G.R. Nos.
141104 & 148763             June 8, 2007 When the case was elevated to the Court of Appeals as CA-
ATLAS CONSOLIDATED MINING AND
DEVELOPMENT CORPORATION, petitioner,
vs.
COMMISSIONER OF INTERNAL REVENUE, respondent.
DECISION
CHICO-NAZARIO, J.:
Before this Court are the consolidated cases involving the
unsuccessful claims of herein petitioner Atlas Consolidated
Mining and Development Corporation (petitioner corporation)
for the refund/credit of the input Value Added Tax (VAT) on
its purchases of capital goods and on its zero-rated sales in the
taxable quarters of the years 1990 and 1992, the denial of
which by the Court of Tax Appeals (CTA), was affirmed by
the Court of Appeals.
Petitioner corporation is engaged in the business of mining,
production, and sale of various mineral products, such as gold,
pyrite, and copper concentrates. It is a VAT-registered
taxpayer. It was initially issued VAT Registration No. 32-A-6-
002224, dated 1 January 1988, but it had to register anew with
the appropriate revenue district office (RDO) of the Bureau of
Internal Revenue (BIR) when it moved its principal place of
business, and it was re-issued VAT Registration No. 32-0-
004622, dated 15 August 1990.1
G.R. No. 141104
Petitioner corporation filed with the BIR its VAT Return for
the first quarter of 1992.2 It alleged that it likewise filed with
the BIR the corresponding application for the refund/credit of
its input VAT on its purchases of capital goods and on its
zero-rated sales in the amount of P26,030,460.00.3 When its
application for refund/credit remained unresolved by the BIR,
petitioner corporation filed on 20 April 1994 its Petition for
Review with the CTA, docketed as CTA Case No. 5102.
Asserting that it was a "zero-rated VAT person," it prayed that
the CTA order herein respondent Commissioner of Internal
Revenue (respondent Commissioner) to refund/credit
petitioner corporation with the amount of P26,030,460.00,
representing the input VAT it had paid for the first quarter of
1992. The respondent Commissioner opposed and sought the
dismissal of the petition for review of petitioner corporation
for failure to state a cause of action. After due trial, the CTA
promulgated its Decision4 on 24 November 1997 with the
following disposition –
WHEREFORE, in view of the foregoing, the instant claim for
refund is hereby DENIED on the ground of prescription,
insufficiency of evidence and failure to comply with Section
230 of the Tax Code, as amended. Accordingly, the petition at
bar is hereby DISMISSED for lack of merit.
The CTA denied the motion for reconsideration of petitioner
corporation in a Resolution5 dated 15 April 1998.
G.R. SP No. 47607, the appellate court, in its Decision,6 dated
6 July 1999, dismissed the appeal of petitioner corporation,
finding no reversible error in the CTA Decision, dated 24
November 1997. The subsequent motion for reconsideration
of petitioner corporation was also denied by the Court of
Appeals in its Resolution,7 dated 14 December 1999.
Thus, petitioner corporation comes before this Court, via a
Petition for Review on Certiorari under Rule 45 of the Revised
Rules of Court, assigning the following errors committed by
the Court of Appeals –
I
THE COURT OF APPEALS ERRED IN AFFIRMING THE
REQUIREMENT OF REVENUE REGULATIONS NO. 2-88
THAT AT LEAST 70% OF THE SALES OF THE [BOARD
OF INVESTMENTS (BOI)]-REGISTERED FIRM MUST
CONSIST OF EXPORTS FOR ZERO-RATING TO APPLY.
II
THE COURT OF APPEALS ERRED IN AFFIRMING THAT
PETITIONER FAILED TO SUBMIT SUFFICIENT
EVIDENCE SINCE FAILURE TO SUBMIT
PHOTOCOPIES OF VAT INVOICES AND RECEIPTS IS
NOT A FATAL DEFECT.
III
THE COURT OF APPEALS ERRED IN RULING THAT
THE JUDICIAL CLAIM WAS FILED BEYOND THE
PRESCRIPTIVE PERIOD SINCE THE JUDICIAL CLAIM
WAS FILED WITHIN TWO (2) YEARS FROM THE
FILING OF THE VAT RETURN.
IV
THE COURT OF APPEALS ERRED IN NOT ORDERING
CTA TO ALLOW THE RE-OPENING OF THE CASE FOR
PETITIONER TO PRESENT ADDITIONAL EVIDENCE.8
G.R. No. 148763
G.R. No. 148763 involves almost the same set of facts as in
G.R. No. 141104 presented above, except that it relates to the
claims of petitioner corporation for refund/credit of input VAT
on its purchases of capital goods and on its zero-rated sales
made in the last three taxable quarters of 1990.
Petitioner corporation filed with the BIR its VAT Returns for
the second, third, and fourth quarters of 1990, on 20 July
1990, 18 October 1990, and 20 January 1991, respectively. It
submitted separate applications to the BIR for the
refund/credit of the input VAT paid on its purchases of capital
goods and on its zero-rated sales, the details of which are
presented as follows –
Date of Application Period Covered Amount App
1
 For WHETHER OR NOT THE COURT OF APPEALS ERRED
IN HOLDING THAT PETITIONER'S CLAIM IS BARRED
UNDER REVENUE REGULATIONS NOS. 2-88 AND 3-88
21 August 1990 2nd Quarter, P 54,014,722.04
I.E., FOR FAILURE TO PTOVE [sic] THE 70%
1990
THRESHOLD FOR ZERO-RATING TO APPLY AND FOR
FAILURE TO ESTABLISH THE FACTUAL BASIS FOR
21 November 1990 3rd Quarter, 1990 75,304,774.77 THE INSTANT CLAIM.

19 February 1991 4th Quarter, 1990 43,829,766.10
When the BIR failed to act on its applications for
refund/credit, petitioner corporation filed with the CTA the
following petitions for review –
Date Filed Period Covered CTA Case No. G.R. Nos. 141104 and 148763 were consolidated pursuant to a
20 July 1992 2nd Quarter, 4831
1990
9 October 1992 3rd Quarter, 1990 4859
14 January 1993 4th Quarter, 1990 4944
which were eventually consolidated. The respondent
Commissioner contested the foregoing Petitions and prayed
for the dismissal thereof. The CTA ruled in favor of
respondent Commissioner and in its Decision,9 dated 30
October 1997, dismissed the Petitions mainly on the ground
that the prescriptive periods for filing the same had expired. In
a Resolution,10 dated 15 January 1998, the CTA denied the
motion for reconsideration of petitioner corporation since the
latter presented no new matter not already discussed in the
court's prior Decision. In the same Resolution, the CTA also
denied the alternative prayer of petitioner corporation for a
new trial since it did not fall under any of the grounds cited
under Section 1, Rule 37 of the Revised Rules of Court, and it
was not supported by affidavits of merits required by Section
2 of the same Rule.
Petitioner corporation appealed its case to the Court of
Appeals, where it was docketed as CA-G.R. SP No. 46718. On
15 September 2000, the Court of Appeals rendered its
Decision,11 finding that although petitioner corporation timely
filed its Petitions for Review with the CTA, it still failed to
substantiate its claims for the refund/credit of its input VAT
for the last three quarters of 1990. In its Resolution,12 dated
27 June 2001, the appellate court denied the motion for
reconsideration of petitioner corporation, finding no cogent
reason to reverse its previous Decision.
Aggrieved, petitioner corporation filed with this Court another
Petition for Review on Certiorari under Rule 45 of the Revised
Rules of Court, docketed as G.R. No. 148763, raising the
following issues –
A.
B.
WHETHER OR NOT THE COURT OF APPEALS ERRED
IN FINDING THAT THERE IS NO BASIS TO GRANT
PETITIONER'S MOTION FOR NEW TRIAL.
There being similarity of parties, subject matter, and issues,
Resolution, dated 4 September 2006, issued by this Court. The
ruling of this Court in these cases hinges on how it will
resolve the following key issues: (1) prescription of the claims
of petitioner corporation for input VAT refund/credit; (2)
validity and applicability of Revenue Regulations No. 2-88
imposing upon petitioner corporation, as a requirement for the
VAT zero-rating of its sales, the burden of proving that the
buyer companies were not just BOI-registered but also
exporting 70% of their total annual production; (3) sufficiency
of evidence presented by petitioner corporation to establish
that it is indeed entitled to input VAT refund/credit; and (4)
legal ground for granting the motion of petitioner corporation
for re-opening of its cases or holding of new trial before the
CTA so it could be given the opportunity to present the
required evidence.
Prescription
The prescriptive period for filing an application for tax
refund/credit of input VAT on zero-rated sales made in 1990
and 1992 was governed by Section 106(b) and (c) of the Tax
Code of 1977, as amended, which provided that –
SEC. 106. Refunds or tax credits of input tax. – x x x.
(b) Zero-rated or effectively zero-rated sales. – Any person,
except those covered by paragraph (a) above, whose sales are
zero-rated may, within two years after the close of the quarter
when such sales were made, apply for the issuance of a tax
credit certificate or refund of the input taxes attributable to
such sales to the extent that such input tax has not been
applied against output tax.
xxxx
(e) Period within which refund of input taxes may be made by
the Commissioner. – The Commissioner shall refund input
taxes within 60 days from the date the application for refund
was filed with him or his duly authorized representative. No
refund of input taxes shall be allowed unless the VAT-
registered person files an application for refund within the
period prescribed in paragraphs (a), (b) and (c) as the case
may be.

2
By a plain reading of the foregoing provision, the two-year
prescriptive period for filing the application for refund/credit
of input VAT on zero-rated sales shall be determined from the
close of the quarter when such sales were made.
Petitioner contends, however, that the said two-year
prescriptive period should be counted, not from the close of
the quarter when the zero-rated sales were made, but from the
date of filing of the quarterly VAT return and payment of the
tax due 20 days thereafter, in accordance with Section 110(b)
of the Tax Code of 1977, as amended, quoted as follows –
SEC. 110. Return and payment of value-added tax. – x x x.
(b) Time for filing of return and payment of tax. – The return
shall be filed and the tax paid within 20 days following the
end of each quarter specifically prescribed for a VAT-
registered person under regulations to be promulgated by the
Secretary of Finance: Provided, however, That any person
whose registration is cancelled in accordance with paragraph
(e) of Section 107 shall file a return within 20 days from the
cancellation of such registration.
It is already well-settled that the two-year prescriptive period
for instituting a suit or proceeding for recovery of corporate
income tax erroneously or illegally paid under Section
23013 of the Tax Code of 1977, as amended, was to be
counted from the filing of the final adjustment return. This
Court already set out in ACCRA Investments Corporation v.
Court of Appeals,14 the rationale for such a rule, thus –
Clearly, there is the need to file a return first before a claim for
refund can prosper inasmuch as the respondent Commissioner
by his own rules and regulations mandates that the corporate
taxpayer opting to ask for a refund must show in its final
adjustment return the income it received from all sources and
the amount of withholding taxes remitted by its withholding
agents to the Bureau of Internal Revenue. The petitioner
corporation filed its final adjustment return for its 1981
taxable year on April 15, 1982. In our Resolution dated April
10, 1989 in the case of Commissioner of Internal Revenue v.
Asia Australia Express, Ltd. (G.R. No. 85956), we ruled that
the two-year prescriptive period within which to claim a
refund commences to run, at the earliest, on the date of the
filing of the adjusted final tax return. Hence, the petitioner
corporation had until April 15, 1984 within which to file its
claim for refund.
Considering that ACCRAIN filed its claim for refund as early
as December 29, 1983 with the respondent Commissioner who
failed to take any action thereon and considering further that
the non-resolution of its claim for refund with the said
Commissioner prompted ACCRAIN to reiterate its claim
before the Court of Tax Appeals through a petition for review
on April 13, 1984, the respondent appellate court manifestly
committed a reversible error in affirming the holding of the
tax court that ACCRAIN's claim for refund was barred by
prescription.
It bears emphasis at this point that the rationale in computing
the two-year prescriptive period with respect to the petitioner
corporation's claim for refund from the time it filed its final
adjustment return is the fact that it was only then that
ACCRAIN could ascertain whether it made profits or incurred
losses in its business operations. The "date of payment",
therefore, in ACCRAIN's case was when its tax liability, if
any, fell due upon its filing of its final adjustment return on
April 15, 1982.
In another case, Commissioner of Internal Revenue v. TMX
Sales, Inc.,15 this Court further expounded on the same matter
–
A re-examination of the aforesaid minute resolution of the
Court in the Pacific Procon case is warranted under the
circumstances to lay down a categorical pronouncement on the
question as to when the two-year prescriptive period in cases
of quarterly corporate income tax commences to run. A full-
blown decision in this regard is rendered more imperative in
the light of the reversal by the Court of Tax Appeals in the
instant case of its previous ruling in the Pacific Procon case.
Section 292 (now Section 230) of the National Internal
Revenue Code should be interpreted in relation to the other
provisions of the Tax Code in order to give effect the
legislative intent and to avoid an application of the law which
may lead to inconvenience and absurdity. In the case of People
vs. Rivera (59 Phil. 236 [1933]), this Court stated that statutes
should receive a sensible construction, such as will give effect
to the legislative intention and so as to avoid an unjust or an
absurd conclusion. INTERPRETATIO TALIS IN AMBIGUIS
SEMPER FRIENDA EST, UT EVITATUR
INCONVENIENS ET ABSURDUM. Where there is
ambiguity, such interpretation as will avoid inconvenience and
absurdity is to be adopted. Furthermore, courts must give
effect to the general legislative intent that can be discovered
from or is unraveled by the four corners of the statute, and in
order to discover said intent, the whole statute, and not only a
particular provision thereof, should be considered. (Manila
Lodge No. 761, et al. vs. Court of Appeals, et al. 73 SCRA
162 [1976) Every section, provision or clause of the statute
must be expounded by reference to each other in order to
arrive at the effect contemplated by the legislature. The
intention of the legislator must be ascertained from the whole
text of the law and every part of the act is to be taken into
view. (Chartered Bank vs. Imperial, 48 Phil. 931
[1921]; Lopez vs. El Hoger Filipino, 47 Phil. 249, cited
in Aboitiz Shipping Corporation vs. City of Cebu, 13 SCRA
449 [1965]).
Thus, in resolving the instant case, it is necessary that we
consider not only Section 292 (now Section 230) of the
National Internal Revenue Code but also the other provisions
of the Tax Code, particularly Sections 84, 85 (now both
incorporated as Section 68), Section 86 (now Section 70) and
Section 87 (now Section 69) on Quarterly Corporate Income
Tax Payment and Section 321 (now Section 232) on keeping
3
of books of accounts. All these provisions of the Tax Code
should be harmonized with each other.
xxxx
Therefore, the filing of a quarterly income tax returns required
in Section 85 (now Section 68) and implemented per BIR
Form 1702-Q and payment of quarterly income tax should
only be considered mere installments of the annual tax due.
These quarterly tax payments which are computed based on
the cumulative figures of gross receipts and deductions in
order to arrive at a net taxable income, should be treated as
advances or portions of the annual income tax due, to be
adjusted at the end of the calendar or fiscal year. This is
reinforced by Section 87 (now Section 69) which provides for
the filing of adjustment returns and final payment of income
tax. Consequently, the two-year prescriptive period provided
in Section 292 (now Section 230) of the Tax Code should be
computed from the time of filing the Adjustment Return or
Annual Income Tax Return and final payment of income tax.
In the case of Collector of Internal Revenue vs. Antonio
Prieto (2 SCRA 1007 [1961]), this Court held that when a tax
is paid in installments, the prescriptive period of two years
provided in Section 306 (Section 292) of the National Internal
Revenue Code should be counted from the date of the final
payment. This ruling is reiterated in Commissioner of Internal
Revenue vs. Carlos Palanca (18 SCRA 496 [1966]), wherein
this Court stated that where the tax account was paid on
installment, the computation of the two-year prescriptive
period under Section 306 (Section 292) of the Tax Code,
should be from the date of the last installment.
In the instant case, TMX Sales, Inc. filed a suit for a refund on
March 14, 1984. Since the two-year prescriptive period should
be counted from the filing of the Adjustment Return on April
15,1982, TMX Sales, Inc. is not yet barred by prescription.
The very same reasons set forth in the afore-cited cases
concerning the two-year prescriptive period for claims for
refund of illegally or erroneously collected income tax may
also apply to the Petitions at bar involving the same
prescriptive period for claims for refund/credit of input VAT
on zero-rated sales.
It is true that unlike corporate income tax, which is reported
and paid on installment every quarter, but is eventually
subjected to a final adjustment at the end of the taxable year,
VAT is computed and paid on a purely quarterly basis without
need for a final adjustment at the end of the taxable year.
However, it is also equally true that until and unless the VAT-
registered taxpayer prepares and submits to the BIR its
quarterly VAT return, there is no way of knowing with
certainty just how much input VAT16 the taxpayer may apply
against its output VAT;17 how much output VAT it is due to
pay for the quarter or how much excess input VAT it may
carry-over to the following quarter; or how much of its input
VAT it may claim as refund/credit. It should be recalled that
not only may a VAT-registered taxpayer directly apply against
his output VAT due the input VAT it had paid on its
importation or local purchases of goods and services during
the quarter; the taxpayer is also given the option to either (1)
carry over any excess input VAT to the succeeding quarters
for application against its future output VAT liabilities, or (2)
file an application for refund or issuance of a tax credit
certificate covering the amount of such input VAT.18 Hence,
even in the absence of a final adjustment return, the
determination of any output VAT payable necessarily requires
that the VAT-registered taxpayer make adjustments in its
VAT return every quarter, taking into consideration the input
VAT which are creditable for the present quarter or had been
carried over from the previous quarters.
Moreover, when claiming refund/credit, the VAT-registered
taxpayer must be able to establish that it does have refundable
or creditable input VAT, and the same has not been applied
against its output VAT liabilities – information which are
supposed to be reflected in the taxpayer's VAT returns. Thus,
an application for refund/credit must be accompanied by
copies of the taxpayer's VAT return/s for the taxable quarter/s
concerned.
Lastly, although the taxpayer's refundable or creditable input
VAT may not be considered as illegally or erroneously
collected, its refund/credit is a privilege extended to qualified
and registered taxpayers by the very VAT system adopted by
the Legislature. Such input VAT, the same as any illegally or
erroneously collected national internal revenue tax, consists of
monetary amounts which are currently in the hands of the
government but must rightfully be returned to the taxpayer.
Therefore, whether claiming refund/credit of illegally or
erroneously collected national internal revenue tax, or input
VAT, the taxpayer must be given equal opportunity for filing
and pursuing its claim.
For the foregoing reasons, it is more practical and reasonable
to count the two-year prescriptive period for filing a claim for
refund/credit of input VAT on zero-rated sales from the date
of filing of the return and payment of the tax due which,
according to the law then existing, should be made within 20
days from the end of each quarter. Having established thus,
the relevant dates in the instant cases are summarized and
reproduced below –
Period Covered Date of Date of
Filing (Return Filing (Application
w/ BIR) w/ BIR)
2nd Quarter, 20 July 1990 21 August 1990
1990
3rd Quarter, 18 October 1990 21 November 1990
1990
4
 4th Quarter, 20 January 1991 19 February 1991
1990
1st Quarter, 20 April 1992 --
1992
The above table readily shows that the administrative and
judicial claims of petitioner corporation for refund of its input
VAT on its zero-rated sales for the last three quarters of 1990
were all filed within the prescriptive period.
However, the same cannot be said for the claim of petitioner
corporation for refund of its input VAT on its zero-rated sales
for the first quarter of 1992. Even though it may seem that
petitioner corporation filed in time its judicial claim with the
CTA, there is no showing that it had previously filed an
administrative claim with the BIR. Section 106(e) of the Tax
Code of 1977, as amended, explicitly provided that no refund
of input VAT shall be allowed unless the VAT-registered
taxpayer filed an application for refund with respondent
Commissioner within the two-year prescriptive period. The
application of petitioner corporation for refund/credit of its
input VAT for the first quarter of 1992 was not only unsigned
by its supposed authorized representative, Ma. Paz R. Semilla,
Manager-Finance and Treasury, but it was not dated, stamped,
and initialed by the BIR official who purportedly received the
same. The CTA, in its Decision,19 dated 24 November 1997,
in CTA Case No. 5102, made the following observations –
This Court, likewise, rejects any probative value of the
Application for Tax Credit/Refund of VAT Paid (BIR Form
No. 2552) [Exhibit "B'] formally offered in evidence by the
petitioner on account of the fact that it does not bear the BIR
stamp showing the date when such application was filed
together with the signature or initial of the receiving officer of
respondent's Bureau. Worse still, it does not show the date of
application and the signature of a certain Ma. Paz R. Semilla
indicated in the form who appears to be petitioner's authorized
filer.
A review of the records reveal that the original of the
aforecited application was lost during the time petitioner
transferred its office (TSN, p. 6, Hearing of December 9,
1994). Attempt was made to prove that petitioner exerted
efforts to recover the original copy, but to no avail. Despite
this, however, We observe that petitioner completely failed to
establish the missing dates and signatures abovementioned.
On this score, said application has no probative value in
demonstrating the fact of its filing within two years after the
[filing of the VAT return for the quarter] when petitioner's
sales of goods were made as prescribed under Section 106(b)
of the Tax Code. We believe thus that petitioner failed to file
an application for refund in due form and within the legal
period set by law at the administrative level. Hence, the case at
bar has failed to satisfy the requirement on the prior filing of
an application for refund with the respondent before the
commencement of a judicial claim for refund, as prescribed
under Section 230 of the Tax Code. This fact constitutes
another one of the many reasons for not granting petitioner's
judicial claim.
As pointed out by the CTA, in serious doubt is not only the
fact of whether petitioner corporation timely filed its
administrative claim for refund of its input VAT for the first
quarter of 1992, but also whether petitioner corporation
actually filed such administrative claim in the first place. For
failing to prove that it had earlier filed with the BIR an
application for refund/credit of its input VAT for the first
quarter of 1992, within the period prescribed by law, then the
case instituted by petitioner corporation with the CTA for the
refund/credit of the very same tax cannot prosper.
Revenue Regulations No. 2-88 and the 70% export
requirement
Under Section 100(a) of the Tax Code of 1977, as amended, a
10% VAT was imposed on the gross selling price or gross
value in money of goods sold, bartered or exchanged. Yet, the
same provision subjected the following sales made by VAT-
registered persons to 0% VAT –
(1) Export sales; and
(2) Sales to persons or entities whose exemption under special
laws or international agreements to which the Philippines is a
signatory effectively subjects such sales to zero-rate.
"Export Sales" means the sale and shipment or exportation of
goods from the Philippines to a foreign country, irrespective
of any shipping arrangement that may be agreed upon which
may influence or determine the transfer of ownership of the
goods so exported, or foreign currency denominated sales.
"Foreign currency denominated sales", means sales to
nonresidents of goods assembled or manufactured in the
Philippines, for delivery to residents in the Philippines and
paid for in convertible foreign currency remitted through the
banking system in the Philippines.
These are termed zero-rated sales. A zero-rated sale is still
considered a taxable transaction for VAT purposes, although
the VAT rate applied is 0%. A sale by a VAT-registered
taxpayer of goods and/or services taxed at 0% shall not result
in any output VAT, while the input VAT on its purchases of
goods or services related to such zero-rated sale shall be
available as tax credit or refund.20
Petitioner corporation questions the validity of Revenue
Regulations No. 2-88 averring that the said regulations
imposed additional requirements, not found in the law itself,
for the zero-rating of its sales to Philippine Smelting and
Refining Corporation (PASAR) and Philippine Phosphate, Inc.
(PHILPHOS), both of which are registered not only with the
BOI, but also with the then Export Processing Zone Authority
(EPZA).21
The contentious provisions of Revenue Regulations No. 2-88
read –
5
SEC. 2. Zero-rating. – (a) Sales of raw materials to BOI-
registered exporters. – Sales of raw materials to export-
oriented BOI-registered enterprises whose export sales, under
rules and regulations of the Board of Investments, exceed
seventy percent (70%) of total annual production, shall be
subject to zero-rate under the following conditions:
"(1) The seller shall file an application with the BIR, ATTN.:
Division, applying for zero-rating for each and every separate
buyer, in accordance with Section 8(d) of Revenue
Regulations No. 5-87. The application should be accompanied
with a favorable recommendation from the Board of
Investments."
"(2) The raw materials sold are to be used exclusively by the
buyer in the manufacture, processing or repacking of his own
registered export product;
"(3) The words "Zero-Rated Sales" shall be prominently
indicated in the sales invoice. The exporter (buyer) can no
longer claim from the Bureau of Internal Revenue or any other
government office tax credits on their zero-rated purchases;
(b) Sales of raw materials to foreign buyer. – Sales of raw
materials to a nonresident foreign buyer for delivery to a
resident local export-oriented BOI-registered enterprise to be
used in manufacturing, processing or repacking of the said
buyer's goods and paid for in foreign currency, inwardly
remitted in accordance with Central Bank rules and
regulations shall be subject to zero-rate.
It is the position of the respondent Commissioner, affirmed by
the CTA and the Court of Appeals, that Section 2 of Revenue
Regulations No. 2-88 should be applied in the cases at bar;
and to be entitled to the zero-rating of its sales to PASAR and
PHILPHOS, petitioner corporation, as a VAT-registered
seller, must be able to prove not only that PASAR and
PHILPHOS are BOI-registered corporations, but also that
more than 70% of the total annual production of these
corporations are actually exported. Revenue Regulations No.
2-88 merely echoed the requirement imposed by the BOI on
export-oriented corporations registered with it.
While this Court is not prepared to strike down the validity of
Revenue Regulations No. 2-88, it finds that its application
must be limited and placed in the proper context. Note that
Section 2 of Revenue Regulations No. 2-88 referred only to
the zero-rated sales of raw materials to export-oriented BOI-
registered enterprises whose export sales, under BOI rules and
regulations, should exceed seventy percent (70%) of their total
annual production.
Section 2 of Revenue Regulations No. 2-88, should not have
been applied to the zero-rating of the sales made by petitioner
corporation to PASAR and PHILPHOS. At the onset, it must
be emphasized that PASAR and PHILPHOS, in addition to
being registered with the BOI, were also registered with the
EPZA and located within an export-processing zone.
Petitioner corporation does not claim that its sales to PASAR
and PHILPHOS are zero-rated on the basis that said sales
were made to export-oriented BOI-registered corporations, but
rather, on the basis that the sales were made to EPZA-
registered enterprises operating within export processing
zones. Although sales to export-oriented BOI-registered
enterprises and sales to EPZA-registered enterprises located
within export processing zones were both deemed export
sales, which, under Section 100(a) of the Tax Code of 1977, as
amended, shall be subject to 0% VAT distinction must be
made between these two types of sales because each may have
different substantiation requirements.
The Tax Code of 1977, as amended, gave a limited definition
of export sales, to wit: "The sale and shipment or exportation
of goods from the Philippines to a foreign country,
irrespective of any shipping arrangement that may be agreed
upon which may influence or determine the transfer of
ownership of the goods so exported, or foreign currency
denominated sales." Executive Order No. 226, otherwise
known as the Omnibus Investments Code of 1987 - which, in
the years concerned (i.e., 1990 and 1992), governed
enterprises registered with both the BOI and EPZA, provided
a more comprehensive definition of export sales, as quoted
below:
"ART. 23. "Export sales" shall mean the Philippine port
F.O.B. value, determined from invoices, bills of lading,
inward letters of credit, landing certificates, and other
commercial documents, of export products exported directly
by a registered export producer or the net selling price of
export product sold by a registered export producer or to an
export trader that subsequently exports the same: Provided,
That sales of export products to another producer or to an
export trader shall only be deemed export sales when actually
exported by the latter, as evidenced by landing certificates of
similar commercial documents: Provided, further,
That without actual exportation the following shall be
considered constructively exported for purposes of this
provision: (1) sales to bonded manufacturing warehouses of
export-oriented manufacturers; (2) sales to export processing
zones; (3) sales to registered export traders operating bonded
trading warehouses supplying raw materials used in the
manufacture of export products under guidelines to be set by
the Board in consultation with the Bureau of Internal Revenue
and the Bureau of Customs; (4) sales to foreign military bases,
diplomatic missions and other agencies and/or
instrumentalities granted tax immunities, of locally
manufactured, assembled or repacked products whether paid
for in foreign currency or not: Provided, further, That export
sales of registered export trader may include commission
income; and Provided, finally, That exportation of goods on
consignment shall not be deemed export sales until the export
products consigned are in fact sold by the consignee.
Sales of locally manufactured or assembled goods for
household and personal use to Filipinos abroad and other non-
residents of the Philippines as well as returning Overseas
Filipinos under the Internal Export Program of the government
6
and paid for in convertible foreign currency inwardly remitted
through the Philippine banking systems shall also be
considered export sales. (Underscoring ours.)
The afore-cited provision of the Omnibus Investments Code of
1987 recognizes as export sales the sales of export products to
another producer or to an export trader, provided that the
export products are actually exported. For purposes of VAT
zero-rating, such producer or export trader must be registered
with the BOI and is required to actually export more than 70%
of its annual production.
Without actual exportation, Article 23 of the Omnibus
Investments Code of 1987 also considers constructive
exportation as export sales. Among other types of constructive
exportation specifically identified by the said provision are
sales to export processing zones. Sales to export processing
zones are subjected to special tax treatment. Article 77 of the
same Code establishes the tax treatment of goods or
merchandise brought into the export processing zones. Of
particular relevance herein is paragraph 2, which provides that
"Merchandise purchased by a registered zone enterprise from
the customs territory and subsequently brought into the zone,
shall be considered as export sales and the exporter thereof
shall be entitled to the benefits allowed by law for such
transaction."
Such tax treatment of goods brought into the export processing
zones are only consistent with the Destination Principle and
Cross Border Doctrine to which the Philippine VAT system
adheres. According to the Destination Principle,22 goods and
services are taxed only in the country where these are
consumed. In connection with the said principle, the Cross
Border Doctrine23 mandates that no VAT shall be imposed to
form part of the cost of the goods destined for consumption
outside the territorial border of the taxing authority. Hence,
actual export of goods and services from the Philippines to a
foreign country must be free of VAT, while those destined for
use or consumption within the Philippines shall be imposed
with 10% VAT.24 Export processing zones25 are to be
managed as a separate customs territory from the rest of the
Philippines and, thus, for tax purposes, are effectively
considered as foreign territory. For this reason, sales by
persons from the Philippine customs territory to those inside
the export processing zones are already taxed as exports.
Plainly, sales to enterprises operating within the export
processing zones are export sales, which, under the Tax Code
of 1977, as amended, were subject to 0% VAT. It is on this
ground that petitioner corporation is claiming refund/credit of
the input VAT on its zero-rated sales to PASAR and
PHILPHOS.
The distinction made by this Court in the preceding
paragraphs between the zero-rated sales to export-oriented
BOI-registered enterprises and zero-rated sales to EPZA-
registered enterprises operating within export processing
zones is actually supported by subsequent development in tax
laws and regulations. In Revenue Regulations No. 7-95, the
Consolidated VAT Regulations, as amended,26 the BIR
defined with more precision what are zero-rated export sales –
(1) The sale and actual shipment of goods from the Philippines
to a foreign country, irrespective of any shipping arrangement
that may be agreed upon which may influence or determine
the transfer of ownership of the goods so exported paid for in
acceptable foreign currency or its equivalent in goods or
services, and accounted for in accordance with the rules and
regulations of the Bangko Sentral ng Pilipinas (BSP);
(2) The sale of raw materials or packaging materials to a non-
resident buyer for delivery to a resident local export-oriented
enterprise to be used in manufacturing, processing, packing or
repacking in the Philippines of the said buyer's goods and paid
for in acceptable foreign currency and accounted for in
accordance with the rules and regulations of the Bangko
Sentral ng Pilipinas (BSP);
(3) The sale of raw materials or packaging materials to an
export-oriented enterprise whose export sales exceed seventy
percent (70%) of total annual production;
Any enterprise whose export sales exceed 70% of the total
annual production of the preceding taxable year shall be
considered an export-oriented enterprise upon accreditation as
such under the provisions of the Export Development Act
(R.A. 7844) and its implementing rules and regulations;
(4) Sale of gold to the Bangko Sentral ng Pilipinas (BSP); and
(5) Those considered export sales under Articles 23 and 77 of
Executive Order No. 226, otherwise known as the Omnibus
Investments Code of 1987, and other special laws, e.g.
Republic Act No. 7227, otherwise known as the Bases
Conversion and Development Act of 1992.
The Tax Code of 1997, as amended,27 later adopted the
foregoing definition of export sales, which are subject to 0%
VAT.
This Court then reiterates its conclusion that Section 2 of
Revenue Regulations No. 2-88, which applied to zero-rated
export sales to export-oriented BOI-registered enterprises,
should not be applied to the applications for refund/credit of
input VAT filed by petitioner corporation since it based its
applications on the zero-rating of export sales to enterprises
registered with the EPZA and located within export processing
zones.
Sufficiency of evidence
There can be no dispute that the taxpayer-claimant has the
burden of proving the legal and factual bases of its claim for
tax credit or refund, but once it has submitted all the required
documents, it is the function of the BIR to assess these
documents with purposeful dispatch.28 It therefore falls upon
herein petitioner corporation to first establish that its sales
qualify for VAT zero-rating under the existing laws (legal
basis), and then to present sufficient evidence that said sales
7
were actually made and resulted in refundable or creditable
input VAT in the amount being claimed (factual basis).
It would initially appear that the applications for refund/credit
filed by petitioner corporation cover only input VAT on its
purportedly zero-rated sales to PASAR and PHILPHOS;
however, a more thorough perusal of its applications, VAT
returns, pleadings, and other records of these cases would
reveal that it is also claiming refund/credit of its input VAT on
purchases of capital goods and sales of gold to the Central
Bank of the Philippines (CBP).
This Court finds that the claims for refund/credit of input VAT
of petitioner corporation have sufficient legal bases.
As has been extensively discussed herein, Section 106(b)(2),
in relation to Section 100(a)(2) of the Tax Code of 1977, as
amended, allowed the refund/credit of input VAT on export
sales to enterprises operating within export processing zones
and registered with the EPZA, since such export sales were
deemed to be effectively zero-rated sales.29 The fact that
PASAR and PHILPHOS, to whom petitioner corporation sold
its products, were operating inside an export processing zone
and duly registered with EPZA, was never raised as an issue
herein. Moreover, the same fact was already judicially
recognized in the case Atlas Consolidated Mining &
Development Corporation v. Commissioner of Internal
Revenue.30 Section 106(c) of the same Code likewise
permitted a VAT-registered taxpayer to apply for refund/credit
of the input VAT paid on capital goods imported or locally
purchased to the extent that such input VAT has not been
applied against its output VAT. Meanwhile, the effective zero-
rating of sales of gold to the CBP from 1989 to 199131 was
already affirmed by this Court in Commissioner of Internal
Revenue v. Benguet Corporation,32 wherein it ruled that –
At the time when the subject transactions were consummated,
the prevailing BIR regulations relied upon by respondent
ordained that gold sales to the Central Bank were zero-rated.
The BIR interpreted Sec. 100 of the NIRC in relation to Sec. 2
of E.O. No. 581 s. 1980 which prescribed that gold sold to the
Central Bank shall be considered export and therefore shall be
subject to the export and premium duties. In coming out with
this interpretation, the BIR also considered Sec. 169 of Central
Bank Circular No. 960 which states that all sales of gold to the
Central Bank are considered constructive exports. x x x.
This Court now comes to the question of whether petitioner
corporation has sufficiently established the factual bases for its
applications for refund/credit of input VAT. It is in this regard
that petitioner corporation has failed, both in the
administrative and judicial level.
Applications for refund/credit of input VAT with the BIR
must comply with the appropriate revenue regulations. As this
Court has already ruled, Revenue Regulations No. 2-88 is not
relevant to the applications for refund/credit of input VAT
filed by petitioner corporation; nonetheless, the said
applications must have been in accordance with Revenue
Regulations No. 3-88, amending Section 16 of Revenue
Regulations No. 5-87, which provided as follows –
SECTION 16. Refunds or tax credits of input tax. –
xxxx
(c) Claims for tax credits/refunds. – Application for Tax
Credit/Refund of Value-Added Tax Paid (BIR Form No.
2552) shall be filed with the Revenue District Office of the
city or municipality where the principal place of business of
the applicant is located or directly with the Commissioner,
Attention: VAT Division.
A photocopy of the purchase invoice or receipt evidencing the
value added tax paid shall be submitted together with the
application. The original copy of the said invoice/receipt,
however, shall be presented for cancellation prior to the
issuance of the Tax Credit Certificate or refund. In addition,
the following documents shall be attached whenever
applicable:
xxxx
"3. Effectively zero-rated sale of goods and services.
"i) photo copy of approved application for zero-rate if filing
for the first time.
"ii) sales invoice or receipt showing name of the person or
entity to whom the sale of goods or services were delivered,
date of delivery, amount of consideration, and description of
goods or services delivered.
"iii) evidence of actual receipt of goods or services.
"4. Purchase of capital goods.
"i) original copy of invoice or receipt showing the date of
purchase, purchase price, amount of value-added tax paid and
description of the capital equipment locally purchased.
"ii) with respect to capital equipment imported, the photo copy
of import entry document for internal revenue tax purposes
and the confirmation receipt issued by the Bureau of Customs
for the payment of the value-added tax.
"5. In applicable cases,
where the applicant's zero-rated transactions are regulated by
certain government agencies, a statement therefrom showing
the amount and description of sale of goods and services,
name of persons or entities (except in case of exports) to
whom the goods or services were sold, and date of transaction
shall also be submitted.
In all cases, the amount of refund or tax credit that may be
granted shall be limited to the amount of the value-added tax
(VAT) paid directly and entirely attributable to the zero-rated
transaction during the period covered by the application for
credit or refund.
8
Where the applicant is engaged in zero-rated and other taxable
and exempt sales of goods and services, and the VAT paid
(inputs) on purchases of goods and services cannot be directly
attributed to any of the aforementioned transactions, the
following formula shall be used to determine the creditable or
refundable input tax for zero-rated sale:
Amount of Zero-rated Sale
Total Sales
X therewith during the course of the trial of the said cases.
Total Amount of Input Taxes
= In Commissioner of Internal Revenue v. Manila Mining
Amount Creditable/Refundable
In case the application for refund/credit of input VAT was
denied or remained unacted upon by the BIR, and before the
lapse of the two-year prescriptive period, the taxpayer-
applicant may already file a Petition for Review before the
CTA. If the taxpayer's claim is supported by voluminous
documents, such as receipts, invoices, vouchers or long
accounts, their presentation before the CTA shall be governed
by CTA Circular No. 1-95, as amended, reproduced in full
below –
In the interest of speedy administration of justice, the Court
hereby promulgates the following rules governing the
presentation of voluminous documents and/or long accounts,
such as receipts, invoices and vouchers, as evidence to
establish certain facts pursuant to Section 3(c), Rule 130 of the
Rules of Court and the doctrine enunciated in Compania
Maritima vs. Allied Free Workers Union (77 SCRA 24), as
well as Section 8 of Republic Act No. 1125:
1. The party who desires to introduce as evidence such
voluminous documents must, after motion and approval by the
Court, present:
(a) a Summary containing, among others, a chronological
listing of the numbers, dates and amounts covered by the
invoices or receipts and the amount/s of tax paid; and (b) a
Certification of an independent Certified Public Accountant
attesting to the correctness of the contents of the summary
after making an examination, evaluation and audit of the
voluminous receipts and invoices. The name of the accountant
or partner of the firm in charge must be stated in the motion so
that he/she can be commissioned by the Court to conduct the
audit and, thereafter, testify in Court relative to such summary
and certification pursuant to Rule 32 of the Rules of Court.
2. The method of individual presentation of each and every
receipt, invoice or account for marking, identification and
comparison with the originals thereof need not be done before
the Court or Clerk of Court anymore after the introduction of
the summary and CPA certification. It is enough that the
receipts, invoices, vouchers or other documents covering the
said accounts or payments to be introduced in evidence must
be pre-marked by the party concerned and submitted to the
Court in order to be made accessible to the adverse party who
desires to check and verify the correctness of the summary and
CPA certification. Likewise, the originals of the voluminous
receipts, invoices or accounts must be ready for verification
and comparison in case doubt on the authenticity thereof is
raised during the hearing or resolution of the formal offer of
evidence.
Since CTA Cases No. 4831, 4859, 4944,33 and 5102,34 were
still pending before the CTA when the said Circular was
issued, then petitioner corporation must have complied
Corporation,35 this Court denied the claim of therein
respondent, Manila Mining Corporation, for refund of the
input VAT on its supposed zero-rated sales of gold to the CBP
because it was unable to substantiate its claim. In the same
case, this Court emphasized the importance of complying with
the substantiation requirements for claiming refund/credit of
input VAT on zero-rated sales, to wit –
For a judicial claim for refund to prosper, however, respondent
must not only prove that it is a VAT registered entity and that
it filed its claims within the prescriptive period. It
must substantiate the input VAT paid by
purchase invoices or official receipts.
This respondent failed to do.
Revenue Regulations No. 3-88 amending Revenue
Regulations No. 5-87 provides the requirements in claiming
tax credits/refunds.
xxxx
Under Section 8 of RA1125, the CTA is described as a court
of record. As cases filed before it are litigated de novo, party
litigants should prove every minute aspect of their cases. No
evidentiary value can be given the purchase invoices or
receipts submitted to the BIR as the rules on documentary
evidence require that these documents must be formally
offered before the CTA.
This Court thus notes with approval the following findings of
the CTA:
x x x [S]ale of gold to the Central Bank should not be subject
to the 10% VAT-output tax but this does not ipso fact mean
that [the seller] is entitled to the amount of refund sought as it
is required by law to present evidence showing the input taxes
it paid during the year in question. What is being claimed in
the instant petition is the refund of the input taxes paid by the
herein petitioner on its purchase of goods and services.
Hence, it is necessary for the Petitioner to show proof that it
had indeed paid the input taxes during the year 1991. In the
case at bar, Petitioner failed to discharge this duty. It did not
adduce in evidence the sales invoice, receipts or other
documents showing the input value added tax on the purchase
of goods and services.
xxx
9
Section 8 of Republic Act 1125 (An Act Creating the Court of
Tax Appeals) provides categorically that the Court of Tax
Appeals shall be a court of record and as such it is required to
conduct a formal trial (trial de novo) where the parties must
present their evidence accordingly if they desire the Court to
take such evidence into consideration. (Emphasis and italics
supplied)
A "sales or commercial invoice" is a written account of goods
sold or services rendered indicating the prices charged therefor
or a list by whatever name it is known which is used in the
ordinary course of business evidencing sale and transfer or
agreement to sell or transfer goods and services.
A "receipt" on the other hand is a written acknowledgment of
the fact of payment in money or other settlement between
seller and buyer of goods, debtor or creditor, or person
rendering services and client or customer.
These sales invoices or receipts issued by the supplier are
necessary to substantiate the actual amount or quantity of
goods sold and their selling price, and taken collectively are
the best means to prove the input VAT payments.36
Although the foregoing decision focused only on the proof
required for the applicant for refund/credit to establish the
input VAT payments it had made on its purchases from
suppliers, Revenue Regulations No. 3-88 also required it to
present evidence proving actual zero-rated VAT sales to
qualified buyers, such as (1) photocopy of the approved
application for zero-rate if filing for the first time; (2) sales
invoice or receipt showing the name of the person or entity to
whom the goods or services were delivered, date of delivery,
amount of consideration, and description of goods or services
delivered; and (3) the evidence of actual receipt of goods or
services.
Also worth noting in the same decision is the weight given by
this Court to the certification by the independent certified
public accountant (CPA), thus –
Respondent contends, however, that the certification of the
independent CPA attesting to the correctness of the contents of
the summary of suppliers' invoices or receipts which were
examined, evaluated and audited by said CPA in accordance
with CTA Circular No. 1-95 as amended by CTA Circular No.
10-97 should substantiate its claims.
There is nothing, however, in CTA Circular No. 1-95, as
amended by CTA Circular No. 10-97, which either expressly
or impliedly suggests that summaries and schedules of input
VAT payments, even if certified by an independent CPA,
suffice as evidence of input VAT payments.
xxxx
The circular, in the interest of speedy administration of justice,
was promulgated to avoid the time-consuming procedure of
presenting, identifying and marking of documents before the
Court. It does not relieve respondent of its imperative task
of pre-marking photocopies of sales receipts and invoices
and submitting the same to the court after the independent
CPA shall have examined and compared them with the
originals. Without presenting these pre-marked documents as
evidence – from which the summary and schedules were
based, the court cannot verify the authenticity and veracity of
the independent auditor's conclusions.
There is, moreover, a need to subject these invoices or receipts
to examination by the CTA in order to confirm whether they
are VAT invoices. Under Section 21 of Revenue Regulation,
No. 5-87, all purchases covered by invoices other than a VAT
invoice shall not be entitled to a refund of input VAT.
xxxx
While the CTA is not governed strictly by technical rules of
evidence, as rules of procedure are not ends in themselves but
are primarily intended as tools in the administration of justice,
the presentation of the purchase receipts and/or invoices is not
mere procedural technicality which may be disregarded
considering that it is the only means by which the CTA may
ascertain and verify the truth of the respondent's claims.
The records further show that respondent miserably failed to
substantiate its claims for input VAT refund for the first
semester of 1991. Except for the summary and schedules of
input VAT payments prepared by respondent itself, no other
evidence was adduced in support of its claim.
As for respondent's claim for input VAT refund for the second
semester of 1991, it employed the services of Joaquin
Cunanan & Co. on account of which it (Joaquin Cunanan &
Co.) executed a certification that:
We have examined the information shown below concerning
the input tax payments made by the Makati Office of Manila
Mining Corporation for the period from July 1 to December
31, 1991. Our examination included inspection of the pertinent
suppliers' invoices and official receipts and such other auditing
procedures as we considered necessary in the circumstances. x
xx
As the certification merely stated that it used "auditing
procedures considered necessary" and not auditing procedures
which are in accordance with generally accepted auditing
principles and standards, and that the examination was made
on "input tax payments by the Manila Mining Corporation,"
without specifying that the said input tax payments are
attributable to the sales of gold to the Central Bank, this Court
cannot rely thereon and regard it as sufficient proof of the
respondent's input VAT payments for the second semester.37
As for the Petition in G.R. No. 141104, involving the input
VAT of petitioner corporation on its zero-rated sales in the
first quarter of 1992, this Court already found that the
petitioner corporation failed to comply with Section 106(b) of
the Tax Code of 1977, as amended, imposing the two-year
prescriptive period for the filing of the application for
refund/credit thereof. This bars the grant of the application for
10
refund/credit, whether administratively or judicially, by
express mandate of Section 106(e) of the same Code.
Granting arguendo that the application of petitioner
corporation for the refund/credit of the input VAT on its zero-
rated sales in the first quarter of 1992 was actually and timely
filed, petitioner corporation still failed to present together with
its application the required supporting documents, whether
before the BIR or the CTA. As the Court of Appeals ruled –
In actions involving claims for refund of taxes assessed and
collected, the burden of proof rests on the taxpayer. As clearly
discussed in the CTA's decision, petitioner failed to
substantiate its claim for tax refunds. Thus:
"We note, however, that in the cases at bar, petitioner has
relied totally on Revenue Regulations No. 2-88 in determining
compliance with the documentary requirements for a
successful refund or issuance of tax credit. Unmentioned is the
applicable and specific amendment later introduced by
Revenue Regulations No. 3-88 dated April 7, 1988 (issued
barely after two months from the promulgation of Revenue
Regulations No. 2-88 on February 15, 1988), which amended
Section 16 of Revenue Regulations No. 5-87 on refunds or tax
credits of input tax. x x x.
xxxx
"A thorough examination of the evidence submitted by the
petitioner before this court reveals outright the failure to
satisfy documentary requirements laid down under the above-
cited regulations. Specifically, petitioner was not able to
present the following documents, to wit:
"a) sales invoices or receipts;
"b) purchase invoices or receipts;
"c) evidence of actual receipt of goods;
"d) BOI statement showing the amount and description of sale
of goods, etc.
"e) original or attested copies of invoice or receipt on capital
equipment locally purchased; and
"f) photocopy of import entry document and confirmation
receipt on imported capital equipment.
"There is the need to examine the sales invoices or receipts in
order to ascertain the actual amount or quantity of goods sold
and their selling price. Without them, this Court cannot verify
the correctness of petitioner's claim inasmuch as the
regulations require that the input taxes being sought for refund
should be limited to the portion that is directly and entirely
attributable to the particular zero-rated transaction. In this
instance, the best evidence of such transaction are the said
sales invoices or receipts.
"Also, even if sales invoices are produced, there is the further
need to submit evidence that such goods were actually
received by the buyer, in this case, by CBP, Philp[h]os and
PASAR.
xxxx
"Lastly, this Court cannot determine whether there were actual
local and imported purchase of capital goods as well as
domestic purchase of non-capital goods without the required
purchase invoice or receipt, as the case may be, and
confirmation receipts.
"There is, thus, the imperative need to submit before this
Court the original or attested photocopies of petitioner's
invoices or receipts, confirmation receipts and import entry
documents in order that a full ascertainment of the claimed
amount may be achieved.
"Petitioner should have taken the foresight to introduce in
evidence all of the missing documents abovementioned. Cases
filed before this Court are litigated de novo. This means that
party litigants should endeavor to prove at the first instance
every minute aspect of their cases strictly in accordance with
the Rules of Court, most especially on documentary
evidence." (pp. 37-42, Rollo)
Tax refunds are in the nature of tax exemptions. It is regarded
as in derogation of the sovereign authority, and should be
construed in strictissimi juris against the person or entity
claiming the exemption. The taxpayer who claims for
exemption must justify his claim by the clearest grant of
organic or statute law and should not be permitted to stand on
vague implications (Asiatic Petroleum Co. v. Llanes, 49 Phil.
466; Northern Phil. Tobacco Corp. v. Mun. of Agoo, La
Union, 31 SCRA 304; Reagan v. Commissioner, 30 SCRA
968; Asturias Sugar Central, Inc. v. Commissioner of
Customs, 29 SCRA 617; Davao Light and Power Co., Inc. v.
Commissioner of Customs, 44 SCRA 122).
There is no cogent reason to fault the CTA's conclusion that
the SGV's certificate is "self-destructive", as it finds comfort
in the very SGV's stand, as follows:
"It is our understanding that the above procedure are sufficient
for the purpose of the Company. We make no presentation
regarding the sufficiency of these procedures for such purpose.
We did not compare the total of the input tax claimed each
quarter against the pertinent VAT returns and books of
accounts. The above procedures do not constitute an audit
made in accordance with generally accepted auditing
standards. Accordingly, we do not express an opinion on the
company's claim for input VAT refund or credit. Had we
performed additional procedures, or had we made an audit in
accordance with generally accepted auditing standards, other
matters might have come to our attention that we would have
accordingly reported on."
The SGV's "disclaimer of opinion" carries much weight as it is
petitioner's independent auditor. Indeed, SGV expressed that it
"did not compare the total of the input tax claimed each
quarter against the VAT returns and books of accounts."38
11
Moving on to the Petition in G.R. No. 148763, concerning the
input VAT of petitioner corporation on its zero-rated sales in
the second, third, and fourth quarters of 1990, the appellate
court likewise found that petitioner corporation failed to
sufficiently establish its claims. Already disregarding the
declarations made by the Court of Appeals on its erroneous
application of Revenue Regulations No. 2-88, quoted
hereunder is the rest of the findings of the appellate court after
evaluating the evidence submitted in accordance with the
requirements under Revenue Regulations No. 3-88 –
The Secretary of Finance validly adopted Revenue
Regulations [No.] x x x 3-98 pursuant to Sec. 245 of the
National Internal Revenue Code, which recognized his power
to "promulgate all needful rules and regulations for the
effective enforcement of the provisions of this Code." Thus, it
is incumbent upon a taxpayer intending to file a claim for
refund of input VATs or the issuance of a tax credit certificate
with the BIR x x x to prove sales to such buyers as required by
Revenue Regulations No. 3-98. Logically, the same evidence
should be presented in support of an action to recover taxes
which have been paid.
x x x Neither has [herein petitioner corporation] presented
sales invoices or receipts showing sales of gold, copper
concentrates, and pyrite to the CBP, [PASAR], and
[PHILPHOS], respectively, and the dates and amounts of the
same, nor any evidence of actual receipt by the said buyers of
the mineral products. It merely presented receipts of purchases
from suppliers on which input VATs were allegedly paid.
Thus, the Court of Tax Appeals correctly denied the claims for
refund of input VATs or the issuance of tax credit certificates
of petitioner [corporation]. Significantly, in the resolution,
dated 7 June 2000, this Court directed the parties to file
memoranda discussing, among others, the submission of proof
for "its [petitioner's] sales of gold, copper concentrates, and
pyrite to buyers." Nevertheless, the parties, including the
petitioner, failed to address this issue, thereby necessitating
the affirmance of the ruling of the Court of Tax Appeals on
this point.39
This Court is, therefore, bound by the foregoing facts, as
found by the appellate court, for well-settled is the general rule
that the jurisdiction of this Court in cases brought before it
from the Court of Appeals, by way of a Petition for Review
on Certiorari under Rule 45 of the Revised Rules of Court, is
limited to reviewing or revising errors of law; findings of fact
of the latter are conclusive.40 This Court is not a trier of facts.
It is not its function to review, examine and evaluate or weigh
the probative value of the evidence presented.41
The distinction between a question of law and a question of
fact is clear-cut. It has been held that "[t]here is a question of
law in a given case when the doubt or difference arises as to
what the law is on a certain state of facts; there is a question of
fact when the doubt or difference arises as to the truth or
falsehood of alleged facts."42
Whether petitioner corporation actually made zero-rated sales;
whether it paid input VAT on these sales in the amount it had
declared in its returns; whether all the input VAT subject of its
applications for refund/credit can be attributed to its zero-rated
sales; and whether it had not previously applied the input VAT
against its output VAT liabilities, are all questions of fact
which could only be answered after reviewing, examining,
evaluating, or weighing the probative value of the evidence it
presented, and which this Court does not have the jurisdiction
to do in the present Petitions for Review on Certiorari under
Rule 45 of the revised Rules of Court.
Granting that there are exceptions to the general rule, when
this Court looked into questions of fact under particular
circumstances,43 none of these exist in the instant cases. The
Court of Appeals, in both cases, found a dearth of evidence to
support the claims for refund/credit of the input VAT of
petitioner corporation, and the records bear out this finding.
Petitioner corporation itself cannot dispute its non-compliance
with the requirements set forth in Revenue Regulations No. 3-
88 and CTA Circular No. 1-95, as amended. It concentrated its
arguments on its assertion that the substantiation requirements
under Revenue Regulations No. 2-88 should not have applied
to it, while being conspicuously silent on the evidentiary
requirements mandated by other relevant regulations.
Re-opening of cases/holding of new trial before the CTA
This Court now faces the final issue of whether the prayer of
petitioner corporation for the re-opening of its cases or holding
of new trial before the CTA for the reception of additional
evidence, may be granted. Petitioner corporation prays that the
Court exercise its discretion on the matter in its favor,
consistent with the policy that rules of procedure be liberally
construed in pursuance of substantive justice.
This Court, however, cannot grant the prayer of petitioner
corporation.
An aggrieved party may file a motion for new trial or
reconsideration of a judgment already rendered in accordance
with Section 1, Rule 37 of the revised Rules of Court, which
provides –
SECTION 1. Grounds of and period for filing motion for new
trial or reconsideration. – Within the period for taking an
appeal, the aggrieved party may move the trial court to set
aside the judgment or final order and grant a new trial for one
or more of the following causes materially affecting the
substantial rights of said party:
(a) Fraud, accident, mistake or excusable negligence which
ordinary prudence could not have guarded against and by
reason of which such aggrieved party has probably been
impaired in his rights; or
(b) Newly discovered evidence, which he could not, with
reasonable diligence, have discovered and produced at the
trial, and which if presented would probably alter the result.
12
Within the same period, the aggrieved party may also move
fore reconsideration upon the grounds that the damages
awarded are excessive, that the evidence is insufficient to
justify the decision or final order, or that the decision or final
order is contrary to law.
In G.R. No. 148763, petitioner corporation attempts to justify
its motion for the re-opening of its cases and/or holding of
new trial before the CTA by contending that the "[f]ailure of
its counsel to adduce the necessary evidence should be
construed as excusable negligence or mistake which should
constitute basis for such re-opening of trial as for a new trial,
as counsel was of the belief that such evidence was rendered
unnecessary by the presentation of unrebutted evidence
indicating that respondent [Commissioner] has acknowledged
the sale of [sic] PASAR and [PHILPHOS] to be zero-
rated." 44 The CTA denied such motion on the ground that it
was not accompanied by an affidavit of merit as required by
Section 2, Rule 37 of the revised Rules of Court. The Court of
Appeals affirmed the denial of the motion, but apart from this
technical defect, it also found that there was no justification to
grant the same.
On the matter of the denial of the motion of the petitioner
corporation for the re-opening of its cases and/or holding of
new trial based on the technicality that said motion was
unaccompanied by an affidavit of merit, this Court rules in
favor of the petitioner corporation. The facts which should
otherwise be set forth in a separate affidavit of merit may,
with equal effect, be alleged and incorporated in the motion
itself; and this will be deemed a substantial compliance with
the formal requirements of the law, provided, of course, that
the movant, or other individual with personal knowledge of
the facts, take oath as to the truth thereof, in effect converting
the entire motion for new trial into an affidavit.45 The motion
of petitioner corporation was prepared and verified by its
counsel, and since the ground for the motion was premised on
said counsel's excusable negligence or mistake, then the
obvious conclusion is that he had personal knowledge of the
facts relating to such negligence or mistake. Hence, it can be
said that the motion of petitioner corporation for the re-
opening of its cases and/or holding of new trial was in
substantial compliance with the formal requirements of the
revised Rules of Court.
Even so, this Court finds no sufficient ground for granting the
motion of petitioner corporation for the re-opening of its cases
and/or holding of new trial.
In G.R. No. 141104, petitioner corporation invokes the
Resolution,46 dated 20 July 1998, by the CTA in another case,
CTA Case No. 5296, involving the claim of petitioner
corporation for refund/credit of input VAT for the third
quarter of 1993. The said Resolution allowed the re-opening
of CTA Case No. 5296, earlier dismissed by the CTA, to give
the petitioner corporation the opportunity to present the
missing export documents.
The rule that the grant or denial of motions for new trial rests
on the discretion of the trial court,47 may likewise be
extended to the CTA. When the denial of the motion rests
upon the discretion of a lower court, this Court will not
interfere with its exercise, unless there is proof of grave abuse
thereof.48
That the CTA granted the motion for re-opening of one case
for the presentation of additional evidence and, yet, deny a
similar motion in another case filed by the same party, does
not necessarily demonstrate grave abuse of discretion or
arbitrariness on the part of the CTA. Although the cases
involve identical parties, the causes of action and the evidence
to support the same can very well be different. As can be
gleaned from the Resolution, dated 20 July 1998, in CTA Case
No. 5296, petitioner corporation was claiming refund/credit of
the input VAT on its zero-rated sales, consisting of actual
export sales, to Mitsubishi Metal Corporation in Tokyo, Japan.
The CTA took into account the presentation by petitioner
corporation of inward remittances of its export sales for the
quarter involved, its Supply Contract with Mitsubishi Metal
Corporation, its 1993 Annual Report showing its sales to the
said foreign corporation, and its application for refund. In
contrast, the present Petitions involve the claims of petitioner
corporation for refund/credit of the input VAT on
its purchases of capital goods and on its effectively zero-rated
sales to CBP and EPZA-registered enterprises PASAR and
PHILPHOS for the second, third, and fourth quarters of 1990
and first quarter of 1992. There being a difference as to the
bases of the claims of petitioner corporation for refund/credit
of input VAT in CTA Case No. 5926 and in the Petitions at
bar, then, there are resulting variances as to the evidence
required to support them.
Moreover, the very same Resolution, dated 20 July 1998, in
CTA Case No. 5296, invoked by petitioner corporation,
emphasizes that the decision of the CTA to allow petitioner
corporation to present evidence "is applicable pro hac vice or
in this occasion only as it is the finding of [the CTA] that
petitioner [corporation] has established a few of the
aforementioned material points regarding the possible
existence of the export documents together with the prior and
succeeding returns for the quarters involved, x x x" [Emphasis
supplied.] Therefore, the CTA, in the present cases, cannot be
bound by its ruling in CTA Case No. 5296, when these cases
do not involve the exact same circumstances that compelled it
to grant the motion of petitioner corporation for re-opening of
CTA Case No. 5296.
Finally, assuming for the sake of argument that the non-
presentation of the required documents was due to the fault of
the counsel of petitioner corporation, this Court finds that it
does not constitute excusable negligence or mistake which
would warrant the re-opening of the cases and/or holding of
new trial.
Under Section 1, Rule 37 of the Revised Rules of Court, the
"negligence" must be excusable and generally imputable to the
13
party because if it is imputable to the counsel, it is binding on
the client. To follow a contrary rule and allow a party to
disown his counsel's conduct would render proceedings
indefinite, tentative, and subject to re-opening by the mere
subterfuge of replacing the counsel. What the aggrieved
litigant should do is seek administrative sanctions against the
erring counsel and not ask for the reversal of the court's
ruling.49
As elucidated by this Court in another case,50 the general rule
is that the client is bound by the action of his counsel in the
conduct of his case and he cannot therefore complain that the
result of the litigation might have been otherwise had his
counsel proceeded differently. It has been held time and again
that blunders and mistakes made in the conduct of the
proceedings in the trial court as a result of the ignorance,
inexperience or incompetence of counsel do not qualify as a
ground for new trial. If such were to be admitted as valid
reasons for re-opening cases, there would never be an end to
litigation so long as a new counsel could be employed to
allege and show that the prior counsel had not been
sufficiently diligent, experienced or learned.
Moreover, negligence, to be "excusable," must be one which
ordinary diligence and prudence could not have guarded
against.51 Revenue Regulations No. 3-88, which was issued
on 15 February 1988, had been in effect more than two years
prior to the filing by petitioner corporation of its earliest
application for refund/credit of input VAT involved herein on
21 August 1990. CTA Circular No. 1-95 was issued only on
25 January 1995, after petitioner corporation had filed its
Petitions before the CTA, but still during the pendency of the
cases of petitioner corporation before the tax court. The
counsel of petitioner corporation does not allege ignorance of
the foregoing administrative regulation and tax court circular,
only that he no longer deemed it necessary to present the
documents required therein because of the presentation of
alleged unrebutted evidence of the zero-rated sales of
petitioner corporation. It was a judgment call made by the
counsel as to which evidence to present in support of his
client's cause, later proved to be unwise, but not necessarily
negligent.
Neither is there any merit in the contention of petitioner
corporation that the non-presentation of the required
documentary evidence was due to the excusable mistake of its
counsel, a ground under Section 1, Rule 37 of the revised
Rules of Court for the grant of a new trial. "Mistake," as it is
referred to in the said rule, must be a mistake of fact, not of
law, which relates to the case.52 In the present case, the
supposed mistake made by the counsel of petitioner
corporation is one of law, for it was grounded on his
interpretation and evaluation that Revenue Regulations No. 3-
88 and CTA Circular No. 1-95, as amended, did not apply to
his client's cases and that there was no need to comply with
the documentary requirements set forth therein. And although
the counsel of petitioner corporation advocated an erroneous
legal position, the effects thereof, which did not amount to a
deprivation of his client's right to be heard, must bind
petitioner corporation. The question is not whether petitioner
corporation succeeded in establishing its interests, but whether
it had the opportunity to present its side.53
Besides, litigation is a not a "trial and error" proceeding. A
party who moves for a new trial on the ground of mistake
must show that ordinary prudence could not have guarded
against it. A new trial is not a refuge for the
obstinate.54 Ordinary prudence in these cases would have
dictated the presentation of all available evidence that would
have supported the claims for refund/credit of input VAT of
petitioner corporation. Without sound legal basis, counsel for
petitioner corporation concluded that Revenue Regulations
No. 3-88, and later on, CTA Circular No. 1-95, as amended,
did not apply to its client's claims. The obstinacy of petitioner
corporation and its counsel is demonstrated in their failure,
nay, refusal, to comply with the appropriate administrative
regulations and tax court circular in pursuing the claims for
refund/credit, now subject of G.R. Nos. 141104 and 148763,
even though these were separately instituted in a span of more
than two years. It is also evident in the failure of petitioner
corporation to address the issue and to present additional
evidence despite being given the opportunity to do so by the
Court of Appeals. As pointed out by the appellate court, in its
Decision, dated 15 September 2000, in CA-G.R. SP No.
46718 –
x x x Significantly, in the resolution, dated 7 June 2000, this
Court directed the parties to file memoranda discussing,
among others, the submission of proof for "its [petitioner's]
sales of gold, copper concentrates, and pyrite to buyers."
Nevertheless, the parties, including the petitioner, failed to
address this issue, thereby necessitating the affirmance of the
ruling of the Court of Tax Appeals on this point.55
Summary
Hence, although this Court agreed with the petitioner
corporation that the two-year prescriptive period for the filing
of claims for refund/credit of input VAT must be counted
from the date of filing of the quarterly VAT return, and that
sales to EPZA-registered enterprises operating within
economic processing zones were effectively zero-rated and
were not covered by Revenue Regulations No. 2-88, it still
denies the claims of petitioner corporation for refund of its
input VAT on its purchases of capital goods and effectively
zero-rated sales during the second, third, and fourth quarters of
1990 and the first quarter of 1992, for not being established
and substantiated by appropriate and sufficient evidence.
Petitioner corporation is also not entitled to the re-opening of
its cases and/or holding of new trial since the non-presentation
of the required documentary evidence before the BIR and the
CTA by its counsel does not constitute excusable negligence
or mistake as contemplated in Section 1, Rule 37 of the
revised Rules of Court.
WHEREFORE, premises considered, the instant Petitions for
Review are hereby DENIED, and the Decisions, dated 6 July
14
1999 and 15 September 2000, of the Court of Appeals in CA-
G.R. SP Nos. 47607 and 46718, respectively, are
hereby AFFIRMED. Costs against petitioner.

15
G.R. No. 180434
COMMISSIONER OF INTERNAL REVENUE, Petitioner,
vs.
MIRANT PAGBILAO CORPORATION (now TeaM
Energy Corporation),* Respondent.
DECISION
REYES, J.:
This appeal by Petition for Review on Certiorari1 seeks to
reverse and set aside the Decision 2 dated September 11, 2007
and Resolution3 dated November 7, 2007 of the Court of Tax
Appeals (CTA) en banc in E.B. Case Nos. 216 and 225,
affirming the Decision4 dated August 31, 2005 of the CTA
Second Division in CTA Case No. 6417, ordering petitioner
Commissioner of Internal Revenue (CIR) to issue a refund or
a tax credit certificate in the amount of Pl18,756,640.97 in
favor of Mirant Pagbilao Corporation5 (MPC).
The Facts
MPC is a duly-registered Philippine corporation located at
Pagbilao Grande Island in Pagbilao, Quezon, and primarily
engaged in the generation and distribution of electricity to the
National Power Corporation (NAPOCOR) under a Build,
Operate, Transfer Scheme. As such, it is registered with the
Bureau of Internal Revenue (BIR) as a Value-Added Tax
(VAT) taxpayer in accordance with Section 236 of the
National Internal Revenue Code (NIRC) of 1997, with
Taxpayer Identification No. 0001-726-870, and registered
under RDO Control No. 96-600-002498.6
On November 26, 1999, the BIR approved MPC’s application
for Effective Zero-Rating for the construction and operation of
its power plant.7
For taxable year 2000, the quarterly VAT returns filed by
MPC on April 25, 2000, July 25, 2000, October 24, 2000, and
August 27, 2001 showed an excess input VAT paid on
domestic purchases of goods, services and importation of
goods in the amount of ₱127,140,331.85.8
On March 11, 2002, MPC filed before the BIR an
administrative claim for refund of its input VAT covering the
taxable year of 2000, in accordance with Section 112,
subsections (A) and (B) of the NIRC. Thereafter, or on March
26, 2002, fearing that the period for filing a judicial claim for
refund was about to expire, MPC proceeded to file a petition
for review before the CTA, docketed as CTA Case No.
6417,9 without waiting for the CIR’s action on the
administrative claim.
On August 31, 2005, the CTA Second Division rendered a
Decision10 partially granting MPC’s claim for refund, and
ordering the CIR to grant a refund or a tax credit certificate,
but only in the reduced amount of ₱118,749,001.55,
representing MPC’s unutilized input VAT incurred for the
second, third and fourth quarters of taxable year 2000.
The CTA Second Division held that by virtue of NAPOCOR’s
exemption from direct and indirect taxes as provided for in
Section 1311 of Republic Act No. 6395,12 MPC’s sale of
services to NAPOCOR is subject to VAT at 0% rate. The
Secretary of Finance even issued a Memorandum dated
January 28, 1998, addressed to the CIR, espousing the Court’s
ruling that purchases by NAPOCOR of electricity from
independent power producers are subject to VAT at 0% rate,
to wit:
As explained by the Supreme Court, the rationale for the
[NAPOCOR’s] tax exemption is to ensure cheaper power. If
the BIR’s recent view is to be implemented, the VAT being an
indirect tax, may be passed on by the seller of electricity to
[NAPOCOR]. Effectively, this means that electricity will be
sold at a higher rate to the consumers. Estimates show that a
10% VAT on electricity which is purchased by [NAPOCOR]
from its independent power producers will increase power cost
by about P1.30 billion a year. The effect on the consumer is an
additional charge of P0.59 per kilowatt-hour. The recognition
of [NAPOCOR’s] broad privilege will inure to the benefit of
the Filipino consumer.
In view of the foregoing and using the power of review
granted to the Secretary of Finance under Section 4 of
Republic Act No. 8424, the DOF upholds the ruling of the
Supreme Court that the [NAPOCOR] is exempt under its
charter and subsequent laws from all direct and indirect taxes
on its purchases of petroleum products and electricity. Thus,
the purchases by [NAPOCOR] of electricity from independent
power producers are subject to VAT at zero-rate.13
In arriving at the reduced amount of ₱118,749,001.55, the
CTA Second Division found out that: (a) ₱2,116,851.79 input
taxes claimed should be disallowed because MPC failed to
validate by VAT official receipts and invoices the excess
payment of input taxes; (b) ₱6,274,478.51 of input taxes was
not properly documented; and (c) the input taxes of
₱127,140,331.85 for the year 2000 were already deducted by
MPC from the total available input VAT as of April 25, 2002
as evidenced by the 2002 first quarterly VAT return. Thus, the
input taxes sought to be refunded were not applied by MPC
against its output VAT liability as of April 25, 2002 and can
no longer be used as credit against its future output VAT
liability.14
Undaunted, MPC filed a motion for partial reconsideration and
new trial in view of the additional amount it sought to be
approved.
In an Amended Decision dated August 30, 2006, the CTA
Second Division found that MPC is entitled to a modified
amount of ₱118,756,640.97 input VAT, upon allowing the
amount of ₱7,639.42 in addition to the VAT input tax.
However, MPC’s motion for new trial was denied.
Dissatisfied, MPC elevated the matter to the CTA en
banc, particularly in E.B. Case No. 216.15
16
Meanwhile, the CIR filed a motion for reconsideration of the
amended decision. However, on November 13, 2006, the CTA
Second Division issued a Resolution denying the motion.
Thereafter, the CIR filed a petition for review before the
CTA en banc, docketed as E.B. Case No. 225.16
In a Decision17 dated September 11, 2007, the CTA en
banc affirmed in toto the assailed amended decision and
resolved the issues presented in E.B. Case Nos. 216 and 225.
In sustaining the decision of the CTA Second Division in E.B.
Case No. 216, the CTA en banc ruled that:
(a) MPC’s claim for the refund of ₱810,047.31 is disallowed
for lack of supporting documents. Tax refunds, being in the
nature of tax exemptions, are construed in strictissimi
juris against the claimant. Thus, a mere summary list
submitted by MPC is considered immaterial to prove the
amount of its claimed unutilized input taxes.18
(b) MPC’s claim for the refund of ₱836,768.00 as input taxes
is denied due to lack of proof of payment. As a rule, "input tax
on importations should be supported with Import Entry and
Internal Revenue Declarations (IEIRDs) duly validated for
actual payment of input tax" and that other documents may be
adduced to determine its payment.19 Here, the IEIRDs
presented by MPC did not show payment of the input taxes
and the amounts indicated therein differed from the bank debit
advice. More so, the bank debit advice did not properly
describe the mode of payment of the input tax which made it
difficult to determine which payee, and to what kind of
payment did the bank debit advices pertain to.20
(c) The denial of MPC’s motion for new trial was correct since
it was pointless to require MPC to submit additional
documents in support of the unutilized input tax of
₱3,310,109.20, in view of MPC’s admission that the VAT
official receipts and invoices were not even pre-marked and
proffered before the court. Regrettably, without such
documents, the CTA could not in any way properly verify the
correctness of the certified public accountant’s conclusion.21
As regards E.B. Case No. 225, the CTA en banc upheld the
ruling of the CTA Second Division that VAT at 0% rate may
be imposed on the sale of services of MPC to NAPOCOR on
the basis of NAPOCOR’s exemption from direct and indirect
taxes.22
Disagreeing with the CTA en banc’s decision, both parties
filed their respective motions for reconsideration, which were
denied in the CTA en banc Resolution23 dated November 7,
2007.
Feeling aggrieved by the adverse ruling of the CTA en banc,
the CIR now seeks recourse to the Court via a petition for
review on certiorari.
The Issues
The CIR raises in the petition the sole issue of whether or not
the CTA erred in granting MPC’s claim for refund of its
excess input VAT payments on domestic purchases of goods,
services and importation of goods attributable to zero-rated
sales for taxable year 2000.24
The Court, however, points out that given the factual
antecedents, the case also raises a jurisdictional issue
inasmuch as MPC instituted the CTA action 15 days from the
filing of its administrative claim for refund and without
waiting for the CIR’s action thereon. Thus, towards a full and
proper resolution of the issue on the tax court’s action on
MPC’s case, the Court finds it necessary to likewise resolve
the issue of whether or not the CTA had jurisdiction to
entertain MPC’s judicial claim.
Ruling of the Court
The Court shall first address the issue on jurisdiction. While
the matter was not raised by the CIR in its petition, it is settled
that a jurisdictional issue may be invoked by either party or
even the Court motu proprio, and may be raised at any stage
of the proceedings, even on appeal. Thus, the Court
emphasized in Sales, et al. v. Barro:25
It is well-settled that a court’s jurisdiction may be raised at any
stage of the proceedings, even on appeal. The reason is that
jurisdiction is conferred by law, and lack of it affects the very
authority of the court to take cognizance of and to render
judgment on the action. x x x [E]ven if [a party] did not raise
the issue of jurisdiction, the reviewing court is not precluded
from ruling that it has no jurisdiction over the case. In this
sense, dismissal for lack of jurisdiction may even be ordered
by the court motu proprio.26 (Citations omitted)
In the present dispute, compliance with the requirements on
administrative claims with the CIR, which are to precede
judicial actions with the CTA, indubitably impinge on the tax
court’s jurisdiction. In CIR v. Aichi Forging Company of Asia,
Inc.,27 the Court ruled that the premature filing of a claim for
refund or credit of input VAT before the CTA warrants a
dismissal, inasmuch as no jurisdiction is acquired by the tax
court.28 Pertinent thereto are the provisions of Section 112 of
the NIRC at the time of MPC’s filing of the administrative and
judicial claims, and which prescribe the periods within which
to file and resolve such claims, to wit:
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 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 x x x.
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)
17
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 [CTA].
xxxx
Contrary to the specified periods, specifically those that are
provided in the second paragraph of Section 112(D), MPC
filed its petition for review with the CTA on March 26, 2002,
or a mere 15 days after it filed an administrative claim for
refund with the CIR on March 11, 2002. It then did not wait
for the lapse of the 120-day period expressly provided for by
law within which the CIR shall grant or deny the application
for refund. The Court’s pronouncement in CIR v. San Roque
Power Corporation29 is instructive on the effect of such failure
to comply with the 120-day waiting period, to wit:
1. Application of the 120+30-Day Periods
xxxx
It is indisputable that compliance with the 120-day waiting
period is mandatory and jurisdictional. The waiting period,
originally fixed at 60 days only, was part of the provisions of
the first VAT law, Executive Order No. 273, which took effect
on 1 January 1988. The waiting period was extended to 120
days effective 1 January 1998 under RA 8424 or the Tax
Reform Act of 1997. Thus, the waiting period has been in
our statute books for more than fifteen (15)
years before San Roque filed its judicial claim.
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 taxpayer’s
petition. Philippine jurisprudence is replete with cases
upholding and reiterating these doctrinal principles.
The charter of the CTA expressly provides that its jurisdiction
is to review on appeal "decisions of the [CIR] in cases
involving x x x refunds of internal revenue taxes." When a
taxpayer prematurely files a judicial claim for tax refund or
credit with the CTA without waiting for the decision of the
Commissioner, there is no "decision" of the Commissioner to
review and thus the CTA as a court of special jurisdiction has
no jurisdiction over the appeal. 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 Commissioner’s 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.30 (Citations omitted, emphasis in the original and
underscoring ours)
The Court explained further:
The old rule that the taxpayer may file the judicial claim,
without waiting for the Commissioner’s 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. One of
the conditions for a judicial claim of refund or credit under the
VAT System is compliance 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.31 (Citations omitted and emphasis in the
original)
The cited exception to the general rule, which came as a result
of the issuance of BIR Ruling No. DA-489-03, does not apply
to MPC’s case as its administrative and judicial claims were
both filed in March 2002.
The doctrine laid down in San Roque was reiterated in
subsequent cases. In CIR v. Aichi Forging Company of Asia,
Inc.,32 the Court cited the general rule that parties must
observe the mandatory 120-day waiting period to give the CIR
an opportunity to act on administrative claims; otherwise, their
judicial claims are prematurely filed.33 In Team Energy
Corporation (formerly MPC) v. CIR,34 the Court again
emphasized the rule stating that "the 120-day period is crucial
in filing an appeal with the CTA." 35 "[T]he 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."36
Clearly, MPC's failure to observe the mandatory 120-day
period under the law was fatal to its immediate filing of a
judicial claim before the CTA. It rendered the filing of the
CTA petition premature, and barred the tax court from
acquiring jurisdiction over the same. Thus, the dismissal of the
petition is in order. "[T]ax refunds or tax credits - just like tax
18
exemptions - are strictly construed against taxpayers, the latter
having the burden to prove strict compliance with the
conditions for the grant of the tax refund or credit."37

With the CTA being barren of jurisdiction to entertain MPC's

petition, the Court finds it unnecessary, even inappropriate, to
still discuss the main issue of MPC's entitlement to the
disputed tax refund. The petition filed by MPC with the CT A
instead warrants a dismissal. It is settled that "a void judgment
for want of jurisdiction is no judgment at all."38

WHEREFORE, the DeCision dated September 11, 2007 and

Resolution dated November 7, 2007 of the Court of Tax
Appeals en banc in E.B. Case Nos. 216 and 225 are SET
ASIDE, as the CTA Case No. 6417 was prematurely filed, and
therefore, the CTA lacked jurisdiction to entertain Mirant
Pagbilao Corporation's judicial claim.

SO ORDERED.

19
G.R. No. 184823               October 6, 2010
COMMISSIONER OF INTERNAL REVENUE, Petitioner,
vs.
AICHI FORGING COMPANY OF ASIA,
INC., Respondent.
DECISION
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 ₱3,891,123.82 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
₱131,791,399.00,8 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 ₱3,912,088.14 from purchases and
importation attributable to its zero-rated sales;10 and 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 ₱3,891,123.82.11
In response, petitioner filed his Answer 12 raising the following
special and affirmative defenses, to wit:
4. Petitioner’s 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
respondent’s 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:
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 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
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-
20
262," "JJ" to "JJ-431," "KK" to "KK-394" and "LL") shows
that it is engaged in sales which are zero-rated.
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
₱3,239,119.25, computed as follows:
Amount of Claimed Input VAT ₱ 3,891,123.82
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 petitioner’s
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
Division’s 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:

Less:   Petitioner argues that the administrative and judicial claims

Exceptions as found by the ICPA
Net Creditable Input VAT
Less:
Output VAT Due
Excess Creditable Input VAT
were filed beyond the period allowed by law and hence, the
41,020.37 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
₱ 3,850,103.45 authority of the honorable Court to exercise jurisdiction over
the judicial claim.
 
We are not persuaded.
610,984.20
Section 114 of the 1997 NIRC, and We quote, to wit:
₱ 3,239,119.25
SEC. 114. Return and Payment of Value-added Tax. –

(A) In General. – Every person liable to pay the value-added

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 (₱3,239,119.25), 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
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.
21
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 respondent’s 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
Petitioner’s Arguments
Petitioner maintains that respondent’s 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
Respondent’s 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.
4970236 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
22
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:
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 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: 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. (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.
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 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. (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, MPC’s claim for refund or tax credit
filed on December 10, 1999 had already prescribed.
Reckoning for prescriptive period under
Secs. 204(C) and 229 of the NIRC inapplicable
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:
23
Sec. 204. Authority of the Commissioner to Compromise,
Abate and Refund or Credit Taxes. – The Commissioner may
– Considering the foregoing discussion, it is clear that Sec. 112
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.
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.
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.
MPC’s 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
(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 two-year 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
24
prescriptive period (reckoned from the time respondent filed Applying this to the present case, the two-year period to file a
its final adjusted return on April 14, 1998) consisted of 24 claim for tax refund/credit for the period July 1, 2002 to
calendar months, computed as follows: September 30, 2002 expired on September 30, 2004. Hence,
respondent’s administrative claim was timely filed.
Year 1 1st calendar month April 15, 1998 to May 14, 1998
The filing of the judicial claim was premature
2nd calendar month May 15, 1998 to June 14, 1998 However, notwithstanding the timely filing of the
administrative claim, we
3rd calendar month June 15, 1998 to July 14, 1998
are constrained to deny respondent’s claim for tax
4th calendar month July 15, 1998 to August 14, 1998refund/credit for having been filed in violation of Section
112(D) of the NIRC, which provides that:
5th calendar month August 15, 1998 to September 14, 1998
SEC. 112. Refunds or Tax Credits of Input Tax. –
6th calendar month September 15, 1998 to October 14,
x x1998
xx

7th calendar month October 15, 1998 to November 14,(D)1998

Period within which Refund or Tax Credit of Input Taxes
shall be Made. – In proper cases, the Commissioner shall grant
8th calendar month November 15, 1998 to Decembera14, refund
1998or 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
9th calendar month December 15, 1998 to January 14, 1999
application filed in accordance with Subsections (A) and (B)
hereof.
10th calendar month January 15, 1999 to February 14, 1999
In case of full or partial denial of the claim for tax refund or
11th calendar month February 15, 1999 to March 14, 1999
tax credit, or the failure on the part of the Commissioner to act
on the application within the period prescribed above, the
12th calendar month March 15, 1999 to April 14, 1999taxpayer affected may, within thirty (30) days from the receipt
of the decision denying the claim or after the expiration of the
Year 2 13th calendar month April 15, 1999 to May 14, 1999 one hundred twenty day-period, appeal the decision or the
unacted claim with the Court of Tax Appeals. (Emphasis
14th calendar month May 15, 1999 to June 14, 1999 supplied.)
Section 112(D) of the NIRC clearly provides that the CIR has
15th calendar month June 15, 1999 to July 14, 1999
"120 days, from the date of the submission of the complete
documents in support of the application [for tax
16th calendar month July 15, 1999 to August 14, 1999
refund/credit]," within which to grant or deny the claim. In
case of full or partial denial by the CIR, the taxpayer’s
17th calendar month August 15, 1999 to September 14, 1999
recourse is to file an appeal before the CTA within 30 days
from receipt of the decision of the CIR. However, if after the
18th calendar month September 15, 1999 to October 14, 1999 period the CIR fails to act on the application for tax
120-day
refund/credit, the remedy of the taxpayer is to appeal the
19th calendar month October 15, 1999 to November 14, 1999 of the CIR to CTA within 30 days.
inaction

20th calendar month
21st calendar month
22nd calendar month
November 15, 1999 to DecemberIn14, this case, the administrative and the judicial claims were
1999
simultaneously filed on September 30, 2004. Obviously,
respondent
December 15, 1999 to January 14, 2000 did not wait for the decision of the CIR or the
lapse of the 120-day period. For this reason, we find the filing
January 15, 2000 to February 14,of2000
the judicial claim with the CTA premature.

Respondent’s assertion that the non-observance of the 120-day

23rd calendar month February 15, 2000 to March 14, period
2000 is not fatal to the filing of a judicial claim as long as
both the administrative and the judicial claims are filed within
24th calendar month March 15, 2000 to April 14, 2000
the two-year prescriptive period52 has no legal basis.
We therefore hold that respondent's petition (filed on April 14, There is nothing in Section 112 of the NIRC to support
2000) was filed on the last day of the 24th calendar month respondent’s view. Subsection (A) of the said provision states
from the day respondent filed its final adjusted return. Hence, that "any VAT-registered person, whose sales are zero-rated
it was filed within the reglementary period.51 or effectively zero-rated may, within two years after the close
25
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 respondent’s 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.

26
G.R. No. 187485               February 12, 2013
COMMISSIONER OF INTERNAL REVENUE, Petitioner,
vs..
SAN ROQUE POWER CORPORATION, Respondent.
X----------------------------X
G.R. No. 196113
TAGANITO MINING CORPORATION, Petitioner,
vs.
COMMISSIONER OF INTERNAL
REVENUE, Respondent.
x----------------------------x
G.R. No. 197156
PHILEX MINING CORPORATION, Petitioner,
vs.
COMMISSIONER OF INTERNAL
REVENUE, Respondent.
DECISION
CARPIO, J.:
The Cases
G.R. No. 187485 is a petitiOn for review 1 assailing the
Decision2 promulgated on 25 March 2009 as well as the
Resolution3 promulgated on 24 April 2009 by the Court of Tax
Appeals En Banc (CTA EB) in CTA EB No. 408. The CTA
EB affirmed the 29 November 2007 Amended Decision4 as
well as the 11 July 2008 Resolution5 of the Second Division of
the Court of Tax Appeals (CTA Second Division) in CTA
Case No. 6647. The CTA Second Division ordered the
Commissioner of Internal Revenue (Commissioner) to refund
or issue a tax credit for P483,797,599.65 to San Roque Power
Corporation (San Roque) for unutilized input value-added tax
(VAT) on purchases of capital goods and services for the
taxable year 2001.
G.R. No. 196113 is a petition for review6 assailing the
Decision7 promulgated on 8 December 2010 as well as the
Resolution8 promulgated on 14 March 2011 by the CTA EB in
CTA EB No. 624. In its Decision, the CTA EB reversed the 8
January 2010 Decision9 as well as the 7 April 2010
Resolution10of the CTA Second Division and granted the
CIR’s petition for review in CTA Case No. 7574. The CTA
EB dismissed, for having been prematurely filed, Taganito
Mining Corporation’s (Taganito) judicial claim for
P8,365,664.38 tax refund or credit.
G.R. No. 197156 is a petition for review11 assailing the
Decision12promulgated on 3 December 2010 as well as the
Resolution13 promulgated on 17 May 2011 by the CTA EB in
CTA EB No. 569. The CTA EB affirmed the 20 July 2009
Decision as well as the 10 November 2009 Resolution of the
CTA Second Division in CTA Case No. 7687. The CTA
Second Division denied, due to prescription, Philex Mining
Corporation’s (Philex) judicial claim for P23,956,732.44 tax
refund or credit.
On 3 August 2011, the Second Division of this Court
resolved14 to consolidate G.R. No. 197156 with G.R. No.
196113, which were pending in the same Division, and with
G.R. No. 187485, which was assigned to the Court En Banc.
The Second Division also resolved to refer G.R. Nos. 197156
and 196113 to the Court En Banc, where G.R. No. 187485, the
lower-numbered case, was assigned.
G.R. No. 187485
CIR v. San Roque Power Corporation
The Facts
The CTA EB’s narration of the pertinent facts is as follows:
[CIR] is the duly appointed Commissioner of Internal
Revenue, empowered, among others, to act upon and approve
claims for refund or tax credit, with office at the Bureau of
Internal Revenue ("BIR") National Office Building, Diliman,
Quezon City.
[San Roque] is a domestic corporation duly organized and
existing under and by virtue of the laws of the Philippines with
principal office at Barangay San Roque, San Manuel,
Pangasinan. It was incorporated in October 1997 to design,
construct, erect, assemble, own, commission and operate
power-generating plants and related facilities pursuant to and
under contract with the Government of the Republic of the
Philippines, or any subdivision, instrumentality or agency
thereof, or any governmentowned or controlled corporation, or
other entity engaged in the development, supply, or
distribution of energy.
As a seller of services, [San Roque] is duly registered with the
BIR with TIN/VAT No. 005-017-501. It is likewise registered
with the Board of Investments ("BOI") on a preferred pioneer
status, to engage in the design, construction, erection,
assembly, as well as to own, commission, and operate electric
power-generating plants and related activities, for which it was
issued Certificate of Registration No. 97-356 on February 11,
1998.
On October 11, 1997, [San Roque] entered into a Power
Purchase Agreement ("PPA") with the National Power
Corporation ("NPC") to develop hydro-potential of the Lower
Agno River and generate additional power and energy for the
Luzon Power Grid, by building the San Roque Multi-Purpose
Project located in San Manuel, Pangasinan. The PPA provides,
among others, that [San Roque] shall be responsible for the
design, construction, installation, completion, testing and
commissioning of the Power Station and shall operate and
maintain the same, subject to NPC instructions. During the
cooperation period of twenty-five (25) years commencing
from the completion date of the Power Station, NPC will take
and pay for all electricity available from the Power Station.
27
On the construction and development of the San Roque Multi-
Purpose Project which comprises of the dam, spillway and
power plant, [San Roque] allegedly incurred, excess input
VAT in the amount of ₱559,709,337.54 for taxable year 2001
which it declared in its Quarterly VAT Returns filed for the
same year. [San Roque] duly filed with the BIR separate
claims for refund, in the total amount of ₱559,709,337.54,
representing unutilized input taxes as declared in its VAT
returns for taxable year 2001.
However, on March 28, 2003, [San Roque] filed amended
Quarterly VAT Returns for the year 2001 since it increased its
unutilized input VAT to the amount of ₱560,200,283.14.
Consequently, [San Roque] filed with the BIR on even date,
separate amended claims for refund in the aggregate amount
of ₱560,200,283.14.
[CIR’s] inaction on the subject claims led to the filing by [San
Roque] of the Petition for Review with the Court [of Tax
Appeals] in Division on April 10, 2003.
Trial of the case ensued and on July 20, 2005, the case was
submitted for decision.15
The Court of Tax Appeals’ Ruling: Division
The CTA Second Division initially denied San Roque’s claim.
In its Decision16 dated 8 March 2006, it cited the following as
bases for the denial of San Roque’s claim: lack of recorded
zero-rated or effectively zero-rated sales; failure to submit
documents specifically identifying the purchased
goods/services related to the claimed input VAT which were
included in its Property, Plant and Equipment account; and
failure to prove that the related construction costs were
capitalized in its books of account and subjected to
depreciation.
The CTA Second Division required San Roque to show that it
complied with the following requirements of Section 112(B)
of Republic Act No. 8424 (RA 8424)17 to be entitled to a tax
refund or credit of input VAT attributable to capital goods
imported or locally purchased: (1) it is a VAT-registered
entity; (2) its input taxes claimed were paid on capital goods
duly supported by VAT invoices and/or official receipts; (3) it
did not offset or apply the claimed input VAT payments on
capital goods against any output VAT liability; and (4) its
claim for refund was filed within the two-year prescriptive
period both in the administrative and judicial levels.
The CTA Second Division found that San Roque complied
with the first, third, and fourth requirements, thus:
The fact that [San Roque] is a VAT registered entity is
admitted (par. 4, Facts Admitted, Joint Stipulation of Facts,
Records, p. 157). It was also established that the instant claim
of ₱560,200,823.14 is already net of the ₱11,509.09 output tax
declared by [San Roque] in its amended VAT return for the
first quarter of 2001. Moreover, the entire amount of
₱560,200,823.14 was deducted by [San Roque] from the total
available input tax reflected in its amended VAT returns for
the last two quarters of 2001 and first two quarters of 2002
(Exhibits M-6, O-6, OO-1 & QQ-1). This means that the
claimed input taxes of ₱560,200,823.14 did not form part of
the excess input taxes of ₱83,692,257.83, as of the second
quarter of 2002 that was to be carried-over to the succeeding
quarters. Further, [San Roque’s] claim for refund/tax credit
certificate of excess input VAT was filed within the two-year
prescriptive period reckoned from the dates of filing of the
corresponding quarterly VAT returns.
For the first, second, third, and fourth quarters of 2001, [San
Roque] filed its VAT returns on April 25, 2001, July 25, 2001,
October 23, 2001 and January 24, 2002, respectively (Exhibits
"H, J, L, and N"). These returns were all subsequently
amended on March 28, 2003 (Exhibits "I, K, M, and O"). On
the other hand, [San Roque] originally filed its separate claims
for refund on July 10, 2001, October 10, 2001, February 21,
2002, and May 9, 2002 for the first, second, third, and fourth
quarters of 2001, respectively, (Exhibits "EE, FF, GG, and
HH") and subsequently filed amended claims for all quarters
on March 28, 2003 (Exhibits "II, JJ, KK, and LL"). Moreover,
the Petition for Review was filed on April 10, 2003. Counting
from the respective dates when [San Roque] originally filed its
VAT returns for the first, second, third and fourth quarters of
2001, the administrative claims for refund (original and
amended) and the Petition for Review fall within the two-year
prescriptive period.18
San Roque filed a Motion for New Trial and/or
Reconsideration on 7 April 2006. In its 29 November 2007
Amended Decision,19 the CTA Second Division found legal
basis to partially grant San Roque’s claim. The CTA Second
Division ordered the Commissioner to refund or issue a tax
credit in favor of San Roque in the amount of
₱483,797,599.65, which represents San Roque’s unutilized
input VAT on its purchases of capital goods and services for
the taxable year 2001. The CTA based the adjustment in the
amount on the findings of the independent certified public
accountant. The following reasons were cited for the
disallowed claims: erroneous computation; failure to ascertain
whether the related purchases are in the nature of capital
goods; and the purchases pertain to capital goods. Moreover,
the reduction of claims was based on the following: the
difference between San Roque’s claim and that appearing on
its books; the official receipts covering the claimed input VAT
on purchases of local services are not within the period of the
claim; and the amount of VAT cannot be determined from the
submitted official receipts and invoices. The CTA Second
Division denied San Roque’s claim for refund or tax credit of
its unutilized input VAT attributable to its zero-rated or
effectively zero-rated sales because San Roque had no record
of such sales for the four quarters of 2001.
The dispositive portion of the CTA Second Division’s 29
November 2007 Amended Decision reads:
WHEREFORE, [San Roque’s] "Motion for New Trial and/or
Reconsideration" is hereby PARTIALLY GRANTED and this
28
Court’s Decision promulgated on March 8, 2006 in the instant
case is hereby MODIFIED.
Accordingly, [the CIR] is hereby ORDERED to REFUND or
in the alternative, to ISSUE A TAX CREDIT CERTIFICATE
in favor of [San Roque] in the reduced amount of Four
Hundred Eighty Three Million Seven Hundred Ninety Seven
Thousand Five Hundred Ninety Nine Pesos and Sixty Five
Centavos (₱483,797,599.65) representing unutilized input
VAT on purchases of capital goods and services for the
taxable year 2001.
SO ORDERED.20
The Commissioner filed a Motion for Partial Reconsideration
on 20 December 2007. The CTA Second Division issued a
Resolution dated 11 July 2008 which denied the CIR’s motion
for lack of merit.
The Court of Tax Appeals’ Ruling: En Banc
The Commissioner filed a Petition for Review before the CTA
EB praying for the denial of San Roque’s claim for refund or
tax credit in its entirety as well as for the setting aside of the
29 November 2007 Amended Decision and the 11 July 2008
Resolution in CTA Case No. 6647.
The CTA EB dismissed the CIR’s petition for review and
affirmed the challenged decision and resolution.
The CTA EB cited Commissioner of Internal Revenue v.
Toledo Power, Inc.21 and Revenue Memorandum Circular No.
49-03,22 as its bases for ruling that San Roque’s judicial claim
was not prematurely filed. The pertinent portions of the
Decision state:
More importantly, the Court En Banc has squarely and
exhaustively ruled on this issue in this wise:
It is true that Section 112(D) of the abovementioned
provision applies to the present case. However, what the
petitioner failed to consider is Section 112(A) of the same
provision. The respondent is also covered by the two (2) year
prescriptive period. We have repeatedly held that the claim for
refund with the BIR and the subsequent appeal to the Court of
Tax Appeals must be filed within the two-year period.
Accordingly, the Supreme Court held in the case of Atlas
Consolidated Mining and Development Corporation vs.
Commissioner of Internal Revenue that the two-year
prescriptive period for filing a claim for input tax is reckoned
from the date of the filing of the quarterly VAT return and
payment of the tax due. If the said period is about to expire
but the BIR has not yet acted on the application for
refund, the taxpayer may interpose a petition for review
with this Court within the two year period.
In the case of Gibbs vs. Collector, the Supreme Court held
that if, however, the Collector (now Commissioner) 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 Court of Tax
Appeals before the end of the two-year period without
awaiting the decision of the Collector.
Furthermore, in the case of Commissioner of Customs and
Commissioner of Internal Revenue vs. The Honorable Court
of Tax Appeals and Planters Products, Inc., the Supreme
Court held that the taxpayer need not wait indefinitely for
a decision or ruling which may or may not be forthcoming
and which he has no legal right to expect. It is disheartening
enough to a taxpayer to keep him waiting for an indefinite
period of time for a ruling or decision of the Collector (now
Commissioner) of Internal Revenue on his claim for refund. It
would make matters more exasperating for the taxpayer if we
were to close the doors of the courts of justice for such a relief
until after the Collector (now Commissioner) of Internal
Revenue, would have, at his personal convenience, given his
go signal.
This Court ruled in several cases that once the petition is filed,
the Court has already acquired jurisdiction over the claims and
the Court is not bound to wait indefinitely for no reason for
whatever action respondent (herein petitioner) may take. At
stake are claims for refund and unlike disputed
assessments, no decision of respondent (herein petitioner)
is required before one can go to this Court. (Emphasis
supplied and citations omitted)
Lastly, it is apparent from the following provisions of
Revenue Memorandum Circular No. 49-03 dated August 18,
2003, that [the CIR] knows that claims for VAT refund or tax
credit filed with the Court [of Tax Appeals] can proceed
simultaneously with the ones filed with the BIR and that
taxpayers need not wait for the lapse of the subject 120-day
period, to wit:
In response to [the] request of selected taxpayers for adoption
of procedures in handling refund cases that are aligned to the
statutory requirements that refund cases should be elevated to
the Court of Tax Appeals before the lapse of the period
prescribed by law, certain provisions of RMC No. 42-2003 are
hereby amended and new provisions are added thereto.
In consonance therewith, the following amendments are being
introduced to RMC No. 42-2003, to wit:
I.) A-17 of Revenue Memorandum Circular No. 42-2003 is
hereby revised to read as follows:
In cases where the taxpayer has filed a "Petition for
Review" with the Court of Tax Appeals involving a claim
for refund/TCC that is pending at the administrative
agency (Bureau of Internal Revenue or OSS-DOF), the
administrative agency and the tax court may act on the
case separately. While the case is pending in the tax court and
at the same time is still under process by the administrative
agency, the litigation lawyer of the BIR, upon receipt of the
summons from the tax court, shall request from the head of the
investigating/processing office for the docket containing
certified true copies of all the documents pertinent to the
29
claim. The docket shall be presented to the court as evidence bridges, piers, wharves, wells, reservoirs, plumes,
for the BIR in its defense on the tax credit/refund case filed by watercourses, waterworks, aqueducts, shafts, tunnels,
the taxpayer. In the meantime, the investigating/processing furnaces, cook ovens, crushing works, gasworks, electric
office of the administrative agency shall continue processing lights and power plants and compressed air plants, chemical
the refund/TCC case until such time that a final decision has works of all kinds, concentrators, smelters, smelting plants,
been reached by either the CTA or the administrative agency. and refineries, matting plants, warehouses, workshops,
factories, dwelling houses, stores, hotels or other buildings,
If the CTA is able to release its decision ahead of the engines, machinery, spare parts, tools, implements and other
evaluation of the administrative agency, the latter shall works, conveniences and properties of any description in
cease from processing the claim. On the other hand, if the connection with or which may be directly or indirectly
administrative agency is able to process the claim of the conducive to any of the objects of the corporation, and to
taxpayer ahead of the CTA and the taxpayer is amenable to the contribute to, subsidize or otherwise aid or take part in any
findings thereof, the concerned taxpayer must file a motion to operations;
withdraw the claim with the CTA.23 (Emphasis supplied)
and is a VAT-registered entity, with Certificate of Registration
G.R. No. 196113 (BIR Form No. 2303) No. OCN 8RC0000017494. Likewise,
Taganito Mining Corporation v. CIR [Taganito] is registered with the Board of Investments (BOI)
The Facts as an exporter of beneficiated nickel silicate and chromite
ores, with BOI Certificate of Registration No. EP-88-306.
The CTA Second Division’s narration of the pertinent facts is
as follows: Respondent, on the other hand, is the duly appointed
Commissioner of Internal Revenue vested with authority to
Petitioner, Taganito Mining Corporation, is a corporation duly exercise the functions of the said office, including inter alia,
organized and existing under and by virtue of the laws of the the power to decide refunds of internal revenue taxes, fees and
Philippines, with principal office at 4th Floor, Solid Mills other charges, penalties imposed in relation thereto, or other
Building, De La Rosa St., Lega[s]pi Village, Makati City. It is matters arising under the National Internal Revenue Code
duly registered with the Securities and Exchange Commission (NIRC) or other laws administered by Bureau of Internal
with Certificate of Registration No. 138682 issued on March Revenue (BIR) under Section 4 of the NIRC. He holds office
4, 1987 with the following primary purpose: at the BIR National Office Building, Diliman, Quezon City.
To carry on the business, for itself and for others, of mining [Taganito] filed all its Monthly VAT Declarations and
lode and/or placer mining, developing, exploiting, extracting, Quarterly Vat Returns for the period January 1, 2005 to
milling, concentrating, converting, smelting, treating, refining, December 31, 2005. For easy reference, a summary of the
preparing for market, manufacturing, buying, selling, filing dates of the original and amended Quarterly VAT
exchanging, shipping, transporting, and otherwise producing Returns for taxable year 2005 of [Taganito] is as follows:
and dealing in nickel, chromite, cobalt, gold, silver, copper,
Exhibit(s)
lead, zinc, brass, iron, steel, limestone, and all kinds of ores, Quarter Nature of Mode of filing Filing Date
metals and their by-products and which by-products thereof of the Return
every kind and description and by whatsoever process the
same can be or may hereafter be produced, and generally L and
to L-4 1st Original Electronic April 15, 2005
without limit as to amount, to buy, sell, locate, exchange,
lease, acquire and deal in lands, mines, and mineral rights Mandto M-3 Amended Electronic July 20, 2005
claims and to conduct all business appertaining thereto, to
purchase, locate, lease or otherwise acquire, mining claims N to N-4 Amended Electronic October 18, 2006
and rights, timber rights, water rights, concessions and mines,
buildings, dwellings, plants machinery, spare parts, tools Q andto Q-3 2nd Original Electronic July 20, 2005
other properties whatsoever which this corporation may from
time to time find to be to its advantage to mine lands, andRto to R-4 Amended Electronic October 18, 2006
explore, work, exercise, develop or turn to account the same,
and to acquire, develop and utilize water rights in such manner
U to U-4 3rd Original Electronic October 19, 2005
as may be authorized or permitted by law; to purchase, hire,
make, construct or otherwise, acquire, provide, maintain, V to V-4 Amended Electronic October 18, 2006
equip, alter, erect, improve, repair, manage, work and operate
private roads, barges, vessels, aircraft and vehicles, private
Y to Y-4 4th Original Electronic January 20, 2006
telegraph and telephone lines, and other communication
media, as may be needed by the corporation for its own
Z to Z-4 Amended Electronic October 18, 2006
purpose, and to purchase, import, construct, machine,
fabricate, or otherwise acquire, and maintain and operate

30
 As can be gleaned from its amended Quarterly VAT Returns, 5. The amount of ₱8,365,664.38 being claimed by [Taganito]
[Taganito] reported zero-rated sales amounting to as alleged unutilized input VAT on domestic purchases of
P1,446,854,034.68; input VAT on its domestic purchases and goods and services and on importation of capital goods for the
importations of goods (other than capital goods) and services period January 1, 2005 to December 31, 2005 is not properly
amounting to P2,314,730.43; and input VAT on its domestic documented;
purchases and importations of capital goods amounting to
P6,050,933.95, the details of which are summarized as 6. [Taganito] must prove that it has complied with the
follows: provisions of Sections 112 (A) and (D) and 229 of the
National Internal Revenue Code of 1997 (1997 Tax Code) on
riod Zero-Rated Sales Input VAT on Input VAT on Total the prescriptive period for claiming tax refund/credit;
Input
vered Domestic Domestic VAT 7. Proof of compliance with the prescribed checklist of
Purchases and Purchases and requirements to be submitted involving claim for VAT refund
Importations Importations pursuant to Revenue Memorandum Order No. 53-
of Goods and of Capital 98, otherwise there would be no sufficient compliance with
Services Goods the filing of administrative claim for refund, the
administrative claim thereof being mere proforma, which
01/05 - P551,179,871.58 P1,491,880.56 P239,803.22 P1,731,683.78is a condition sine qua non prior to the filing of judicial
31/05 claim in accordance with the provision of Section 229 of the
1997 Tax Code. Further, Section 112 (D) of the Tax Code, as
01/05 - 64,677,530.78 204,364.17 5,811,130.73 6,015,494.90 amended, requires the submission of complete documents in
30/05 support of the application filed with the BIR before the 120-
day audit period shall apply, and before the taxpayer could
01/05 - 480,784,287.30 144,887.67 - 144,887.67 avail of judicial remedies as provided for in the law. Hence,
30/05 [Taganito’s] failure to submit proof of compliance with the
above-stated requirements warrants immediate dismissal of
01/05 - 350,212,345.02 473,598.03 - 473,598.03 the petition for review.
31/05
8. [Taganito] must prove that it has complied with the
TAL P1,446,854,034.68 P2,314,730.43 P6,050,933.95 P8,365,664.38invoicing requirements mentioned in Sections 110 and 113 of
the 1997 Tax Code, as amended, in relation to provisions of
On November 14, 2006, [Taganito] filed with [the CIR], Revenue Regulations No. 7-95.
through BIR’s Large Taxpayers Audit and Investigation
Division II (LTAID II), a letter dated November 13, 2006 9. In an action for refund/credit, the burden of proof is on the
claiming a tax credit/refund of its supposed input VAT taxpayer to establish its right to refund, and failure to sustain
amounting to ₱8,365,664.38 for the period covering January 1, the burden is fatal to the claim for refund/credit (Asiatic
2004 to December 31, 2004. On the same date, [Taganito] Petroleum Co. vs. Llanes, 49 Phil. 466 cited in Collector of
likewise filed an Application for Tax Credits/Refunds for the Internal Revenue vs. Manila Jockey Club, Inc., 98 Phil.
period covering January 1, 2005 to December 31, 2005 for the 670);
same amount. 10. Claims for refund are construed strictly against the
On November 29, 2006, [Taganito] sent again another letter claimant for the same partake the nature of exemption from
dated November 29, 2004 to [the CIR], to correct the period of taxation (Commissioner of Internal Revenue vs. Ledesma,
the above claim for tax credit/refund in the said amount of 31 SCRA 95) and as such, they are looked upon with
₱8,365,664.38 as actually referring to the period covering disfavor (Western Minolco Corp. vs. Commissioner of
January 1, 2005 to December 31, 2005. Internal Revenue, 124 SCRA 1211).

As the statutory period within which to file a claim for refund
for said input VAT is about to lapse without action on the part
of the [CIR], [Taganito] filed the instant Petition for Review
on February 17, 2007.
In his Answer filed on March 28, 2007, [the CIR] interposes
the following defenses:
4. [Taganito’s] alleged claim for refund is subject to
administrative investigation/examination by the Bureau of
Internal Revenue (BIR);
SPECIAL AND AFFIRMATIVE DEFENSES
11. The Court of Tax Appeals has no jurisdiction to entertain
the instant petition for review for failure on the part of
[Taganito] to comply with the provision of Section 112 (D) of
the 1997 Tax Code which provides, thus:
Section 112. Refunds or Tax Credits of Input Tax. –
x x x           x x x          x x x
(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
31
input taxes within one hundred (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 cases of full or partial denial 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 dayperiod, appeal the decision or the
unacted claim with the Court of Tax Appeals. (Emphasis
supplied.)
12. As stated, [Taganito] filed the administrative claim for
refund with the Bureau of Internal Revenue on November 14,
2006. Subsequently on February 14, 2007, the instant petition
was filed. Obviously the 120 days given to the Commissioner
to decide on the claim has not yet lapsed when the petition
was filed. The petition was prematurely filed, hence it must be
dismissed for lack of jurisdiction.
During trial, [Taganito] presented testimonial and
documentary evidence primarily aimed at proving its supposed
entitlement to the refund in the amount of ₱8,365,664.38,
representing input taxes for the period covering January 1,
2005 to December 31, 2005. [The CIR], on the other hand,
opted not to present evidence. Thus, in the Resolution
promulgated on January 22, 2009, this case was submitted for
decision as of such date, considering [Taganito’s]
"Memorandum" filed on January 19, 2009 and [the CIR’s]
"Memorandum" filed on December 19, 2008.24
The Court of Tax Appeals’ Ruling: Division
The CTA Second Division partially granted Taganito’s claim.
In its Decision25 dated 8 January 2010, the CTA Second
Division found that Taganito complied with the requirements
of Section 112(A) of RA 8424, as amended, to be entitled to a
tax refund or credit of input VAT attributable to zero-rated or
effectively zero-rated sales.26
The pertinent portions of the CTA Second Division’s Decision
read:
Finally, records show that [Taganito’s] administrative claim
filed on November 14, 2006, which was amended on
November 29, 2006, and the Petition for Review filed with
this Court on February 14, 2007 are well within the two-year
prescriptive period, reckoned from March 31, 2005, June 30,
2005, September 30, 2005, and December 31, 2005,
respectively, the close of each taxable quarter covering the
period January 1, 2005 to December 31, 2005.
In fine, [Taganito] sufficiently proved that it is entitled to a tax
credit certificate in the amount of ₱8,249,883.33 representing
unutilized input VAT for the four taxable quarters of 2005.
WHEREFORE, premises considered, the instant Petition for
Review is hereby PARTIALLY GRANTED. Accordingly,
[the CIR] is hereby ORDERED to REFUND to [Taganito] the
amount of EIGHT MILLION TWO HUNDRED FORTY
NINE THOUSAND EIGHT HUNDRED EIGHTY THREE
PESOS AND THIRTY THREE CENTAVOS (P8,249,883.33)
representing its unutilized input taxes attributable to zero-rated
sales from January 1, 2005 to December 31, 2005.
SO ORDERED.27
The Commissioner filed a Motion for Partial Reconsideration
on 29 January 2010. Taganito, in turn, filed a
Comment/Opposition on the Motion for Partial
Reconsideration on 15 February 2010.
In a Resolution28 dated 7 April 2010, the CTA Second
Division denied the CIR’s motion. The CTA Second Division
ruled that the legislature did not intend that Section 112
(Refunds or Tax Credits of Input Tax) should be read in
isolation from Section 229 (Recovery of Tax Erroneously or
Illegally Collected) or vice versa. The CTA Second Division
applied the mandatory statute of limitations in seeking judicial
recourse prescribed under Section 229 to claims for refund or
tax credit under Section 112.
The Court of Tax Appeals’ Ruling: En Banc
On 29 April 2010, the Commissioner filed a Petition for
Review before the CTA EB assailing the 8 January 2010
Decision and the 7 April 2010 Resolution in CTA Case No.
7574 and praying that Taganito’s entire claim for refund be
denied.
In its 8 December 2010 Decision, 29 the CTA EB granted the
CIR’s petition for review and reversed and set aside the
challenged decision and resolution.
The CTA EB declared that Section 112(A) and (B) of the 1997
Tax Code both set forth the reckoning of the two-year
prescriptive period for filing a claim for tax refund or credit
over input VAT to be the close of the taxable quarter when the
sales were made. The CTA EB also relied on this Court’s
rulings in the cases of Commissioner of Internal Revenue v.
Aichi Forging Company of Asia, Inc.
(Aichi)30 and Commisioner of Internal Revenue v. Mirant
Pagbilao Corporation
(Mirant).31 Both Aichi and Mirant ruled that the two-year
prescriptive period to file a refund for input VAT arising from
zero-rated sales should be reckoned from the close of the
taxable quarter when the sales were made. Aichi further
emphasized that the failure to await the decision of the
Commissioner or the lapse of 120-day period prescribed in
Section 112(D) amounts to a premature filing.
The CTA EB found that Taganito filed its administrative claim
on 14 November 2006, which was well within the period
prescribed under Section 112(A) and (B) of the 1997 Tax
Code. However, the CTA EB found that Taganito’s judicial
claim was prematurely filed. Taganito filed its Petition for
Review before the CTA Second Division on 14 February
2007. The judicial claim was filed after the lapse of only 92
32
days from the filing of its administrative claim before the CIR,
in violation of the 120-day period prescribed in Section
112(D) of the 1997 Tax Code.
The dispositive portion of the Decision states:
WHEREFORE, the instant Petition for Review is hereby
GRANTED. The assailed Decision dated January 8, 2010 and
Resolution dated April 7, 2010 of the Special Second Division
of this Court are hereby REVERSED and SET ASIDE.
Another one is hereby entered DISMISSING the Petition for
Review filed in CTA Case No. 7574 for having been
prematurely filed.
SO ORDERED.32
33
In his dissent,  Associate Justice Lovell R. Bautista insisted
that Taganito timely filed its claim before the CTA. Justice
Bautista read Section 112(C) of the 1997 Tax Code (Period
within which Refund or Tax Credit of Input Taxes shall be
Made) in conjunction with Section 229 (Recovery of Tax
Erroneously or Illegally Collected). Justice Bautista also relied
on this Court’s ruling in Atlas Consolidated Mining and
Development Corporation v. Commissioner of Internal
Revenue (Atlas),34 which stated that refundable or creditable
input VAT and illegally or erroneously collected national
internal revenue tax are the same, insofar as both are monetary
amounts which are currently in the hands of the government
but must rightfully be returned to the taxpayer. Justice
Bautista concluded:
Being merely permissive, a taxpayer claimant has the option
of seeking judicial redress for refund or tax credit of excess or
unutilized input tax with this Court, either within 30 days from
receipt of the denial of its claim, or after the lapse of the 120-
day period in the event of inaction by the Commissioner,
provided that both administrative and judicial remedies must
be undertaken within the 2-year period.35
Taganito filed its Motion for Reconsideration on 29 December
2010. The Commissioner filed an Opposition on 26 January
2011. The CTA EB denied for lack of merit Taganito’s motion
in a Resolution36 dated 14 March 2011. The CTA EB did not
see any justifiable reason to depart from this Court’s rulings
in Aichi and Mirant.
G.R. No. 197156
Philex Mining Corporation v. CIR
The Facts
The CTA EB’s narration of the pertinent facts is as follows:
[Philex] is a corporation duly organized and existing under the
laws of the Republic of the Philippines, which is principally
engaged in the mining business, which includes the
exploration and operation of mine properties and commercial
production and marketing of mine products, with office
address at 27 Philex Building, Fairlaine St., Kapitolyo, Pasig
City.
[The CIR], on the other hand, is the head of the Bureau of
Internal Revenue ("BIR"), the government entity tasked with
the duties/functions of assessing and collecting all national
internal revenue taxes, fees, and charges, and enforcement of
all forfeitures, penalties and fines connected therewith,
including the execution of judgments in all cases decided in its
favor by [the Court of Tax Appeals] and the ordinary courts,
where she can be served with court processes at the BIR Head
Office, BIR Road, Quezon City.
On October 21, 2005, [Philex] filed its Original VAT Return
for the third quarter of taxable year 2005 and Amended VAT
Return for the same quarter on December 1, 2005.
On March 20, 2006, [Philex] filed its claim for refund/tax
credit of the amount of ₱23,956,732.44 with the One Stop
Shop Center of the Department of Finance. However, due to
[the CIR’s] failure to act on such claim, on October 17, 2007,
pursuant to Sections 112 and 229 of the NIRC of 1997, as
amended, [Philex] filed a Petition for Review, docketed as
C.T.A. Case No. 7687.
In [her] Answer, respondent CIR alleged the following special
and affirmative defenses:
4. Claims for refund are strictly construed against the taxpayer
as the same partake the nature of an exemption;
5. The taxpayer has the burden to show that the taxes were
erroneously or illegally paid. Failure on the part of [Philex] to
prove the same is fatal to its cause of action;
6. [Philex] should prove its legal basis for claiming for the
amount being refunded.37
The Court of Tax Appeals’ Ruling: Division
The CTA Second Division, in its Decision dated 20 July 2009,
denied Philex’s claim due to prescription. The CTA Second
Division ruled that the two-year prescriptive period specified
in Section 112(A) of RA 8424, as amended, applies not only
to the filing of the administrative claim with the BIR, but also
to the filing of the judicial claim with the CTA. Since Philex’s
claim covered the 3rd quarter of 2005, its administrative claim
filed on 20 March 2006 was timely filed, while its judicial
claim filed on 17 October 2007 was filed late and therefore
barred by prescription.
On 10 November 2009, the CTA Second Division denied
Philex’s Motion for Reconsideration.
The Court of Tax Appeals’ Ruling: En Banc
Philex filed a Petition for Review before the CTA EB praying
for a reversal of the 20 July 2009 Decision and the 10
November 2009 Resolution of the CTA Second Division in
CTA Case No. 7687.
The CTA EB, in its Decision 38 dated 3 December 2010, denied
Philex’s petition and affirmed the CTA Second Division’s
Decision and Resolution.
33
The pertinent portions of the Decision read:
In this case, while there is no dispute that [Philex’s]
administrative claim for refund was filed within the two-year
prescriptive period; however, as to its judicial claim for
refund/credit, records show that on March 20, 2006, [Philex]
applied the administrative claim for refund of unutilized input
VAT in the amount of ₱23,956,732.44 with the One Stop
Shop Center of the Department of Finance, per Application
No. 52490. From March 20, 2006, which is also presumably
the date [Philex] submitted supporting documents, together
with the aforesaid application for refund, the CIR has 120
days, or until July 18, 2006, within which to decide the claim.
Within 30 days from the lapse of the 120-day period, or from
July 19, 2006 until August 17, 2006, [Philex] should have
elevated its claim for refund to the CTA. However, [Philex]
filed its Petition for Review only on October 17, 2007, which
is 426 days way beyond the 30- day period prescribed by law.
Evidently, the Petition for Review in CTA Case No. 7687 was
filed 426 days late. Thus, the Petition for Review in CTA Case
No. 7687 should have been dismissed on the ground that the
Petition for Review was filed way beyond the 30-day
prescribed period; thus, no jurisdiction was acquired by the
CTA in Division; and not due to prescription.
WHEREFORE, premises considered, the instant Petition for
Review is hereby DENIED DUE COURSE, and accordingly,
DISMISSED. The assailed Decision dated July 20, 2009,
dismissing the Petition for Review in CTA Case No. 7687 due
to prescription, and Resolution dated November 10, 2009
denying [Philex’s] Motion for Reconsideration are hereby
AFFIRMED, with modification that the dismissal is based on
the ground that the Petition for Review in CTA Case No. 7687
was filed way beyond the 30-day prescribed period to appeal.
SO ORDERED.39
G.R. No. 187485
CIR v. San Roque Power Corporation
The Commissioner raised the following grounds in the
Petition for Review:
I. The Court of Tax Appeals En Banc erred in holding that
[San Roque’s] claim for refund was not prematurely filed.
II. The Court of Tax Appeals En Banc erred in affirming the
amended decision of the Court of Tax Appeals (Second
Division) granting [San Roque’s] claim for refund of alleged
unutilized input VAT on its purchases of capital goods and
services for the taxable year 2001 in the amount of
P483,797,599.65. 40
G.R. No. 196113
Taganito Mining Corporation v. CIR
Taganito raised the following grounds in its Petition for
Review:
I. The Court of Tax Appeals En Banc committed serious error
and acted with grave abuse of discretion tantamount to lack or
excess of jurisdiction in erroneously applying
the Aichi doctrine in violation of [Taganito’s] right to due
process.
II. The Court of Tax Appeals committed serious error and
acted with grave abuse of discretion amounting to lack or
excess of jurisdiction in erroneously interpreting the
provisions of Section 112 (D).41
G.R. No. 197156
Philex Mining Corporation v. CIR
Philex raised the following grounds in its Petition for Review:
I. The CTA En Banc erred in denying the petition due to
alleged prescription. The fact is that the petition was filed with
the CTA within the period set by prevailing court rulings at
the time it was filed.
II. The CTA En Banc erred in retroactively applying the Aichi
ruling in denying the petition in this instant case. 42
The Court’s Ruling
For ready reference, the following are the provisions of the
Tax Code applicable to the present cases:
Section 105:
Persons Liable. — Any person who, in the course of trade
or business, sells, barters, exchanges, leases goods or
properties, renders services, and any person who imports
goods shall be subject to the value-added tax
(VAT) imposed in Sections 106 to 108 of this Code.
The value-added tax is an indirect tax and the amount of
tax may be shifted or passed on to the buyer, transferee or
lessee of the goods, properties or services. This rule shall
likewise apply to existing contracts of sale or lease of goods,
properties or services at the time of the effectivity of Republic
Act No. 7716.
xxxx
Section 110(B):
Sec. 110. Tax Credits. —
(B) Excess Output or Input Tax. — If at the end of any taxable
quarter the output tax exceeds the input tax, the excess shall be
paid by the VAT-registered person. If the input tax exceeds
the output tax, the excess shall be carried over to the
succeeding quarter or quarters: [Provided, That the input
tax inclusive of input VAT carried over from the previous
quarter that may be credited in every quarter shall not exceed
seventy percent (70%) of the output VAT:]43 Provided,
however, That any input tax attributable to zero-rated sales
by a VAT-registered person may at his option be refunded
or credited against other internal revenue taxes, subject to
the provisions of Section 112.
34
Section 112:44
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 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: 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.
(B) Capital Goods.- A VAT — registered person may apply
for the issuance of a tax credit certificate or refund of input
taxes paid on capital goods imported or locally purchased, to
the extent that such input taxes have not been applied against
output taxes. The application may be made only within two (2)
years after the close of the taxable quarter when the
importation or purchase was made.
(C) Cancellation of VAT Registration. — A person whose
registration has been cancelled due to retirement from or
cessation of business, or due to changes in or cessation of
status under Section 106(C) of this Code may, within two (2)
years from the date of cancellation, apply for the issuance of a
tax credit certificate for any unused input tax which may be
used in payment of his other internal revenue taxes
(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 Subsection (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.
(E) Manner of Giving Refund. — Refunds shall be made upon
warrants drawn by the Commissioner or by his duly
authorized representative without the necessity of being
countersigned by the Chairman, Commission on Audit, the
provisions of the Administrative Code of 1987 to the contrary
notwithstanding: Provided, that refunds under this paragraph
shall be subject to post audit by the Commission on Audit.
Section 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.
(All emphases supplied)
I. Application of the 120+30 Day Periods
a. G.R. No. 187485 - CIR v. San Roque Power Corporation
On 10 April 2003, a mere 13 days after it filed its amended
administrative claim with the Commissioner on 28 March
2003, San Roque filed a Petition for Review with the CTA
docketed as CTA Case No. 6647. From this we gather two
crucial facts: first, San Roque did not wait for the 120-day
period to lapse before filing its judicial claim; second, San
Roque filed its judicial claim more than four (4)
years before the Atlas45 doctrine, which was promulgated by
the Court on 8 June 2007.
Clearly, San Roque failed to comply with the 120-day waiting
period, the time expressly given by law to the Commissioner
to decide whether to grant or deny San Roque’s application for
tax refund or credit. It is indisputable that compliance with the
120-day waiting period is mandatory and jurisdictional. The
waiting period, originally fixed at 60 days only, was part of
the provisions of the first VAT law, Executive Order No. 273,
which took effect on 1 January 1988. The waiting period was
extended to 120 days effective 1 January 1998 under RA 8424
or the Tax Reform Act of 1997. Thus, the waiting period has
been in our statute books for more than fifteen (15)
years before San Roque filed its judicial claim.
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
35
premature and thus without a cause of action, with the effect
that the CTA does not acquire jurisdiction over the taxpayer’s
petition. Philippine jurisprudence is replete with cases
upholding and reiterating these doctrinal principles.46
The charter of the CTA expressly provides that its jurisdiction
is to review on appeal "decisions of the Commissioner of
Internal Revenue in cases involving x x x refunds of internal
revenue taxes."47 When a taxpayer prematurely files a judicial
claim for tax refund or credit with the CTA without waiting
for the decision of the Commissioner, there is no "decision" of
the Commissioner to review and thus the CTA as a court of
special jurisdiction has no jurisdiction over the appeal. 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"48 of the application for tax refund or credit. It is the
Commissioner’s 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.49
San Roque’s failure to comply with the 120-
day mandatory period renders its petition for review with the
CTA void. Article 5 of the Civil Code provides, "Acts
executed against provisions of mandatory or prohibitory laws
shall be void, except when the law itself authorizes their
validity." San Roque’s void petition for review cannot be
legitimized by the CTA or this Court because Article 5 of the
Civil Code states that such void petition cannot be legitimized
"except when the law itself authorizes [its] validity." There is
no law authorizing the petition’s validity.
It is hornbook doctrine that a person committing a void act
contrary to a mandatory provision of law cannot claim or
acquire any right from his void act. A right cannot spring in
favor of a person from his own void or illegal act. This
doctrine is repeated in Article 2254 of the Civil Code, which
states, "No vested or acquired right can arise from acts or
omissions which are against the law or which infringe upon
the rights of others."50 For violating a mandatory provision of
law in filing its petition with the CTA, San Roque cannot
claim any right arising from such void petition. Thus, San
Roque’s petition with the CTA is a mere scrap of paper.
This Court cannot brush aside the grave issue of the
mandatory and jurisdictional nature of the 120-day period just
because the Commissioner merely asserts that the case was
prematurely filed with the CTA and does not question the
entitlement of San Roque to the refund. The mere fact that a
taxpayer has undisputed excess input VAT, or that the tax was
admittedly illegally, erroneously or excessively collected from
him, does not entitle him as a matter of right to a tax refund or
credit. Strict compliance with the mandatory and jurisdictional
conditions prescribed by law to claim such tax refund or credit
is essential and necessary for such claim to prosper. Well-
settled is the rule that tax refunds or credits, just like tax
exemptions, are strictly construed against the
taxpayer.51 The burden is on the taxpayer to show that he has
strictly complied with the conditions for the grant of the tax
refund or credit.
This Court cannot disregard mandatory and jurisdictional
conditions mandated by law simply because the Commissioner
chose not to contest the numerical correctness of the claim for
tax refund or credit of the taxpayer. Non-compliance with
mandatory periods, non-observance of prescriptive periods,
and non-adherence to exhaustion of administrative
remedies bar a taxpayer’s claim for tax refund or credit,
whether or not the Commissioner questions the numerical
correctness of the claim of the taxpayer. This Court should not
establish the precedent that non-compliance with mandatory
and jurisdictional conditions can be excused if the claim is
otherwise meritorious, particularly in claims for tax refunds or
credit. Such precedent will render meaningless compliance
with mandatory and jurisdictional requirements, for then every
tax refund case will have to be decided on the numerical
correctness of the amounts claimed, regardless of non-
compliance with mandatory and jurisdictional conditions.
San Roque cannot also claim being misled, misguided or
confused by the Atlas doctrine because San Roque filed its
petition for review with the CTA more than four years
before Atlas was promulgated. The Atlas doctrine did not
exist at the time San Roque failed to comply with the 120- day
period. Thus, San Roque cannot invoke the Atlas doctrine as
an excuse for its failure to wait for the 120-day period to lapse.
In any event, the Atlas doctrine merely stated that the two-
year prescriptive period should be counted from the date of
payment of the output VAT, not from the close of the taxable
quarter when the sales involving the input VAT were
made. The Atlas doctrine does not interpret, expressly or
impliedly, the 120+3052 day periods.
In fact, Section 106(b) and (e) of the Tax Code of 1977 as
amended, which was the law cited by the Court in Atlas as the
applicable provision of the law did not yet provide for the 30-
day period for the taxpayer to appeal to the CTA from the
decision or inaction of the Commissioner. 53 Thus,
the Atlas doctrine cannot be invoked by anyone to
disregard compliance with the 30-day mandatory and
jurisdictional period. Also, the difference between
the Atlas doctrine on one hand, and the Mirant54 doctrine on
the other hand, is a mere 20 days. The Atlas doctrine counts
the two-year prescriptive period from the date of payment of
the output VAT, which means within 20 days after the close of
the taxable quarter. The output VAT at that time must be paid
at the time of filing of the quarterly tax returns, which were to
be filed "within 20 days following the end of each quarter."
Thus, in Atlas, the three tax refund claims listed below were
deemed timely filed because the administrative claims filed
with the Commissioner, and the petitions for review filed with
the CTA, were all filed within two years from the date of
payment of the output VAT, following Section 229:
36
 Date of
Filing
Date of Filing Return Date of Filing
iod Covered Petition
& Payment of Tax Administrative Claim
CTA
d Quarter, 1990 20 July 1990 21 August 1990 20 July 1992 Section 112(C) also expressly grants the taxpayer a 30-day
se of Quarter
June 1990
Quarter, 1990 18 October 1990 21 November 1990 9 October 1992x x x the taxpayer affected may, within thirty (30) days from
se of Quarter
September 1990
Quarter, 1990 20 January 1991 19 February 1991
14 January 1993
se of Quarter
December 1990
Atlas paid the output VAT at the time it filed the quarterly tax
returns on the 20th, 18th, and 20th day after the close of the
taxable quarter. Had the twoyear prescriptive period been
counted from the "close of the taxable quarter" as expressly
stated in the law, the tax refund claims of Atlas would have
already prescribed. In contrast, the Mirant doctrine counts the
two-year prescriptive period from the "close of the taxable
quarter when the sales were made" as expressly stated in the
law, which means the last day of the taxable quarter. The 20-
day difference55 between the Atlas doctrine and the
later Mirant doctrine is not material to San Roque’s claim
for tax refund.
Whether the Atlas doctrine or the Mirant doctrine is applied to
San Roque is immaterial because what is at issue in the
present case is San Roque’s non-compliance with the 120-day
mandatory and jurisdictional period, which is counted from
the date it filed its administrative claim with the
Commissioner. The 120-day period may extend beyond the
two-year prescriptive period, as long as the administrative
claim is filed within the two-year prescriptive period.
However, San Roque’s fatal mistake is that it did not wait for
the Commissioner to decide within the 120-day period, a
mandatory period whether the Atlas or the Mirant doctrine is
applied.
At the time San Roque filed its petition for review with the
CTA, the 120+30 day mandatory periods were already in the
law. Section 112(C)56 expressly grants the Commissioner 120
days within which to decide the taxpayer’s claim. The law is
clear, plain, and unequivocal: "x x x 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." Following
the verba legis doctrine, this law must be applied exactly as
worded since it is clear, plain, and unequivocal. The taxpayer
cannot simply file a petition with the CTA without waiting for
the Commissioner’s decision within the 120-day mandatory
and jurisdictional period. The CTA will have no jurisdiction
because there will be no "decision" or "deemed a denial"
decision of the Commissioner for the CTA to review. In San
Roque’s case, it filed its petition with the CTA a mere 13 days
after it filed its administrative claim with the Commissioner.
With
Indisputably, San Roque knowingly violated the mandatory
120-day period, and it cannot blame anyone but itself.
period to appeal to the CTA the decision or inaction of the
Commissioner, thus:
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)
This law is clear, plain, and unequivocal. Following the well-
settled verba legis doctrine, this law should be applied exactly
as worded since it is clear, plain, and unequivocal. As this law
states, the taxpayer may, if he wishes, appeal the decision of
the Commissioner to the CTA within 30 days from receipt of
the Commissioner’s decision, or if the Commissioner does not
act on the taxpayer’s claim within the 120-day period, the
taxpayer may appeal to the CTA within 30 days from the
expiration of the 120-day period.
b. G.R. No. 196113 - Taganito Mining Corporation v. CIR
Like San Roque, Taganito also filed its petition for review
with the CTA without waiting for the 120-day period to lapse.
Also, like San Roque, Taganito filed its judicial
claim before the promulgation of the Atlas doctrine. Taganito
filed a Petition for Review on 14 February 2007 with the
CTA. This is almost four months before the adoption of
the Atlas doctrine on 8 June 2007. Taganito is similarly
situated as San Roque - both cannot claim being misled,
misguided, or confused by the Atlas doctrine.
However, Taganito can invoke BIR Ruling No. DA-489-
0357 dated 10 December 2003, which expressly ruled 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." Taganito filed its judicial
claim after the issuance of BIR Ruling No. DA-489-03 but
before the adoption of the Aichi doctrine. Thus, as will be
explained later, Taganito is deemed to have filed its judicial
claim with the CTA on time.
c. G.R. No. 197156 – Philex Mining Corporation v. CIR
Philex (1) filed on 21 October 2005 its original VAT Return
for the third quarter of taxable year 2005; (2) filed on 20
March 2006 its administrative claim for refund or credit; (3)
filed on 17 October 2007 its Petition for Review with the
CTA. The close of the third taxable quarter in 2005 is 30
September 2005, which is the reckoning date in computing the
two-year prescriptive period under Section 112(A).
Philex timely filed its administrative claim on 20 March 2006,
within the two-year prescriptive period. Even if the two-year
prescriptive period is computed from the date of payment of
37
the output VAT under Section 229, Philex still filed its
administrative claim on time. Thus, the Atlas doctrine is
immaterial in this case. The Commissioner had until 17 July
2006, the last day of the 120-day period, to decide Philex’s
claim. Since the Commissioner did not act on Philex’s claim
on or before 17 July 2006, Philex had until 17 August 2006,
the last day of the 30-day period, to file its judicial claim. The
CTA EB held that 17 August 2006 was indeed the last day
for Philex to file its judicial claim. However, Philex filed its
Petition for Review with the CTA only on 17 October 2007, or
four hundred twenty-six (426) days after the last day of
filing. In short, Philex was late by one year and 61 days in
filing its judicial claim. As the CTA EB correctly found:
Evidently, the Petition for Review in C.T.A. Case No. 7687
was filed 426 days late. Thus, the Petition for Review in
C.T.A. Case No. 7687 should have been dismissed on the
ground that the Petition for Review was filed way beyond the
30-day prescribed period; thus, no jurisdiction was acquired
by the CTA Division; x x x58 (Emphasis supplied)
Unlike San Roque and Taganito, Philex’s case is not one of
premature filing but of late filing. 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, Philex’s 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,
Philex’s 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
Philex’s claim during the 120-day period is, by express
provision of law, "deemed a denial" of Philex’s claim. Philex
had 30 days from the expiration of the 120-day period to file
its judicial claim with the CTA. Philex’s 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.59 Philex failed to comply with the statutory
conditions and must thus bear the consequences.
II. Prescriptive Periods under Section 112(A) and (C)
There are three compelling reasons why the 30-day period
need not necessarily fall within the two-year prescriptive
period, as long as the administrative claim is filed within the
two-year prescriptive period.
First, Section 112(A) clearly, plainly, and unequivocally
provides that the taxpayer "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 the creditable input tax due or paid to such sales."
In short, the law states that the taxpayer may apply with the
Commissioner for a refund or credit "within two (2)
years," which means at anytime within two years. Thus, the
application for refund or credit may be filed by the taxpayer
with the Commissioner on the last day of the two-year
prescriptive period and it will still strictly comply with the
law. The twoyear prescriptive period is a grace period in favor
of the taxpayer and he can avail of the full period before his
right to apply for a tax refund or credit is barred by
prescription.
Second, Section 112(C) provides that the Commissioner shall
decide the application for refund or credit "within one hundred
twenty (120) days from the date of submission of complete
documents in support of the application filed in accordance
with Subsection (A)." The reference in Section 112(C) of the
submission of documents "in support of the application filed
in accordance with Subsection A" means that the application
in Section 112(A) is the administrative claim that the
Commissioner must decide within the 120-day period. In
short, the two-year prescriptive period in Section 112(A)
refers to the period within which the taxpayer can file an
administrative claim for tax refund or credit. Stated
otherwise, the two-year prescriptive period does not refer
to the filing of the judicial claim with the CTA but to the
filing of the administrative claim with the Commissioner.
As held in Aichi, the "phrase ‘within two years x x x apply for
the issuance of a tax credit or refund’ refers to applications
for refund/credit with the CIR and not to appeals made to
the CTA."
Third, if the 30-day period, or any part of it, is required to fall
within the two-year prescriptive period (equivalent to 730
days60), then the taxpayer must file his administrative claim for
refund or credit within the first 610 days of the two-year
prescriptive period. Otherwise, the filing of the
administrative claim beyond the first 610 days will result
in the appeal to the CTA being filed beyond the two-year
prescriptive period. Thus, if the taxpayer files his
administrative claim on the 611th day, the Commissioner,
with his 120-day period, will have until the 731st day to
decide the claim. If the Commissioner decides only on the
731st day, or does not decide at all, the taxpayer can no longer
file his judicial claim with the CTA because the two-year
prescriptive period (equivalent to 730 days) has lapsed. The
30-day period granted by law to the taxpayer to file an appeal
before the CTA becomes utterly useless, even if the taxpayer
complied with the law by filing his administrative claim
within the two-year prescriptive period.
The theory that the 30-day period must fall within the two-
year prescriptive period adds a condition that is not found in
the law. It results in truncating 120 days from the 730 days
38
that the law grants the taxpayer for filing his administrative
claim with the Commissioner. This Court cannot interpret a
law to defeat, wholly or even partly, a remedy that the law
expressly grants in clear, plain, and unequivocal language.
Section 112(A) and (C) must be interpreted according to its
clear, plain, and unequivocal language. The taxpayer can file
his administrative claim for refund or credit at anytime within
the two-year prescriptive period. If he files his claim on the
last day of the two-year prescriptive period, his claim is still
filed on time. The Commissioner will have 120 days from
such filing to decide the claim. If the Commissioner decides
the claim on the 120th day, or does not decide it on that day,
the taxpayer still has 30 days to file his judicial claim with the
CTA. This is not only the plain meaning but also the only
logical interpretation of Section 112(A) and (C).
III. "Excess" Input VAT and "Excessively" Collected Tax
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. The input
VAT is a tax liability of, and legally paid by, a VAT-
registered seller61 of goods, properties or services used as input
by another VAT-registered person in the sale of his own
goods, properties, or services. This tax liability is true even if
the seller passes on the input VAT to the buyer as part of the
purchase price. The second VAT-registered person, who is not
legally liable for the input VAT, is the one who applies the
input VAT as credit for his own output VAT. 62 If the input
VAT is in fact "excessively" collected as understood under
Section 229, then it is the first VAT-registered person - the
taxpayer who is legally liable and who is deemed to have
legally paid for the input VAT - who can ask for a tax refund
or credit under Section 229 as an ordinary refund or
credit outside of the VAT System. In such event, the second
VAT-registered taxpayer will have no input VAT to offset
against his own output VAT.
In a claim for refund or credit of "excess" input VAT under
Section 110(B) and Section 112(A), the input VAT is not
"excessively" collected as understood under Section 229. At
the time of payment of the input VAT the amount paid is the
correct and proper amount. Under the VAT System, there is
no claim or issue that the input VAT is "excessively"
collected, that is, that the input VAT paid is more than what is
legally due. The person legally liable for the input VAT
cannot claim that he overpaid the input VAT by the mere
existence of an "excess" input VAT. The term "excess" input
VAT simply means that the input VAT available as credit
exceeds the output VAT, not that the input VAT is excessively
collected because it is more than what is legally due. Thus, the
taxpayer who legally paid the input VAT cannot claim for
refund or credit of the input VAT as "excessively" collected
under Section 229.
Under Section 229, the prescriptive period for filing a judicial
claim for refund is two years from the date of payment of the
tax "erroneously, x x x illegally, x x x excessively or in any
manner wrongfully collected." The prescriptive period is
reckoned from the date the person liable for the tax pays the
tax. Thus, if the input VAT is in fact "excessively" collected,
that is, the person liable for the tax actually pays more than
what is legally due, the taxpayer must file a judicial claim for
refund within two years from his date of payment. Only the
person legally liable to pay the tax can file the judicial
claim for refund. The person to whom the tax is passed on
as part of the purchase price has no personality to file the
judicial claim under Section 229.63
Under Section 110(B) and Section 112(A), the prescriptive
period for filing a judicial claim for "excess" input VAT is two
years from the close of the taxable quarter when the sale was
made by the person legally liable to pay the output VAT. This
prescriptive period has no relation to the date of payment of
the "excess" input VAT. The "excess" input VAT may have
been paid for more than two years but this does not bar the
filing of a judicial claim for "excess" VAT under Section
112(A), which has a different reckoning period from Section
229. Moreover, the person claiming the refund or credit of the
input VAT is not the person who legally paid the input VAT.
Such person seeking the VAT refund or credit does not claim
that the input VAT was "excessively" collected from him, or
that he paid an input VAT that is more than what is legally
due. He is not the taxpayer who legally paid the input VAT.
As its name implies, the Value-Added Tax system is a tax on
the value added by the taxpayer in the chain of transactions.
For simplicity and efficiency in tax collection, the VAT is
imposed not just on the value added by the taxpayer, but on
the entire selling price of his goods, properties or services.
However, the taxpayer is allowed a refund or credit on the
VAT previously paid by those who sold him the inputs for his
goods, properties, or services. The net effect is that the
taxpayer pays the VAT only on the value that he adds to the
goods, properties, or services that he actually sells.
Under Section 110(B), a taxpayer can apply his input VAT
only against his output VAT. The only exception is when the
taxpayer is expressly "zero-rated or effectively zero-rated"
under the law, like companies generating power through
renewable sources of energy.64 Thus, a non zero-rated VAT-
registered taxpayer who has no output VAT because he has no
sales cannot claim a tax refund or credit of his unused input
VAT under the VAT System. Even if the taxpayer has sales
but his input VAT exceeds his output VAT, he cannot seek a
tax refund or credit of his "excess" input VAT under the VAT
System. He can only carry-over and apply his "excess"
input VAT against his future output VAT. If such "excess"
input VAT is an "excessively" collected tax, the taxpayer
should be able to seek a refund or credit for such "excess"
input VAT whether or not he has output VAT. The VAT
System does not allow such refund or credit. Such "excess"
input VAT is not an "excessively" collected tax under Section
229. The "excess" input VAT is a correctly and properly
collected tax. However, such "excess" input VAT can be
applied against the output VAT because the VAT is a tax
39
imposed only on the value added by the taxpayer. If the input
VAT is in fact "excessively" collected under Section 229, then
it is the person legally liable to pay the input VAT, not the
person to whom the tax was passed on as part of the purchase
price and claiming credit for the input VAT under the VAT
System, who can file the judicial claim under Section 229.
Any suggestion that the "excess" input VAT under the VAT
System is an "excessively" collected tax under Section 229
may lead taxpayers to file a claim for refund or credit for such
"excess" input VAT under Section 229 as an ordinary tax
refund or credit outside of the VAT System. Under Section
229, mere payment of a tax beyond what is legally due can be
claimed as a refund or credit. There is no requirement under
Section 229 for an output VAT or subsequent sale of goods,
properties, or services using materials subject to input VAT.
From the plain text of Section 229, it is clear that what can be
refunded or credited is a tax that is "erroneously, x x x
illegally, x x x excessively or in any manner
wrongfully collected." In short, there must be a wrongful
payment because what is paid, or part of it, is not legally due.
As the Court held in Mirant, Section 229 should "apply only
to instances of erroneous payment or illegal collection of
internal revenue taxes." Erroneous or wrongful payment
includes excessive payment because they all refer to
payment of taxes not legally due. Under the VAT System,
there is no claim or issue that the "excess" input VAT is
"excessively or in any manner wrongfully collected." In fact,
if the "excess" input VAT is an "excessively" collected tax
under Section 229, then the taxpayer claiming to apply such
"excessively" collected input VAT to offset his output VAT
may have no legal basis to make such offsetting. The person
legally liable to pay the input VAT can claim a refund or
credit for such "excessively" collected tax, and thus there will
no longer be any "excess" input VAT. This will upend the
present VAT System as we know it.
IV. Effectivity and Scope of
the Atlas , Mirant and Aichi Doctrines
The Atlas doctrine, which held that claims for refund or credit
of input VAT must comply with the two-year prescriptive
period under Section 229, should be effective only from its
promulgation on 8 June 2007 until its abandonment on 12
September 2008 in Mirant. The Atlas doctrine was limited to
the reckoning of the two-year prescriptive period from the date
of payment of the output VAT. Prior to the Atlas doctrine, the
two-year prescriptive period for claiming refund or credit of
input VAT should be governed by Section 112(A) following
the verba legis rule. The Mirant ruling, which abandoned
the Atlas doctrine, adopted the verba legis rule, thus applying
Section 112(A) in computing the two-year prescriptive period
in claiming refund or credit of input VAT.
The Atlas doctrine has no relevance to the 120+30 day periods
under Section 112(C) because the application of the 120+30
day periods was not in issue in Atlas. The application of the
120+30 day periods was first raised in Aichi, which adopted
the verba legis rule in holding that the 120+30 day periods are
mandatory and jurisdictional. The language of Section 112(C)
is plain, clear, and unambiguous. When Section 112(C) states
that "the Commissioner shall grant a refund or issue the tax
credit within one hundred twenty (120) days from the date of
submission of complete documents," the law clearly gives the
Commissioner 120 days within which to decide the taxpayer’s
claim. Resort to the courts prior to the expiration of the 120-
day period is a patent violation of the doctrine of exhaustion of
administrative remedies, a ground for dismissing the judicial
suit due to prematurity. Philippine jurisprudence is awash with
cases affirming and reiterating the doctrine of exhaustion of
administrative remedies.65 Such doctrine is basic and
elementary.
When Section 112(C) states that "the taxpayer affected may,
within thirty (30) days from 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," the law does not make the 120+30 day
periods optional just because the law uses the word "may."
The word "may" simply means that the taxpayer may or may
not appeal the decision of the Commissioner within 30 days
from receipt of the decision, or within 30 days from the
expiration of the 120-day period. Certainly, by no stretch of
the imagination can the word "may" be construed as making
the 120+30 day periods optional, allowing the taxpayer to file
a judicial claim one day after filing the administrative claim
with the Commissioner.
The old rule66 that the taxpayer may file the judicial claim,
without waiting for the Commissioner’s 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. One of
the conditions for a judicial claim of refund or credit under the
VAT System is compliance 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.
40
V. Revenue Memorandum Circular No. 49-03 (RMC 49-
03) dated 15 April 2003
There is nothing in RMC 49-03 that states, expressly or
impliedly, that the taxpayer need not wait for the 120-day
period to expire before filing a judicial claim with the CTA.
RMC 49-03 merely authorizes the BIR to continue processing
the administrative claim even after the taxpayer has filed its
judicial claim, without saying that the taxpayer can file its
judicial claim before the expiration of the 120-day period.
RMC 49-03 states: "In cases where the taxpayer has filed a
‘Petition for Review’ with the Court of Tax Appeals involving
a claim for refund/TCC that is pending at the administrative
agency (either the Bureau of Internal Revenue or the One-
Stop Shop Inter-Agency Tax Credit and Duty Drawback
Center of the Department of Finance), the administrative
agency and the court may act on the case separately." Thus, if
the taxpayer files its judicial claim before the expiration of the
120-day period, the BIR will nevertheless continue to act on
the administrative claim because such premature filing cannot
divest the Commissioner of his statutory power and
jurisdiction to decide the administrative claim within the 120-
day period.
On the other hand, if the taxpayer files its judicial claim after
the 120- day period, the Commissioner can still continue to
evaluate the administrative claim. There is nothing new in this
because even after the expiration of the 120-day period, the
Commissioner should still evaluate internally the
administrative claim for purposes of opposing the taxpayer’s
judicial claim, or even for purposes of determining if the BIR
should actually concede to the taxpayer’s judicial claim. The
internal administrative evaluation of the taxpayer’s claim
must necessarily continue to enable the BIR to oppose
intelligently the judicial claim or, if the facts and the law
warrant otherwise, for the BIR to concede to the judicial
claim, resulting in the termination of the judicial proceedings.
What is important, as far as the present cases are
concerned, is that the mere filing by a taxpayer of a
judicial claim with the CTA before the expiration of the
120-day period cannot operate to divest the Commissioner
of his jurisdiction to decide an administrative claim within
the 120-day mandatory period, unless the Commissioner
has clearly given cause for equitable estoppel to apply as
expressly recognized in Section 246 of the Tax Code.67
VI. BIR Ruling No. DA-489-03 dated 10 December 2003
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, 68 that the
expiration of the 120-day period is mandatory and
jurisdictional before a judicial claim can be filed.
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. Section 246 provides as follows:
Sec. 246. Non-Retroactivity of Rulings. — Any revocation,
modification or reversal of any of the rules and
regulations promulgated in accordance with the preceding
Sections or any of the rulings or circulars promulgated by the
Commissioner shall not be given retroactive application if
the revocation, modification or reversal will be prejudicial
to the taxpayers, except in the following cases:
(a) Where the taxpayer deliberately misstates or omits material
facts from his return or any document required of him by the
Bureau of Internal Revenue;
(b) Where the facts subsequently gathered by the Bureau of
Internal Revenue are materially different from the facts on
which the ruling is based; or
41
(c) Where the taxpayer acted in bad faith. (Emphasis supplied)
Thus, a general interpretative rule issued by the Commissioner
may be relied upon by taxpayers from the time the rule is
issued up to its reversal by the Commissioner or this Court.
Section 246 is not limited to a reversal only by the
Commissioner because this Section expressly states,
"Any revocation, modification or reversal" without specifying
who made the revocation, modification or reversal. Hence, a
reversal by this Court is covered under Section 246.
Taxpayers should not be prejudiced by an erroneous
interpretation by the Commissioner, particularly on a difficult
question of law. The abandonment of the Atlas doctrine
by Mirant and Aichi69 is proof that the reckoning of the
prescriptive periods for input VAT tax refund or credit is a
difficult question of law. The abandonment of
the Atlas doctrine did not result in Atlas, or other taxpayers
similarly situated, being made to return the tax refund or credit
they received or could have received under Atlas prior to its
abandonment. This Court is
applying Mirant and Aichi prospectively. Absent fraud, bad
faith or misrepresentation, the reversal by this Court of a
general interpretative rule issued by the Commissioner, like
the reversal of a specific BIR ruling under Section 246, should
also apply prospectively. As held by this Court in CIR v.
Philippine Health Care Providers, Inc.:70
In ABS-CBN Broadcasting Corp. v. Court of Tax Appeals, this
Court held that under Section 246 of the 1997 Tax Code, the
Commissioner of Internal Revenue is precluded from
adopting a position contrary to one previously taken where
injustice would result to the taxpayer. Hence, where an
assessment for deficiency withholding income taxes was
made, three years after a new BIR Circular reversed a previous
one upon which the taxpayer had relied upon, such an
assessment was prejudicial to the taxpayer. To rule otherwise,
opined the Court, would be contrary to the tenets of good
faith, equity, and fair play.
This Court has consistently reaffirmed its ruling in ABS-CBN
Broadcasting Corp.1âwphi1 in the later cases
of Commissioner of Internal Revenue v. Borroughs,
Ltd., Commissioner of Internal Revenue v. Mega Gen. Mdsg.
Corp., Commissioner of Internal Revenue v. Telefunken
Semiconductor (Phils.) Inc., and Commissioner of Internal
Revenue v. Court of Appeals. The rule is that the BIR
rulings have no retroactive effect where a grossly unfair
deal would result to the prejudice of the taxpayer, as in
this case.
More recently, in Commissioner of Internal Revenue v.
Benguet Corporation, wherein the taxpayer was entitled to tax
refunds or credits based on the BIR’s own issuances but later
was suddenly saddled with deficiency taxes due to its
subsequent ruling changing the category of the taxpayer’s
transactions for the purpose of paying its VAT, this Court
ruled that applying such ruling retroactively would be
prejudicial to the taxpayer. (Emphasis supplied)
Thus, the only issue is whether BIR Ruling No. DA-489-03 is
a general interpretative rule applicable to all taxpayers or a
specific ruling applicable only to a particular taxpayer.
BIR Ruling No. DA-489-03 is a general interpretative rule
because it was a response to a query made, not by a particular
taxpayer, but by a government agency tasked with processing
tax refunds and credits, that is, the One Stop Shop Inter-
Agency 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. DA-
489-03. Thus, while this government agency mentions in its
query to the Commissioner the administrative claim of Lazi
Bay Resources Development, Inc., the agency was in fact
asking the Commissioner what to do in cases like the tax claim
of Lazi Bay Resources Development, Inc., where the taxpayer
did not wait for the lapse of the 120-day period.
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
However, BIR Ruling No. DA-489-03 cannot be given
retroactive effect for four reasons: first, it is admittedly an
erroneous interpretation of the law; second, prior to its
issuance, the BIR held that the 120-day period was mandatory
and jurisdictional, which is the correct interpretation of the
law; third, prior to its issuance, no taxpayer can claim that it
was misled by the BIR into filing a judicial claim prematurely;
and fourth, a claim for tax refund or credit, like a claim for tax
exemption, is strictly construed against the taxpayer.
San Roque, therefore, cannot benefit from BIR Ruling No.
DA-489-03 because it filed its judicial claim prematurely on
10 April 2003, before the issuance of BIR Ruling No. DA-
489-03 on 10 December 2003. To repeat, San Roque cannot
claim that it was misled by the BIR into filing its judicial
claim prematurely because BIR Ruling No. DA-489-03 was
issued only after San Roque filed its judicial claim. At the
time San Roque filed its judicial claim, the law as applied and
administered by the BIR was that the Commissioner had 120
days to act on administrative claims. This was in fact the
position of the BIR prior to the issuance of BIR Ruling No.
DA-489-03. Indeed, San Roque never claimed the benefit
of BIR Ruling No. DA-489-03 or RMC 49-03, whether in
this Court, the CTA, or before the Commissioner.
Taganito, however, filed its judicial claim with the CTA on 14
February 2007, after the issuance of BIR Ruling No. DA-489-
03 on 10 December 2003. Truly, Taganito can claim that in
filing its judicial claim prematurely without waiting for the
120-day period to expire, it was misled by BIR Ruling No.
DA-489-03. Thus, Taganito can claim the benefit of BIR
Ruling No. DA-489-03, which shields the filing of its judicial
claim from the vice of prematurity.
42
Philex’s situation is not a case of premature filing of its
judicial claim but of late filing, indeed very late filing. BIR
Ruling No. DA-489-03 allowed premature filing of a judicial
claim, which means non-exhaustion of the 120-day period for
the Commissioner to act on an administrative claim. Philex
cannot claim the benefit of BIR Ruling No. DA-489-03
because Philex did not file its judicial claim prematurely but
filed it long after the lapse of the 30-day period following the
expiration of the 120-day period. In fact, Philex filed its
judicial claim 426 days after the lapse of the 30-day period.
VII. Existing Jurisprudence
There is no basis whatsoever to the claim that in five cases this
Court had already made a ruling that the filing dates of the
administrative and judicial claims are inconsequential, as long
as they are within the two-year prescriptive period. The effect
of the claim of the dissenting opinions is that San Roque’s
failure to wait for the 120-day mandatory period to lapse is
inconsequential, thus allowing San Roque to claim the tax
refund or credit. However, the five cases cited by the
dissenting opinions do not support even remotely the claim
that this Court had already made such a ruling. None of these
five cases mention, cite, discuss, rule or even hint that
compliance with the 120-day mandatory period is
inconsequential as long as the administrative and judicial
claims are filed within the two-year prescriptive period.
In CIR v. Toshiba Information Equipment (Phils.), Inc.,71 the
issue was whether any output VAT was actually passed on to
Toshiba that it could claim as input VAT subject to tax credit
or refund. The Commissioner argued that "although Toshiba
may be a VAT-registered taxpayer, it is not engaged in a
VAT-taxable business." The Commissioner cited Section
4.106-1 of Revenue Regulations No. 75 that "refund of input
taxes on capital goods shall be allowed only to the extent that
such capital goods are used in VAT-taxable business." In the
words of the Court, "Ultimately, however, the issue still to be
resolved herein shall be whether respondent Toshiba is
entitled to the tax credit/refund of its input VAT on its
purchases of capital goods and services, to which this Court
answers in the affirmative." Nowhere in this case did the
Court discuss, state, or rule that the filing dates of the
administrative and judicial claims are inconsequential, as long
as they are within the two-year prescriptive period.
In Intel Technology Philippines, Inc. v. CIR,72 the Court stated:
"The issues to be resolved in the instant case are (1) whether
the absence of the BIR authority to print or the absence of the
TIN-V in petitioner’s export sales invoices operates to forfeit
its entitlement to a tax refund/credit of its unutilized input
VAT attributable to its zero-rated sales; and (2) whether
petitioner’s failure to indicate "TIN-V" in its sales invoices
automatically invalidates its claim for a tax credit
certification." Again, nowhere in this case did the Court
discuss, state, or rule that the filing dates of the administrative
and judicial claims are inconsequential, as long as they are
within the two-year prescriptive period.
In AT&T Communications Services Philippines, Inc. v.
CIR,73 the Court stated: "x x x the CTA First Division,
conceding that petitioner’s transactions fall under the
classification of zero-rated sales, nevertheless denied
petitioner’s claim ‘for lack of substantiation,’ x x x." The
Court quoted the ruling of the First Division that "valid VAT
official receipts, and not mere sale invoices, should have
been submitted" by petitioner to substantiate its claim. The
Court further stated: "x x x the CTA En Banc, x x x affirmed x
x x the CTA First Division," and "petitioner’s motion for
reconsideration having been denied x x x, the present petition
for review was filed." Clearly, the sole issue in this case is
whether petitioner complied with the substantiation
requirements in claiming for tax refund or credit. Again,
nowhere in this case did the Court discuss, state, or rule that
the filing dates of the administrative and judicial claims are
inconsequential, as long as they are within the two-year
prescriptive period.
In CIR v. Ironcon Builders and Development
Corporation,74 the Court put the issue in this manner: "Simply
put, the sole issue the petition raises is whether or not the CTA
erred in granting respondent Ironcon’s application for refund
of its excess creditable VAT withheld." The Commissioner
argued that "since the NIRC does not specifically grant
taxpayers the option to refund excess creditable VAT
withheld, it follows that such refund cannot be allowed." Thus,
this case is solely about whether the taxpayer has the right
under the NIRC to ask for a cash refund of excess creditable
VAT withheld. Again, nowhere in this case did the Court
discuss, state, or rule that the filing dates of the administrative
and judicial claims are inconsequential, as long as they are
within the two-year prescriptive period.
In CIR v. Cebu Toyo Corporation,75 the issue was whether
Cebu Toyo was exempt or subject to VAT. Compliance with
the 120-day period was never an issue in Cebu Toyo. As the
Court explained:
Both the Commissioner of Internal Revenue and the Office of
the Solicitor General argue that respondent Cebu Toyo
Corporation, as a PEZA-registered enterprise, is exempt from
national and local taxes, including VAT, under Section 24
of Rep. Act No. 7916 and Section 109 of the NIRC. Thus,
they contend that respondent Cebu Toyo Corporation is not
entitled to any refund or credit on input taxes it previously
paid as provided under Section 4.103-1 of Revenue
Regulations No. 7-95, notwithstanding its registration as a
VAT taxpayer. For petitioner claims that said registration was
erroneous and did not confer upon the respondent any right to
claim recognition of the input tax credit.
The respondent counters that it availed of the income tax
holiday under E.O. No. 226 for four years from August 7,
1995 making it exempt from income tax but not from other
taxes such as VAT. Hence, according to respondent, its
export sales are not exempt from VAT, contrary to
petitioner’s claim, but its export sales is subject to 0%
43
VAT. Moreover, it argues that it was able to establish through
a report certified by an independent Certified Public
Accountant that the input taxes it incurred from April 1, 1996
to December 31, 1997 were directly attributable to its export
sales. Since it did not have any output tax against which said
input taxes may be offset, it had the option to file a claim for
refund/tax credit of its unutilized input taxes.
Considering the submission of the parties and the evidence on
record, we find the petition bereft of merit.
Petitioner’s contention that respondent is not entitled to
refund for being exempt from VAT is untenable. This
argument turns a blind eye to the fiscal incentives granted to
PEZA-registered enterprises under Section 23 of Rep. Act No.
7916. Note that under said statute, the respondent had two
options with respect to its tax burden. It could avail of an
income tax holiday pursuant to provisions of E.O. No. 226,
thus exempt it from income taxes for a number of years but
not from other internal revenue taxes such as VAT; or it could
avail of the tax exemptions on all taxes, including VAT under
P.D. No. 66 and pay only the preferential tax rate of 5% under
Rep. Act No. 7916. Both the Court of Appeals and the Court
of Tax Appeals found that respondent availed of the income
tax holiday for four (4) years starting from August 7, 1995, as
clearly reflected in its 1996 and 1997 Annual Corporate
Income Tax Returns, where respondent specified that it was
availing of the tax relief under E.O. No. 226. Hence,
respondent is not exempt from VAT and it correctly
registered itself as a VAT taxpayer. In fine, it is engaged in
taxable rather than exempt transactions. (Emphasis
supplied)
Clearly, the issue in Cebu Toyo was whether the taxpayer
was exempt from VAT or subject to VAT at 0% tax rate. If
subject to 0% VAT rate, the taxpayer could claim a refund or
credit of its input VAT. Again, nowhere in this case did the
Court discuss, state, or rule that the filing dates of the
administrative and judicial claims are inconsequential, as long
as they are within the two-year prescriptive period.
While this Court stated in the narration of facts in Cebu
Toyo that the taxpayer "did not bother to wait for the
Resolution of its (administrative) claim by the CIR" before
filing its judicial claim with the CTA, this issue was not raised
before the Court. Certainly, this statement of the Court is not a
binding precedent that the taxpayer need not wait for the 120-
day period to lapse.
Any issue, whether raised or not by the parties, but not
passed upon by the Court, does not have any value as
precedent. As this Court has explained as early as 1926:
It is contended, however, that the question before us was
answered and resolved against the contention of the appellant
in the case of Bautista vs. Fajardo (38 Phil. 624). In that case
no question was raised nor was it even suggested that said
section 216 did not apply to a public officer. That question
was not discussed nor referred to by any of the parties
interested in that case. It has been frequently decided that the
fact that a statute has been accepted as valid, and invoked and
applied for many years in cases where its validity was not
raised or passed on, does not prevent a court from later
passing on its validity, where that question is squarely and
properly raised and presented. Where a question passes the
Court sub silentio, the case in which the question was so
passed is not binding on the Court (McGirr vs. Hamilton
and Abreu, 30 Phil. 563), nor should it be considered as a
precedent. (U.S. vs. Noriega and Tobias, 31 Phil.
310; Chicote vs. Acasio, 31 Phil. 401; U.S. vs. More, 3 Cranch
[U.S.] 159, 172; U.S. vs. Sanges, 144 U.S. 310, 319; Cross vs.
Burke, 146 U.S. 82.) For the reasons given in the case
of McGirr vs. Hamilton and Abreu, supra, the decision in the
case of Bautista vs. Fajardo, supra, can have no binding force
in the interpretation of the question presented
here.76 (Emphasis supplied)
In Cebu Toyo, the nature of the 120-day period, whether it is
mandatory or optional, was not even raised as an issue by any
of the parties. The Court never passed upon this issue.
Thus, Cebu Toyo does not constitute binding precedent on the
nature of the 120-day period.
There is also the claim that there are numerous CTA decisions
allegedly supporting the argument that the filing dates of the
administrative and judicial claims are inconsequential, as long
as they are within the two-year prescriptive period. Suffice it
to state that CTA decisions do not constitute precedents, and
do not bind this Court or the public. That is why CTA
decisions are appealable to this Court, which may affirm,
reverse or modify the CTA decisions as the facts and the law
may warrant. Only decisions of this Court constitute binding
precedents, forming part of the Philippine legal system. 77 As
held by this Court in The Philippine Veterans Affairs Office v.
Segundo:78
x x x Let it be admonished that decisions of the Supreme
Court "applying or interpreting the laws or the
Constitution . . . form part of the legal system of the
Philippines," and, as it were, "laws" by their own right because
they interpret what the laws say or mean. Unlike rulings of
the lower courts, which bind the parties to specific cases
alone, our judgments are universal in their scope and
application, and equally mandatory in character. Let it be
warned that to defy our decisions is to court contempt.
(Emphasis supplied)
The same basic doctrine was reiterated by this Court in De
Mesa v. Pepsi Cola Products Phils., Inc.:79
The principle of stare decisis et non quieta movere is
entrenched in Article 8 of the Civil Code, to wit:
ART. 8. Judicial decisions applying or interpreting the laws or
the Constitution shall form a part of the legal system of the
Philippines.
44
It enjoins adherence to judicial precedents. It requires our
courts to follow a rule already established in a final
decision of the Supreme Court. That decision becomes a
judicial precedent to be followed in subsequent cases by all
courts in the land. The doctrine of stare decisis is based on the
principle that once a question of law has been examined and
decided, it should be deemed settled and closed to further
argument. (Emphasis supplied)
VIII. Revenue Regulations No. 7-95 Effective 1 January
1996
Section 4.106-2(c) of Revenue Regulations No. 7-95, by its
own express terms, applies only if the taxpayer files the
judicial claim "after" the lapse of the 60-day period, a period
with which San Roque failed to comply. Under Section
4.106-2(c), the 60-day period is still mandatory and
jurisdictional.
Moreover, it is a hornbook principle that a prior administrative
regulation can never prevail over a later contrary law, more so
in this case where the later law was enacted precisely to
amend the prior administrative regulation and the law it
implements.
The laws and regulation involved are as follows:
1977 Tax Code, as amended by Republic Act No. 7716
(1994)
Sec. 106. Refunds or tax credits of creditable input tax. —
(a) x x x x
(d) Period within which refund or tax credit of input tax shall
be made - In proper cases, the Commissioner shall grant a
refund or issue the tax credit for creditable input taxes within
sixty (60) days from the date of submission of complete
documents in support of the application filed in accordance
with subparagraphs (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 receipt of the decision
denying the claim or after the expiration of the sixty-day
period, appeal the decision or the unacted claim with the
Court of Tax Appeals.
Revenue Regulations No. 7-95 (1996)
Section 4.106-2. Procedures for claiming refunds or tax credits
of input tax — (a) x x x
xxxx
(c) Period within which refund or tax credit of input taxes
shall be made. — In proper cases, the Commissioner shall
grant a tax credit/refund for creditable input taxes within sixty
(60) days from the date of submission of complete documents
in support of the application filed in accordance with
subparagraphs (a) and (b) above.
In case of full or partial denial of the claim for tax
credit/refund as decided by the Commissioner of Internal
Revenue, the taxpayer may appeal to the Court of Tax Appeals
within thirty (30) days from the receipt of said denial,
otherwise the decision will become final. However, if no
action on the claim for tax credit/refund has been taken by
the Commissioner of Internal Revenue after the sixty (60)
day period from the date of submission of the application
but before the lapse of the two (2) year period from the
date of filing of the VAT return for the taxable quarter,
the taxpayer may appeal to the Court of Tax Appeals.
xxxx
1997 Tax Code
Section 112. Refunds or Tax Credits of Input Tax —
(A) x x x
xxxx
(D) Period within which Refund or Tax Credit of Input Taxes
shall be made. — In proper cases, the Commissioner shall
grant the 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 hundred twenty day-period,
appeal the decision or the unacted claim with the Court of
Tax Appeals.
There can be no dispute that under Section 106(d) of the 1977
Tax Code, as amended by RA 7716, the Commissioner has a
60-day period to act on the administrative claim. This 60-day
period is mandatory and jurisdictional.
Did Section 4.106-2(c) of Revenue Regulations No. 7-95
change this, so that the 60-day period is no longer mandatory
and jurisdictional? The obvious answer is no.
Section 4.106-2(c) itself expressly states that if, "after the
sixty (60) day period," the Commissioner fails to act on the
administrative claim, the taxpayer may file the judicial claim
even "before the lapse of the two (2) year period." Thus,
under Section 4.106-2(c) the 60-day period is still
mandatory and jurisdictional.
Section 4.106-2(c) did not change Section 106(d) as amended
by RA 7716, but merely implemented it, for two
reasons. First, Section 4.106-2(c) still expressly requires
compliance with the 60-day period. This cannot be
disputed.1âwphi1
45
Second, under the novel amendment introduced by RA 7716,
mere inaction by the Commissioner during the 60-day period
is deemed a denial of the claim. Thus, Section 4.106-2(c)
states that "if no action on the claim for tax refund/credit has
been taken by the Commissioner after the sixty (60) day
period," the taxpayer "may" already file the judicial
claim even long before the lapse of the two-year prescriptive
period. Prior to the amendment by RA 7716, the taxpayer had
to wait until the two-year prescriptive period was about to
expire if the Commissioner did not act on the claim. 80 With
the amendment by RA 7716, the taxpayer need not wait until
the two-year prescriptive period is about to expire before filing
the judicial claim because mere inaction by the Commissioner
during the 60-day period is deemed a denial of the claim. This
is the meaning of the phrase "but before the lapse of the
two (2) year period" in Section 4.106-2(c). As Section
4.106- 2(c) reiterates that the judicial claim can be filed only
"after the sixty (60) day period," this period remains
mandatory and jurisdictional. Clearly, Section 4.106-2(c) did
not amend Section 106(d) but merely faithfully implemented
it.
Even assuming, for the sake of argument, that Section 4.106-
2(c) of Revenue Regulations No. 7-95, an administrative
issuance, amended Section 106(d) of the Tax Code to make
the period given to the Commissioner non-mandatory, still the
1997 Tax Code, a much later law, reinstated the original intent
and provision of Section 106(d) by extending the 60-day
period to 120 days and re-adopting the original wordings of
Section 106(d). Thus, Section 4.106-2(c), a mere
administrative issuance, becomes inconsistent with Section
112(D), a later law. Obviously, the later law prevails over a
prior inconsistent administrative issuance.
Section 112(D) of the 1997 Tax Code is clear, unequivocal,
and categorical that the Commissioner has 120 days to act on
an administrative claim. The taxpayer can file the judicial
claim (1) only within thirty days after the Commissioner
partially or fully denies the claim within the 120- day period,
or (2) only within thirty days from the expiration of the 120-
day period if the Commissioner does not act within the 120-
day period.
There can be no dispute that upon effectivity of the 1997 Tax
Code on 1 January 1998, or more than five years before San
Roque filed its administrative claim on 28 March 2003, the
law has been clear: the 120- day period is mandatory and
jurisdictional. San Roque’s claim, having been filed
administratively on 28 March 2003, is governed by the 1997
Tax Code, not the 1977 Tax Code. Since San Roque filed its
judicial claim before the expiration of the 120-day mandatory
and jurisdictional period, San Roque’s claim cannot prosper.
San Roque cannot also invoke Section 4.106-2(c), which
expressly provides that the taxpayer can only file the judicial
claim "after" the lapse of the 60-day period from the filing of
the administrative claim. San Roque filed its judicial claim
just 13 days after filing its administrative claim. To recall,
San Roque filed its judicial claim on 10 April 2003, a mere 13
days after it filed its administrative claim.
Even if, contrary to all principles of statutory construction as
well as plain common sense, we gratuitously apply now
Section 4.106-2(c) of Revenue Regulations No. 7-95, still San
Roque cannot recover any refund or credit because San
Roque did not wait for the 60-day period to lapse, contrary
to the express requirement in Section 4.106-2(c). In short,
San Roque does not even comply with Section 4.106-2(c). A
claim for tax refund or credit is strictly construed against the
taxpayer, who must prove that his claim clearly complies with
all the conditions for granting the tax refund or credit. San
Roque did not comply with the express condition for such
statutory grant.
A final word. Taxes are the lifeblood of the nation. The
Philippines has been struggling to improve its tax efficiency
collection for the longest time with minimal success.
Consequently, the Philippines has suffered the economic
adversities arising from poor tax collections, forcing the
government to continue borrowing to fund the budget deficits.
This Court cannot turn a blind eye to this economic malaise by
being unduly liberal to taxpayers who do not comply with
statutory requirements for tax refunds or credits. The tax
refund claims in the present cases are not a pittance. Many
other companies stand to gain if this Court were to rule
otherwise. The dissenting opinions will turn on its head the
well-settled doctrine that tax refunds are strictly construed
against the taxpayer.
WHEREFORE, the Court hereby (1) GRANTS the petition
of the Commissioner of Internal Revenue in G.R. No. 187485
to DENY the P483,797,599.65 tax refund or credit claim of
San Roque Power Corporation; (2) GRANTS the petition of
Taganito Mining Corporation in G.R. No. 196113 for a tax
refund or credit of P8,365,664.38; and (3) DENIES the
petition of Philex Mining Corporation in G.R. No. 197156 for
a tax refund or credit of P23,956,732.44.
SO ORDERED.
46