FIRST DIVISION

G.R. No. 197980, December 01, 2016

DEUTSCHE KNOWLEDGE SERVICES PTE LTD., Petitioner, v. COMMISSIONER OF

INTERNAL REVENUE, Respondent.

DECISION

LEONARDO-DE CASTRO, J.:

This is an appeal from the Decision1 dated July 22, 2011 of the Court of Tax Appeals
(CTA) En Banc in CTA E.B. Case No. 596, entitled "Deutsche Knowledge Services Pte
Ltd. v. Commissioner of Internal Revenue." The aforementioned judgment affirmed with
modification the Resolution dated October 28, 2009 as well as the Resolution dated
February 8, 2010 of the CTA (Former Second Division) in CTA Case No. 7921. Both
resolutions disposed of the petition for review and the subsequent motion for
reconsideration filed by petitioner Deutsche Knowledge Services Pte. Ltd. before the
CTA's former Second Division with regard to the alleged inaction of respondent
Commissioner of Internal Revenue on the former's application for tax credit/refund of
alleged excess and unutilized input Value-Added Tax (VAT).

The factual and procedural antecedents of this case were narrated in the July 22, 2011
Decision of the CTA En Banc in this wise:chanRoblesvirtualLawlibrary

Petitioner avers that on March 31, 2009, it filed an application for Tax Credit/Refund of
its allegedly excess and unutilized input VAT for the 1st quarter of the calendar year
2007 in the amount of P12,549,446.30 with respondent Commissioner of Internal
Revenue (empowered to act upon and approve claims for refund or tax credit as
provided by law) through its BIR Revenue District No. 47.

Citing inaction on the part of respondent, petitioner on April 17, 2009 filed a Petition for
Review or [s]eventeen (17) days after petitioner filed an application for tax
credit/refund with respondent based on Section 112 and 229 of the National Internal
Revenue Code of 1997, as amended.

However, on June 8, 2009, instead of an Answer respondent filed a Motion to Dismiss

on ground of prescription. Citing the case of Commissioner of Internal Revenue v.
Mirant Pagbilao Corporation (Mirant Case), respondent alleged that the Petition for
Review was filed out of time on the ground of having been filed beyond the two-year
prescriptive period.

A day after or on June 9, 2009, respondent filed an Answer again citing the same
grounds in the Motion to Dismiss in her Special and Affirmative defenses.
After hearing and the filing of Comment/Opposition on the Motion to Dismiss, the
former Second Division of this Court resolved to grant said motion on October 28, 2009.
Petitioner filed a motion for reconsideration thereon on November 16, 2009.

However, in an Order dated January 11, 2010, the case was ordered to be transferred
to the Third Division of this Court pursuant to CTA Administrative Circular No. 01-2010,
"Implementing the Fully Expanded Membership in the Court of Tax Appeals".

Notwithstanding, on February 8, 2010, the former Second Division of this Court

promulgated a Resolution which denied petitioner's Motion for Reconsideration.2
chanrobleslaw
Petitioner then filed a petition for review with the CTA En Banc. However, the said
tribunal merely affirmed with modification the assailed resolutions and dismissed
petitioner's suit for having been prematurely filed prior to the expiration of the 120-day
period granted to respondent to resolve the tax claim. The dispositive portion of the
assailed July 22, 2011 Decision of the CTA En Banc reads:chanRoblesvirtualLawlibrary
WHEREFORE, premises considered, the Resolution of the former Second Division of
this Court in CTA Case No. 7921, dated October 28, 2009 and its Resolution, dated
February 8, 2010, are hereby AFFIRMED with MODIFICATION. Accordingly, CTA
Case No. 7921 is hereby DISMISSED for having been prematurely filed pursuant to
the case of Commissioner of Internal Revenue v. Aichi Forging Company of Asia,
Inc. No pronouncement as to costs.3
chanrobleslaw
Hence, petitioner resorted to the present appeal, by way of a petition for review under
Rule 45, wherein it cited the following errors allegedly committed by the CTA En Banc:
ASSIGNMENT OF ERRORS

THE CTA EN BANC DECISION IS NOT IN ACCORD WITH LAW AND WITH THE
RELEVANT DECISIONS OF THE SUPREME COURT, AND CONSTITUTE A
DEPARTURE FROM THE ACCEPTED AND USUAL COURSE OF JUDICIAL
PROCEEDINGS AS TO CALL FOR AN EXERCISE OF THE POWER OF THIS
HONORABLE COURT'S SUPERVISION, AS FOLLOWS:cralawlawlibrary

A.
THE CTA EN BANC COMMITTED REVERSIBLE ERROR IN AFFIRMING THAT
THE CTA'S FORMER SECOND DIVISION COULD STILL RESOLVE
PETITIONER'S MOTION FOR RECONSIDERATION AFTER IT HAD LOST
JURISDICTION OVER THE CASE UPON ITS TRANSFER TO THE THIRD
DIVISION.chanroblesvirtuallawlibrary

B.
THE CTA EN BANC COMMITTED REVERSIBLE ERROR IN NOT FINDING THAT
THE CTA'S FORMER SECOND DIVISION SHOULD HAVE ORDERED THE PRE-
TRIAL CONFERENCE TO PROCEED:chanRoblesvirtualLawlibrary
B.1 THE CTA'S FORMER SECOND DIVISION FAILED TO ADDRESS VITAL
SUFFICIENT TO RENDER RESPONDENT'S MOTION TO DISMISS MOOT AND
ACADEMIC.

B.2 RESPONDENT DEFIED THE CTA'S FORMER SECOND DIVISION'S ORDER.

THE SECOND DIVISION INTENDED TO HEAR THE CASE IN ITS ENTIRETY
WHEN IT ORDERED RESPONDENT TO FILE AN ANSWER INSTEAD OF A
MOTION TO DISMISS, IN LINE WITH THE INTEGRATED BAR OF THE
PHILIPPINES-OFFICE OF THE COURT ADMINISTRATOR MEMORANDUM ON
POLICY GUIDELINES DATED MARCH 12, 2002 ("IBP-COA MEMORANDUM").

B.3 RESPONDENT LOST HER RIGHT TO ASSAIL THE FORMER SECOND

DIVISION'S JURISDICTION WHEN SHE SOUGHT RELIEF FROM THE COURT
BY FILING A MOTION FOR EXTENSION OF TIME TO FILE ANSWER.

B.4 THE ISSUES OF THE CASE HAVE BEEN JOINED UPON RESPONDENT'S
FILING OF THE ANSWER, AND THUS, PRE-TRIAL AND TRIAL SHOULD HAVE
PROCEEDED AS A MATTER OF PROCEDURE; AND
chanrobleslaw
C.

THE CTA EN BANC ERRED IN NOT FINDING THAT PETITIONER'S JUDICIAL

CLAIM FOR REFUND WAS TIMELY FILED IN ACCORDANCE WITH SECTION
112(C), TAX CODE IN RELATION TO THE TWO-YEAR PRESCRIPTIVE PERIOD
PROVIDED UNDER SECTION 229, TAX CODE. THE LETTER AND THE INTENT
[OF THE] LAW AS WELL AS EXISTING JURISPRUDENCE ALL POINT TO THE
PRIMORDIAL SIGNIFICANCE OF THE TWO-YEAR PRESCRIPTIVE
PERIOD:cralawlawlibrary

C.1 THE TWO-YEAR PRESCRIPTIVE PERIOD FOR THE FILING OF CLAIMS FOR
REFUND SHOULD BE RECKONED FROM THE DATE OF FILING OF THE
QUARTERLY VAT RETURN AS SETTLED IN ATLAS.

C.2 THE CTA EN BANC ERRED IN FINDING THAT AICHIPREVAILS OVER

AND/OR OVERTURNED THE DOCTRINE IN ATLAS, WHICH UPHELD THE
PRIMACY OF THE TWO-YEAR PERIOD UNDER SECTION 229, 1997 TAX CODE.
THE LAW AND JURISPRUDENCE HAVE LONG ESTABLISHED THE DOCTRINE
THAT THE TAXPAYER IS DUTY-BOUND TO OBSERVE THE TWO-YEAR PERIOD
UNDER SECTION 229, 1997 TAX CODE WHEN FILING ITS CLAIM FOR
REFUND OF EXCESS AND UNUTILIZED VAT.
C.3 THE CTA EN BANC ERRED IN NOT HOLDING THAT RESPONDENT IS
PRECLUDED FROM QUESTIONING THE JURISDICTION OF THE CTA-DIVISION
BASED ON HER PRONOUNCEMENTS RECOGNIZING THAT THE 120-DAY
PERIOD IS NOT JURISDICTIONAL VIS-A-VIS HER FAlLURE TO RAISE THE
ISSUE OF PREMATURITY IN HER ANSWER AND IN HER MOTION TO DISMISS.

C.4 THE CTA EN BANC ERRED IN FINDING THAT AICHICAN BE APPLIED

INVARIABLY TO TAXPAYERS WHO, IN GOOD FAITH, FILED AND LITIGATED
THEIR CLAIMS FOR REFUND OF INPUT VAT RELYING UPON ESTABLISHED
DECLARATIONS AND PRONOUNCEMENTS OF THIS HONORABLE COURT AND
THE CTA. ASSUMING AICHI IS MADE TO APPLY, THE PROSPECTIVE
APPLICATION THEREOF IS LEGALLY AND EQUITABLY IMPERATIVE.4
chanrobleslaw
In deciding the substantive aspect of petitioner's suit before it, the CTA En
Banc ratiocinated that:chanRoblesvirtualLawlibrary
[T]he substance of petitioner's argument is the alleged applicability of the Decision of
the Supreme Court in the case of Atlas Consolidated Mining and Development
Corporation v. Commissioner of Internal Revenue (Atlas Case) promulgated on June 8,
2007 and the non-applicability of the case of Commissioner of Internal Revenue v.
Mirant Pagbilao Corporation (Mirant Case), promulgated on September 12, 2008.

In applying the Mirant Case in relation to Section 112, the former Second Division held
that the administrative claim was filed on time while the Petition for Review before this
Court's Division was filed out of time or beyond the two-year prescriptive period, the
close of the taxable first quarter of the calendar year 2007 or March 31, 2007 as the
reckoning period, it appearing that the application for tax credit/refund was filed with
the respondent on March 31, 2009 and the petition for review was filed on April 17,
2009.

However, in the case of Commissioner of Internal Revenue v. Aichi Forging Company of

Asia, Inc., reiterating the "Mirant Case", the Supreme Court categorically ruled that
unutilized input VAT must be claimed within two years after the close of the taxable
quarter when the sales were made and that the 120-day period is crucial in filing an
appeal with this Court. The pertinent portion of which reads as
follows:chanRoblesvirtualLawlibrary
"The pivotal question of when to reckon the running of the two-year prescriptive period,
however, has already been resolved in Commissioner of Internal Revenu v. Mirant
Pagbilao Corporation, 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 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." x x x.

xxxx
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 unuti1ized 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.

xxxx

Section 112(D) of the NIRC clearly provides that the CIR has "120 days, from the date
of the submission of the complete documents in support of the application [for tax
refund/credit]," within which to grant or deny the claim. In case of full or partial denial
by the CIR, the taxpayer's recourse is to file an appeal before the CTA within 30 days
from receipt of the decision of the CIR. However, if after the 120-day period the CIR
fails to act on the application for tax refund/credit, the remedy of the taxpayer is to
appeal the inaction of the CIR to CTA within 30 days.

In this case, the administrative and the judicial claims were simultaneously filed on
September 30, 2004. Obviously, respondent did not wait for the decision of the CIR or
the lapse of the 120-day period. For this reason, we find the filing of the judicial claim
with the CTA premature.

Respondent's assertion that the non-observance of the 120-day period is not fatal to
the filing of a judicial claim as long as both the administrative and the judicial claims are
filed within the two-year prescriptive period has no legal basis.

There is nothing in Section 112 of the NIRC to support respondent's view. Subsection
(A) of the said provision states that "any VAT-registered person, whose sales are zero-
rated or effectively zero-rated may, within two yearsafter the close of the taxable
quarter when the sales were made, apply for the issuance of a tax credit
certificate or refund of creditable input tax due or paid attributable to such sales."
The phrase "within two (2) years x x x apply for the issuance of a tax credit certificate
or refund" refers to applications for refund/credit filed with the CIR and not to appeals
made to the CT A. 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. 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."
chanrobleslaw
In the instant case, the administrative claim or application for tax credit/refund of its
allegedly excess and unutilized input VAT for the first quarter of taxable year 2007 was
filed on March 31, 2009 or within the two-year prescriptive period. Respondent had 120
days or until July 29, 2009 to determine the validity of the claim. However, petitioner
filed an appeal by way of a petition for review on April 17, 2009 or 17 days after the
filing of the administrative claim. Apparently, petitioner did not wait for the decision of
the CIR or the lapse of the 120-day period and this is in clear contravention of Section
112(D) [now Section 112(C)] of the 1997 NIRC, as amended, and of the doctrine laid
down in the Aichi case.

Accordingly, we find the filing of an appeal by way of a petition for review before this
Court's former Second Division is strikingly similar with that of the facts in
the Aichi Case. In both cases, the taxpayer (petitioner in the instant case) did not wait
for the decision of the CIR or the lapse of the 120-day period before the filing of an
appeal by way of a petition for review before this Court.

Pertinently, our disquisitions in the case of Marubeni Philippines Corporation v.

Commissioner of Internal Revenue of the applicability of Section 112 of the 1997 NIRC
and Aichi Case in the instant case are hereby adopted, as
follows:chanRoblesvirtualLawlibrary
"A careful analysis of the above-mentioned cases Atlas, Mirant and Aichi clearly shows
that the Atlas Case was an interpretation by the Supreme Court of the 1977 NIRC, prior
to its amendment by R.A. 7716; while the Mirant and Aichi cases was an interpretation
of the 1997 NIRC or the application and interpretation of the amendatory provisions of
the Tax Reform Act of 1997.

Significantly, it is emphasized that the premise of the Supreme Court's ruling in

the Atlas Case was anchored on the need to harmonize the provisions on Refund or Tax
Credits of Input Tax under Section 106 (now Section 112) with the two-year
prescriptive period for instituting a suit or proceeding for the Recovery of Tax
Erroneously or Illegaly paid under Section 230 (now Section 229) of the Tax Code of
1977, as amended, citing the cases of ACCRA Investments Corporation v. Court of
Appeals and Commissioner of Internal Revenue v. TMX Sales, Inc. x x x.
It was the advent of R.A. No. 7716 and R.A. 8424 when the legislature specifically
provided for a judicial recourse with the Court of Tax Appeals in claiming unutilized
input VAT refund/credit under Section 106(D) of the NIRC of 1977 (now Section 112 of
the NIRC of 1997) within which the period of thirty (30) days reckoned from the receipt
of the decision of the CIR denying the claim or after the expiration of a given period
(now 120 days).

Accordingly, petitioner cannot blindly invoke the doctrine enunciated in Atlas case in the
instant case. As discussed above, the need to harmonize the provisions of Section 106
and Section 230 of the Tax Code of 1977 is no longer necessary nor applicable due to
the clear legislative intent embodied in the provisions of R.A. No. 7716 and R.A. 8424,
which delineated specific amendatory provision for the prescriptive period in claiming
[administrative] and judicial claims for unutilized input VAT refund/credit."
chanrobleslaw
In fine, we find that the Aichi Case is the prevailing doctrine in so far as the mandatory
observance of the 120-30 day period under Section 112 of the NIRC of 1997 before
filing an appeal with the Court of Tax Appeals and that the Atlas Case and Section 229
of the 1997 NIRC are not applicable in the instant case.5
chanrobleslaw
From the foregoing, it is apparent that the assailed July 22, 2011 ruling of the CTA En
Banc, in dismissing petitioner's appeal before it, relied on Section 112(C)6 of the 1997
National Internal Revenue Code (NIRC) as well as the doctrine laid down by the First
Division of this Court in Commissioner of Internal Revenue v. Aichi Forging Company of
Asia, Inc.7 (Aichi case) which states that the 120-day period is crucial in filing an appeal
with the CTA. The CTA En Banc was correct in so ruling since, at the time the assailed
July 22, 2011 ruling was promulgated, the Aichi case was still the controlling
jurisprudence on the matter.

However, subsequent to the Aichi ruling and during the pendency of the case at bar,
the Supreme Court En Banc resolved the consolidated cases involved in Commissioner
of Internal Revenue v. San Roque Power Corporation8 (San Roque case) and stated that
a judicial claim for refund of input VAT which was filed with the CTA before the lapse of
the 120-day period under Section 112 of the NIRC is considered to have been timely
made, if such filing occurred after the issuance of the Bureau of Internal Revenue (BIR)
Ruling No. DA-489-03 dated December 10, 2003 but before the adoption of
the Aichi doctrine which was promulgated on October 6, 2010.

In San Roque, we recognized that prior to BIR Ruling No. DA-489- 03, which expressly
stated 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," the
Commissioner of Internal Revenue (CIR) was correct in considering the 120-day period
as mandatory and jurisdictional before a judicial claim can be filed. Nevertheless, we
cited two exceptions to this rule: (1) if the CIR, through a specific ruling, misleads a
particular taxpayer to prematurely file a judicial claim with the CTA - that specific ruling
is applicable only to such particular taxpayer; and (2) if the CIR, through a general
interpretative rule issued under Section 4 of the NIRC, misleads all taxpayers into filing
prematurely judicial claims with the CTA - in these cases, the CIR cannot later on be
allowed to question the CTA's assumption of jurisdiction over such claim since equitable
estoppel has set in as expressly authorized under Section 246 of the NIRC.9

Pursuant to the CIR's power to interpret tax laws under Section 410 of the NIRC, the
CIR issued BIR Ruling No. DA-489-03 which we considered in San Roque as a general
interpretative rule that may be relied upon by taxpayers from the time the rule was
issued up to its reversal by the CIR or by this Court, thus, providing a valid claim for
equitable estoppel under Section 246 of the NIRC, to wit:chanRoblesvirtualLawlibrary
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:cralawlawlibrary

(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;ChanRoblesVirtualawlibrary

(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

(c) Where the taxpayer acted in bad faith. (Emphases supplied.)

chanrobleslaw
We likewise held that Section 246 of the NIRC is not limited to a reversal only by the
CIR because the same expressly states "[a]ny revocation, modification or reversal"
without specifying who made the revocation, modification or reversal; hence, a reversal
by this Court is covered under the said tax provision.11

Thus, we elaborated in San Roque 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 and that taxpayers should not be prejudiced by an erroneous
interpretation by the CIR, particularly on a difficult question of law. We quote the
relevant portion of San Roque here:chanRoblesvirtualLawlibrary
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 Aichi 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 Atlas 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. x x x.12
chanrobleslaw
In the present case, the records indicate that petitioner filed its administrative claim for
tax credit/refund of its allegedly excess and unutilized input VAT for the 1st quarter of
the calendar year 2007 in the amount of P12,549,446.30 with respondent on March 31,
2009. Subsequently, petitioner filed its judicial claim on the same matter through a
petition for review with the CTA on April 17, 2009. It is undisputed that the
aforementioned date of filing falls within the period following the issuance of BIR Ruling
No. DA-489-03 on December 10, 2003 but before the promulgation of the Aichi case on
October 6, 2010. In accordance with the doctrine laid down in San Roque, we rule that
petitioner's judicial claim had been timely filed and should be given due course and
consideration by the CTA.

In light of the foregoing, we find it unnecessary to pass upon the other issues raised in
the petition.

WHEREFORE, the petition is GRANTED. The Decision dated July 22, 2011 of the
Court of Tax Appeals En Banc in CTA EB Case No. 596 is REVERSED and SET
ASIDE. The Court of Tax Appeals is hereby ORDERED to proceed with the hearing
and resolution of CTA Case No. 7921.

SO ORDERED.ChanRoblesVirtualawlibrary

Sereno, CJ., (Chairperson), Bersamin, Perlas-Bernabe, and Caguioa, JJ., concur.

FIRST DIVISION

G.R. No. 211072, November 07, 2016

COMMISSIONER OF INTERNAL REVENUE, Petitioner, v. DEUTSCHE

KNOWLEDGE SERVICES, PTE. LTD., Respondent.

DECISION

CAGUIOA, J.:

Before the Court is a Petition for Review1 on Certiorari under Rule 45 of the Rules of
Court filed by petitioner Commissioner of Internal Revenue (CIR), assailing the
Amended Decision2 dated July 29, 2013 and Resolution3 dated January 7, 2014 of the
Court of Tax Appeals (CTA) En Banc in CTA EB No. 815. The CTA En Banc reversed and
set aside its earlier decision dated January 31, 2013, which affirmed the CTA First
Division's dismissal of the claim for refund or issuance of tax credit filed by respondent
Deutsche Knowledge Services, Pte. Ltd. (DKS) in CTA Case No. 7940 on the ground of
prematurity, and remanded the case to the court of origin for further proceedings.

Facts

DKS is the Philippine branch of a multinational company organized and existing under
and by the virtue of the laws of Singapore. It is licensed to do business as a regional
operating headquarters in the Philippines.

On July 25, 2007, DKS filed its original Quarterly Value Added Tax (VAT) Return for the
2nd quarter of CY 2007 with the Bureau of Internal Revenue (BIR).

On June 18, 2009, DKS filed with the BIR-Revenue District Office No. 47 an Application
for Tax Credits/Refunds (BIR Form No. 1914) of its excess and unutilized input VAT for
the 2nd quarter of CY 2007 in the amount of P8,767,719.30. Subsequently, on June 30,
2009, or even before any action by the CIR on its administrative claim, DKS filed a
Petition for Review with the CTA, docketed as CTA Case No. 7940.

Trial commenced and DKS filed its Formal Offer of Evidence on September 22, 2010,
which was admitted by the CTA First Division in a Resolution dated December 1, 2010.

Meanwhile, on October 6, 2010, while DKS's claim for refund or tax credit was pending
before the CTA First Division, this Court promulgated Commissioner of Internal Revenue
v. Aichi Forging Company of Asia, Inc.4 (Aichi). In that case, the Court held that
compliance with the 120-day period granted to the CIR, within which to act on an
administrative claim for refund or credit of unutilized input VAT, as provided under
Section 112(C) of the National Internal Revenue Code (NIRC) of 1997, as amended, is
mandatory and jurisdictional in filing an appeal with the CTA.

On February 21, 2011, the CIR filed a Motion to Dismiss,5 stating that the CTA First
Division lacked jurisdiction because respondent's Petition for Review was prematurely
filed.

In a Resolution dated April 26, 2011,6 the CTA First Division dismissed respondent's
judicial claim, the decretal portion of which reads:

WHEREFORE, premises considered, the Motion to Dismiss dated February 21, 2011,
filed by respondent [CIR], is hereby GRANTED. Consequently, the Petition for Review
dated June 30, 2009, filed by petitioner Deutsche Knowledge Services Pte. Ltd. is
hereby DISMISSED.

SO ORDERED.7
The CTA First Division ruled that the petition for review filed by DKS on June 30, 2009,
or barely twelve (12) days after the filing of its administrative claim for refund, was
clearly premature justifying its dismissal. The CTA First Division explained that pursuant
to Section 112(C) of the NIRC and the jurisprudence laid down in Aichi, it is a
mandatory requirement to wait for the lapse of the 120-day period granted to petitioner
to act on the application for refund or issuance of tax credit, before a judicial claim may
be filed with the CTA.

DKS moved for reconsideration, but the same was denied by the CTA First Division in its
Resolution8dated August 2, 2011.

Aggrieved, DKS elevated the matter to the CTA En Banc, raising the following
arguments: (1) the CTA First Division validly acquired jurisdiction of its judicial claim for
refund; (2) Aichi should not be applied indiscriminately to all claims for VAT refund; (3)
the prospective application of the Aichi interpretation on the observance of the 120-day
rule is legally and equitably imperative; and (4) DKS is entitled to a refund of its claimed
input VAT for the 2nd quarter of CY 2007.

On January 31, 2013, the CTA En Banc rendered a Decision9 affirming the April 26,
2011 and August 2, 2011 Resolutions of the CTA First Division. It agreed with the CTA
First Division in applying the ruling inAichi which warranted the dismissal of DKS's
judicial claim for refund on the ground of prematurity.

In the meantime, on February 12, 2013, this Court decided the consolidated cases
of Commissioner of Internal Revenue v. San Roque Power Corporation, Taganito Mining
Corporation v. Commissioner of Internal Revenue, and Philex Mining Corporation v.
Commissioner of Internal Revenue 10 (San Roque), wherein the Court recognized BIR
Ruling No. DA-489-03 as an exception to the 120-day period.

Invoking this Court's pronouncements in San Roque, DKS moved for reconsideration.
The CTA En Bancfound merit in said motion and rendered the assailed Amended
Decision, the dispositive portion of which reads as follows:

WHEREFORE, premises considered, the instant Motion for Reconsideration (Re:

Decision dated January 31, 2013) is hereby GRANTED. The Decision dated January 31,
2013, which affirmed the CTA First Division's dismissal of the Petition for Review
docketed as CTA Case No. 7940 on the ground of prematurity, is hereby REVERSED
AND SET ASIDE.

Accordingly, CTA Case No. 7940 is hereby REMANDED to the court of origin for further
proceedings.

SO ORDERED.11
The CIR filed a Motion for Reconsideration but the motion was denied for lack of merit
by the CTA En Banc in its Resolution12 dated January 7, 2014.

Hence, this petition.

Issue

The singular issue submitted by the Petition for this Court's resolution is whether the
CTA En Banc erred in taking cognizance of the case and holding that DKS's petition for
review was not prematurely filed with the CTA First Division.

The Court's Ruling

The Petition lacks merit.

Exception to the mandatory and

jurisdictional nature of the 120-day period
under Section 112(C) of the NIRC

Section 112 of the NIRC provides for the rules on claiming refunds or tax credits of
unutilized input VAT, the pertinent portions of which read as follows:

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

xxxx

(C) 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) hereof.

In case of full or partial denial of the claim for tax refund or tax credit, or the failure on
the part of the Commissioner to act on the application within the period prescribed
above, the taxpayer affected may, within thirty (30) days from the receipt of the
decision denying the claim or after the expiration of the one hundred twenty-day
period, appeal the decision or the unacted claim with the Court of Tax Appeals.
(Emphasis supplied)
Based on the plain language of the foregoing provision, a VAT registered taxpayer
claiming for a refund or tax credit of its excess and unutilized input VAT must file an
administrative claim within two (2) years from the close of the taxable quarter when the
sales are made. After that, the CIR is given 120 days, from the submission of complete
documents in support of said administrative claim, within which to grant or deny said
claim. Upon receipt of CIR's decision, denying the claim in full or partially, or upon the
expiration of the 120-day period without action from the CIR, the taxpayer has 30 days
within which to file a petition for review with the CTA.

As earlier stated, this Court in Aichi clarified that the 120-day period granted to the CIR
is mandatory and jurisdictional, the non-observance of which is fatal to the filing of a
judicial claim with the CTA. The Court further explained that the two (2)-year
prescriptive period under Section 112(A) of the NIRC pertains only to the filing of the
administrative claim with the BIR; while the judicial claim may be filed with the CTA
within 30 days from the receipt of the decision of the CIR or expiration of 120-day
period of the CIR to act on the claim. Thus:

Section 112 (D) of the NIRC clearly provides that the CIR has "120 days,
from the date of the submission of the complete documents in support of the
application [for tax refund/credit]," within which to grant or deny the
claim. In case of full or partial denial by the CIR, the taxpayer's recourse is to file an
appeal before the CTA within 30 days from receipt of the decision of the
CIR. However, if after the 120-day period the CIR fails to act on the
application for tax refund/credit, the remedy of the taxpayer is to appeal the
inaction of the CIR to CTA within 30 days.

In this case, the administrative and the judicial claims were simultaneously filed on
September 30, 2004. Obviously, respondent did not wait for the decision of the CIR or
the lapse of the 120-day period. For this reason, we find the filing of the judicial claim
with the CTA premature.

Respondent's assertion that the non-observance of the 120-day period is not fatal to
the filing of a judicial claim as long as both the administrative and the judicial claims are
filed within the two-year prescriptive period has no legal basis.

There is nothing in Section 112 of the NIRC to support respondent's view. Subsection
(A) of the said provision states that "any VAT-registered person, whose sales are zero-
rated or effectively zero-rated may, within two years after the close of the taxable
quarter when the sales were made, apply for the issuance of a tax credit certificate or
refund of creditable input tax due or paid attributable to such sales." The phrase "within
two (2) years x x x apply for the issuance of a tax credit certificate or refund" refers to
applications for refund/credit filed with the CIR and not to appeals made to the CTA.
This is apparent in the first paragraph of subsection (D) of the same provision, which
states that the CIR has "120 days from the submission of complete documents in
support of the application filed in accordance with Subsections (A) and (B)" within
which to decide on the claim.

In fact, applying the two-year period to judicial claims would render nugatory Section
112(D) of the NIRC, which already provides for a specific period within which a
taxpayer should appeal the decision or inaction of the CIR. The second paragraph of
Section 112(D) of the NIRC envisions two scenarios: (1) when a decision is issued by
the CIR before the lapse of the 120-day period; and (2) when no decision is made after
the 120-day period. In both instances, the taxpayer has 30 days within which to file an
appeal with the CTA. As we see it then, the 120-day period is crucial in filing an
appeal with the CTA.

xxxx

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.13(Emphasis supplied)

Subsequently, in San Roque, while the Court reiterated the mandatory and jurisdictional
nature of the 120+30 day periods, it recognized as an exception BIR Ruling No. DA-
489-03, issued prior to the promulgation of Aichi, where the BIR expressly allowed the
filing of judicial claims with the CTA even before the lapse of the 120-day period. The
Court held that BIR Ruling No. DA-489-03 furnishes a valid basis to hold the CIR in
estoppel because the CIR had misled taxpayers into filing judicial claims before the CTA
even before the lapse of the 120-day period:

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.

xxxx

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.14 (Emphasis supplied)

Following San Roque, the Court, in a catena of cases,15 has consistently adopted the
rule that the 120-day waiting period does not apply to claims for refund that were
prematurely filed during the period from the issuance of BIR Ruling No. DA-489-03 on
December 10, 2003, until October 6, 2010, when the Aichi was promulgated; but before
and after said period, the observance of the 120-day period is mandatory and
jurisdictional.16

In this case, records show that DKS filed its administrative and judicial claim for refund
on June 18, 2009 and June 30, 2009, respectively, or after the issuance of BIR Ruling
No. DA-489-03, but before the date when Aichi was promulgated. Thus, even though
DKS filed its judicial claim without waiting for the expiration of the 120-day mandatory
period, the CTA may still take cognizance of the case because the claim was filed within
the excepted period stated in San Roque. Verily, the CTA En Banc did not err in
reversing the dismissal of DKS's judicial claim and remanding the case to the CTA First
Division for the resolution of the case on the merits.

Application and validity of BIR Ruling No.

DA-489-03

The CIR now claims that BIR Ruling No. DA-489-03 is invalid because it was merely
issued by a Deputy Commissioner and not by the CIR, who is exclusively authorized by
law to interpret the provisions of the NIRC.

The Court is not persuaded. The Court En Banc's Resolution in San Roque dated
October 8, 201317 is instructive:

In asking this Court to disallow Taganito's claim for tax refund or credit, the CIR
repudiates the validity of the issuance of its own BIR Ruling No. DA-489-03. "Taganito
cannot rely on the pronouncements in BIR Ruling No. DA-489-03, being a mere
issuance of a Deputy Commissioner.

Although Section 4 of the 1997 Tax Code provides that 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," Section
7 of the same Code does not prohibit the delegation of such power. Thus, "[t]he
Commissioner may delegate the powers vested in him under the pertinent
provisions of this Code to any or such subordinate officials with the rank
equivalent to a division chief or higher, subject to such limitations and restrictions
as may be imposed under rules and regulations to be promulgated by the Secretary of
Finance, upon recommendation of the Commissioner."18

Finally, the CIR contends that even assuming that BIR Ruling No. DA-489-03 should be
considered as an exception to the 120-day period; it was already repealed and
superseded on November 1, 2005 by Revenue Regulations No. 16-2005 (RR 16-2005),
which echoed the mandatory and jurisdictional nature of the 120-day waiting period
under Section 112 of the NIRC. Thus, DKS cannot rely on BIR Ruling No. DA-489-03
because its claim was filed in June 2009 or almost four (4) years since RR 16-2005 took
effect.

In other words, the CIR posits that compliance with the 120-day period should only be
considered permissible from December 10, 2003, when BIR Ruling No. DA-489-03 was
issued, until October 31, 2005, prior to the effectivity of RR 16-2005.

The Court disagrees.

Again, it has already been settled in San Roque that BIR Ruling No. DA-489-03 is a
general interpretative rule which all taxpayers may rely upon from the time of its
issuance on December 10, 2003 until its effective reversal by the Court in Aichi. While
RR 16-2005 may have re-established the necessity of the 120-day period, taxpayers
cannot be faulted for still relying on BIR Ruling DA-489-03 even after the issuance of
RR 16-2005 because the issue on the mandatory compliance of the 120-day period was
only brought before the Court and resolved with finality in Aichi.

All told, the Court maintains that the 120-day period is permissible from December 10,
2003, when BIR Ruling No. DA-489-03 was issued, until October 6, 2010,
when Aichi was promulgated; but before and after said period, the observance of the
120-day period is mandatory and jurisdictional.

WHEREFORE, premises considered, the instant petition for review is hereby DENIED.
The Amended Decision dated July 29, 2013 and the Resolution dated January 7, 2014
of the CTA En Banc in CTA EB No. 815 are hereby AFFIRMED. Let this case
be REMANDED to the CTA First Division for the proper determination of the refundable
amount due to respondent, if any.

SO ORDERED.

Sereno, C.J., (Chairperson), Leonardo-De Castro, Bersamin, and Perlas-Bernabe, JJ.,

concur.
 FIRST DIVISION

G.R. No. 193321, October 19, 2016

TAKENAKA CORPORATION-PHILIPPINE
BRANCH, Petitioner, v. COMMISSIONER OF INTERNAL REVENUE, Respondent.

DECISION

BERSAMIN, J.:

The petitioner as taxpayer appeals before the Court the adverse decision entered on
March 29, 20101 and the resolution issued on August 12, 20102 in C.T.A. EB No. 514,
whereby the Court of Tax Appeals (CTA) En Banc respectively denied its claim for
refund of excess input value-added tax (VAT) arising from its zero-rated sales of
services for taxable year 2002, and denied its ensuing motion for reconsideration.

The factual and procedural antecedents, as narrated by the CTA En Banc, are quoted
below:chanRoblesvirtualLawlibrary

Respondent Takenaka, as a subcontractor, entered into an On-Shore Construction

Contract with Philippine Air Terminal Co., Inc. (PIATCO) for the purpose of constructing
the Ninoy Aquino Terminal III (NAIA-IPT3).

PIATCO is a corporation duly organized and existing under the laws of the Philippines
and was duly registered with the Philippine Economic Zone Authority (PEZA), as an
Ecozone Developer/Operator under RA 7916.

Respondent Takenaka filed its Quarterly VAT Returns for the four quarters of taxable
year 2002 on April 24, 2002, July 22, 2002, October 22, 2002 and January 22, 2003,
respectively. Subsequently, respondent Takenaka amended its quarterly VAT returns
several times. In its final amended Quarterly VAT Returns, the following were indicated
thereon:cralawlawlibrary

Exh Yea Input VAT

. r Zero-rate
Taxable Output
Sales/Receipt
200 Sales VAT This Quarter Excess
s
2

Q 1st P854,160,170 P5,292,340. P529,234. P52,044,766. P51,515,532.

.42 00 00 05 05
 II 2nd 599,459,273. 60,588,638.0 60,588,638.0
90 9 9

DD 3rd 480,168,744. 55,234,736.1 55,234,736.1

D 90 5 5

VV 4th 304,283,730. 30,494,993.5 30,494,993.5

V 15 1 1

TOTAL P2.23 P5,292,340. P529,234. P198,363,133 P197,833,899

8,071,899.37 00 00 .80 .80

On January 13, 2003, the BIR issued VAT Ruling No. 011-03 which states that the sales
of goods and services rendered by respondent Takenaka to PIATCO are subject to zero-
percent (0%) VAT and requires no prior approval for zero rating based on Revenue
Memorandum Circular 74-99.

On April 11, 2003, respondent Takenaka filed its claim for tax refund covering the
aforesaid period before the BIR Revenue District Office No. 51, Pasay City Branch.

For failure of the BIR to act on its claim, respondent Takenaka filed a Petition for
Review with this Court, docketed as C.T.A. Case No. 6886.

After trial on the merits, on November 4, 2008, the Former First Division rendered a
Decision partly granting the Petition for Review and ordering herein petitioner CIR to
refund to respondent Takenaka the reduced amount of P53,374,366.52, with a
Concurring and Dissenting Opinion from Presiding Justice Ernesto D. Acosta.

Not satisfied, on November 26, 2008, respondent Takenaka filed a "Motion for
Reconsideration".

During the deliberation of respondent Takenaka's "Motion for Reconsideration",

Associate Justice Caesar A. Casanova changed his stand and concurred with Presiding
Justice Ernesto D. Acosta, while the original Ponente, Associate Justice Lovell R.
Bautista, maintained his stand. Thus, respondent Takenaka's "Motion for
Reconsideration" was granted by the Former First Division in its Amended Decision
dated March 16, 2009, with a Dissenting Opinion from Associate Justice Lovell R.
Bautista.

On April 7, 2009, petitioner CIR filed a "Motion for Reconsideration" of the Amended
Decision, which the Former First Division denied in a Resolution dated June 29, 2009,
with Associate Justice Lovell R. Bautista reiterating his Dissenting Opinion.3
chanrobleslaw
Consequently, the respondent filed a petition for review in the CTA En Banc to seek the
reversal of the March 16, 2009 decision and the June 29, 2009 resolution of the CTA
Former First Division.4

On March 29, 2010, the CTA En Banc promulgated its decision disposing
thusly:chanRoblesvirtualLawlibrary
WHEREFORE, premises considered, the present Petition for Review is
hereby GRANTED. Accordingly, the Amended Decision dated March 16, 2009 and
Resolution dated June 29, 2009 rendered by the Former First Division are
hereby REVERSED and SET ASIDE, and another one is hereby
entered DENYING respondent Takenaka's claimed input tax attributable to its zero
rated sales of services for taxable year 2002 in the amount of P143,997,333.40.

SO ORDERED.5
chanrobleslaw
Later on, through the resolution dated August 12, 2010,6 the CTA En Banc denied the
petitioner's motion for reconsideration.

Hence, this petition for review on certiorari.

Issue

The lone issue is whether or not the sales invoices presented by the petitioner were
sufficient as evidence to prove its zero-rated sale of services to Philippine Air Terminal
Co., Inc. (PIATCO), thereby entitling it to claim the refund of its excess input VAT for
taxable year 2002.chanroblesvirtuallawlibrary

Ruling of the Court

We deny the appeal

First of all, the Court deems it appropriate to determine the timeliness of the petitioner's
judicial claim for refund in order to ascertain whether or not the CTA properly acquired
jurisdiction thereof. Well-settled is the rule that the issue of jurisdiction over the subject
matter may at any time either be raised by the parties or considered by the Court motu
proprio. As such, the jurisdiction of the CTA over the appeal could still be determined by
this Court despite its not being raised as an issue by the parties.7

In Mindanao II Geothermal Partnership v. Commissioner of Internal Revenue,8 the

Court has underscored that:chanRoblesvirtualLawlibrary
 (1) An administrative claim must be filed with the CIR within two years after the
close of the taxable quarter when the zero-rated or effectively zero-rated sales
were made.

(2) The CIR has 120 days from the date of submission of complete documents in
support of the administrative claim within which to decide whether to grant a
refund or issue a tax credit certificate. The 120-day period may extend beyond
the two-year period from the filing of the administrative claim if the claim is
filed in the later part of the two-year period. If the 120-day period expires
without any decision from the CIR, then the administrative claim may be
considered to be denied by inaction.

(3) A judicial claim must be filed with the CTA within 30 days from the receipt of
the CIR's decision denying the administrative claim or from the expiration of the
120-day period without any action from the CIR.

(4) All taxpayers, however, 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, as an exception to the mandatory andjurisdictional 120+30 day
periods.
chanrobleslaw
In this case, the following dates are relevant to determine the timeliness of the
petitioner's claim for refund, to wit:cralawlawlibrary

Amount Close Last day for Actual dat Last day for Actual fil
Claimed of quarte filing admin e of filing filing judici ing
and r when istra tive of adminis al claim of judicia
Taxable sales wer claim for tra tive with CTA ( l claim
Period c e made refund (2 claim for 120+30) with CT
overed years) refund A

P51,515,5 March 31, March 31, April 11, September 8, March

32.05, 2002 2004 2003 2003 10, 2004
1stquarter
of 2002

June 30, 2004

 P60,588,6
38.09, June 30,
nd
2 quarter 2002
of 2002

P55,234,7 September September 30,

36.15, 30, 2002 2004
3rdquarter
of 2002

P30,494,9 December December 31,

93.51, 31, 2002 2004
4 quarter
th

of 2002

Based on the foregoing, the petitioner's situation is actually a case of late filing and is
similar with the case of Philex Mining Corporation in Commissioner of Internal Revenue
v. San Roque Power Corporation.9

The petitioner timely filed its administrative claim on April 11, 2003, within the two-year
prescriptive period after the close of the taxable quarter when the zero-rated sales were
made. The respondent had 120 days, or until August 9, 2003, to decide the petitioner's
claim. Considering that the respondent did not act on the petitioner's claim on or before
August 9, 2003, the latter had until September 8, 2003, the last day of the 30-day
period, within which to file its judicial claim. However, it brought its petition for review
in the CTA only on March 10, 2004, or 184 days after the last day for the filing. Clearly,
the petitioner belatedly brought its judicial claim for refund, and the CTA did not acquire
jurisdiction over the petitioner's appeal.

We note, however, that the petitioner's judicial claim was brought well within the two-
year prescriptive period. Be that as it may, it must be stressed that the two-year
prescriptive period refers to the period within which the taxpayer can file an
administrative claim, not the judicial claim with the CTA.10 Accordingly, the CTA should
have denied petitioner's claim for tax refund or credit for lack of jurisdiction.

Nonetheless, the CTA did not err in denying the claim for refund on the ground that the
petitioner had not established its zero-rated sales of services to PIATCO through the
presentation of official receipts. In this regard, as evidence of an administrative claim
for tax refund or tax credit, there is a certain distinction between a receipt and
an invoice. The Court has reiterated the distinction in Northern Mindanao Power
Corporation v. Commissioner of Internal Revenue11 in this
wise:chanRoblesvirtualLawlibrary
Section 113 of the NIRC of 1997 provides that a VAT invoice is necessary for every sale,
barter or exchange of goods or properties, while a VAT official receipt properly pertains
to every lease of goods or properties; as well as to every sale, barter or exchange of
services.

The Court has in fact distinguished an invoice from a receipt in Commissioner of

Internal Revenue v. Manila Mining Corporation:
chanrobleslaw
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" oh 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.
chanrobleslaw
A VAT invoice is the seller's best proof of the sale of goods or services to the buyer,
while a VAT receipt is the buyer's best evidence of the payment of goods or services
received from the seller. A VAT invoice and a VAT receipt should not be confused and
made to refer to one and the same thing. Certainly, neither does the law intend the two
to be used alternatively. (Bold underscoring supplied for emphasis)
chanrobleslaw
The petitioner submitted sales invoices, not official receipts, to support its claim for
refund. In light of the aforestated distinction between a receipt and an invoice, the
submissions were inadequate for the purpose thereby intended. The Court concurs with
the conclusion of the CTA En Banc, therefore, that "[w]ithout proper VAT official
receipts issued to its clients, the payments received by respondent Takenaka for
providing services to PEZA-registered entities cannot qualify for VAT zero-rating. Hence,
it cannot claim such sales as zero-rated VAT not subject to output tax."12

Under VAT Ruling No. 011-03, the sales of goods and services rendered by the
petitioner to PIATCO were subject to zero-percent (0%) VAT, and required no prior
approval for zero rating based on Revenue Memorandum Circular 74-99.13 This
notwithstanding, the petitioner's claim for refund must still be denied for its failure as
the taxpayer to comply with the substantiation requirements for administrative claims
for tax refund or tax credit. The Court explains why in Western Mindanao Power
Corporation v. Commissioner of Internal Revenue:14chanroblesvirtuallawlibrary
In a claim for tax refund or tax credit, the applicant must prove not only entitlement to
the grant of the claim under substantive law. It must also show satisfaction of all the
documentary and evidentiary requirements for an administrative claim for a refund or
tax credit. Hence, the mere fact that petitioner's application for zero-rating
has been approved by the CIR does not, by itself, justify the grant of a refund
or tax credit. The taxpayer claiming the refund must further comply with the
invoicing and accounting requirements mandated by the NIRC, as well as by
revenue regulations implementing them. (Bold underscoring supplied for
emphasis)
chanrobleslaw
WHEREFORE, the Court DENIES the petition for review on certiorari; AFFIRMS the
decision promulgated on March 29, 2010 in C.T.A. EB No. 514; and DIRECTS the
petitioner to pay the costs of suit.

SO ORDERED.ChanRoblesVirtualawlibrary

Leonardo-De Castro, (Acting Chairperson), Perlas-Bernabe, Jardeleza,* and Caguioa, JJ.,

concur.

THIRD DIVISION

G.R. No. 205721, September 14, 2016

HARTE-HANKS PHILIPPINES, INC., Petitioner, v. COMMISSIONER OF

INTERNAL REVENUE, Respondent.

DECISION

REYES, J.:

This is a Petition for Review on Certiorari1 under Rule 45 of the 1997 Rules of Court
which seeks to reverse and set aside the Decision2 dated September 7, 2012 and
Resolution3 dated February 4, 2013 of the Court of Tax Appeals (CTA) en banc in C.T.A.
EB No. 748 (C.T.A. Case No. 8050) regarding the claim for Value-Added Tax (VAT)
refund of Harte-Hanks Philippines, Inc. (HHPI) in the amount of P3,167,402.34.

Facts of the Case

HHPI is a domestic corporation engaged in the business of providing outsourcing

customer relationship management solutions through inbound and outbound call
services to its customers. It is located in Bonifacio Global City in Taguig and, as such,
pays VAT to the Bureau of Internal Revenue (BIR) using the calendar year (CY)
system.4chanrobleslaw

During the first quarter of CY 2008, HHPI received income for services rendered within
the Philippines for clients abroad. On April 25, 2008, it filed its original Quarterly VAT
Return with the BIR through the BIR Electronic Filing and Payment System. The return
was amended on May 29, 2008 showing that HHPI had no output VAT liability for the
first quarter of CY 2008 as it had no local sales subject to 12% VAT but it has unutilized
input VAT of P3,167,402.34 on its domestic purchases of goods and services on its
zero-rated sales of services.5chanrobleslaw

On March 23, 2010, HHPI filed a claim for refund of its unutilized input VAT of
P3,167,402.34 before the BIR. Asserting that there was inaction on the part of the
Commissioner of Internal Revenue (CIR) and in order to toll the running of the two-year
period prescribed by law, HHPI elevated its claim to the CTA on March 30,
2010.6chanrobleslaw

On May 25, 2010, the CIR sought the dismissal of HHPI's claim for refund due to the
prematurity of the appeal. According to the CIR, the 120-day period under Section
112(C)7 of the National Internal Revenue Code (NIRC) of 1997 for the CIR to act on the
matter had not yet lapsed. Therefore, HHPI failed to exhaust administrative remedies
before it appealed before the CTA.8chanrobleslaw

On July 14, 2010, HHPI filed its comment praying for the denial of the motion to
dismiss because: (1) it was procedurally infirm for having been addressed to the Clerk
of Court instead of the party litigant; (2) it lacked basis that HHPI failed to exhaust
administrative remedies; (3) the two-year prescriptive period under Section 2299 of the
1997 NIRC was not applicable; (4) the duty imposed in Section 112(C) of the 1997
NIRC was upon the CIR and not upon HHPI; (5) the motion was violative of HHPI's
right to seek refund within the two-year period; and (6) HHPI failed to take action on its
administrative claim.10chanrobleslaw

In a Resolution11 dated November 30, 2010, the CTA Third Division granted the motion
to dismiss in view of the prematurity of the petition. Citing the case of CIR v. Aichi
Forging Company of Asia, Inc.,12 the CTA explained the mandatory 120-day period
under Section 112(D) of the 1997 NIRC reckoned from the date of submission of the
complete documents in support of the application for refund, and the 30-day period to
appeal to be reckoned either from the lapse of the 120-day period without any decision
rendered by the CIR on the application or, upon receipt of the CIR's decision before or
after the 120-day period has expired. The CTA Third Division also stressed that the two-
year period refers to the period for the filing of the claim before the CIR and was never
intended to include the period for filing the judicial claim.13chanrobleslaw

HHPI's motion for reconsideration14 thereof was denied in the CTA's Resolution15 dated
March 14, 2011 after finding no cogent reason to deviate from its ruling.

Undaunted, HHPI filed a petition for review16 before the CTA en banc which, however,
denied the same in the assailed Decision17 dated September 7, 2012, and accordingly,
affirmed the resolution of the CTA Third Division. It was declared that the crucial nature
of the mandatory 120 and 30-day periods and that non-observance thereof will deprive
the court of competence to entertain the appeal;18 that the 120 and 30-day periods in
Section 112(C) of the 1997 NIRC refer to the taxpayer's discretion on whether or not to
appeal the CIR's decision or inaction with the CTA; and, that the said periods are
indispensable even if the claim is lodged within the two-year prescriptive
period.19chanrobleslaw

HHPI sought for reconsideration but the same was denied in the Resolution20 dated
February 4, 2013.

Hence, this petition anchored on the following arguments, to wit:

1. In CIR v. San Roque Power Corporation,21 the Court held that taxpayers who
filed their judicial claims after the issuance of BIR Ruling No. DA-489-03 but
before Aichi22 cannot be faulted for filing such claims
prematurely;23chanrobleslaw

2. The failure to comply with the 120-day period under Section 112(C) of the 1997
NIRC is not jurisdictional;24chanrobleslaw

3. CIR's motion to dismiss was fatally defective and should have been
disregarded;25cralawred and

4. 4. Sections 112 and 229 of the 1997 NIRC should be reconciled.26

Ruling of the Court

The petition has no merit.

It should be noted that the petition for review was filed before the CTA on March 30,
2010, or merely seven days after the administrative claim for refund was filed before
the BIR on March 23, 2010. Evidently, HHPI failed to wait for the lapse of the 120-day
period which is expressly provided for by law for the CIR to grant or deny the
application for refund.

In San Roque,27 it has been held that the 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 January 1, 1988. The waiting period was extended to 120 days effective
January 1, 1998 under Republic Act No. 8424 or the Tax Reform Act of 1997. The 120-
day period under Section 112(C) has been in the statute books for more than
15 years before respondent San Roque filed its judicial claim.28chanrobleslaw

Moreover, a taxpayer's failure to comply with the prescribed 120-day waiting period
would render the petition premature and is violative of the principle on exhaustion of
administrative remedies. Accordingly, the CTA does not acquire jurisdiction over the
same. This being so, "[w]hen a taxpayer prematurely files a judicial claim for tax refund
or credit with the CTA without waiting for the decision of the [CIR], there is no
'decision' of the [CIR] to review and thus the CTA as a court of special jurisdiction has
no jurisdiction over the appeal."29chanrobleslaw

The CTA, being a court of special jurisdiction, has the judicial power to review the
decisions of the CIR. Concomitantly, the CTA also has the power to decide an appeal
because the CIR's inaction30 within the 120-day waiting period shall be deemed a denial
of the taxpayer's application for refund or tax credit.

In the instant case, the petition for review is considered premature because the 120-
day mandatoryperiod was not observed before an appeal was elevated to the CTA.
Either the CTA or this Court could also legitimize such procedural infirmity because it
would run counter to Article 531 of the Civil Code unless a law exists that would
authorize the validity of said petition. Regrettably, such law is wanting in the instant
case.

Tax refunds or credits, just like tax exemptions, are strictly construed against the
taxpayer.32 A refund is not a matter of right by the mere fact that a taxpayer has
undisputed excess input VAT or that such tax was admittedly illegally, erroneously or
excessively collected. Corollarily, a taxpayer's non-compliance with the mandatory 120-
day period is fatal to the petition even if the CIR does not assail the numerical
correctness of the tax sought to be refunded. Otherwise, the mandatory and
jurisdictional conditions impressed by law would be rendered useless.

Additionally, the 30-day appeal period to the CTA "was adopted precisely to do away
with the old rule,33so that under the VAT System the taxpayer will always have 30 days
to file the judicial claim even if the CIR acts only on the 120th day, or does not act at all
during the 120-day period."34 In effect, the taxpayer should wait for the 120th day
before the 30-day prescriptive period to appeal can be availed of. Hence, the non-
observance of the 120-day period is fatal to the filing of a judicial claim to the CTA, the
non-observance of which will result in the dismissal of the same due to prematurity. In
fine, the premature filing of the judicial claim for refund of the excess input VAT of
HHPI in the amount of P3,167,402.34 warrants a dismissal of the petition because the
latter acquired no jurisdiction over the same.

WHEREFORE, in view of the foregoing, the Decision dated September 7, 2012 and
Resolution dated February 4, 2013 of the Court of Tax Appeals en banc, in C.T.A. EB
No. 748, are AFFIRMED.

SO ORDERED.chanRoblesvirtualLawlibrary

Carpio,*Velasco, Jr., (Chairperson), Peralta, and Perez, JJ., concur.

G.R. No. 190506

CORAL BAY NICKEL CORPORATION, Petitioner,
vs.
COMMISSIONER OF INTERNAL REVENUE, Respondent.

DECISION

BERSAMIN, J.:

This appeal is brought by a taxpayer whose claim for the refund or credit pertaining to
its alleged unutilized input tax for the third and fourth quarters of the year 2002
amounting to ₱50, 124,086.75 had been denied by the Commissioner of Internal
Revenue. The Court of Tax Appeals (CTA) En Banc and in Division denied its appeal.

We sustain the denial of the appeal.

Antecedents

The petitioner, a domestic corporation engaged in the manufacture of nickel and/or

cobalt mixed sulphide, is a VAT entity registered with the Bureau of Internal Revenue
(BIR). It is also registered with the Philippine Economic Zone Authority (PEZA) as an
Ecozone Export Enterprise at the Rio Tuba Export Processing Zone under PEZA
Certificate of Registration dated December 27, 2002.1

On August 5, 2003,2 the petitioner filed its Amended VAT Return declaring unutilized
input tax from its domestic purchases of capital goods, other than capital goods and
services, for its third and fourth quarters of 2002 totalling ₱50,124,086.75. On June 14,
2004,3 it filed with Revenue District Office No. 36 in Palawan its Application for Tax
Credits/Refund (BIR Form 1914) together with supporting documents.

Due to the alleged inaction of the respondent, the petitioner elevated its claim to the
CTA on July 8, 2004 by petition for review, praying for the refund of the aforesaid input
VAT (CTA Case No. 7022).4

After trial on the merits, the CTA in Division promulgated its decision on March 10,
20085 denying the petitioner's claim for refund on the ground that the petitioner was
not entitled to the refund of alleged unutilized input VAT following Section
106(A)(2)(a)(5) of the National Internal Revenue Code (NIRC) of 1997, as amended, in
relation to Article 77(2) of the Omnibus Investment Code and conformably with the
Cross Border Doctrine. In support of its ruling, the CTA in Division cited Commissioner
of Internal Revenue v. Toshiba Information Equipment (Phils) Inc. (Toshiba)6and
Revenue Memorandum Circular ("RMC") No. 42-03.7

After the CTA in Division denied its Motion for Reconsideration8 on July 2, 2008,9 the
petitioner elevated the matter to the CTA En Banc (CTA EB Case No. 403), which also
denied the petition through the assailed decision promulgated on May 29, 2009. 10
The CTA En Banc denied the petitioner's Motion for Reconsideration through the
resolution dated December 10, 2009.11

Hence, this appeal, whereby the petitioner contends that Toshiba is not applicable
inasmuch as the unutilized input VAT subject of its claim was incurred from May 1, 2002
to December 31, 2002 as a VAT-registered taxpayer, not as a PEZA-registered
enterprise; that during the period subject of its claim, it was not yet registered with
PEZA because it was only on December 27, 2002 that its Certificate of Registration was
issued; 12 that until then, it could not have refused the payment of VAT on its purchases
because it could not present any valid proof of zero-rating to its VAT-registered
suppliers; and that it complied with all the procedural and substantive requirements
under the law and regulations for its entitlement to the refund. 13

Issue

Was the petitioner, an entity located within an ECOZONE, entitled to the refund of its
unutilized input taxes incurred before it became a PEZA-registered entity?

Ruling of the Court

The appeal is bereft of merit.

We first explain why we have given due course to the petition for review
on certiorari despite the petitioner's premature filing of its judicial claim in the CTA.

The petitioner filed with the BIR on June 10, 2004 its application for tax refund or credit
representing the unutilized input tax for the third and fourth quarters of 2002. Barely 28
days later, it brought its appeal in the CTA contending that there was inaction on the
part of the petitioner despite its not having waited for the lapse of the 120-day period
mandated by Section 112 (D) of the 1997 NIRC. At the time of the petitioner's appeal,
however, the applicable rule was that provided under BIR Ruling No. DA-489-
03,14 issued on December 10, 2003, to wit:

It appears, therefore, that it is not necessary for the Commissioner of Internal Revenue
to first act unfavorably on the claim for refund before the Court of Tax Appeals could
validly take cognizance of the case. This is so because of the positive mandate of
Section 230 of the Tax Code and also by virtue of the doctrine that the delay of the
Commissioner in rendering his decision does not extend the reglementary period
prescribed by statute.

Incidentally, the taxpayer could not be faulted for taking advantage of the full two-year
period set by law for filing his claim for refund [with the Commissioner of Internal
Revenue]. Indeed, no provision in the tax code requires that the claim for refund be
filed at the earliest instance in order to give the Commissioner an opportunity to rule on
it and the court to review the ruling of the Commissioner of Internal Revenue on
appeal.

xxx

As pronounced in Silicon Philippines Inc. vs. Commissioner of Internal Revenue, 15the

exception to the mandatory and jurisdictional compliance with the 120+30 day-period is
when the claim for the tax refund or credit was filed in the period between December
10, 2003 and October 5, 2010 during which BIR Ruling No. DA-489-03 was still in
effect. Accordingly, the premature filing of the judicial claim was allowed, giving to the
CTA jurisdiction over the appeal.

As to the main issue, we sustain the assailed decision of the CTA En Banc.

The petitioner's insistence, that Toshiba is not applicable because Toshiba Information
Equipment (Phils) Inc., the taxpayer involved thereat, was a PEZA-registered entity
during the time subject of the claim for tax refund or credit, is unwarranted. The most
significant difference between Toshiba and this case is that Revenue Memorandum
Circular No. 74-9916 was not yet in effect at the time Toshiba Information Equipment
(Phils) Inc. brought its claim for refund. Regardless of the distinction,
however, Toshiba actually discussed the VAT implication of PEZA-registered enterprises
and ECOZONE-located enterprises in its entirety, which renders Toshiba applicable to
the petitioner's case.

Prior to the effectivity of RMC 74-99, the old VAT rule for PEZA-registered enterprises
was based on their choice of fiscal incentives, namely: (1) if the PEZA-registered
enterprise chose the 5% preferential tax on its gross income in lieu of all taxes, as
provided by Republic Act No. 7916, as amended, then it was VAT-exempt; and (2) if the
PEZA-registered enterprise availed itself of the income tax holiday under Executive
Order No. 226, as amended, it was subject to VAT at 10%17 (now, 12%). Based on this
old rule, Toshiba allowed the claim for refund or credit on the part of Toshiba
Information Equipment (Phils) Inc.

This is not true with the petitioner. With the issuance of RMC 74-99, the distinction
under the old rule was disregarded and the new circular took into consideration the two
important principles of the Philippine VAT system: the Cross Border Doctrine and the
Destination Principle. Thus, Toshiba opined:

The rule that any sale by a VAT-registered supplier from the Customs Territory to a
PEZA-registered enterprise shall be considered an export sale and subject to zero
percent (0%) VAT was clearly established only on 15 October 1999, upon the issuance
of RMC No. 74-99. Prior to the said date, however, whether or not a PEZA-registered
enterprise was VAT-exempt depended on the type of fiscal incentives availed of by the
said enterprise. This old rule on VAT-exemption or liability of PEZA-registered
enterprises, followed by the BIR, also recognized and affirmed by the CTA, the Court of
Appeals, and even this Court, cannot be lightly disregarded considering the great
number of PEZA-registered enterprises which did rely on it to determine its tax
liabilities, as well as, its privileges.

According to the old rule, Section 23 of Rep. Act No. 7916, as amended, gives the
PEZA-registered enterprise the option to choose between two sets of fiscal incentives:
(a) The five percent (5%) preferential tax rate on its gross income under Rep. Act No.
7916, as amended; and (b) the income tax holiday provided under Executive Order No.
226, otherwise known as the Omnibus Investment Code of 1987, as amended.

xxxx

This old rule clearly did not take into consideration the Cross Border Doctrine
essential to the VAT system or the fiction of the ECOZONE as a foreign
territory. It relied totally on the choice of fiscal incentives of the PEZA-registered
enterprise. Again, for emphasis, the old VAT rule for PEZA-registered enterprises was
based on their choice of fiscal incentives: (1) If the PEZA-registered enterprise chose
the five percent (5%) preferential tax on its gross income, in lieu of all taxes, as
provided by Rep. Act No. 7916, as amended, then it would be VAT-exempt; (2) If the
PEZA-registered enterprise availed of the income tax holiday under Exec. Order No.
226, as amended, it shall be subject to VAT at ten percent (10%). Such distinction
was abolished by RMC No. 74-99, which categorically declared that all sales
of goods, properties, and services made by a VAT-registered supplier from
the Customs Territory to an ECOZONE enterprise shall be subject to VAT, at
zero percent (0%) rate, regardless of the latter's type or class of PEZA
registration; and, thus, affirming the nature of a PEZA-registered or an
ECOZONE enterprise as a VAT-exempt entity. 18(underscoring and emphasis
supplied)

Furthermore, Section 8 of Republic Act No. 7916 mandates that PEZA shall manage and
operate the ECOZONE as a separate customs territory.1âwphi1 The provision thereby
establishes the fiction that an ECOZONE is a foreign territory separate and distinct from
the customs territory. Accordingly, the sales made by suppliers from a customs territory
to a purchaser located within an ECOZONE will be considered as exportations. Following
the Philippine VAT system's adherence to the Cross Border Doctrine and Destination
Principle, the VAT implications are that "no VAT shall be imposed to form part of the
cost of goods destined for consumption outside of the territorial border of the taxing
authority" 19 Thus, Toshiba has discussed that:

This Court agrees, however, that PEZA-registered enterprises, which would

necessarily be located within ECOZONES, are VAT-exempt entities, not
because of Section 24 of Rep. Act No. 7916, as amended, which imposes the five
percent (5%) preferential tax rate on gross income of PEZA-registered enterprises, in
lieu of all taxes; but, rather, because of Section 8 of the same statute which
establishes the fiction that ECOZONES are foreign territory.

It is important to note herein that respondent Toshiba is located within an

ECOZONE. An ECOZONE or a Special Economic Zone has been described as –

. . . [S]elected areas with highly developed or which have the -Q potential to be

developed into agro-industrial, industrial, tourist, recreational, commercial, banking,
investment and financial centers whose metes and bounds are fixed or delimited by
Presidential Proclamations. An ECOZONE may contain any or all of the following:
industrial estates (IEs), export processing zones (EPZs), free trade zones and
tourist/recreational centers.

The national territory of the Philippines outside of the proclaimed borders of the ECO
ZONE shall be referred to as the Customs Territory.1âwphi1

Section 8 of Rep. Act No. 7916, as amended, mandates that the PEZA shall manage and
operate the ECOZONES as a separate customs territory; thus, creating the fiction
that the ECOZONE is a foreign territory. As a result, sales made by a supplier
in the Customs Territory to a purchaser in the ECOZONE shall be treated as
an exportation from the Customs Territory. Conversely, sales made by a supplier
from the ECOZONE to a purchaser in the Customs Territory shall be considered as an
importation into the Customs Territory.20 (underscoring and emphasis are supplied)

The petitioner's principal office was located in Barangay Rio Tuba, Bataraza,
Palawan.21 Its plant site was specifically located inside the Rio Tuba Export Processing
Zone - a special economic zone (ECOZONE) created by Proclamation No. 304, Series of
2002, in relation to Republic Act No. 7916. As such, the purchases of goods and
services by the petitioner that were destined for consumption within the ECOZONE
should be free of VAT; hence, no input VAT should then be paid on such purchases,
rendering the petitioner not entitled to claim a tax refund or credit. Verily, if the
petitioner had paid the input VAT, the CTA was correct in holding that the petitioner's
proper recourse was not against the Government but against the seller who had shifted
to it the output VAT following RMC No. 42-03,22 which provides:

In case the supplier alleges that it reported such sale as a taxable sale, the
substantiation of remittance of the output taxes of the seller (input taxes of the
exporter-buyer) can only be established upon the thorough audit of the suppliers' VAT
returns and corresponding books and records. It is, therefore, imperative that the
processing office recommends to the concerned BIR Office the audit of the records of
the seller.
In the meantime, the claim for input tax credit by the exporter-buyer should be denied
without prejudice to the claimant's right to seek reimbursement of the VAT paid, if any,
from its supplier.

We should also take into consideration the nature of VAT as an indirect tax. Although
the seller is statutorily liable for the payment of VAT, the amount of the tax is allowed
to be shifted or passed on to the buyer.23 However, reporting and remittance of the
VAT paid to the BIR remained to be the seller/supplier's obligation. Hence, the proper
party to seek the tax refund or credit should be the suppliers, not the petitioner.

In view of the foregoing considerations, the Court must uphold the rejection of the
appeal of the petitioner. This Court has repeatedly pointed out that a claim for tax
refund or credit is similar to a tax exemption and should be strictly construed against
the taxpayer. The burden of proof to show that he is ultimately entitled to the grant of
such tax refund or credit rests on the taxpayer.24 Sadly, the petitioner has not
discharged its burden.

WHEREFORE, the Court AFFIRMS the decision promulgated on May 29, 2009 in CTA
EB Case No. 403; and ORDERS the petitioner to pay the costs of suit.

SO ORDERED.

G.R. No. 182737, March 02, 2016

SILICON PHILIPPINES, INC. (FORMERLY INTEL PHILIPPINES

MANUFACTURING, INC.), Petitioner, v. COMMISSIONER OF INTERNAL
REVENUE, Respondent.

DECISION

SERENO, C.J.:

Before us is a Petition for Review on Certiorari under Rule 45 of the Rules of Court
assailing the Court of Tax Appeals (CTA) En Banc Decision1 dated 18 January 2008 and
Resolution2 dated 30 April 2008 in CTA EB No. 298.

The CTA En Banc affirmed the CTA Second Division Decision3 dated 5 February 2007
and Resolution4dated 29 June 2007 in CTA Case Nos. 6741, 6800 & 6841. That Decision
denied the claim for tax refund or issuance of tax credit certificates corresponding to
petitioner's excess/unutilized input value-added tax (VAT) for the 2nd, 3rd and
4th quarters of taxable year 2001. The CTA En Banc Resolution denied petitioner's
motion for reconsideration.

FACTS
Petitioner is a corporation engaged in the business of designing, developing,
manufacturing and exporting integrated circuit components.5 It is a preferred pioneer
enterprise registered with the Board of Investments.6 It is likewise registered with the
Bureau of Internal Revenue (BIR) as a VAT taxpayer by virtue of its sale of goods and
services7 with a permit to print accounting documents like sales invoices and official
receipts.8

On 24 July 2001, petitioner filed its 2nd Quarter VAT Return reporting the amount of
P765,696,325.68 as its zero-rated sales.9

Its 3rd Quarter VAT Return filed on 23 October 2001 indicated zero-rated sales in the
amount of P571,812,011.26.10 This amount was increased to P678,418,432.83 in the
Amended 3rd Quarter VAT Return filed on 29 October 2001.11

The 4th Quarter VAT Return filed on 15 January 2002 reported zero-rated sales in the
amount of P1,000,052,659.89.12 This amount remained unchanged in the Amended 4th
Quarter VAT Return filed on 22 May 2002.13

Petitioner sought to recover the VAT it paid on imported capital goods for the
2nd quarter of 2001. On 16 October 2001, it filed with the One-Stop Shop Inter-Agency
Tax Credit and Duty Drawback Center, Department of Finance, an application for a tax
credit/refund in the amount of P9,038,279.56.14

On 4 September 2002, petitioner also filed for a tax credit/refund of the VAT it had paid
on imported capital goods for the 3rd and 4th quarters of 2001 in the amounts of
P1,420,813.0415 and P14,582,023.62,16 respectively.

Because of the continuous inaction by respondent on the administrative claims of

petitioner for a tax credit/refund in the total amount of P25,041,116.22,17 the latter filed
separate petitions for review before the CTA.

CTA Case No. 6741 filed on 30 July 2003 sought to recover P9,038,279.56 for the
2nd quarter of 2001;18CTA Case No. 6800 filed on 20 October 2003, the amount of
P1,420,813.04 for the 3rd quarter of 2001;19and CTA Case No. 6841 filed on 30
December 2003, P14,582,023.62 for the 4th quarter of 2001.20

The three cases were consolidated by the CTA Second Division in a Resolution dated 20
February 2004.21Trial on the merits ensued, and the case was submitted for decision on
23 August 2007.22

RULING OF THE CTA SECOND DIVISION

In a Decision23 dated 5 February 2007, the CTA Second Division dismissed the petitions
for lack of merit.

It ruled that pursuant to Section 112 of the National Internal Revenue Code (NIRC), the
refund/tax credit of unutilized input VAT is allowed (a) when the excess input VAT is
attributable to zero-rated or effectively zero-rated sales; and (b) when the excess input
VAT is attributable to capital goods purchased by a VAT-registered person.24

In order to prove zero-rated export sales,25 a VAT-registered person must present the
following: (1) the sales invoice as proof of the sale of goods; (2) the export declaration
or bill of lading/airway bill as proof of actual shipment of the goods from the Philippines
to a foreign country; and (3) bank credit advice or certificate of remittance or any other
document proving payment for the goods in acceptable foreign currency or its
equivalent in goods and services.26

The CTA Second Division found that petitioner presented nothing more than a
certificate of inward remittances for the entire year 2001, in compliance with the third
requirement only.27 That being the case, petitioner's reported export sales in the total
amount of P2,444,167,418.4028 cannot qualify as VAT zero-rated sales.29

On the other hand, a taxpayer claiming a refund/tax credit of input VAT paid on
purchased capital goods must prove all of the following: (1) that it is a VAT-registered
entity; (2) that it paid input VAT on capital goods purchased; (3) that its input VAT
payments on capital goods were duly supported by VAT invoices or official receipts; (4)
that it did not offset or apply the claimed input VAT payments on capital goods against
any output VAT liability; and (5) that the administrative and judicial claims for a refund
were filed within the two-year prescriptive period.30

The CTA Second Division found that petitioner was able to prove the first and the fifth
requisites for the pertinent quarters of the year 2001.31

However, petitioner was not able to prove the fourth requisite with regard to the
claimed input VAT payments for the 3rd and the 4th quarters of 2001. The evidence
purportedly showing that it had not offset or applied the claimed input VAT payment
against any output VAT liability was denied admission as evidence for being a mere
photocopy.32

Petitioner also failed to prove the second and the third requisite with regard to the
claimed input VAT payment for the 2nd quarter of 2001. Specifically, it failed to prove
that the purchases were capital goods.33

For purchases to fall under the definition of capital goods or properties, the following
conditions must be present: (1) the goods or properties have an estimated useful life of
more than one year; (2) they are treated as depreciable assets under Section 29(f) of
Revenue Regulations No. 7-95; and (3) they are used directly or indirectly in the
production or sale of taxable goods or services.34

The CTA Second Division perused the Summary List of Importations on Capital Goods
for the 2nd quarter of 2001 presented by petitioner and found items therein that could
not be considered as depreciable assets.35 As to the rest of the items, petitioner failed
to present the detailed general ledgers and audited financial statements to show that
those goods were capitalized in the books of accounts and subjected to depreciation.36

Petitioner filed a Motion for Reconsideration, which was denied in the Resolution dated
29 June 2007.37 It then filed before the CTA En Banc a petition for review challenging
the CTA Second Division Decision and Resolution.

RULING OF THE CTA EN BANC

The CTA En Banc issued the assailed Decision38 dated 18 January 2008 dismissing the
petition for lack of merit.

It affirmed the finding of the CTA Second Division that petitioner had failed to prove its
capital goods purchases for the 2nd quarter of the year 2001.39 The CTA En Banc
emphasized the evidentiary nature of a claim that a VAT-registered person made capital
goods purchases.40 It is necessary to ascertain the treatment of the purported capital
goods as depreciable assets, which can only be determined through the examination of
the detailed general ledgers and audited financial statements, including the person's
income tax return.41 In view of petitioner's lack of evidence on this point, the claim for
the refund or the issuance of tax credit certificates must be denied.

Petitioner's Motion for Reconsideration was denied in the challenged Resolution dated
30 April 2008.42

Issues

Petitioner now comes before us raising the following issues for our consideration:
chanRoblesvirtualLawlibrary
I.

[WHETHER] THE COURT OF TAX APPEALS ERRED IN DENYING [PETITIONER'S] CLAIM

FOR REFUND OF ITS EXCESS / UNUTILIZED INPUT VAT DERIVED FROM IMPORTATION
OF CAPITAL GOODS DUE TO ITS FAILURE TO PROVE THE EXISTENCE OF ZERO-RATED
EXPORT SALES.

II.

[WHETHER] THE COURT OF TAX APPEALS ERRED IN FINDING THAT [PETITIONER]

FAILED TO COMPLY WITH THE REQUIREMENTS OF A VALID CLAIM FOR REFUND / TAX
CREDIT OF INPUT VAT PAID ON ITS IMPORTATION OF CAPITAL GOODS.
 III.

[WHETHER] THE COURT OF TAX APPEALS ERRED IN RULING THAT [PETITIONER]

FAILED TO PROVE THAT THE GOODS IMPORTED ARE CAPITAL GOODS

IV.

[WHETHER] THE INPUT VAT ON THE ALLEGED NON-CAPITAL GOODS ARE STILL
REFUNDABLE BECAUSE THEY ARE ATTRIBUTABLE TO THE ZERO RATED SALES OF
[PETITIONER, A 100% EXPORT ENTERPRISE]43ChanRoblesVirtualawlibrary
In the Resolution dated 30 July 2008,44 we required respondent to comment on the
petition. The Comment dated 21 January 200945 was filed by the Office of the Solicitor
General as counsel.

OUR RULING

The applicable provision of the NIRC, as amended, is Section 112,46 which provides:
chanRoblesvirtualLawlibrary
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 [Subsections] (A) [and (B)] hereof.

In case of full or partial denial of the claim for tax refund or tax credit, or the failure
on the part of the Commissioner to act on the application within the period
prescribed above, the taxpayer affected may, within thirty (30) days from
the receipt of the decision denying the claim or after the expiration of the
one hundred twenty day-period, appeal the decision or the unacted claim
with the Court of Tax Appeals.

(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.
(Emphases supplied)
Under the foregoing provision, the administrative claim of a VAT-registered person for
the issuance by respondent of tax credit certificates or the refund of input taxes paid on
zero-rated sales or capital goods imported may be made within two years after the
close of the taxable quarter when the sale or importation/purchase was made.

In the case of petitioner, its administrative claim for the 2nd quarter of the year 2001
was filed on 16 October 2001, well within the two-year period provided by law. The
same is true with regard to the administrative claims for the 3rd and the 4th quarters of
2001, both of which were filed on 4 September 2002.

Upon the filing of an administrative claim, respondent is given a period of 120 days
within which to (1) grant a refund or issue the tax credit certificate for creditable input
taxes; or (2) make a full or partial denial of the claim for a tax refund or tax credit.
Failure on the part of respondent to act on the application within the 120-day period
shall be deemed a denial.

Note that the 120-day period begins to run from the date of submission of complete
documents supporting the administrative claim. If there is no evidence showing that the
taxpayer was required to submit47 - or actually submitted - additional documents after
the filing of the administrative claim, it is presumed that the complete documents
accompanied the claim when it was filed.48
Considering that there is no evidence in this case showing that petitioner made later
submissions of documents in support of its administrative claims, the 120-day period
within which respondent is allowed to act on the claims shall be reckoned from 16
October 2001 and 4 September 2002.

Whether respondent rules in favor of or against the taxpayer - or does not act at all on
the administrative claim - within the period of 120 days from the submission of
complete documents, the taxpayer may resort to a judicial claim before the CTA.

Section 7 of Republic Act No. (R.A.) 1125 (An Act Creating the Court of Tax Appeals),
as amended, provides:
chanRoblesvirtualLawlibrary
SECTION 7. Jurisdiction. — The CTA shall exercise:

a. Exclusive appellate jurisdiction to review by appeal, as herein provided:

1. Decisions of the Commissioner of Internal Revenue in cases involving

disputed assessments, refunds of internal revenue taxes, fees or other charges,
penalties in relation thereto, or other matters arising under the National Internal
Revenue Code or other laws administered by the Bureau of Internal Revenue;

2. Inaction by the Commissioner of Internal Revenue in cases involving disputed

assessments, refunds of internal revenue taxes, fees or other charges, penalties in
relations thereto, or other matters arising under the National Internal Revenue Code or
other laws administered by the Bureau of Internal Revenue, where the National
Internal Revenue Code provides a specific period of action, in which case the
inaction shall be deemed a denial; (Emphasis supplied)
The judicial claim shall be filed within a period of 30 days after the receipt of
respondent's decision or ruling or after the expiration of the 120-day period, whichever
is sooner.49

Aside from a specific exception to the mandatory and jurisdictional nature of the
periods provided by the law,50 any claim filed in a period less than or beyond the
120+30 days provided by the NIRC is outside the jurisdiction of the CTA.51

As shown by the table below, the judicial claims of petitioner were filed beyond the
120+30 day period:
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End of End of
Taxable Judicial Number
Administrative the 120- the 30-
Quarter Claim of Days
Claim Filed day day
of 2001 Filed Late
Period Period
 13
15 March 30 July
2nd 16 October 2001 February 502 days
2002 2003
2002

4 September 2 January 1 February 20 October

3rd 261 days
2002 2003 2003 2003

30
4 September 2 January 1 February
4th December 332 days
2002 2003 2003
2003
The judicial claim for the 4th quarter of 2001, while filed within the period 10 December
2003 up to 6 October 2010, cannot find solace in BIR Ruling No. DA-489-03. The
general interpretative rule allowed the premature filing of judicial claims by providing
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."52The rule certainly
did not allow the filing of a judicial claim long after the expiration of the 120+30 day
period.53

As things stood, the CTA had no jurisdiction to act upon, take cognizance of, and render
judgment upon the petitions for review filed by petitioner. For having been rendered
without jurisdiction, the decision of the CTA Second Division in this case - and
consequently, the decision of the CTA En Banc - is a total nullity that creates no rights
and produces no effect.54

Section 19 of R.A. 1125 provides that parties adversely affected by a decision or ruling
of the CTA En Banc may file before us a verified petition for review on certiorari
pursuant to Rule 45 of the 1997 Rules of Civil Procedure. In this case, the assailed CTA
rulings are not decisions in contemplation of law55 that can serve as the subject of this
Court's exercise of its power of review.

Given the foregoing, there is no reason for this Court to rule upon the issues raised by
petitioner in the instant petition.chanrobleslaw

WHEREFORE, this Court hereby SETS ASIDE the assailed Court of Tax Appeals En
Banc Decision dated 18 January 2008 and Resolution dated 30 April 2008 in CTA EB No.
298; and the Court of Tax Appeals Second Division Decision dated 5 February 2007 and
Resolution dated 29 June 2007 in CTA CaseNos. 6741, 6800 & 6841.

The judicial claims filed by petitioner with the Court of Tax Appeals for the refund of the
input value-added tax paid on imported capital goods for the 2nd, 3rd and 4th quarters of
2001 are DISMISSED for lack of jurisdiction.

SO ORDERED.cralawlawlibrary
Leonardo-De Castro, Bersamin, Perlas-Bernabe, and Caguioa, JJ.,
concur.chanroblesvirtuallawlibrary

Republic of the Philippines

SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 204745 December 8, 2014

MINDANAO II GEOTHERMAL PARTNERSHIP, Petitioner,

vs.
COMMISSIONER OF INTERNAL REVENUE,Respondent.

DECISION

PERLAS-BERNABE, J.:

Assailed in this petition for review on certiorari1 are the Decision2 dated July 5, 2012
and the Resolution3 dated November 29, 2012 of the Court of Tax Appeals (CTA) En
Banc in CTA EB No. 750, which affirmed the Resolutions dated January 20, 20114 and
March 15, 20115 of the CTA Second Division (CTA Division) in CTA Case Nos. 8082 and
8106 dismissing the claim for refund of excess input value-added tax (VAT) of petitioner
Mindanao II Geothermal Partnership (petitioner) in CTA Case No. 8082 for being
prematurely filed.

The Facts

Petitioner, a partnership duly registered with the Securities and Exchange Commission,
is a VAT-registered entity with VAT/ Tax Identification No. 004-766-953, and is engaged
in the generation, collection, and distribution of electricity.6 On March 11, 1997, it
entered into a Build Operate-Transfer Contract with the Philippine National Oil Company
Energy Development Corporation (PNOC-EDC) for the finance, engineering, supply,
installation, testing, commissioning, operation, and maintenance of a 48.25 megawatt
geothermal power plant, provided that the PNOC-EDC shall supply and deliver steam to
petitioner at no cost. In turn, petitioner shall convert the steam into electric capacity
and energy for the PNOC-EDC, and shall deliver the same to the National Power
Corporation for and on behalf of the PNOC-EDC.7 For this purpose, petitioner’s 48.25
megawatt geothermal power plant was accredited by the Department of Energy as a
Block Power Production Facility, pursuant to the provisions of Executive Order No. 215.
The Energy Regulatory Commission likewise issued Certificate of Compliance Nos. 03-
10-GXT25-0025 and 08-12-GXT25-0025 in petitioner’s favor.8
On April 24, 2008, July 25, 2008, October 24, 2008, and January 2, 2009, petitioner
filed its quarterly VAT returns for the four (4) quarters of 2008 reflecting the amount of
₱6,149,256.25 as unutilized/excess input VAT.9

On December 28, 2009, petitioner filed before the Bureau of Internal Revenue (BIR)
District Office No. 108 of Kidapawan City, Cotabato an administrative claim for
refund/credit of its unapplied and unutilized input VAT for the year 2008 in the
aforesaid amount.10 Thereafter, or on March 30, 2010, petitioner filed its judicial claim
for refund/credit of its unutilized/excess input VAT for the first quarter of 2008 in the
amount of ₱1,624,603.3311 before the CTA, docketed as CTA Case No. 8082.12 About
two (2) months later, oron May 27, 2010, petitioner filed its judicial claim for
refund/credit of its unutilized/excess input VAT for the second to fourth quarters of
2008 in the amount of ₱4,524,652.9213 before the CTA, docketed as CTA Case No.
8106. Eventually, the two cases were consolidated by the CTA.14

On December 7, 2010, respondent Commissioner of Internal Revenue (CIR) filed a

Motion to Dismiss,15 praying for the dismissal of CTA Case No. 8082 on the ground of
lack of jurisdiction.16 Relying on the case of CIR v. Aichi Forging Company of Asia, Inc.
(Aichi),17 the CIR contended that since the judicial claim for refund/credit in Case No.
8082 was filed only 107 days from the filing of the administrative claim,18 it should be
dismissed for being prematurely filed for petitioner’s failure to comply with the 120-day
period prescribed under Section 112 (D) of the National Internal Revenue Code
(NIRC).19

The CTA Division Ruling

In a Resolution20 dated January 20, 2011, the CTA Division granted the CIR’s motion to
dismiss, and accordingly, dismissed CTA Case No. 8082 for being prematurely filed.21 It
agreed with the CIR’s contention and held that pursuant to jurisprudence laid down in
Aichi, the expiration of the 120-day period is crucial before a taxpayer may filea judicial
claim for refund before the CTA.22 The CTA Division then concluded that petitioner’s
premature filing of its judicial claim for refund/credit warrants a dismissal inasmuch as
the CTA acquired no jurisdiction over the same.23

Petitioner moved for reconsideration,24 which was, however, denied in a

Resolution25 dated March 15, 2011.Aggrieved, petitioner appealed to the CTA En Banc.

The CTA En Banc Ruling

In a Decision26 dated July 5, 2012, the CTA En Banc dismissed petitioner’s appeal for
lack of merit, and thereby affirmed the ruling of the CTA Division. Also citing Aichi, the
CTA En Banc held that compliance with the 120-day period stated in Section 112 (D) of
the NIRC is a mandatory and judicial requisite in the filing of a judicial claim for
refund/credit of input VAT before the CTA.27 Hence, petitioner’s noncompliance
therewith is fatal to its refund/credit claim in Case No. 8082, and as such, the CTA
Division correctly dismissed the same on the ground of prematurity.28

Undaunted, petitioner moved for reconsideration,29 which was, however, denied in a

Resolution30 dated November 29, 2012, hence, this petition.

The Issue Before the Court

The primordial issue for the Court’s resolution is whether or not the CTA En Banc
correctly affirmed the CTA Division’s dismissal of petitioner’s judicial claim for
refund/credit of input VAT in CTA Case No. 8082 for being prematurely filed.

The Court’s Ruling

The petition is meritorious.

Section 112 of the NIRC, as amended by RA 9337,31 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 zerorated 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.

xxxx

(C) 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 fromthe date of
submission of complete documents in support of the application filed in accordance with
Subsection (A) 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.

x x x x (Emphases and underscoring supplied)

In the Aichi case cited by both the CTA Division and the CTA En Banc, the Court held
that the observance of the 120-day period is a mandatory and jurisdictional requisite
tothe filing of a judicial claim for refund/credit of input VAT before the CTA.
Consequently, its non observance would lead to the dismissal of the judicial claim on
the ground of lack of jurisdiction. Aichi also clarified that the two (2)-year prescriptive
period applies only to administrative claims and not to judicial claims.32 Succinctly put,
once the administrative claim is filed within the two (2)-year prescriptive period, the
claimant must wait for the 120-day period to end and, thereafter, he is given a 30-day
period to file his judicial claim before the CTA, even if said 120-day and 30-day periods
would exceed the aforementioned two (2)-year prescriptive period.33

However, in CIR v. San Roque Power Corporation (San Roque),34 the Court recognized
an exception to the mandatory and jurisdictional nature of the 120-day period. It ruled
that BIR Ruling No. DA-489-03 dated December 10, 2003 provided a valid claim for
equitable estoppel under Section 24635 of the NIRC. In essence, the aforesaid BIR
Ruling stated 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."36

Recently, in Taganito Mining Corporation v. CIR,37 the Court reconciled the

pronouncements in the Aichi and San Roque cases in the following manner:

Reconciling the pronouncements in the Aichi and San Roque cases, the rule must
therefore be that during the period December 10, 2003 (when BIR Ruling No. DA-489-
03 was issued) to October 6, 2010 (when the Aichi case was promulgated), taxpayers-
claimants need not observe the 120-day period before it could file a judicial claim for
refund of excess input VAT before the CTA. Before and after the aforementioned period
(i.e., December 10, 2003 to October 6, 2010), the observance of the 120-day period is
mandatory and jurisdictional tothe filing of such claim.1âwphi1(Emphases and
underscoring supplied)38

In this case, records disclose that petitioner filed its administrative and judicial claims
for refund/credit of its input VAT in CTA Case No. 8082 on December 28, 2009 and
March 30, 2010, respectively, or during the period when BIR Ruling No. DA-489-03 was
in place, i.e., from December 10, 2003 to October 6, 2010. As such, it need not wait for
the expiration of the 120-day period before filing its judicial claim before the CTA, and
hence, is deemed timely filed. In view of the foregoing, both the CTA Division and the
CTA En Bancerred in dismissing outright petitioner’s claim on the ground of prematurity.

Be that as it may, the Court is not inclined to grant outright petitioner’s claim for
refund/credit ofinput VAT in CTA Case No. 8082 in the amount of ₱1,624,603.33
representing unutilized input VAT for the first quarter of 2008. This is because the
determination of petitioner’s entitlement to such claim would necessarily involve
questions of fact, which are not reviewable and cannot be passed upon by the Court in
the exercise of its power of review under Rule 45 of the Rules of Court.39 In addition,
the CTA Division, as affirmed by the CTA En Banc, dismissed the judicial claim on a
preliminary procedural technicality. Hence, the Court deems it prudent to remand the
case to the CTA Division for resolution of the instant case on the merits.

WHEREFORE, the petition is GRANTED. The Decision dated July 5, 2012 and the
Resolution dated November 29, 2012 of the Court of Tax Appeals (CTA) En Banc in CTA
EB Case No. 750 are hereby REVERSED and SET ASIDE. Accordingly, CTA Case No.
8082 is REMANDED to the CTA Second Division for its resolution on the merits.

SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 198928 December 3, 2014

CBK POWER COMPANY LIMITED, Petitioner,

vs.
COMMISSIONER OF INTERNAL REVENUE, Respondent.

DECISION

PERLAS-BERNABE, J.:

Assailed in this petition for review on certiorari1 are the Decision2 dated July 20, 2011
and the Resolution3 dated October 5, 2011 of the Court of Tax Appeals (CTA) En Banc
in CTA EB Case No. 639, which reversed and set aside the Decision4 dated February 6,
2009, the Amended Decision5 dated February 8, 2010, and the Resolution6 dated May
20, 2010 of the CTA Second Division in C.T.A. Case No. 7220 and dismissed the claim
for refund of excess input value-added tax (VAT) of petitioner CBK Power Company
Limited (CBK Power) for being prematurely filed.

The Facts

CBK Power, a partnership duly organized and existing under Philippine laws, is a special
purpose entity formed for the sole purpose of engaging in all aspects of: (a) the design,
financing, construction, testing, commissioning, operation, maintenance, management,
and ownership of Kalayaan II pumped-storage hydroelectric power plant, the new
Caliraya Spillway, and other assets located in the Province of Laguna; and (b) the
rehabilitation, upgrade expansion, testing, commissioning, operation, maintenance, and
management of the Caliraya, Botocan, and Kalayaan I hydroelectric power plants and
their related facilities located in the Province of Laguna. It is registered as a VAT entity
since April 10, 2000 and on January 29, 2003, its application for a VAT zero-rate status
was approved pursuant to VAT Review Committee Ruling No. 018-13.7

On April 24, 2003, July 25, 2003, October 24, 2003, and January 26, 2004, CBK Power
submitted its quarterly VAT returns for the period covering January 1, 2003 to
December 31, 2003. Subsequently, CBK Power amended its April 24, 2003 VAT return
on June 10, 2003 and March 23, 2005. Similarly, CBK Power made amendments in its
July 25, 2003, October 24, 2003, and January 26, 2004 VAT returns on March 23, 2005.
These amendments reflected unutilized/excess input VAT in the amount of
298,430,362.42.8

On March 29, 2005, CBK Power filed before the Bureau of Internal Revenue (BIR)
District Office No. 55 of Laguna an administrative claim for the issuance of a tax credit
certificate for a total amount of ₱295,994,518.00, representing unutilized input VAT on
its purchase of capital goods, as well as unutilized inputVAT on its local purchase of
goods and services other than capital goods, all for the calendar year 2003. Thereafter,
on April 18, 2005, CBK Power filed its judicial claim for tax refund/credit before the CTA,
docketed as CTA Case No. 7220.9

For its part, respondent Commissioner of InternalRevenue (CIR) claimed, inter alia, that
the amount being claimed by CBK Power as alleged unutilized input VAT for the period
January 1, 2003 to December 31, 2003 must be denied for not being properly
documented.10

The CTA Second Division Ruling

In a Decision11 dated February 6, 2009,the CTA Second Division ruled in favor of CBK
Power and accordingly awarded it a tax credit certificate, albeit in the reduced amount
of ₱215,998,263.13.12 In disallowing certain portions of CBK Power’s claim for
refund/credit, the CTA Second Division found that CBK Power failed to prove that the
purchases under scrutiny pertained to its capital purchases as reflected in its audited
financial statements for the calendar year 2003.13

On partial reconsideration from both parties, the CTA Second Division rendered an
Amended Decision14 dated February 8, 2010, increasing CBK Power’s entitlement to a
tax credit certificate in the amount of 286,783,847.37.15

The CIR again moved for reconsideration,16 which was, however, denied in a
Resolution17 dated May 20, 2010. Dissatisfied, the CIR appealed to the CTA En Banc.

The CTA En Banc Ruling

In a Decision18 dated July 20, 2011, the CTA En Banc reversed and set aside the CTA
Second Division’sruling and thereby denied CBK Power’s claim for refund in its
entirety.19 It found that CBK Power filed its judicial claim for refund/credit on April 18,
2005 or just 20 days after it filed its administrative claim on March 29, 2005.As such, it
failed to observe the mandatory and jurisdictional 120-day period provided under
Section 112 (D) of the National Internal Revenue Code20 (NIRC). Consequently, it ruled
that such non-observance resulted in the prematurity of CBK Power’s claim, warranting
a dismissal thereof for lack of jurisdiction.21 Aggrieved, CBK Power moved for
reconsideration,22 which was, however, denied in a Resolution23 dated October 5, 2011,
hence, this petition.

The Issue Before the Court

The primordial issue for the Court’s resolution is whether or not the CTA En Banc
correctly denied CBK Power’sclaim for refund for being prematurely filed.

The Court’s Ruling

The petition is meritorious.

Executive Order No. 273, Series of 198724 or the original VAT law first allowed the
refund or credit of unutilized excess input VAT. Thereafter, the provision on refund or
credit was amended several times by Republic Act No. (RA) 7716,25 RA 8424, and RA
9337,26 which took effect on November 1, 2005.27 Since CBK Power’s claims for refund
covered periods before the effectivity of RA 9337, i.e., January 1, 2003 to December
31, 2003, Section 112 of the NIRC, as amended by RA 8424 should apply, to wit:

Section 112. Refunds or Tax Credits of Input Tax.–

(A) Zero-rated or Effectively Zero-rated Sales. – any VAT registered person, whose
sales are zero-rated or effectively zerorated 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.

xxxx

(D) Period within which Refund or Tax Credit of Input Taxes shall be Made. – In proper
cases, the Commissioner shall grant a refund or issue the tax credit certificate for
creditable input taxes within one hundred twenty (120) days from the date of
submission of complete documents in support of the application filed in accordance with
Subsections (A) and (B) hereof.

In case of full or partial denial of the claim for tax refund or tax credit, or the failure on
the part of the Commissioner to act on the application within the period prescribed
above, the taxpayer affected may, within thirty (30) days from the receipt of the
decision denying the claim or after the expiration of the one hundred twenty day-
period, appeal the decision or the unacted claim with the Court of Tax Appeals.

x x x x (Emphases and underscoring supplied)

In CIR v. Aichi Forging Company of Asia, Inc. (Aichi),28 the Court held that the
observance of the 120-day period is a mandatory and jurisdictional requisite to the filing
of a judicial claim for refund before the CTA. Consequently, its non-observance would
lead to the dismissal of the judicial claim on the ground of lack of jurisdiction. Aichi also
clarified that the two (2)-year prescriptive period applies only to administrative claims
and not to judicial claims.29Succinctly put, once the administrative claim is filed within
the two (2)-year prescriptive period, the claimant must wait for the 120-day period to
end; thereafter, he is given a 30-day period to file his judicial claim before the CTA,
even if said 120-day and 30-day periods would exceed the aforementioned two (2)-year
prescriptive period.30

However, in CIR v. San Roque Power Corporation (San Roque),31 the Court categorically
recognized anexception to the mandatory and jurisdictional nature of the 120-day
period. It ruled that BIR Ruling No. DA-489-03 dated December 10, 2003 provided a
valid claim for equitable estoppel under Section 24632 of the NIRC. In essence, the
aforesaid BIR Ruling stated that "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."33

Recently, in Taganito Mining Corporation v. CIR,34 the Court reconciled the

pronouncements in the Aichi and San Roque cases in the following manner:

Reconciling the pronouncements in the Aichi and San Roque cases, the rule must
therefore be that during the period December 10, 2003 (when BIR Ruling No. DA-489-
03 was issued) to October 6, 2010 (when the Aichi case was promulgated), taxpayers-
claimants need not observe the 120-day period before it could file a judicial claim for
refund of excess input VAT before the CT A. Before and after the aforementioned
period (i.e., December 10, 2003 to October 6, 2010), the observance of the 120-day
period is mandatory and jurisdictional to the filing of such claim.35(Emphases and
undersconng supplied)

In this case, records disclose that CBK Power filed its administrative and judicial claims
for issuance of tax credits on March 29, 2005 and April 18, 2005, respectively or during
the period when BIR Ruling No. DA-489-03 was in place, i.e., from December 10, 2003
to October 6, 2010.1âwphi1 As such, it need not wait for the expiration of the 120-day
period before filing its judicial claim before the CTA, which was timely filed. In view of
the foregoing, the CTA En Banc erred in dismissing CBK Power's claim on the ground of
prematurity and, thus, its ruling must be corrected accordingly.
Considering, however, that the CTA En Banc dismissed CBK Power's claim for refund
solely on procedural ground and no longer delved on its substantive merits, i.e.,
whether or not CBK Power was able to substantiate its claim for issuance of a tax credit
certificate, the Court deems it prudent to remand the case to the CTA En Banc for
resolution on the merits.

WHEREFORE, the petition is GRANTED. The Decision dated July 20, 2011 and the
Resolution dated October 5, 2011 of the Court of Tax Appeals (CTA) En Banc in CTA EB
Case No. 639 are hereby REVERSED and SET ASIDE. For reasons aforestated, the
instant case is REMANDED to the CTA En Banc for resolution on the merits.

SO ORDERED.