Tax Cases

Procter and Gamble Asia PTE LTD. Vs. CIR G.R. No.
202071 19 February
2014
This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court assailing the Court of Tax Appeals (CTA) En Banc
Decision and Resolution in CTA EB No. 746, which denied petitioner's claim for refund of unutilized input value-added tax (VAT) for not
observing the mandatory 120-day waiting period under Section 112 of the National Internal Revenue Code.
1
On 26 September and 13 December 2006, petitioner filed administrative claims with the Bureau of Internal Revenue (BIR) for the refund or
credit of the input VAT attributable to the formers zero-rated sales covering the periods 1 July-30 September 2004 and 1 October-31
December 2004, respectively.
4
On 2 October and 29 December 2006, petitioner filed judicial claims docketed as CTA Case Nos. 7523 and 7556, respectively, for the
aforementioned refund or credit of its input VAT. Respondent filed separate Answers to the two cases, which were later consolidated,
basically arguing that petitioner failed to substantiate its claims for refund or credit.
5
Trial on the merits ensued. On 17 January 2011, the CTA First Division rendered a Decision dismissing the judicial claims for having been
prematurely filed. It ruled that petitioner had failed to observe the mandatory 120-day waiting period to allow the Commissioner of Internal
Revenue (CIR) to decide on the administrative claim. Petitioners Motion for Reconsideration was denied on 15 March 2011.
7
10
Petitioner thereafter filed a Petition for Review before the CTA En Banc. The latter, however, issued the assailed Decision affirming the ruling
of the CTA First Division. Petitioners Motion for Reconsideration was denied in the assailed Resolution.
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Petitioner filed the present petition arguing mainly that the 120-day waiting period, reckoned from the filing of the administrative claim for the
refund or credit of unutilized input VAT before the filing of the judicial claim, is not jurisdictional. According to petitioner, the premature filing of
its judicial claims was a mere failure to exhaust administrative remedies, amounting to a lack of cause of action. When respondent did not file
a motion to dismiss based on this ground and opted to participate in the trial before the CT A, it was deemed to have waived such defense.
11
On 3 June 2013, we required respondent to submit its Comment, which it filed on 4 December 2013. Citing the recent case CIR v. San
Roque Power Corporation, respondent counters that the 120-day period to file judicial claims for a refund or tax credit is mandatory and
jurisdictional. Failure to comply with the waiting period violates the doctrine of exhaustion of administrative remedies, rendering the judicial
claim premature. Thus, the CTA does not acquire jurisdiction over the judicial claim.
12
13
14
Respondent is correct on this score. However, it fails to mention that San Roque also recognized the validity of BIR Ruling No. DA-489-03.
The ruling expressly states that the "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."
15
The Court, in San Roque, ruled that equitable estoppel had set in when respondent issued BIR Ruling No. DA-489-03. This was a general
interpretative rule, which effectively misled all taxpayers into filing premature judicial claims with the CTA. Thus, taxpayers could rely on the
ruling from its issuance on 10 December 2003 up to its reversal on 6 October 2010, when CIR v. Aichi Forging Company of Asia, lnc. was
promulgated.
16
The judicial claims in the instant petition were filed on 2 October and 29 December 2006, well within the ruling's period of validity. Petitioner
is in a position to "claim the benefit of BIR Ruling No. DA-489-03, which shields the filing of its judicial claim from the vice of prematurity."
17
WHEREFORE, the petition is GRANTED. The Decision and Resolution of the Court of Tax Appeals En Banc in CTA EB No. 746 are
REVERSED and SET ASIDE. This case is hereby REMANDED to the CT A First Division for further proceedings and a determination of
whether the claims of petitioner for refund or tax credit of unutilized input value-added tax are valid.
SO ORDERED.
--------------------------------------------------------------------------------------------------------------------------------------CIR vs. Toledo Power, Inc. G.R. No. 183880 20 January 2014
This resolves the Petition for Review on Certiorari under Rule 45 of the Rules of Court seeking the reversal of the Court of Tax Appeals (CTA)
En Banc Decision dated May 7, 2008, and Resolution dated July 18, 2008.
1
The pertinent facts, as narrated by the CT A First Division, are as follows:

Petitioner (herein respondent Toledo Power, Inc.) is a general partnership duly organized and existing under Philippine laws, with principal
office at Sangi, Toledo City, Cebu. It is principally engaged in the business of power generation and subsequent sale thereof to the National
Power Corporation (NPC), Cebu Electric Cooperative III (CEBECO), Atlas Consolidated Mining and Development Corporation, Atlas Fertilizer
Corporation and Cebu Industrial Park Development, Inc., and is registered with the Bureau of Internal Revenue (BIR) as a Value
Added Tax taxpayer in accordance with Section 236 of the National Internal Revenue Code (NIRC) with Tax Identification No. 003-883-626VAT and BIR Certificate of Registration bearing RDO Control No. 94-083-000300.
On June 20, 2002, petitioner filed an application with the Energy Regulatory Commission (ERC) for the issuance of a Certificate of
Compliance pursuant to the Implementing Rules and Regulations of R.A. 9136, otherwise known as the "Electric Power Industry Reform Act
of 2007" (EPIRA).
On October 25, 2001, petitioner filed with the BIR Revenue District Office (RDO) No. 83 at Toledo City, Province of Cebu, its Quarterly VAT
Return for the third quarter of 2001, declaring among others, the following:
Zero-rated Sales/Receipts
Taxable Sales-Sale of Scrap/Others
Output Tax
P 143,000,032.37
378,651.74
34,422.89
Less: Input Tax

On Domestic Purchases
4,765,458.58
On Importation of Goods
1,242,792.00
Total Available Input Tax
6,008,250.58
Excess Input Tax & Overpayment
P 5,973,827.69
However, an amended Quarterly VAT Return for the same quarter of 2001was filed on November 22, 2001. The amended return shows
unutilized input VAT credits of P5,909,588.96 arising from petitioners taxable purchases for the third quarter of 2001 and the following other
information:
Output Tax
P 143,000,032.37
378,651.74
34,422.89
Less: Input Tax

4,718,099.85
1,225,912.00
5,944,011.85
P 5,909,588.96
Thus, for the third quarter of 2001, petitioner allegedly has unutilized input VAT in the total amount ofP5,909,588.96 on its domestic purchase
of taxable goods and services and importation of goods, which purchases and importations are all attributable to its zero-rated sale of power
generation services to NPC, CEBECO, Atlas Consolidated Mining and Development Corporation, Atlas Fertilizer Corporation and Cebu
Industrial Park Development, Inc. Said input VAT of P5,909,588.96 paid by petitioner on its domestic purchase of goods and services for the
third quarter of 2001 allegedly remained unutilized against output VAT liability in said period or even in subsequent matters.
On January 25, 2002, petitioner filed with the BIR RDO No. 83 at Toledo City, Province of Cebu, its Quarterly VAT Return for the fourth
quarter of 2001 declaring, among others, the following:
Output Tax
P 127,259,720.44
309,697.50
28,154.33
Less: Input Tax

1,374,608.64
1,873,327.00
3,247,935.64
P 3,219,781.31
Thus, petitioner allegedly had an excess input VAT credits of P3,219,781.31 for the fourth quarter of 2001 which remained unutilized against
output VAT liability in said period or even in the subsequent quarters.
For the third and fourth quarters of 2001, petitioner incurred and accumulated input VAT from its domestic purchase of goods and services,
which are all attributable to its zero-rated sales of power generation services to NPC, CEBECO, Atlas Consolidated Mining and Development
Corporation, Atlas Fertilizer Corporation and Cebu Industrial Park Development Inc., in the total amount ofP9,129,370.27. Said excess and
unutilized input VAT was allegedly not utilized against any output VAT liability in the subsequent quarters nor carried over to the succeeding
taxable quarters.
On September 30, 2003, pursuant to the procedure prescribed in Revenue Regulations No. 7-95, as amended, petitioner filed with the BIR
RDO No. 83, an administrative claim for refund or unutilized input VAT for the third and fourth quarter of 2001 in the amounts
of P5,909,588.96 and P3,219,781.31, respectively, or the aggregate amount of P9,129,370.27.
Respondent (herein petitioner Commissioner of Internal Revenue) has not ruled upon petitioners administrative claim and in order to
preserve its right to file a judicial claim for the refund or issuance of a tax credit certificate of its unutilized input VAT, petitioner filed a Petition
for
Review to suspend the running of the two-year prescriptive period under Section 112(D) of the 1997 NIRC and Section 4.106-2(c) of
Revenue Regulations No. 7-95, as amended. On October 24, 2003, petitioner filed a Petition for Review for the refund or issuance of a tax
credit certificate in the amount of P5,909,588.96 for the third quarter of 2001, docketed as CTA Case No. 6805 and, on January 22, 2004,
filed another Petition for Review for the refund or issuance of tax credit certificate in the amount of P3,219,781.31 for the fourth quarter of
2001, docketed as CTA Case No. 6851, both for its unutilized input VAT paid by petitioner on its domestic purchases of goods and services
and importation of goods attributable to zero-rated sales.
On January 30, 2004, petitioner filed a Motion for Consolidation CTA Case Nos. 6805 and 6851, since these cases involve the same parties,
same facts and issues. The said Motion was granted in open court on February 27, 2004 and confirmed in a Resolution dated March 8,
2004.
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After presenting its testimonial and documentary evidence, petitioner formally offered its evidence on February 16, 2006. On March 24, 2006,
this Court promulgated a Resolution admitting all the exhibits offered by petitioner. Respondent, on the other hand, failed to adduce any
evidence.
In a Resolution dated July 6, 2006, this consolidated case was ordered submitted for decision with only petitioners Memorandum, as
respondent failed to file one within the period given by the Court.
3
Acting on the petition, the CTA First Division issued a Decision dated May 17, 2007 partially granting Toledo Power, Inc.s (TPI) refund claim
or issuance of tax credit certificate. Pertinent portions of the Decision read:
In sum, petitioner was able to show its entitlement to the refund or issuance of tax credit certificate in the amount of P8,553,050.44 computed
as follows:
Total Available Input VAT
Less: Disallowed Input VAT
(P20,696.34+P52,363.64+P277,207.50)
Substantiated available input VAT
Less: Output VAT
Substantiated Unutilized Input VAT
P 9,191,947.49
350,267.48
P 8,841,680.01
62,577.22
P 8,779,102.79
Multiply by the ratio of substantiated

zero-rated sales to the total zero-rated
sales
Substantiated zero-rated sales
263,300,858.02
Total zero-rated sales
270,259,752.81
Refundable Input VAT
P 8,553,050.44
IN VIEW OF THE FOREGOING, the Petition for Review is PARTIALLY GRANTED. Respondent is hereby ORDERED to refund or to issue a
tax credit certificate in favor of petitioner in the reduced amount ofP8,553,050.44 representing the substantiated unutilized input VAT for the
third and fourth quarters of 2001.
SO ORDERED.
The Commissioner of Internal Revenue (CIR), thereafter, filed a Motion for Reconsideration against said Decision. However, the same was
denied in a Resolution dated October 15, 2007.
On appeal to the CTA En Banc, the CIR argued that TPI failed to comply with the invoicing requirements to prove entitlement to the refund or
issuance of tax credit certificate. In addition, he challenged the jurisdiction of the CTA First Division to entertain respondents petition for
review for failure on its part to comply with the provisions of Section 112 (C) of the Tax Code.
In a Decision dated May 7, 2008, the CTA En Banc affirmed with modification the First Divisions assailed decision. It held
x x x after re-examination of the records of this case, out of the alleged Zero-rated sales amounting toP270,259,752.81, only the amount
of P248,989,191.87 is fully substantiated. Therefore, respondent is entitled to the refund or issuance of tax credit certificate in the amount
of P8,088,151.07 computed as follows:
Total Available Input VAT
P 9,191,947.49
Less: Disallowed Input VAT

(P20,696.34+P52,363.64+P277,207.50)
Substantiated available input VAT
350,267.48
P 8,841,680.01
Less: Output VAT
62,577.22
Substantiated Unutilized Input VAT
P 8,779,102.79
Multiply by the ratio of substantiated

zero-rated sales to the total zero-rated
sales
Substantiated zero-rated sales
248,989,191.87
Total zero-rated sales
270,259,752.81
Refundable Input VAT
P 8,088,151.07
WHEREFORE, premises considered, the Petition for Review En Banc is DENIED for lack of merit. Accordingly, the Decision dated May 17,
2007 and Resolution dated October 15, 2007 are AFFIRMED with MODIFICATION. Petitioner is hereby ORDERED TO REFUND to
respondent the sum of EIGHT MILLION EIGHTY-EIGHT THOUSAND ONE HUNDRED FIFTY-ONE PESOS AND SEVEN CENTAVOS
(P8,088,151.07) only for the third and fourth quarters of taxable year 2001.
SO ORDERED.
In a Resolution dated July 18, 2008, the CTA En Banc denied the CIRs motion for reconsideration.
Undaunted by the adverse ruling of the CTA, the CIR now seeks recourse to this Court on the following ground:
THE COURT OF TAX APPEALS EN BANC ERRED IN RULING THAT THE GOVERNMENT IS LIABLE TO REFUND PETITIONER FOR
ALLEGED OVERPAYMENT OF VAT.
6
In essence, two issues must be addressed to determine whether TPI is indeed entitled to its claim for refund or issuance of tax credit
certificate: (1) whether TPI complied with the 120+30 day rule under Section 112 (C) of the Tax Code, and (2) whether TPI sufficiently
complied with the invoicing requirements under the Tax Code.
Let us discuss the issues in seriatim.

First, it must be emphasized that to validly claim a refund or tax credit of input tax, compliance with the 120+30 day rule under Section 112 of
the Tax Code is mandatory.
Pertinent portions of Section 112 of the Tax Code, as amended by Republic Act No. 9337, state:
7
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: Provided, however, That in the case of zero-rated sales under Section 106(A)(2)(a)(1), (2) and (b) and Section 108(B)(1)
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 zerorated sale and also in taxable or exempt sale of goods of 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.
xxxx
(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 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.
Section 112 decrees that a VAT-registered person, whose sales are zero-rated or effectively zero-rated, may apply for the issuance of a tax
credit or refund creditable input tax due or paid attributable to such sales within two years after the close of the taxable quarter when the
sales were made. From the date of submission of complete documents in support of its application, the CIR has 120 days to decide whether
or not to grant the claim for refund or issuance of tax credit certificate. In case of full or partial denial of the claim for tax refund or tax credit,
or the failure on the part of the CIR to act on the application within the given period, the taxpayer may, within 30 days from receipt of the
decision denying the claim or after the expiration of the 120-day period, appeal with the CTA the decision or inaction of the CIR.
Recently, in the consolidated cases of Commissioner of Internal Revenue v. San Roque Power Corporation, (San Roque), the Court
confirmed the mandatory and jurisdictional nature of the 120+30 day rule. It ratiocinated as follows:
8
At the time San Roque filed its petition for review with the CTA, the 120+30 day mandatory periods were already in the law. Section 112 (C)
expressly grants the Commissioner 120 days within which to decide the taxpayers claim. The law is clear, plain and unequivocal: "x x x 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." Following the verba legis doctrine, this law must be applied exactly as worded since it is clear,
plain and unequivocal. The taxpayer cannot simply file a petition with the CTA without waiting for the Commissioners decision within the 120day mandatory and jurisdictional period. The CTA will have no jurisdiction because there will be no "decision" or "deemed a denial" decision
of the Commissioner for the CTA to review. In San Roques case, it filed its petition with the CTA a mere 13 days after it filed its administrative
claim with the Commissioner. Indisputably, San Roque knowingly violated the mandatory 120-day period, and it cannot blame anyone but
itself.
Section 112(C) also expressly grants the taxpayer a 30-day period to appeal to the CTA the decision or inaction of the Commissioner, thus:
x x x the taxpayer affected may, within thirty (30) days from the receipt of the decision denying the claim or after the expiration of the onehundred twenty day-period, appeal the decision or the unacted claim with the Court of Tax Appeals. (Emphasis supplied.)
This law is clear, plain, and unequivocal. Following the well-settled verba legis doctrine, this law should be applied exactly as worded since
it is clear, plain and unequivocal. As this law states, the taxpayer may, if he wishes, appeal the decision of the Commissioner to the CTA
within 30 days from receipt of the Commissioners decision, or if the Commissioner does not act on the taxpayers claim within the 120-day
period, the taxpayer may appeal to the CTA within 30 days from the expiration of the 120-day period.
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When Section 112 (C) states that "the taxpayer affected may, within thirty (30) days from 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," the law does not
make the 120+30 day periods optional just because the law uses the word "may." The word "may" simply means that the taxpayer may or
may not appeal the decision of the Commissioner within 30 days from receipt of the decision, or within 30 days from the expiration of the
120-day period. Certainly by no stretch of the imagination can the word "may" be construed as making the 120+30 day periods optional,
allowing the taxpayer to file a judicial claim one day after filing the administrative claim with the Commissioner.
The old rule that the taxpayer may file the judicial claim, without waiting for the Commissioners decision if the two-year prescriptive period is
about to expire, cannot apply because that rule was adopted before the enactment of the 30-day period. The 30-day period was adopted
precisely to do away with the old rule, so that under the VAT System the taxpayer will always have 30 days to file the judicial claim even if the
Commissioner acts only on the 120th day, or does not act at all during the 120-day period. With the 30-day period always available to the
taxpayer, the taxpayer can no longer file a judicial claim for refund or credit of input VAT without waiting for the Commissioner to decide until
the expiration of the 120-day period.
To repeat, a claim for tax refund or credit, like a claim for tax exemption, is construed strictly against the taxpayer. One of the conditions for a
judicial claim of refund or credit under the VAT System is compliance with the 120+30 day mandatory and jurisdictional periods. Thus, strict
compliance with the 120+30 day periods is necessary for such a claim to prosper, whether before, during, or after the effectivity of the Atlas
doctrine, except for the period from the issuance of BIR Ruling No. DA-489-03 on 10 December 2003 to 6 October 2010 when the Aichi
doctrine was adopted, which again reinstated the 120+30 day periods as mandatory and jurisdictional.
9
In a nutshell, the rules on the determination of the prescriptive period for filing a tax refund or credit of unutilized input VAT, as provided in
Section 112 of the Tax Code, are as follows:
(1) An administrative claim must be filed with the CIR within two years after the close of the taxable quarter when the zero-rated or
effectively zero-rated sales were made.
(2) The CIR has 120 days from the date of submission of complete documents in support of the administrative claim within which
to decide whether to grant a refund or issue a tax credit certificate. The 120-day period may extend beyond the two-year period
from the filing of the administrative claim if the claim is filed in the later part of the two-year period. If the 120-day period expires
without any decision from the CIR, then the administrative claim may be considered to be denied by inaction.
(3) A judicial claim must be filed with the CTA within 30 days from the receipt of the CIRs decision denying the administrative
claim or from the expiration of the 120-day period without any action from the CIR.
(4) All taxpayers, however, 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, as an exception to the mandatory and jurisdictional 120+30 day periods.
10
Here, TPI filed its third and fourth quarterly VAT returns for 2001 on October 25, 2001 and January 25, 2002, respectively. It then filed an
administrative claim for refund of its unutilized input VAT for the third and fourth quarters of 2001 on September 30, 2003. Thus, the CIR had
120 days or until January 28, 2004, after the submission of TPIs administrative claim and complete documents in support of its application,
within which to decide on its claim. Then, it is only after the expiration of the 120-day period, if there is inaction on the part of the CIR, where
TPI may elevate its claim with the CTA within 30 days.
In the present case, however, it appears that TPIs judicial claims for refund of its unutilized input VAT covering the third and fourth quarters
of 2001 were prematurely filed on October 24, 2003 and January 22, 2004, respectively.
However, although TPIs judicial claim for the fourth quarter of 2001 has been filed prematurely, the most recent pronouncements of the
Court provide for a window wherein the same may be entertained.
As held in the San Roque ponencia, strict compliance with the 120+30 day mandatory and jurisdictional periods is not necessary when the
judicial claims are filed between December 10, 2003 (issuance of BIR Ruling No. DA-489-03 which states that the taxpayer need not wait for
the 120-day period to expire before it could seek judicial relief) to October 6, 2010 (promulgation of the Aichi doctrine).
Clearly, therefore, TPIs refund claim of unutilized input VAT for the third quarter of 2001 was denied for being prematurely filed with the CTA,
while its refund claim of unutilized input VAT for the fourth quarter of 2001 may be entertained since it falls within the exception provided in
the Courts most recent rulings.
With that settled, we now resolve the issue of whether TPI sufficiently complied with the invoicing requirements under the Tax Code with
respect to the fourth quarter of 2001.
Section 113 (A), in relation to Section 237 of the Tax Code, provides:
SEC. 113. Invoicing and Accounting Requirements for VAT-Registered Persons.
(A) Invoicing Requirements. A VAT-registered person shall, for every sale, issue an invoice or receipt. In addition to the information shall
be indicated in the invoice or receipt:
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(1) A statement that the seller is a VAT-registered person, followed by his taxpayers identification number (TIN); and
(2) The total amount which the purchaser pays or is obligated to pay to the seller with the indication that such amount includes
value-added tax.
xxxx
SEC. 237. Issuance of Receipts or Sales of Commercial Invoices. All persons subject to an internal revenue tax shall, for each sale or
transfer of merchandise or for services rendered valued at Twenty-five pesos (P25.00) or more, issue duly registered receipts or sales or
commercial invoices, prepared at least in duplicate, showing the date of transaction, quantity, unit cost and description of merchandise or
nature of service: Provided, however, That in the case of sales, receipts or transfers in the amount of One hundred pesos (P100.00) or more,
or regardless of the amount, where the sale or transfer is made by a person liable to value-added tax to another person also liable to valueadded tax; or where the receipt is issued to cover payment made as rentals, commissions, compensations or fees, receipts or invoices shall
be issued which shall show the name, business style, if any, and address of the purchaser, customer or client: Provided, further, That where
the purchaser is a VAT-registered person, in addition to the information herein required, the invoice or receipts shall further show the
Taxpayer Identification Number (TIN) of the purchaser.
Section 4.108-1 of Revenue Regulations No. 7-95 states:
Section 4.108-1. Invoicing Requirements All VAT-registered persons shall, for every sale or lease of goods or properties or services, issue
duly registered receipts or sales or commercial invoices which must show:
1. the name, TIN and address of seller;
2. date of transaction;
3. quantity, unit cost and description of merchandise or nature of service;
4. the name, TIN, business style, if any, and address of the VAT-registered purchaser, customer or client;
5. the word "zero-rated" imprinted on the invoice covering zero-rated sales; and
6. the invoice value or consideration.
11
In the present case, we agree with the CTAs findings that the words "zero-rated" appeared on the VAT invoices/official receipts presented by
the TPI in support of its refund claim. Although the same was merely stamped and not pre-printed, the same is sufficient compliance with the
law, since the imprinting of the word "zero-rated" was required merely to distinguish sales subject to 10% VAT, those that are subject to 0%
VAT (zero-rated) and exempt sales, to enable the Bureau of Internal Revenue to properly implement and enforce the other VAT provisions of
the Tax Code.
Moreover, it is doctrinal that the Court will not lightly set aside the conclusions reached by the CTA which, by the very nature of its function of
being dedicated exclusively to the resolution of tax problems, has accordingly developed an expertise on the subject, unless there has been
an abuse or improvident exercise of authority.
12
In Barcelon, Roxas Securities, Inc. v. Commissioner of Internal Revenue, the Court held that it accords the findings of fact by the CTA with
the highest respect. It ruled that factual findings made by the CTA can only be disturbed on appeal if they are supported by substantial
evidence or there is a showing of gross error or abuse on the part of the Tax Court. In the absence of any clear and convincing proof to the
contrary, this Court must presume that the CTA rendered a decision which is valid in every respect.
13
14
WHEREFORE, premises considered, the instant petition is PARTIALLY GRANTED. The Commissioner of Internal Revenue is hereby
ORDERED to refund or issue tax credit certificate in favor of Toledo Power, Inc. only for the fourth quarter of 2001. This case is hereby
REMANDED to the Court of Tax Appeals for the proper computation of the refundable amount representing unutilized input VAT for the fourth
quarter of 2001.
SO ORDERED.
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CIR vs. Aichi Forging Co. of Asia, Inc. 6 October 2010

Doctrine:
The CIR has 120 days, from the date of the submission of the complete
documents within which to grant or deny the claim for refund/credit of input vat. In
case of full or partial denial by the CIR, the taxpayers recourse is to file an appeal
before the CTA within 30 days from receipt of the decision of the CIR. However, if
after the 120-day period the CIR fails to act on the application for tax refund/credit,
the remedy of the taxpayer is to appeal the inaction of the CIR to CTA within 30
days.
A taxpayer is entitled to a refund either by authority of a statute expressly
granting such right, privilege, or incentive in his favor, or under the principle
of solutio indebiti requiring the return of taxes erroneously or illegally collected.
In both cases, a taxpayer must prove not only his entitlement to a refund but also
his compliance with the procedural due process.
As between the Civil Code and the Administrative Code of 1987, it is the latter
that must prevail being the more recent law, following the legal maxim, Lex
posteriori derogat priori.
The phrase within two (2) years x x x apply for the issuance of a tax credit
certificate or refund under Subsection (A) of Section 112 of the NIRC refers to
applications for refund/credit filed with the CIR and not to appeals made to the CTA.
Facts:
Petitioner filed a claim of refund/credit of input vat in relation to its zero-rated sales
from July 1, 2002 to September 30, 2002. The CTA 2nd Division partially granted
respondents claim for refund/credit.
Petitioner filed a Motion for Partial Reconsideration, insisting that the administrative
and the judicial claims were filed beyond the two-year period to claim a tax
refund/credit provided for under Sections 112(A) and 229 of the NIRC. He reasoned
that since the year 2004 was a leap year, the filing of the claim for tax refund/credit
on September 30, 2004 was beyond the two-year period, which expired on
September 29, 2004. He cited as basis Article 13 of the Civil Code, which provides
that when the law speaks of a year, it is equivalent to 365 days. In addition,
petitioner argued that the simultaneous filing of the administrative and the judicial
claims contravenes Sections 112 and 229 of the NIRC. According to the petitioner, a
prior filing of an administrative claim is a condition precedent before a judicial
claim can be filed.
The CTA denied the MPR thus the case was elevated to the CTA En Banc for review.
The decision was affirmed. Thus the case was elevated to the Supreme Court.
Respondent contends that the non-observance of the 120-day period given to the
CIR to act on the claim for tax refund/credit in Section 112(D) is not fatal because
what is important is that both claims are filed within the two-year prescriptive
period. In support thereof, respondent cited Commissioner of Internal Revenue v.
Victorias Milling Co., Inc. [130 Phil 12 (1968)] where it was ruled that if the CIR
takes time in deciding the claim, and the period of two years is about to end, the
suit or proceeding must be started in the CTA before the end of the two-year period
without awaiting the decision of the CIR.
Issues:
1. Whether or not the claim for refund was filed within the prescribed period
2. Whether or not the simultaneous filing of the administrative and the judicial
claims contravenes Section 229 of the NIRC, which requires the prior filing of an
administrative claim, and violates the doctrine of exhaustion of administrative
remedies
Held:
1. Yes. As ruled in the case of Commissioner of Internal Revenue v. Mirant Pagbilao
Corporation (G.R. No. 172129, September 12, 2008), the two-year period should be
reckoned from the close of the taxable quarter when the sales were made.
In Commissioner of Internal Revenue v. Primetown Property Group, Inc (G.R. No.
162155, August 28, 2007, 531 SCRA 436), we said that as between the Civil Code,
which provides that a year is equivalent to 365 days, and the Administrative Code of
1987, which states that a year is composed of 12 calendar months, it is the latter
that must prevail being the more recent law, following the legal maxim, Lex
posteriori derogat priori.
Thus, applying this to the present case, the two-year period to file a claim for tax
refund/credit for the period July 1, 2002 to September 30, 2002 expired on
September 30, 2004. Hence, respondents administrative claim was timely filed.
2. Yes. We find the filing of the judicial claim with the CTA premature.
Section 112(D) of the NIRC clearly provides that the CIR has 120 days, from the
date of the submission of the complete documents in support of the application [for
tax refund/credit], within which to grant or deny the claim. In case of full or partial
denial by the CIR, the taxpayers recourse is to file an appeal before the CTA within
30 days from receipt of the decision of the CIR. However, if after the 120-day period
the CIR fails to act on the application for tax refund/credit, the remedy of the
taxpayer is to appeal the inaction of the CIR to CTA within 30 days.
Subsection (A) of Section 112 of the NIRC states that any VAT-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.
The case of Commissioner of Internal Revenue v. Victorias Milling, Co., Inc. is
inapplicable as the tax provision involved in that case is Section 306, now Section
229 of the NIRC. Section 229 does not apply to refunds/credits of input VAT.
The premature filing of respondents claim for refund/credit of input VAT before the
CTA warrants a dismissal inasmuch as no jurisdiction was acquired by the CTA.
-------------------------------------------------------------------------------------------------------------------------------------CIR vs. San Roque Power Corp. G.R. No. 187485 12 February 2013
This Resolution resolves the Motion for Reconsideration and the Supplemental Motion for Reconsideration filed by San Roque Power
Corporation (San Roque) in G.R. No. 187485, the Comment to the Motion for Reconsideration filed by the Commissioner of Internal Revenue
(CIR) in G.R. No. 187485, the Motion for Reconsideration filed by the CIR in G.R.No. 196113, and the Comment to the Motion for
Reconsideration filed by Taganito Mining Corporation (Taganito) in G.R. No. 196113.
San Roque prays that the rule established in our 12 February 2013 Decision be given only a prospective effect, arguing that "the manner by
which the Bureau of Internal Revenue (BIR) and the Court of Tax Appeals(CTA) actually treated the 120 + 30 day periods constitutes an
operative fact the effects and consequences of which cannot be erased or undone." 1
The CIR, on the other hand, asserts that Taganito Mining Corporation's (Taganito) judicial claim for tax credit or refund was prematurely filed
before the CTA and should be disallowed because BIR Ruling No. DA-489-03 was issued by a Deputy Commissioner, not by the
Commissioner of Internal Revenue.
We deny both motions.
The Doctrine of Operative Fact
The general rule is that a void law or administrative act cannot be the source of legal rights or duties. Article 7 of the Civil Code enunciates
this general rule, as well as its exception: "Laws are repealed only by subsequent ones, and their violation or non-observance shall not be
excused by disuse, or custom or practice to the contrary. When the courts declared a law to be inconsistent with the Constitution, the former
shall be void and the latter shall govern. Administrative or executive acts, orders and regulations shall be valid only when they are not
contrary to the laws or the Constitution."
The doctrine of operative fact is an exception to the general rule, such that a judicial declaration of invalidity may not necessarily obliterate all
the effects and consequences of a void act prior to such declaration. 2 In Serrano de Agbayani v. Philippine National Bank, 3 the application of
the doctrine of operative fact was discussed as follows:
The decision now on appeal reflects the orthodox view that an unconstitutional act, for that matter an executive order or a municipal
ordinance likewise suffering from that infirmity, cannot be the source of any legal rights or duties. Nor can it justify any official act taken under
it. Its repugnancy to the fundamental law once judicially declared results in its being to all intents and purposes a mere scrap of paper. As the
new Civil Code puts it: "When the courts declare a law to be inconsistent with the Constitution, the former shall be void and the latter shall
govern. Administrative or executive acts, orders and regulations shall be valid only when they are not contrary to the laws of the
Constitution." It is understandable why it should be so, the Constitution being supreme and paramount. Any legislative or executive act
contrary to its terms cannot survive.
Such a view has support in logic and possesses the merit of simplicity. It may not however be sufficiently realistic. It does not admit of doubt
that prior to the declaration of nullity such challenged legislative or executive act must have been in force and had to be complied with. This
is so as until after the judiciary, in an appropriate case, declares its invalidity, it is entitled to obedience and respect. Parties may have acted
under it and may have changed their positions. What could be more fitting than that in a subsequent litigation regard be had to what has
been done while such legislative or executive act was in operation and presumed to be valid in all respects. It is now accepted as a doctrine
that prior to its being nullified, its existence as a fact must be reckoned with. This is merely to reflect awareness that precisely because the
judiciary is the governmental organ which has the final say on whether or not a legislative or executive measure is valid, a period of time may
have elapsed before it can exercise the power of judicial review that may lead to a declaration of nullity. It would be to deprive the law of its
quality of fairness and justice then, if there be no recognition of what had transpired prior to such adjudication.
In the language of an American Supreme Court decision: "The actual existence of a statute, prior to such a determination of
unconstitutionality, is an operative fact and may have consequences which cannot justly be ignored. The past cannot always be erased by a
new judicial declaration. The effect of the subsequent ruling as to invalidity may have to be considered in various aspects, with respect to
particular relations, individual and corporate, and particular conduct, private and official." This language has been quoted with approval in a
resolution in Araneta v. Hill and the decision in Manila Motor Co., Inc. v. Flores. An even more recent instance is the opinion of Justice
Zaldivar speaking for the Court in Fernandez v. Cuerva and Co. (Boldfacing and italicization supplied)
Clearly, for the operative fact doctrine to apply, there must be a "legislative or executive measure," meaning a law or executive issuance, that
is invalidated by the court. From the passage of such law or promulgation of such executive issuance until its invalidation by the court, the
effects of the law or executive issuance, when relied upon by the public in good faith, may have to be recognized as valid. In the present
case, however, there is no such law or executive issuance that has been invalidated by the Court except BIR Ruling No. DA-489-03.
To justify the application of the doctrine of operative fact as an exemption, San Roque asserts that "the BIR and the CTA in actual practice did
not observe and did not require refund seekers to comply with the120+30 day periods." 4 This is glaring error because an administrative
practice is neither a law nor an executive issuance. Moreover, in the present case, there is even no such administrative practice by the BIR
as claimed by San Roque.
In BIR Ruling No. DA-489-03 dated 10 December 2003, the Department of Finances One-Stop Shop Inter-Agency Tax Credit and Duty
Drawback Center (DOF-OSS) asked the BIR to rule on the propriety of the actions taken by Lazi Bay Resources Development, Inc. (LBRDI).
LBRDI filed an administrative claim for refund for alleged input VAT for the four quarters of 1998. Before the lapse of 120 days from the filing
of its administrative claim, LBRDI also filed a judicial claim with the CTA on 28March 2000 as well as a supplemental judicial claim on 29
September 2000.In its Memorandum dated 13 August 2002 before the BIR, the DOF-OSS pointed out that LBRDI is "not yet on the right
forum in violation of the provision of Section 112(D) of the NIRC" when it sought judicial relief before the CTA. Section 112(D) provides for the
120+30 day periods for claiming tax refunds.
The DOF-OSS itself alerted the BIR that LBRDI did not follow the120+30 day periods. In BIR Ruling No. DA-489-03, Deputy Commissioner
Jose Mario C. Buag ruled 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 Petition for Review." Deputy Commissioner Buag, citing the 7February 2002 decision of the Court of Appeals (CA) in
Commissioner of Internal Revenue v. Hitachi Computer Products (Asia) Corporation 5 (Hitachi), stated that the claim for refund with the
Commissioner could be pending simultaneously with a suit for refund filed before the CTA.
Before the issuance of BIR Ruling No. DA-489-03 on 10 December 2003, there was no administrative practice by the BIR that supported
simultaneous filing of claims. Prior to BIR Ruling No. DA-489-03, the BIR considered the 120+30 day periods mandatory and jurisdictional.
Thus, prior to BIR Ruling No. DA-489-03, the BIRs actual administrative practice was to contest simultaneous filing of claims at the
administrative and judicial levels, until the CA declared in Hitachi that the BIRs position was wrong. The CAs Hitachi decision is the basis of
BIR Ruling No. DA-489-03 dated 10 December 2003 allowing simultaneous filing. From then on taxpayers could rely in good faith on BIR
Ruling No. DA-489-03 even though it was erroneous as this Court subsequently decided in Aichi that the 120+30 day periods were
mandatory and jurisdictional.
We reiterate our pronouncements in our Decision as follows:
At the time San Roque filed its petition for review with the CTA, the 120+30 day mandatory periods were already in the law. Section112(C)
expressly grants the Commissioner 120 days within which to decide the taxpayers claim. The law is clear, plain, and unequivocal: "x x x 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." Following the verbalegis doctrine, this law must be applied exactly as worded since it is clear,
plain, and unequivocal. The taxpayer cannot simply file a petition with the CTA without waiting for the Commissioners decision within the
120-daymandatory and jurisdictional period. The CTA will have no jurisdiction because there will be no "decision" or "deemed a denial"
decision of the Commissioner for the CTA to review. In San Roques case, it filed its petition with the CTA a mere 13 days after it filed its
administrative claim with the Commissioner. Indisputably, San Roque knowingly violated the mandatory 120-day period, and it cannot blame
anyone but itself.
Section 112(C) also expressly grants the taxpayer a 30-day period to appeal to the CTA the decision or inaction of the Commissioner x x x.
xxxx
To repeat, a claim for tax refund or credit, like a claim for tax exemption, is construed strictly against the taxpayer. One of the conditions for
a judicial claim of refund or credit under the VAT System is compliance with the 120+30 day mandatory and jurisdictional periods. Thus, strict
compliance with the 120+30 day periods is necessary for such a claim to prosper, whether before, during, or after the effectivity of the Atlas
doctrine, except for the period from the issuance of BIR Ruling No. DA-489-03 on 10 December 2003 to 6 October 2010 when the Aichi
doctrine was adopted, which again reinstated the 120+30 day periods as mandatory and jurisdictional. 6
1wphi1
San Roques argument must, therefore, fail. The doctrine of operative fact is an argument for the application of equity and fair play. In the
present case, we applied the doctrine of operative fact when we recognized simultaneous filing during the period between 10 December
2003, when BIR Ruling No. DA-489-03 was issued, and 6 October 2010, when this Court promulgated Aichi declaring the 120+30 day
periods mandatory and jurisdictional, thus reversing BIR Ruling No. DA-489-03.
The doctrine of operative fact is in fact incorporated in Section 246 of the Tax Code, which provides:
SEC. 246. Non-Retroactivity of Rulings. - Any revocation, modification or reversal of any of 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. (Emphasis supplied)
Under Section 246, taxpayers may rely upon a rule or ruling issued by the Commissioner from the time the rule or ruling is issued up to its
reversal by the Commissioner or this Court. The reversal is not given retroactive effect. This, in essence, is the doctrine of operative fact.
There must, however, be a rule or ruling issued by the Commissioner that is relied upon by the taxpayer in good faith. A mere administrative
practice, not formalized into a rule or ruling, will not suffice because such a mere administrative practice may not be uniformly and
consistently applied. An administrative practice, if not formalized as a rule or ruling, will not be known to the general public and can be
availed of only by those within formal contacts with the government agency.
Since the law has already prescribed in Section 246 of the Tax Code how the doctrine of operative fact should be applied, there can be no
invocation of the doctrine of operative fact other than what the law has specifically provided in Section 246. In the present case, the rule or
ruling subject of the operative fact doctrine is BIR Ruling No. DA-489-03 dated 10 December 2003. Prior to this date, there is no such rule or
ruling calling for the application of the operative fact doctrine in Section 246. Section246, being an exemption to statutory taxation, must be
applied strictly against the taxpayer claiming such exemption.
San Roque insists that this Court should not decide the present case in violation of the rulings of the CTA; otherwise, there will be adverse
effects on the national economy. In effect, San Roques doomsday scenario is a protest against this Courts power of appellate review. San
Roque cites cases decided by the CTA to underscore that the CTA did not treat the 120+30 day periods as mandatory and jurisdictional.
However, CTA or CA rulings are not the executive issuances covered by Section 246 of the Tax Code, which adopts the operative fact
doctrine. CTA or CA decisions are specific rulings applicable only to the parties to the case and not to the general public. CTA or CA
decisions, unlike those of this Court, do not form part of the law of the land. Decisions of lower courts do not have any value as precedents.
Obviously, decisions of lower courts are not binding on this Court. To hold that CTA or CA decisions, even if reversed by this Court, should
still prevail is to turn upside down our legal system and hierarchy of courts, with adverse effects far worse than the dubious doomsday
scenario San Roque has conjured.
San Roque cited cases7 in its Supplemental Motion for Reconsideration to support its position that retroactive application of the doctrine in
the present case will violate San Roques right to equal protection of the law. However, San Roque itself admits that the cited cases never
mentioned the issue of premature or simultaneous filing, nor of compliance with the 120+30 day period requirement. We reiterate that "any
issue, whether raised or not by the parties, but not passed upon by the Court, does not have any value as precedent." 8 Therefore, the cases
cited by San Roque to bolster its claim against the application of the 120+30 day period requirement do not have any value as precedents in
the present case.
Authority of the Commissioner
to Delegate Power
In asking this Court to disallow Taganitos claim for tax refund or credit, the CIR repudiates the validity of the issuance of its own BIR Ruling
No. DA-489-03. "Taganito cannot rely on the pronouncements in BIR Ruling No. DA-489-03, being a mere issuance of a Deputy
Commissioner."9
Although Section 4 of the 1997 Tax Code provides that the "power to interpret the provisions of this Code and other tax laws shall be under
the exclusive and original jurisdiction of the Commissioner, subject to review by the Secretary of Finance," Section 7 of the same Code does
not prohibit the delegation of such power. Thus, "the Commissioner may delegate the powers vested in him under the pertinent provisions of
this Code to any or such subordinate officials with the rank equivalent to a division chief or higher, subject to such limitations and restrictions
as may be imposed under rules and regulations to be promulgated by the Secretary of Finance, upon recommendation of the
Commissioner."
WHEREFORE, we DENY with FINALITY the Motions for Reconsideration filed by San Roque Power Corporation in G.R. No. 187485,and the
Commissioner of Internal Revenue in G.R. No. 196113.
SO ORDERED.
----------------------------------------------------------------------------------------------------------------------------------------CIR vs. Pascor Realty and Devt Corp. G.R. No. 128315 29 June 2009
Facts: The CIR authorized certain BIR officers to examine the books of accounts and
otheraccounting records of Pascor Realty and Development Corp. (PRDC) for 1986, 1987 and
1988. The examination resulted in recommendation for the issuance of an assessment of
P7,498,434.65 and P3,015,236.35 for 1986 and 1987, respectively. The Commissioner filed
acriminal complaint for tax evasion against PRDC, its president and treasurer before the DOJ.
Private respondents filed immediately an urgent request for reconsideration on
reinvestigation disputing the tax assessment and tax liability. The Commissioner denied
private respondents request for reconsideration/reinvestigation on the ground that no
formal assessment has been issued which the latter elevated to the CTA on a petition for
review. The Commissionersmotion to dismiss on the ground of the CTAs lack of jurisdiction
denied by CTA and ordered the Commissioner to file an answer. Instead of complying with
the order of CTA, Commissioner filed a petition with the CA alleging grave abuse of
discretion and lack of jurisdiction on the part of CTA for considering the affidavit/report of the
revenue officers and the endorsement of said report as assessment which may be appealed
to the CTA. The CA sustained the CTA decision and dismissed the petition.
Issues: (1) Whether or not the criminal complaint for tax evasion can be construed as an
assessment. (2) Whether or not an assessment is necessary before criminal charges for tax
evasion may be instituted.
Held: The filing of the criminal complaint with the DOJ cannot be construed as a formal
assessment. Neither the Tax Code nor the revenue regulations governing the protest
assessments provide a specific definition or form of an assessment.
An assessment must be sent to and received by the taxpayer, and must demand payment of
the taxes described therein within a specific period. The revenue officers affidavit merely
contained a computation of respondents tax liability. It did not state a demand or period for
payment. It was addressed to the Secretary of Justice not to the taxpayer. They joint affidavit
was meant to support the criminal complaint for tax evasion; it was not meant to be a notice
of tax due and a demand to private respondents for the payment thereof. The fact that the
complaint was sent to the DOJ, and not to private respondent, shows that commissioner
intended to file a criminal complaint for tax evasion, not to issue an assessment.
An assessment is not necessary before criminal charges can be filed. A criminal charge need
not only be supported by a prima facie showing of failure to file a required return. The CIR
had, in such tax evasion cases, discretion on whether to issue an assessment, or to file
a criminal caseagainst the taxpayer, or to do both.
----------------------------------------------------------------------------------------------------------------------------------------CIR vs. Metro Star Superama, Inc. 637 SCRA 633

On January 26, 2001, the Regional Director of Revenue of Legazpi City, issued letter of Authority to examine Metro
Stars books of accounts and other accounting records for income tax and other internal revenue taxes for the
taxable year 1999.
For Metro Stars failure to comply with several requests for the presentation of records and Subpoena Duces Tecum,
BIR of Legazpi City proceeded with the investigation based on the best evidence obtainable preparatory to the
issuance of assessment notice.
On April 11, 2002, Metro Star received a Formal Letter of Demand dated April 3, 2002 from Revenue District No.
67, Legazpi City, assessing petitioner the amount of P292,874.16.) for deficiency value-added and withholding
taxes for the taxable year 1999.
Subsequently, Revenue District Office No. 67 sent a copy of the Final Notice of Seizure dated May 12, 2003, which
petitioner received on May 15, 2003, giving the latter last opportunity to settle its deficiency tax liabilities within
ten (10) [days] from receipt thereof, otherwise respondent BIR shall be constrained to serve and execute the
Warrants of Distraint and/or Levy and Garnishment to enforce collection.
On February 6, 2004, petitioner received from Revenue District Office No. 67 a Warrant of Distraint and/or Levy No.
67-0029-23 dated May 12, 2003 demanding payment of deficiency value-added tax and withholding tax payment
in the amount of P292,874.16.
On July 30, 2004, petitioner filed with the Office of respondent Commissioner a Motion for Reconsideration
pursuant to Section 3.1.5 of Revenue Regulations No. 12-99.
On February 8, 2005, respondent Commissioner, through its authorized representative, Revenue Regional Director
of Revenue Region 10, Legaspi City, issued a Decision denying petitioners Motion for Reconsideration. Petitioner,
through counsel received said Decision on February 18, 2005.
Denying that it received a Preliminary Assessment Notice (PAN) and claiming that it was not accorded due process,
Metro Star filed a petition for review[4] with the CTA.
The CTA-Second Division found merit in the petition of Metro Star and, on March 21, 2007, rendered a decision,
granting the petition and ordering CIR from collecting the subject taxes. It opined that [w]hile there [is] a
disputable presumption that a mailed letter [is] deemed received by the addressee in the ordinary course of mail, a
direct denial of the receipt of mail shifts the burden upon the party favored by the presumption to prove that the
mailed letter was indeed received by the addressee.[5] It also found that there was no clear showing that Metro
Star actually received the alleged PAN, dated January 16, 2002. It, accordingly, ruled that the Formal Letter of
Demand dated April 3, 2002, as well as the Warrant of Distraint and/or Levy dated May 12, 2003 were void, as
Metro Star was denied due process.[6]
The CIR sought reconsideration[7] but the motion was denied. CIR filed a petition for review [9] with the CTA-En
Banc, but the petition was dismissed after a determination that no new matters were raised. The motion for
reconsideration[10] filed by the CIR was likewise denied by the CTA-En Banc in its November 18, 2008Resolution.[11]
Hence this petition.
ISSUES & HELD:
1. Whether or not Metro Star was denied due process? YES.
The Court agrees with the CTA that the CIR failed to discharge its duty and present any evidence to show
that Metro Star indeed received the PAN dated January 16, 2002. It could have simply presented the registry
receipt or the certification from the postmaster that it mailed the PAN, but failed. Neither did it offer any
explanation on why it failed to comply with the requirement of service of the PAN. It merely accepted the letter of
Metro Stars chairman dated April 29, 2002, that stated that he had received theFAN dated April 3, 2002, but not
the PAN; that he was willing to pay the tax as computed by the CIR; and that he just wanted to clarify some
matters with the hope of lessening its tax liability.
2. Is the failure to strictly comply with notice requirements tantamount to a denial of due process?
Section 228 of the Tax Code clearly requires that the taxpayer must first be informed that he is liable for
deficiency taxes through the sending of a PAN. He must be informed of the facts and the law upon which the
assessment is made. The law imposes a substantive, not merely a formal, requirement. To proceed heedlessly with
tax collection without first establishing a valid assessment is evidently violative of the cardinal principle in
administrative investigations - that taxpayers should be able to present their case and adduce supporting evidence.
[14]
It is clear that the sending of a PAN to taxpayer to inform him of the assessment made is but part of the
due process requirement in the issuance of a deficiency tax assessment, the absence of which renders nugatory
any assessment made by the tax authorities. The use of the word shall in subsection 3.1.2describes the
mandatory nature of the service of a PAN. The persuasiveness of the right to due process reaches both substantial
and procedural rights and the failure of the CIR to strictly comply with the requirements laid down by law and its
own rules is a denial of Metro Stars right to due process. [15] Thus, for its failure to send the PAN stating the facts
and the law on which the assessment was made as required by Section 228 of R.A. No. 8424, the assessment
made by the CIR is void.
The case of CIR v. Menguito[16] cited by the CIR in support of its argument that only the non-service of the
FAN is fatal to the validity of an assessment, cannot apply to this case because the issue therein was the noncompliance with the provisions of R. R. No. 12-85 which sought to interpret Section 229 of the old tax law. RA No.
8424 has already amended the provision of Section 229 on protesting an assessment. The old requirement of
merely notifying the taxpayer of the CIRs findings was changed in 1998 to informing the taxpayer of not only the
law, but also of the facts on which an assessment would be made. Otherwise, the assessment itself would be
invalid.[17] The regulation then, on the other hand, simply provided that a notice be sent to the respondent in the
form prescribed, and that no consequence would ensue for failure to comply with that form.
The Court need not belabor to discuss the matter of Metro Stars failure to file its protest, for it is wellsettled that a void assessment bears no fruit.
----------------------------------------------------------------------------------------------------------------------------------------CIR vs. Enron Subic Power Corp. 575 SCRA 212

Facts: The BIR assessed Enron which countered by filing a Petition for Review with the CTA
stating that the assessment disregarded the provisions of the Tax Code and of RR No. 12-99,
when the assessment failed to provide the legal and factual bases of the assessment. The
CTA and CA ruled that the assessment notice must not only refer to the supporting revenue
laws or regulations for the assessment but must also justify their applicability to the factual
milieu of the assessment.
Issue: Is the disputed assessment valid?
Held: NO. The assessment is not valid. Although the revenue examiners discussed their
findings with Respondents representative during the pre-assessment stage, the same,
together with the Preliminary Five-Day Letter and Petitioners Annex G, were not sufficient to
comply with the procedural requirement of due process. The Tax Code provides that a
taxpayer shall be informed (and not merely notified as was the requirement before) in
writing of the law and the facts on which the assessment is made; otherwise, the
assessment shall be void. The use of the word shall indicates the mandatory nature of the
requirement.
---------------------------------------------------------------------------------------------------------------------------------------------------
BPI vs. CIR G.R. No. 139736 17 October 2005

Facts:
The BIR issued an Assessment for a deficiency of Documentary Stamp Tax (DST). The petitioner filed a protest
letter, requesting for reconsideration with BIR however the latter did not reply. Instead, BIR issued a warrant for
distraint/levy against petitioner BPI. The petitioner did not hear from BIR until September 11, 1997 when then
Commissioner Liwayway Vinzons-Chado, denied its request for reconsideration.
Subsequently, the petitioner filed a petition for review with the CTA, raising the defense of prescription. The CTA
denied the petition and held that the period of prescription had not yet prescribed nonetheless, it held that the
petitioner was not liable for the deficiency of DST.
On appeal, the CA reversed the ruling of CTA on the issue of DST tax and held that the petitioner was indeed liable
for DST.
ISSUE: Whether or not the right of the respondent to collect from petitioner BPI is barred by prescription?
Held:
Yes, the Court ruled that the period to collect has already prescribed. The BIR has three years, counted from the
date of actual filing of the return or from the last date prescribed by law for the filing of such return, whichever
comes later, to assess a national internal revenue tax or to begin a court proceeding for the collection thereof
without an assessment. In case of a false or fraudulent return with intent to evade tax or the failure to file any
return at all, the prescriptive period for assessment of the tax due shall be 10 years from discovery by the BIR of
the falsity, fraud, or omission. When the BIR validly issues an assessment, within either the three-year or ten-year
period, whichever is appropriate, then the BIR has another three years after the assessment within which to collect
the national internal revenue tax due thereon by distraint, levy, and/or court proceeding. The assessment of the
tax is deemed made and the three-year period for collection of the assessed tax begins to run on the date the
assessment notice had been released, mailed or sent by the BIR to the taxpayer.
In their Decisions, both the CTA and the Court of Appeals found that the filing by petitioner BPI of a protest letter
suspended the running of the prescriptive period for collecting the assessed DST. This Court, however, takes the
opposing view, and, based on the succeeding discussion, concludes that there is no valid ground for suspending the
running of the prescriptive period for collection of the deficiency DST assessed against petitioner BPI.
The statute of limitations on assessment and collection of taxes is for the protection of the taxpayer and, thus, shall
be construed liberally in his favor.
----------------------------------------------------------------------------------------------------------------------------------------CIR vs. Frist Express Pawnshop Co. G.R. No. 172045 16 June 2009
Facts: CIR issued assessment notices against Respondent for deficiency income tax, VAT and
documentary stamp tax on deposit on subscription and on pawn tickets. Respondent filed its
written protest on the assessments. When CIR did not act on the protest during the 180-day
period, respondent filed a petition before the CTA.
Issue: Has Respondents right to dispute the assessment in the CTA prescribed?
Held: NO. The assessment against Respondent has not become final and unappealable. It
cannot be said that respondent failed to submit relevant supporting documents that would
render the assessment final because when respondent submitted its protest, respondent
attached all the documents it felt were necessary to support its claim. Further, CIR cannot
insist on the submission of proof of DST payment because such document does not exist as
respondent claims that it is not liable to pay, and has not paid, the DST on the deposit on
subscription.
The term "relevant supporting documents" are those documents necessary to support the
legal basis in disputing a tax assessment as determined by the taxpayer. The BIR can only
inform the taxpayer to submit additional documents and cannot demand what type of
supporting documents should be submitted. Otherwise, a taxpayer will be at the mercy of
the BIR, which may require the production of documents that a taxpayer cannot submit.
Since the taxpayer is deemed to have submitted all supporting documents at the time of
filing of its protest, the 180-day period likewise started to run on that same date.
----------------------------------------------------------------------------------------------------------------------------------------Oceanic Network Wireless Inc. G.R. No. 168498 24 April 2007

xxxxxx
----------------------------------------------------------------------------------------------------------------------------------------Lacsona Land Co., Inc. vs. CIR G.R. No. 171251 05 March 2012
Facts:
March 27, 1998 - CIR issued Assessment Notice against Lascona informing the latter of its alleged
deficiency income tax for the year 1993.
On April 20, 1998, Lascona filed a protest but the same was denied. According to a letter dated March 3,
1999by the Regional Director, he cannot give due course to Lasconas request to cancel or set aside the
assessment notice because the case was not elevated to the CTA as mandated by the provisions of the last
paragraph of Sec. 288 of the Tax Code. The Regional Director alleged that the failure to appeal to the CTA
within 30 days from the lapse of the 180-day period rendered the assessment final and executor.
On April 12, 1999, Lascona appealed the decision before the CTA.
The CTA nullified the subject assessment. It held that in cases of inaction by the CIR on the protested
assessment, Section 228 of the NIRC provided two options for the taxpayer: (1) appeal to the CTA within
thirty (30) days from the lapse of the one hundred eighty (180)-day period, or (2) wait until the Commissioner
decides on his protest before he elevates the case.
CIR moved for reconsideration. It argued that in declaring the subject assessment as final, executory and
demandable, it did so pursuant to Section 3 (3.1.5) of Revenue Regulations No. 12-99 dated September 6,
1999.
CTA denied the motion for lack of merit.
CIR appealed before the CA. the CA set aside the Decision of the CTA. It further declared that the subject
Assessment Notice dated March 27, 1998 final, executor.
Issue:
Has the assessment become final due to the failure of petitioner to file an appeal before the CTA within thirty (30)
days from the lapse of the One Hundred Eighty (180)-day period pursuant to Section 228 of the NIRC?
Held:
Section 228 of the NIRC is instructional as to the remedies of a taxpayer in case of the inaction of the Commissioner
on the protested assessment, to wit:
SEC. 228.Protesting of Assessment. x xx
Within a period to be prescribed by implementing rules and regulations, the taxpayer shall be required to
respond to said notice. If the taxpayer fails to respond, the Commissioner or his duly authorized representative shall
issue an assessment based on his findings.
Such assessment may be protested administratively by filing a request for reconsideration or reinvestigation
within thirty (30) days from receipt of the assessment in such form and manner as may be prescribed by
implementing rules and regulations.
Within sixty (60) days from filing of the protest, all relevant supporting documents shall have been submitted;
otherwise, the assessment shall become final.
If the protest is denied in whole or in part, or is not acted upon within one hundred eighty (180) days from
submission of documents, the taxpayer adversely affected by the decision or inaction may appeal to the Court of Tax
Appeals within (30) days from receipt of the said decision, or from the lapse of the one hundred eighty (180)-day
period; otherwise the decision shall become final, executory and demandable.
Respondent, however, insists that in case of the inaction by the Commissioner on the protested assessment
within the 180-day reglementary period, petitioner should have appealed the inaction to the CTA. Respondent
maintains that due to Lascona's failure to file an appeal with the CTA after the lapse of the 180-day period, the
assessment became final and executory.
We do not agree.
In RCBC v. CIR, the Court has held that in case the Commissioner failed to act on the disputed assessment
within the 180-day period from date of submission of documents, a taxpayer can either: (1) file a petition for review
with the Court of Tax Appeals within 30 days after the expiration of the 180-day period; or (2) await the final decision
of the Commissioner on the disputed assessments and appeal such final decision to the Court of Tax Appeals within
30 days after receipt of a copy of such decision.
This is consistent with Section 3 A (2), Rule 4 of the Revised Rules of the Court of Tax Appeals, to wit:
SEC. 3.Cases within the jurisdiction of the Court in Divisions. The Court in Divisions shall exercise:
(a) Exclusive original or appellate jurisdiction to review by appeal the following:
(1) Decisions of the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of
internal revenue taxes, fees or other charges, penalties in relation thereto, or other matters arising under the National
Internal Revenue Code or other laws administered by the Bureau of Internal Revenue;
(2) Inaction by the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of
internal revenue taxes, fees or other charges, penalties in relation thereto, or other matters arising under the National
Internal Revenue Code or other laws administered by the Bureau of Internal Revenue, where the National Internal
Revenue Code or other applicable law provides a specific period for action: Provided, that in case of disputed
assessments, the inaction of the Commissioner of Internal Revenue within the one hundred eighty day-period under
Section 228 of the National Internal revenue Code shall be deemed a denial for purposes of allowing the taxpayer to
appeal his case to the Court and does not necessarily constitute a formal decision of the Commissioner of Internal
Revenue on the tax case; Provided, further, that should the taxpayer opt to await the final decision of the
Commissioner of Internal Revenue on the disputed assessments beyond the one hundred eighty day-period
abovementioned, the taxpayer may appeal such final decision to the Court under Section 3(a), Rule 8 of these Rules;
and Provided, still further, that in the case of claims for refund of taxes erroneously or illegally collected, the taxpayer
must file a petition for review with the Court prior to the expiration of the two-year period under Section 229 of the
National Internal Revenue Code;
(Emphasis ours)
In arguing that the assessment became final and executory by the sole reason that petitioner failed to
appeal the inaction of the Commissioner within 30 days after the 180-day reglementary period, respondent, in effect,
limited the remedy of Lascona, as a taxpayer, under Section 228 of the NIRC to just one, that is - to appeal the
inaction of the Commissioner on its protested assessment after the lapse of the 180-day period. This is incorrect.
As early as the case of CIR v. Villa, it was already established that the word "decisions" in paragraph 1,
Section 7 of Republic Act No. 1125, quoted above, has been interpreted to mean the decisions of the Commissioner
of Internal Revenue on the protest of the taxpayer against the assessments. Definitely, said word does not signify the
assessment itself. We quote what this Court said aptly in a previous case:
In the first place, we believe the respondent court erred in holding that the assessment in question is the respondent
Collector's decision or ruling appealable to it, and that consequently, the period of thirty days prescribed by section 11
of Republic Act No. 1125 within which petitioner should have appealed to the respondent court must be counted from
its receipt of said assessment. Where a taxpayer questions an assessment and asks the Collector to reconsider or
cancel the same because he (the taxpayer) believes he is not liable therefor, the assessment becomes a "disputed
assessment" that the Collector must decide, and the taxpayer can appeal to the Court of Tax Appeals only upon
receipt of the decision of the Collector on the disputed assessment, . . .
Therefore, as in Section 228, when the law provided for the remedy to appeal the inaction of the CIR, it did
not intend to limit it to a single remedy of filing of an appeal after the lapse of the 180-day prescribed period.
Precisely, when a taxpayer protested an assessment, he naturally expects the CIR to decide either positively or
negatively. A taxpayer cannot be prejudiced if he chooses to wait for the final decision of the CIR on the protested
assessment. More so, because the law and jurisprudence have always contemplated a scenario where the CIR will
decide on the protested assessment.
It must be emphasized, however, that in case of the inaction of the CIR on the protested assessment, while
we reiterate the taxpayer has two options, either: (1) file a petition for review with the CTA within 30 days after the
expiration of the 180-day period; or (2) await the final decision of the Commissioner on the disputed assessment and
appeal such final decision to the CTA within 30 days after the receipt of a copy of such decision, these options are
mutually exclusive and resort to one bars the application of the other.
Accordingly, considering that Lascona opted to await the final decision of the Commissioner on the protested
assessment, it then has the right to appeal such final decision to the Court by filing a petition for review within thirty
days after receipt of a copy of such decision or ruling, even after the expiration of the 180-day period fixed by law for
the Commissioner of Internal Revenue to act on the disputed assessments. Thus, Lascona , when it filed an appeal
on April 12, 1999 before the CTA, after its receipt of the Letter dated March 3, 1999 on March 12, 1999, the appeal
was timely made as it was filed within 30 days after receipt of the copy of the decision.
----------------------------------------------------------------------------------------------------------------------------------------Manila Electric Co. vs Province of Laguna G.R. No. 131359 5 May 1999
Facts:
Certain municipalities of the Province of Laguna,by virtue of existing laws then in
effect, issued resolutions through their respective municipal councils granting
franchise in favor of Manila Electric Company ("MERALCO") for the supply of electric
light, heat and power within their concerned areas. MERALCO was likewise granted
a franchise by the National Electrification Administration to operate an electric light
and power service in the Municipality of Calamba, Laguna. On 12 September 1991,
Republic Act No. 7160, otherwise known as the "Local Government Code of 1991,"
was enacted to take effect on 01 January 1992 enjoining local government units to
create their own sources of revenue and to levy taxes, fees and charges, subject to
the limitations expressed therein, consistent with the basic policy of local autonomy.
Pursuant to the provisions of the Code, the Province enacted Laguna Provincial
Ordinance No. 01-92, effective 01 January 1993, providing, in part, as follows: Sec.
2.09. Franchise Tax. There is hereby imposed a tax on businesses enjoying a
franchise, at a rate of fifty percent (50%) of one percent (1%) of the gross annual
receipts, which shall include both cash sales and sales on account realized during
the preceding calendar year within this province, including the territorial limits on
any city located in the province. On the basis of the ordinance, the Provincial
Treasurer sent a demand letter to MERALCO for the corresponding tax
payment. MERALCO, contended that the imposition of a franchise tax under Section
2.09 of Laguna Provincial Ordinance No. 01-92, insofar as it concerned MERALCO,
contravened the provisions of Section 1 of P.D. 551 which read: Any provision of
law or local ordinance to the contrary notwithstanding, the franchise tax payable by
all grantees of franchises to generate, distribute and sell electric current for light,
heat and power shall be two per cent (2%) of their gross receipts received from the
sale of electric current and from transactions incident to the generation, distribution
and sale of electric current. Such franchise tax shall be payable to the
Commissioner of Internal Revenue or his duly authorized representative on or before
the twentieth day of the month following the end of each calendar quarter or
month, as may be provided in the respective franchise or pertinent municipal
regulation and shall, any provision of the Local Tax Code or any other law to the
contrary notwithstanding, be in lieu of all taxes and assessments of whatever nature
imposed by any national or local authority on earnings, receipts, income and
privilege of generation, distribution and sale of electric current.
Issue:
Whether the Local Government Code of 1991, has repealed, amended or modified
Presidential Decree No. 551.
Held:
Local governments do not have the inherent power to tax except to the extent that
such power might be delegated to them either by the basic law or by statute.
Presently, under Article X of the 1987 Constitution, a general delegation of that
power has been given in favor of local government units. Under the now prevailing
Constitution, where there is neither a grant nor a prohibition by statute, the tax
power must be deemed to exist although Congress may provide statutory
limitations and guidelines. The basic rationale for the current rule is to safeguard
the viability and self-sufficiency of local government units by directly granting them
general and broad tax powers. Nevertheless, the fundamental law did not intend the
delegation to be absolute and unconditional; the constitutional objective obviously
is to ensure that, while the local government units are being strengthened and
made more autonomous, 6 the legislature must still see to it that (a) the taxpayer
will not be over-burdened or saddled with multiple and unreasonable impositions;
(b) each local government unit will have its fair share of available resources; (c) the
resources of the national government will not be unduly disturbed; and (d) local
taxation will be fair, uniform, and just. The Local Government Code of 1991 has
incorporated and adopted, by and large, the provisions of the now repealed Local
Tax Code, which had been in effect since 01 July 1973, promulgated into law by
Presidential
Decree
No. 231 7 pursuant to the then provisions of Section 2, Article XI, of the 1973
Constitution. The 1991 Code explicitly authorizes provincial governments,
notwithstanding "any exemption granted by any law or other special law, . . . (to)
impose a tax on businesses enjoying a franchise." Section 137 thereof provides:
Sec. 137. Franchise Tax Notwithstanding any exemption granted by any law or
other special law, the province may impose a tax on businesses enjoying a
franchise, at a rate not exceeding fifty percent (50%) of one percent (1%) of the
gross annual receipts for the preceding calendar year based on the incoming
receipt, or realized, within its territorial jurisdiction. In the case of a newly started
business, the tax shall not exceed one-twentieth (1/20) of one percent (1%) of the
capital investment. In the succeeding calendar year, regardless of when the
business started to operate, the tax shall be based on the gross receipts for the
preceding calendar year, or any fraction thereof, as provided herein. Indicative of
the legislative intent to carry out the Constitutional mandate of vesting broad tax
powers to local government units, the Local Government Code has effectively
withdrawn under Section 193 thereof, tax exemptions or incentives theretofore
enjoyed by certain entities. This law states: Sec. 193. Withdrawal of Tax Exemption
Privileges Unless otherwise provided in this Code, tax exemptions or incentives
granted to, or presently enjoyed by all persons, whether natural or juridical,
including government-owned or controlled corporations, except local water districts,

cooperatives duly registered under R.A. No. 6938, non-stock and non-profit hospitals
and educational institutions, are hereby withdrawn upon the effectivity of this Code.
The Code, in addition, contains a general repealing clause in its Section 534; thus:
Sec. 534. Repealing Clause. . . .(f) All general and special laws, acts, city
charters, decrees, executive orders, proclamations and administrative regulations,
or part or parts thereof which are inconsistent with any of the provisions of this
Code are hereby repealed or modified accordingly.
------------------------------------------------------------------------------------------------------------------------------
City of Manila vs. Coca-Cola Bottlers Phils Inc. G.R. No. 181845 04 August
2009
xxxx
-----------------------------------------------------------------------------------------------------------------------------Quezon City vs. ABS-CBN G.R. No. 166408 06 Ocotber 2008
please see PDF file
---------------------------------------------------------------------------------------------------------------------------------------Lung Center of the Phils. Vs. Quezon City G.R. No. 144104 29 June 2004
please see PDF file
-------------------------------------------------------------------------------------------------------------------------------------Allied Banking Corp., etc vs. Quezon City Government G.R No. 154126 11
October 2005

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Procter and Gamble Asia PTE LTD. Vs. CIR G.R. No.

The pertinent facts, as narrated by the CT A First Division, are as follows:

Less: Input Tax

Total Available Input Tax

Excess Input Tax & Overpayment

Less: Input Tax

Total Available Input Tax

Excess Input Tax & Overpayment

Less: Input Tax

Total Available Input Tax

Excess Input Tax & Overpayment

Multiply by the ratio of substantiated

Total zero-rated sales

Refundable Input VAT

Less: Disallowed Input VAT

Less: Output VAT

Substantiated Unutilized Input VAT

Multiply by the ratio of substantiated

Total zero-rated sales

Refundable Input VAT

Let us discuss the issues in seriatim.

SEC. 112. Refunds or Tax Credits of Input Tax.

CIR vs. Aichi Forging Co. of Asia, Inc. 6 October 2010

----------------------------------------------------------------------------------------------------------------------------------------CIR vs. Metro Star Superama, Inc. 637 SCRA 633

----------------------------------------------------------------------------------------------------------------------------------------CIR vs. Enron Subic Power Corp. 575 SCRA 212

BPI vs. CIR G.R. No. 139736 17 October 2005

----------------------------------------------------------------------------------------------------------------------------------------Oceanic Network Wireless Inc. G.R. No. 168498 24 April 2007

including government-owned or controlled corporations, except local water districts,

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