Commissioner of Internal Revenue vs. Taganito Mining Corporation/Taganito Mining Corporation vs. Commissioner of Internal...

FIRST DIVISION

[ G.R. Nos. 219630-31. December 07, 2021 ]

COMMISSIONER OF INTERNAL REVENUE, PETITIONER, VS. TAGANITO MINING CORPORATION, RESPONDENT.

[G.R. Nos. 219635-36]

TAGANITO MINING CORPORATION, PETITIONER, VS. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

D E C I S I O N

GESMUNDO, C.J.:

Before the Court are two (2) petitions for review on certiorari under Rule 45 of the Rules of Court, filed separately by the Commissioner of Internal Revenue (CIR) and Taganito Mining Corporation (TMC), seeking the reversal of the Decision1 dated December 16, 2014, and Resolution2 dated August 3, 2015 of the Court of Tax Appeals (CTA) En Banc in CTA EB Case Nos. 935 and 936. In the assailed decision, the CTA En Banc affirmed in toto the May 25, 2012 Decision3 of the CTA Second Division (CTA Division) in CTA Case No. 8090 ordering the CIR to refund or issue a Tax Credit Certificate (TCC) in favor of TMC in the reduced amount of P3,981,970.05, representing the latter's unutilized input Value Added Tax (VAT) on purchases of capital goods attributable to its zero-rated sales for the calendar year 2008.

TMC is a corporation duly organized under Philippine laws primarily engaged in the business of exploring, producing, and exporting nickel, chromite, cobalt, gold, and all kinds of ores, metals, and their by-products. It is registered as a VAT taxpayer with the Bureau of Internal Revenue (BIR) and as an exporter of beneficiated nickel silicate ores and chromite ores with the Board of Investments (BOI). As certified by the BOI, TMC exports and ships 100% of its ores to foreign countries, such as Japan and Australia.

On December 1, 2009, TMC filed with the BIR a claim for refund of excess input VAT paid on domestic purchases of taxable goods and services and importation of goods in the total amount of P42,038,669.54, covering the period of January 1 to December 31, 2008. TMC attached to its letter-claim the following supporting documents:

1) Duly accomplished BIR Form No. 1914;

2) Original and latest amended quarterly VAT Returns for the four (4) quarters of 2008 with supporting schedules on Summary Lists of Sales and Purchases for the year 2008;

3) Original and latest amended Monthly VAT Declarations for 2008 with supporting schedules or Summary Lists of Sales and Purchases for the year 2008;

4) Photocopy of the Certification issued by Security Bank Corporation dated February 17, 2009 as to the export remittance proceeds received by the said bank in favor of TMC for the year 2008;

5) Photocopy of Certificate of Registration No. OCN 8RC0000017494 and corresponding BIR Form 1905 filed on December 9, 2004;

6) Annual Income Tax Return For CY 2008 duly filed with the BIR;

7) Audited Financial Statements For CY 2008 with attached Report of Independent Auditors;

8) Certification issued by the Department of Finance (DOF) One Stop Shop Inter-Agency Tax Credit and Duty Drawback Center to [the] effect that TMC has not filed any similar, previous and/or outstanding application for tax credit and duty drawback with the said agency for the period January 1, 2008 to December 31, 2008.4

When the BIR failed to take action on its administrative claim, TMC filed a petition for review before the CTA on April 21, 2010, to forestall the lapse of the two-year prescriptive period for such a judicial claim. The petition was docketed as CTA Case No. 8090 and raffled to the CTA Division of the tax court. In its petition for review, TMC sought the tax refund/credit of the lower amount of P34,131,592.29 because of the CIR's alleged representation that a portion of the claim of TMC pertaining to purchases of non-capital goods and capital goods below P1 Million was already about to be released.

After trial, the CTA Division rendered its Decision5 on May 25, 2012, partially granting the petition of TMC.

The CTA Division found that TMC was able to sufficiently substantiate P33,608,456.58 out of its total claim, after disallowing three transactions amounting to P523,135.71 which were not supported by proper VAT invoices. However, the CTA Division also held that not all of the substantiated claims of TMC were refundable/creditable. It reasoned that pursuant to Section 110(A) of the National Internal Revenue Code (NIRC) of 1997, as amended, input VAT on purchases of capital goods which are attributable to zero-rated sales may be claimed as refund/credit in two ways, depending on the aggregate acquisition cost of the capital goods in the calendar month, i.e.: (a) If the aggregate acquisition cost of the capital goods does not exceed P1 Million, the full amount of input VAT shall be allowed as credit/refund in the month of acquisition; or (b) If the aggregate acquisition cost of the capital goods exceeds P1 Million, the claim for input VAT would be spread over 60 months or the estimated useful life of the capital goods, whichever is shorter. Since the judicial claim of TMC only involved its purchases of capital goods with aggregate acquisition cost exceeding P1 Million, the CTA Division spread the P33,608,456.58 substantiated input VAT of TMC in 2008 over 60 months or the estimated useful life of the capital goods, whichever was shorter, to compute for the amount of input VAT refundable/creditable by December 31, 2008, thus: 

Allowable Input VAT
Exhibit	Capital Goods Purchases Exceeding P1M	Input VAT	Useful Life(in months)	Months of acquisition	Remaining Months of 2008	Total
FEBRUARY
N-11-19,	2,241,071.50	268,928.58	60	4,482.14	44,821.43	49,303.57
MARCH
N-11-172,	18,873.328.63	2,264,799.44	48	47,183.32	424,649.90	471,833.22
MAY
N-11-173	54,413,695.00	6,529,643.40	48	136,034.24	952,239.66	1,088.273.90
JUNE
N-11-93-1	1,339,285.71	160,714.29	48	3,348.21	20,089.29	23,437.50
JULY
N-11-175	89,641,766.66	10,757,012.00	48	224,104.42	1,120,522.08	1,344,626.50
N-11-176	56,436,650.00	6,772,398.00	48	141,091.63	705,458.13	846,549.75
SEPTEMBER
N-11-133	2,017,857.14	242,142.86	48	5,044.64	15,133.93	20,178.57
DECEMBER
N-11-177	24,300,291.67	2,916,035.00	48	60,750.73	60,750.73
N-11-174	30,806,522.14	3,696,782.66	48	77,016.31	77,016.31
INPUT VAT ALLOWABLE FOR REFUND	3,981,970.056

Based on the foregoing, the CTA determined that only P3,981,970.05 input VAT of TMC may be refunded/credited for the year 2008. It further ruled that since TMC only reported zero-rated sales in its quarterly VAT returns for 2008, all of its purchases and input VAT incurred thereon were attributable to its zero-rated sales; and that there was no output VAT liability during the same time period against which the said input VAT could have been applied.

As for the timeliness of the filing by TMC of its administrative and judicial claims, the CTA Division cited the case of Commissioner of Internal Revenue v. Aichi Forging Company of Asia, Inc.7 (Aichi). According to the CTA Division, it was clarified in Aichi that the administrative claim for refund/credit of creditable input VAT should be made within two years from the close of the taxable quarter when the sales were made, as provided under Sec. 112(A) of the Tax Code of 1997. It then concluded that the administrative claim for refund/credit of TMC in this case, filed on December 1, 2009, was within the two-year prescriptive period, as the following summary would show:

Year 2008	End of the Quarter	End of 2-year Period	Administrative Claim filed on
1st Quarter	March 31, 2008	March 31, 2010
2nd Quarter	June 30, 2008	June 30, 2010	December 1,20098
3rd Quarter	September 30, 2008	September 30, 2010
4th Quarter	December 31, 2008	December 31, 2010

Still referring to Aichi, the CTA Division stated that the filing of a judicial claim for refund/credit should comply with the provisions of Sec. 112(D) [now Sec. 112(C)] of the same Code, which gives the CIR 120 days to act on the administrative claim, counted from the date of submission by the taxpayer of complete documents in support of its claim. Thereafter, the taxpayer should file its petition for review before the CTA within 30 days, either from the receipt of the CIR's decision denying its administrative claim or after the expiration of the 120-day period for the CIR to act on its administrative claim. TMC filed its administrative claim on December 1, 2009, together with the supporting documents. The CIR did not inform TMC that it submitted incomplete supporting documents or that it still needed to submit additional documents, so that the 120-day period for the CIR to act on the claim started to run on December 1, 2009. The filing by TMC of its petition for review before the CTA on April 21, 2010, was well within the 30-day period after the lapse of the 120-day period for the CIR to act on the administrative claim.

The dispositive portion of the decision of the CTA Division reads:

WHEREFORE, premises considered, the instant Petition for Review is hereby PARTIALLY GRANTED. [CIR] is hereby ORDERED TO REFUND OR ISSUE A TAX CREDIT CERTIFICATE to [TMC] in the reduced amount of P3,981,970.05 representing its unutilized input VAT on capital goods purchases attributable to its zero-rated sales for the period January 1 to December 31,2008.

SO ORDERED.9

The CIR and TMC filed their respective motions for reconsideration of the foregoing decision together with comment on each other's motion for reconsideration. In its Resolution10 dated August 30, 2012, the CTA Division denied both the motions for reconsideration of the CIR and TMC for lack of merit.

The parties each filed an appeal before the CTA En Banc, with the appeal of TMC being docketed as CTA EB Case No. 935, while that of the CIR as CTA EB Case No. 936. The CTA En Banc, in its Decision11 dated December 16, 2014, denied both appeals and affirmed in toto the judgment of the CTA Division. It also subsequently denied in its Resolution dated August 3, 2015, the respective motions for reconsideration of the parties for lack of merit.

The parties sought recourse from the Court through the petitions for review at bar.

The Court's Ruling

TMC timely filed its judicial claim.

The CIR contends in its petition, docketed as G.R. Nos. 219630-31, that the judicial claim of TMC before the CTA Division was prematurely filed. The CIR stresses that the 120-day period for her to act on the administrative claim, accorded by Sec. 112 of the Tax Code of 1997, as amended, is jurisdictional and mandatory; and its non-observance would lead to the dismissal of the judicial claim due to the CTA's lack of jurisdiction. Since TMC did not submit the complete documents as required under Revenue Memorandum Order (RMO) No. 53-98,12 the CIR posits that the 120-day period has not yet commenced, thus, also depriving the CIR of the opportunity to examine and evaluate its claim for refund. The CIR lastly maintains that claims for tax refund/credit are in the nature of claims for tax exemption, so that the law relied upon is not only construed in strictissimi juris against the taxpayer, but the proof presented entitling a taxpayer to an exemption is also strictissimis scrutinized.

There is no merit in the CIR's contentions.

Sec. 112 of the Tax Code of 1997, as amended,13 provides for the time periods for the filing and processing of administrative claims for tax refund/credit:

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)(l), (2) and (b) and Section 108(B)(l) 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 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 non-zero-rated sales.

x x x x

(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, (emphases supplied)

As for the time period for filing of judicial claims for tax refund/credit, reference may be made to Sec. 11 of Republic Act (R.A.) No. 1125,14 as amended:15

Section 11. Who May Appeal; Mode of Appeal; Effect of Appeal. - Any party adversely affected by a decision, ruling or inaction of the Commissioner of Internal Revenue, the Commissioner of Customs, the Secretary of Finance, the Secretary of Trade and Industry or the Secretary of Agriculture or the Central Board of Assessment Appeals or the Regional Trial Courts may file an appeal with the CTA within thirty (30) days after the receipt of such decision or ruling or after the expiration of the period fixed by law for adion as referred to in Section 7(a)(2) herein.

Appeal shall be made by filing a petition for review under a procedure analogous to that provided for under Rule 42 of the 1997 Rules of Civil Procedure with the CTA within thirty (30) days from the receipt of the decision or ruling or in the case of inaction as herein provided, from the expiration of the period fixed by law to act thereon. A Division of the CTA shall hear the appeal: Provided, however, That with respect to decisions or rulings of the Central Board of Assessment Appeals and the Regional Trial Court in the exercise of its appellate jurisdiction, appeal shall be made by filing a petition for review under a procedure analogous to that provided for under rule 43 of the 1997 Rules of Civil-Procedure with the CTA, which shall hear the case en banc.

x x x x (emphases supplied)