Revised Rules and Procedures for the Exercise of Retention Right by Landowners

SPECIAL FIRST DIVISION [C.T.A. CASE NO. 7351. September 28, 2010.] KEIHIN-EVERETT FORWARDING CO., INC. , petitioner , vs . COMMISSIONER OF INTERNAL REVENUE , respondent . [C.T.A. CASE NO. 7472. September 28, 2010.] KEIHIN-EVERETT FORWARDING CO., INC. , petitioner , vs . COMMISSIONER OF INTERNAL REVENUE , respondent . RESOLUTION BAUTISTA , J p : This resolves respondent's Motion for Reconsideration filed on May 11, 2010, with petitioner's Comment to Respondent's Motion for Reconsideration dated May 7, 2010 filed on June 8, 2010. Respondent moves for the reconsideration of this Court's Decision promulgated on April 21, 2010, the dispositive portion of which reads: " WHEREFORE , premises considered, the instant Petitions for Review are hereby PARTIALLY GRANTED . Accordingly, respondent Commissioner of Internal Revenue is hereby ORDERED TO ISSUE A TAX CREDIT CERTIFICATE in the amount of FOUR HUNDRED THIRTY-SEVEN THOUSAND ONE HUNDRED NINETY-THREE PESOS AND 46/100 (P437,193.46) in favor of petitioner Keihin-Everett Forwarding Co., Inc., representing its unutilized input VAT on purchases of capital goods and on domestic purchases of goods and services attributable to zero-rated sales covering the third quarter of 2003 to the fourth quarter of 2004. SO ORDERED. " Respondent anchors his motion on the following ground: "1. THE HONORABLE COURT ERRED IN RENDERING THE D ECISIO N PROMULGATED ON APRIL 21, 2010 ORDERING THE ISSUANCE OF A TAX CREDIT CERTIFICATE IN FAVOR OF PETITIONER IN THE AMOUNT OF FOUR HUNDRED THIRTY-SEVEN THOUSAND ONE HUNDRED NINETY-THREE AND 46/100 (P437,193.46) REPRESENTING ITS UNUTILIZED INPUT VAT ON PURCHASES OF CAPITAL GOODS AND ON DOMESTIC PURCHASES OF GOODS AND SERVICES TO ZERO-RATED SALES COVERING THE THIRD QUARTER OF 2003 TO THE FOURTH QUARTER OF 2004." Respondent argues that the d ecisio n of this Court finding that the Petitions for Review were timely filed is erroneous as it contradicts the clear and unequivocal provision of Section 112 (A) of the National Internal Revenue Code (NIRC) of 1997, which states: "SEC. 112. Refunds or Tax Credits of Input Tax. AIHDcC (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 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) Further, respondent points out that the filing of the Petitions for Review on October 25, 2005 for its unutilized input VAT claims for the third and fourth quarters of taxable year 2003 and on April 24, 2006 for its unutilized input VAT claims for taxable year 2004 are both not within the reglementary period provided for in Section 112 (D) of the NIRC of 1997, to wit: "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 deci sion denying the claim or after the expiration of the one hundred twenty-day period , appeal the deci sion or the unacted claim with the Court of Tax Appeals." (Emphasis supplied) Respondent also cites the ruling of the Supreme Court in the case of Commissioner of Internal Revenue vs. Mirant Pagbilao Corporation (Formerly Southern Energy Quezon, Inc.) , 1 where it was held that the reckoning of the two-year prescriptive period for the filing of a claim for input VAT refund should be counted from the close of the taxable quarter when the relevant sales were made pertaining to the input VAT. Respondent further avers that the afore-mentioned ruling is clearly provided for in Section 112 (A) of the NIRC of 1997, as distinguished from the reckoning of the two-year prescriptive period for the filing of a claim for refund or tax credit from the date of erroneous payment of the tax or penalty or illegal collection of internal revenue taxes. In its Comment , petitioner made the following counter-arguments: (1) the two-year prescriptive period for the filing of administrative and judicial claims for refund of excess and unutilized input VAT should be reckoned from the date of filing of the Quarterly VAT Return and the payment of output VAT; and (2) the 120-day period provided under Section 112 (D) 2 of the NIRC of 1997 is neither mandatory nor compulsory, and may be dispensed with as long as the claim for refund is filed within the two-year prescriptive period under Sections 112 (A) and 229 of the NIRC of 1997. This Court agrees with petitioner. The two-year prescriptive period for filing a claim for refund is governed by Section 112 (A) in relation to Section 229 of the NIRC of 1997, to wit: "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: . . ." "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. ESTaHC 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 a 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) At the time of filing of the Petition for Review with this Court on October 25, 2005 (CTA Case No. 7351) and on April 24, 2006 (CTA Case No. 7472), relative to petitioner's claim for refund of input VAT attributable to zero-rated sales covering the third quarter of 2003 to the fourth quarter of 2004, the prevailing jurisprudence then provided that the two-year prescriptive period is reckoned from the filing of the Quarterly VAT Return and the payment of the tax due. 3 A review of the records of this case shows that the claim in CTA Case No. 7351 pertains to input VAT incurred for the third and fourth quarters of calendar year 2003; while the claim in CTA Case No. 7472 involves the input VAT incurred for the four quarters of calendar year 2004. Counting from the date of filing of the VAT Return for the third quarter of 2003, which was on October 27, 2003 and from the date of filing of the VAT Return for the first quarter of 2004, which was on April 26, 2004, petitioner had until October 27, 2005 and April 26, 2006, respectively, to file its claim for refund both in the administrative and judicial levels. Hence, the administrative claim filed on December 21, 2004 and the Petition for Review filed on October 25, 2005 for CTA Case No. 7351, and the filing of the administrative claim on May 10, 2005 and the filing of the Petition for Review on April 24, 2006 for CTA Case No. 7472 were all done within the reglementary period. On the other hand, Section 112 (D) of the NIRC of 1997 provides for a 120-day period from the submission of complete documents within which respondent may grant or deny the taxpayer's application for refund or issuance of tax credit certificate. However, in a long line of cases, it has been consistently held that the administrative claim and the subsequent appeal to this Court must be filed within the two-year prescriptive period. 4 Therefore, as long as an administrative claim is filed prior to the filing of a judicial case, and both are filed within the prescriptive period, this Court has jurisdiction to take cognizance of the claim. WHEREFORE , respondent's Motion for Reconsideration is hereby DENIED for lack of merit. SO ORDERED. (SGD.) LOVELL R. BAUTISTA Associate Justice Caesar A. Casanova, J. , concurs. Ernesto D. Acosta, P.J. , with concurring and dissenting opinion. Separate Opinions ACOSTA , P.J., concurring and dissenting opinion : Firstly, I concur with the majority in finding that at the time of the filing of both petitions in the cases at bar involving claims for refund of input VAT attributable to zero-rated sales covering the third quarter of 2003 to the fourth quarter of 2002, the prevailing jurisprudence (Atlas Consolidated Mining and Development Corporation vs. Commissioner of Internal Revenue , G.R. Nos. 141104 and 148763, June 8, 2007) should govern. Pursuant to said case, the two-year prescriptive period is reckoned from the filing of the Quarterly VAT Return and the payment of the tax due. It is only with the promulgation of the de cision in the ca se of Commissioner of Internal Revenue vs. Mirant Pagbilao Corporation 1 on September 12, 2008, that the Supreme Court ruled that the counting of the two-year period in Section 112 (A) of the 1997 Tax Code is reckoned from the close of the taxable quarter when the sales were made. CAaSED Although, it would seem that the Mirant ruling is not a reversal of the Atlas case considering that the former case interpreted a provision of the 1997 Tax Code, whereas the latter case interpreted a 1977 Tax Code provision. However, a perusal of the subject provision (Section 106 of the 1977 Tax Code, now Section 112) in the Atlas case and the subject provision in the Mirant case (Section 112) will reveal that the provisions are similar as far as the starting point of the counting of the two-year period is concerned. Both provisions stated that the two-year period is to be counted from the close of the taxable quarter. The only difference is that in the Mirant case, the Supreme Court adhered to the literal application of the provision in contrast to that of the Atlas case. Therefore, it can be said that the Mirant ruling is a reversal of the Atlas ruling because the Supreme Court issued different interpretations on similar provisions. This brings to fore the equally important rule in statutory construction that while a judicial ruling of the Supreme Court interpreting a law forms part of the laws as of the date of its enactment, it cannot be given retroactive effect if to do so will impair vested rights. Nor may a judicial ruling overruling a previous one be applied retroactively so as to nullify a right which arose under the previous ruling before its abandonment. 2 In other words, an interpretation placed by the Supreme Court on a law will continue until overruled and the new doctrine is applied prospectively in favor of the parties who have relied on the old doctrine and have acted in good faith in accordance therewith. In the light of the foregoing, I agree with the majority that the ruling in the Mirant case should be applied prospectively in consideration of fairness and equity and the well pronounced rule against the retroa ctive application of judicial decis ions, if to do so, will impair the rights of the people who, in good faith, relied on the old declaration. It is with utmost regret, however, that I express my dissent to the majority's conclusion that the judicial claims were timely filed in accordance with the provisions of the NIRC of 1997, as amended. In the cases at bar, the petitioner filed its applications for issuance of tax credit certificates before the BIR on December 21, 2004 (for third and fourth quarters of taxable year 2003) and on May 10, 2005 (for first, second, third and fourth quarters of taxable year 2004), respectively. Subsequently, after failing to receive any action on the claims by the respondent, it filed its petitions for review before this Court on October 25, 2005 and April 24, 2006, respectively. It is clear, however, that a straightforward application of Section 112 (D) in relation to Section 112 (A) of the NIRC of 1997 to the cases at bar belies a finding of timeliness of these judicial claims. The law provides: 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 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 of 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. cSEDTC 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 , app eal the deci sion or the unacted claim with the Court of Tax Appeals. (Emphasis Supplied.) The foregoing provisions clearly state that a VAT-registered taxpayer who desires to refund its unutilized or excess input VAT attributable to zero-rated sales may apply for the issuance of a tax credit certificate within two (2) years from the close of the taxable quarter. The Commissioner of Internal Revenue shall, in this case, issue a tax credit certificate within one hundred twenty (120) days from the submission of complete documents. In case of a denial or inaction by the Commissioner within the 120-day period, the VAT-registered taxpayer may appeal to the Court within thirty (30) days from rec eipt of the deci sion or the lapse of the 120-day period. Flowing from the above, the petitioner only had until May 20, 2005 (or thirty days after the lapse of the 120-day period from filing its administrative claim on December 21, 2004) to have filed its appeal before this Court following the inaction of the respondent Commissioner on its application for issuance of tax credit certificate for the third and fourth quarters of taxable year 2003. The same is true for its judicial claim of unutilized input VAT for first, second, third and fourth quarters of taxable year 2004 which it should have filed on or before October 7, 2005 (or thirty days after the lapse of the 120-day period from filing its administrative claim on May 10, 2005). To reiterate, petitioner's filing of the petitions for review on October 25, 2005 and April 24, 2006 are both well beyond the reglementary period provided for in Section 112 (D) of the NIRC of 1997; said period of filing having already prescribed. Specifically, 308 days lapsed from the filing of the administrative claim on December 21, 2004 before petitioner filed its appeal before this Court on October 25, 2005 for its unutilized input VAT claims for the third and fourth quarters of taxable year 2003. On the other hand, 349 days likewise passed from the filing of the administrative claim on May 10, 2005 to petitioner's filing an appeal before this Court on April 24, 2006 for its unutilized input VAT claims for taxable year 2004. Hence, I am reiterating my dissent with respect to the portion of the Resolution that found herein petitions for review to have been timely filed. WHEREFORE , claims should be dismissed on account of prescription. IDSaAH Footnotes 1. G.R. No. 172129, September 12, 2008. 2. Now Section 112 (C) of the NIRC of 1997, as amended. 3. Atlas Consolidated Mining and Development Corporation vs. Commissioner of Internal Revenue , G.R. Nos. 141104 and 148763, June 8, 2007. 4. Commissioner of Internal Revenue vs. Victorias Milling Co., Inc., et al. , G.R. No. L-24108, January 3, 1968. ACOSTA, P.J., concurring and dissenting: 1. G.R. No. 172129, September 12, 2008. 2. Statutory Construction, Ruben Agpalo, Fifth Edition, page 68.