G.R. No. 187548, February 10, 2014

THIRD DIVISION [ G.R. No. 187548, February 10, 2014 ] COMMISSIONER OF INTERNAL REVENUE VS. TAGANITO MINING CORPORATION.

Before this court is a petition for review[1] under Rule 45, seeking to reverse and set aside the January 19, 2009 decision[2] and April 21, 2009 resolution[3] of the Court of Tax Appeals En Banc in C.T.A. E.B. No. 376.

The assailed decision denied petitioner's appeal and affirmed the October 22, 2007 decision[4] and February 28, 2008 resolution[5] of the Second Division of the Court of Tax Appeals, granting respondent a tax refund or credit in the reduced amount of P10,899,282.06, representing unutilized input taxes attributable to zero-rated export sales for the four quarters of 2003. The assailed resolution denied petitioner's partial motion for reconsideration.

The pertinent facts are as follows:

Respondent Taganito Mining Corporation "is a VAT-registered entity with Certificate of Registration No. 94-470-000373, issued x x x on June 15, 1994."[6] It is "registered with the Board of Investments x x x as an exporter of beneficiated nickel silicate ores and chromite ores with BOI Certificate of Registration No. EP-88-306."[7]

In 2003, "[r]espondent filed its Original Quarterly [Value-Added Tax] Returns on April 21, 2003, July 16, 2003, October 21, 2003 and January 22, 2004 for the first, second, third and fourth quarter[s], respectively, with the following details":[8]
Quarter
Zero-rated Sales
VAT Input Taxes on Domestic Purchases of goods and services
VAT Input Taxes on Importation of Capital Goods
Total VAT Input
Taxes
First
P133,433,103.94
P399,513.96
P203,510.43
P603,024.39
Second
187,084,812.45
552,516.79
7,533,486.25
8,086,003.04
Third
124,802,022.15
133,469.03
2,433,442.23
2,566,911.24
Fourth
109,750,051.60
308,095.99
0.00
308,095.98
Total
P555,069,990.14
P1,393,595.77
P10,170,438.89
P11,564,034.65
On December 29, 2004, respondent filed with the Bureau of Internal Revenue's Excise Taxpayers' Assistance Division under the Large Taxpayers Division a claim[9] for refund of unutilized input Value-Added Tax in the amount of P11,564,034.65 for the first to fourth quarters of taxable year 2003.On February 24, 2005, respondent filed a petition for review[10] before the Court of Tax Appeals, which was assigned to the Second Division.

The Court of Tax Appeals Second Division partially granted respondent's petition on the ground that respondent was able to substantiate some of its claim, viz:
WHEREFORE, premises considered, the instant Petition for Review is hereby PARTIALLY GRANTED. Respondent Commissioner of Internal Revenue is hereby ORDERED to REFUND or TO ISSUE A TAX CREDIT CERTIFICATE in favor of petitioner in the reduced amount of TEN MILLION EIGHT HUNDRED NINETY NINE THOUSAND TWO HUNDRED EIGHTY TWO AND 06/100 PESOS (P10,899,282.06), representing unutilized input taxes attributable to zero-rated export sales for the four quarters of 2003. 
SO ORDERED.[11]
Upon the denial of its motion for reconsideration, petitioner filed on April 2, 2008 a petition for review[12] with the Court of Tax Appeals En Banc anchored on the ground that the Second Division erred in resolving that respondent was entitled to a tax refund/credit. This was because the appeal filed by respondent was premature, and it failed to properly substantiate its claim for refund. Respondent filed its comment/opposition[13] to the petition.

On January 19, 2009, the Court of Tax Appeals En Banc promulgated its decision denying the petition for lack of merit. It held that since both the administrative and judicial claims of respondent were filed within the two-year prescriptive period set forth in Section 229 of the 1997 National Internal Revenue Code (or the 1997 Tax Code), there was no reason for it not to acquire jurisdiction over respondent's claim. As to compliance with substantiation requirements before the Bureau, the Court of Tax Appeals En Banc noted that in respondent's letter of refund,[14] it already attached documents which it thought would be sufficient in the processing of its claim. It also indicated its willingness to cooperate with petitioner regarding further requirements that the latter might impose regarding its request. Petitioner had sufficient time to inform respondent of the documents needed, but it failed to do so. Petitioner's inaction, according to the Court of Tax Appeals, should not hinder respondent's right to claim for a refund. The dispositive portion of the Court of Tax Appeals En Banc's decision reads:
WHEREFORE, finding no reversible error in the assailed Decision promulgated on October 22, 2007 and Resolution dated February 28, 2008, the instant Petition for Review is hereby DISMISSED for lack of merit.
SO ORDERED.[15]
The Court of Tax Appeals En Banc also denied petitioner's motion for partial reconsideration[16] dated February 5, 2009 in its April 21, 2009 resolution.
Hence, this instant petition was filed, anchored on the following issues:
1)
Whether the Court of Tax Appeals erred in giving due course to respondent's petition for review despite its failure to exhaust available administrative remedies; and
2)
Whether the Court of Tax Appeals erred in holding that respondent is entitled to its claim for issuance of tax credit in the amount of P10,899,282.06, representing its alleged unutilized input Value-Added Tax for the period of January 1 to December 31, 2003, notwithstanding its failure to substantiate its claim before the Bureau of Internal Revenue.
Petitioner alleges that respondent's petition for review, filed before the Court of Tax Appeals prior to the lapse of the 120-day period under Section 112, paragraph (C) of the 1997 Tax Code, was premature and should have been dismissed.

Moreover, petitioner contends that respondent is not entitled to a tax refund or credit for its failure to submit all relevant evidentiary documents supporting its administrative claim before the Bureau of Internal Revenue.

In its comment,[17] respondent counters that:
1)
It has clearly established its entitlement to the claimed refund/tax credit of its unutilized input Value-Added Tax for the period of January 1 to December 31, 2003;
2)
Section 229, not Section 112, of the National Internal Revenue Code is applicable insofar as prescriptive period for filing claims for refund is concerned; and
3)
Bureau of Internal Revenue Memorandum Circular No. 49-03 dated August 18, 2003, which has neither been revoked nor rendered ineffectual and is presumed to remain in full force and effect, allows administrative claims for refund to proceed simultaneously with judicial claims, and effectively declares that taxpayers need not wait for the lapse of the 120-day period before having recourse to the Court of Tax Appeals.
In its reply,[18] petitioner maintains that Section 112 of the 1997 National Internal Revenue Code applies specifically to claims for refund of excess input Value-Added Tax, while Section 229 applies to instances of erroneous payment or illegal collection of taxes. It adds that there is no direct or indirect reference in Section 112 to the two-year limitation set forth in Section 229, which may be construed to mean that Section 229 is not applicable. Lastly, petitioner submits that a revenue memorandum circular cannot take precedence over the provisions of the Tax Code, and in case of discrepancy between the basic law and an interpretative or administrative ruling, the basic law prevails.

In its July 19, 2010 resolution, this court resolved to give due course to the petition and to dispense with the filing of the parties' respective memorandum.

This court finds the petition to be without merit.

The main issue on the timeliness of the filing of respondent's judicial claim is anchored on the nature of the prescriptive periods under Section 112 of the 1997 National Internal Revenue Code:
Section 112. Refunds or Tax Credits of Input Tax. —
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.
A simple reading of the quoted provision will reveal that the taxpayer may appeal the denial or the inaction of the Commissioner of Internal Revenue only within thirty (30) days from receipt of the decision that denies the claim or the expiration of the 120-day period given to the Commissioner to decide the claim.

In the fairly recent case of Commissioner of Internal Revenue v. San Roque Power Corporation,[19] this court's En Banc affirmed with qualification the decision of its First Division in Commissioner of Internal Revenue v. Aichi Forging Company of Asia, Inc.[20] This court held that compliance with the 120-day and the 30-day periods under Section 112 of the Tax Code, save for those Value-Added Tax refund cases that were prematurely (i.e., before the lapse of the 120-day period) filed with the Court of Tax Appeals between December 10, 2003 (when the Bureau of Internal Revenue Ruling No. DA-489-03 was issued) and October 6, 2010, is mandatory and jurisdictional.

This court also declared that, following Commissioner of Internal Revenue v. Mirant Pagbilao Corporation,[21] claims for refund or tax credit of excess input tax are governed not by Section 229 but only by Section 112 of the 1997 National Internal Revenue Code.

San Roque filed a motion for reconsideration and supplemental motion for reconsideration in G.R. No. 187485 arguing for the prospective application of the 120-day and 30-day mandatory and jurisdictional periods, which this court denied with finality in a resolution promulgated on October 10, 2013. The same resolution also denied the motion for reconsideration filed by the Commissioner of Internal Revenue in G.R. No. 196113 assailing the validity of Ruling No. DA-489-03.[22]

In the present case, respondent filed its petition for review with the Court of Tax Appeals on February 24, 2005 or only 57 days after it had filed its administrative claim with the Commissioner on December 29, 2004. Clearly, respondent failed to comply with the 120-day waiting period, the time expressly given by law to the Commissioner to decide whether to grant or deny its application for tax refund or credit. However, since respondent filed its judicial claim within the window created in San Roque, its petition for review filed before the Court of Tax Appeals is exempted from the strict application of the 120-day mandatory period.

As to the other issue on substantiation requirements, the Court of Tax Appeals En Banc upheld the Division's finding that the invoices and/or official receipts, as well as machine-validated Bureau of Customs' import entry declarations submitted by respondent, were sufficient to prove respondent's entitlement to a refund/tax credit in the reduced amount of P10,899,282.06. This court sees no reason to overturn their factual findings.

WHEREFORE, the petition is DENIED.

SO ORDERED.

[1] Rollo, pp. 7-46. This petition for review was received by the Supreme Court on June 8, 2009.[2] Id. at 47-61. This decision was penned by Presiding Justice Ernesto D. Acosta with Associate Justices Juanito C. Castañeda, Jr., Loveli R. Bautista, Erlinda P. Uy, Caesar A. Casanova, and Olga Palanca- Enriquez, concurring.
[3] Id. at 62-67. This resolution was penned by Associate Justice Loveli R. Bautista with Associate Justices Juanito C. Castañeda, Jr., Erlinda P. Uy, Caesar A. Casanova, and Olga Palanca-Enriquez, concurring; Presiding Justice Ernesto D. Acosta, dissenting. On March 19, 2009, Presiding Justice Acosta, the ponente of the January 19, 2009 decision, requested that the case be re-raffled to another Justice, as he changed his position on the interpretation and application of Section 229 of the 1997 National Internal Revenue Code. Accordingly, on March 24, 2009, the case was re-raffled to Associate Justice Bautista.
[4] Id. at 103-122. This decision was penned by Associate Justice Olga Palanca-Enriquez with Associate Justices Juanito C. Castañeda, Jr. (Chair) and Erlinda P. Uy, concurring.
[5] Id. at 172-373.
[6] Id. at 49; Court of Tax Appeals En Banc decision dated January 19, 2009, pp. 2-4.
[7] Id.
[8] Id. at 49-50.
[9] Id. at 76-77.
[10] Id. at 68-75. This petition for review was docketed as CTA Case No. 7157.
[11] Id. at 121.
[12] Id. at 143-152.
[13] Id. at 174-177.
[14] Id. at 76-77.
[15] Id. at 60.
[16] Id. at 235-245.
[17] Id. at 290-306. This comment was posted on October 12, 2009 and was received by this court on October 22, 2009.
[18] This reply was received by this court on March 26, 2010.
[19] G.R. Nos. 187485, 196113, and 197156, February 12, 2013, 690 SCRA 336 [Per J. Carpio, En Banc].
[20] G.R. No. 184823, October 6, 2010, 632 SCRA 422.
[21] G.R. No. 172129, September 12, 2008, 565 SCRA 154.
[22] G.R. Nos. 187485, 196113, and 197156, October 8, 2013 [Per J. Carpio, En Banc].

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