12/13/2014 G.R.Nos.

19872930

TodayisSaturday,December13,2014

RepublicofthePhilippines
SUPREMECOURT
Manila

FIRSTDIVISION

G.R.Nos.19872930January15,2014

CBKPOWERCOMPANYLIMITED,Petitioner,
vs.
COMMISSIONEROFINTERNALREVENUE,Respondent.

DECISION

SERENO,CJ:

ThisisaPetitionforReviewonCertiorari1underRule45ofthe1997RulesofCivilProcedurefiledbyCBKPower
Company Limited (petitioner). The Petition assails the Decision2 dated 27 June 2011 and Resolution3 dated 16
September 2011 of the Court of Tax Appeals En Banc (CTA En Banc in C.T.A. EB Nos. 658 and 659. The
assailed Decision and Resolution reversed and set aside the Decision4 dated 3 March 2010 and Resolution5
dated6July2010renderedbytheCTASpecialSecondDivisioninC.T.A.CaseNo.7621,whichpartlygranted
theclaimofpetitionerfortheissuanceofataxcreditcertificaterepresentingthelatter'sallegedunutilizedinput
taxes on local purchases of goods and services attributable to effectively zerorated sales to National Power
Corporation(NPC)forthesecondandthirdquartersof2005.

TheFacts

Petitioner is engaged, among others, in the operation, maintenance, and management of the Kalayaan II
pumpedstorage hydroelectric power plant, the new Caliraya Spillway, Caliraya, Botocan and the Kalayaan I
hydroelectricpowerplantsandtheirrelatedfacilitieslocatedintheProvinceofLaguna.6

On 29 December 2004, petitioner filed an Application for VAT ZeroRate with the Bureau of Internal Revenue
(BIR)inaccordancewithSection108(B)(3)oftheNationalInternalRevenueCode(NIRC)of1997,asamended.
TheapplicationwasdulyapprovedbytheBIR.Thus,petitionerssaleofelectricitytotheNPCfrom1January
2005 to 31 October 2005 was declared to be entitled to the benefit of effectively zerorated value added tax
(VAT).7

Petitioner filed its administrative claims for the issuance of tax credit certificates for its alleged unutilized input
taxesonitspurchaseofcapitalgoodsandallegedunutilizedinputtaxesonitslocalpurchasesand/orimportation
of goods and services, other than capital goods, pursuant to Sections 112(A) and (B) of the NIRC of 1997, as
amended,withBIRRevenueDistrictOffice(RDO)No.55ofLaguna,asfollows:8

PeriodCovered DateOfFiling

1stquarterof2005 30Jun05
2ndquarterof2005 15Sep05

3rdquarterof2005 28Oct05

Alleging inaction of the Commissioner of Internal Revenue (CIR), petitioner filed a Petition for Review with the
CTAon18April2007.

THECTASPECIALSECONDDIVISIONRULING

After trial on the merits, the CTA Special Second Division rendered a Decision on 3 March 2010. Applying
CommissionerofInternalRevenuev.MirantPagbilaoCorporation(Mirant),9thecourt

aquoruledthatpetitionerhaduntilthefollowingdateswithinwhichtofilebothadministrativeandjudicialclaims:

http://www.lawphil.net/judjuris/juri2014/jan2014/gr_198729_2014.html 1/7
12/13/2014 G.R.Nos.19872930

TaxableQuarter LastDayto
FileClaimfor
2005 Closeofthequarter Refund

1stquarter 31Mar05 31Mar07

2ndquarter 30Jun05 30Jun07
3rdquarter 30Sep05 30Sep07

Accordingly, petitioner timely filed its administrative claims for the three quarters of 2005. However, considering
thatthejudicialclaimwasfiledon18April2007,theCTADivisiondeniedtheclaimforthefirstquarterof2005for
havingbeenfiledoutoftime.

Afteranevaluationofpetitionersclaimforthesecondandthirdquartersof2005,thecourtaquopartlygranted
the claim and ordered the issuance of a tax credit certificate in favor of petitioner in the reduced amount of
P27,170,123.36.

ThepartiesfiledtheirrespectiveMotionsforPartialReconsideration,whichwerebothdeniedbytheCTADivision.

THECTAENBANCRULING

Onappeal,relyingonCommissionerofInternalRevenuev.AichiForgingCompanyofAsia,Inc.(Aichi),10theCTA
EnBancruledthatpetitionersjudicialclaimforthefirst,second,andthirdquartersof2005werebelatedlyfiled.

The CTA Special Second Division Decision and Resolution were reversed and set aside, and the Petition for
Review filed in CTA Case No. 7621 was dismissed. Petitioners Motion for Reconsideration was likewise denied
forlackofmerit.

Hence,thisPetition.ISSUE

Petitioners assigned errors boil down to the principal issue of the applicable prescriptive period on its claim for
refundofunutilizedinputVATforthefirsttothirdquartersof2005.11

THECOURTSRULING

ThepertinentprovisionoftheNIRCatthetimewhenpetitionerfileditsclaimforrefundprovides:

SEC.112.RefundsorTaxCreditsofInputTax.

(A)ZeroratedorEffectivelyZeroratedSales.AnyVATregisteredperson,whosesalesarezeroratedor
effectivelyzeroratedmay,withintwo(2)yearsafterthecloseofthetaxablequarterwhenthesaleswere
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
appliedagainstoutputtax:Provided,however,ThatinthecaseofzeroratedsalesunderSection106(A)(2)
(a)(1),(2) and (B) and Section 108 (B)(1) and (2), the acceptable foreign currency exchange proceeds
thereofhadbeendulyaccountedforinaccordancewiththerulesandregulationsoftheBangkoSentralng
Pilipinas (BSP): Provided, further, That where the taxpayer is engaged in zerorated or effectively zero
rated sale and also in taxable or exempt sale of goods or properties or services, and the amount of
creditableinputtaxdueorpaidcannotbedirectlyandentirelyattributedtoanyoneofthetransactions,it
shallbeallocatedproportionatelyonthebasisofthevolumeofsales.

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
applicationfiledinaccordancewithSubsections(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
Commissionertoactontheapplicationwithintheperiodprescribedabove,thetaxpayeraffectedmay,withinthirty
(30)daysfromthereceiptofthedecisiondenyingtheclaimoraftertheexpirationoftheonehundredtwentyday
period,appealthedecisionortheunactedclaimwiththeCourtofTaxAppeals.

PetitionerssalestoNPCareeffectivelyzerorated

AsaptlyruledbytheCTASpecialSecondDivision,petitionerssalestoNPCareeffectivelysubjecttozeropercent
(0%)VAT.TheNPCisanentitywithaspecialcharter,whichcategoricallyexemptsitfromthepaymentofanytax,
http://www.lawphil.net/judjuris/juri2014/jan2014/gr_198729_2014.html 2/7
12/13/2014 G.R.Nos.19872930

whether direct or indirect, including VAT. Thus, services rendered to NPC by a VATregistered entity are
effectivelyzerorated.Infact,theBIRitselfapprovedtheapplicationforzeroratingon29December2004,filed
bypetitionerforitssalestoNPCcoveringJanuarytoOctober2005.12Asaconsequence,petitionerclaimsforthe
refundoftheallegedexcessinputtaxattributabletoitseffectivelyzeroratedsalestoNPC.

InPanasonicCommunicationsImagingCorporationofthePhilippinesv.CommissionerofInternalRevenue,13this
Courtruled:

Underthe1997NIRC,ifattheendofataxablequarterthesellerchargesoutputtaxesequaltotheinputtaxes
thathissupplierspassedontohim,nopaymentisrequiredofhim.Itiswhenhisoutputtaxesexceedhisinput
taxesthathehastopaytheexcesstotheBIR.Iftheinputtaxesexceedtheoutputtaxes,however,theexcess
paymentshallbecarriedovertothesucceedingquarterorquarters.Shouldtheinputtaxesresultfromzerorated
or effectively zerorated transactions or from the acquisition of capital goods, any excess over the output taxes
shallinsteadberefundedtothetaxpayer.

ThecruxofthecontroversyarosefromtheproperapplicationoftheprescriptiveperiodssetforthinSection112
oftheNIRCof1997,asamended,andtheinterpretationoftheapplicablejurisprudence.

Although the ponente in this case expressed a different view on the mandatory application of the 120+30 day
periodasprescribedinSection112,withthefinalityoftheCourtspronouncementontheconsolidatedtaxcases
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 Revenue14
(hereby collectively referred as San Roque), we are constrained to apply the dispositions therein to the facts
hereinwhicharesimilar.

AdministrativeClaim

Section112(A)providesthatafterthecloseofthetaxablequarterwhenthesalesweremade,thereisatwoyear
prescriptiveperiodwithinwhichaVATregisteredpersonwhosesalesarezeroratedoreffectivelyzeroratedmay
applyfortheissuanceofataxcreditcertificateorrefundofcreditableinputtax.

Our VAT Law provides for a mechanism that would allow VATregistered persons to recover the excess input
taxesovertheoutputtaxestheyhadpaidinrelationtotheirsales.Fortherefundorcreditofexcessorunutilized
input tax, Section 112 is the governing law. Given the distinctive nature of creditable input tax, the law under
Section 112 (A) provides for a different reckoning point for the twoyear prescriptive period, specifically for the
refundorcreditofthattaxonly.

We agree with petitioner that Mirant was not yet in existence when their administrative claim was filed in 2005
thus,itshouldnotretroactivelybeappliedtotheinstantcase.

However,thefactremainsthatSection112isthecontrollingprovisionfortherefundorcreditofinputtaxduring
the time that petitioner filed its claim with which they ought to comply. It must be emphasized that the Court
merely clarified in Mirant that Sections 204 and 229, which prescribed a different starting point for the twoyear
prescriptivelimitforfilingaclaimforarefundorcreditofexcessinputtax,werenotapplicable.Inputtaxisneither
anerroneouslypaidnoranillegallycollectedinternalrevenuetax.15

Section 112(A) is clear that for VATregistered persons whose sales are zerorated or effectively zerorated, a
claim for the refund or credit of creditable input tax that is due or paid, and that is attributable to zerorated or
effectivelyzeroratedsales,mustbefiledwithintwoyearsafterthecloseofthetaxablequarterwhensuchsales
weremade.Thereckoningframewouldalwaysbetheendofthequarterwhenthepertinentsaleortransactions
weremade,regardlessofwhentheinputVATwaspaid.16

PursuanttoSection112(A),petitionersadministrativeclaimswerefiledwellwithinthetwoyearperiodfromthe
closeofthetaxablequarterwhentheeffectivelyzeroratedsalesweremade,towit:

PeriodCovered Closeofthe LastdaytoFileAdministrative DateofFiling

Taxable Claim
Quarter
1stquarter2005 31Mar05 31Mar07 30Jun05

2ndquarter2005 30Jun05 30Jun07 15Sep05

3rdquarter2005 30Sep05 30Sep07 28Oct05

JudicialClaim

http://www.lawphil.net/judjuris/juri2014/jan2014/gr_198729_2014.html 3/7
12/13/2014 G.R.Nos.19872930

Section112(D)furtherprovidesthattheCIRhastodecideonanadministrativeclaimwithinonehundredtwenty
(120)daysfromthedateofsubmissionofcompletedocumentsinsupportthereof.

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
entitlementtoarefundinitsapplication,absentanyevidencetothecontrary.

Thereafter,thetaxpayeraffectedbytheCIRsdecisionorinactionmayappealtotheCTAwithin30daysfromthe
receipt of the decision or from the expiration of the 120day period within which the claim has not been acted
upon.

Consideringfurtherthatthe30dayperiodtoappealtotheCTAisdependentonthe120dayperiod,compliance
withbothperiodsisjurisdictional.Theperiodof120daysisaprerequisiteforthecommencementofthe30day
periodtoappealtotheCTA.

Prescinding from San Roque in the consolidated case Mindanao II Geothermal Partnership v. Commissioner of
InternalRevenueandMindanaoIGeothermalPartnershipv.CommissionerofInternalRevenue,17thisCourthas
ruledthus:

Notwithstandingastrictconstructionofanyclaimfortaxexemptionorrefund,theCourtinSanRoquerecognized
that BIR Ruling No. DA48903 constitutes equitable estoppel in favor of taxpayers. BIR Ruling No. DA48903
expresslystatesthatthe"taxpayerclaimantneednotwaitforthelapseofthe120dayperiodbeforeitcouldseek
judicialreliefwiththeCTAbywayofPetitionforReview."ThisCourtdiscussedBIRRulingNo.DA48903andits
effectontaxpayers,thus:

TaxpayersshouldnotbeprejudicedbyanerroneousinterpretationbytheCommissioner,particularlyonadifficult
question of law. The abandonment of the Atlas doctrine by Mirant and Aichi is proof that the reckoning of the
prescriptiveperiodsforinputVATtaxrefundorcreditisadifficultquestionoflaw.TheabandonmentoftheAtlas
doctrinedidnotresultinAtlas,orothertaxpayerssimilarlysituated,beingmadetoreturnthetaxrefundorcredit
theyreceivedorcouldhavereceivedunderAtlaspriortoitsabandonment.ThisCourtisapplyingMirantandAichi
prospectively.Absentfraud,badfaithormisrepresentation,thereversalbythisCourtofageneralinterpretative
ruleissuedbytheCommissioner,likethereversalofaspecificBIRrulingunderSection246,shouldalsoapply
prospectively.xxx.

xxxx

Thus, the only issue is whether BIR Ruling No. DA48903 is a general interpretative rule applicable to all
taxpayers or a specific ruling applicable only to a particular taxpayer. BIR Ruling No. DA48903 is a general
interpretativerulebecauseitwasaresponsetoaquerymade,notbyaparticulartaxpayer,butbyagovernment
agency asked with processing tax refunds and credits, that is, the One Stop Shop InterAgency Tax Credit and
Drawback Center of the Department of Finance. This government agency is also the addressee, or the entity
responded to, in BIR Ruling No. DA48903. Thus, while this government agency mentions in its query to the
CommissionertheadministrativeclaimofLaziBayResourcesDevelopment,Inc.,theagencywasinfactasking
the Commissioner what to do in cases like the tax claim of Lazi Bay Resources Development, Inc., where the
taxpayerdidnotwaitforthelapseofthe120dayperiod.

Clearly,BIRRulingNo.DA48903isageneralinterpretativerule. Thus,alltaxpayerscanrelyonBIRRulingNo.
1 w p h i1

DA48903 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. (Emphasis
supplied)

Inapplyingtheforegoingtotheinstantcase,weconsiderthefollowingpertinentdates:
1 w p h i1

PeriodCovered Administrative Expirationof Lastdaytofile JudicialClaim

ClaimFiled 120days JudicialClaim Filed

1stquarter2005 30Jun05 28Oct05 27Nov05 18Apr07

2ndquarter 15Sep05 13Jan06 13Feb06

2005

3rdquarter2005 28Oct05 26Feb06 28Mar06

Itmustbeemphasizedthatthisisnotacaseofprematurefilingofajudicialclaim.Althoughpetitionerdidnotfile
itsjudicialclaimwiththeCTApriortotheexpirationofthe120daywaitingperiod,itfailedtoobservethe30day
prescriptiveperiodtoappealtotheCTAcountedfromthelapseofthe120dayperiod.

http://www.lawphil.net/judjuris/juri2014/jan2014/gr_198729_2014.html 4/7
12/13/2014 G.R.Nos.19872930

PetitionerissimilarlysituatedasPhilexinthesamecase,SanRoque,18inwhichthisCourtruled:

UnlikeSanRoqueandTaganito,Philexscaseisnotoneofprematurefilingbutoflatefiling.Philexdidnotfileany
petitionwiththeCTAwithinthe120dayperiod.PhilexdidnotalsofileanypetitionwiththeCTAwithin30days
after the expiration of the 120day period. Philex filed its judicial claim long after the expiration of the 120day
period,infact426daysafterthelapseofthe120dayperiod.Inanyevent,whethergovernedbyjurisprudence
before, during, or after the Atlas case, Philexs judicial claim will have to be rejected because of late filing.
Whether the twoyear prescriptive period is counted from the date of payment of the output VAT following the
Atlasdoctrine,orfromthecloseofthetaxablequarterwhenthesalesattributabletotheinputVATweremade
followingtheMirantandAichidoctrines,Philexsjudicialclaimwasindisputablyfiledlate.

TheAtlasdoctrinecannotsavePhilexfromthelatefilingofitsjudicialclaim.TheinactionoftheCommissioneron
Philexs claim during the 120day period is, by express provision of law, "deemed a denial" of Philexs claim.
Philexhad30daysfromtheexpirationofthe120dayperiodtofileitsjudicialclaimwiththeCTA.Philexsfailure
todosorenderedthe"deemedadenial"decisionoftheCommissionerfinalandinappealable.Therighttoappeal
totheCTAfromadecisionor"deemedadenial"decisionoftheCommissionerismerelyastatutoryprivilege,not
a constitutional right. The exercise of such statutory privilege requires strict compliance with the conditions
attachedbythestatuteforitsexercise.Philexfailedtocomplywiththestatutoryconditionsandmustthusbear
theconsequences.(Emphasesintheoriginal)

Likewise,whilepetitionerfileditsadministrativeandjudicialclaimsduringtheperiodofapplicabilityofBIRRuling
No.DA48903,itcannotclaimthebenefitoftheexceptionperiodasitdidnotfileitsjudicialclaimprematurely,
but did so long after the lapse of the 30day period following the expiration of the 120day period. Again, BIR
Ruling No. DA48903 allowed premature filing of a judicial claim, which means nonexhaustion of the 120day
periodfortheCommissionertoactonanadministrativeclaim,19butnotitslatefiling.

As this Court enunciated in San Roque , petitioner cannot rely on Atlas either, since the latter case was
promulgated only on 8 June 2007. Moreover, the doctrine in Atlas which reckons the twoyear period from the
dateoffilingofthereturnandpaymentofthetax,doesnotinterpretexpresslyorimpliedlythe120+30day
periods.20Simplystated,Atlasreferredonlytothereckoningoftheprescriptiveperiodforfilinganadministrative
claim.

Forfailureofpetitionertocomplywiththe120+30daymandatoryandjurisdictionalperiod,petitionerlostitsright
toclaimarefundorcreditofitsallegedexcessinputVAT.

WithregardtopetitionersargumentthatAichishouldnotbeappliedretroactively,wereiteratethatevenwithout
thatruling,thelawisexplicitonthemandatoryandjurisdictionalnatureofthe120+30dayperiod.

Also devoid of merit is the applicability of the principle of solutio indebiti to the present case. According to this
principle, if something is received when there is no right to demand it, and it was unduly delivered through
mistake,theobligationtoreturnitarises.Inthatsituation,acreditordebtorrelationshipiscreatedunderaquasi
contract,wherebythepayorbecomesthecreditorwhothenhastherighttodemandthereturnofpaymentmade
bymistake,andthepersonwhohasnorighttoreceivethepaymentbecomesobligatedtoreturnit.21Thequasi
contract of solutio indebiti is based on the ancient principle that no one shall enrich oneself unjustly at the
expenseofanother.22

Thereissolutioindebitiwhen:

(1)Paymentismadewhenthereexistsnobindingrelationbetweenthepayor,whohasnodutytopay,and
thepersonwhoreceivedthepaymentand

(2)Paymentismadethroughmistake,andnotthroughliberalityorsomeothercause.23

Thoughtheprincipleofsolutioindebitimaybeapplicabletosomeinstancesofclaimsforarefund,theelements
thereofarewantinginthiscase.

First,thereexistsabindingrelationbetweenpetitionerandtheCIR,theformerbeingataxpayerobligatedtopay
VAT.

Second,thepaymentofinputtaxwasnotmadethroughmistake,sincepetitionerwaslegallyobligatedtopayfor
thatliability.Theentitlementtoarefundorcreditofexcessinputtaxissolelybasedonthedistinctivenatureofthe
VATsystem.AtthetimeofpaymentoftheinputVAT,theamountpaidwascorrectandproper.24

Finally,equity,whichhasbeenaptlydescribedas"ajusticeoutsidelegality,"isappliedonlyintheabsenceof,and
neveragainst,statutorylaworjudicialrulesofprocedure.25Section112isapositiverulethatshouldpreemptand
prevailoverallabstractargumentsbasedonlyonequity.Wellsettledistherulethattaxrefundsorcredits,just
like tax exemptions, are strictly construed against the taxpayer.26 The burden is on the taxpayer to show strict

http://www.lawphil.net/judjuris/juri2014/jan2014/gr_198729_2014.html 5/7
12/13/2014 G.R.Nos.19872930

compliancewiththeconditionsforthegrantofthetaxrefundorcredit.27

WHEREFORE,premisesconsidered,theinstantPetitionisDENIED.

SOORDERED.

MARIALOURDESP.A.SERENO
ChiefJustice,Chairperson

WECONCUR:

TERESITAJ.LEONARDODECASTRO
AssociateJustice

LUCASP.BERSAMIN MARTINS.VILLARAMA,JR.
AssociateJustice AssociateJustice

BIENVENIDOL.REYES
AssociateJustice

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, I certify that the conclusions in the above Decision had
beenreachedinconsultationbeforethecasewasassignedtothewriteroftheopinionoftheCourtsDivision.

MARIALOURDESP.A.SERENO
ChiefJustice

Footnotes
1
Rollo,pp.94160.
2
Id. at 1136 penned by Associate Justice Caesar A. Casanova and concurred in by Presiding Justice
ErnestoD.Acosta,AssociateJusticesJuanitoC.CastanedaJr.,ErlindaP.UyandOlgaPalancaEnriquez,
EsperanzaR.FabonVictorino,CielitoN.MindaroGrullaandAmeliaContangcoManalastaswithAssociate
JusticeLovellR.Bautistadissenting.
3
Id.at3942.
4
Id.at6383pennedbyAssociateJustict'ErlindaP.UyandconcurredinbyAssociateJusticesJuanitoC.
CastanedaJr.andOlgaPalancaEnriquez.
5
Id.at8592.
6
Id.at9899PetitionforReviewonCertiorariUnderRule45oftheRevisedRulesofCourt.
7
Id.at220CTASpecialSecondDivisionDecision.
8
Id.at221.
9
G.R.No.172129,12September2008,565SCRA154.
10
G.R.No.184823,6October2010,632SCRA422.
11
Supranote6,at116117.
12
Supranote7,at220,231233.
13
G.R. No. 178090, 8 February, 2010, 612 SCRA 28, 34, citing Commissioner of Internal Revenue v.
SeagateTechnology(Philippines),491Phil.317,333(2005).
14
G.R.Nos.187485,196113and197156,12February2013.
15
Supranote9.
16
Id.

http://www.lawphil.net/judjuris/juri2014/jan2014/gr_198729_2014.html 6/7
12/13/2014 G.R.Nos.19872930
17
G.R.Nos.193301and194637,11March2013.
18
Supranote14.
19
Id.
20
Id.
21
Sigaanv.Villanueva,G.R.No.173227,20January2009,576SCRA696,708.
22
Id.,citingMoreoLentferv.Wolff,484Phil.552,559560(2004).
23
BPIv.Sarmiento,519Phil.247,256(2006).
24
Supranote14.
25
Mendiola v. Court of Appeals, 327Phil. 1156, 1166 (1996), citing Causapin v. Court of Appeals, 233
SCRA615,625(1994).
26
CommissionerofInternalRevenuev.BankofthePhilippineIslands,G.R.No.178490,7July2009,592
SCRA219,235CommissionerofInternalRevenuev.RioTubaNickelMiningCorp.,G.R.Nos.8358384,
25March1992,207SCRA549,552LaCarlotaSugarCentralv.Jimenez,112Phil.232,235(1961).
27
Supranote14.

TheLawphilProjectArellanoLawFoundation

http://www.lawphil.net/judjuris/juri2014/jan2014/gr_198729_2014.html 7/7