged with the BIR.
WHEREFORE, the petition is partly GRANTED. The November 20, 2007 Decision and the January 9, 2008
Resolution of the Court of Tax Appeals En Banc are hereby REVERSED and SET ASIDE and the claim for
refund with respect to CTA Case No. 6790 is DENIED. However, the claim pertaining to CTA Case No.
6838 is remanded to the CTA for the proper determination of the refundable amount due respondent.
SO ORDERED.
G.R. No. 184266
November 11, 2013
APPLIED FOOD INGREDIENTS COMPANY, INC., Petitioner, vs. COMMISSIONER OF INTERNAL

REVENUE, Respondent.
SERENO, CJ:
This is a Petition for Review on Certiorari1 under Rule 45 of the 1997 Rules of Civil Procedure filed by
Applied Food Ingredients, Company, Inc. (petitioner). The Petition assails the Decision 2 dated 4 June 2008
and Resolution3 dated 26 August 2008 of the Court of Tax Appeals En Bane (CTA En Bane in C.TA. EB
No. 359. The assailed Decision and Resolution affirmed the Decision 4 dated 13 June 2007 and
Resolution5 dated 16 January 2008 rendered by the CTA First Division in C.TA. Case No. 6513 which
denied petitioner's claim for the issuance of a tax credit Decision 2 G.R. No. 184266 certificate representing
its alleged excess input taxes attributable to zero-rated sales for the period 1 April 2000 to 31 December
2000.
THE FACTS
Considering that there are no factual issues in this case, we adopt the findings of fact of the CTA En Banc,
as follows:
Petitioner is registered with the Regional District Office (RDO) No. 43 of the BIR in Pasig City (BIR-Pasig)
as, among others, a Value-Added Tax (VAT) taxpayer engaged in the importation and exportation
business, as a pure buy-sell trader.
Petitioner alleged that from September 1998 to December 31, 2000, it paid an aggregate sum of input
taxes ofP9,528,565.85 for its importation of food ingredients, as reported in its Quarterly Vat Return.
Subsequently, these imported food ingredients were exported between the periods of April 1, 2000 to
December 31, 2000, from which the petitioner was able to generate export sales amounting
to P114,577,937.24. The proceeds thereof were inwardly remitted to petitioner's dollar accounts with
Equitable Bank Corporation and with Australia New Zealand Bank-Philippine Branch.
Petitioner further claimed that the aforestated export sales which transpired from April 1, 2000 to December
31, 2000 were "zero-rated" sales, pursuant to Section 106(A (2)(a)(1) of the N1RC of 1997.
Petitioner alleged that the accumulated input taxes of P9,528,565.85 for the period of September 1, 1998 to
December 31, 2000 have not been applied against any output tax.
On March 26, 2002 and June 28, 2002, petitioner filed two separate applications for the issuance of tax
credit certificates in the amounts of P5,385, 208.32 and P4,143,357.53, respectively.
On July 24, 2002, in view of respondent's inaction, petitioner elevated the case before this Court b y way of
a Petition for Review, docketed as C.T.A. Case No. 6513.
In his Answer filed on August 28, 2002, respondent alleged by way of special and affirmative defenses that
the request for tax credit certificate is still under examination by respondent's examiners; that taxes paid
and collected are presumed to have been made in accordance with law and regulations, hence not
refundable; petitioner's allegation that it erroneously and excessively paid the tax during the year under
review does not ipso facto warrant the refund/credit or the issuance of a certificate thereto; petitioner must
prove that it has complied with the governing rules with reference to tax recovery or refund, which are found
in Sections 204(C) and 229 of the Tax Code, as amended. 6
Trial ensued and the CTA First Division rendered a Decision on 13 June 2007. It denied petitioners claim
for failure to comply with the invoicing requirements prescribed under Section 113 in relation to Section 237
of the National Internal Revenue Code (NIRC) of 1997 and Section 4.108-1 of Revenue Regulations No. 795.
On appeal, the CTA En Banc likewise denied the claim of petitioner on the same ground and ruled that the
latters sales for the subject period could not qualify for VAT zero-rating, as the export sales invoices did not
bear the following: 1) the imprinted word "zero-rated;" 2) "TIN-VAT;" and 3) BIRs permit number, all in
violation of the invoicing requirements.
THE ISSUES
Petitioner raises this sole issue for the consideration of this Court:
WHETHER OR NOT THE PETITIONER IS ENTITLED TO THE ISSUANCE OF A TAX CREDIT
CERTIFICATE OR REFUND OF THE AMOUNT OF P9,528,565.85 REPRESENTING CREDITABLE
INPUT TAXES INCURRED FOR THE PERIOD OF SEPTEMBER 1, 1998 TO DECEMBER 31, 2000
WHICH ARE ATTRIBUTABLE TO ZERO-RATED SALES FOR THE PERIOD OF APRIL 1, 2000 TO
DECEMBER 31, 2000.7
THE COURTS RULING
The Petition has no merit.
Our VAT Law provides for a mechanism that would allow VAT-registered persons to recover the excess
input taxes over the output taxes they had paid in relation to their sales.
In Panasonic Communications Imaging Corporation of the Philippines v. Commissioner of Internal
Revenue,8 this Court explained that "the VAT is a tax on consumption, an indirect tax that the provider of
goods or services may pass on to his customers. Under the VAT method of taxation, which is invoicebased, an entity can subtract from the VAT charged on its sales or outputs the VAT it paid on its purchases,
inputs and imports."
For zero-rated or effectively zero-rated sales, although the sellers in these transactions charge no output
tax, they can claim a refund of the VAT that their suppliers charged them. 9
At the outset, bearing in mind that tax refunds or credits just like tax exemptions are strictly construed
against taxpayers,10 the latter have the burden to prove strict compliance with the conditions for the grant of
the tax refund or credit.
Section 112 of the NIRC of 1997 laid down the manner in which the refund or credit of input tax may be
made, to wit:
(A) Zero-rated or Effectively Zero-rated Sales. - Any VAT-registered person, whose sales are zero-rated or
106(A)(2)(a)(1), (2) and (B) and Section 108(B)(1) and (2), the acceptable foreign currency exchange
effectively zero-rated sale and also in taxable or exempt sale of goods of properties or services, and the
transactions, it shall be allocated proportionately on the basis of the volume of sales.
xxxx
(D) Period within which Refund or Tax Credit of Input Taxes shall be Made. - In proper cases, the
This Court finds it appropriate to first determine the timeliness of petitioners claim in accordance with the
above provision.
Well-settled is the rule that the issue of jurisdiction over the subject matter may, at any time, be raised by
the parties or considered by the Court motu proprio. 11 Therefore, the jurisdiction of the CTA over petitioners
appeal may still be considered and determined by this Court.
Although the ponente in this case expressed a different view on the mandatory application of the 120+30
day period as prescribed in the above provision, with the advent, however, of this Courts pronouncement
on the consolidated tax cases of Commissioner of Internal Revenue v. San Roque Power Corporation,
Taganito Mining Corporation v. Commissioner of Internal Revenue, and Philex Mining Corporation v.
Commissioner of Internal Revenue 12 (hereby collectively referred as San Roque), we are constrained to
apply the dispositions therein to similar facts as those in the present case.
To begin with, Section 112(A) provides for a two-year prescriptive period after the close of the taxable
quarter when the sales were made, within which a VAT-registered person whose sales are zero-rated or
effectively zero-rated may apply for the issuance of a tax credit certificate or refund of creditable input tax.
In this case, petitioner claims that from April 2000 to December 2000 it had zero-rated sales to which it
attributed the accumulated input taxes it had incurred from September 1998 to December 2000.
Applying Section 112(A), petitioner had until 30 June 2002, 30 September 2002 and 31 December 2002
or the close of the taxable quarter when the zero-rated sales were made within which to file its
administrative claim for refund. Thus, we find sufficient compliance with the two-year prescriptive period
when petitioner filed its claim on 26 March 200213 and 28 June 200214 covering its zero-rated sales for the
period April to September 2000 and October to December 2000, respectively.
The Commissioner of Internal Revenue (CIR) had one hundred twenty (120) days from the date of
submission of complete documents in support of the application within which to decide on the
administrative claim.
In relation thereto, absent any evidence to the contrary and bearing in mind that the burden to prove
entitlement to a tax refund is on the taxpayer, it is presumed that in order to discharge its burden, petitioner
had attached complete supporting documents necessary to prove its entitlement to a refund in its
application filed on 26 March 2002 and 28 June 2002. Therefore, the CIRs 120-day period to decide on
petitioners administrative claim commenced to run on 26 March 2002 and 28 June 2002, respectively.
Counting 120 days from 26 March 2002, the CIR had until 24 July 2002 within which to decide on the claim
of petitioner for an input VAT refund attributable to the its zero-rated sales for the period April to September
2000.
On the other hand, the CIR had until 26 October 2002 within which to decide on petitioners claim for refund
filed on 28 June 2002, or for the period covering October to December 2000.
Records, however, show that the judicial claim of petitioner was filed on 24 July 2002.15 Petitioner clearly
failed to observe the mandatory 120-day waiting period. Consequently, the premature filing of its claim for
refund/credit of input VAT before the CTA warranted a dismissal, inasmuch as no jurisdiction was acquired
by the CTA.16
In San Roque, this Court, held thus: "Failure to comply with the 120-day waiting period violates a
mandatory provision of law. It violates the doctrine of exhaustion of administrative remedies and renders
the petition premature and thus without a cause of action, with the effect that the CTA does not acquire
jurisdiction over the taxpayers petition. Philippine jurisprudence is replete with cases upholding and
reiterating these doctrinal principles."17
Furthermore, the CTA, being a court of special jurisdiction, can take cognizance only of matters that are
clearly within its jurisdiction.18 Section 7 of R.A. 1125,19 as amended by R.A. 9282,20 specifically provides:
SEC. 7. Jurisdiction. The CTA shall exercise:
(a) Exclusive appellate jurisdiction to review by appeal, as herein provided:
(1) Decisions of the Commissioner of Internal Revenue in cases involving disputed
assessments, refunds of internal revenue taxes, fees or other charges, penalties in relation
thereto, or other matters arising under the National Internal Revenue Code or other laws
administered by the Bureau of Internal Revenue;
(2) Inaction by the Commissioner of Internal Revenue in cases involving disputed
assessments, refunds of internal revenue taxes, fees or other charges, penalties in relation
thereto, or other matters arising under the National Internal Revenue Code or other laws
administered by the Bureau of Internal Revenue, where the National Internal Revenue Code
provides a specific period of action, in which case the inaction shall be deemed a denial; x x
x.(Emphases supplied)
"Inaction by the CIR" in cases involving the refund of creditable input tax, arises only after the lapse of 120
days. Thus, prior thereto and without a decision of the CIR, the CTA, as a court of special jurisdiction, has
no jurisdiction to entertain claims for the refund or credit of creditable input tax. "The charter of the CTA
also expressly provides that if the Commissioner fails to decide within "a specific period" required by law,
such "inaction shall be deemed a denial" of the application for tax refund or credit. It is the Commissioners
decision, or inaction "deemed a denial," that the taxpayer can take to the CTA for review. Without a
decision or an "inaction x x x deemed a denial" of the Commissioner, the CTA has no jurisdiction over a
petition for review."21
Considering further that the 30-day period to appeal to the CTA is dependent on the 120-day period, both
periods are hereby rendered jurisdictional. Failure to observe 120 days prior to the filing of a judicial claim
is not a mere non-exhaustion of administrative remedies, but is likewise considered jurisdictional. The
period of 120 days is a prerequisite for the commencement of the 30-day period to appeal to the CTA. In
both instances, whether the CIR renders a decision (which must be made within 120 days) or there was
inaction, the period of 120 days is material.
This Court further ruled:
The old rule that the taxpayer may file the judicial claim, without waiting for the Commissioners decision if
the two-year prescriptive period is about to expire, cannot apply because that rule was adopted before the
enactment of the 30-day period. The 30-day period was adopted precisely to do away with the old rule, so
that under the VAT System the taxpayer will always have 30 days to file the judicial claim even if the
Commissioner acts only on the 120th day, or does not act at all during the 120-day period. With the 30-day
period always available to the taxpayer, the taxpayer can no longer file a judicial claim for refund or credit of
input VAT without waiting for the Commissioner to decide until the expiration of the 120-day period.
To repeat, a claim for tax refund or credit, like a claim for tax exemption, is construed strictly against the
taxpayer.1wphi1 One of the conditions for a judicial claim of refund or credit under the VAT System is with
the 120+ 30 day mandatory and jurisdictional periods. Thus, strict compliance with the 120+30 day periods
is necessary for such a claim to prosper, whether before, during, or after the effectivity of the Atlas doctrine,
except for the period from the issuance of BIR Ruling No DA-489-03 on 10 December 2003 to 6 October
2010 when the Aichi doctrine was adopted, which again reinstated the 120+ 30 day periods as mandatory
and jurisdictional.22 (Emphasis supplied)
In accordance with San Roque and considering that petitioner s judicial claim was filed on 24 July 2002,
when the 120+30 day mandatory periods were already in the law and BIR Ruling No. DA-489-03 had not
yet been issued, petitioner does not have an excuse for not observing the 120+ 30 day period. Failure of
petitioner to observe the mandatory 120-day period is fatal to its claim and rendered the CT A devoid of
jurisdiction over the judicial claim.
The Court finds, in view of the absence of jurisdiction of the Court of the Tax Appeals over the judicial claim
of petitioner, that there is no need to discuss the other issues raised.
WHEREFORE, premises considered, the instant Petition is DENIED.
SO ORDERED.
G.R. No. 184823 - October 6, 2010
COMMISSIONER OF INTERNAL REVENUE, Petitioner, vs. AICHI FORGING COMPANY OF ASIA,
INC., Respondent.
DEL CASTILLO, J.:
A taxpayer is entitled to a refund either by authority of a statute expressly granting such right, privilege, or
incentive in his favor, or under the principle of solutio indebiti requiring the return of taxes erroneously or
illegally collected. In both cases, a taxpayer must prove not only his entitlement to a refund but also his
compliance with the procedural due process as non-observance of the prescriptive periods within which to
file the administrative and the judicial claims would result in the denial of his claim.
This Petition for Review on Certiorari under Rule 45 of the Rules of Court seeks to set aside the July 30,
2008 Decision1 and the October 6, 2008 Resolution 2 of the Court of Tax Appeals (CTA) En Banc.
Factual Antecedents
Respondent Aichi Forging Company of Asia, Inc., a corporation duly organized and existing under the laws
of the Republic of the Philippines, is engaged in the manufacturing, producing, and processing of steel and
its by-products.3 It is registered with the Bureau of Internal Revenue (BIR) as a Value-Added Tax (VAT)
entity4 and its products, "close impression die steel forgings" and "tool and dies," are registered with the
Board of Investments (BOI) as a pioneer status. 5
On September 30, 2004, respondent filed a claim for refund/credit of input VAT for the period July 1, 2002
to September 30, 2002 in the total amount of P3,891,123.82 with the petitioner Commissioner of Internal
Revenue (CIR), through the Department of Finance (DOF) One-Stop Shop Inter-Agency Tax Credit and
Duty Drawback Center.6
Proceedings before the Second Division of the CTA

On even date, respondent filed a Petition for Review 7 with the CTA for the refund/credit of the same input
VAT. The case was docketed as CTA Case No. 7065 and was raffled to the Second Division of the CTA.
In the Petition for Review, respondent alleged that for the period July 1, 2002 to September 30, 2002, it
generated and recorded zero-rated sales in the amount of P131,791,399.00,8 which was paid pursuant to
Section 106(A) (2) (a) (1), (2) and (3) of the National Internal Revenue Code of 1997 (NIRC); 9 that for the
said period, it incurred and paid input VAT amounting to P3,912,088.14 from purchases and importation
attributable to its zero-rated sales;10and that in its application for refund/credit filed with the DOF One-Stop
Shop Inter-Agency Tax Credit and Duty Drawback Center, it only claimed the amount of P3,891,123.82.11
In response, petitioner filed his Answer12 raising the following special and affirmative defenses, to wit:
4. Petitioners alleged claim for refund is subject to administrative investigation by the Bureau;
5. Petitioner must prove that it paid VAT input taxes for the period in question;
6. Petitioner must prove that its sales are export sales contemplated under Sections 106(A) (2) (a),
and 108(B) (1) of the Tax Code of 1997;
7. Petitioner must prove that the claim was filed within the two (2) year period prescribed in Section
229 of the Tax Code;
8. In an action for refund, the burden of proof is on the taxpayer to establish its right to refund, and
failure to sustain the burden is fatal to the claim for refund; and
9. Claims for refund are construed strictly against the claimant for the same partake of the nature of
exemption from taxation.13
Trial ensued, after which, on January 4, 2008, the Second Division of the CTA rendered a Decision partially
granting respondents claim for refund/credit. Pertinent portions of the Decision read:
For a VAT registered entity whose sales are zero-rated, to validly claim a refund, Section 112 (A) of the
NIRC of 1997, as amended, provides:
(A) Zero-rated or Effectively Zero-rated Sales. Any VAT-registered person, whose sales are zero-rated or
applied against output tax: x x x
Pursuant to the above provision, petitioner must comply with the following requisites: (1) the taxpayer is
engaged in sales which are zero-rated or effectively zero-rated; (2) the taxpayer is VAT-registered; (3) the
claim must be filed within two years after the close of the taxable quarter when such sales were made; and
(4) the creditable input tax due or paid must be attributable to such sales, except the transitional input tax,
to the extent that such input tax has not been applied against the output tax.
The Court finds that the first three requirements have been complied [with] by petitioner.
With regard to the first requisite, the evidence presented by petitioner, such as the Sales Invoices (Exhibits
"II" to "II-262," "JJ" to "JJ-431," "KK" to "KK-394" and "LL") shows that it is engaged in sales which are zerorated.
The second requisite has likewise been complied with. The Certificate of Registration with OCN
1RC0000148499 (Exhibit "C") with the BIR proves that petitioner is a registered VAT taxpayer.
In compliance with the third requisite, petitioner filed its administrative claim for refund on September 30,
2004 (Exhibit "N") and the present Petition for Review on September 30, 2004, both within the two (2) year
prescriptive period from the close of the taxable quarter when the sales were made, which is from
September 30, 2002.
As regards, the fourth requirement, the Court finds that there are some documents and claims of petitioner
that are baseless and have not been satisfactorily substantiated.
xxxx
In sum, petitioner has sufficiently proved that it is entitled to a refund or issuance of a tax credit certificate
representing unutilized excess input VAT payments for the period July 1, 2002 to September 30, 2002,
which are attributable to its zero-rated sales for the same period, but in the reduced amount
of P3,239,119.25, computed as follows:
Amount of Claimed Input VAT
Less:
Exceptions as found by the ICPA
P 3,891,123.82
Net Creditable Input VAT

Less:
Output VAT Due
Excess Creditable Input VAT
P 3,850,103.45
41,020.37
610,984.20
P 3,239,119.25
WHEREFORE, premises considered, the present Petition for Review is PARTIALLY GRANTED.
Accordingly, respondent is hereby ORDERED TO REFUND OR ISSUE A TAX CREDIT CERTIFICATE in
favor of petitioner [in] the reduced amount of THREE MILLION TWO HUNDRED THIRTY NINE
THOUSAND ONE HUNDRED NINETEEN AND 25/100 PESOS (P3,239,119.25), representing the
unutilized input VAT incurred for the months of July to September 2002.
SO ORDERED.14
Dissatisfied with the above-quoted Decision, petitioner filed a Motion for Partial Reconsideration, 15 insisting
that the administrative and the judicial claims were filed beyond the two-year period to claim a tax
refund/credit provided for under Sections 112(A) and 229 of the NIRC. He reasoned that since the year
2004 was a leap year, the filing of the claim for tax refund/credit on September 30, 2004 was beyond the
two-year period, which expired on September 29, 2004. 16 He cited as basis Article 13 of the Civil
Code,17 which provides that when the law speaks of a year, it is equivalent to 365 days. In addition,
petitioner argued that the simultaneous filing of the administrative and the judicial claims contravenes
Sections 112 and 229 of the NIRC.18 According to the petitioner, a prior filing of an administrative claim is a
"condition precedent"19 before a judicial claim can be filed. He explained that the rationale of such
requirement rests not only on the doctrine of exhaustion of administrative remedies but also on the fact that
the CTA is an appellate body which exercises the power of judicial review over administrative actions of the
BIR. 20
The Second Division of the CTA, however, denied petitioners Motion for Partial Reconsideration for lack of
merit. Petitioner thus elevated the matter to the CTA En Banc via a Petition for Review.21
Ruling of the CTA En Banc
On July 30, 2008, the CTA En Banc affirmed the Second Divisions Decision allowing the partial tax
refund/credit in favor of respondent. However, as to the reckoning point for counting the two-year period,
the CTA En Banc ruled:
Petitioner argues that the administrative and judicial claims were filed beyond the period allowed by law
and hence, the honorable Court has no jurisdiction over the same. In addition, petitioner further contends
that respondent's filing of the administrative and judicial [claims] effectively eliminates the authority of the
honorable Court to exercise jurisdiction over the judicial claim.
We are not persuaded.
Section 114 of the 1997 NIRC, and We quote, to wit:
SEC. 114. Return and Payment of Value-added Tax.
(A) In General. Every person liable to pay the value-added tax imposed under this Title shall file a
quarterly return of the amount of his gross sales or receipts within twenty-five (25) days following the close
of each taxable quarter prescribed for each taxpayer: Provided, however, That VAT-registered persons
shall pay the value-added tax on a monthly basis.
[x x x x ]
Based on the above-stated provision, a taxpayer has twenty five (25) days from the close of each taxable
quarter within which to file a quarterly return of the amount of his gross sales or receipts. In the case at bar,
the taxable quarter involved was for the period of July 1, 2002 to September 30, 2002. Applying Section
114 of the 1997 NIRC, respondent has until October 25, 2002 within which to file its quarterly return for its
gross sales or receipts [with] which it complied when it filed its VAT Quarterly Return on October 20, 2002.
In relation to this, the reckoning of the two-year period provided under Section 229 of the 1997 NIRC
should start from the payment of tax subject claim for refund. As stated above, respondent filed its VAT
Return for the taxable third quarter of 2002 on October 20, 2002. Thus, respondent's administrative and
judicial claims for refund filed on September 30, 2004 were filed on time because AICHI has until October
20, 2004 within which to file its claim for refund.
In addition, We do not agree with the petitioner's contention that the 1997 NIRC requires the previous filing
of an administrative claim for refund prior to the judicial claim. This should not be the case as the law does
not prohibit the simultaneous filing of the administrative and judicial claims for refund. What is controlling is
that both claims for refund must be filed within the two-year prescriptive period.
In sum, the Court En Banc finds no cogent justification to disturb the findings and conclusion spelled out in
the assailed January 4, 2008 Decision and March 13, 2008 Resolution of the CTA Second Division. What
the instant petition seeks is for the Court En Banc to view and appreciate the evidence in their own
perspective of things, which unfortunately had already been considered and passed upon.
WHEREFORE, the instant Petition for Review is hereby DENIED DUE COURSE and DISMISSED for lack
of merit. Accordingly, the January 4, 2008 Decision and March 13, 2008 Resolution of the CTA Second
Division in CTA Case No. 7065 entitled, "AICHI Forging Company of Asia, Inc. petitioner vs. Commissioner
of Internal Revenue, respondent" are hereby AFFIRMED in toto.
SO ORDERED.22
Petitioner sought reconsideration but the CTA En Banc denied23 his Motion for Reconsideration.
Issue
Hence, the present recourse where petitioner interposes the issue of whether respondents judicial and
administrative claims for tax refund/credit were filed within the two-year prescriptive period provided in
Sections 112(A) and 229 of
the NIRC.24
Petitioners Arguments
Petitioner maintains that respondents administrative and judicial claims for tax refund/credit were filed in
violation of Sections 112(A) and 229 of the NIRC. 25 He posits that pursuant to Article 13 of the Civil
Code,26 since the year 2004 was a leap year, the filing of the claim for tax refund/credit on September 30,
2004 was beyond the two-year period, which expired on September 29, 2004. 27
Petitioner further argues that the CTA En Banc erred in applying Section 114(A) of the NIRC in determining
the start of the two-year period as the said provision pertains to the compliance requirements in the
payment of VAT.28 He asserts that it is Section 112, paragraph (A), of the same Code that should apply
because it specifically provides for the period within which a claim for tax refund/ credit should be made. 29
Petitioner likewise puts in issue the fact that the administrative claim with the BIR and the judicial claim with
the CTA were filed on the same day. 30 He opines that the simultaneous filing of the administrative and the
judicial claims contravenes Section 229 of the NIRC, which requires the prior filing of an administrative
claim.31 He insists that such procedural requirement is based on the doctrine of exhaustion of administrative
remedies and the fact that the CTA is an appellate body exercising judicial review over administrative
actions of the CIR.32
Respondents Arguments
For its part, respondent claims that it is entitled to a refund/credit of its unutilized input VAT for the period
July 1, 2002 to September 30, 2002 as a matter of right because it has substantially complied with all the
requirements provided by law.33 Respondent likewise defends the CTA En Banc in applying Section 114(A)
of the NIRC in computing the prescriptive period for the claim for tax refund/credit. Respondent believes
that Section 112(A) of the NIRC must be read together with Section 114(A) of the same Code. 34
As to the alleged simultaneous filing of its administrative and judicial claims, respondent contends that it
first filed an administrative claim with the One-Stop Shop Inter-Agency Tax Credit and Duty Drawback
Center of the DOF before it filed a judicial claim with the CTA. 35 To prove this, respondent points out that its
Claimant Information Sheet No. 49702 36 and BIR Form No. 1914 for the third quarter of 2002, 37 which were
filed with the DOF, were attached as Annexes "M" and "N," respectively, to the Petition for Review filed with
the CTA.38 Respondent further contends that the non-observance of the 120-day period given to the CIR to
act on the claim for tax refund/credit in Section 112(D) is not fatal because what is important is that both
claims are filed within the two-year prescriptive period.39 In support thereof, respondent cites Commissioner
of Internal Revenue v. Victorias Milling Co., Inc. 40 where it was ruled that "[i]f, however, the [CIR] takes time
in deciding the claim, and the period of two years is about to end, the suit or proceeding must be started in
the [CTA] before the end of the two-year period without awaiting the decision of the [CIR]." 41 Lastly,
respondent argues that even if the period had already lapsed, it may be suspended for reasons of equity
considering that it is not a jurisdictional requirement. 42
Our Ruling
The petition has merit.
Unutilized input VAT must be claimed within two years after the close of the taxable quarter when the sales
were made
In computing the two-year prescriptive period for claiming a refund/credit of unutilized input VAT, the
Second Division of the CTA applied Section 112(A) of the NIRC, which states:
(A) Zero-rated or Effectively Zero-rated Sales Any VAT-registered person, whose sales are zero-rated or
106(A)(2)(a)(1), (2) and (B) and Section 108 (B)(1) and (2), the acceptable foreign currency exchange
effectively zero-rated sale and also in taxable or exempt sale of goods or properties or services, and the
transactions, it shall be allocated proportionately on the basis of the volume of sales. (Emphasis supplied.)
The CTA En Banc, on the other hand, took into consideration Sections 114 and 229 of the NIRC, which
read:
SEC. 114. Return and Payment of Value-Added Tax.
(A) In General. Every person liable to pay the value-added tax imposed under this Title shall file a
quarterly return of the amount of his gross sales or receipts within twenty-five (25) days following the close
of each taxable quarter prescribed for each taxpayer: Provided, however, That VAT-registered persons
shall pay the value-added tax on a monthly basis.
Any person, whose registration has been cancelled in accordance with Section 236, shall file a return and
pay the tax due thereon within twenty-five (25) days from the date of cancellation of registration: Provided,
That only one consolidated return shall be filed by the taxpayer for his principal place of business or head
office and all branches.
xxxx
SEC. 229. Recovery of tax erroneously or illegally collected.
No suit or proceeding shall be maintained in any court for the recovery of any national internal revenue tax
hereafter alleged to have been erroneously or illegally assessed or collected, or of any penalty claimed to
have been collected without authority, or of any sum alleged to have been excessively or in any manner
wrongfully collected, until a claim for refund or credit has been duly filed with the Commissioner; but such
suit or proceeding may be maintained, whether or not such tax, penalty or sum has been paid under protest
or duress.
however, That the Commissioner may, even without written claim therefor, refund or credit any tax, where
erroneously paid. (Emphasis supplied.)
Hence, the CTA En Banc ruled that the reckoning of the two-year period for filing a claim for refund/credit of
unutilized input VAT should start from the date of payment of tax and not from the close of the taxable
quarter when the sales were made. 43
The pivotal question of when to reckon the running of the two-year prescriptive period, however, has
already been resolved in Commissioner of Internal Revenue v. Mirant Pagbilao Corporation, 44 where we
ruled that Section 112(A) of the NIRC is the applicable provision in determining the start of the two-year
period for claiming a refund/credit of unutilized input VAT, and that Sections 204(C) and 229 of the NIRC
are inapplicable as "both provisions apply only to instances of erroneous payment or illegal collection of
internal revenue taxes."45 We explained that:
The above proviso [Section 112 (A) of the NIRC] clearly provides in no uncertain terms that unutilized
input VAT payments not otherwise used for any internal revenue tax due the taxpayer must be
claimed within two years reckoned from the close of the taxable quarter when the relevant sales
were made pertaining to the input VAT regardless of whether said tax was paid or not. As the CA
aptly puts it, albeit it erroneously applied the aforequoted Sec. 112 (A), "[P]rescriptive period commences
from the close of the taxable quarter when the sales were made and not from the time the input VAT was
paid nor from the time the official receipt was issued." Thus, when a zero-rated VAT taxpayer pays its input
VAT a year after the pertinent transaction, said taxpayer only has a year to file a claim for refund or tax
credit of the unutilized creditable input VAT. The reckoning frame would always be the end of the quarter
when the pertinent sales or transaction was made, regardless when the input VAT was paid. Be that as it
may, and given that the last creditable input VAT due for the period covering the progress billing of
September 6, 1996 is the third quarter of 1996 ending on September 30, 1996, any claim for unutilized
creditable input VAT refund or tax credit for said quarter prescribed two years after September 30, 1996 or,
to be precise, on September 30, 1998. Consequently, MPCs claim for refund or tax credit filed on
December 10, 1999 had already prescribed.
Reckoning
for
prescriptive
Secs. 204(C) and 229 of the NIRC inapplicable
period
under
To be sure, MPC cannot avail itself of the provisions of either Sec. 204(C) or 229 of the NIRC which, for the
purpose of refund, prescribes a different starting point for the two-year prescriptive limit for the filing of a
claim therefor. Secs. 204(C) and 229 respectively provide:
Sec. 204. Authority of the Commissioner to Compromise, Abate and Refund or Credit Taxes. The
Commissioner may
xxxx
(c) Credit or refund taxes erroneously or illegally received or penalties imposed without authority, refund the
value of internal revenue stamps when they are returned in good condition by the purchaser, and, in his
discretion, redeem or change unused stamps that have been rendered unfit for use and refund their value
upon proof of destruction. No credit or refund of taxes or penalties shall be allowed unless the taxpayer files
in writing with the Commissioner a claim for credit or refund within two (2) years after the payment of the tax
or penalty: Provided, however, That a return filed showing an overpayment shall be considered as a written
claim for credit or refund.
xxxx
Sec. 229. Recovery of Tax Erroneously or Illegally Collected. No suit or proceeding shall be maintained in
any court for the recovery of any national internal revenue tax hereafter alleged to have been erroneously
or illegally assessed or collected, or of any penalty claimed to have been collected without authority, of any
sum alleged to have been excessively or in any manner wrongfully collected without authority, or of any
sum alleged to have been excessively or in any manner wrongfully collected, until a claim for refund or
credit has been duly filed with the Commissioner; but such suit or proceeding may be maintained, whether
or not such tax, penalty, or sum has been paid under protest or duress.
however, That the Commissioner may, even without a written claim therefor, refund or credit any tax, where
erroneously paid.
Notably, the above provisions also set a two-year prescriptive period, reckoned from date of payment of the
tax or penalty, for the filing of a claim of refund or tax credit. Notably too, both provisions apply only to
instances of erroneous payment or illegal collection of internal revenue taxes.
MPCs creditable input VAT not erroneously paid
For perspective, under Sec. 105 of the NIRC, creditable input VAT is an indirect tax which can be shifted or
passed on to the buyer, transferee, or lessee of the goods, properties, or services of the taxpayer. The fact
that the subsequent sale or transaction involves a wholly-tax exempt client, resulting in a zero-rated or
effectively zero-rated transaction, does not, standing alone, deprive the taxpayer of its right to a refund for
any unutilized creditable input VAT, albeit the erroneous, illegal, or wrongful payment angle does not enter
the equation.
xxxx
Considering the foregoing discussion, it is clear that Sec. 112 (A) of the NIRC, providing a two-year
prescriptive period reckoned from the close of the taxable quarter when the relevant sales or
transactions were made pertaining to the creditable input VAT, applies to the instant case, and not
to the other actions which refer to erroneous payment of taxes. 46 (Emphasis supplied.)
In view of the foregoing, we find that the CTA En Banc erroneously applied Sections 114(A) and 229 of the
NIRC in computing the two-year prescriptive period for claiming refund/credit of unutilized input VAT. To be
clear, Section 112 of the NIRC is the pertinent provision for the refund/credit of input VAT. Thus, the twoyear period should be reckoned from the close of the taxable quarter when the sales were made.
The administrative claim was timely filed
Bearing this in mind, we shall now proceed to determine whether the administrative claim was timely filed.
Relying on Article 13 of the Civil Code, 47 which provides that a year is equivalent to 365 days, and taking
into account the fact that the year 2004 was a leap year, petitioner submits that the two-year period to file a
claim for tax refund/ credit for the period July 1, 2002 to September 30, 2002 expired on September 29,
2004.48
We do not agree.
In Commissioner of Internal Revenue v. Primetown Property Group, Inc., 49 we said that as between the
Civil Code, which provides that a year is equivalent to 365 days, and the Administrative Code of 1987,
which states that a year is composed of 12 calendar months, it is the latter that must prevail following the
legal maxim, Lex posteriori derogat priori. 50 Thus:
Both Article 13 of the Civil Code and Section 31, Chapter VIII, Book I of the Administrative Code of 1987
deal with the same subject matter the computation of legal periods. Under the Civil Code, a year is
equivalent to 365 days whether it be a regular year or a leap year. Under the Administrative Code of 1987,
however, a year is composed of 12 calendar months. Needless to state, under the Administrative Code of
1987, the number of days is irrelevant.
There obviously exists a manifest incompatibility in the manner of
computing legal periods under the Civil Code and the Administrative Code of 1987. For this reason, we
hold that Section 31, Chapter VIII, Book I of the Administrative Code of 1987, being the more recent law,
governs the computation of legal periods. Lex posteriori derogat priori.
Applying Section 31, Chapter VIII, Book I of the Administrative Code of 1987 to this case, the two-year
prescriptive period (reckoned from the time respondent filed its final adjusted return on April 14, 1998)
consisted of 24 calendar months, computed as follows:
Year 1 1st calendar month
April 15, 1998 to May 14, 1998
2nd calendar month
May 15, 1998 to June 14, 1998
3rd calendar month
June 15, 1998 to July 14, 1998
4th calendar month
July 15, 1998 to August 14, 1998
5th calendar month
August 15, 1998 to September 14, 1998
6th calendar month
September 15, 1998 to October 14, 1998
7th calendar month
October 15, 1998 to November 14, 1998
8th calendar month
November 15, 1998 to December 14, 1998
9th calendar month
December 15, 1998 to January 14, 1999
10th calendar month
January 15, 1999 to February 14, 1999

11th calendar month
February 15, 1999 to March 14, 1999
12th calendar month
March 15, 1999 to April 14, 1999
Year 2 13th calendar month
April 15, 1999 to May 14, 1999
14th calendar month
May 15, 1999 to June 14, 1999
15th calendar month
June 15, 1999 to July 14, 1999
16th calendar month
July 15, 1999 to August 14, 1999
17th calendar month
August 15, 1999 to September 14, 1999
18th calendar month
September 15, 1999 to October 14, 1999
19th calendar month
October 15, 1999 to November 14, 1999
20th calendar month
November 15, 1999 to December 14, 1999
21st calendar month
December 15, 1999 to January 14, 2000
22nd calendar month
January 15, 2000 to February 14, 2000
23rd calendar month
February 15, 2000 to March 14, 2000
24th calendar month
March 15, 2000 to April 14, 2000
We therefore hold that respondent's petition (filed on April 14, 2000) was filed on the last day of the 24th
calendar month from the day respondent filed its final adjusted return. Hence, it was filed within the
reglementary period.51
Applying this to the present case, the two-year period to file a claim for tax refund/credit for the period July
1, 2002 to September 30, 2002 expired on September 30, 2004. Hence, respondents administrative claim
was timely filed.
The filing of the judicial claim was premature
However, notwithstanding the timely filing of the administrative claim, we
are constrained to deny respondents claim for tax refund/credit for having been filed in violation of Section
112(D) of the NIRC, which provides that:
xxxx
(Emphasis supplied.)
Section 112(D) of the NIRC clearly provides that the CIR has "120 days, from the date of the submission of
the complete documents in support of the application [for tax refund/credit]," within which to grant or deny
the claim. In case of full or partial denial by the CIR, the taxpayers recourse is to file an appeal before the
CTA within 30 days from receipt of the decision of the CIR. However, if after the 120-day period the CIR
fails to act on the application for tax refund/credit, the remedy of the taxpayer is to appeal the inaction of the
CIR to CTA within 30 days.
In this case, the administrative and the judicial claims were simultaneously filed on September 30, 2004.
Obviously, respondent did not wait for the decision of the CIR or the lapse of the 120-day period. For this
reason, we find the filing of the judicial claim with the CTA premature.
Respondents assertion that the non-observance of the 120-day period is not fatal to the filing of a judicial
claim as long as both the administrative and the judicial claims are filed within the two-year prescriptive
period52 has no legal basis.
There is nothing in Section 112 of the NIRC to support respondents view. Subsection (A) of the said
provision states that "any VAT-registered person, whose sales are zero-rated or effectively zero-rated may,
within two 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." The phrase
"within two (2) years x x x apply for the issuance of a tax credit certificate or refund" refers to applications
for refund/credit filed with the CIR and not to appeals made to the CTA. This is apparent in the first
paragraph of subsection (D) of the same provision, which states that the CIR has "120 days from the
submission of complete documents in support of the application filed in accordance with Subsections (A)
and (B)" within which to decide on the claim.
In fact, applying the two-year period to judicial claims would render nugatory Section 112(D) of the NIRC,
which already provides for a specific period within which a taxpayer should appeal the decision or inaction
of the CIR. The second paragraph of Section 112(D) of the NIRC envisions two scenarios: (1) when a
decision is issued by the CIR before the lapse of the 120-day period; and (2) when no decision is made
after the 120-day period. In both instances, the taxpayer has 30 days within which to file an appeal with the
CTA. As we see it then, the 120-day period is crucial in filing an appeal with the CTA.
With regard to Commissioner of Internal Revenue v. Victorias Milling, Co., Inc.53 relied upon by respondent,
we find the same inapplicable as the tax provision involved in that case is Section 306, now Section 229 of
the NIRC. And as already discussed, Section 229 does not apply to refunds/credits of input VAT, such as
the instant case.
In fine, the premature filing of respondents claim for refund/credit of input VAT before the CTA warrants a
dismissal inasmuch as no jurisdiction was acquired by the CTA.
WHEREFORE, the Petition is hereby GRANTED. The assailed July 30, 2008 Decision and the October 6,
2008 Resolution of the Court of Tax Appeals are hereby REVERSED and SET ASIDE. The Court of Tax
Appeals Second Division is DIRECTED to dismiss CTA Case No. 7065 for having been prematurely filed.
SO ORDERED.

Taxation II - Cases

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Taxation II - Cases

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TAXATION II - ATTY.

1st Quarter of year 2004

April 16, 2004

2nd Quarter of year 2004

July 15, 2004

3rd Quarter of year 2004

October 15, 2004

4th Quarter of year 2004

January 11, 2005

1st Quarter of year 2005

April 25, 2005

2nd Quarter of year 2005

July 19, 2005

3rd Quarter of year 2005

October 26, 2005

1st Quarter of year 2004

2nd Quarter of year 2004

August 12, 2004

3rd Quarter of year 2004

February 18, 2005

4th Quarter of year 2004

February 18, 2005

1st Quarter of year 2005

May 11, 2005

2nd Quarter of year 2005

November 18, 2005

3rd Quarter of year 2005

November 18, 2005

TAXATION II (Saturday- Atty. Villarubia) EUNICE 2

March 17, 2006

March 17, 2006

July 18, 2005

March 17, 2006

March 17, 2006

March 17, 2006

October 7, 2004 November 6, 2004

August 12, 2004 December

18, June 18, 2005

May 11, 2005

10, January 9, 2005

18, March 18, 2006

April 17, 2006

May 11, 2005

November 18, March

November 18, March

December 11, 2013

Sec. 112 refers only to administrative claims

120+30 day period under Sec. 112 is mandatory and jurisdictional

November 11, 2013

THE COMMISSIONER OF INTERNAL REVENUE, Petitioner, vs. VISAYAS GEOTHERMAL POWER

November 11, 2013

APPLIED FOOD INGREDIENTS COMPANY, INC., Petitioner, vs. COMMISSIONER OF INTERNAL

Proceedings before the Second Division of the CTA

TAXATION II (Saturday- Atty. Villarubia) EUNICE 22

Net Creditable Input VAT

April 15, 1998 to May 14, 1998

2nd calendar month

May 15, 1998 to June 14, 1998

3rd calendar month

June 15, 1998 to July 14, 1998

4th calendar month

July 15, 1998 to August 14, 1998

5th calendar month

August 15, 1998 to September 14, 1998