Implementing Rules and Regulations of RA 7354

EN BANC [C.T.A. EB CASE NO. 609 . June 27, 2011.] (C.T.A. Case No. 7428) COMMISSIONER OF INTERNAL REVENUE , petitioner , vs . TAGANITO MINING CORPORATION , respondent . RESOLUTION UY , J p : This resolves respondent's "MOTION FOR RECONSIDERATION" filed on February 4, 2011, praying that the Court En Banc render judgment reversing its Decision promulgated on January 11, 2011, the dispositive portion of which reads: SHTcDE " WHEREFORE , all the foregoing considered, the instant Petition for Review is hereby GRANTED . The assailed Decision dated November 24, 2009 and Resolution dated March 12, 2010 rendered by the Court in Division, are hereby REVERSED and SET ASIDE. Accordingly, CTA Case No. 7428 is hereby DISMISSED for having been prematurely filed. SO ORDERED. " Respondent also prays for the modification of the Decision dated November 24, 2009 of the Court in Division in CTA Case No. 7428, by declaring that respondent is entitled to refund in the amount of P1,337,231.42 in addition to the amount of P537,645.43, which was already granted by the said Court in Division, representing excess value-added tax (VAT) input taxes paid on domestic purchases of taxable goods and services and on importation and local purchases of capital goods from January 1, 2004 to December 31, 2004. In the Motion, respondent argues that Section 112 (D) of the National Internal Revenue Code (NIRC) of 1997 cannot be suddenly construed as giving rise to jurisdictional issues in refund cases in violation of respondent's right to due process; that said provision is merely permissive; that there is legal basis in not adhering strictly to procedural requirements which must also be applied prospectively; that the non-refund of respondent's claim constitutes solutio indebiti ; and that the claim of respondent was properly substantiated by evidence. In her Comment filed on March 4, 2011, petitioner contends that Section 112 (D) of the NIRC of 1997 governs respondent's claim for refund as it 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. Further, petitioner stresses that respondent's claim for refund was prematurely filed as there is yet no decision of the Commissioner to appeal from; and that such claim for refund is not properly substantiated by evidence insofar as invoicing requirements are concerned for VAT-registered persons. The instant Motion lacks merit. No violation of due process of law in applying Section 112 (D) of the NIRC of 1997 in the instant case. Section 112 (D) of the NIRC of 1997 pertinently provides as follows: "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 ." prcd The foregoing provision clearly speaks of the right to appeal by "the taxpayer affected" by the full or partial denial of the refund claim or by the inaction of the Commissioner within the prescribed period of 120 days. This provision has long been in effect since January 1, 1998, the effectivity date of NIRC of 1997, as amended, and thus, there can be no violation of due process in applying said provision in petitioner's instant case. Moreover, it must be remembered that the right to appeal is, inter alia , not an inherent right, but a mere statutory privilege which must be exercised in accordance with procedural requirements. Failing which, the right to appeal will be denied without violating the respondent's right to due process. As aptly held in Yao vs. Court of Appeals, et al. : 1 "The right to appeal is not a constitutional , natural or inherent right . It is a statutory privilege of statutory origin and, therefore, available only if granted or provided by statute. Since the right to appeal is not a natural right nor a part of due process, it may be exercised only in the manner and in accordance with the provisions of law . Corollary, its requirements must be strictly complied with . That an appeal must be perfected in the manner and within the period fixed by law is not only mandatory but jurisdictional . . . . ." (Emphases supplied) Aside from the foregoing procedural considerations, the Supreme Court clearly and explicitly said in the recent case of Commissioner of Internal Revenue vs. Aichi Forging Company of Asia, Inc. , 2 that the premature filing of a Petition for Review in cases involving refund claims in contravention with the provisions of the above-quoted Section 112 (D) is jurisdictional, to wit: "In fact, applying the two-year period to judicial claims would render nugatory Section 112(D) of the NIRC, which already provides 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. 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 no jurisdiction was acquired by the CTA ." (Emphases and underscoring supplied) It must be noted that the High Court could not have used the phrase "no jurisdiction was acquired by the CTA" so loosely, if the said premature filing with this Court is not jurisdictional. Thus, when it appears from the pleadings or the evidence on record that the court has no jurisdiction over the subject matter, the court shall dismiss the claim. 3 EcTaSC Another point which respondent emphasizes is that it would be unfair and unjust to suddenly tell the taxpayer that it was a mistake to have relied in good faith on the earlier rulings of this Court coupled with the issuance of petitioner. Respondent points to the earlier decisions of this Court in Asian Books, Inc. vs. Commissioner of Internal Revenue 4 and San Roque Power Corporation vs. Commissioner of Internal Revenue ; 5 and to Revenue Memorandum Circular No. (RMC) 49-03 6 issued by the Commissioner of Internal Revenue. Respondent's reasoning is specious. By tradition and in our system of judicial administration, the Supreme Court has the last word on what the law is, and that its decisions applying or interpreting the laws or the Constitution form part of the legal system of the country. 7 All courts must take their bearings from the decisions of said Court. 8 Thus, this Court is duty bound to adhere to the ruling enunciated in the Aichi case, even when it has previously taken a contrary or different view on a specific case. For this Court to rule otherwise would be to transgress the Constitution and arrogate upon itself a power that it does not by law possess. 9 Anent the issuance of the respondent, suffice it state that, contrary to respondent's stance, 10 nothing in RMC 49-03 did it recognize the fact that the 120-day period under Section 112 (D) of the NIRC of 1997 is not jurisdictional. In fact, nothing is said about the 120-day period. Said issuance reads: "In cases where the taxpayer has filed a 'Petition for Review' with the Court of Tax Appeals involving a claim for refund/TCC that is pending at the administrative agency (Bureau of Internal Revenue or OSS-DOF), the administrative agency and the tax court may act on the case separately. While the case is pending in the tax court and at the same time is still under process by the administrative agency, the litigation lawyer of the BIR, upon receipt of the summons from the tax court, shall request from the head of the investigating/processing office for the docket containing certified true copies of all the documents pertinent to the claim. The docket shall be presented to the court as evidence for the BIR in its defense on the tax credit/refund case filed by the taxpayer. In the meantime, the investigating/processing office of the administrative agency shall continue processing the refund/TCC case until such time that a final decision has been reached by either the CTA or the administrative agency. If the CTA is able to release its decision ahead of the evaluation of the administrative agency, the latter shall cease from processing the claim. On the other hand, if the administrative agency is able to process the claim of the taxpayer ahead of the CTA and the taxpayer is amenable to the findings thereof, the concerned taxpayer must file a motion to withdraw the claim with the CTA. A copy of the positive resolution or approval of the motion must be furnished the administrative agency as a prerequisite to the release of the tax credit certificate/tax refund processed administratively. However, if the taxpayer is not agreeable to the findings of the administrative agency or does not respond accordingly to the action of the agency, the agency shall not release the refund/TCC unless the taxpayer shows proof of withdrawal of the case filed with the tax court. If, despite the termination of the processing of the refund/TCC at the administrative level, the taxpayer decides to continue with the case filed at the tax court, the litigation lawyer of the BIR, upon the initiative of either the Legal Office or the Processing Office of the Administrative Agency, shall present as evidence against the claim of the taxpayer the result of investigation of the investigating/processing office." AHCETa The foregoing issuance merely addresses the scenario when a taxpayer has already filed an appeal regarding its refund claim, which was earlier filed at the administrative level. To the mind of the Court, this issuance is even to the advantage on the part of the taxpayer concerned, because even when it has filed the pertinent Petition for Review and the case is still pending before this Court, the Bureau of Internal Revenue or the Department of Finance still continues to process the refund claim. But even granting that RMC 49-03 interpreted Section 112 (D) to the effect that it does not involve a jurisdictional issue, the same could not operate as binding on this Court. In the case of Philippine Bank of Communications vs. Commissioner of Internal Revenue, et al. , 11 the Supreme Court declared: "Article 8 of the Civil Code recognizes judicial decisions, applying or interpreting statutes as part of the legal system of the country. But administrative decisions do not enjoy that level of recognition. A memorandum-circular of a bureau head could not operate to vest a taxpayer with a shield against a judicial action. For there are no vested rights to speak of respecting a wrong construction of the law by the administrative officials and such wrong interpretation could not place the Government in estoppel to correct or overrule the same . . . . ." (Emphasis supplied) Section 112 (D) of the NIRC of 1997 is NOT permissive. It is mandatory. Admittedly, the taking of appeals before this Court under Section 112 (D) of the NIRC of 1997 is couched in the permissive term "may" instead of the mandatory word "shall". And while the ordinary acceptations of these terms may indeed be resorted to as guides in the ascertainment of the mandatory or directory character of statutory provisions, they are in no wise absolute and inflexible criteria in the vast areas of law and equity. Depending upon a consideration of the entire provision, its nature, its object and the consequences that would follow from construing it one way or the other, the convertibility of said terms either as mandatory or permissive is a standard recourse in statutory construction. 12 The matter here involved not only concerns public interest but also goes into the jurisdiction of the Court in Division and is of the essence of the proceedings taken thereon. On this point, there is authority to the fact that in statutes relating to procedures, as is the one now under consideration, every act which is jurisdictional , or of the essence of the proceedings, or is prescribed for the protection or benefit of the party affected, is mandatory . 13 It is apparent that the present case is well within the purview of this doctrine. The principle of solutio indebiti goes together with the observance of procedural due process. While this Court does not refute the applicability of the principle of solutio indebiti in claims for tax refund, it cannot be ignored that the taxpayer concerned must still prove compliance with the procedural due process. The Aichi case is clear on the matter, to wit: HTaSEA "A taxpayer is entitled to a refund either by authority of a statute expressly granting such right, privilege, or incentive in his favor, or under the principle of solutio indebiti requiring the return of taxes erroneously or illegally collected. In both cases, 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 ." (Emphasis supplied) Such being the case, since respondent failed to observe the prescriptive periods within which to file the judicial claim, the denial of its claim is warranted under the premises. WHEREFORE , all the foregoing considered, the instant Motion for Reconsideration is hereby DENIED for lack of merit. SO ORDERED. (SGD.) ERLINDA P. UY Associate Justice Juanito C. Castaeda, Jr., Caesar A. Casanova, Olga Palanca-Enriquez, Esperanza R. Fabon-Victorino and Cielito N. Mindaro-Grulla, JJ., concur. Ernesto D. Acosta, P.J., with separate concurring opinion. Lovell R. Bautista, J., I maintain my dissenting opinion on January 11, 2011. Amelia R. Cotangco-Manalastas, J., I join Presiding Justice Acosta in his comment but concur with the ponente. Separate Opinions ACOSTA , P.J. , concurring opinion : I am in conformity with the majority in dismissing the Petition for Review as it was prematurely filed, hence, respondent Taganito Mining Corporation (Taganito) failed to exhaust administrative remedies. The case is dismissible for lack of cause of action. The failure of respondent Taganito to observe the 120-day period prescribed in Section 112 (D) of the 1997 NIRC renders the Petition for Review premature. 1 Said premature filing is a violation of the doctrine of exhaustion of administrative remedies. It is already well settled that non-exhaustion of administrative remedies is not jurisdictional. It only renders 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. 2 The premature invocation of court's intervention is fatal to one's cause of action. Accordingly, absent any finding of waiver or estoppel, the case is susceptible of dismissal for lack of cause of action. 3 Since herein petitioner-CIR has invoked the application of Section 112 (D) of the 1997 NIRC as early as in her Answer, the defense of lack of cause of action is not waived. The case, therefore, is dismissible for lack of cause of action. CIaHDc Footnotes 1. G.R. No. 132428, October 24, 2000. 2. G.R. No. 184823, October 6, 2010. 3. Section 1, Rule 9, Rules of Court. 4. CTA Case No. 6527, December 28, 2004. 5. CTA Case No. 6213, December 23, 2004. 6. SUBJECT: Amending Answer to Question Number 17 of Revenue Memorandum Circular No. 42-2003 and Providing Additional Guidelines on Issues Relative to the Processing of Claims for Value-Added Tax (VAT) Credit/Refund, Including Those Filed with the Tax and Revenue Group, One-Stop Shop Inter-Agency Tax Credit and Duty Drawback Center, Department of Finance (OSS-DOF) by Direct Exporters. 7. Caram Resources Corporation vs. Contreras , A.M. No. MTJ-93-849, October 26, 1994. 8. Nacuray, et al. vs. National Labor Relations Commission, et al. , G.R. Nos. 114924-27, March 18, 1997. 9. See Republic of the Philippines vs. Maj. Gen. Garcia , G.R. No. 167741, July 17, 2007. 10. Par. 3, respondent's Motion for Reconsideration, Docket, p. 138. 11. G.R. No. 112024, January 28, 1999. 12. Vda. De Mesa, et al. vs. Mencias, et al. , G.R. No. 24583, October 29, 1966. 13. Id. ; and Vda. De la Cruz, et al. vs. Court of Appeals, et al. , G.R. No. L-41107, February 28, 1979. ACOSTA, P.J., concurring opinion: 1. Commissioner of Internal Revenue vs. Aichi Forging Company of Asia, Inc. , G.R. No. 184823, October 6, 2010. 2. Carale vs. Abarintos , G.R. No. 120704, March 3, 1997. 3. Paat vs. Court of Appeals , G.R. No. 111107, January 10, 1997; 266 SCRA 167, pp. 175-177.