VALUE ADDED TAX (VAT) – PERIOD FOR REFUND 3.
3. [September 30, 2004] On even date, AFCA filed a Petition for Review with the Court
G.R. No. 184823 – CIR v. AICHI FORGING COMPANY OF ASIA, INC.
DEL CASTILLO, J.
Respondent Aichi Forging Company of Asia ("AFCA"), a company engaged in
manufacturing, producing and processing steel is a VAT-registered entity. AFCA filed a claim
for refund/ credit of input VAT for July 2002 to September 2002 with the CIR. On the same
day it also filed a Petition for Review with the Court of Tax Appeals 2ND Division for the
refund/credit of the same input VAT. Petitioner CIR filed its answer raising the defense that
such claim for refund by AFCA is subject to the administrative investigation of the CIR
wherein AFCA must prove that its sales are export sales as the burden of proof is on the
taxpayer to establish its right to refund. CIR also claimed that AFCA filed beyond the 2-year
period prescribed for refund. AFCA was successful in the CTA hence CIR's appeal to the
SC. The SC held that while AFCA was correct in claiming that it filed within the prescriptive
period (which commences from the close of the taxable quarter when the sales were made
and not from the time the input VAT was paid nor the time when the OR issued) its filing of
the judicial claim was premature since the CIR still has 120 days within which to grant or
deny the refund/ credit claim.
DOCTRINE
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.
Claimant of refund/credit 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 prescriptive 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.
FACTS
1. Aichi Forging Company of Asia, Inc. ("AFCA") is a corporation organized under the laws
of the Philippines and registered with the Bureau of Internal Revenue ("BIR") as a Value
Added Tax ("VAT") entity. It is engaged in the manufacturing, production, and
processing of steel and its by-products.
2. [September 30, 2004] AFCA filed a claim for refund/credit of input VAT for the period
July 1, 2002 to September 30, 2002 in the total amount of PHP 3,891,123.82 with
petitioner Commission of Internal Revenue ("CIR") through the Department of Finance
("DOF") One-Stop Shop Inter-Agency Tax Credit and Duty Drawback Center.
of Tax Appeals ("CTA") for the refund/credit of the same input VAT. This was raffled to
the Second Division of the CTA. AFCA alleged the following:
a. For the period it was applying a refund for, it generated and recorded zero-
rated sales in the amount of PHP 131,791,399 which was paid.
b. For the same period it incurred and paid input VAT amounting to PHP
3,912,088.14 from purchase and importation attributable to the zero-rated
sales.
c. In its application for refund/credit filed with the DOF, it only claimed the
amount PHP 3,891,123.82
4. In response, the CIR filed its Answer, raising the following special and affirmative
defenses:
a. AFCA's claim is subject to administrative investigation by the Bureau
b. AFCA must prove that it paid VAT input taxes for the period
c. AFCA must prove that its sales are export sales contemplated under §
106(A)(2)(a) and § 108(B)(1) of the 1997 NIRC
d. AFCA must prove that such claim was filed within two (2) year period
prescribed in § 229 of the Tax Code
e. In actions for refund, the burden of proof is on the taxpayer to establish its
right to refund – failure to sustain this is fatal to the claim
f. Claims for refund are construed strictly against the claimant for they
partake of the nature of exemption from taxation
5. [January 4, 2008] The Second Division of the CTA partially granted AFCA's claim.
a. it found that AFCA complied with the first three requirements (see Doctrine)
b. it found that AFCA did not satisfactorily substantiate the fourth requirement
c. ordered the refund of PHP 3,239,119.25
6. CIR filed a motion for partial reconsideration, insisting the following:
a. AFCA's administrative and judicial claims were filed beyond the 2-year period
per § 112(A) and 229 of the NIRC
i. This is because 2004 was a leap year, hence the filing on
September 30, 2004 was beyond the 2-year period which supposed
to have expired on September 29, 2004
1. Basis is Article 13 of the CC (year = 365 days)
ii. Simultaneous filing of the administrative (with DOF) and judicial
(with CTA) claims contravened §112 and §229 of the NIRC
1. Requirement rests on doctrine of administrative remedies
2. Also on the fact that CTA IS AN APPELLATE BODY which
exercises power of judicial review over administrative
action of the BIR
7. However, the 2nd Division of the CTA denied CIR's MR. Hence, petitioner elevated the
same to the CTA En Banc
8. [July 30, 2008] The CTA En Banc affirmed the 2nd Division's decision. However, as to
the reckoning period, it made the following ruling:
a. We are not persuaded with the petitioner's argument that the filing of
administrative and judicial claims eliminates the authority of the Court to
exercise jurisdiction.
b. Based on § 114, a taxpayer has 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
c. 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
1
 for its gross sales or receipts with which it complied when it filed its VAT
Quarterly Return on October 20, 2002.
d. In relation to this, the reckoning of the 2-year period provided under § 229 of
the NIRC should start from the payment of tax subject claim for refund.
e. Thus, AFCA's admin and judicial claims for refund filed on September 30,
2004 were filed on time because AFCA's has until October 20, 2004 within
which to file its claim for refund.
f. We also do not agree with the contention that the NIRC requires the previous
filing of an administrative claim for refund PRIOR to the judicial claim. The law
does not prohibit the simultaneous filing of the same. What is controlling is
that both must be filed within the 2-year period
9. CIR filed an MR which the CTA En Banc denied.
10. Hence this petition.
ISSUE with HOLDING
1. WON AFCA's judicial and administrative claims for tax refund/credit were filed within
the 2-year prescriptive period under § 112(A) and 229 of the NIRC. – YES
a. Petitioner: 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.
b. Respondent: "nonobservance 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"
c. S. Court: "Respondent is correct.
i. Prescriptive 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
ii. The administrative claim was timely filed.
1. The Administrative Code is a specific law that actually
provides for the process of counting the number of days in
a year.
2. Applying Section 31, Chapter VIII, Book I of the
Administrative Code of 1987 to this case, the two-year
prescriptive period (reckoned from the time respondent
filed its final adjusted return on April 14, 1998) consisted
of 24 calendar months
3. Applying this to the present case, the two-year period to
file a claim for tax refund/credit for the period July 1, 2002
to September 30, 2002 expired on September 30, 2004.
Hence, respondent's administrative claim was timely filed.
i. NIIRC clearly provides that the CIR has "120 days, from the date
of the submission of the complete documents in support of the
application [for tax refund/credit]," within which to grant or deny the
claim
ii. The phrase "within two (2) years . . . 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
c. Applying the two-year period to judicial claims would render nugatory.
d. 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.
e. The second paragraph of Section 112 (D) of the NIRC envisions two
scenarios:
i. (1) when a decision is issued by the CIR before the lapse of the 120-
day period; and
ii. (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
DISPOSITIVE PORTION
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.
DIGESTER:

2. WON AFCA is entitled to its tax refund/credit. – NO.

a. Though petitioners' contention is correct, AFCA is still not entitled to its tax
refund as its judicial claim is premature.
b. Such judicial complaint was filed in violation of 112(D) of the NIRC stating
that: