Supreme Court – THIRD DIVISION
G.R. No. 203249, July 23, 2018
SAN ROQUE POWER CORPORATION, Petitioner, vs. COMMISSIONER OF INTERNAL REVENUE, Respondent.
D E C I S I O N
MARTIRES, J.:
The application of the 120-day and 30-day periods provided in Section 112 (D) [later renumbered as Section 112 (C)] of the National Internal Revenue Code (NIRC) is at the heart of the present case.
In Commissioner of Internal Revenue v. Aichi Forging Company of Asia, Inc. (Aichi),[1] the Court considered whether the simultaneous filing of both the administrative claim (before the Bureau of Internal Revenue [BIR]) and judicial claim (before the Court of Tax Appeals [CTA]) for refund/credit of input VAT under the cited law is permissible. In that case, the respondent asserted that the non-observance of the 120-day period is not fatal to the filing of a judicial claim as long as both the administrative and the judicial claims are filed within the two-year prescriptive period. We held that the premature filing of respondent’s claim for refund/credit before the CTA warrants a dismissal inasmuch as no jurisdiction was acquired by that court.
In the case before us, San Roque Power Corporation (petitioner) brought its judicial claims before the CTA prior to the promulgation of the Aichi ruling. Yet, the lower court (CTA En Banc) dismissed the petitioner’s judicial claims on the ground of prematurity, a decision that happily coincided with the Court’s ruling in Aichi. In its petition, San Roque Power Corporation rues the retroactive application of Aichi to taxpayers who merely relied on the alleged prevailing rule of procedure antecedent to Aichi that allowed the filing of judicial claims before the expiration of the 120-day period.
We hold that there is no established precedence prior to Aichi that permits the simultaneous filing of administrative and judicial claims for refund/credit under Section 112 of the NIRC. Nonetheless, we concede that the CTA has jurisdiction over the claims in this case in view of our pronouncement in Commissioner of Internal Revenue v. San Roque Power Corporation (San Roque).[2] In said case, the Court, while upholding Aichi, recognized an exception to the mandatory and jurisdictional character of the 120-day period: taxpayers who relied on BIR Ruling DA-489-03, issued on 10 December 2003, until its reversal in Aichi on 6 October 2010, are shielded from the vice of prematurity. The said ruling expressly stated that “a taxpayer-claimant need not wait for the lapse of the 120-day period before it could seek judicial relief with the CTA by way of a Petition for Review.”
This is a petition for review on certiorari under Rule 45 of the Rules of Court assailing the 4 April 2012 Decision[3] of the CTA En Banc in CTA EB No. 657. The CTA En Banc dismissed the petitioner’s judicial claims on the ground of prematurity, thus, setting aside the CTA Second Division’s partial grant of the refund claims in the consolidated CTA Case Nos. 7424 and 7492. In the subsequent 17 August 2012 Resolution[4] of the CTA En Banc, the court a quo denied the petitioner’s motion for reconsideration.
The Antecedents
San Roque Power Corporation is a VAT-registered taxpayer which was granted by the BIR a zero-rating on its sales of electricity to National Power Corporation (NPC) effective 14 January 2004, up to 31 December 2004.[5]
On 22 December 2005 and 27 February 2006, the petitioner filed two separate administrative claims for refund of its alleged unutilized input tax for the period 1 January 2004 up to 31 March 2004, and 1 April 2004 up to 31 December 2004, respectively.[6]
Due to the inaction of respondent CIR, the petitioner filed petitions for review before the CTA (raffled to the Second Division): (1) on 30 March 2006, for its unutilized input VAT for the period 1 January 2004 to 31 March 2004, amounting to P17,017,648.31, docketed as CTA Case No. 7424; and (2) on 20 June 2006, for the unutilized input VAT for the period 1 April 2004 to 31 December 2004, amounting to P14,959,061.57, docketed as CTA Case No. 7492.
The Ruling of the CTA Division
During trial, the petitioner presented documentary and testimonial evidence to prove its claim. On the other hand, respondent CIR was deemed to have waived its right to present evidence due to its failure to appear in the two scheduled hearings on the presentation of evidence for the defense. In due course, the CTA Division partially granted the refund claim of the petitioner in the total amount of P29,931,505.18 disposing as follows:
WHEREFORE, premises considered, the instant Petitions for Review are hereby PARTIALLY GRANTED. Accordingly, respondent Commissioner of Internal Revenue is hereby ORDERED TO REFUND or TO ISSUE A TAX CREDIT CERTIFICATE in the reduced amount of TWENTY-NINE MILLION NINE HUNDRED THIRTY-ONE THOUSAND FIVE HUNDRED FIVE PESOS AND 18/100 (P29,931,505.18) in favor of petitioner, representing unutilized input VAT attributable effectively zero-rated sales of electricity to NPC for the four quarters of 2004.
SO ORDERED.[7]
The Petition for Review before
the CTA En Banc
The Ruling of the CTA En Banc
The CTA En Banc sided with the CIR in ruling that the judicial claims of the petitioner were prematurely filed in violation of the 120-day and 30-day periods prescribed in Section 112 (D) of the NIRC. The court held that by reason of prematurity of its petitions for review, San Roque Power Corporation failed to exhaust administrative remedies which is fatal to its invocation of the court’s power of review. The dispositive portion of the CTA En Banc’s assailed decision reads:
WHEREFORE, the Petition for Review filed by petitioner Commissioner of Internal Revenue is hereby GRANTED. Accordingly, the Petition for Review filed by respondent on March 30, 2006 docketed as CTA Case No. 7424, as well as the Petition tor Review filed on June 20, 2006 docketed as CTA Case No. 7492 are hereby DISMISSED on ground of prematurity.
SO ORDERED.[8]
The petitioner argues that at the time it filed the petitions for review before the CTA on 30 March 2006 and 20 June 2006, no ruling yet was laid down by the Supreme Court concerning the 120-day and 30-day periods provided in Section 112 of the NIRC. Instead, taxpayers such as the petitioner were guided only by the rulings of the CTA[9] which consistently adopted the interpretation that a claimant is not bound by the 120-day and 30-day periods but by the two-year prescriptive period as provided in Section 112 (A) of the NIRC. Such CTA decisions, according to the petitioner, are recognized interpretations of Philippines’ tax laws.
The petitioner also asserts that the CTA En Banc erred in applying retroactively the Aichi ruling as regards the 120-day and 30-day periods under Section 112 of the NIRC for the following reasons: (1) the Aichi ruling laid down a new rule of procedure which cannot be given retroactive effect without impairing vested rights; (2) a judicial ruling overruling a previous one cannot be applied retroactively before its abandonment; and (3) a judicial decision which declares an otherwise permissible act as impermissible violates the ex post facto rule under the Constitution.
We grant the petition.
No retroactive application of
the Aichi ruling
At the outset, it bears stressing that while Aichi was already firmly established at the time the CTA En Banc promulgated the assailed decision, nowhere do we find in such assailed decision, however, that the court a quo cited or mentioned the Aichi case as basis for dismissing the subject petitions for review. As we see it, the CTA En Banc merely relied on Section 112 (D) 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:
(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 tor 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. (emphases supplied)
– correctly interpreting the 120-day and 30-day periods prescribed therein as mandatory and jurisdictional. Thus, it cannot appropriately be insisted that the CTA En Banc’s imputed error may be traced to a misplaced invocation of Aichi.
Be that as it may, the petitioner cannot find solace in the various CTA decisions that allegedly dispense with the timeliness of the judicial claim for as long as it is within the two-year prescriptive period. Such legal posturing has already been passed upon.
Thus, in San Roque,[10] a case involving the same parties and substantially the same factual antecedents as in the present petition, we rejected the claim that the CTA decisions may be relied upon as binding precedents. We said –
There is also the claim that there are numerous CTA decisions allegedly supporting the argument that the filing dates of the administrative and judicial claims are inconsequential, as long as they are within the two-year prescriptive period. Suffice it to state that CTA decisions do not constitute precedents, and do not bind this Court or the public. That is why CTA decisions are appealable to this Court, which may affirm, reverse or modify the CTA decisions as the facts and the law may warrant. Only decisions of this Court constitute binding precedents, forming part of the Philippine legal system. As held by this Court in The Philippine Veterans Affairs Office v. Segundo:
x x x Let it be admonished that decisions or the Supreme Court “applying or interpreting the laws or the Constitution . . . form part of the legal system of the Philippines,” and, as it were, “laws” by their own right because they interpret what the laws say or mean. Unlike rulings of the lower courts, which bind the parties to specific cases alone, our judgments are universal in their scope and application, and equally mandatory in character. Let it be warned that to defy our decisions is to court contempt.[11] (emphasis supplied)
We further held in said case that Article 8 of the Civil Code[12] enjoins adherence to judicial precedents. The law requires courts to follow a rule already established in a final decision of the Supreme Court. Contrary to the petitioner’s view, the decisions of the CTA are not given the same level of recognition.
Concerning the 120-day period in Section 112 (D) of the NIRC, there was no jurisprudential rule prior to Aichi interpreting such provision as permitting the premature filing of a judicial claim before the expiration of the 120-day period. The alleged CTA decisions that entertained the judicial claims despite their prematurity are not to be relied upon because they are not final decisions of the Supreme Court worthy of according binding precedence. That Aichi was yet to be promulgated at that time did not mean that the premature filing of a petition for review before the CTA was a permissible act.
It was only in Aichi that this Court directly tackled the 120-day period in Section 112 (D) of the NIRC and declared it to be mandatory and jurisdictional. In particular, Aichi brushed aside the contention that the non-observance of the 120-day period is not fatal to the filing of a judicial claim as long as both the administrative and judicial claims are filed within the two-year prescriptive period provided in Section 112 (A) of the NIRC.
The mandatory and jurisdictional nature of the 120-day period first expressed in Aichi, however, is not a new rule of procedure to be followed in pursuit of a refund claim of unutilized creditable input VAT attributable to zero-rated sales. As suggested above, the pronouncement in Aichi regarding the mandatory and jurisdictional nature of the 120-day period was the Court’s interpretation of Section 112 (D) of the NIRC. It is that law, Section 112 (D) of the NIRC, that laid the rule of procedure for maintaining a refund claim of unutilized creditable input VAT attributable to zero-rated sales. In said provision, the Commissioner has 120 days to act on an administrative claim.
Hence, from the effectivity of the 1997 NIRC on 1 January 1998, the procedure has always been definite: the 120-day period is mandatory and jurisdictional. Accordingly, a taxpayer can file a judicial claim (1) only within thirty days after the Commissioner partially or fully denies the claim within the 120-day period, or (2) only within thirty days from the expiration of the 120- day period if the Commissioner does not act within such period.[13] This is the rule of procedure beginning 1 January 1998 as interpreted in Aichi.
Given all the foregoing, it is indubitable that, subject to our discussion below on the reason why the present petition should nonetheless be granted, the petitioner’s arguments have no leg to stand on –
(1) | The Aichi ruling laid down a new rule of procedure which cannot be given retroactive effect without impairing vested rights. | |
– | Section 112 (D) of the NIRC, not the Aichi ruling, lays down the rule of procedure governing refund claims of unutilized creditable input VAT attributable to zero-rated sales; Aichi is merely an interpretation of an existing law; there is no vested right to speak of respecting a wrong construction of the law[14] (permitting a premature filing of judicial claim); | |
(2) | A judicial ruling overruling a previous one cannot be applied retroactively before its abandonment. | |
– | There was no established doctrine abandoned or overturned by Aichi; the petitioner merely harps on CTA decisions that cannot be relied on as binding precedents; and | |
(3) | A judicial decision which declares an otherwise permissible act as impermissible violates the ex post facto rule under the Constitution – | |
– | Prior to Aichi, there was no law or jurisprudence permitting the premature filing of a judicial claim of creditable input VAT; Aichi did not declare as impermissible that which was previously recognized by law or jurisprudence as a permissible act; it is, therefore, inconsequential to consider the ex post facto provision of the Constitution. | |
To reiterate, the 120-day and 30-day periods, as held in the case of Aichi, are mandatory and jurisdictional. Thus, noncompliance with the mandatory 120+30-day period renders the petition before the CTA void. The ruling in said case as to the mandatory and jurisdictional character of said periods was reiterated in San Roque and a host of succeeding similar cases.
Significantly, a taxpayer can file a judicial claim only within thirty (30) days from the expiration of the 120-day period if the Commissioner does not act within the 120-day period. The taxpayer cannot file such judicial claim prior to the lapse of the 120-day period, unless the CIR partially or wholly denies the claim within such period. The taxpayer-claimant must strictly comply with the mandatory period by filing an appeal to the CTA within thirty days from such inaction; otherwise, the court cannot validly acquire jurisdiction over it.
In this case, the petitioner timely filed its administrative claims for refund/credit of its unutilized input VAT for the first quarter of 2004, and for the second to fourth quarters of the same year, on 22 December 2005 and 27 February 2006, respectively, or within the two-year prescriptive period. Counted from such dates of submission of the claims (with supporting documents), the CIR had 120 days, or until 13 April 2006, with respect to the first administrative claim, and until 27 June 2006, on the second administrative claim, to decide.
However, the petitioner, without waiting for the full expiration of the 120-day periods and without any decision by the CIR, immediately filed its petitions for review with the CTA on 30 March 2006, or a mere ninety-eight (98) days for the first administrative claim; and on 20 June 2006, or only one hundred thirteen (113) days for the second administrative claim, from the submission of the said claims. In other words, the judicial claims of the petitioner were prematurely filed as correctly found by the CTA En Banc.
Ordinarily, a prematurely filed appeal is to be dismissed for lack of jurisdiction in line with our ruling in Aichi. But, as stated in the premises, we shall accord to the CTA jurisdiction over the claims in this case due to our ruling in San Roque.
BIR Ruling No. DA-489-03
constitutes an exception to
the mandatory and
jurisdictional nature of the
120+30-day period.
[A] taxpayer-claimant need not wait for the lapse of the 120-day period before it could seek judicial relief with the CTA by way of Petition for Review.
– is a general interpretative rule issued by the CIR pursuant to its power under Section 4 of the NIRC, hence, applicable to all taxpayers. Thus, taxpayers can rely on this ruling from the time of its issuance on 10 December 2003. The conclusion is impelled by the principle of equitable estoppel enshrined in Section 246[15] of the NIRC which decrees that a BIR regulation or ruling cannot adversely prejudice a taxpayer who in good faith relied on the BIR regulation or ruling prior to its reversal.
Then, in Taganito Mining Corporation v. CIR,[16] the Court further clarified the doctrines in Aichi and San Roque explaining that during the window period from 10 December 2003, upon the issuance of BIR Ruling No. DA-489-03 up to 6 October 2010, or date of promulgation of Aichi, taxpayers need not observe the stringent 120-day period.[17]
In other words, the 120+30-day period is generally mandatory and jurisdictional from the effectivity of the 1997 NIRC on 1 January 1998, up to the present. By way of an exception, judicial claims filed during the window period from 10 December 2003 to 6 October 2010, need not wait for the exhaustion of the 120-day period. The exception in San Roque has been applied consistently in numerous decisions of this Court.
In this case, the two judicial claims filed by the petitioner fell within the window period, thus, the CTA can take cognizance over them.
The petitioner is similarly situated as Taganito Mining Corporation (Taganito) in the consolidated cases of San Roque. In that case, Taganito prematurely filed on 14 February 2007 its petition for review with the CTA, or within the window period from 10 December 2003, with the issuance of BIR Ruling DA-489-03 and 6 October 2010, when Aichi was promulgated. The Court considered Taganito to have filed its administrative claim on time. Similarly, the judicial claims in this case were filed on 30 March 2006 and 20 June 2006, or within the said window period. Consequently, the exception to the mandatory and jurisdictional character of the 120-day and 30-day periods is applicable.
What this means is that the CTA can validly take cognizance over the two judicial claims filed in this case. The CTA Division, in fact, did this, which eventually led to the partial grant of the refund claims in favor of the petitioner. In reversing the CTA Division for lack of jurisdiction, the CTA En Banc failed to consider BIR Ruling No. DA-489-03.
It is imperative, however, to point out that the petitioner did not actually invoke BIR Ruling No. DA-489-03 in all its pleadings to justify the timeliness of its judicial claims with the CTA. To recall, the petitioner vociferously insisted on the propriety of its judicial claims in view of the prevailing interpretations of the CTA prior to Aichi that allowed premature filing of petitions for review before the CTA. This apparently also explains the silence on the end of the CTA En Banc regarding such BIR ruling in disposing of the matter on jurisdiction.
Hence, whether the petitioner can benefit from BIR Ruling DA-489-03 even if it did not invoke it is a question worthy of consideration.
The beneficiaries of BIR
Ruling No. DA-489-03 include
those who did not specifically
invoke it.
x x x BIR Ruling No. DA-489-03 is a general interpretative rule. Thus, all taxpayers can rely on BIR Ruling No. DA-489-03 from the time of its issuance on 10 December 2003 up to its reversal by this Court in Aichi on 6 October 2010, where this Court held that the 120+30-day periods are mandatory and jurisdictional.[18] (emphasis supplied)
As previously stated, San Roque has been consistently applied in a long line of cases that recognized the exception to the mandatory and jurisdictional nature of the 120+30-day period. To limit the application of BIR Ruling No. DA-489-03 only to those who invoked it specifically would unduly strain the pronouncements in San Roque. To provide jurisprudential stability, it is best to apply the benefit of BIR Ruling No. DA-489-03 to all taxpayers who filed their judicial claims within the window period from 10 December 2003 until 6 October 2010.
We said the same in Commissioner of Internal Revenue v. Air Liquide Philippines. Inc.,[19] thus –
The Court agrees with ALPI in its survey of cases which shows that BIR Ruling No. DA-489-03 was applied even though the taxpayer did not specifically invoke the same. As long as the judicial claim was filed between December 10, 2003 and October 6, 2010, then the taxpayer would not be required to wait for the lapse of 120-day period. This doctrine has been consistently upheld in the recent decisions of the Court. On the other hand, in Nippon Express v. CIR, Applied Food Ingredients v. CIR and Silicon Philippines v. CIR, the taxpayer did not benefit from BIR Ruling No. DA-489-03 because they filed their precipitate judicial claim before December 10, 2003.
Indeed, BIR Ruling No. DA-489-03 is a general interpretative law and it applies to each and every taxpayer. To subscribe to the contention of the CIR would alter the Court’s ruling in San Roque. It will lead to an unreasonable classification of the beneficiaries of BIR Ruling No. DA-489-03 and further complicate the doctrine. ALPI cannot be faulted for not specifically invoking BIR Ruling No. DA-489-03 as the rules for its application were not definite until the San Roque case was promulgated.
In the furtherance of the doctrinal pronouncements in San Roque, the better approach would be to apply BIR Ruling No. DA-489-03 to all taxpayers who filed their judicial claim for VAT refund within the period of exception from December 10, 2003 to October 6, 2010.[20] (citations omitted)
Moreover, in Procter and Gamble Asia Pte Ltd. v. Commissioner of Internal Revenue,[21] we considered as insignificant the failure of a taxpayer to invoke BIR Ruling No. DA-489-03 before the CTA. Our reason was that the said ruling is an official act emanating from the BIR. We can take judicial notice of such issuance and its consistent application in past rulings of the Court relating to the timeliness of judicial claims which makes it even more mandatory in taking cognizance of the same.
All told, the CTA has jurisdiction over the judicial claims filed by the petitioner in this case. The CTA En Banc, thus, erred in setting aside the decision of the CTA Division on the ground of lack of jurisdiction. Consequently, the decision of the CTA Division partially granting the claim for refund/credit in favor of the petitioner must be reinstated.
WHEREFORE, the petition is GRANTED. The 4 April 2012 Decision and 17 August 2012 Resolution of the Court of Tax Appeals En Banc in CTA EB No. 657 are REVERSED and SET ASIDE. The 8 January 2010 Decision and 28 June 2010 Resolution of the CTA Former Second Division in CTA Cases Nos. 7424 and 7492 are hereby REINSTATED.
The public respondent Commissioner of Internal Revenue is hereby ORDERED TO REFUND or, in the alternative, TO ISSUE A TAX CREDIT CERTIFICATE in favor of the petitioner in the total sum of Twenty-Nine Million Nine Hundred Thirty-One Thousand Five Hundred Five Pesos and 18/100 Centavos (P29,931,505.18) representing unutilized input VAT attributable to zero-rated sales to the NPC for the four taxable quarters of2004.
SO ORDERED.
Velasco, Jr., (Chairperson), Bersamin, Leonen, and Gesmundo, JJ., concur.
[1] 646 Phil. 710 (2010).
[2] 703 Phil. 310 (2013)
[3] Rollo, pp. 7-28.
[4] Id. at 35-42.
[5] Id. at 9 (Decision of the CTA En Banc in CTA EB No. 657, p. 3).
[6] Id. at 10 (Decision of the CTA En Banc in CTA EB No. 657, p. 4).
[7] Id. at 363.
[8] Id. at 26-27.
[9] The CTA cases cited were: CIR v. Visayas Geothermal Power Company, Inc., CTA EB Case No. 282, 20 November 2007; CIR v. CE Cebu Geothermal Power Company, Inc., CTA EB Nos. 426 and 427 (CTA Case Nos. 6791 and 6836). 29 May 2009; CIR v. Accenture, Inc., CTA EB No. 410, 18 March 2009; CE Luzon Geothermal Power Company, Inc. v. CIR, CTA Case No. 7393, 2 March 2010; and Eastern Telecommunications Philippines, Inc. v. CIR, CTA EB Case No. 11 (CTA Case No.6255), 19 April 2005.
[10] Supra note 2.
[11] Id. at 382.
[12] ART. 8. Judicial decisions applying or interpreting the laws or the Constitution shall form a part of the legal system of the Philippines.
[13] CIR v. San Roque, supra note 2 at 386-387.
[14] Philippine Bank of Communications v. CIR, 361 Phil. 916, 931 (1999).
[15] SEC. 246. Non-Retroactivity of Rulings. – Any revocation, modification or reversal of any or 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.
[16] 736 Phil. 591 (2014).
[17] Id. at 600.
[18] Supra note 2 at 376.
[19] 765 Phil. 304 (2015).
[20] Id. at 311-312.
[21] 785 Phil. 817 (2016).
