Commissioner of Internal Revenue v. Philex Mining Corp.

THIRD DIVISION

[G.R. No. 233942. February 21, 2018.]

COMMISSIONER OF INTERNAL REVENUE, petitioner,vs. PHILEX MINING CORPORATION, respondent.

NOTICE

Sirs/Mesdames :

Please take notice that the Court, Third Division, issued a Resolution datedFebruary 21, 2018, which reads as follows: HTcADC

"G.R. No. 233942 (Commissioner of Internal Revenue, petitioner, v. Philex Mining Corporation, respondent) — This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court filed by petitioner Commissioner of Internal Revenue (CIR) seeking the reversal and setting aside of the Decision 1 dated 1 June 2017, and the Resolution 2 dated 24 August 2017, of the Court of Tax Appeals (CTA) En Banc in CTA EB Case No. 1493. The CTA En Banc affirmed the 20 May 2016 Decision and 7 July 2016 Resolution of the CTA Second Division which partially granted the tax refund claim of respondent Philex Mining Corporation (Philex).

THE FACTS

Philex is a VAT-registered taxpayer engaged in the business of mining. For the second and third taxable quarters of 2012, it filed its Quarterly VAT Returns on 18 July 2012 and 19 October 2012, respectively.

On 17 December 2013, Philex filed an administrative claim for refund or tax credit 3 of its alleged excess and unutilized input VAT in the amounts of P43,969,988.40 for the second quarter and P42,125,610.72 for the third quarter of 2012. As the CIR failed to take action on the administrative claim for refund, Philex filed on 15 May 2014 a judicial claim by filing a petition for review before the CTA. The case was docketed as CTA Case No. 8819 and raffled off to the CTA Second Division (CTA Division).

After due proceedings, the CTA Division partially granted the refund claim of Philex. The CIR moved for reconsideration but to no avail. Hence, the CIR appealed before the CTA En Banc which, as noted above, affirmed the ruling of the CTA Division.

Undaunted, the CIR is now before this Court questioning the decision of the CTA En Banc partially granting the refund claim of Philex. The CIR anchors its petition on the following grounds:

I.

RESPONDENT PHILEX FAILED TO ESTABLISH THAT THE INPUT TAXES PAID WERE ACTUALLY ATTRIBUTABLE TO ITS ALLEGED ZERO-RATED SALES.

II.

RESPONDENT PHILEX FAILED TO PROVE THE ACTUAL RECEIPT BY THE BUYER OF THE GOODS IT SOLD.

III.

RESPONDENT PHILEX FAILED TO SUBMIT THE COMPLETE DOCUMENTARY REQUIREMENTS FOR ITS CLAIM FOR REFUND.

IV.

THE CTA SHOULD NOT HAVE CONSIDERED AS VALID ALL THE FINAL INVOICES BEARING DATES LATER THAN THE DATES OF SALE OF RESPONDENT'S GOODS.

The CIR claims that Philex failed to submit complete documents to support its administrative claim for refund. 4 Without the submission of complete documents, the counting of the 120-day period within which the CIR should grant a refund would not start. 5 And since the 120-day period had yet to kick in, there was likewise no basis for reckoning the 30-day period to appeal before the CTA. 6 Consequently, the judicial claim of Philex was prematurely filed. 7

Pressing on the non-submission of complete documents, the CIR claims that Philex's letter, dated 11 December 2013, enumerating the documents submitted in support of its claim for refund, cannot be considered as proof that Philex had submitted the supporting documents because it was dated a week before the filing of the administrative claim on 17 December 2013. Thus, as far as the CIR is concerned, the only documents presented by Philex were the Claim Information Sheet and Claim Stub. 8

The CIR also argues that Philex failed to prove that its input taxes are attributable to its alleged zero-rated sales. 9 Invoking Atlas Consolidated Mining and Development Corporation v. CIR (Atlas), 10 the CIR insists that sales invoices or receipts, among other requirements, are indispensable as the best evidence of the zero-rated sales. 11 The invoices submitted by Philex were dated outside of the period covered by the refund claim, 12 thus, they should not be considered in the computation of the alleged zero-rated sales. 13 It also adds that Philex failed to prove actual receipt by the buyer of the goods as dictated by Atlas. 14

Lastly, the CIR points to the failure of Philex to submit its subsidiary sales journal and subsidiary purchase journal, as required by Section 113 (C) of the National Internal Revenue Code (NIRC), as well as Section 3.113.3 of Revenue Regulations No. 16-2005, in support of its refund claim. The CIR faults the CTA for overlooking this legal requirement.

ISSUE

Whether the CTA erred in partially granting the refund claim of Philex.

OUR RULING

The CIR has not sufficiently shown that the CTA seriously erred in partially granting the refund claim of Philex.

The pertinent law is Section 112 of the NIRC, 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 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: 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. aScITE

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.

xxx xxx xxx

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.

Under the foregoing provision, the running of the 120-day period for the Commissioner to decide the refund claim commences from the time of the submission of complete documents in support of the application. After the 120-day period expires without the Commissioner acting on the refund application, the 30-day period of appeal begins. In accordance with CIR v. San Roque Power Corporation, 15 the inaction by the Commissioner after 120 days is deemed a denial of the claim and, thus, the taxpayer-claimant, if it so chooses, must file its judicial claim within thirty days thereafter. It other words, what activates the running of the 30-day period of appeal is the decision of the Commissioner within the 120-day period, or his inaction which is deemed a denial of the claim, and which is to be reckoned from the submission of complete documents.

We do not agree with the CIR that the judicial claim in this case was prematurely filed based on the theory that the 30-day period of appeal to the CTA has not commenced because of the failure of Philex to submit complete documents to support its claim.

In Pilipinas Total Gas, Inc. v. CIR, 16 we explained that prior to Revenue Memorandum Circular (RMC) No. 54-2014, which took effect on 14 June 2014, RMC No. 49-2003 governed in which case the determination of whether the documents in support of the application for refund/credit are complete is left to the taxpayer, thus:

[F]or purposes of determining when the supporting documents have been completed — it is the taxpayer who ultimately determines when complete documents have been submitted for the purpose of commencing and continuing the running of the 120-day period. After all, he may have already completed the necessary documents the moment he filed his administrative claim, in which case, the 120-day period is reckoned from the date of filing. The taxpayer may have also filed the complete documents on the 30th day from filing of his application, pursuant to RMC No. 49-2003. He may very well have filed his supporting documents on the first day he was notified by the BIR of the lack of the necessary documents. In such cases, the 120-day period is computed from the date the taxpayer is able to submit the complete documents in support of his application.

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Lest it be misunderstood, the benefit given to the taxpayer to determine when it should complete its submission of documents is not unbridled. Under RMC No. 49-2003, if in the course of the investigation and processing of the claim, additional documents are required for the proper determination of the legitimacy of the claim, the taxpayer-claimants shall submit such documents within thirty (30) days from request of the investigating/processing office. Again, notice, by way of a request from the tax collection authority to produce the complete documents in these cases, is essential.17 (emphasis in the original and underlining supplied)

However, under RMC No. 54-2014, a taxpayer-claimant is now required at the time of filing his claim to complete his supporting documents and attest that he will no longer submit any other document to prove his claim. He is barred from submitting additional documents after he has filed his administrative claim. As we observed in Pilipinas, the reckoning of the 120-day period has been withdrawn from the taxpayer by RMC No. 54-2014. Moreover, pursuant to Section 246 of the NIRC, 18 this circular cannot be given retroactive application as it imposes new obligations upon taxpayers in order to perfect their administrative claim.

Considering that the administrative claim in this case was filed on 17 December 2013, RMC No. 54-2014 is clearly not applicable. Instead, RMC No. 49-2003 applies, in which case, Philex relatively has control in determining whether its claim is complete with supporting documents for purposes of commencing the 120-day period for the CIR to decide. We emphasize that the CIR neither gave notice to Philex that its documents were inadequate, nor ruled to deny Philex's claim for failure of the latter to substantiate its claim. It is also worth noting that the CIR acknowledged in this petition that Philex had already submitted the supporting documents even prior to the date of filing the application. With the previous submission of supporting documents, it is only logical to conclude that the subsequent filing by Philex of the application effectively perfected its claim for refund/credit.

Thus, the counting of the 120-day period should be reckoned from 17 December 2013, the date Philex filed the application for refund/credit. On this date, Philex may be said to have "submitted complete documents to support its application" for refund of excess unutilized input VAT. Thus, reckoned from this date, the CIR had 120 days to decide, or until 17 April 2014. Without any action or notice from the CIR as of 17 April 2014, the claim of Philex was deemed denied. It follows that Philex had 30 days, or until 17 May 2014, to file a judicial claim. The cause of action of Philex is the inaction of the CIR which is deemed a denial of its claim.

Philex properly filed its judicial claim (before the CTA) on 15 May 2014. It is incorrect to say, therefore, that the CTA appeal was premature.

All the other allegations relate to the substantiation of the claim for refund. In particular, the CIR asserts that Philex failed to prove that its input taxes are attributable to zero-rated sales; that its buyer received the goods sold; and that the sales invoices presented are within the period covered in the refund claim. The CIR also finds fault in Philex's failure to submit subsidiary journals to support its claim. We observe that these allegations necessarily involve factual issues and, thus, are evidentiary in nature which cannot be entertained in the present petition; it is well-settled that in a petition for review under Rule 45, only pure questions of law may be resolved. 19 The Court, not being a trier of facts, is not duty bound to look into the documents submitted during trial in order to test the truthfulness of their contents. 20 Therefore, the factual findings of the trial court are generally not disturbed on appeal unless it is perceived to have overlooked, misunderstood or misinterpreted certain facts or circumstances of weight, which, if properly considered, would affect the result of the case and warrant a reversal of the decision involved. 21 Here, we find no cogent reason to depart from this general principle.

In any event, we stress that the submission of the subsidiary sales journal and subsidiary purchase journal is not indispensable to support a claim for refund under Section 112 of the NIRC. The full text of paragraph C, Section 113 of the NIRC provides:

(C) Accounting Requirements. — Notwithstanding the provisions of Section 233, all persons subject to the value-added tax under Sections 106 and 108 shall, in addition to the regular accounting records required, maintain a subsidiary sales journal and subsidiary purchase journal on which the daily sales and purchases are recorded. The subsidiary journals shall contain such information as may be required by the Secretary of Finance.

As the CTA correctly held, the subsidiary journals are not specifically required to be submitted to support a claim for refund. Simply, nothing from the foregoing paragraph would suggest that such subsidiary journals are part of substantiation requirements under Section 112 of the NIRC. They may, however, prove vital as sources of information which the CIR may utilize for other purposes such as in making assessments.

Considering the foregoing, the petition of the CIR must be denied, there being no reversible error committed by the CTA.

WHEREFORE, the instant petition is DENIED for lack of merit.

SO ORDERED."

Very truly yours,

(SGD.) WILFREDO V. LAPITANDivision Clerk of Court

 

Footnotes

1.Rollo, pp. 34-45; penned by Associate Justice Lovell R. Bautista, and concurred in by Associate Justices Juanito C. Castañeda, Jr., Erlinda P. Uy, Caesar A. Casanova, Esperanza R. Fabon-Victorino, Cielito N. Mindaro-Grulla, Ma. Belen M. Ringpis-Liban and Catherine T. Manahan, with concurring opinion of Associate Justice Roman G. Del Rosario.

2.Id. at 53-56.

3. Filed before the One-Stop Shop Inter-Agency Tax Credit and Duty Drawback Center of the Department of Finance. As of the date of filing of the administrative claim in this case, Revenue Memorandum Circular (RMC) No. 49-2003 was still in effect. RMC No. 54-2014 would later be issued on 11 June 2014.

4.Rollo, p. 15.

5.Id. at 17.

6.Id.

7.Id. at 18.

8.Id. at 23.

9.Id. at 19.

10. 551 Phil. 519 (2007).

11.Rollo, p. 21.

12.Id. at 25.

13.Id. at 26.

14.Id. at 22.

15. 703 Phil. 310, 360 (2013).

16. 774 Phil. 473 (2015).

17.Id. at 493-494.

18. SEC. 246. Non-Retroactivity of Rulings. — Any revocation, modification or reversal of any of the rules and regulations promulgated in accordance with the preceding Sections or any of the rulings or circulars promulgated by the Commissioner shall not be given retroactive application if the revocation, modification or reversal will be prejudicial to the taxpayers, except in the following cases:

   (a) Where the taxpayer deliberately misstates or omits material facts from his return or any document required of him by the Bureau of Internal Revenue;

   (b) Where the facts subsequently gathered by the Bureau of Internal Revenue are materially different from the facts on which the ruling is based; or

   (c) Where the taxpayer acted in bad faith.

19. See Cargill Philippines, Inc. v. CIR, 755 Phil. 820, 831 (2015).

20. See CIR v. De La Salle University, G.R. Nos. 196596 and 198841, 9 November 2016.

21. See Atlas Consolidated Mining and Development Corporation v. CIR, 569 Phil. 483, 492 (2008).