Tax 2

Republic of the Philippines
Supreme Court
Manila
FIRST DIVISION
COMMISSIONER OF INTERNAL
G.R. No. 184823
REVENUE,
Petitioner,
Present:
CORONA, C. J., Chairperson,
- versus -
VELASCO, JR.,
LEONARDO-DE CASTRO,
DEL CASTILLO, and
PEREZ, JJ.
AICHI FORGING COMPANY OF

ASIA, INC.,
Promulgated:
Respondent.
October 6, 2010
x-------------------------------------------------------------------x
DECISION
DEL CASTILLO, J.:
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 non-observance of the prescriptive periods within which to file the administrative and the
judicial claims would result in the denial of his claim.
This Petition for Review on Certiorari under Rule 45 of the Rules of Court seeks to set aside the July 30, 2008
Decision[1] and the October 6, 2008 Resolution[2] of the Court of Tax Appeals (CTA) En Banc.
Factual Antecedents
Respondent Aichi Forging Company of Asia, Inc., a corporation duly organized and existing under the laws of
the Republic of the Philippines, is engaged in the manufacturing, producing, and processing of steel and its byproducts.[3] It is registered with the Bureau of Internal Revenue (BIR) as a Value-Added Tax (VAT) entity [4] and its
products, close impression die steel forgings and tool and dies, are registered with the Board of Investments (BOI) as
a pioneer status.[5]
On September 30, 2004, respondent filed a claim for refund/credit of input VAT for the period July 1, 2002 to
September 30, 2002 in the total amount of P3,891,123.82 with the petitioner Commissioner of Internal Revenue
(CIR), through the Department of Finance (DOF) One-Stop Shop Inter-Agency Tax Credit and Duty Drawback Center.
[6]
Proceedings before the Second Division of the CTA

On even date, respondent filed a Petition for Review[7] with the CTA for the refund/credit of the same input
VAT. The case was docketed as CTA Case No. 7065 and was raffled to the Second Division of the CTA.
In the Petition for Review, respondent alleged that for the period July 1, 2002 to September 30, 2002, it
generated and recorded zero-rated sales in the amount of P131,791,399.00,[8]which was paid pursuant to Section
106(A) (2) (a) (1), (2) and (3) of the National Internal Revenue Code of 1997 (NIRC); [9] that for the said period, it
incurred and paid input VAT amounting to P3,912,088.14 from purchases and importation attributable to its zerorated sales;[10] and that in its application for refund/credit filed with the DOF One-Stop Shop Inter-Agency Tax Credit
and Duty Drawback Center, it only claimed the amount of P3,891,123.82.[11]
In response, petitioner filed his Answer[12] raising the following special and affirmative defenses, to wit:
4.
5.
Petitioners alleged claim for refund is subject to administrative investigation by the

Bureau;
Petitioner must prove that it paid VAT input taxes for the period in question;
6.
Petitioner must prove that its sales are export sales contemplated under Sections 106(A)
(2) (a), and 108(B) (1) of the Tax Code of 1997;
7.
Petitioner must prove that the claim was filed within the two (2) year period prescribed in
Section 229 of the Tax Code;
8.
In an action for refund, the burden of proof is on the taxpayer to establish its right to
refund, and failure to sustain the burden is fatal to the claim for refund; and
9.
Claims for refund are construed strictly against the claimant for the same partake of the
nature of exemption from taxation.[13].
Trial ensued, after which, on January 4, 2008, the Second Division of the CTA rendered a Decision partially
granting respondents claim for refund/credit. Pertinent portions of the Decision read:
For a VAT registered entity whose sales are zero-rated, to validly claim a refund, Section 112
(A) of the NIRC of 1997, as amended, provides:
SEC. 112. Refunds or Tax Credits of Input Tax.
(A) Zero-rated or Effectively Zero-rated Sales. Any VAT-registered person,
whose sales are zero-rated or effectively zero-rated may, within two (2) years after
the close of the taxable quarter when the sales were made, apply for the issuance of
a tax credit certificate or refund of creditable input tax due or paid attributable to
such sales, except transitional input tax, to the extent that such input tax has not
been applied against output tax: x x x
Pursuant to the above provision, petitioner must comply with the following requisites: (1) the
taxpayer is engaged in sales which are zero-rated or effectively zero-rated; (2) the taxpayer is VATregistered; (3) the claim must be filed within two years after the close of the taxable quarter when
such sales were made; and (4) the creditable input tax due or paid must be attributable to such
sales, except the transitional input tax, to the extent that such input tax has not been applied
against the output tax.
The Court finds that the first three requirements have been complied [with] by petitioner.
With regard to the first requisite, the evidence presented by petitioner, such as the Sales
Invoices (Exhibits II to II-262, JJ to JJ-431, KK to KK-394 and LL) shows that it is engaged in sales which
are zero-rated.
The second requisite has likewise been complied with. The Certificate of Registration with
OCN 1RC0000148499 (Exhibit C) with the BIR proves that petitioner is a registered VAT taxpayer.
In compliance with the third requisite, petitioner filed its administrative claim for refund on
September 30, 2004 (Exhibit N) and the present Petition for Review on September 30, 2004, both
within the two (2) year prescriptive period from the close of the taxable quarter when the sales were
made, which is from September 30, 2002.
As regards, the fourth requirement, the Court finds that there are some documents and
claims of petitioner that are baseless and have not been satisfactorily substantiated.
xxxx
In sum, petitioner has sufficiently proved that it is entitled to a refund or issuance of a tax
credit certificate representing unutilized excess input VAT payments for the period July 1, 2002 to
September 30, 2002, which are attributable to its zero-rated sales for the same period, but in the
reduced amount of P3,239,119.25, computed as follows:
Amount of Claimed Input VAT
Less:
Exceptions as found by the ICPA
Net Creditable Input VAT
Less:
Output VAT Due
Excess Creditable Input VAT
P 3,891,123.82
41,020.37
P 3,850,103.45
610,984.20
P 3,239,119.25
WHEREFORE, premises considered, the present Petition for Review is PARTIALLY GRANTED.
Accordingly, respondent is hereby ORDERED TO REFUND OR ISSUE A TAX CREDIT CERTIFICATE in
favor of petitioner [in] the reduced amount of THREE MILLION TWO HUNDRED THIRTY NINE
THOUSAND ONE HUNDRED NINETEEN AND 25/100 PESOS (P3,239,119.25), representing the
unutilized input VAT incurred for the months of July to September 2002.
SO ORDERED.[14]
Dissatisfied with the above-quoted Decision, petitioner filed a Motion for Partial Reconsideration,[15] 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.[16] He cited as basis Article 13 of the Civil Code,[17] 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.[18] According to the petitioner, a prior filing of
an administrative claim is a condition precedent [19] before a judicial claim can be filed. He explained that the
rationale of such requirement rests not only on the doctrine of exhaustion of administrative remedies but also on
the fact that the CTA is an appellate body which exercises the power of judicial review over administrative actions of
the BIR.
[20]
The Second Division of the CTA, however, denied petitioners Motion for Partial Reconsideration for lack of
merit. Petitioner thus elevated the matter to the CTA En Banc via a Petition for Review.[21]
Ruling of the CTA En Banc
On July 30, 2008, the CTA En Banc affirmed the Second Divisions Decision allowing the partial tax
refund/credit in favor of respondent. However, as to the reckoning point for counting the two-year period, the
CTA En Banc ruled:
Petitioner argues that the administrative and judicial claims were filed beyond the period
allowed by law and hence, the honorable Court has no jurisdiction over the same. In addition,
petitioner further contends that respondent's filing of the administrative and judicial [claims]
effectively eliminates the authority of the honorable Court to exercise jurisdiction over the judicial
claim.
We are not persuaded.
Section 114 of the 1997 NIRC, and We quote, to wit:
SEC. 114. Return and Payment of Value-added Tax.
(A) In General. Every person liable to pay the value-added tax imposed
under this Title shall file a quarterly return of the amount of his gross sales or receipts
within twenty-five (25) days following the close of each taxable quarter prescribed
for each taxpayer: Provided, however, That VAT-registered persons shall pay the
value-added tax on a monthly basis.
[x x x x ]
Based on the above-stated provision, a taxpayer has twenty five (25) days from the close of
each taxable quarter within which to file a quarterly return of the amount of his gross sales or
receipts. In the case at bar, the taxable quarter involved was for the period of July 1,
2002 to September 30, 2002. Applying Section 114 of the 1997 NIRC, respondent has until October
25, 2002 within which to file its quarterly return for its gross sales or receipts [with] which it complied
when it filed its VAT Quarterly Return on October 20, 2002.
In relation to this, the reckoning of the two-year period provided under Section 229 of the
1997 NIRC should start from the payment of tax subject claim for refund. As stated above,
respondent filed its VAT Return for the taxable third quarter of 2002 on October 20, 2002. Thus,
respondent's administrative and judicial claims for refund filed on September 30, 2004 were filed on
time because AICHI has untilOctober 20, 2004 within which to file its claim for refund.
In addition, We do not agree with the petitioner's contention that the 1997 NIRC requires the
previous filing of an administrative claim for refund prior to the judicial claim. This should not be the
case as the law does not prohibit the simultaneous filing of the administrative and judicial claims for
refund. What is controlling is that both claims for refund must be filed within the two-year
prescriptive period.
In sum, the Court En Banc finds no cogent justification to disturb the findings and conclusion
spelled out in the assailed January 4, 2008 Decision and March 13, 2008 Resolution of the CTA
Second Division. What the instant petition seeks is for the Court En Banc to view and appreciate the
evidence in their own perspective of things, which unfortunately had already been considered and
passed upon.
WHEREFORE, the instant Petition for Review is hereby DENIED DUE COURSE and DISMISSED
for lack of merit. Accordingly, the January 4, 2008 Decision and March 13, 2008 Resolution of the
CTA Second Division in CTA Case No. 7065 entitled, AICHI Forging Company of Asia, Inc. petitioner
vs. Commissioner of Internal Revenue, respondent are hereby AFFIRMED in toto.
SO ORDERED.[22]
Petitioner sought reconsideration but the CTA En Banc denied[23] his Motion for Reconsideration.
Issue
Hence, the present recourse where petitioner interposes the issue of whether respondents judicial and
administrative claims for tax refund/credit were filed within the two-yearprescriptive period provided in Sections
112(A) and 229 of
the NIRC.[24]
Petitioners Arguments
Petitioner maintains that respondents administrative and judicial claims for tax refund/credit were filed in violation of
Sections 112(A) and 229 of the NIRC.[25] He posits that pursuant to Article 13 of the Civil Code,[26] 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 onSeptember 29, 2004.[27]
Petitioner further argues that the CTA En Banc erred in applying Section 114(A) of the NIRC in determining the start
of the two-year period as the said provision pertains to the compliance requirements in the payment of VAT. [28] He
asserts that it is Section 112, paragraph (A), of the same Code that should apply because it specifically provides for
the period within which a claim for tax refund/ credit should be made.[29]
Petitioner likewise puts in issue the fact that the administrative claim with the BIR and the judicial claim with the CTA
were filed on the same day. [30] He opines that 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. [31] He insists that
such procedural requirement is based on the doctrine of exhaustion of administrative remedies and the fact that the
CTA is an appellate body exercising judicial review over administrative actions of the CIR.[32]
Respondents Arguments
For its part, respondent claims that it is entitled to a refund/credit of its unutilized input VAT for the period July 1,
2002 to September 30, 2002 as a matter of right because it has substantially complied with all the requirements
provided by law.[33] Respondent likewise defends the CTA En Banc in applying Section 114(A) of the NIRC in
computing the prescriptive period for the claim for tax refund/credit. Respondent believes that Section 112(A) of the
NIRC must be read together with Section 114(A) of the same Code.[34]
As to the alleged simultaneous filing of its administrative and judicial claims, respondent contends that it first filed
an administrative claim with the One-Stop Shop Inter-Agency Tax Credit and Duty Drawback Center of the DOF
before it filed a judicial claim with the CTA.[35] To prove this, respondent points out that its Claimant Information
Sheet No. 49702[36] and BIR Form No. 1914 for the third quarter of 2002, [37] which were filed with the DOF, were
attached as Annexes M and N, respectively, to the Petition for Review filed with the CTA. [38]Respondent further
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.[39] In support thereof, respondent cites Commissioner of Internal Revenue v. Victorias Milling Co., Inc.
[40]
where it was ruled that [i]f, however, 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].[41] Lastly, respondent argues that even if the period had already lapsed, it may be
suspended for reasons of equity considering that it is not a jurisdictional requirement.[42]
Our Ruling
The petition has merit.
Unutilized input VAT must be claimed within two years after
the close of the taxable quarter when the sales were made
In computing the two-year prescriptive period for claiming a refund/credit of unutilized input VAT, the Second
Division of the CTA applied Section 112(A) of the NIRC, which states:
(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 zero-rated sale and also in taxable or exempt
sale of goods or 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. (Emphasis supplied.)
The CTA En Banc, on the other hand, took into consideration Sections 114 and 229 of the NIRC, which read:
SEC. 114. Return and Payment of Value-Added Tax.
(A) In General. Every person liable to pay the value-added tax imposed under this Title
shall file a quarterly return of the amount of his gross sales or receipts within twenty-
five (25) days following the close of each taxable quarter prescribed for each taxpayer:
Provided, however, That VAT-registered persons shall pay the value-added tax on a monthly basis.
Any person, whose registration has been cancelled in accordance with Section 236, shall file
a return and pay the tax due thereon within twenty-five (25) days from the date of cancellation of
registration: Provided, That only one consolidated return shall be filed by the taxpayer for his
principal place of business or head office and all branches.
xxxx
SEC. 229. Recovery of tax erroneously or illegally collected.
No suit or proceeding shall be maintained in any court for the recovery of any national internal
revenue tax hereafter alleged to have been erroneously or illegally assessed or collected, or of any
penalty claimed to have been collected without authority, or of any sum alleged to have been
excessively or in any manner wrongfully collected, until a claim for refund or credit has been duly
filed with the Commissioner; but such suit or proceeding may be maintained, whether or not such
tax, penalty or sum has been paid under protest or duress.
In any case, no such suit or proceeding shall be filed after the expiration of two (2)
years from the date of payment of the tax or penalty regardless of any supervening cause
that may arise after payment: Provided, however, That the Commissioner may, even without written
claim therefor, refund or credit any tax, where on the face of the return upon which payment was
made, such payment appears clearly to have been erroneously paid. (Emphasis supplied.)
Hence, the CTA En Banc ruled that the reckoning of the two-year period for filing a claim for refund/credit of
unutilized input VAT should start from the date of payment of tax and not from the close of the taxable quarter
when the sales were made.[43]
The pivotal question of when to reckon the running of the two-year prescriptive period, however, has already been
resolved in Commissioner of Internal Revenue v. Mirant Pagbilao Corporation,[44] where we ruled that Section 112(A)
of the NIRC is the applicable provision in determining the start of the two-year period for claiming a refund/credit of
unutilized input VAT, and that Sections 204(C) and 229 of the NIRC are inapplicable as both provisions apply only to
instances of erroneous payment or illegal collection of internal revenue taxes.[45] We explained that:
The above proviso [Section 112 (A) of the NIRC] clearly provides in no uncertain terms
that unutilized input VAT payments not otherwise used for any internal revenue tax due
the taxpayer must be claimed within two years reckoned from the close of the taxable
quarter when the relevant sales were made pertaining to the input VAT regardless of
whether said tax was paid or not. As the CA aptly puts it, albeit it erroneously applied the
aforequoted Sec. 112 (A), [P]rescriptive period commences from the close of the taxable quarter
when the sales were made and not from the time the input VAT was paid nor from the time the
official receipt was issued. Thus, when a zero-rated VAT taxpayer pays its input VAT a year after the
pertinent transaction, said taxpayer only has a year to file a claim for refund or tax credit of the
unutilized creditable input VAT. The reckoning frame would always be the end of the quarter when
the pertinent sales or transaction was made, regardless when the input VAT was paid. Be that as it
may, and given that the last creditable input VAT due for the period covering the progress billing of
September 6, 1996 is the third quarter of 1996 ending on September 30, 1996, any claim for
unutilized creditable input VAT refund or tax credit for said quarter prescribed two years after
September 30, 1996 or, to be precise, on September 30, 1998. Consequently, MPCs claim for refund
or tax credit filed on December 10, 1999 had already prescribed.
Reckoning for prescriptive period under
Secs. 204(C) and 229 of the NIRC inapplicable
To be sure, MPC cannot avail itself of the provisions of either Sec. 204(C) or 229 of the NIRC
which, for the purpose of refund, prescribes a different starting point for the two-year prescriptive
limit for the filing of a claim therefor. Secs. 204(C) and 229 respectively provide:
Sec. 204. Authority of the Commissioner to Compromise, Abate and Refund
or Credit Taxes. The Commissioner may
xxxx
(c) Credit or refund taxes erroneously or illegally received or penalties
imposed without authority, refund the value of internal revenue stamps when they
are returned in good condition by the purchaser, and, in his discretion, redeem or
change unused stamps that have been rendered unfit for use and refund their value
upon proof of destruction. No credit or refund of taxes or penalties shall be allowed
unless the taxpayer files in writing with the Commissioner a claim for credit or refund
within two (2) years after the payment of the tax or penalty: Provided, however, That
a return filed showing an overpayment shall be considered as a written claim for
credit or refund.
xxxx
Sec. 229. Recovery of Tax Erroneously or Illegally Collected. No suit or
proceeding shall be maintained in any court for the recovery of any national internal
revenue tax hereafter alleged to have been erroneously or illegally assessed or
collected, or of any penalty claimed to have been collected without authority, of any
sum alleged to have been excessively or in any manner wrongfully collected without
authority, or of any sum alleged to have been excessively or in any manner
wrongfully collected, until a claim for refund or credit has been duly filed with the
Commissioner; but such suit or proceeding may be maintained, whether or not such
tax, penalty, or sum has been paid under protest or duress.
In any case, no such suit or proceeding shall be filed after the expiration of
two (2) years from the date of payment of the tax or penalty regardless of any
supervening cause that may arise after payment: Provided, however, That the
Commissioner may, even without a written claim therefor, refund or credit any tax,
where on the face of the return upon which payment was made, such payment
appears clearly to have been erroneously paid.
Notably, the above provisions also set a two-year prescriptive period, reckoned from date of
payment of the tax or penalty, for the filing of a claim of refund or tax credit. Notably too, both
provisions apply only to instances of erroneous payment or illegal collection of internal
revenue taxes.
MPCs creditable input VAT not erroneously paid
For perspective, under Sec. 105 of the NIRC, creditable input VAT is an indirect tax which can
be shifted or passed on to the buyer, transferee, or lessee of the goods, properties, or services of the
taxpayer. The fact that the subsequent sale or transaction involves a wholly-tax exempt client,
resulting in a zero-rated or effectively zero-rated transaction, does not, standing alone, deprive the
taxpayer of its right to a refund for any unutilized creditable input VAT, albeit the erroneous, illegal,
or wrongful payment angle does not enter the equation.
xxxx
Considering the foregoing discussion, it is clear that Sec. 112 (A) of the NIRC,
providing a two-year prescriptive period reckoned from the close of the taxable quarter
when the relevant sales or transactions were made pertaining to the creditable input
VAT, applies to the instant case, and not to the other actions which refer to erroneous
payment of taxes.[46] (Emphasis supplied.)
In view of the foregoing, we find that the CTA En Banc erroneously applied Sections 114(A) and 229 of the NIRC in
computing the two-year prescriptive period for claiming refund/credit of unutilized input VAT. To be clear, Section
112 of the NIRC is the pertinent provision for the refund/credit of input VAT. Thus, the two-year period should be
reckoned from the close of the taxable quarter when the sales were made.
The administrative claim was timely filed
Bearing this in mind, we shall now proceed to determine whether the administrative claim was timely filed.
Relying on Article 13 of the Civil Code,[47] which provides that a year is equivalent to 365 days, and taking
into account the fact that the year 2004 was a leap year, petitioner submits that 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 29, 2004.[48]
We do not agree.
In Commissioner of Internal Revenue v. Primetown Property Group, Inc.,[49] we said that as between the Civil
Code, which provides that a year is equivalent to 365 days, and theAdministrative Code of 1987, which states that a
year is composed of 12 calendar months, it is the latter that must prevail following the legal maxim, Lex posteriori
derogat priori.[50] Thus:
Both Article 13 of the Civil Code and Section 31, Chapter VIII, Book I of the Administrative
Code of 1987 deal with the same subject matter the computation of legal periods. Under the Civil
Code, a year is equivalent to 365 days whether it be a regular year or a leap year. Under the
Administrative Code of 1987, however, a year is composed of 12 calendar months. Needless to
state, under the Administrative Code of 1987, the number of days is irrelevant.
There obviously exists a manifest incompatibility in the manner of
computing legal periods under the Civil Code and the Administrative Code of 1987. For this reason,
we hold that Section 31, Chapter VIII, Book I of the Administrative Code of 1987, being the more
recent law, governs the computation of legal periods. Lex posteriori derogat priori.
Applying Section 31, Chapter VIII, Book I of the Administrative Code of 1987 to this case, the
two-year prescriptive period (reckoned from the time respondent filed its final adjusted return on
April 14, 1998) consisted of 24 calendar months, computed as follows:
Year 1 1st calendar
month
2nd calendar month
3rd calendar month
4th calendar month
5th calendar month
6th calendar month
7th calendar month
8th calendar month
9th
10th
11th
12th
Year
month
14th
15th
16th
17th
18th
19th
20th
April 15, 1998 to May 14, 1998
May 15, 1998 to June 14, 1998

June 15, 1998 to July 14, 1998
July 15, 1998 to August 14, 1998
August 15, 1998 to September 14, 1998
September 15, 1998 to October 14, 1998
October 15, 1998 to November 14, 1998
November 15, 1998 to December 14,
1998
calendar month December 15, 1998 to January 14, 1999
calendar month January 15, 1999 to February 14, 1999
calendar month February 15, 1999 to March 14, 1999
calendar month March 15, 1999 to April 14, 1999
2 13th calendar April 15, 1999 to May 14, 1999
calendar month
calendar month
calendar month
calendar month
calendar month
calendar month
calendar month
21st calendar month

22nd calendar month
23rd calendar month
24th calendar month
May 15, 1999 to June 14, 1999

June 15, 1999 to July 14, 1999
July 15, 1999 to August 14, 1999
August 15, 1999 to September 14, 1999
September 15, 1999 to October 14, 1999
October 15, 1999 to November 14, 1999
November 15, 1999 to December 14,
1999
December 15, 1999 to January 14, 2000
January 15, 2000 to February 14, 2000
February 15, 2000 to March 14, 2000
March 15, 2000 to April 14, 2000
We therefore hold that respondent's petition (filed on April 14, 2000) was filed on the last
day of the 24th calendar month from the day respondent filed its final adjusted return. Hence, it was
filed within the reglementary period.[51]
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.
The filing of the judicial claim was premature
However, notwithstanding
administrative claim, we
the
timely
filing
of
the
are constrained to deny respondents claim for tax refund/credit for having been filed in violation of Section 112(D)
of the NIRC, which provides that:
xxxx
(D) Period within which Refund or Tax Credit of Input Taxes shall be Made. In proper cases, the
Commissioner shall grant a refund or issue the tax credit certificate for creditable input taxes within
one hundred twenty (120) days from the date of submission of complete documents in
support of the application filed in accordance with Subsections (A) and (B) hereof.
In case of full or partial denial of the claim 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. (Emphasis supplied.)
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.
In this case, the administrative and the judicial claims were simultaneously filed on September 30,
2004. Obviously, respondent did not wait for the decision of the CIR or the lapse of the 120-day period. For this
reason, we find the filing of the judicial claim with the CTA premature.
Respondents assertion that the non-observance of the 120-day period is not fatal to the filing of a judicial
claim as long as both the administrative and the judicial claims are filed within the two-year prescriptive
period[52] has no legal basis.
There is nothing in Section 112 of the NIRC to support respondents view. Subsection (A) of the said provision
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. This is apparent in the first paragraph of subsection (D) of the same
provision, which states that the CIR has 120 days from the submission of complete documents in support of
the application filed in accordance with Subsections (A) and (B) within which to decide on the claim.
In fact, applying the two-year period to judicial claims would render nugatory Section 112(D) of the NIRC,
which already provides for a specific period within which a taxpayer should appeal the decision or inaction of the
CIR. The second paragraph of Section 112(D) of the NIRC envisions two scenarios: (1) when a decision is issued by
the CIR before the lapse of the 120-day period; and (2) when no decision is made after the 120-day period. In both
instances, the taxpayer has 30 days within which to file an appeal with the CTA. As we see it then, the 120-day
period is crucial in filing an appeal with the CTA.
With regard to Commissioner of Internal Revenue v. Victorias Milling, Co., Inc.[53] relied upon by respondent,
we find the same inapplicable as the tax provision involved in that case is Section 306, now Section 229 of the
NIRC. And as already discussed, Section 229 does not apply to refunds/credits of input VAT, such as the instant
case.
In fine, 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.
WHEREFORE, the Petition is hereby GRANTED. The assailed July 30, 2008 Decision and the October 6,
2008 Resolution of the Court of Tax Appeals are hereby REVERSED andSET ASIDE. The Court of Tax Appeals
Second Division is DIRECTED to dismiss CTA Case No. 7065 for having been prematurely filed.

SUPREME COURT
Manila
EN BANC
G.R. No. 187485
October 8, 2013
COMMISSIONER OF INTERNAL REVENUE, Petitioner,

vs.
SAN ROQUE POWER CORPORATION, Respondent.
x-----------------------x
G.R. No. 196113
TAGANITO MINING CORPORATION, Petitioner,
vs.
COMMISSIONER OF INTERNAL REVENUE, Respondent.
x-----------------------x
G.R. No. 197156
PHILEX MINING CORPORATION, Petitioner,
vs.
COMMISSIONER OF INTERNAL REVENUE, Respondent.
RESOLUTION
CARPIO, J.:
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. DA489-03 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 InterAgency 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. DA489-03, 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.1wphi1 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
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-48903 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
to Delegate Power
of
the
Commissioner
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.

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 191498
January 15, 2014
COMMISSIONER OF INTERNAL REVENUE, Petitioner,

vs.
MINDANAO II GEOTHERMAL PARTNERSHIP, Respondent.
DECISION
SERENO, CJ:
This Rule 45 Petition1 requires this Court to address the question of timeliness with respect to petitioner's
administrative and judicial claims for refund and credit of accumulated unutilized input Value Added Tax
(VAT) under Section 112(A) and Section 112(D) of the 1997 Tax Code. Petitioner Mindanao II Geothermal
Partnership (Mindanao II) assails the Decision2 and Resolution3 of the Court of Tax Appeals En Banc (CTA En
Banc) in CTA En Banc Case No. 448, affirming the Decision in CTA Case No. 7507 of the CTA Second
Division.4 The latter ordered the refund or issuance of a tax credit certificate in the amount
of P6,791,845.24 representing unutilized input VAT incurred for the second, third, and fourth quarters of
taxable year 2004 in favor of herein respondent, Mindanao II.
FACTS
Mindanao II is a partnership registered with the Securities and Exchange Commission. 5 It is engaged in the
business of power generation and sale of electricity to the National Power Corporation (NAPOCOR) 6 and is
accredited by the Department of Energy.7
Mindanao II filed its Quarterly VAT Returns for the second, third and fourth quarters of taxable year 2004
on the following dates:8
Date filed
Quarter
Taxable Year
12 July 2005
2nd
2004
22 October 2004
12 July 2005
3rd
2004
25 January 2005
12 July 2005
4th
2004
Original
Amended
26 July 2004
On 6 October 2005, Mindanao II filed with the Bureau of Internal Revenue (BIR) an application for the
refund or credit of accumulated unutilized creditable input taxes. 9 In support of the administrative claim for
refund or credit, Mindanao II alleged, among others, that it is registered with the BIR as a value-added
taxpayer10 and all its sales are zero-rated under the EPIRA law.11 It further stated that for the second, third,
and fourth quarters of taxable year 2004, it paid input VAT in the aggregate amount of P7,167,005.84,
which were directly attributable to the zero-rated sales. The input taxes had not been applied against
output tax.
Pursuant to Section 112(D) of the 1997 Tax Code, the Commissioner of Internal Revenue (CIR) had a period
of 120 days, or until 3 February 2006, to act on the claim. The administrative claim, however, remained
unresolved on 3 February 2006.
Under the same provision, Mindanao II could treat the inaction of the CIR as a denial of its claim, in which
case, the former would have 30 days to file an appeal to the CTA, that is, on 5 March 2006. Mindanao II,
however, did not file an appeal within the 30-day period.
Apparently, Mindanao II believed that a judicial claim must be filed within the two-year prescriptive period
provided under Section 112(A) and that such time frame was to be reckoned from the filing of its Quarterly
VAT Returns for the second, third, and fourth quarters of taxable year 2004, that is, from 26 July 2004, 22
October 2004, and 25 January 2005, respectively. Thus, on 21 July 2006, Mindanao II, claiming inaction on
the part of the CIR and that the two-year prescriptive period was about to expire, filed a Petition for Review
with the CTA docketed as CTA Case No. 6133.12
On 8 June 2007, while the application for refund or credit of unutilized input VAT of Mindanao II was
pending before the CTA Second Division, this Court promulgated Atlas Consolidated Mining and
Development Corporation v. CIR13 (Atlas). Atlas held that the two-year prescriptive period for the filing of a
claim for an input VAT refund or credit is to be reckoned from the date of filing of the corresponding
quarterly VAT return and payment of the tax.
On 12 August 2008, the CTA Second Division rendered a Decision 14 ordering the CIR to grant a refund or a
tax credit certificate, but only in the reduced amount of P6,791,845.24, representing unutilized input VAT
incurred for the second, third and fourth quarters of taxable year 2004. 15
In support of its ruling, the CTA Second Division held that Mindanao II complied with the twin requisites for
VAT zero-rating under the EPIRA law: first, it is a generation company, and second, it derived sales from
power generation. It also ruled that Mindanao II satisfied the requirements for the grant of a refund/credit
under Section 112 of the Tax Code: (1) there must be zero-rated or effectively zero-rated sales; (2) input
taxes must have been incurred or paid; (3) the creditable input tax due or paid must be attributable to
zero-rated sales or effectively zero-rated sales; (4) the input VAT payments must not have been applied
against any output liability; and (5) the claim must be filed within the two-year prescriptive period. 16
As to the second requisite, however, the input tax claim to the extent of P375,160.60 corresponding to
purchases of services from Mitsubishi Corporation was disallowed, since it was not substantiated by official
receipts.17
As regards to the fifth requirement in section 112 of the Tax Code, the tax court, citing Atlas, counted from
26 July 2004, 22 October 2004, and 25 January 2005 the dates when Mindanao II filed its Quarterly VAT
Returns for the second, third, and fourth quarters of taxable year 2004, respectively and determined that
both the administrative claim filed on 6 October 2005 and the judicial claim filed on 21 July 2006 fell within
the two-year prescriptive period.18
On 1 September 2008, the CIR filed a Motion for Partial Reconsideration, 19 pointing out that prescription
had already set in, since the appeal to the CTA was filed only on 21 July 2006, which was way beyond the
last day to appeal 5 March 2006.20 As legal basis for this argument, the CIR relied on Section 112(D) of
the 1997 Tax Code.21
Meanwhile, on 12 September 2008, this Court promulgated CIR v. Mirant Pagbilao Corporation
(Mirant).22 Mirant fixed the reckoning date of the two-year prescriptive period for the application for refund
or credit of unutilized input VAT at the close of the taxable quarter when the relevant sales were made , as
stated in Section 112(A).23
On 3 December 2008, the CTA Second Division denied the CIRs Motion for Partial Reconsideration. 24 The
tax court stood by its reliance on Atlas 25 and on its finding that both the administrative and judicial claims
of Mindanao II were timely filed.26
On 7 January 2009, the CIR elevated the matter to the CTA En Banc via a Petition for Review. 27 Apart from
the contention that the judicial claim of Mindanao II was filed beyond the 30-day period fixed by Section
112(D) of the 1997 Tax Code,28 the CIR argued that Mindanao II erroneously fixed 26 July 2004, the date
when the return for the second quarter was filed, as the date from which to reckon the two-year
prescriptive period for filing an application for refund or credit of unutilized input VAT under Section 112(A).
As the two-year prescriptive period ended on 30 June 2006, the Petition for Review of Mindanao II was filed
out of time on 21 July 2006.29 The CIR invoked the recently promulgated Mirant to support this theory.
On 11 November 2009, the CTA En Banc rendered its Decision denying the CIRs Petition for Review. 30 On
the question whether the application for refund was timely filed, it held that the CTA Second Division
correctly applied the Atlas ruling. 31 It reasoned that Atlas remained to be the controlling doctrine. Mirant
was a new doctrine and, as such, the latter should not apply retroactively to Mindanao II who had relied on
the old doctrine of Atlas and had acted on the faith thereof. 32
As to the issue of compliance with the 30-day period for appeal to the CTA, the CTA En Banc held that this
was a requirement only when the CIR actually denies the taxpayers claim. But in cases of CIR inaction, the
30-day period is not a mandatory requirement; the judicial claim is seasonably filed as long as it is filed
after the lapse of the 120-day waiting period but within two years from the date of filing of the return. 33
The CIR filed a Motion for Partial Reconsideration34 of the Decision, but it was denied for lack of merit.35
Dissatisfied, the CIR filed this Rule 45 Petition, raising the following arguments in support of its appeal:
I.
THE CTA 2ND DIVISION LACKED JURISDICTION TO TAKE COGNIZANCE OF THE CASE.
II.
THE COURT A QUOS RELIANCE ON THE RULING IN ATLAS IS MISPLACED. 36
ISSUES
The resolution of this case hinges on the question of compliance with the following time requirements for
the grant of a claim for refund or credit of unutilized input VAT: (1) the two-year prescriptive period for
filing an application for refund or credit of unutilized input VAT; and (2) the 120+30 day period for filing an
appeal with the CTA.
THE COURTS RULING
We deny Mindanao IIs claim for refund or credit of unutilized input VAT on the ground that its judicial
claims were filed out of time, even as we hold that its application for refund was filed on time.
I.
MINDANAO
REFUND WAS FILED ON TIME
IIS
APPLICATION
FOR
We find no error in the conclusion of the tax courts that the application for refund or credit of unutilized
input VAT was timely filed. The problem lies with their bases for the conclusion as to: (1) what should be
filed within the prescriptive period; and (2) the date from which to reckon the prescriptive period.
We thus take a different route to reach the same conclusion, initially focusing our discussion on what
should be filed within the two-year prescriptive period.
A. The Judicial Claim Need Not Be Filed Within the Two-Year Prescriptive Period
Section 112(A) provides:
(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 or 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.
Both the CTA Second Division and CTA En Banc decisions held that the phrase "apply for the issuance of a
tax credit certificate or refund" in Section 112(A) is construed to refer to both the administrative claim filed
with the CIR and the judicial claim filed with the CTA. This view, however, has no legal basis.
In Commissioner of Internal Revenue v. Aichi Forging Company of Asia, Inc. (Aichi), we dispelled the
misconception that both the administrative and judicial claims must be filed within the two-year
prescriptive period:37
There is nothing in Section 112 of the NIRC to support respondents view. Subsection (A) of the said
provision 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. This is apparent in the first
paragraph of subsection (D) of the same provision, which states that the CIR has "120 days from the
submission of complete documents in support of the application filed in accordance with Subsections (A)
and (B)" within which to decide on the claim.
In fact, applying the two-year period to judicial claims would render nugatory Section 112 (D) of the NIRC,
which already provides for a specific period within which a taxpayer should appeal the decision or inaction
of the CIR. The second paragraph of Section 112 (D) of the NIRC envisions two scenarios: (1) when a
decision is issued by the CIR before the lapse of the 120-day period; and (2) when no decision is made
after the 120-day period. In both instances, the taxpayer has 30 days within which to file an appeal with
the CTA. As we see it then, the 120-day period is crucial in filing an appeal with the CTA. (Emphasis
supplied)
The message of Aichi is clear: it is only the administrative claim that must be filed within the two-year
prescriptive period; the judicial claim need not fall within the two-year prescriptive period.
Having disposed of this question, we proceed to the date for reckoning the prescriptive period under
Section 112(A).
B. Reckoning Date is the Close of the Taxable Quarter When the Relevant Sales Were Made.
The other flaw in the reasoning of the tax courts is their reliance on the Atlas ruling, which fixed the
reckoning point to the date of filing the return and payment of the tax.
The CIRs Stand
The CIRs stand is that Atlas is not applicable to the case at hand as it involves Section 230 of the 1977 Tax
Code, which contemplates recovery of tax payments erroneously or illegally collected. On the other hand,
this case deals with claims for tax refund or credit of unutilized input VAT for the second, third, and fourth
quarters of 2004, which are covered by Section 112 of the 1977 Tax Code. 38
The CIR further contends that Mindanao II cannot claim good faith reliance on the Atlas doctrine since the
case was decided only on 8 June 2007, two years after Mindanao II filed its claim for refund or credit with
the CIR and one year after it filed a Petition for Review with the CTA on 21 July 2006. 39
In lieu of Atlas, the CIR proposes that it is the Court's ruling in Mirant that should apply to this case despite
the fact that the latter was promulgated on 12 September 2008, after Mindanao II had filed its
administrative claim in 2005.40 It argues that Mirant can be applied retroactively to this case, since the
decision merely interprets Section 112, a provision that was already effective when Mindanao II filed its
claims for tax refund or credit.
The Taxpayers Defense
On the other hand, Mindanao II counters that Atlas, decided by the Third Division of this Court, could not
have been superseded by Mirant, a Second Division Decision of this Court. A doctrine laid down by the
Supreme Court in a Division may be modified or reversed only through a decision of the Court sitting en
banc.41
Mindanao II further contends that when it filed its Petition for Review, the prevailing rule in the CTA reckons
the two-year prescriptive period from the date of the filing of the VAT return. 42 Finally, after building its
case on Atlas, Mindanao II assails the CIRs reliance on the Mirant doctrine stating that it cannot be applied
retroactively to this case, lest it violate the rock-solid rule that a judicial ruling cannot be given retroactive
effect if it will impair vested rights.43
Section 112(A) is the Applicable Rule
The issue posed is not novel. In the recent case of Commissioner of Internal Revenue v. San Roque Power
Corporation44 (San Roque), this Court resolved the threshold question of when to reckon the two-year
prescriptive period for filing an administrative claim for refund or credit of unutilized input VAT under the
1997 Tax Code in view of our pronouncements in Atlas and Mirant. In that case, we delineated the scope
and effectivity of the Atlas and Mirant doctrines as follows:
The Atlas doctrine, which held that claims for refund or credit of input VAT must comply with the two-year
prescriptive period under Section 229, should be effective only from its promulgation on 8 June 2007 until
its abandonment on 12 September 2008 in Mirant. The Atlas doctrine was limited to the reckoning of the
two-year prescriptive period from the date of payment of the output VAT. Prior to the Atlas doctrine, the
two-year prescriptive period for claiming refund or credit of input VAT should be governed by Section
112(A) following the verba legis rule. The Mirant ruling, which abandoned the Atlas doctrine, adopted the
verba legis rule, thus applying Section 112(A) in computing the two-year prescriptive period in claiming
refund or credit of input VAT. (Emphases supplied)
Furthermore, San Roque distinguished between Section 112 and Section 229 of the 1997 Tax Code:
The input VAT is not "excessively" collected as understood under Section 229 because at the time the input
VAT is collected the amount paid is correct and proper. The input VAT is a tax liability of, and legally paid
by, a VAT-registered seller of goods, properties or services used as input by another VAT-registered person
in the sale of his own goods, properties, or services. This tax liability is true even if the seller passes on the
input VAT to the buyer as part of the purchase price. The second VAT-registered person, who is not legally
liable for the input VAT, is the one who applies the input VAT as credit for his own output VAT. If the input
VAT is in fact "excessively" collected as understood under Section 229, then it is the first VAT-registered
person the taxpayer who is legally liable and who is deemed to have legally paid for the input VAT
who can ask for a tax refund or credit under Section 229 as an ordinary refund or credit outside of the VAT
System. In such event, the second VAT-registered taxpayer will have no input VAT to offset against his own
output VAT.
In a claim for refund or credit of "excess" input VAT under Section 110(B) and Section 112(A), the input VAT
is not "excessively" collected as understood under Section 229. At the time of payment of the input VAT
the amount paid is the correct and proper amount. Under the VAT System, there is no claim or issue that
the input VAT is "excessively" collected, that is, that the input VAT paid is more than what is legally due.
The person legally liable for the input VAT cannot claim that he overpaid the input VAT by the mere
existence of an "excess" input VAT. The term "excess" input VAT simply means that the input VAT available
as credit exceeds the output VAT, not that the input VAT is excessively collected because it is more than
what is legally due. Thus, the taxpayer who legally paid the input VAT cannot claim for refund or credit of
the input VAT as "excessively" collected under Section 229.
Under Section 229, the prescriptive period for filing a judicial claim for refund is two years from the date of
payment of the tax "erroneously, . . . illegally, . . . excessively or in any manner wrongfully collected." The
prescriptive period is reckoned from the date the person liable for the tax pays the tax. Thus, if the input
VAT is in fact "excessively" collected, that is, the person liable for the tax actually pays more than what is
legally due, the taxpayer must file a judicial claim for refund within two years from his date of payment.
Only the person legally liable to pay the tax can file the judicial claim for refund. The person to whom the
tax is passed on as part of the purchase price has no personality to file the judicial claim under Section
229.
Under Section 110(B) and Section 112(A), the prescriptive period for filing a judicial claim for "excess"
input VAT is two years from the close of the taxable quarter when the sale was made by the person legally
liable to pay the output VAT. This prescriptive period has no relation to the date of payment of the "excess"
input VAT. The "excess" input VAT may have been paid for more than two years but this does not bar the
filing of a judicial claim for "excess" VAT under Section 112(A), which has a different reckoning period from
Section 229. Moreover, the person claiming the refund or credit of the input VAT is not the person who
legally paid the input VAT. Such person seeking the VAT refund or credit does not claim that the input VAT
was "excessively" collected from him, or that he paid an input VAT that is more than what is legally due. He
is not the taxpayer who legally paid the input VAT.
As its name implies, the Value-Added Tax system is a tax on the value added by the taxpayer in the chain
of transactions. For simplicity and efficiency in tax collection, the VAT is imposed not just on the value
added by the taxpayer, but on the entire selling price of his goods, properties or services. However, the
taxpayer is allowed a refund or credit on the VAT previously paid by those who sold him the inputs for his
goods, properties, or services. The net effect is that the taxpayer pays the VAT only on the value that he
adds to the goods, properties, or services that he actually sells.
Under Section 110(B), a taxpayer can apply his input VAT only against his output VAT. The only exception is
when the taxpayer is expressly "zero-rated or effectively zero-rated" under the law, like companies
generating power through renewable sources of energy. Thus, a non zero-rated VAT-registered taxpayer
who has no output VAT because he has no sales cannot claim a tax refund or credit of his unused input VAT
under the VAT System. Even if the taxpayer has sales but his input VAT exceeds his output VAT, he cannot
seek a tax refund or credit of his "excess" input VAT under the VAT System. He can only carry-over and
apply his "excess" input VAT against his future output VAT. If such "excess" input VAT is an "excessively"
collected tax, the taxpayer should be able to seek a refund or credit for such "excess" input VAT whether or
not he has output VAT. The VAT System does not allow such refund or credit. Such "excess" input VAT is not
an "excessively" collected tax under Section 229. The "excess" input VAT is a correctly and properly
collected tax. However, such "excess" input VAT can be applied against the output VAT because the VAT is
a tax imposed only on the value added by the taxpayer. If the input VAT is in fact "excessively" collected
under Section 229, then it is the person legally liable to pay the input VAT, not the person to whom the tax
was passed on as part of the purchase price and claiming credit for the input VAT under the VAT System,
who can file the judicial claim under Section 229.
Any suggestion that the "excess" input VAT under the VAT System is an "excessively" collected tax under
Section 229 may lead taxpayers to file a claim for refund or credit for such "excess" input VAT under
Section 229 as an ordinary tax refund or credit outside of the VAT System. Under Section 229, mere
payment of a tax beyond what is legally due can be claimed as a refund or credit. There is no requirement
under Section 229 for an output VAT or subsequent sale of goods, properties, or services using materials
subject to input VAT.
From the plain text of Section 229, it is clear that what can be refunded or credited is a tax that is
"erroneously . . . illegally, . . . excessively or in any manner wrongfully collected." In short, there must be a
wrongful payment because what is paid, or part of it, is not legally due. As the Court held in Mirant, Section
229 should "apply only to instances of erroneous payment or illegal collection of internal revenue taxes."
Erroneous or wrongful payment includes excessive payment because they all refer to payment of taxes not
legally due. Under the VAT System, there is no claim or issue that the "excess" input VAT is "excessively or
in any manner wrongfully collected." In fact, if the "excess" input VAT is an "excessively" collected tax
under Section 229, then the taxpayer claiming to apply such "excessively" collected input VAT to offset his
output VAT may have no legal basis to make such offsetting. The person legally liable to pay the input VAT
can claim a refund or credit for such "excessively" collected tax, and thus there will no longer be any
"excess" input VAT. This will upend the present VAT System as we know it. 45
Two things are clear from the above quoted San Roque disquisitions. First, when it comes to recovery of
unutilized input VAT, Section 112, and not Section 229 of the 1997 Tax Code, is the governing law. Second,
prior to 8 June 2007, the applicable rule is neither Atlas nor Mirant, but Section 112(A).
We present the rules laid down by San Roque in determining the proper reckoning date of the two-year
prescriptive period through the following timeline:
Thus, the task at hand is to determine the applicable period for this case.
In this case, Mindanao II filed its administrative claims for refund or credit for the second, third and fourth
quarters of 2004 on 6 October 2005. The case thus falls within the first period as indicated in the above
timeline. In other words, it is covered by the rule prior to the advent of either Atlas or Mirant.
Accordingly, the proper reckoning date in this case, as provided by Section 112(A) of the 1997 Tax Code, is
the close of the taxable quarter when the relevant sales were made.
C. The Administrative Claims Were Timely Filed
We sum up our conclusions so far: (1) it is only the administrative claim that must be filed within the twoyear prescriptive period; and (2) the two-year prescriptive period begins to run from the close of the
taxable quarter when the relevant sales were made.
Bearing these in mind, we now proceed to determine whether Mindanao II's administrative claims for the
second, third, and fourth quarters of 2004 were timely filed.
Second Quarter
Since the zero-rated sales were made in the second quarter of 2004, the date of reckoning the two-year
prescriptive period is the close of the second quarter, which is on 30 June 2004. Applying Section 112(A),
Mindanao II had two years from 30 June 2004, or until 30 June 2006 to file an administrative claim with the
CIR. Mindanao II filed its administrative claim on 6 October 2005, which is within the two-year prescriptive
period. The administrative claim for the second quarter of 2004 was thus timely filed. For clarity, we
present the rules laid down by San Roque in determining the proper reckoning date of the two-year
prescriptive period through the following timeline:
Third Quarter
As regards the claim for the third quarter of 2004, the two-year prescriptive period started to run on 30
September 2004, the close of the taxable quarter. It ended on 30 September 2006, pursuant to Section
112(A) of the 1997 Tax Code. Mindanao II filed its administrative claim on 6 October 2005. Thus, since the
administrative claim was filed well within the two-year prescriptive period, the administrative claim for the
third quarter of 2004 was timely filed. (See timeline below)
Fourth Quarter
Here, the two-year prescriptive period is counted starting from the close of the fourth quarter which is on
31 December 2004. The last day of the prescriptive period for filing an application for tax refund/credit
with the CIR was on 31 December 2006. Mindanao II filed its administrative claim with the CIR on 6
October 2005. Hence, the claims were filed on time, pursuant to Section 112(A) of the 1997 Tax Code. (See
timeline below)
II.
MINDANAO IIS JUDICIAL CLAIMS WERE FILED OUT OF TIME
Notwithstanding the timely filing of the administrative claims, we find that the CTA En Banc erred in
holding that Mindanao IIs judicial claims were timely filed.
A. 30-Day Period Also Applies to Appeals from Inaction
Section 112(D) of the 1997 Tax Code states the time requirements for filing a judicial claim for refund or
tax credit of input VAT:
(D) Period within which Refund or Tax Credit of Input Taxes shall be Made. In proper cases, the
Commissioner shall grant a refund or issue the tax credit certificate for creditable input taxes within one
hundred twenty (120) days from the date of submission of complete documents in support of the
application filed in accordance with Subsection (A) and (B) 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. (Emphases supplied)
Section 112(D) speaks of two periods: the period of 120 days, which serves as a waiting period to give
time for the CIR to act on the administrative claim for refund or credit, and the period of 30 days, which
refers to the period for interposing an appeal with the CTA. It is with the 30-day period that there is an
issue in this case.
The CTA En Bancs holding is that, since the word "or" a disjunctive term that signifies dissociation and
independence of one thing from another is used in Section 112(D), the taxpayer is given two options: 1)
file an appeal within 30 days from the CIRs denial of the administrative claim; or 2) file an appeal with the
CTA after expiration of the 120-day period, in which case the 30-day appeal period does not apply. The
judicial claim is seasonably filed so long as it is filed after the lapse of the 120-day waiting period but
before the lapse of the two-year prescriptive period under Section 112(A). 46
We do not agree.
The 30-day period applies not only to instances of actual denial by the CIR of the claim for refund or tax
credit, but to cases of inaction by the CIR as well. This is the correct interpretation of the law, as held in
San Roque:47
Section 112(C)48 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 one hundred twenty day-period, appeal the decision or the unacted claim with
the Court of Tax Appeals.
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
Commissioner's decision, or if the Commissioner does not act on the taxpayer's claim within the 120-day
period, the taxpayer may appeal to the CTA within 30 days from the expiration of the 120-day period.
(Emphasis supplied)
The San Roque pronouncement is clear. The taxpayer can file the appeal in one of two ways: (1) file the
judicial claim within thirty days after the Commissioner denies the claim within the 120-day period, or (2)
file the judicial claim within thirty days from the expiration of the 120-day period if the Commissioner does
not act within the 120-day period.
B. The Judicial Claim Was Belatedly Filed
In this case, the facts are not up for debate. Mindanao II filed its administrative claim for refund or credit
for the second, third, and fourth quarters of 2004 on 6 October 2005. The CIR, therefore, had a period of
120 days, or until 3 February 2006, to act on the claim. The CIR, however, failed to do so. Mindanao II then
could treat the inaction as a denial and appeal it to the CTA within 30 days from 3 February 2006, or until 5
March 2006.
Mindanao II, however, filed a Petition for Review only on 21 July 2006, 138 days after the lapse of the 30day period on 5 March 2006. The judicial claim was therefore filed late. (See timeline below.)
C. The 30-Day Period to Appeal is Mandatory and Jurisdictional

However, what is up for debate is the nature of the 30-day time requirement. The CIR posits that it is
mandatory. Mindanao II contends that the requirement of judicial recourse within 30 days is only directory
and permissive, as indicated by the use of the word "may" in Section 112(D). 49
The answer is found in San Roque. There, we declared that the 30-day period to appeal is both mandatory
and jurisdictional:
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 one hundred 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
Commissioner's decision, or if the Commissioner does not act on the taxpayer's claim within the 120-day
period, the taxpayer may appeal to the CTA within 30 days from the expiration of the 120-day period.
xxxx
Section 112(A) and (C) must be interpreted according to its clear, plain, and unequivocal language. The
taxpayer can file his administrative claim for refund or credit at anytime within the two-year prescriptive
period. If he files his claim on the last day of the two-year prescriptive period, his claim is still filed on time.
The Commissioner will have 120 days from such filing to decide the claim. If the Commissioner decides the
claim on the 120th day, or does not decide it on that day, the taxpayer still has 30 days to file his judicial
claim with the CTA. This is not only the plain meaning but also the only logical interpretation of Section
112(A) and (C).
xxxx
When Section 112(C) states that "the taxpayer affected may, within thirty (30) days from receipt of
decision denying the claim or after the expiration of the one hundred twenty-day period, appeal
decision or the unacted claim with the Court of Tax Appeals," the law does not make the 120+30
periods optional just because the law uses the word " may." The word "may" simply means that
taxpayer may or may not appeal the decision of the Commissioner within 30 days from receipt of
decision, or within 30 days from the expiration of the 120-day period. x x x. 50
the
the
day
the
the
D. Exception to the mandatory and jurisdictional nature of the 120+30 day period not applicable
Nevertheless, San Roque provides an exception to the mandatory and jurisdictional nature of the 120+30
day period BIR Ruling No. DA-489-03 dated 10 December 2003. The BIR ruling declares 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."
Although Mindanao II has not invoked the BIR ruling, we deem it prudent as well as necessary to dwell on
this issue to determine whether this case falls under the exception.
For this question, we come back to San Roque, which provides that BIR Ruling No. DA-489-03 is a general
interpretative rule; thus, taxpayers can rely on it from the time of its issuance on 10 December 2003 until
its reversal by this Court in Aichi on 6 October 2010, when the 120+30 day periods were held to be
mandatory and jurisdictional. The Court reasoned as follows:
Taxpayers should not be prejudiced by an erroneous interpretation by the Commissioner, particularly on a
difficult question of law. The abandonment of the Atlas doctrine by Mirant and Aichi is proof that the
reckoning of the prescriptive periods for input VAT tax refund or credit is a difficult question of law. The
abandonment of the Atlas doctrine did not result in Atlas, or other taxpayers similarly situated, being made
to return the tax refund or credit they received or could have received under Atlas prior to its
abandonment. This Court is applying Mirant and Aichi prospectively. Absent fraud, bad faith or
misrepresentation, the reversal by this Court of a general interpretative rule issued by the Commissioner,
like the reversal of a specific BIR ruling under Section 246, should also apply prospectively. x x x.
xxxx
Thus, the only issue is whether BIR Ruling No. DA-489-03 is a general interpretative rule applicable to all
taxpayers or a specific ruling applicable only to a particular taxpayer.
BIR Ruling No. DA-489-03 is a general interpretative rule because it was a response to a query made, not
by a particular taxpayer, but by a government agency tasked with processing tax refunds and credits, that
is, the One Stop Shop Inter-Agency Tax Credit and Drawback Center of the Department of Finance . This
government agency is also the addressee, or the entity responded to, in BIR Ruling No. DA-489-03. Thus,
while this government agency mentions in its query to the Commissioner the administrative claim of Lazi
Bay Resources Development, Inc., the agency was in fact asking the Commissioner what to do in cases like
the tax claim of Lazi Bay Resources Development, Inc., where the taxpayer did not wait for the lapse of the
120-day period.
Clearly, BIR Ruling No. DA-489-03 is a general interpretative rule. Thus, all taxpayers can rely on BIR Ruling
No. DA-489-03 from the time of its issuance on 10 December 2003 up to its reversal by this Court in Aichi
on 6 October 2010, where this Court held that the 120+30 day periods are mandatory and jurisdictional. 51
Thus, in San Roque, the Court applied this exception to Taganito Mining Corporation (Taganito), one of the
taxpayers in San Roque. Taganito filed its judicial claim on 14 February 2007, after the BIR ruling took
effect on 10 December 2003 and before the promulgation of Mirant. The Court stated:
Taganito, however, filed its judicial claim with the CTA on 14 February 2007, after the issuance of BIR
Ruling No. DA-489-03 on 10 December 2003. Truly, Taganito can claim that in filing its judicial claim
prematurely without waiting for the 120-day period to expire, it was misled by BIR Ruling No. DA-489-03.
Thus, Taganito can claim the benefit of BIR Ruling No. DA-489-03, which shields the filing of its judicial
claim from the vice of prematurity.52
San Roque was also careful to point out that the BIR ruling does not retroactively apply to premature
judicial claims filed before the issuance of the BIR ruling:
However, BIR Ruling No. DA-489-03 cannot be given retroactive effect for four reasons: first, it is
admittedly an erroneous interpretation of the law; second, prior to its issuance, the BIR held that the 120day period was mandatory and jurisdictional, which is the correct interpretation of the law; third, prior to
its issuance, no taxpayer can claim that it was misled by the BIR into filing a judicial claim prematurely;
and fourth, a claim for tax refund or credit, like a claim for tax exemption, is strictly construed against the
taxpayer.53
Thus, San Roque held that taxpayer San Roque Power Corporation, could not seek refuge in the BIR ruling
as it jumped the gun when it filed its judicial claim on 10 April 2003, prior to the issuance of the BIR ruling
on 10 December 2003.1wphi1 The Court stated:
San Roque, therefore, cannot benefit from BIR Ruling No. DA-489-03 because it filed its judicial claim
prematurely on 10 April 2003, before the issuance of BIR Ruling No. DA-489-03 on 10 December 2003. To
repeat, San Roque cannot claim that it was misled by the BIR into filing its judicial claim prematurely
because BIR Ruling No. DA-489-03 was issued only after San Roque filed its judicial claim. At the time San
Roque filed its judicial claim, the law as applied and administered by the BIR was that the Commissioner
had 120 days to act on administrative claims. This was in fact the position of the BIR prior to the issuance
of BIR Ruling No. DA-489-03. Indeed, San Roque never claimed the benefit of BIR Ruling No. DA-489-03 or
RMC 49-03, whether in this Court, the CTA, or before the Commissioner. 54
San Roque likewise ruled out the application of the BIR ruling to cases of late filing. The Court held that the
BIR ruling, as an exception to the mandatory and jurisdictional nature of the 120+30 day periods, is limited
to premature filing and does not extend to late filing of a judicial claim. Thus, the Court found that since
Philex Mining Corporation, the other party in the consolidated case San Roque, filed its claim 426 days
after the lapse of the 30-day period, it could not avail itself of the benefit of the BIR ruling:
Philexs situation is not a case of premature filing of its judicial claim but of late filing, indeed
Very late filing. BIR Ruling No. DA-489-03 allowed premature filing of a judicial claim, which means nonexhaustion of the 120-day period for the Commissioner to act on an administrative claim. Philex cannot
claim the benefit of BIR Ruling No. DA-489-03 because Philex did not file its judicial claim prematurely but
filed it long after the lapse of the 30-day period following the expiration of the 120-day period. In fact,
Philex filed its judicial claim 426 days after the lapse of the 30-day period. 55
We sum up the rules established by San Roque on the mandatory and jurisdictional nature of the 30-day
period to appeal through the following timeline:
Bearing in mind the foregoing rules for the timely filing of a judicial claim for refund or credit of unutilized
input VAT, we rule on the present case of Mindanao II as follows:
We find that Mindanao IIs situation is similar to that of Philex in San Roque.
As mentioned above, Mindanao II filed its judicial claim with the CTA on 21 July 2006. This was after the
issuance of BIR Ruling No. DA-489-03 on 10 December 2003, but before its reversal on 5 October 2010.
However, while the BIR ruling was in effect when Mindanao II filed its judicial claim, the rule cannot be
properly invoked. The BIR ruling, as discussed earlier, contemplates premature filing. The situation of
Mindanao II is one of late filing. To repeat, its judicial claim was filed on 21 July 2006 long after 5 March
2006, the last day of the 30-day period for appeal. In fact, it filed its judicial claim 138 days after the lapse
of the 30-day period. (See timeline below)
E. Undersigned dissented in San Roque to the retroactive application of the mandatory and jurisdictional
nature of the 120+30 day period.
It is worthy to note that in San Roque, this ponente registered her dissent to the retroactive application of
the mandatory and jurisdictional nature of the 120+30 day period provided under Section 112(D) of the
Tax Code which, in her view, is unfair to taxpayers. It has been the view of this ponente that the mandatory
nature of 120+30 day period must be completely applied prospectively or, at the earliest, only upon the
finality of Aichi in order to create stability and consistency in our tax laws. Nevertheless, this ponente is
mindful of the fact that judicial precedents cannot be ignored. Hence, the majority view expressed in San
Roque must be applied.
SUMMARY OF RULES ON PRESCRIPTIVE PERIODS FOR CLAIMING REFUND OR CREDIT OF INPUT VAT
The lessons of this case may be summed up as follows:
A. Two-Year Prescriptive Period
1. It is only the administrative claim that must be filed within the two-year prescriptive period.
(Aichi) 2. The proper reckoning date for the two-year prescriptive period is the close of the taxable
quarter when the relevant sales were made. (San Roque)
3. The only other rule is the Atlas ruling, which applied only from 8 June 2007 to 12 September
2008. Atlas states that the two-year prescriptive period for filing a claim for tax refund or credit of
unutilized input VAT payments should be counted from the date of filing of the VAT return and
payment of the tax. (San Roque)
B. 120+30 Day Period
1. The taxpayer can file an appeal in one of two ways: (1) file the judicial claim within thirty days
after the Commissioner denies the claim within the 120-day period, or (2) file the judicial claim
within thirty days from the expiration of the 120-day period if the Commissioner does not act within
the 120-day period.
2. The 30-day period always applies, whether there is a denial or inaction on the part of the CIR.
3. As a general rule, the 3 0-day period to appeal is both mandatory and jurisdictional. (Aichi and
San Roque)
4. As an exception to the general rule, premature filing is allowed only if filed between 10
December 2003 and 5 October 2010, when BIR Ruling No. DA-489-03 was still in force. (San Roque)
5. Late filing is absolutely prohibited, even during the time when BIR Ruling No. DA-489-03 was in
force. (San Roque)
SUMMARY AND CONCLUSION
In sum, our finding is that the three administrative claims for the refund or credit of unutilized input VAT
were all timely filed, while the corresponding judicial claims were belatedly filed.
The foregoing considered, the CT A lost jurisdiction over Mindanao Ils claims for refund or
credit.1wphi1 The CTA EB erred in granting these claims.
WHEREFORE, we GRANT the Petition. The assailed Court of Tax Appeals En Banc Decision dated 11
November 2009 and Resolution dated 3 March 2010 of the in CTA EB Case No. 448 (CTA Case No. 7507)
are hereby REVERSED and SET ASIDE. A new ruling is entered DENYING respondent s claim for a tax refund
or credit ofP6,791,845.24.

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Republic of the Philippines

G.R. No. 184823

AICHI FORGING COMPANY OF

Proceedings before the Second Division of the CTA

Petitioners alleged claim for refund is subject to administrative investigation by the

April 15, 1998 to May 14, 1998

May 15, 1998 to June 14, 1998

21st calendar month

May 15, 1999 to June 14, 1999

Republic of the Philippines

G.R. No. 187485

COMMISSIONER OF INTERNAL REVENUE, Petitioner,

Republic of the Philippines

January 15, 2014

COMMISSIONER OF INTERNAL REVENUE, Petitioner,

C. The 30-Day Period to Appeal is Mandatory and Jurisdictional

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