DIGESTS
Input VAT Refund: 120+30-day periods
Interpretation and application of Section 112 of the NIRC of 1997 [prior to RA No. 10963 (TRAIN)].
Under Section 112(C) of the NIRC, in case of failure on the part of the CIR to act on the application, the taxpayer affected may, within 30 days after the expiration of the 120-day period, appeal the unacted claim with the CTA. The charter of the CTA also expressly provides that if the Commissioner fails to decide within “a specific period” required by law, such “inaction shall be deemed a denial” of the application for tax refund or credit. In Commissioner of Internal Revenue v. San Roque Power Corporation, we emphasized that compliance with the 120-day waiting period is mandatory and jurisdictional. In this case, when TSC filed its administrative claim on 21 December 2005, the CIR had a period of 120 days, or until 20 April 2006, to act on the claim. However, the CIR failed to act on TSC’s claim within this 120-day period. Thus, TSC filed its petition for review with the CTA on 24 April 2006 or within 30 days after the expiration of the 120-day period. Accordingly, we do not find merit in the CIR’s argument that the judicial claim was prematurely filed.
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Pursuant to Section 112 (A) and (D) of the NIRC, a taxpayer has two (2) years from the close of the taxable quarter when the zero-rated sales were made within which to file with the CIR an administrative claim for refund or credit of unutilized input VAT attributable to such sales. The CIR, on the other hand, has 120 days from receipt of the complete documents within which to act on the administrative claim. Upon receipt of the decision, a taxpayer has 30 days within which to appeal the decision to the CTA. However, if the 120-day period expires without any decision from the CIR, the taxpayer may appeal the, inaction to the CTA within 30 days from the expiration of the 120-day period.
In Commissioner of Internal Revenue v. San Roque Power Corporation, we said that the 120+30-day period must be strictly observed except from the date of issuance of BIR Ruling No. DA-489-03 on December 10, 2003, which allowed taxpayers to file a judicial claim without waiting for the end of the 120-day period, up to the date of promulgation of Commissioner of Internal Revenue v. Aichi Forging Company of Asia, Inc. on October 6, 2010, where we declared that compliance with the 120+30-day period is mandatory and jurisdictional.
In this case, TPC applied for a claim for refund or credit of its unutilized input VAT for the taxable year 2002 on December 22, 2003. Since the CIR did not act on its application within the 120-day period, TPC appealed the inaction on April 22, 2004. Clearly, both the administrative and the judicial claims were filed within the prescribed period provided in Section 112 of the NIRC.
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Under Section 112 of NIRC of 1997, a VAT-registered taxpayer who has excess and unutilized creditable input VAT attributable to zero-rated sales may file an application for cash refund or issuance of TCC (administrative claim) before the CIR who has primary jurisdiction to decide such application. The period within which to file the administrative claim is two (2) years reckoned from the close of the taxable quarter when the pertinent zero-rated sales were made.
From the submission of complete documents to support the administrative claim, the CIR is given a 120-day period to decide. In case of whole or partial denial of or inaction on the administrative claim, the taxpayer may bring his judicial claim, through a petition for review, before the CTA who has exclusive and appellate jurisdiction. The period to appeal is thirty (30) days counted from the receipt fo the decision or inaction by the CIR.
The 30-day period is further emphasized in Section 11 of RA No. 1125, as amended by RA No. 9282, or the CTA Charter.
In the seminal cases of Commissioner of Internal Revenue v. Aichi Forging Company of Asia, Inc. and Commissioner v. San Roque Power Corporation/Taganito Mining Corporation v. Commissioner/Philex Mining Corporation v. Commissioner (San Roque), the Court interpreted the 30-day period of appeal is mandatory and jurisdictional. Thus, non-compliance with he mandatory 30-day period renders the petition before the CTA void. The ruling in said cases as to the mandatory and jurisdictional character of the 30-day period of appeal was reiterated in a litany of cases thereafter.
Pertinently, the CTA law expressly provides that when the CIR fails to take action on the administrative claim, the “inaction shall be deemed a denial” of the application for tax refund or credit. The taxpayer-claimant must strictly comply with the mandatory period by filing an appeal with the CTA within thirty days from such inaction, otherwise, the court cannot validly acquire jurisdiction over it.
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In order for the CTA to acquire jurisdiction over a judicial claim for refund or tax credit arising from unutilized input VAT, the said claim must first comply with the mandatory 120+30-day waiting period. Any judicial claim for refund or tax credit filed in contravention of said period is rendered premature, depriving the CTA of jurisdiction to act on it.
It is clear from Section 112, Subsections (A) and (C) of the NIRC of 1997, as amended by RA No. 9337, that any taxpayer seeking a refund or tax credit arising from unutilized input VAT from zero-rated or effectively zero-rated sales should first file an initial administrative claim with the BIR. This claim for refund or tax credit must be filed within two years after the close of the taxable quarter when the sales were made.
The CIR is then given a period of 120-days from the submission of complete documents in support of the application to either grant or deny the claim. If the claim is denied by the CIR or the latter has not acted on it within the 120-day period, the taxpayer-claimant is then given a period of 30 days to file a judicial claim via petition for review with the CTA.
As such, the law provides for two scenarios before a judicial claim for refund may be filed with the CTA: (1) the full or partial denial of the claim within the 120-day period, or (2) the lapse of the 120-day period without the CIR having acted on the claim. It is only from the happening of either one may a taxpayer-claimant file its judicial claim for refund or tax credit for unutilized input VAT. Consequently, failure to observe the said period renders the judicial claim premature, divesting the CTA of jurisdiction to act on it.
This mandatory and jurisdictional nature of the 120-day waiting period has been reiterated time and again by the Court. In the case of Commissioner of Internal Revenue vs. San Roque Power Corporation, the Court En Banc categorically stated:
Failure to comply with the 120-day waiting period violates a mandatory provision of law. It violates the doctrine of exhaustion of administrative remedies and renders the petition premature and thus without a cause of action, with the effect that the CTA does not acquire jurisdiction over the taxpayer’s petition. Philippine jurisprudence is replete with cases upholding and reiterating these doctrinal principles.
Likewise, in Harte-Hanks Philippines, Inc. vs. Commissioner of Internal Revenue, the Court illustrated the fatal effect of non-observance of the 120-day period. In said case, the Court dismissed the judicial claim for refund because it was filed a mere seven days after taxpayer-claimant HHPI filed its administrative claim, without waiting for it to be first resolved. The Court explained that the CTA must wait for the Commissioner’s decision on the administrative claim or the lapse of the 120-day waiting period otherwise there would be nothing to review. It is the denial or inaction “deemed a denial” which the taxpayer-claimant takes to the CTA for review. Without any “decision”, the CTA as a court of special jurisdiction acquires no jurisdiction over a taxpayer-claimant’s judicial claim for refund.
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The 120-day waiting period is mandatory, not merely permissive; Non-compliance with the said period renders the judicial claim void or a mere scrap of paper.
TSC submits that at a time of the filing of its claims for refund, prevailing jurisprudence espoused that the 120-day waiting period was merely permissive instead of mandatory. Otherwise stated, TSC argues that as long as a taxpayer-claimant filed both its administrative and judicial claim within the two year prescriptive period under Section 112(A) of the NIRC then there would be no need to comply with the 120-day waiting period. This assertion has no basis.
In support of its position, TSC cites the cases of Intel Technology Philippines, Inc. vs. Commissioner of Internal Revenue, San Roque Power Corporation vs. Commissioner of Internal Revenue, AT&T Communications Services Philippines, Inc. vs. Commissioner of Internal Revenue, and Southern Philippines Power Corporation vs. Commissioner of Internal Revenue. TSC insists that in said cases, because the Court allowed the filing of the judicial claim even before the CIR could act on the administrative claim, then the Court implicitly ruled that the 120-day period is not mandatory. However, a more thorough study of the cases reveals that they are inapplicable to this controversy as they involve different issues.
In Intel Technology Philippines, the Court resolved the issue of whether entities engaged in business are required to indicate in their receipts or invoices the authority from the BIR to print the same. Nowhere in the case did the Court rule that the 120-day period may be dispensed with as long as the administrative and judicial claims are filed within the two-year prescriptive period.
In San Roque Power Corporation, the main issued revolved around the coverage of the terms, “zero-rated or effectively zero-rated sales.” The Court discussed that the NIRC does not limit the definition of “sale” to commercial transactions in the normal course of business, but extends the term to transactions which are also “deemed” sale under Section 106(B) of the NIRC. Again, nowhere in said case was the 120-day period even remotely mentioned or ruled upon.
Finally, in AT&T Communications Services Philippines, Inc. and Southern Philippines Power Corporation, the issues resolved by the Court dealt with the substantiation requirements in relation to a claim for tax refund or credit. Likewise, the Court never touched upon the nature of the 120-day waiting period in said case.
Given the foregoing, it is apparent that none of these cases constitute binding precedent as to the nature of the 120-day period. As such, TSC cannot now claim that at the time they filed their judicial claims, they relied in good faith on the then-prevailing interpretation as to the nature of the 120-day period.
Nevertheless, TSC insists that assuming arguendo that the 120-day period was indeed mandatory and jurisdictional, the issue of its non-compliance with said period, as a ground to deny its claim, was already waived since the CIR did not raise it in the proceedings before the CTA Division. It claims that non-compliance with the 120-day period prior to the filing of a judicial claim with the CTA merely results in a lack of cause of action, a ground which may be waived for failure to timely invoke the same.
However, it is apparent from the records that the issue of TSC’s non-compliance with the 120-day waiting period has been raised by the CIR throughout the pendency of the entire case. In fact, the records reveal that the CIR raised it at the earliest possible opportunity, when it filed its motion for partial reconsideration with the CTA Division dated July 3, 2009.
In any case, even if the CIR failed to raise the issue of TSC’s non-compliance with the 120-day waiting period at the first instance, such failure would not operate to vest the CTA with jurisdiction over TSC’s judicial claim for refund. The Court has already settled that a judicial claim for refund which does not comply with the 120-day mandatory waiting period renders the same void. As such, no right can be claimed or acquired from it, notwithstanding the failure of a party to raise it as a ground for dismissal. In San Roque, the Court expounded on such point, to wit:
San Roque’s failure to comply with the 120-day mandatory period renders its petition for review with the CTA void. Article 5 of the Civil Code provides, “Acts executed against provisions of mandatory or prohibitory laws shall be void, except when the law itself authorizes their validity.” San Roque’s void petition for review cannot be legitimized by the CTA or this Court because Article 5 of the Civil Code states that such void petition cannot be legitimized “except when the law itself authorizes [its] validity.” There is no law authorizing the petition’s validity.
It is hornbook doctrine that a person committing a void contrary to a mandatory provision of law cannot claim or acquire any right from his void act. A right cannot spring in favor of a person from his own void or illegal act. This doctrine is repeated in Article 2254 of the Civil Code, which states, “No vested or acquired right can arise from acts or omissions which are against the law or which infringe upon the rights of others.” For violating a mandatory provision of law in filing its petition with the CTA, San Roque cannot claim any right arising from such void petition. This, San Roque’s petition with the CTA is a mere scrap of paper. (Emphasis supplied)
Being a mere scrap of paper, TSC’s judicial claim for refund filed on March 31, 2003 covering the first quarter of taxable year 2001 cannot be the source of any rights.
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The 120+30-day is not a mere procedural technicality.
A claim for input VAT refund or credit is constructed strictly against the taxpayer. Accordingly, there must be strict compliance with the prescriptive periods and substantive requirements set by law before a claim for tax refund or credit may prosper. The mere fact that Team Energy has proved its excess input VAT does not entitle it as a matter of right to tax refund or credit. The 120+30-day periods in Section 112 is not a mere procedural technicality that can be set aside if the claim is otherwise meritorious. It is mandatory and jurisdictional condition imposed by law. Team Energy’s failure to comply with the prescriptive periods is, thus, fatal to its claim.
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Pro forma administrative claim?
The administrative claim was not pro forma as TPC submitted documents to support its claim for refund and even manifested its willingness to submit additional documents if necessary. The CIR, however, never requested TPC to submit additional documents. Thus, she cannot now raise the issue that TPC failed to submit the complete documents.
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Determination of the completeness of documents supporting a refund claim of input VAT.
Section 112(C) of the NIRC of 1997 (Tax Code) gives the CIR 120 days from the date of submission of complete documents (date of completion) supporting the application for credit or refund excess input VAT attributable to zero-rated sales to resolve the administrative claim. If it remains unresolved after this period, the law allows the taxpayer to appeal the unacted claim to the CTA within 30 days from the expiration of the 120-day period (120 and 30-day periods).
Stated differently, the date of completion commences the CIR’s 120-day period to resolve the claim. In turn, the expiration of the 120-day period triggers the running of the 30-day period to appeal an unacted claim.
The CIR argues that RMO No. 53-98 provides a list of documents that the taxpayer must submit to substantiate his claim for tax refund or credit. It points out that, when DKS filed its administrative claim, it failed to submit the complete documents. Thus, the 120 and 30-day periods did not begin to run.
This content on directly contravenes law, applicable tax regulations, and jurisprudence.
First, the Court pronounced in Commissioner of Internal Revenue v. Team Sual Corp. that inasmuch as RMO No. 53-98 enumerates the documentary requirements during an audit investigation, its provisions do not apply to applications for tax refund or credit.
Second, in Pilipinas Total Gas, Inc. v. Commissioner of Internal Revenue, the Court -emphasized that the law accords the claimant sufficient latitude to determine the completeness of his submission for the purpose of ascertaining the date of completion from which the 120- day period shall be reckoned. He “enjoys relative freedom to submit such evidence to prove his claim” because, in the first place, he bears the burden of proving his entitlement to a tax refund or credit.
This benefit, a component of the claimant’s fundamental right to due process, allows him: (a) to declare that he had already submitted complete supporting documents upon filing his claim and that he no longer intends to make additional submissions thereafter; or (b) to further substantiate his application within 30 days after filing, as allowed by RMC No. 49-03.
To counterbalance the claimant’s liberty to do so, he may be required by the tax authorities in the course of their evaluation, to submit additional documents for the proper evaluation thereof. In which case, the CIR shall duly notify the claimant of his request from which the claimant has 30 days to comply.
Notably, both parties are given the occasion to determine the completeness of documents supporting a claim for tax refund or credit. However, the Court must differentiate between these two functions.
On the one hand, the claimant has the prerogative to determine whether he had completed his submissions upon filing or within 30 days thereafter. This procedural determination of completeness is aimed at ascertaining the date of completion from which the 120-day period shall commence.
In contrast, whether the claimant’s submissions “are actually complete as required by law – is for the CIR and the courts to determine.” The CIR and courts’ subsequent evaluation of the documents is a substantive determination of completeness, for the purpose of ascertaining the claimant’s entitlement to the tax refund or credit sought.
Clearly, the CIR has no authority to unilaterally determine the completeness of these documents and dictate the running of the 120-day period to resolve the claim, as he attempts to do so in the present case. To sanction this would be giving the tax authorities “unbridled power to indefinitely delay the administrative claim” and in turn “prevent the filing of a judicial claim with the CTA.”
Third, as discussed above, RMC No. 49-03 explicitly empowers the tax authorities to request for additional documents that will aid them in verifying the claim. If its supporting documents were incomplete, the BIR was duty-bound to notify DKS of its deficiencies and require them to make further submissions, as necessary.
The tax authorities had the full opportunity to opine on the issue of documentary completeness while DKS’s claim was pending before them. However, there was no action on the claim on the administrative level. The first instance the BIR served a formal response to the claimant, alleging documentary deficiencies, was already in the CIR’s Answer filed before the CTA on May 11, 2012. In other words, it took the BIR 203 days to show concern on the matter, only to ask the court to deny the claim based on a mere procedural issue that they themselves- could have addressed on the administrative level.
Its belated response to the present claim only brings to light that the BIR had been remiss in their duties to duly notify the claimant -to submit additional documentary requirements and to timely resolve their claim. The CIR cannot now fault DKS for proceeding to court for the appropriate remedial action on the claim they ignored.
Parenthetically, the Court reiterates that the above analysis involving the determination of the completeness of documents supporting a claim for tax refund or credit applies only to claims filed prior to June 11, 2014. At present, RMC No. 54-14 requires the taxpayer to attach the following to his claim upon filing thereof: (a) complete supporting documents, as enumerated in the issuance, and (b) a statement under oath attesting that the documents submitted are in fact complete. The guidelines now ensure that the date of completion coincides with the date of filing of the claim.
This new issuance cannot be made to apply to the present case, which involves a claim filed in 2011, due to the rule on non-retroactivity of rulings.
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Certain principles
Under Section 112(C) of the NIRC, the CIR has 120 days to decide the taxpayer’s claim from the date of submission of complete documents in support of the application filed in accordance with Section 112(A) of the NIRC. In Intel Technology v. Commissioner of Internal Revenue, we ruled that once the taxpayer has established by sufficient evidence that it is entitled to a refund or issuance of a tax credit certificate, in accordance with the requirements of Section 112(A) of the NIRC, its claim should be granted.
In Atlas Consolidated Mining v. Commissioner of Internal Revenue, we held that applications for refund or credit of input tax with the BIR must comply with the appropriate revenue regulations. Thus, applications must be in accordance with Section 2 of RR No. 3-88 , amending Section 16 of RR No. 5-87, to wit:
SECTION 2. Section 16 of Revenue Regulations 5-87 is hereby amended to read as follows:
SECTION 16. Refunds or tax credits of input tax. –
x x x x
(c) Claims for tax credits/refunds. – Application for Tax Credit/Refund of Value-Added Tax Paid (BIR Form No. 2552) shall be filed with the Revenue District Office of the city or municipality where the principal place of business of the applicant is located or directly with the Commissioner, Attention: VAT Division.
A photocopy of the purchase invoice or receipt evidencing the value added tax paid shall be submitted together with the application. The original copy of the said invoice/receipt, however, shall be presented for cancellation prior to the issuance of the Tax Credit Certificate or refund. In addition, the following documents shall be attached whenever applicable:
x x x x
3. Effectively zero-rated sale of goods and services.
i) photocopy of approved application for zero-rate if filing for the first time.
ii) sales invoice or receipt showing name of the person or entity to whom the sale of goods or services were delivered, date of delivery, amount of consideration, and description of goods or services delivered. iii) evidence of actual receipt of goods or services.
x x x x
5. In applicable cases, where the applicant’s zero-rated transactions are regulated by certain government agencies, a statement therefrom showing the amount and description of sale of goods and services, name of persons or entities (except in case of exports) to whom the goods or services were sold, and date of transaction shall also be submitted.
In all cases, the amount of refund or tax credit that may be granted shall be limited to the amount of the value-added tax (VAT) paid directly and entirely attributable to the zero-rated transaction during the period covered by the application for credit or refund.
Where the applicant is engaged in zero-rated and other taxable and exempt sales of goods and services, and the VAT paid (inputs) on purchases of goods and services cannot be directly attributed to any of the aforementioned transactions, the following formula shall be used to determine the creditable or refundable input tax for zero-rated sale:
Amount of Zero-rated Sale
Total Sales
X
Total Amount of Input Taxes
=
Amount Creditable/Refundable
x x x x
We likewise applied RR 3-88 in AT&T Communications Services Philippines, Inc. v. Commissioner of Internal Revenue, and held that only preponderance of evidence as applied in ordinary civil cases is needed to substantiate a claim for tax refund.
~~~CIR vs. Team Sual Corporation (G.R. No. 205055, 18 July 2014, 2nd Div., J. Carpio)
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Failure to submit all relevant documents set out in RMO No. 53-98 is not fatal to the refund claim.
The CIR insists that TSC failed to submit the complete documents enumerated in RMO No. 53-98. Thus, the 120-day period given for it to decide allegedly did not commence.
The CIR’s reliance on RMO No. 53-98 is misplaced. There is nothing in Section 112 of the NIRC, RR No. 3-88 or RMO No. 53-98 itself that requires submission of the complete documents enumerated in RMO No. 53-98 for a grant of a refund or credit of input VAT. The subject of RMO No. 53-98 states that it is a “Checklist of Documents to be Submitted by a Taxpayer upon Audit of his Tax Liabilities x x x.” In this case, TSC was applying for a grant of refund or credit of its input tax. There was no allegation of an audit being conducted by the CIR. Even assuming that RMO No. 53-98 applies, it specifically states that some documents are required to be submitted by the taxpayer “if applicable.”
Moreover, if TSC indeed failed to submit the complete documents in support of its application, the CIR could have informed TSC of its failure, consistent with RMC No. 42-03. However, the CIR did not inform TSC of the document it failed to submit, even up to the present petition. The CIR likewise raised the issue of TSC’s alleged failure to submit the complete documents only in its motion for reconsideration of the CTA Special First Division’s 4 March 2010 Decision. Accordingly, we affirm the CTA EB’s finding that TSC filed its administrative claim on 21 December 2005, and submitted the complete documents in support of its application for refund or credit of its input tax at the same time.
~~~CIR vs. Team Sual Corporation (G.R. No. 205055, 18 July 2014, 2nd Div., J. Carpio)
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Neither do we find the alleged failure of TPC to submit all relevant documents set out in RMO No. 53-98 fatal to its claim. In Commissioner of Internal Revenue v. Team Sual Corporation (formerly Mirant Sual Corporation), we said that:
The CIR’s reliance on RMO 53-98 is misplaced. There is nothing in Section 112 of the NIRC, RR 3-88 or RMO 53-98 itself that requires submission of the complete documents enumerated in RMO 53-98 for a grant of a refund or credit of input VAT. The subject of RMO 53-98 states that it is a “Checklist of Documents to be Submitted by a Taxpayer upon Audit of his Tax Liabilities ….” In this case, TSC was applying for a grant of refund or credit of its input tax. There was no allegation of an audit being conducted by the CIR. Even assuming that RMO 53-98 applies, it specifically states that some documents are required to be submitted by the taxpayer “if applicable.”
Moreover, if TSC indeed failed to submit the complete documents in support of its application, the CIR could have informed TSC of its failure, consistent with Revenue Memorandum Circular No. (RMC) 42-03. However, the CIR did not inform TSC of the document it failed to submit, even up to the present petition. The CIR likewise raised the issue of TSC’s alleged failure to submit the complete documents only in its motion for reconsideration of the CTA Special First Division’s 4 March 2010 Decision. Accordingly, we affirm the CTA EB’s finding that TSC filed its administrative claim on 21 December 2005, and submitted the complete documents in support of its application for refund or credit of its input tax at the same time.
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