Pulp Specialties Philippines, Inc. v. Commissioner of Internal Revenue

THIRD DIVISION [C.T.A. CASE NO. 9936. July 8, 2021.] PULP SPECIALTIES PHILIPPINES, INC. , petitioner , vs. COMMISSIONER OF INTERNAL REVENUE , respondent . DECISION UY , J p : Before this Court is a Petition for Review 1 filed by Pulp Specialties Philippines, Inc. (PSPI) on September 27, 2018 against the Commissioner of Internal Revenue (CIR), praying for the refund of and/or the issuance of a tax credit certificate in the amount of Two Million Five Hundred Fifteen Thousand Ninety Four Pesos and 62/100 Centavos (P2,515,094.62), representing PSPI's excess and unutilized input value-added tax (VAT) on domestic purchases of goods and services, and creditable input VAT for the period, all of which are attributable to zero rated sales. 2 THE FACTS Petitioner is a domestic corporation duly organized and existing under the laws of the Republic of the Philippines, with principal office at 7F Citibank Center, 8741 Paseo de Roxas, Makati City. 3 Petitioner was incorporated on June 14, 2002. 4 Petitioner was registered with the Securities and Exchange Commission with Company Reg. No. A200209626 on June 14, 2002, 5 Board of Investments with Certificate of Registration No. EP 2002-139 6 and with the Bureau of Internal Revenue (BIR) as a VAT taxpayer with TIN 219-637-370-000. 7 Petitioner's primary purpose is "to engage in the manufacture and sale of rope, twine, pulp and other by-products of abaca, coconut and other fibrous, woody, or pulpy growth, whether cultured or natural; to own and operate factories of every kind and description for the making of rope, twine, pulp, or other by-products of abaca, coconut and of the other natural plan growths aforementioned." Its secondary purpose is "to engage in agriculture and to acquire and exploit forest concessions; and generally, to do and perform every act and thing necessary for the growing culture, gathering, buying, selling, importing and exporting of all agricultural or forest products whether in raw, semi-processed or processed form in the Philippines and anywhere else." 8 Petitioner may be served with pleadings, orders, notices, resolutions, and other processes of the Honorable Court though its counsel, Atty. Jan Louenn L. Lumanta and Atty. Audie G. Bernabe, at Suite B, 2F Overland Park Building, No. 245 Banawe St. cor. Quezon Ave., Quezon City. 9 CAIHTE Respondent Bureau of Internal Revenue (BIR), through the CIR, is the agency of the government tasked with the enforcement of revenue laws and the collection of taxes and duties. Respondent is represented in this case by the legal officers of the Legal Division, Revenue Region No. 8, Makati City, with office address at the 2nd Floor Legal Division, BIR Bldg., No. 313 Sen. Gil Puyat Ave., Makati City, where summons, pleadings, notices and other processes of this Honorable Court may be served. 10 On August 30, 2005, petitioner filed with BIR RDO No. 50, an administrative claim for the refund of unutilized input VAT for the period from August 1, 2003 to December 31, 2004. 11 Respondent issued a Letter of Authority with Reference No. LOA 200100027223 12 dated May 29, 2006, authorizing Revenue Officer (RO) Joel Evangelista and Group Supervisor (GS) Josephine Elarmo to conduct verification of the factual basis of petitioner's VAT refund and the same was duly received by petitioner. 13 On August 16, 2018, respondent, through Regional Director Glen A. Geraldino of Revenue Region No. 8, denied petitioner's claim for VAT refund, due to its failure to submit complete supporting documents in violation of Section 112 (D) of the Tax Code. 14 On September 27, 2018, petitioner filed the instant Petition for Review 15 praying for the refund of and/or the issuance of a tax credit certificate in the amount of Two Million Five Hundred Fifteen Thousand Ninety Four Pesos and 62/100 Centavos (P2,515,094.62), representing PSPI's excess and unutilized input value-added tax (VAT) on domestic purchases of goods and services, and creditable input VAT for the period, all of which are attributable to zero rated sales. 16 Respondent filed his Answer on November 29, 2018, 17 interposing the following special and affirmative defenses: 1) taxes paid and collected are presumed to have been made in accordance with law, hence, not refundable; 2) PSPI's claim for refund failed to comply with the substantiation requirements prescribed under Revenue Regulations No. 16-2005, in relation to Sections 113 and 237 of the 1997 Tax Code, as well as the conditions prescribed under Section 112 (A) (C) of the same Code; 3) PSPI has the burden of proof to establish its right to the claimed refund and failure to adduce sufficient proof is fatal to its claim; 4) PSPI failed to comply with the prescribed conditions to qualify its sales of goods and services made to its foreign clients/affiliates as zero-rated VAT under Sections 106 (A) (2) (a) (1) and 108 (B) (1) (2) (3) of the 1997 Tax Code; and 5) claims for refund are strictly construed against the taxpayer for the same partakes the nature of exemption from taxation and as such, they are looked upon with disfavor. HEITAD After the Pre-Trial Conference was on February 19, 2019, 18 the parties filed their Joint Stipulation of Facts and Issues (JSFI) on March 5, 2019. 19 The JSFI was approved by the Court in the Resolution 20 dated March 11, 2019 and Pre-Trial was deemed terminated. Thereafter, the Court issued the Pre-Trial Order 21 dated April 15, 2019. During trial, petitioner presented its sole witness, its Corporate Secretary and Treasurer, Lorenzo D. Inocando. 22 Petitioner filed its Formal Offer of Evidence/Exhibits 23 on October 15, 2019, to which the CIR filed his Comment (To Petitioner's Formal Offer of Evidence) 24 on October 25, 2019. In the Resolution 25 dated November 22, 2019, this Court admitted most of petitioner's documentary evidence, except: Exhibits "P-14" and "P-15", for failure to present the originals for comparison. Moreover, the Court noted the following: 1. Exhibit "P-3-a" is actually marked as Exhibit "P-3-1"; and 2. While Exhibit "P-18" is offered and identified as "Letter of Authority (LOA) with no. LOA-050-2001-00027223 dated May 29, 2006," the duly marked document shows the LOA No. as "LOA 2001 0002723." For his part, respondent presented the following witnesses: 1) Revenue Officer Joel F. Evangelista, 26 and 2) Revenue Officer Rolando S. Dela Torre. 27 On January 30, 2020, the CIR filed his Formal Offer of Evidence/Exhibits (For Respondent) , 28 to which petitioner filed its Comments To Respondent's Formal Offer of Evidence 29 on February 5, 2020. In the Resolution 30 dated March 6, 2020, the Court admitted all of respondent's documentary evidence. With the filing of the Memorandum (For Petitioner) with Notice of Change of Address of Counsel 31 on August 7, 2020 and the Memorandum for the Respondent 32 on August 26, 2020, the case was submitted for decision on September 15, 2020. 33 Hence, this Decision. THE ISSUES The issues stipulated by the parties are as follows: 34 "a. Whether or not respondent has factual and legal bases for its denial of petitioner's claim for input VAT refund/issuance of Tax Credit Certificate; b. Whether or not petitioner is entitled to claim for refund or tax credit in the amount of P3,204,525.96, as alleged unutilized input VAT, for period August 1, 2003 to December 31, 2004." Petitioner's arguments: Petitioner argues that it has legal bases to claim for input VAT refund. On the other hand, respondent allegedly has no factual and legal bases for denying petitioner's claim for input VAT refund. In this case, there were already recommendations for the approval of the claim for tax refund/credit in the amount of P2,515,094.62, by both the Revenue District Officer and Regional Director. Thus, the denial of the claim for not submitting complete documents has no basis in fact and in law. Moreover, no less than respondent's witness, admitted that petitioner submitted complete documents. Petitioner likewise contends that the Revenue Examiner who recommended the denial of the claim for refund has no letter of authority to investigate petitioner's claim for refund. Finally, petitioner avers that the denial letter did not comply with the requirements of the law, and equity dictates that technicalities should not defeat a valid claim. Respondent's counter-arguments: Respondent counters that the instant petition must be dismissed on account of being filed out of time. Respondent likewise asserts that he has factual and legal bases for its denial of petitioner's claim for input VAT refund/issuance of Tax Credit Certificate (TCC). Finally, respondent claims that the petitioner failed to prove that it is entitled to claim a refund or tax credit for alleged unutilized input VAT, for the period August 1, 2003 to December 31, 2004. THE COURT'S RULING To successfully claim for the refund or issuance of tax credit certificate for input taxes, a taxpayer is required to prove compliance with Section 112 (A) and (C) of the NIRC of 1997, as amended, which provides: " SEC. 112. Refunds or Tax Credits of Input Tax . (A) Zero-rated or Effectively Zero-rated Sales . Any VAT-registered person, whose sales are zero-rated or effectively zero-rated may, within two (2) years after the close of the taxable quarter when the sales were made, apply for the issuance of a tax credit certificate or refund of creditable input tax due or paid attributable to such sales, except transitional input tax, to the extent that such input tax has not been applied against output tax: 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 sales 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 nonzero-rated sales. ETHIDa xxx xxx xxx (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." From the foregoing provision, it has been jurisprudentially established that a taxpayer must comply with the following requisites, in order to successfully obtain a credit/refund of input VAT, to wit: As to the timeliness of the filing of the administrative and judicial claims : 1. the claim is filed with the BIR within two years after the close of the taxable quarter when the sales were made; 35 2. that in case of full or partial denial of the refund claim, or the failure on the part of the CIR to act on the said claim within a period of 120 days, the judicial claim must be filed with this Court, within 30 days from receipt of the decision or after the expiration of the said 120-day period; 36 With reference to the taxpayer's registration with the BIR : 3. the taxpayer is VAT registered; 37 With regard to the taxpayer's output VAT : 4. the taxpayer is engaged in zero-rated or effectively zero-rated sales; 38 5. for zero-rated sales under Section 106(A)(2)(a)(1) and (2); 106(B); and 108(B)(1) and (2), the acceptable foreign currency exchange proceeds have been duly accounted for in accordance with BSP rules and regulations; 39 With regard to the taxpayer's refund claim for input VAT : 6. the input taxes are due or paid; 40 7. the input taxes claimed are attributable to zero-rated or effectively zero-rated sales. However, where there are both zero-rated or effectively zero-rated sales and taxable or exempt sales, and the input taxes cannot be directly and entirely attributable to any of these sales, the input taxes shall be proportionately allocated on the basis of sales volume; 41 and 8. the input taxes have not been applied against output taxes during and in the succeeding quarters. 42 We shall now look at petitioner's compliance with the foregoing requirements. As mentioned earlier, Section 112 of the NIRC of 1997, as amended, mandates compliance by a taxpayer-claimant with two (2) reglementary periods pertaining to the timeliness of the filing of the taxpayer's: (1) administrative, and (2) judicial claim for refund. cSEDTC Petitioner's administrative claim was timely filed. The first period is specified in Section 112 (A) of the NIRC of 1997, as amended, which states that the administrative claim for the refund must be filed with the BIR within two (2) years after the close of the taxable quarter when the zero-rated or effectively zero-rated sales were made. In this case, petitioner's claim for refund of unutilized input VAT is for the period from August 1, 2003 to December 31, 2004. Thus, petitioner had two (2) years after the close of each respective taxable quarter when the zero-rated or effectively zero-rated sales were made, within which to file its administrative claim. For easy reference, the last day for the filing of petitioner's administrative claims is summarized herein, to wit: Taxable Quarter Close of Taxable Quarter Last Day to File Administrative Claim Administrative Claim Filed 3rd Quarter (July to Sept. 2003) Sept. 30, 2003 Sept. 30, 2005 Aug. 30, 2005 4th Quarter (Oct. to Dec. 2003) Dec. 31, 2003 Dec. 31, 2005 Aug. 30, 2005 1st Quarter (Jan. to Mar. 2004) March 31, 2004 March 31, 2006 Aug. 30, 2005 2nd Quarter (Apr. to June 2004) June 30, 2004 June 30, 2006 Aug. 30, 2005 3rd Quarter (July to Sept. 2004) Sept. 30, 2004 Sept. 30, 2006 Aug. 30, 2005 4th Quarter (Oct. to Dec. 2004) Dec. 31, 2004 Dec. 31, 2006 Aug. 30, 2005 Evidently, petitioner's administrative claim for refund, 43 for the period from August 1, 2003 to December 31, 2004, filed with the BIR on August 30, 2005, was timely filed. Petitioner's judicial claim was filed out of time. The second period is specified under Section 112 (C) of the NIRC of 1997, as amended, which provides that the CIR has one hundred twenty (120) days from the date of submission of the complete documents in support of the application for refund or tax credit certificate, within which to grant or deny the claim. Thereafter, upon receipt of the adverse decision, or from the lapse of the 120-day period for the CIR to act on the claim, the taxpayer has 30 days within which to file its judicial claim, through a Petition for Review before this Court. Strict compliance with the 120+30-day periods is necessary for such a claim to prosper. 44 Applying the foregoing reglementary periods to the instant case, the CIR had one hundred twenty (120) days from the filing of petitioner's administrative claim on August 30, 2005 , or until December 28, 2005 , within which to render a decision on the said claim. For easy reference, the relevant dates in this case are summarized as follows: Date of Administrative Claim End of the 120-day period for the CIR to decide on the claim End of the 30-day period to file judicial claim Date of Filing of Judicial Claim August 30, 2005 December 28, 2005 January 27, 2006 September 27, 2018 However, in this case, the CIR neither granted nor denied petitioner's refund claim within the 120-day reglementary period. Instead, respondent, through Regional Director Glen A. Geraldino of Revenue Region No. 8, denied petitioner's subject refund claim only on August 16, 2018, which is way beyond the reglementary period of 120 days. SDAaTC In view thereof, petitioner may not invoke August 16, 2018 as the reckoning date of the thirty (30)-day period within which to file its judicial claim for refund because it violates the mandates of Section 112 (C) of the NIRC of 1997, as amended. Thus, considering that the CIR did not act on petitioner's claim on or before December 28, 2005, petitioner had thirty (30) days, or until January 27, 2006 , within which to file its judicial claim before this Court. Considering that the instant Petition for Review 45 was filed only on September 27, 2018 , or way beyond the thirty (30)-day period to appeal, petitioner's judicial claim was filed out of time. Therefore, this Court acquired no jurisdiction over the case. In Silicon Philippines, Inc. (Formerly Intel Philippines Manufacturing, Inc.) vs. Commissioner of Internal Revenue , 46 it was held that the 30-day period commences after the receipt of respondent's decision or ruling or after the expiration of the 120-day period, whichever is sooner , to wit: "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. xxx xxx xxx 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 . Aside from a specific exception to the mandatory and jurisdictional nature of the periods provided by law, 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 ." (Emphases and underscoring supplied) It is well-settled, therefore, that the 30-day period provided by law is reckoned from the date of receipt of respondent's decision/ruling rendered within the 120-day period from submission of complete documents, or after the expiration of the 120-day period, whichever is sooner . Consequently, any judicial claim filed in a period less than or beyond the said 120+30-day period, is outside the jurisdiction of this Court. In fact, in Rohm Apollo Semiconductor Philippines v. Commissioner of Internal Revenue , 47 taxpayers were reminded that when the 120-day period lapses and there is no decision/ruling from the CIR within the said period, the taxpayer must no longer wait for the CIR to come up with a decision, to wit: "A final note, the taxpayers are reminded that when the 120-day period lapses and there is inaction on the part of the CIR, they must no longer wait for it to come up with a decision thereafter. The CIR's inaction is the decision itself. It is already a denial of the refund claim . Thus, the taxpayer must file an appeal within 30 days from the lapse of the 120-day waiting period." (Emphasis supplied) Thus, the inaction, i.e. , failure of the CIR to render a decision/ruling on the taxpayer's administrative claim for refund, within the 120-day period from submission of complete documents, should be treated by the taxpayer as a denial of its claim. acEHCD Consequently, the taxpayer must no longer wait for respondent to come up with a decision before it files an appeal to this Court. In fact, the taxpayer must file an appeal within thirty (30) days from the lapse of the 120-day waiting period. With the foregoing findings of lack of jurisdiction over the instant case, it becomes no longer necessary to determine whether the subject claim for input VAT refund has factual and legal bases. It should be stressed that a claim for unutilized input VAT is in the nature of a tax exemption. Thus, strict adherence to the conditions prescribed by the law is required of the taxpayer. Refunds need to be proven and their application raised in the right manner as required by law. In this case, non-compliance with the 120+30-day periods is fatal to the taxpayer's judicial claim. 48 WHEREFORE , in light of the foregoing considerations, the instant Petition for Review is hereby DISMISSED for lack of jurisdiction. SO ORDERED. (SGD.) ERLINDA P. UY Associate Justice Ma. Belen M. Ringpis-Liban and Maria Rowena Modesto-San Pedro, JJ. , concur. Footnotes 1. Docket Vol. 1, pp. 10 to 32. 2. Docket Vol. 1, p. 25. 3. JSFI, Docket Vol. 1, par. 1, p. 285. 4. JSFI, Docket Vol. 1, par. 6, p. 286. 5. Exhibit "P-2," Docket Vol. 1, p. 33. 6. Exhibit "P-5," Docket Vol. 1, p. 62; and JSFI, Docket Vol. 1, par. 8, p. 286. 7. Exhibit "P-6," Docket Vol. 1, p. 63; and JSFI, Docket Vol. 1, par. 9, p. 287. 8. JSFI, Docket Vol. 1, par. 7, p. 286. 9. JSFI, Docket Vol. 1, par. 2, p. 285. 10. JSFI, Docket Vol. 1, par. 3, p. 286. 11. JSFI, Docket Vol. 1, par. 4, p. 286; Exhibit "P-8," Docket Vol. 1, p. 65; Exhibit "P-7," Docket Vol. 1, p. 64; and Exhibit "R-1". 12. Exhibit "P-18," Docket Vol. 1, p. 75; and BIR Records, p. 3. 13. JSFI, Docket Vol. 1, par. 10, p. 287. 14. JSFI, Docket Vol. 1, par. 14, p. 287; and Exhibits "P-28" and "R-16," BIR Records, p. 590. 15. Docket Vol. 1, pp. 10 to 32. 16. Docket Vol. 1, p. 25. 17. Docket Vol. 1, pp. 96 to 98. 18. Docket Vol. 1, pp. 282 to 284. 19. JSFI, Docket Vol. 1, pp. 285 to 302. 20. Docket Vol. 1, p. 304. 21. Docket Vol. 1, pp. 326 to 334. 22. Exhibit "P-29," Docket Vol. 1, pp. 172 to 195. 23. Docket Vol. 1, pp. 393 to 407. 24. Docket Vol. 1, pp. 471 to 473. 25. Docket Vol. 1, pp. 478 to 479. 26. Exhibit "R-17," Docket Vol. 1, pp. 105 to 113. 27. Exhibit "R-18," Docket Vol. 1, pp. 139 to 144. 28. Docket Vol. 1, pp. 483 to 488. 29. Docket Vol. 1, pp. 489 to 491. 30. Docket Vol. 1, 496 to 497. 31. Docket Vol. 2, pp. 498 to 528. 32. Docket Vol. 2, pp. 530 to 540. 33. Docket Vol, 2, p. 543. 34. Issues, JSFI, Docket Vol. 1, p. 288. 35. Commissioner of Internal Revenue vs. Chevron Holdings, Inc. , G.R. No. 233301, February 17, 2020; Intel Technology Philippines, Inc. vs. Commissioner of Internal Revenue , G.R. No. 166732, April 27, 2007; San Roque Power Corporation vs. Commissioner of Internal Revenue , G.R. No. 180345, November 25, 2009; and AT&T Communications Services Philippines, Inc. vs. Commissioner of Internal Revenue , G.R. No. 182364, August 3, 2010. 36. Steag State Power, Inc. (Formerly State Power Development Corporation) vs. Commissioner of Internal Revenue , G.R. No. 205282, January 14, 2019; Rohm Apollo Semiconductor Philippines vs. Commissioner of Internal Revenue , G.R. No. 168950, January 14, 2015. 37. Intel Technology Philippines, Inc. vs. Commissioner of Internal Revenue, supra; San Roque Power Corporation vs. Commissioner of Internal Revenue, supra ; and AT&T Communications Services Philippines, Inc. vs. Commissioner of Internal Revenue, supra . 38. Id. 39. Id. 40. Id. 41. Intel Technology Philippines, Inc. vs. Commissioner of Internal Revenue, supra ; and San Roque Power Corporation vs. Commissioner of Internal Revenue, supra . 42. Intel Technology Philippines, Inc. vs. Commissioner of Internal Revenue, supra; San Roque Power Corporation vs. Commissioner of Internal Revenue, supra ; and AT&T Communications Services Philippines, Inc. vs. Commissioner of Internal Revenue, supra . 43. JSFI, Docket Vol. 1, par. 4, p. 286, Exhibit "P-8," Docket Vol. 1, p. 65; Exhibit "P-7," Docket Vol. 1, p. 64; and Exhibit "R-1". 44. Commissioner of Internal Revenue vs. San Roque Power Corporation, et seq. , G.R. No. 187485, 196113, 197156, February 12, 2013. 45. Docket Vol. 1, pp. 10 to 32. 46. G.R. No. 182737, March 2, 2016. 47. G.R. No. 168950, January 14, 2015. 48. Steag State Power, Inc. (Formerly State Power Development Corporation) vs. Commissioner of Internal Revenue , G.R. No. 205282, January 14, 2019.