San Roque Power Corp. v. Commissioner of Internal Revenue

FIRST DIVISION [C.T.A. CASE NOS. 7744 & 7802. May 31, 2011.] SAN ROQUE POWER CORPORATION , petitioner , vs . COMMISSIONER OF INTERNAL REVENUE , respondent . RESOLUTION ACOSTA , P.J p : For resolution is the Motion for Reconsideration filed by petitioner on 07 February 2011, moving for the reconsideration of this Court's Decision dated 10 January 2011, the dispositive portion of which reads: WHEREFORE , these consolidated Petitions for Review, CTA Case Nos. 7744 covering the first, third and fourth quarter and 7802 covering second quarter are hereby DISMISSED since the Court has no jurisdiction thereof. SO ORDERED. The petitioner's Motion for Partial Reconsideration is anchored on the following arguments: I. The recent ruling of the Honorable Supreme Court in Commissioner of Internal Revenue vs. Aichi Forging Company of Asia, Inc., G.R. No. 184823, 06 October 2010 (hereinafter, the Aichi case) cannot be applied retroactively to petitioner in the present case. II. The retroactive application of the ruling in the Aichi Forging case to the Petitions for Review of petitioner who relied in good faith on the then consistent rulings of this Honorable Court (in the absence of a Supreme Court ruling on the matter) will certainly produce substantial inequitable results. Petitioner claims that it should not be prejudiced by the retroactive application of the Aichi case since its Petition for Review was filed long before the promulgation thereof by the Supreme Court. It posits that applying Aichi retroactively will certainly produce substantial inequitable results not only to it, the petitioner in the instant case, but to the many taxpayers and litigants before this Court who for almost a decade relied in good faith on the Court of Tax Appeals' well-settled rulings when they filed their judicial claim for tax refund/credit of their excess and unutilized input taxes. 1 HCaEAT Countering petitioner's stance, respondent filed a Comment to the Motion for Reconsideration of petitioner on 15 March 2011. In resolving the motion, this Court does not see any justifiable reason to depart from the pronouncement of the Honorable Supreme Court in Aichi on the application of Section 112 of the National Internal Revenue Code of 1997 (NIRC). At the onset, the applicable law to the instant claim for refund is the NIRC specifically Section 112, 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: . . . 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 . xxx xxx xxx (Underscoring supplied.) As a general rule, the first and fundamental duty of courts is to apply the law. Construction and interpretation come only after it has demonstrated that application is impossible or inadequate without them. They are the very last functions which a court should exercise. 2 In other words, where a provision of law speaks categorically, the need for interpretation is obviated, no plausible pretense being entertained to justify non-compliance. All that has to be done is to apply it in every case that falls within its terms. 3 Since Section 112, as amended, clearly pertains to Refunds or Tax Credits of Input Tax, as the title of the section suggests, said provision of the NIRC must prevail in a case for refund of input value added tax (VAT) rather than Section 229 of the same Code, which pertains to Recovery of Tax Erroneously or Illegally Collected. Thus, petitioner's contention that this Court's rulings prior to Aichi , applying Section 229 in relation to Section 112 (D) [now Section 112 (C)] in cases of refund of input VAT, should be controlling in the instant case lacks credit given the clear mandate of the law. As time and again been held, a special and specific provision prevails over a general provision irrespective of their relative position in the statute. Generalia specialibus non derogant. Where there is in the same statute a particular enactment and also a general one which in its most comprehensive sense would include what is embraced in the former, the particular enactment must be operative, and the general enactment must be taken to affect only such cases within its general language as are not within the provisions of the particular enactment. It is a principle in statutory construction that where two statutes are of equal theoretical application to a particular case, the one specially designed for said case must prevail over the other. 4 It is pressing to state further that if the Court agrees with petitioner and goes on to apply the two year prescriptive period in Section 229 for refund or tax credit of input VAT, the provision of Section 112, especially Section 112 (C), as amended, of the NIRC will become futile and inoperative. It is, thus, imperative for this Court to avoid a legal fiat, if possible, a construction that renders any part of the statute meaningless and extraneous. A law should be interpreted with a view to upholding rather than destroying it. One portion of a statute should not be construed to destroy the other. A construction that would render a provision inoperative or ineffective should be avoided. The provisions should be harmonized and reconciled, if possible; they should be construed together as means to effect the purpose of the law. The most general and absolute terms of one section may be qualified and limited by conditions and exceptions contained in another so that all may stand together. 5 aTEHCc As to petitioner's argument that Aichi should have a prospective application, the same is likewise devoid of merit. The date of effectivity of the provision of Subsections 112 (A) and (C), as amended, of the 1997 NIRC must be the date from which said law must take effect and not from the date of the promulgation of any decision pertinent to said law. Notably, it is only upon the effectivity of the statute when such legal rights and obligations become available to those entitled by the language of the statute. 6 The validity and obligatory force of a law proceed from the fact that it has first been promulgated. 7 It has already been settled that the interpretation placed upon the written law by a competent court has the force of law. The interpretation or construction placed by the courts establishes the contemporaneous legislative intent of the law. The latter as so interpreted and construed would thus constitute a part of that law as of the date the statute is enacted. It is only when a prior ruling of the Supreme Court involving the same provision of law finds itself later overruled, and a different view is adopted, that the new doctrine may have to be applied prospectively in favor of parties who have relied on the old doctrine and have acted in good faith in accordance therewith under the familiar rule of "lex prospicit, non respicit" . 8 According to Aichi , in cases of a claim for a tax refund or tax credit of unutilized input VAT, the controlling provision is Section 112, as amended, of the 1997 NIRC. Accordingly, an administrative claim for the refund should be filed within two years after the close of the taxable quarter when the sales were made. 9 The judicial remedy, on the other hand, is laid down by then Section 112 (D), which provides that the taxpayer may, within thirty (30) days from receipt of an adverse decision or after the expiration of the 120-day period, appeal the decision or the unacted claim with this Court. 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) [now subsection (C)] 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. This Court thus finds no cogent reason to disturb its Decision dated 10 January 2011 with respect to the petitioner's claim for refund covering the third and fourth quarters of the taxable year 2006. As culled from the records, petitioner filed its administrative and judicial claims for refund covering the last two quarters of 2006 on 21 September 2007 and 28 March 2008, respectively. Computing the days in between the two filings, the petition filed before this Court was well-beyond the thirty-day period after the lapse of the one hundred twenty days for the respondent CIR to act on the administrative claim. The thirty-day period to elevate to this Court an adverse decision or inaction of the Bureau of Internal Revenue (BIR) is jurisdictional and thus non-compliance therewith is fatal, robbing this Court of jurisdiction to hear the case. ITHADC With respect to the refund claim covering the first and second quarters of the taxable year 2006, this Court affirms its previous ruling of dismissal but however clarifies that said dismissal is based on petitioner's lack of cause of action and not on the Court not acquiring jurisdiction over the same. Records confirm that petitioner filed its administrative claim for the first and second quarters on 10 March 2008 and its Petition for Review before this Court on 28 March 2008, for the first quarter refund claim, and on 27 June 2008, for the second quarter refund claim. Both petitions were prematurely filed since petitioner should have elevated to this Court its refund claims for the two quarters only after the lapse of one hundred twenty days from the submission of its refund claim with the BIR, which is after 08 July 2008. This failure though of petitioner to await the decision of the respondent CIR on its claim or, at most, the lapse of the one hundred twenty days from the filing of its administrative claim constitutes a violation of the doctrine of exhaustion of administrative remedies. The rule on exhaustion of administrative remedies before resorting to the courts means that there should be an orderly procedure which favors a preliminary administrative sifting process, particularly with respect to matters peculiar within the competence of the administrative agency, avoidance of interference with functions of such administrative agency by withholding judicial action until the administrative process has run its course, and prevention of attempts to swamp the courts by a resort to them in the first instance. 10 A party seeking an administrative remedy must not merely initiate the prescribed administrative procedure to obtain relief, but also pursue it to its appropriate conclusion before seeking judicial intervention in order to give the administrative agency an opportunity to decide the matter itself correctly and prevent unnecessary and premature resort to court action. 11 The failure to exhaust available administrative remedies nonetheless will not rob the court of its jurisdiction over a case as the same is tantamount only to a judicial petition lacking a cause of action . In our jurisdiction, the defense of lack of cause of action is not jurisdictional and may be deemed waived if not timely raised in a Motion to Dismiss or in the Answer. 12 Settled is the rule that the non-exhaustion of administrative remedies is not jurisdictional and it renders only the action premature, i.e. , the claimed cause of action is not ripe for judicial determination and for that reason, a party has no cause of action to ventilate in court. 13 The premature invocation of the court's intervention is thus only fatal to one's cause of action, though the case is still susceptible of dismissal for such failure to state a cause of action absent any finding of waiver or estoppel. 14 Notably, in the instant case, there was the absence of waiver by respondent of the defense of non-exhaustion of administrative remedies or the lack of a cause of action, as the issue of petitioner's premature filing of the Petition for Review was raised in the Special and Administrative Defenses contained in the Answer dated 02 September 2008. In the Answer, respondent stated that 15. The specific provision of law governing the periods for filing judicial claim of excess unutilized input taxes attributable to VAT zero-rated sales after the filing of an administrative claim is Section 112 (D) 15 of the National Internal Revenue Code (NIRC) of 1997. The said section provides: xxx xxx xxx 16. The administrative claim of petitioner is not acted upon with finality by respondent until the lapse of 120 days from 10 March 2008 or on 8 July 2008. Thereafter the law provides that petitioner has 30 days or until 07 August 2008, within which to elevate its claim before the Honorable Court of Tax Appeals. However, the present action was prematurely filed on 27 June 2008, clearly way before the period prescribed by law. This requirement is jurisdictional, failing thus, the Honorable Court cannot acquire jurisdiction over the instant case. Without touching on the issue of this Court's jurisdiction, the premature filing of a petition before this Court exposes it to an attack that it lacks a cause of action, which defense is waivable at the election of the opposing party. Upon a finding that there was no waiver of said defense or estoppel, such judicial petition is susceptible of dismissal. TcIAHS Since there was clearly no waiver or estoppel in the instant case, the prematurely filed petitions for the first and second quarter refund claims should properly be dismissed on the ground that these failed to state any cause of action. It is established that an action for a tax refund partakes of the nature of an exemption, which cannot be allowed unless granted in the most explicit and categorical language, it is strictly construed against the claimant who must discharge such burden convincingly. 16 Unfortunately, respondent in this case failed to discharge such burden. WHEREFORE , finding no sound reason to reverse, amend or modify the Decision of the Court dated 10 January 2011, petitioner's "Motion for Reconsideration" is hereby DENIED for lack of merit. SO ORDERED. (SGD.) ERNESTO D. ACOSTA Presiding Justice Esperanza R. Fabon-Victorino, J., concurs. Erlinda P. Uy, J., is on leave. Footnotes 1. Petitioner's Motion for Reconsideration dated 26 January 2011. 2. Hermanos vs. F.M. YAP TICO , G.R. No. L-6791, 27 March 1913. 3. Luzon Stevedoring Corporation vs. CTA , G.R. No. 30232, 29 July 1988, citing the cases of Allied Brokerage Corporation vs. Commissioner of Customs , G.R. No. L-27641, 31 August 1971 and Quijano, etc. v. DBP , L-26419, 16 October 1970. 4. Commissioner of Customs v. Hon. Court of Tax Appeals, Smith Bell & Co. , G.R. No. L-41861, 23 March 1987. 5. Statutory Construction, Fifth Edition, 2003, Pages 256-257. 6. Abakada Guro Party List, et al. vs. Cesar V. Purisima, et al. , G.R. No. 166715, 14 August 2008. 7. Mighty Corporation vs. E. & J. Gallo Winery , G.R. No. 154342, 14 July 2004. 8. Pesca vs. Pesca , G.R. No. 136921, 17 April 2001. 9. Section 112 (A), as amended, 1997 NIRC. 10. Abe-Abe vs. Manta , L-4827, 31 May 1979. 11. Commissioner of Internal Revenue vs. Rosemarie Acosta , G.R. No. 154068, 03 August 2007. 12. Sec. 1, Rule 9 of the Rules of Court. 13. Carale vs. Abarintos , G.R. No. 120704, 03 March 1997. 14. Iloilo City Zoning Board of Adjustment and Appeals vs. Gegato Abecia Funeral Homes, Inc. , G.R. No. 157118, 08 December 2003. 15. Section (C) of Section 112, as amended by the E-VAT Law. 16. Commissioner of Internal Revenue vs. Acesite (Philippines) Hotel Corporation , G.R. No. 147295, February 16, 2007.