Kurimoto (Philippines) Corp. v. Commissioner of Internal Revenue

FIRST DIVISION [C.T.A. CASE NO. 10156. January 30, 2023.] KURIMOTO (PHILIPPINES) CORPORATION , petitioner , vs. COMMISSIONER OF INTERNAL REVENUE , respondent . DECISION DEL ROSARIO , P.J p : This resolves the Petition for Review which prays for the refund of the amount of P12,564,968.60 representing petitioner's excess and unutilized input value-added tax (VAT) attributable to its zero-rated sale of services for the 1st and 2nd quarters of taxable year (TY) 2017 or from January 1, 2017 to June 30, 2017. THE PARTIES Petitioner KURIMOTO (PHILIPPINES) CORPORATION , a corporation duly organized and existing under and by virtue of the laws of the Philippines, 1 is principally involved in rendering services related to construction, installation works, electronic works, piping works, repairs and maintenance, and staff service to various kinds of plants, with principal office at 10/F Pacific Star Building, Makati Ave. corner Sen. Gil Puyat Ave., Bel-Air, Makati City. 2 Respondent COMMISSIONER OF INTERNAL REVENUE (CIR) is vested by law with the power and authority to decide, approve and grant applications for refund or tax credit of excess internal revenue tax payments. He may be served with summons and other court processes at the Bureau of Internal Revenue (BIR) National Office Building, BIR Road, Diliman, Quezon City. 3 THE FACTS Petitioner filed its Quarterly VAT Return for the 1st quarter of TY 2017 on April 11, 2017, 4 and amended the same on August 6, 2018. 5 For the 2nd quarter of TY 2017 petitioner filed its Quarterly VAT Return on July 12, 2017, 6 and amended the same on January 30, 2019. 7 On March 14, 2019, petitioner filed with the BIR Revenue District Office (RDO) No. 49 its administrative claim together with its Application for Tax Credits/Refunds (BIR Form No. 1914), 8 seeking the refund of its excess and unutilized input VAT for the 1st and 2nd quarters of TY 2017 in the total amount of P12,564,968.60. 9 Atty. Shirley A. Calapatia, Revenue District Officer, issued Tax Verification Notice No. TVN201500028708 on March 15, 2019, which authorized Revenue Officer (RO) Almanie D. Malang to verify the supporting documents submitted by petitioner in relation to its refund claim. 10 In a Letter dated June 7, 2019 issued by Regional Director Glen A. Geraldino and received by petitioner on July 31, 2019, petitioner's claim for refund was denied in view of the latter's failure to submit the correct BIR Form No. 1914 indicating that the claim for refund pertained to VAT and not to withholding tax on compensation (WTC). 11 Petitioner then filed the present Petition for Review on August 30, 2019. 12 Summonses were served upon the Office of the Solicitor General on September 25, 2019, and upon respondent on September 26, 2019. 13 On October 18, 2019 respondent filed a Motion for Leave to File and Admit Attached Answer, with attached Answer, 14 interposing as special and affirmative defenses that: "The instant judicial claim should be denied for petitioner's failure to prove and substantiate the claim for refund at the administrative level: A. It is an established fact that a decision has already been rendered and in such case, the Supreme Court has held that the duty of the Court is now limited in determining whether the decision is proper; and B. The claim for refund should be denied for failure to submit complete supporting documents." 15 In a Resolution dated November 5, 2019, the Court granted respondent's Motion for Leave to File and Admit Attached Answer, and admitted the attached Answer. 16 Pre-Trial Conference was set on January 23, 2020. 17 On January 14, 2020, respondent filed his Pre-Trial Brief. 18 Respondent filed a Compliance transmitting the BIR Records of this case on January 16, 2020, 19 which the Court noted in its Minute Resolution dated January 22, 2020. 20 Petitioner filed its Pre-Trial Brief on January 23, 2020, 21 the same day that the Pre-Trial Conference was conducted. 22 The parties submitted their Joint Stipulation of Facts and Issues (JSFI) on February 7, 2020, 23 which the Court approved in its Resolution dated February 17, 2020. 24 On February 17, 2020, petitioner filed via registered mail a Motion for the Appointment of an Independent Certified Public Accountant (ICPA), with attached Judicial Affidavit of Atty. Ma. Cecilia C. Katigbak, CPA, 25 which was noted by the Court in its Order dated March 10, 2020. 26 The Pre-Trial Order was issued on June 3, 2020. 27 In the Order dated July 28, 2020, the Court granted petitioner's Motion for the Appointment of an ICPA. 28 Accordingly, Atty. Katigbak took her Oath of Commission as ICPA. 29 On August 24, 2020, the ICPA submitted her Report, 30 which the Court noted in its Minute Resolution dated September 2, 2020. 31 Trial of the case thereafter ensued Petitioner offered both documentary and testimonial evidence. It presented the testimonies of: (1) Roxan DS. Ronas, petitioner's Administrative and Accounting Assistant, who testified that petitioner applied for VAT refund representing its excess and unutilized input VAT for the 1st and 2nd Quarters of TY 2017 in the total amount of P12,564,968.60, which was denied by the BIR; that petitioner is registered with the Securities and Exchange Commission and the BIR; and that petitioner's refund claim is based on its input VAT attributable to its zero-rated sales to clients registered with the Philippine Economic Zone Authority (PEZA) and non-resident foreign corporations not doing business in the Philippines; 32 and, (2) Atty. Katigbak, the ICPA, who testified that she performed verification, examination and evaluation of petitioner's supporting documents, the results of which were reflected in the ICPA Report; and that per her examination she found that petitioner was able to substantiate the total input VAT in the amount of P11,665,710.74. 33 Within the extended period, 34 petitioner filed on November 17, 2021 a Motion to Admit [Petitioner's Formal Offer of Exhibits] with attached Formal Offer of Exhibits. 35 On December 20, 2021, respondent filed his Comment thereon. 36 On March 29, 2022, the Court resolved to admit all of petitioner's Exhibits. save for Exhibit "P-11" for petitioner's failure to present the original for comparison, and Exhibit " P-41 " for failure of the document offered and identified to correspond with the document marked; 37 and deemed petitioner to have rested its case. On the other hand, respondent likewise offered both documentary and testimonial evidence. Respondent presented the testimony of RO Malang, who testified that she was authorized to review and evaluate petitioner's refund claim; that on the basis of her evaluation, she recommended the denial of said claim; and, that the refund claim was denied for failure of petitioner to submit the correct BIR Form 1914 indicating that it was a claim for VAT refund. 38 Respondent filed his Formal Offer of Evidence on June 14, 2022. 39 Petitioner filed on June 29, 2022 a Manifestation interposing no objection to respondent's Formal Offer of Evidence. 40 In a Resolution dated August 11, 2022 the Court resolved to admit all of respondent's Exhibits. 41 Respondent filed his Memorandum on September 12, 2022, 42 while petitioner filed its Memorandum on September 20, 2022. 43 On October 10, 2022, the Court issued a Minute Resolution submitting the case for decision. THE ISSUE The sole issue for resolution is: whether petitioner is entitled to a tax refund amounting to P12,564,968.60 representing its alleged excess and/or unutilized input VAT attributable to its zero-rated sale of services for the 1st and 2nd quarters of FY 2017 (or the period January 1, 2017 to June 30, 2017). 44 THE ARGUMENTS OF THE PARTIES Petitioner's Arguments Petitioner contends that respondent committed grave error when it denied its claim for refund due to a mere typographical error. Petitioner insists that even if it inadvertently ticked the box corresponding to the tax type "WC" instead of "VT", such clerical error cannot be the sole basis for the denial of the refund claim. The documents presented by petitioner clearly indicated that the refund claim was for excess and unutilized input VAT. Petitioner argues that it has complied with all the necessary documentary requirements for a claim of VAT refund, and that it has satisfied all requirements for a valid refund claim. 45 Respondent's Counter-arguments Respondent maintains that since there is already a denial of the claim for refund, petitioner cannot present to the Court evidence that it did not present at the administrative level. Moreover, respondent insists that petitioner failed to submit complete documents that would have entitled it to the refund being sought. 46 THE COURT'S RULING After a thorough review of the facts as borne by the records, and applying the applicable laws on the matter, the Court finds that it is bereft of jurisdiction to decide this case. The Court is without jurisdiction to hear, try and decide this case Petitioner's refund claim is founded on Section 112 (A) and (C) of the NIRC of 1997, as amended, which reads: "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. Provided, finally , That for a person making sales that are zero-rated under Section 108(B) (6), the input taxes shall be allocated ratably between his zero-rated and non-zero-rated sales. xxx xxx xxx (C) Period within which Refund of Input Taxes shall be Made . In proper cases, the Commissioner shall grant a refund for creditable input taxes within ninety (90) days from the date of submission of the official receipts or invoices and other documents in support of the application filed in accordance with Subsections (A) and (B) hereof: Provided , That should the Commissioner find that the grant of refund is not proper, the Commissioner must state in writing the legal and factual basis for the denial. In case of full or partial denial of the claim for tax refund, the taxpayer affected may, within thirty (30) days from the receipt of the decision denying the claim, appeal the decision with the Court of Tax Appeals: Provided, however , That failure on the part of any official, agent, or employee of the BIR to act on the application within the ninety (90)-day period shall be punishable under Section 269 of this Code." There are two (2) time requirements that a taxpayer must observe for a valid claim of refund: (1) The period of ninety (90) days, which serves as a waiting period to give time for the CIR to act on the administrative claim for refund or credit; and, (2) The period of thirty (30) days, which refers to the period for filing a judicial claim with the Court. 47 Complementing Section 112 of the NIRC of 1997, as amended, is Section 7 (a) (1) and (2) of Republic Act (RA) No. 1125, as amended, which provides for the jurisdiction of this Court, viz. : "Sec. 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 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 ; x x x" ( Boldfacing supplied ) The above-quoted provisions categorically state that a party adversely affected by a decision or inaction of the CIR may file an appeal before the Court within thirty (30) days after receipt of such decision or after the expiration of the period fixed by law for action. Stated otherwise, the taxpayer may file the appeal within thirty (30) days after the CIR denies the administrative claim within the ninety (90)-day waiting period, or it may file the appeal within thirty (30) days from the expiration of the ninety (90)-day period if there is inaction on the part of the CIR. 48 As elucidated by the Supreme Court in Silicon Philippines, Inc. (Formerly Intel Philippines Manufacturing, Inc.) vs. Commissioner of Internal Revenue : 49 "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 ." ( Boldfacing supplied ) The inaction of the CIR on a claim during the ninety (90)-day period is, by express provision of law, "deemed a denial" of a claim, and the taxpayer has thirty (30) days from the expiration of the ninety (90)-day period to file its judicial claim with the Court; otherwise, its failure to do so renders the "deemed a denial" decision of the CIR final and unappealable. 50 Both the ninety (90)-day period for the CIR to decide on the refund claim and the thirty (30)-day period to file the appeal before the Court are jurisdictional, and the failure to observe both periods is cause for dismissal of the action for lack of jurisdiction. 51 Records reveal the following relevant dates showing the time when the VAT returns and administrative claims were filed, as well as the end of the two (2)-year period to file an administrative claim in accordance with Section 112 (A) of the NIRC of 1997, as amended: Period of Claim End of the Quarter Date Return Filed End of Two (2)-Year Period to File Administrative Claim Date of Filing of Administrative Claim 1st Quarter (TY 2017) March 31, 2017 April 11, 2017 52 March 31, 2019 March 14, 2019 2nd Quarter (TY 2017) June 30, 2017 July 12, 2017 53 June 30, 2019 Based on the table above, petitioner had until March 31, 2019 and June 30, 2019 within which to file the administrative claims for the 1st and 2nd Quarters of TY 2017, respectively. Considering that both claims were filed on March 14, 2019 , the administrative claims were timely filed. Anent the timeliness of the judicial claim, the Court shall ascertain the expiry of the ninety (90)-day period; which is crucial in the filing of the appeal before the Court. As provided for under Section 112 (C) of the NIRC of 1997, as amended, the ninety (90)-day period is reckoned from "the date of submission of the official receipts or invoices and other documents in support of the application." As judicially admitted by the parties, petitioner submitted the supporting documents on March 14, 2019 , the same time it filed the administrative claim. 54 Thus the ninety (90)-day period shall commence to run on said date. Review of the records shows the following relevant dates with respect to the filing of petitioner's judicial claim, viz. : Period of Claim Date of Submission of Supporting Documents End of Ninety (90)-day Period for CIR to decide End of Thirty (30)-day Period to File Judicial Claim Date of Filing of Petition for Review 1st Quarter (TY 2017) March 14, 2019 June 13, 2019 July 13, 2019 August 30, 2019 2nd Quarter (TY 2017) From the submission of petitioner's supporting documents on March 14, 2019 , respondent had ninety (90) days therefrom, or until June 13, 2019, since June 12, 2019 is a regular holiday, 55 within which to decide the refund claim. Sans a decision being rendered on June 13, 2019, petitioner had thirty (30) days therefrom, or until July 13, 2019 within which to file its judicial claim. Of course, in a Letter dated June 7, 2019 of Regional Director Geraldino, petitioner's refund claim was denied. However, said Letter was received by petitioner only on July 31, 2019 , 56 or beyond the ninety (90)-day period for the CIR to decide the administrative claim. Needless to say, such Letter did not in any way alter the jurisdictional period within which an appeal should be made in Court, as mandated by law. Thus the filing of the present Petition for Review on August 30, 2019 is way beyond the prescribed period. To reiterate, the ninety (90)-day period for the CIR to decide on the refund claim, and the thirty (30)-day period for the filing of the judicial claim with the Court, are both mandatory and jurisdictional . 57 Strict compliance with the mandatory and jurisdictional conditions is essential and necessary for such claim to prosper. Noncompliance with the mandatory periods and non-observance of the prescriptive periods bar a taxpayer's claim for tax refund. 58 Thus, petitioner's failure to comply with the said periods is fatal to its cause. WHEREFORE , premises considered, the Petition for Review is DISMISSED for lack of jurisdiction. SO ORDERED. (SGD.) ROMAN G. DEL ROSARIO Presiding Justice Catherine T. Manahan and Marian Ivy F. Reyes-Fajardo, JJ. , concur. Footnotes 1. Exhibit "P-3", Docket, Vol. II, pp. 592-603. 2. Petition for Review, Docket, Vol. I, p. 11. 3. Pre-Trial Order, Docket, Vol. I, p. 317. 4. Exhibit "P-6", Docket, Vol. II, pp. 605-606. 5. Exhibit "P-6-1", Docket, Vol. II, pp. 607-608. 6. Exhibit "P-7", Docket, Vol. II, pp. 609-610. 7. Exhibit "P-7-1", Docket, Vol. II, pp. 611-612. 8. Pre-Trial Order, Docket, Vol. I, p. 317. 9. Exhibits "P-1" to "P-1-3", BIR Records, Folder 1, pp. 30-38. 10. Exhibit "P-8" and Exhibit "R-1", BIR Records, Folder 1, p. 28. 11. Exhibit "P-2", Docket, Vol. I, p. 71; Exhibit "R-2", BIR Records, Folder 1, p. 19. 12. Petition for Review, Docket, Vol. I, pp. 10-88. 13. Docket, Vol. I, pp. 89-90. 14. Docket, Vol. I, pp. 92-108. 15. Docket, Vol. I, pp. 100-106. 16. Docket, Vol. I, pp. 111-112. 17. Docket, Vol. I, pp. 113-116. 18. Docket, Vol. I, pp. 117-121. 19. Docket, Vol. I, pp. 131-134. 20. Docket, Vol. I, pp. 135-136. 21. Docket, Vol. I, pp. 137-143. 22. Docket, Vol. I, pp. 148-151. 23. Docket, Vol. I, pp. 153-162. 24. Docket, Vol. I, p. 166. 25. Docket, Vol. I, pp. 169-186. 26. Docket, Vol. I, pp. 195-196. 27. Docket, Vol. I, pp. 316-324. 28. Docket, Vol. I, pp. 344-347. 29. Docket, Vol. I, p. 248. 30. Docket, Vol. I, pp. 351-369. 31. Docket, Vol. I, pp. 375-376. 32. Exhibit "P-24", Judicial Affidavit of Roxan DS. Ronas, Docket, Vol. I, pp. 437-448. 33. Exhibit "P-26", Judicial Affidavit of Atty. Ma. Cecilia C. Katigbak, Docket, Vol. I, pp. 385-396. 34. Docket, Vol. II, pp. 572-573. 35. Docket, Vol. II, pp. 574-634. 36. Docket, Vol. II, pp. 640-642. 37. Docket, Vol. II, pp. 646-649. 38. Exhibit "R-4", Judicial Affidavit of RO Almanie D. Malang, Docket, Vol. I, pp. 126-130. 39. Docket, Vol. II, pp. 653-656. 40. Docket, Vol. II, pp. 659-661. 41. Docket, Vol. II, pp. 666-667. 42. Docket, Vol. II, pp. 670-678. 43. Docket, Vol. II, pp. 680-694. 44. Pre-Trial Order, Docket, Vol. I, p. 317. 45. Memorandum, Docket, Vol. II, pp. 683-693. 46. Memorandum, Docket, Vol. II, pp. 672-677. 47. Rohm Apollo Semiconductor Philippines vs. Commissioner of Internal Revenue , G.R. No. 168950, January 14, 2015. 48. Id. 49. G.R. No. 182737, March 2, 2016. 50. Commissioner of Internal Revenue vs. San Roque Power Corporation , G.R. No. 187485, February 12, 2013. 51. Applied Foods Ingredients Company, Inc. vs. Commissioner of Internal Revenue , G.R. No. 184266, November 11, 2013. 52. Exhibit "P-6", Docket, Vol. II, pp. 605-606. 53. Exhibit "P-7", Docket, Vol. II, pp. 609-610. 54. Joint Stipulation of Facts and Issues, Docket, Vol. I, p. 153. 55. Section 28, Chapter 7, Book I, Administrative Code of 1987. 56. Exhibit "P-2", Docket, Vol. I, p. 71. 57. San Roque Power Corporation vs. Commissioner of Internal Revenue , G.R. No. 203249, July 23, 2018. 58. Silicon Philippines, Inc. (Formerly Intel Philippines Manufacturing, Inc.) vs. Commissioner of Internal Revenue , G.R. No. 173241, March 25, 2015.