THIRD DIVISION
[G.R. No. 195120. April 19, 2017.]
PHILEX MINING CORPORATION,petitionervs. COMMISSIONER OF INTERNAL REVENUE, respondent.
NOTICE
Sirs/Mesdames :
Please take notice that the Court, Third Division, issued a Resolution dated April 19, 2017, which reads as follows:
"G.R. No. 195120 (Philex Mining Corporation vs. Commissioner of Internal Revenue). — For the Court's consideration is a Petition for Review on Certiorari1 under Rule 45 of the 1997 Rules of Court filed by petitioner Philex Mining Corporation (Philex) challenging the Decision 2 dated September 7, 2010 and the Resolution 3 dated January 11, 2011 of the Court of Tax Appeals (CTA) en banc (CTA-EB) in CTA EB No. 532 which affirmed the CTA First Division's denial of Philex's petition for review docketed as CTA Case No. 7657 seeking the approval of its claim for refund representing excess input Value-Added Tax (VAT) for the second quarter of 2005.
Antecedent Facts
The facts, material to the resolution of the case, are as follows:
Philex is a VAT-registered corporation organized under the Philippine laws and is engaged in the mining business, the exploration of mine properties, and the commercial production and marketing of mine products. Philex applied and was approved on April 12, 1998 for zero rating pursuant to Section 4.100-3 of Revenue Regulations No. 7-95. For the second quarter of 2005, Philex filed its original VAT return on July 26, 2005. The amended return filed on December 1, 2005 reported a total zero-rated sale of P1,335,044,466.98, domestic purchase of goods of P825,912.30 with corresponding input tax of P82,591.23 and importation of goods of P62,500,070.00 with corresponding input tax of P6,250,007.00. 4
Philex filed a claim for tax refund/tax credit with the One-Stop Shop Center of the Department of Finance (DOF) on March 20, 2006 in the amount of P6,332,598.23. Respondent Commissioner of Internal Revenue (CIR) has not acted upon the tax refund of Philex impelling the latter to file a petition for review on certiorari on July 13, 2007 before the CTA. The CIR averred special and affirmative defenses in order to counter the claims of Philex. 5
On May 12, 2009, the CTA First Division rendered a decision denying the petition filed by Philex on the ground of prescription. The dispositive portion of the decision reads:
WHEREFORE, the instant Petition for Review is hereby DENIED on the ground of PRESCRIPTION.
SO ORDERED. 6
Philex filed a motion for reconsideration which was denied by the CTA First Division in a Resolution dated August 12, 2009. 7 Dissatisfied, Philex sought recourse by filing a petition for review before the CTA-EB.
Ruling of the CTA-EB
The CTA-EB affirmed the dismissal of the claim for refund of unutilized input VAT of Philex on the ground of prescription holding that the two-year prescriptive period for administrative and judicial claims for VAT refund is mandatory as expressly provided under the 1997 National Internal Revenue Code (NIRC). The CTA-EB in a Decision 8 dated September 7, 2010 ruled in the following manner:
WHEREFORE, on the basis of the foregoing considerations, the Petition for Review en banc is DISMISSED for lack of merit. Accordingly, the Decision dated May 12, 2009 and the Resolution dated August 12, 2009 issued by the CTA First Division are AFFIRMED.
SOORDERED. 9
Philex sought reconsideration of the CTA-EB decision. However, finding no merit in Philex's motion for reconsideration, the CTA-EB denied the same in a Resolution 10 dated January 11, 2011.
Unyielding, Philex filed the present petition for review on certiorari.
The Issue
The core of the controversy confronting the Court in the present case is the timeliness of Philex's claim for refund of unutilized input VAT governed by Section 112 of the 1997 NIRC.
Ruling of the Court
The Court is unpersuaded.
It is a well-entrenched principle in taxation that a claim for refund is in the nature of a tax exemption and, as such, it is consequently construed strictly against a taxpayer. 11 This strict construction places the burden on the taxpayer to demonstrate its compliance with the mandated requirements and procedures in order to avail of a VAT refund. 12
The original VAT Law found in Executive Order No. 273, series of 1987 is the first provision that allowed refund or credit of unutilized excess input VAT. 13 The said law underwent various amendments until its current form embodied in Republic Act No. 9337 14 which took effect on July 1, 2005. Inexorably, the requirement of filing administrative and judicial claim for VAT refund/credit had been the subject of dissonant interpretations.
On the strength of paragraphs (A) and (C) of Section 112 of the 1997 NIRC, as amended, Philex filed its claim for refund of its excess unutilized input VAT for the second quarter of 2005 on March 20, 2006. The pertinent parts of the subject provisions read as follows:
SEC. 112. Refunds or Tax Credits of Input Tax. —
(A) Zero-ratedor 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: x x x.
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
Entitlement to VAT refund necessitates the observance of the prescriptive periods within which to file the administrative and judicial claims. The reckoning point of the two-year period for the filing of an administrative claim for refund or credit of unutilized input VAT and the applicability of the two-year prescriptive period to both the administrative and judicial claim for refund or credit of unutilized input VAT are among the ancillary matters which remarkably are not novel but nonetheless brought before the Court germane to the disposition of the ultimate issue of whether Philex's claim for refund of unutilized input VAT is time-barred. Seeking refuge from the principles of non-retroactivity of judicial decisions and stare decisis, Philex contends that the prevailing jurisprudence when it filed its administrative claim was the case of Atlas Consolidated Mining and Development Corporation v. CIR 15promulgated on June 8, 2007. The Atlas case fixed the reckoning date of the two-year prescriptive period for the filing of an administrative claim for input VAT refund or credit from the date of the filing of the corresponding quarterly VAT return and payment of the tax. Thus:
For the foregoing reasons, it is more practical and reasonable to count the two-year prescriptive period for filing a claim for refund/credit of input VAT on zero-rated sales from the date of filing of the return and payment of the tax due which, according to the law then existing, should be made within 20 days from the end of each quarter. x x x. 16 (Emphasis ours)
Subsequently, promulgated on September 12, 2008, the CIR v. Mirant Pagbilao Corporation, 17 adopting the verba legis rule, pegged the date of the two-year prescriptive period at the close of the taxable quarter when the relevant sales were made as stated in Section 112 (A) of the 1997 NIRC. The Court made the following pronouncement:
The above proviso (referring to Section 112 (A) of the 1997 NIRC) clearly provides in no uncertain terms that unutilized input VAT payments not otherwise used for any internal revenue tax due the taxpayer must be claimed within two years reckoned from the close of the taxable quarter when the relevant sales were made pertaining to the input VAT regardless of whether said tax was paid or not. x x x. 18 (Emphasis ours)
Contrary to the contention of Philex that the Atlas case should be made to apply to resolve its cause, the Court, in the case of CIR v. Mindanao II Geothermal Partnership 19 proceeding from the Atlas and Mirant cases, outlined the rules regarding the two-year prescriptive period for input VAT refunds. The Court explained:
The Atlas doctrine, which held that claims for refund or credit of input VAT must comply with the two-year prescriptive period under Section 229, should be effective only from its promulgation on 8 June 2007 until its abandonment on 12 September 2008 in Mirant. The Atlas doctrine was limited to the reckoning of the two-year prescriptive period from the date of payment of the output VAT. Prior to the Atlas doctrine, the two-year prescriptive period for claiming refund or credit of input VAT should be governed by Section 112 (A) following the verba legis rule. The Mirant ruling, which abandoned the Atlas doctrine, adopted the verba legis rule, thus applying Section 112 (A) in computing the two-year prescriptive period in claiming refund or credit of input VAT. 20 (Emphasis in the original)
It provides that prior to June 8, 2007, the applicable rule is neither Atlas nor Mirant but Section 112 (A) of the 1997 NIRC. 21 In the instant case, Philex filed its administrative claims for refund or credit for the second quarter of 2005 on March 20, 2006. The administrative claim for refund of Philex can be filed until June 30, 2007 following the rule prior to the advent of either Atlas or Mirant.
However, the petition still fails. Despite the timely filing of the administrative claim, the Court is compelled to reject Philex's claim for tax refund/credit for having been filed in clear contravention of the provision of Section 112 of the 1997 NIRC. Indisputably, Philex's case is one of late judicial filing.
The Court agrees with the conclusion of the CTA denying Philex's application for refund or credit of unutilized input VAT for having been judicially filed out of time. However, the tax court was mistaken as to its ruling that the two-year prescriptive period applies both to administrative and judicial claims for refund. The Court, in the case of CIR v. Aichi Forging Company of Asia, Inc., 22 settled this matter with finality holding that it is only the administrative claim that must be filed within the two-year prescriptive period. The Court stated:
There is nothing in Section 112 of the NIRC to support respondent's view. Subsection (A) of the said provision states that "any VA-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 x x x 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) 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. 23 (Emphasis in the original deleted)
Further, the CTA made an erroneous correlation between Section 229 and Section 112 (A) of the 1997 NIRC which led to its misconception that the two-year prescriptive period is likewise applicable to the judicial remedy of claiming refund or issuance of tax credit certificate of excess input VAT. Section 112 pertains to claim for input VAT refund while Section 229 refers to claim for erroneously or illegally collected tax. The Court, in the case of The CIR v. Visayas Geothermal Power Company, Inc., 24 reiterating previously decided cases underscored that the appropriate provision for determining the prescriptive period for claiming a refund or tax credit for unutilized input VAT is Section 112 (A), and not Section 229, of the 1997 NIRC. 25 Hence, Section 229 of the 1997 NIRC finds no application in the case at bar.
It is beyond question that the two-year prescriptive period only applies to administrative claim following judicial precedents. Additionally, the statutory procedure for claiming VAT refund equally prescribes adherence to the 120 + 30-day periods for the filing of judicial claim. By the plain terms of Section 112 (C) of the 1997 NIRC, the CIR is accorded 120 days from the submission of complete documents in support of the application within which to render its decision on the claim for refund. Admittedly, there are times that the CIR does not act on the claim filed by a taxpayer, Pursuant to the express provisions of the CTA Charter, in case of the failure of the CIR to decide within "a specific period" required by law, such "inaction shall be deemed a denial" of the application for tax refund or credit. 26 In the event of CIR's adverse decision or inaction on the claim for refund, the taxpayer may seek judicial redress before the CTA by way of a petition for review within 30 days from either the receipt of the decision of the CIR or the lapse of the 120-day period given to the CIR to decide the claim for refund/tax credit.
Philex erroneously opines that a petition for review before the CTA need not be filed within 30 days after the lapse of the 120 days as long as the same is filed within the two-year prescriptive period. It maintains that a cursory reading of Section 112 (C) of the 1997 NIRC which made use of the word "may" indicates that a judicial claim is not mandatorily required to be filed within 30 days after the expiration of the 120-day period. These contentions of Philex must be struck down. Case laws emphatically state that strict compliance with the 120 + 30-day periods is mandatory and jurisdictional for a judicial claim for refund to prosper. This however is subject to an exception which embraces only premature filing of a judicial claim or when the petition for review is filed with the CTA before the lapse of the 120-day period applicable only to VAT refund cases filed between December 10, 2003, when Bureau of Internal Revenue (BIR) Ruling No. DA-489-03 was issued, to October 6, 2010 when the Court promulgated Aichi reversing BIR Ruling No. DA-489-03. 27
Records reveal that Philex filed an administrative claim for refund of unutilized input VAT on March 20, 2006 for the second quarter of 2005 which is well within the two-year prescriptive period or until June 30, 2007 as the close of the second quarter is on June 30, 2005. The CIR or in this case, the One-Stop Shop Center of the DOF has 120 days from March 20, 2006 or until July 18, 2006 within which to act on such claim. However, it failed to do so. Philex could treat the inaction as denial and interpose an appeal before the CTA Division within 30 days from July 18, 2006 or until August 17, 2006. Philex belatedly filed its judicial recourse on July 30, 2007 which is 330 days way beyond the prescribed 30-day period.
WHEREFORE, in light of the foregoing, the petition is DENIED. The Decision dated September 7, 2010 and Resolution dated January 11, 2011 of the Court of Tax Appeals en banc in CTA EB No. 532 are AFFIRMED insofar as it denied the petition of Philex Mining Corporation seeking the approval of its application for and issuance of Value-Added Tax refund representing excess input Value-Added Tax for the second quarter of 2005.
SO ORDERED."
Very truly yours,
(SGD.) WILFREDO V. LAPITANDivision Clerk of Court
Footnotes
1.Rollo, pp. 3-29.
2. Penned by Associate Justice Juanito C. Castaneda, Jr., with Associate Justices Erlinda P. Uy, Cielito N. Mindaro-Grulla and Amelia R. Cotangco-Manalastas concurring; Associate Justice Lovell R. Bautista with Concurring and Dissenting Opinion, concurred in by Associate Justice Caesar A. Casanova; Associate Justice Olga Palanca-Enriquez with Separate Concurring and Dissenting Opinion; Associate Justice Esperanza R. Fabon-Victorino with Concurring and Dissenting Opinion, concurred in by Presiding Justice Ernesto D. Acosta; id. at 46-62.
3.Id. at 34-42.
4.Id. at 47-48.
5.Id. at 48.
6.Id. at 47.
7.Id. at 47, 49.
8.Id. at 46-62.
9.Id. at 61.
10.Id. at 34-42.
11.Applied Food Ingredients Company, Inc. v. CIR, 720 Phil. 782, 789 (2013).
12.Id.
13.Taganito Mining Corp. v. CIR, 736 Phil. 591, 597 (2014).
14. AN ACT AMENDING SECTIONS 27, 28, 34, 106, 107, 108, 109, 110, 111, 112, 113, 114, 116, 117, 119, 121, 148, 151, 236, 237 AND 288 OF THE NIRC OF 1997, AS AMENDED, AND FOR OTHER PURPOSES.
15. 551 Phil. 519 (2007).
16.Id. at 537.
17. 586 Phil. 712 (2008).
18.Id. at 730.
19. 724 Phil. 534 (2014).
20. Id. at 547-548, citing CIR v. San Roque Power Corporation, 703 Phil. 310, 369 (2013).
21. CIR v. Mindanao II Geothermal Partnership, id. at 551.
22. 646 Phil. 710 (2010).
23. Id. at 731-732.
24. 720 Phil. 710 (2013).
25. Id. at 723.
26. CIR v. Team Sual Corporation, 739 Phil. 215, 230 (2014).
27. Rohm Apollo Semiconductor Philippines v. CIR, G.R. No. 168950, January 14, 2015, 745 SCRA 663, 671-672, citing CIR v. San Rogue Power Corporation, supra note 20, at 371.