Amended Rules and Regulations to Implement PD 66, as further amended by EO 226

EN BANC [C.T.A. EB CASE NO. 532 . January 11, 2011.] (C.T.A. Case No. 7657) PHILEX MINING CORPORATION , petitioner , vs . COMMISSIONER OF INTERNAL REVENUE , respondent . RESOLUTION CASTAEDA, JR. , J p : This resolves the "Motion for Reconsideration" filed by petitioner Philex Mining Corporation on October 5, 2010 assailing the Decision of the Court En Banc promulgated on September 7, 2010. The Court En Banc dismissed the Petition for Review and affirmed the Decision and Resolution of the CTA First Division which DENIED petitioner's claim for refund on the ground of PRESCRIPTION. CSaHDT The dispositive portion of the assailed Decision of the Court En Banc dated September 7, 2010 reads: WHEREFORE , on the basis of the foregoing considerations, the Petition for Review en banc is DISMISSED for lack of merit. Accordingly, the Decision dated May 12, 2009 and the Resolution dated August 12, 2009 issued by the CTA First Division are AFFIRMED . SO ORDERED . On October 12, 2010, the Court En Banc issued a Resolution requiring respondent to file a Comment on petitioner's Motion for Reconsideration within ten (10) days from receipt thereof. As per records verification, respondent failed to file a Comment. Hence, the Motion for Reconsideration was submitted for resolution. In the Motion for Reconsideration, petitioner argued on the following grounds: I. When Petitioner filed its judicial claim on July 13, 2007, it acted on the faith of the then prevailing Supreme Court, and CTA, rulings that the 2-year prescriptive period is reckoned from date of filing of the VAT return, not from the close of the pertinent quarter when the sales were made. 1 II. The provisions of Sec. 112 (A) and (D) do not support the Court's ruling that judicial claims for VAT refund must be filed within 2 years from close of the quarter when sales were made. 2 III. What the Mirant SC decision has ruled as filed out of time was the administrative claim for refund, not the judicial claim. 3 IV. Assuming as correct that the SC ruled in Mirant that a judicial claim for VAT refund must be filed within the 2-year prescriptive period in Sec. 112(A), said ruling should apply prospectively. 4 We deny the Motion for Reconsideration for lack of merit. The Supreme Court in the recent case of Commissioner of Internal Revenue vs. Aichi Forging Company of Asia, Inc. 5 (Aichi case) has already settled the issue on the counting of the prescriptive period within which to file the administrative and judicial claims for refund of unutilized input VAT. In view of this, We apply outright the ruling in Aichi case as it is on all fours with the present case. Thus, We reconsider the basis upon which our judgment was based in the questioned Decision. The application of Aichi case, however, did not change the result of the Decision as petitioner's judicial claim still fails on the ground of prescription. As enunciated in Aichi case, Section 112 (A) of the National Internal Revenue Code (NIRC) of 1997 is the applicable provision in determining the reckoning of the two-year period within which an administrative claim for refund of unutilized input VAT may be filed. In case of full or partial denial of its administrative claim or the inaction on the part of the Commissioner of Internal Revenue (CIR), the taxpayer may file a judicial claim within the period provided for under Section 112 (D) of the NIRC of 1997. We reproduced below the pertinent portion of the Supreme Court's ruling in Aichi case: Unutilized input VAT must be claimed within two years after the close of the taxable quarter when the sales were made In computing the two-year prescriptive period for claiming a refund/credit of unutilized input VAT, the Second Division of the CTA applied Section 112(A) of the NIRC, which states: SEC. 112. Refunds or Tax Credits of Input Tax. (A) Zero-rated or Effectively Zero-rated Sales Any VAT-registered person, whose sales are zero-rated or effectively zero-rated may, within two (2) years after the close of the taxable quarter when the sales were made , apply for the issuance of a tax credit certificate or refund of creditable input tax due or paid attributable to such sales, except transitional input tax, to the extent that such input tax has not been applied against output tax: Provided, however, That in the case of zero-rated sales under Section 106(A)(2)(a)(1), (2) and (B) and Section 108 (B)(1) and (2), the acceptable foreign currency exchange proceeds thereof had been duly accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP): Provided, further, That where the taxpayer is engaged in zero-rated or effectively zero-rated sale and also in taxable or exempt sale of goods or properties or services, and the amount of creditable input tax due or paid cannot be directly and entirely attributed to any one of the transactions, it shall be allocated proportionately on the basis of the volume of sales. (Emphasis supplied.) caHASI The CTA En Banc , on the other hand, took into consideration Sections 114 and 229 of the NIRC, which read: SEC. 114. Return and Payment of Value-Added Tax. (A) In General. Every person liable to pay the value-added tax imposed under this Title shall file a quarterly return of the amount of his gross sales or receipts within twenty-five (25) days following the close of each taxable quarter prescribed for each taxpayer: Provided, however, That VAT-registered persons shall pay the value-added tax on a monthly basis. Any person, whose registration has been cancelled in accordance with Section 236, shall file a return and pay the tax due thereon within twenty-five (25) days from the date of cancellation of registration: Provided, That only one consolidated return shall be filed by the taxpayer for his principal place of business or head office and all branches. xxx xxx xxx SEC. 229. Recovery of tax erroneously or illegally collected. No suit or proceeding shall be maintained in any court for the recovery of any national internal revenue tax hereafter alleged to have been erroneously or illegally assessed or collected, or of any penalty claimed to have been collected without authority, or of any sum alleged to have been excessively or in any manner wrongfully collected, until a claim for refund or credit has been duly filed with the Commissioner; but such suit or proceeding may be maintained, whether or not such tax, penalty or sum has been paid under protest or duress. In any case, no such suit or proceeding shall be filed after the expiration of two (2) years from the date of payment of the tax or penalty regardless of any supervening cause that may arise after payment: Provided, however, That the Commissioner may, even without written claim therefor, refund or credit any tax, where on the face of the return upon which payment was made, such payment appears clearly to have been erroneously paid. (Emphasis supplied.) Hence, the CTA En Banc ruled that the reckoning of the two-year period for filing a claim for refund/credit of unutilized input VAT should start from the date of payment of tax and not from the close of the taxable quarter when the sales were made. The pivotal question of when to reckon the running of the two-year prescriptive period, however, has already been resolved in Commissioner of Internal Revenue v. Mirant Pagbilao Corporation , where we ruled that Section 112(A) of the NIRC is the applicable provision in determining the start of the two-year period for claiming a refund/credit of unutilized input VAT, and that Sections 204(C) and 229 of the NIRC are inapplicable as "both provisions apply only to instances of erroneous payment or illegal collection of internal revenue taxes." 6 [45] . . . xxx xxx xxx In view of the foregoing, we find that the CTA En Banc erroneously applied Sections 114(A) and 229 of the NIRC in computing the two-year prescriptive period for claiming refund/credit of unutilized input VAT. To be clear, Section 112 of the NIRC is the pertinent provision for the refund/credit of input VAT. Thus, the two-year period should be reckoned from the close of the taxable quarter when the sales were made. xxx xxx xxx The filing of the judicial claim was premature However, notwithstanding the timely filing of the administrative claim, we are constrained to deny respondent's claim for tax refund/credit for having been filed in violation of Section 112(D) of the NIRC, which provides that: SEC. 112. Refunds or Tax Credits of Input Tax. xxx xxx xxx (D) Period within which Refund or Tax Credit of Input Taxes shall be Made. In proper cases, the Commissioner shall grant a refund or issue the tax credit certificate for creditable input taxes within one hundred twenty (120) days from the date of submission of complete documents in support of the application filed in accordance with Subsections (A) and (B) hereof. In case of full or partial denial of the claim for tax refund or tax credit, or the failure on the part of the Commissioner to act on the application within the period prescribed above, the taxpayer affected may, within thirty (30) days from the receipt of the decision denying the claim or after the expiration of the one hundred twenty day-period, appeal the decision or the unacted claim with the Court of Tax Appeals. (Emphasis supplied.) cHDAIS 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 . . . apply for the issuance of a tax credit certificate or refund" refers to applications for refund/credit filed with the CIR and not to appeals made to the CTA. This is apparent in the first paragraph of subsection (D) of the same provision, which states that the CIR has "120 days from the submission of complete documents in support of the application filed in accordance with Subsections (A) and (B)" within which to decide on the claim. In fact, applying the two-year period to judicial claims would render nugatory Section 112(D) of the NIRC, which already provides for a specific period within which a taxpayer should appeal the decision or inaction of the CIR. The second paragraph of Section 112(D) of the NIRC envisions two scenarios: (1) when a decision is issued by the CIR before the lapse of the 120-day period; and (2) when no decision is made after the 120-day period. In both instances, the taxpayer has 30 days within which to file an appeal with the CTA. As we see it then, the 120-day period is crucial in filing an appeal with the CTA. With regard to Commissioner of Internal Revenue v. Victorias Milling, Co., Inc. 7 [53] relied upon by respondent, we find the same inapplicable as the tax provision involved in that case is Section 306, now Section 229 of the NIRC. And as already discussed, Section 229 does not apply to refunds/credits of input VAT, such as the instant case. In fine, the premature filing of respondent's claim for refund/credit of input VAT before the CTA warrants a dismissal inasmuch as no jurisdiction was acquired by the CTA. Based on the foregoing, the administrative claim for refund should be filed within two (2) years reckoned from the close of the taxable quarter when sales were made and judicial claim should be filed within 30 (thirty) days from receipt of the decision of the CIR or upon the expiration of the one hundred twenty (120) days in case of inaction of the CIR. The observance of these periods is mandatory and non-compliance therewith would result in the denial of the claim. Furthermore, it bears stressing that the Supreme Court's ruling on the reckoning of the two-year prescriptive period in the case of Commissioner of Internal Revenue vs. Mirant Pagbilao Corporation 8 was affirmed and applied outright in Aichi case. Thus, petitioner's reliance on the case of Atlas Consolidated Mining and Development Corporation vs. Commissioner of Internal Revenue 9 was misplaced. Applying the foregoing considerations to the present case, the petition still fails and consequently the Motion for Reconsideration should be denied. Albeit, administrative claim was timely filed, nonetheless, the judicial claim was filed beyond the period prescribed by law. It should be noted that the period covered by this refund is the second quarter of 2005, that is, from the months of April to June 2005. The administrative claim was filed on March 20, 2006 which is also presumably the date petitioner submitted supporting documents in the absence of any evidence to the contrary. From March 20, 2006, the CIR or in this case, the One Stop Shop Center of the Department of Finance has one hundred twenty (120) days or until July 18, 2006 within which to render a decision. No decision was rendered. As a result of the inaction, petitioner has thirty (30) days from July 19, 2006 or until August 17, 2006 within which to elevate the case before the CTA in Division. The judicial claim was filed on July 13, 2007 way beyond the 30-day period to file an appeal. Thus, the petition failed for having been filed beyond the 30-day prescriptive period. TSAHIa We reiterate the ruling that "a taxpayer must prove not only his entitlement to a refund but also his compliance with the procedural due process as non-observance of the prescriptive periods within which to file the administrative and the judicial claims would result in the denial of his claim." 10 WHEREFORE , petitioner's "Motion for Reconsideration" is hereby DENIED for lack of merit. SO ORDERED . (SGD.) JUANITO C. CASTAEDA, JR. Associate Justice Ernesto D. Acosta, P.J., Erlinda P. Uy, Caesar A. Casanova, Olga Palanca-Enriquez, Esperanza R. Fabon-Victorino, Cielito N. Mindaro-Grulla and Amelia R. Cotangco-Manalastas, JJ., concur. Lovell R. Bautista, J, with dissenting opinion. Separate Opinions BAUTISTA , J., dissenting opinion : In maintaining my dissent on the dismissal of the Petition for Review filed before the Court En Banc , I must point out the operative facts present in the case at bench, viz. : the administrative claim filed with the Bureau of Internal Revenue ("BIR") on March 20, 2006, and the Petition for Review filed before the First Division of this Court on July 13, 2007. Taking into consideration the aforementioned dates when petitioner filed its claim for refund/tax credit, this Court has consistently held that the two (2)-year prescriptive period within which to file a claim is reckoned from the date of filing of the pertinent return pursuant to the ruling in the case of Atlas Consolidated Mining and Development Corporation v. Commissioner of Internal Revenue . 1 With the principle that when a doctrine of this court is overruled and a different view is adopted, the new doctrine should be applied prospectively, and should not apply to parties who had relied on the old doctrine and acted on the faith thereof, 2 should behoove this Court to defer the application of the reckoning period pursuant to the case of Commissioner of Internal Revenue v. Mirant Pagbilao Corporation (Formerly Southern Energy Quezon, Inc.) , 3 until its promulgation on September 12, 2008. In the same manner that it is my considered opinion that both the administrative and judicial claims must be made within the settled two (2)-year prescriptive period, for beyond that period, the taxpayer can no longer appeal to this Court. 4 This is in accordance with the ruling that Section 112 (C) 5 of the 1997 National Internal Revenue Code ("NIRC"), as amended, is subject to the period prescribed under Sections 112 (A) and 229 of the same Code. 6 Thus, the claim for refund with the BIR and the subsequent appeal to this Court must be made within the 2-year period. Stated otherwise, if the 2-year prescriptive period is about to expire, there is no need to wait for the denial of the claim by the Commissioner of Internal Revenue or its inaction after the expiration of the one hundred twenty (120)-day period before the taxpayer can lodge its appeal with this Court; 7 if not, claims for refund of unutilized input tax attributable to zero-rated sales or effectively zero-rated sales will be time-barred. In view of the foregoing, it is my unyielding point of view that the administrative claim filed with the BIR on March 20, 2006 and the Petition for Review filed on July 13, 2007 with the First Division of this Court were made within the 2-year prescriptive period. Accordingly, I vote for the GRANT of the Motion for Reconsideration filed by the petitioner. Footnotes 1. Petitioner's Motion for Reconsideration, rollo , page 121. 2. Ibid. , rollo , page 126. 3. Ibid. , rollo , page 128. 4. Ibid. , rollo , page 130. 5. G.R. No. 184823, October 6, 2010. 6. Note from the Publisher: Missing footnote text. 7. Note from the Publisher: Missing footnote text. 8. G.R. No. 172129, September 12, 2008, 565 SCRA 154. 9. G.R. Nos. 141104 & 148763, June 8, 2007, 524 SCRA 73. 10. Supra , note 5. BAUTISTA, J., dissenting opinion: 1. G.R. Nos. 141104 & 148763, June 8, 2007, 524 SCRA 73. 2. Albino S. Co v. Court of Appeals , G.R. No. 100776, October 28, 1993, 277 SCRA 444, citing People v. Jabinal, G.R. No. 30061, February 27, 1974, 55 SCRA 607. 3. G.R. No. 172129, September 12, 2008, 565 SCRA 154. 4. Commissioner of Internal Revenue v. Accenture, Inc. , CTA EB No. 410 (CTA Case No. 7387), March 18, 2009. 5. As amended by Republic Act No. 9337. 6. Commissioner of Internal Revenue v. Toledo Power, Inc. , CTA EB No. 321 (CTA Case Nos. 6805 & 6851), May 7, 2008. 7. Commissioner of Internal Revenue v. Aichi Forging Company of Asia, Inc. , CTA EB No. 416, February 4, 2009, Commissioner of Internal Revenue v. San Roque Power Corporation , CTA EB No. 408, March 25, 2009, Commissioner of Internal Revenue v. CE Cebu Geothermal Power Company, Inc. , CTA EB No. 426, May 29, 2009.