EDC v CIR

G.R. No. 203367, March 17, 2021

ENERGY DEVELOPMENT CORPORATION, Petitioner, v. COMMISSIONER OF

INTERNAL REVENUE, Respondent.

DECISION

HERNANDO, J.:

This Petition for Review on Certiorari1 assails the May 31, 2012 Decision2 and August
29, 2012 Resolution3 of the Court of Tax Appeals (CTA) En Banc in CTA En Banc Case
No. 809 which denied petitioner Energy Development Corporation's (EDC) appeal for
lack of merit and for lack of cause of action.

The assailed rulings of the CTA En Banc affirmed with modification the May 9, 2011
Resolution4 of the CTA Second Division dismissing EDC's judicial claim 5 for tax credit or
refund of its unutilized input value-added taxes (VAT) for 2007 in the amount of
P89,103,931.29 lack of cause of action based on our ruling in Commissioner of Internal
Revenue v. Aichi Forging Company of Asia, Inc.6(Aichi).

The Facts:

EDC is a domestic corporation registered with the Bureau of Internal Revenue (BIR) as
a VAT taxpayer.7 On various dates, EDC filed its quarterly VAT Returns and the
amendments thereof, for the year 2007 through Electronic Filing & Payment System of
the BIR.

On March 30, 2009, EDC filed with the BIR Large Taxpayers District Office, Makati City
an administrative claim for tax credit or refund of its unutilized input VAT for its zero-
rated sales amounting to P89,103,931.29 for the taxable year 2007. 8

On April 24, 2009, EDC filed an appeal/Petition for Review with the CTA docketed as
CTA Case No. 7926 which was initially raffled to its First Division and subsequently
transferred to its Second Division.9

The dates of EDC's filings of its 2007 Quarterly VAT Returns and administrative and
judicial claims for input VAT tax credit or refund are as follows: 10chanrobleslawlibrary

Date of Filing (Quarterly

Date of Filing
Taxable Year 2007 Amended Quarterly VAT
(Administrative/Judicial Claim)
Returns)
April 25, 2007/December 22,
1st Quarter March 30, 2009/April 24, 2009
2007
2nd Quarter July 19, 2007/December 22, March 30, 2009/April 24, 2009
 2007
October 25, 2007/December 22,
3rd Quarter March 30, 2009/April 24, 2009
2007
4th Quarter January 25, 2008/none March 30, 2009/April 24, 2009
On June 18, 2009, respondent Commissioner of Internal Revenue (CIR) opposed the
claim of EDC, arguing that EDC failed to substantiate its claim for input VAT tax credit
or refund by the submission of proper documents. 11

Trial ensued with EDC presenting its evidence.

On October 6, 2010, the Supreme Court promulgated its Decision in Aichi12 which

delineated the prescriptive periods for filing separate administrative and judicial claims
for input VAT refund or tax credit of the then Section 112 (A) and (C), 13 of the National
Internal Revenue Code of 1997 (NIRC).

In parallel proceedings, the CTA effected a flurry of dismissals of judicial claims, all
anchored on our ruling in Aichi.

On March 25, 2011, the CIR filed a Motion to Dismiss 14 EDC's Petition for Review citing
EDC's failure to comply with the prescriptive periods under Section 112 (C), of the
NIRC. The CIR alleged that EDC did not wait for: (a) the CIR's action on its
administrative claim for input VAT tax credit or refund before appealing to the CTA
within 30 days, and (b) in the alternative of the CIR's inaction, reckon the 30-day
period to appeal from the expiration of 120 days from the date of the submission of
complete documents to support the administrative claim under Section 112 (A). 15

EDC opposed the CIR's motion to dismiss arguing that Aichi cannot be applied
retroactively to cases where the claim for input VAT tax credit or refund arose
before Aichi's promulgation and especially since the period relied upon for availment of
remedies was based on prevailing jurisprudence. EDC further argued that our ruling
in Atlas Consolidated Mining and Development Corporation v. Commissioner of Internal
Revenue (Atlas)16 is apropos where we ruled that the two-year prescriptive period
under Section 22917 of the NIRC applies to claims for refund or tax credit of unutilized
input VAT.

Ruling of the CTA Second Division.

The CTA Second Division, in its May 9, 2011 Resolution, 18 dismissed EDC's petition for
review for prematurity:chanroblesvirtualawlibrary
WHEREFORE, premises considered, respondent's "Motion to Dismiss" filed on March
25, 2011 is hereby GRANTED. Accordingly, the instant Petition for Review
is DENIED for having been prematurely filed.19
The CTA Second Division held that Section 112 (A), of the NIRC is clear that "a
taxpayer may apply for an administrative claim for refund of its unutilized input VAT
payments 'within two years reckoned from the close of the taxable quarter when the
relevant sales were made".20

Citing Aichi, the Second Division of the tax court explained that after the filing of the
administrative claim, the taxpayer must wait for the decision of the CIR thereon or the
lapse of the 120-day period from the submission of the complete documents in support
thereof before filing a petition for review with the CTA. In both instances, the filing of
the judicial claim must be made within 30 days of either reckoning event or period. 21

Lastly, the CTA Second Division rejected EDC's argument that Section 229 of the NIRC
is applicable to claims for input VAT tax credit or refund. Citing its own Revised Rules of
the Court of Tax Appeals22 and our ruling in Commissioner of Internal Revenue v.
Mirant Pagbilao Corporation (Mirant),23 the CTA Second Division reiterated that the two-
year prescriptive period to file a petition for review with the CTA refers to cases of
disputed assessment in Section 228 of the NIRC, the section preceding the invoked
Section 229, and not claims for refund of input VAT under Section 112 thereof
Specifically, the CTA Second Division noted that the requirement of filing a petition for
review within the two-year period only applies to instances of erroneous payment or
illegal collection of internal revenue taxes. In all, taxpayers cannot avail of the
provisions of Section 229 in cases of refund of unutilized creditable input VAT as the
latter is not an erroneously, illegally or unlawfully collected tax.24

EDC moved for reconsideration which was denied by the CTA Second Division in its July
15, 2011 Resolution.25

Posthaste, EDC appealed to the CTA En Banc raising the issue

of:chanroblesvirtualawlibrary
WHETHER OR NOT [EDC] HAD TIMELY AND DULY FILED ITS ADMINISTRATIVE AND
JUDICIAL CLAIMS FOR TAX CREDIT/REFUND OF ITS INPUT VAT ATTRIBUTABLE TO ITS
ZERO-RATED SALE OF STEAM AND PURCHASES UNDER THE "CONSTRUCTION-IN-
PROGRESS" AMOUNTING TO P89,103,931.29 FOR THE YEAR 2007. 26
The Ruling of the CTA En Banc.

In its assailed May 31, 2012 Decision, the CTA En Banc affirmed the CTA Second
Division's dismissal of EDC's petition for review based on Aichi,
viz.:chanroblesvirtualawlibrary
WHEREFORE, the assailed resolutions dated May 9, 2011 and July 15, 2011 in CTA
Case No. 7926 of the Second Division of this Court are hereby AFFIRMED WITH
MODIFICATION. The instant Petition for Review is hereby DENIED for lack of merit
and for lack of cause of action.27
Applying the Court's pronouncement in Aichi, the CTA En Banc ruled that while EDC
timely filed its administrative claim for input VAT tax credit or refund under Section 112
(A) of the NIRC, i.e., within two years from the close of the taxable quarter when the
sales were made, EDC however prematurely filed its judicial claim or the appeal to the
CTA when it did not comply with the indispensable requirement for the taxpayer to
await the action or inaction of the CIR within the 120-day period as prescribed in
Section 112 (C).28

According to the CTA En Banc, EDC's premature filing of its judicial claim is a violation
of the doctrine of exhaustion of administrative remedies and thus not a jurisdictional
defect. Consequently, EDC's cause of action against the CIR had not yet ripened when it
filed its petition for review before the CTA. In short, the dismissal of EDC's petition for
review was correct but ought to have been based on lack of cause of action. 29
EDC forthwith filed a motion for reconsideration which was subsequently denied by the
CTA En Banc.30

EDC thus comes to this Court decrying the dismissal of its petition for review based on
our ruling in Aichi that the filing of the judicial claim must await either of the CIR's
action or inaction within a 120-day period, on the administrative claim under Section
112 (A) and (C) of the NIRC. In the main, EDC argues that Aichi is not applicable,
either retroactively or as a controlling doctrine, in claims for refund of unutilized input
VAT.

Issues

EDC posited the following assignment of errors:chanroblesvirtualawlibrary

I. WHETHER OR NOT THE AICHI CASE CAN RETROACTIVELY APPLY TO CASES ALREADY
FILED OR PENDING IN COURTS PRIOR TO ITS PROMULGATION.

II. WHETHER OR NOT THE AICHI CASE IS THE CONTROLLING DOCTRINE IN CASES

INVOLVING CLAIMS FOR REFUND OF UNUTILIZED INPUT VAT.

III. WHETHER OR NOT THE AICHI CASE BEING A RULING OF A DIVISION OF THIS

HONORABLE COURT CAN OVERTURN PREVIOUS DOCTRINES RENDERED BY ITS OTHER
DIVISIONS.

IV. WHETHER OR NOT THE 2-YEAR PRESCRIPTIVE PERIOD FOR FILING CLAIMS FOR
REFUND UNDER SECTION 112(A) IN RELATION TO 112(C) OF THE NATIONAL
INTERNAL REVENUE CODE REFERS ONLY TO ADMINISTRATIVE CLAIMS.

V. WHETHER OR NOT THE DOCTRINE ON EXHAUSTION OF ADMINISTRATIVE REMEDIES

PROPERLY APPLIES TO [EDC'S] CASE.

VI. WHETHER OR NOT THE DENIAL OF THE CLAIM FOR REFUND CONSTITUTES UNJUST
ENRICHMENT AND SOLUTIO INDEBITI ON THE PART OF THE GOVERNMENT. 31
We fuse the issues into the singular issue of whether EDC timely filed its judicial claim
or its petition for review before the CTA, for unutilized input VAT tax credit or refund
under Section 112, (A) and (D) of the NIRC.

Our Ruling

The bone of contention herein lies in the applicability, or inapplicability, of our ruling
in Aichi which squarely ruled on the prescriptive periods for the filing of a judicial claim.
However, it must be pointed out that the touchstone of EDC's cassus belli is found on
Section 112 (C) of the NIRC.

Section 112
(A) and (C)  
of the NIRC.

The contentious provision, before its recent amendment by Republic Act No.
10963,32 provides:chanroblesvirtualawlibrary
SECTION 112. Refunds or Tax Credits of Input Tax. - (A) Zero-rated or Effectively
Zero-rated Sales. - Any VAT-registered person, whose sales are zero-rated or
effectively zero-rated may, within two (2) years after the close of the taxable quarter
when the sales were made, apply for the issuance of a tax credit certificate or refund of
creditable input tax due or paid attributable to such sales, except transitional input tax,
to the extent that such input tax has not been applied against output tax: Provided,
however, That in the case of zero-rated sales under Section 106(A)(2)(a)(1),(2) and
(B) and Section 108 (B)(1) and (2), the acceptable foreign currency exchange proceeds
thereof had been duly accounted for in accordance with the rules and regulations of the
Bangko Sentral ng Pilipinas (BSP): Provided, further, That where the taxpayer is
engaged in zero-rated or effectively 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.

xxx

(C) Period within which Refund or Tax Credit of Input Taxes shall be Made. - In proper
cases, the Commissioner shall grant a refund or issue the tax credit certificate for
creditable input taxes within one hundred twenty (120) days from the date of
submission of complete documents in support of the application filed in accordance with
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.
Notably, the recent amendment to Section 112 (C) 33 finally removed the confusion on
the reckoning period for judicial claims by legislating a singular action for the CIR to
decide on the administrative claim for input VAT tax credit or refund within a period of
ninety (90) days.

Contrary to the arguments of EDC, our ruling in Aichi is definitive on the nature of the
prescriptive periods for the filing of claims for input VAT tax credit or refund under the
then Section 112 (A) and (C) of the NIRC.

Aichi delineated the applicability of the two-year prescriptive period mentioned in

Section 112 (A) of the NIRC solely to administrative claims for input VAT tax credit or
refund, thus:chanroblesvirtualawlibrary
Respondent's 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 has no legal basis.

There is nothing in Section 112 of the NIRC to support respondent's 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 ... 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
[(C)] 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 [(C)] 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 [(C)] 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.34 (Emphasis supplied)
Moreover, both subsections (A) and (C) speak of different periods within
which different claims ought to be made. Although these subsections are not
specifically designated as either an "administrative claim" or a "judicial claim," the
classification of claims and their distinct and separate prescriptive periods can be
gleaned from the wordings thereof.

Aside from the fact that subsection (A) is the introductory and initial paragraph on the
main section on "Refunds or Tax Credits of Input Tax," subsection (C) specifically refers
to it as a preceding claim or application for input VAT tax credit or refund made by the
taxpayer before the CIR which the latter, in proper cases, shall grant or issue within
120 days from the date of submission of complete documents in support of the
application or claim filed. Plainly, therefore, the CIR has 120 days within which to act on
the administrative claim which necessarily precedes the filing of a judicial claim.

The second paragraph of subsection (C) then specifically covers both a prior action of
the CIR or his inaction in the period of 120 days afforded him to decide on the
administrative claim. In both instances, as has been repeatedly found and reinforced in
jurisprudence, the taxpayer claiming the input VAT refund or tax credit has 30 days
from the action, or the 120-day period of inaction, by the CIR.

As held in Aichi, there is nothing in Section 112 of the NIRC which sanctions the
simultaneous filing of administrative and judicial claims, and the filing of the judicial
claim prior to the action of the CIR or the lapse of the 120-day period within which the
CIR is required to act on the administrative claim. 35

Neither can EDC take refuge in the prior cases of Atlas36 and Mirant37 as the issues
raised therein did not squarely rule on the nature of the prescriptive periods for both
administrative and judicial claims for input VAT tax refund or credit under Section 112
(A) and (C) of the NIRC. Besides, the Court has already squarely ruled on the
confliction of Atlas from the exact provision of law, Section 112 (A), while Aichi based
its ruling in Mirant regarding the prescriptive period for administrative claims.

The law is explicit. Indeed, Atlas and Mirant dealt with the two-year prescriptive period

for filing a tax refund or credit provided in both Section 230 (now Section 229 of the
NIRC)38 and Section 112 (A). Specifically, the cases ruled on the two-year
prescriptive period for the filing of administrative claims reckoned from either:
(1) the close of the taxable quarter when the zero-rated sales were made according to
the specific provision of law in Section 112 (A) as ruled in Mirant; and (2) the date of
filing of the quarterly VAT return as ruled in Atlas drawing an analogy to the then
Section 230 of the 1977 Tax Code (now Section 229 of the NIRC) as an erroneously or
illegally collected tax.

EDC's interpretation of Section 112 engulfs to other provisions of the NIRC which do not
specifically deal with claims for input VAT tax refund or credit. Instead of applying
directly the particular provision on refund or credit of input VAT, EDC insists on applying
a different section (229) on "Recovery of Tax Erroneously or Illegally Collected."

Section 112 (A) simply cannot be invoked as the prescriptive period for both
administrative and judicial claims of input VAT tax refund or credit with the CIR. The
taxpayer claiming input VAT tax credit or refund should not ignore subsection (C) on
judicial claims, and persist in the notion that the correct prescriptive period to file any
of the claims can be found in an entirely separate provision and chapter (Chapter III)
on "Protesting, Assessment, Refund, Etc."

The teachings
in Commissioner
of Internal
Revenue v. San  
Roque Power
Corporation (San
Roque).39

San Roque clarified the jurisdictional doctrines in Aichi.

First. The 120+30 day mandatory jurisdictional periods in Section 112 (C) are clear,
plain and unequivocal:chanroblesvirtualawlibrary
Clearly, San Roque failed to comply with the 120-day waiting period, the time expressly
given by law to the Commissioner to decide whether to grant or deny San Roque's
application for tax refund or credit. It is indisputable that compliance with the 120-day
waiting period is mandatory and jurisdictional. The waiting period, originally fixed at 60
days only, was part of the provisions of the first VAT law, Executive Order No. 273,
which took effect on 1 January 1988. The waiting period was extended to 120 days
effective 1 January 1998 under RA 8424 or the Tax Reform Act of 1997. Thus, the
waiting period has been in our statute books for more than fifteen (15) years before
San Roque filed its judicial claim.

Failure to comply with the 120-day waiting period violates a mandatory provision of
law. It violates the doctrine of exhaustion of administrative remedies and renders the
petition premature and thus without a cause of action, with the effect that the CTA does
not acquire jurisdiction over the taxpayer's petition. Philippine jurisprudence is replete
with cases upholding and reiterating these doctrinal principles.

The charter of the CTA expressly provides that its jurisdiction is to review on appeal
"decisions of the Commissioner of Internal Revenue in cases involving ... refunds of
internal revenue taxes." When a taxpayer prematurely files a judicial claim for tax
refund or credit with the CTA without waiting for the decision of the Commissioner,
there is no "decision" of the Commissioner to review and thus the CTA as a court of
special jurisdiction has no jurisdiction over the appeal. The charter of the CTA also
expressly provides that if the Commissioner fails to decide within "a specific period"
required by law, such "inaction shall be deemed a denial" of the application for tax
refund or credit. It is the Commissioner's decision, or inaction "deemed a denial," that
the taxpayer can take to the CTA for review. Without a decision or an "inaction x x x
deemed a denial" of the Commissioner, the CTA has no jurisdiction over a petition for
review.

San Roque's failure to comply with the 120-day mandatory period renders its petition
for review with the CTA void. Article 5 of the Civil Code provides, "Acts executed
against provisions of mandatory or prohibitory laws shall be void, except when the law
itself authorizes their validity." San Roque's void petition for review cannot be
legitimized by the CTA or this Court because Article 5 of the Civil Code states that such
void petition cannot be legitimized "except when the law itself authorizes [its] validity.
There is no law authorizing the petition's validity.

It is hornbook doctrine that a person committing a void act contrary to a mandatory

provision of law cannot claim or acquire any right from his void act. A right cannot
spring in favor of a person from his own void or illegal act. This doctrine is repeated in
Article 2254 of the Civil Code, which states, "No vested or acquired right can arise from
acts or omissions which are against the law or which infringe upon the rights of others."
For violating a mandatory provision of law in filing its petition with the CTA, San Roque
cannot claim any right arising from such void petition. Thus, San Roque's petition with
the CTA is a mere scrap of paper.

xxx

x x x The Atlas doctrine does not interpret, expressly or impliedly, the 120+30

day periods.

In fact, Section 106 (b) and (e) of the Tax Code of 1977 as amended, which was the
law cited by the Court in Atlas as the applicable provision of the law did not yet provide
for the 30-day period for the taxpayer to appeal to the CTA from the decision or
inaction of the Commissioner. Thus, the Atlas doctrine cannot be invoked by anyone to
disregard compliance with the 30-day mandatory and jurisdictional period. Also, the
difference between the Atlas doctrine on one hand, and the Mirant doctrine on the other
hand, is a mere 20 days. The Atlas doctrine counts the two-year prescriptive period
from the date of payment of the output VAT, which means within 20 days after the
close of the taxable quarter. The output VAT at that time must be paid at the time of
filing of the quarterly tax returns, which were to be filed "within 20 days following the
end of each quarter."

xxx

Whether the Atlas doctrine or the Mirant doctrine is applied to San Roque is immaterial

because what is at issue in the present case is San Roque's non compliance with the
120-day mandatory and jurisdictional period, which is counted from the date it filed its
administrative claim with the Commissioner. The 120-day period may extend beyond
the two-year prescriptive period, as long as the administrative claim is filed within the
two-year prescriptive period. However, San Roque's fatal mistake is that it did not wait
for the Commissioner to decide within the 120-day period, a mandatory period whether
the Atlas or the Mirant doctrine is applied.

At the time San Roque filed its petition for review with the CTA, the 120+30 day
mandatory periods were already in the law. Section 112(C) expressly grants the
Commissioner 120 days within which to decide the taxpayer's claim. The law is clear,
plain, and unequivocal: "x x x the Commissioner shall grant a refund or issue the tax
credit certificate for creditable input taxes within one hundred twenty (120) days from
the date of submission of complete documents." Following the verba legis doctrine, this
law must be applied exactly as worded since it is clear, plain, and unequivocal. The
taxpayer cannot simply file a petition with the CTA without waiting for the
Commissioner's decision within the 120-day mandatory and jurisdictional period. The
CTA will have no jurisdiction because there will be no "decision" or "deemed a denial"
decision of the Commissioner for the CTA to review. In San Roque's case, it filed its
petition with the CTA a mere 13 days after it filed its administrative claim with the
Commissioner. Indisputably, San Roque knowingly violated the mandatory 120-day
period, and it cannot blame anyone but itself.

Section 112 (C) also expressly grants the taxpayer a 30-day period to appeal to the
CTA the decision or inaction of the Commissioner, thus:chanroblesvirtualawlibrary
. . . 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.40 (Emphasis supplied; citations omitted)
Second. The depiction of the applicable prescriptive periods for administrative and
judicial claims and the levels of compliance under Section 112 (A) and (C) of the
NIRC:chanroblesvirtualawlibrary
II. Prescriptive Periods under Section 112 (A) and (C)

There are three compelling reasons why the 30-day period need not necessarily fall
within the two-year prescriptive period, as long as the administrative claim is filed
within the two-year prescriptive period.

First, Section 112 (A) clearly, plainly, and unequivocally provides that the taxpayer
"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 the creditable input
tax due or paid to such sales." In short, the law states that the taxpayer may apply
with the Commissioner for a refund or credit "within two (2) years," which means at
anytime within two years. Thus, the application for refund or credit may be filed by the
taxpayer with the Commissioner on the last day of the two-year prescriptive period and
it will still strictly comply with the law. The two-year prescriptive period is a grace
period in favor of the taxpayer and he can avail of the full period before his right to
apply for a tax refund or credit is barred by prescription.

Second, Section 112 (C) provides that the Commissioner shall decide the application for
refund or credit "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)." The reference in Section 112 (C) of the submission of documents "in support of
the application filed in accordance with Subsection A" means that the application in
Section 112 (A) is the administrative claim that the Commissioner must decide within
the 120- day period. In short, the two-year prescriptive period in Section 112 (A) refers
to the period within which the taxpayer can file an administrative claim for tax refund
or credit. Stated otherwise, the two-year prescriptive period does not refer to the filing
of the judicial claim with the CTA but to the filing of the administrative claim with the
Commissioner. As held in Aichi, the "phrase 'within two years ... apply for the issuance
of a tax credit or refund' refers to applications for refund/credit with the CIR and not to
appeals made to the CTA."

Third, if the 30-day period, or any part of it, is required to fall within the two-year
prescriptive period (equivalent to 730 days), then the taxpayer must file his
administrative claim for refund or credit within the first 610 days of the two-year
prescriptive period. Otherwise, the filing of the administrative claim beyond the first
610 days will result in the appeal to the CTA being filed beyond the two-year
prescriptive period. Thus, if the taxpayer files his administrative claim on the 611th
day, the Commissioner, with his 120-day period, will have until the 731st day to decide
the claim. If the Commissioner decides only on the 731st day, or does not decide at all,
the taxpayer can no longer file his judicial claim with the CTA because the two-year
prescriptive period (equivalent to 730 days) has lapsed. The 30-day period granted by
law to the taxpayer to file an appeal before the CTA becomes utterly useless, even if
the taxpayer complied with the law by filing his administrative claim within the two-
year prescriptive period.

The theory that the 30-day period must fall within the two-year prescriptive period adds
a condition that is not found in the law. It results in truncating 120 days from the 730
days that the law grants the taxpayer for filing his administrative claim with the
Commissioner. This Court cannot interpret a law to defeat, wholly or even partly, a
remedy that the law expressly grants in clear, plain, and unequivocal language.

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 any time 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). 41
Third. The ruling in Atlas was abandoned in Mirant which was subsequently affirmed
in Aichi where the 120+30 day jurisdictional periods was first raised. Aichi simply
followed the verba legis rule enshrined in the statute, Section 112, (A) and (C). We
emphasized in San Roque, thus:chanroblesvirtualawlibrary
The old rule that the taxpayer may file the judicial claim, without waiting for the
Commissioner's decision if the two-year prescriptive period is about to expire, cannot
apply because that rule was adopted before the enactment of the 30-day period. The
30-day period was adopted precisely to do away with the old rule, so that
under the VAT System the taxpayer will always have 30 days to file the judicial
claim even if the Commissioner acts only on the 120th day, or does not act at
all during the 120-day period. With the 30-day period always available to the
taxpayer, the taxpayer can no longer file a judicial claim for refund or credit of input
VAT without waiting for the Commissioner to decide until the expiration of the 120-day
period.

To repeat, a claim for tax refund or credit, like a claim for tax exemption, is construed
strictly against the taxpayer. One of the conditions for a judicial claim of refund or
credit under the VAT System is compliance with the 120+30 day mandatory and
jurisdictional periods. Thus, strict compliance with the 120+30 day periods is necessary
for such a claim to prosper, whether before, during, or after the effectivity of the Atlas
doctrine, except for the period from the issuance of BIR Ruling No. DA-489-03 on 10
December 2003 to 6 October 2010 when the Aichi doctrine was adopted, which again
reinstated the 120+30 day periods as mandatory and jurisdictional. 42 (Emphasis in the
original)
Last. The exception to the strict application of Aichi and the general interpretative rules
issued by the CIR which ultimately save EDC's herein petition. Given the difficult
question of law and conflicting rulings by the Court, EDC and taxpayers alike have
hedged their actions in the filing of simultaneous administrative and judicial claims or
the filing of premature judicial claims on an incorrect interpretation of Section 112 (A)
and (C) of the NIRC.

The Court ruled in San Roque that all taxpayers can rely on BIR Ruling No. DA-489-03
dated December 10, 2003 issued by the CIR from the time of its issuance up to its
reversal in Aichi on October 6, 2010:chanroblesvirtualawlibrary
BIR Ruling No. DA-489-03 does provide a valid claim for equitable estoppel under
Section 246 of the Tax Code. BIR Ruling No. DA-489-03 expressly states that the
"taxpayer-claimant need not wait for the lapse of the 120-day period before it could
seek judicial relief with the CTA by way of Petition for Review." Prior to this ruling, the
BIR held, as shown by its position in the Court of Appeals, that the expiration of the
120-day period is mandatory and jurisdictional before a judicial claim can be filed.

There is no dispute that the 120-day period is mandatory and jurisdictional, and that
the CTA does not acquire jurisdiction over a judicial claim that is filed before the
expiration of the 120-day period. There are, however, two exceptions to this rule. The
first exception is if the Commissioner, through a specific ruling, misleads a particular
taxpayer to prematurely file a judicial claim with the CTA. Such specific ruling is
applicable only to such particular taxpayer. The second exception is where the
Commissioner, through a general interpretative rule issued under Section 4 of the Tax
Code, misleads all taxpayers into filing prematurely judicial claims with the CTA. In
these cases, the Commissioner cannot be allowed to later on question the CTA's
assumption of jurisdiction over such claim since equitable estoppel has set in as
expressly authorized under Section 246 of the Tax Code.

Section 4 of the Tax Code, a new provision introduced by RA 8424, expressly grants to
the Commissioner the power to interpret tax laws, thus:chanroblesvirtualawlibrary
Sec. 4. Power of the Commissioner To Interpret Tax Laws and To Decide Tax Cases. -
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.

The power to decide disputed assessments, refunds of internal revenue taxes, fees or
other charges, penalties imposed in relation thereto, or other matters arising under this
Code or other laws or portions thereof administered by the Bureau of Internal Revenue
is vested in the Commissioner, subject to the exclusive appellate jurisdiction of the
Court of Tax Appeals.
Since the Commissioner has exclusive and original jurisdiction to interpret tax laws,
taxpayers acting in good faith should not be made to suffer for adhering to general
interpretative rules of the Commissioner interpreting tax laws, should such
interpretation later turn out to be erroneous and be reversed by the Commissioner or
this Court. Indeed, Section 246 of the Tax Code expressly provides that a reversal of a
BIR regulation or ruling cannot adversely prejudice a taxpayer who in good faith relied
on the BIR regulation or ruling prior to its reversal. Section 246 provides as follows:

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:chanroblesvirtualawlibrary
(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.

Thus, a general interpretative rule issued by the Commissioner may be relied upon by
taxpayers from the time the rule is issued up to its reversal by the Commissioner or
this Court. Section 246 is not limited to a reversal only by the Commissioner because
this Section expressly states, "Any revocation, modification or reversal" without
specifying who made the revocation, modification or reversal. Hence, a reversal by this
Court is covered under Section 246.

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

xxx
[T]he 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. (Emphasis ours)

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 120-day 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.43
Application to the case at bench.

Clearly, from the foregoing, EDC did not comply with Section 112 (C) of the NIRC
relative to the filing of its judicial claim before the CTA. Thus, even without harping on
the applicability of Aichi, EDC's premature judicial claim has no leg to stand on.

However, applying the exception molded in San Roque, i.e., that "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,"44 EDC's petition for review before
the CTA should be reinstated since the filing of its administrative and judicial claims fell
within the stated period.

On this score, we remove the cobwebs in the declaration of the CTA En Banc that EDC's
premature filing of its petition for review merely failed to exhaust administrative
remedies which "is not a jurisdictional defect." 45 As has been repeatedly emphasized
herein and in the auspicious case of San Roque, the 120+30 day prescriptive periods in
the law is mandatory and jurisdictional.

WHEREFORE, the Petition for Review on Certiorari is GRANTED. The May 31, 2012
Decision and August 29, 2012 Resolution of the Court of Tax Appeals En Banc in CTA EB
No. 809 are REVERSED and SET ASIDE. The Petition for Review of petitioner Energy
Development Corporation in CTA Case No. 7926 before the Court of Tax Appeals
Second Division is REINSTATED and the proceedings therein are to be resumed with
dispatch.chanroblesvirtualawlibrary
SO ORDERED.
CIR v Philex
SECOND DIVISION

G.R. No. 230016, November 23, 2020

COMMISSIONER OF INTERNAL REVENUE, Petitioner, v. PHILEX MINING

CORPORATION, Respondents.

DECISION

LOPEZ, J.:

While the tax law requires mandatory compliance with the keeping of subsidiary
journals and the filing of monthly value-added tax (VAT) declarations, the Court will not
deny the request for refund on the sole basis that the taxpayer failed to comply with
these requirements when the law does not provide for its compliance by the taxpayer to
be entitled for refund. The Court may not construe a statute that is free from doubt;
neither can we impose conditions or limitations when none is provided for. 1

This Petition for Review on Certiorari2 under Rule 45 of the Rules of Court seeks to set
aside the Decision3 dated October 19, 2016 and Resolution4 dated February 14, 2017 of
the Court of Tax Appeals (CTA) En Banc in CTA EB No. 1334, which affirmed the CTA
Division's Decision5 dated March 31, 2015 and Resolution6 dated June 24, 2015 in CTA
Case Nos. 8553 and 8562, ordering the Commissioner of Internal Revenue (CIR) to
refund in favor of Philex Mining Corporation (Philex Mining) the amount of
P51,734,898.99, representing its unutilized input VAT attributable to its zero-rated
sales for the second and third quarters of the taxable year (TY) 2010.

ANTECEDENTS

Philex Mining is a domestic corporation engaged in the mining business, such as the
exploration and operation of mining properties and the commercial production,
marketing, and exportation of mineral products.7 It is a VAT-registered taxpayer with
duly approved Application for Zero-Rate effective April 12, 1998. 8 During the second
and third quarters of TY 2010, Philex Mining sold and shipped mineral products to Pan
Pacific Copper Co., Ltd., Louise Dreyfus Commodities Metals Suisse SA, and Heraeus
Ltd.9

On February 13, 2012, Philex Mining filed its amended quarterly VAT returns for the
second and third quarters to reflect excess input tax arising from its zero-rated
sales.10 On June 7, 2012 and June 22, 2012, it filed claims for refund of P45,048,921.68
and P51,464,383.81 with the Department of Finance's One-Stop Shop Center (DOF-
OSS) and attached to the Claimant Information Sheet Nos. 62442 and 22002, the
letters dated May 4, 2012, containing a list of documents to support its claims. 11

Thereafter, Philex Mining filed two (2) separate petitions for review before the CTA
Division on October 9, 2012 (docketed as CTA Case No. 8553) and on October 25, 2012
(docketed as CTA Case No. 8562).12 The Court granted the motions to consolidate the
two (2) cases and to commission an Independent Certified Public Accountant (ICPA) on
February 14, 2013.13 Thereafter, trial ensued.

Ruling of the CTA

On March 31, 2015, the CTA Division partly granted Philex Mining's petitions. 14 It held
that Philex Mining timely filed its administrative and judicial claims for a refund within
the period prescribed under Sections 112 (A) and (C) of the 1997 National Internal
Revenue Code (NIRC), as amended15 (Tax Code), and that it attached to the Claimant
Information Sheets the required documents to support its claims. The CTA Division
examined the pieces of documentary evidence submitted by Philex Mining and
evaluated the report issued by the ICPA, and concluded that Philex Mining sufficiently
proved its entitlement to a refund for its unutilized input VAT attributable to its zero-
rated sales for the second and third quarters of TY 2010, but in the reduced amount of
P51,734,898.99. The dispositive portion of the Decision reads: cralawred

WHEREFORE, premises considered, the instant Petition for Review is

hereby PARTIALLY GRANTED. Accordingly, [the Commissioner of Internal Revenue] is
hereby ORDERED to REFUND in favor of [Philex Mining Corporation] the amount of
P51,734,898.99, representing its unutilized and excess input VAT attributable to its
zero-rated sales for the second and third quarter[s] of 2010.

SO ORDERED.16 (Emphases in the original.)

The CIR moved for reconsideration alleging that the judicial claim for refund was
premature, Philex Mining did not submit to the DOF-OSS the required checklist of
documents, and Philex Mining failed to comply with the accounting requirements,
specifically the keeping of subsidiary sales journal and subsidiary purchase journal, and
the filing of monthly VAT declarations.

On June 24, 2015, the CTA Division denied the CIR's motion for reconsideration for lack
of merit.17 The CTA Division reiterated that the judicial claim was timely filed and that
Philex Mining submitted complete documents to support its claims. As regards non-
compliance with the accounting requirements, the CTA Division held that there was
nothing in Section 112 (A) of the Tax Code that required the presentation of subsidiary
journals or the filing of monthly VAT declarations so that the taxpayer may be entitled
to a refund or the issuance of tax credit certificate of its claimed excess input tax.

Discontented, the CIR appealed to the CTA En Banc reiterating the arguments raised in
his motion for reconsideration filed with the CTA Division. On October 19, 2016, the
CTA En Banc affirmed the CTA Division's findings and conclusion and disposed: 18
WHEREFORE, the Petition for Review filed by [the] Commissioner of Internal Revenue
on August 5, 2015, is hereby DENIED, for lack of merit. Accordingly, the assailed
Decision and Resolution dated March 31, 2015 and June 24, 2015, respectively
promulgated by [the] Court in Division in CTA Case Nos. 8553 & 8562, are
hereby AFFIRMED. chanroblesvirtuallawlibrary

SO ORDERED.19 (Emphases in the original.)

Failing at reconsideration,20 the CIR, through the Office of the Solicitor General, filed the
instant petition with this Court, raising the sole issue: cralawred
CONTRARY TO THE FINDINGS OF THE CTA EN BANC, TAX DECLARATIONS AND
SUBSIDIARY JOURNALS FORM PART OF THE REQUIREMENTS OF THE LAW FOR THE
GRANT OF TAX CREDIT OR REFUND, AND IT IS THE OBLIGATION OF RESPONDENT TO
PROVE COMPLIANCE THERET0.21
RULING

The petition is bereft of merit.

First off, it is not disputed that Philex Mining was engaged in zero-rated export sales
under Section 106 (A)(2)(a)(1)22 of the Tax Code and that it imported goods other than
capital goods and purchased services in relation to such sales for the second and third
quarters of TY 2010.23

Under Section 112 (A),24 a taxpayer engaged in zero-rated sales may apply for the
issuance of a tax credit certificate, or refund of excess input tax due or paid,
attributable to the sale, subject to the following conditions: (1) the taxpayer must be
VAT-registered; (2) the taxpayer must be engaged in sales which are zero-rated or
effectively zero-rated; (3) the claim must be filed within two (2) years after the close of
the taxable quarter when such sales were made; (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; 25 and (5) in case of
zero-rated sales under Section 106 (A)(2)(a)(1), the acceptable foreign currency
exchange proceeds have been duly accounted for in accordance with Bangko Sental ng
Pilipinas rules and regulations.26

The issue hinges on the fourth requisite.

The CIR posits that Philex Mining did not comply with the requirement of Section 4.113-
327 of Revenue Regulations (RR) No. 16-200528 to keep, preserve, and maintain
subsidiary sales and purchase journals. Likewise, Philex Mining failed to prove that it
filed the monthly VAT declarations required under Section 114 (A) 29 of the Tax Code, as
implemented by Section 4.114-130 of RR No. 16-2005. The CIR opines that prior
compliance with these requirements is a condition sine qua non in claiming unutilized
zero-rated input VAT because the subsidiary journals and monthly VAT declarations will
assist the CIR and the courts in determining whether Philex Mining incurred input taxes
in connection with its zero-rated sales and whether the input taxes were not applied
against any output tax liability.31

The CIR is mistaken.

It is elementary rule in statutory construction that when the words of a statute are
clear, plain, and free from ambiguity, it must be given its literal meaning and applied
without attempted interpretation.32 The plain-meaning rule or verba legis, expressed in
the maxim index animi sermo, or speech is the index of intention, rests on the valid
presumption that the words employed by the legislature in a statute correctly express
its intention or will, and preclude the court from construing it differently. 33Verba legis
non est recedendum. From the words of a statute there should be no departure.
Furthermore, every part of the statute must be interpreted with reference to the
context, i.e. that every part of the statute must be considered together with the other
parts, and kept subservient to the general intent of the whole enactment. 34
Guided by the foregoing principles, we see no reason to depart from the findings and
conclusion of the CTA. As the CTA aptly held, and as will be discussed below, there was
nothing in the Tax Code or in RR No. 16-2005 that would suggest that the subsidiary
journals and monthly VAT declarations are part of the substantiation requirements that
must be complied with to support a claim for tax refund or credit. 35

Under Section 110 (A)36 of the Tax Code, creditable input taxes must be evidenced by a
VAT invoice or official receipt, which must, in turn, be issued in accordance with
Sections 11337 and 237.38 Related to these provisions, Sections 4.110-8, 4.113-1 (A)
and (B) of RR No. 16-2005 enumerate the documents required and information that
must appear on the face of the official receipt, to substantiate the input tax on
importation of goods other than capital goods and on domestic purchases of
services, viz.:
cralawred

SEC. 4.110-8. Substantiation of Input Tax Credits. -

(a) Input taxes for the importation of goods or the domestic purchase of goods,
properties or services is made in the course of trade or business, whether such input
taxes shall be credited against zero-rated sale, non-zero-rated sales, or subjected to
the 5% Final Withholding VAT, must be substantiated and supported by the
following documents, x x x:

(1) For the importation of goods - import entry or other equivalent document showing
actual payment of VAT on the imported goods.

xxxx

(4) For the purchase of services - official receipt showing the information required
under Secs. 113 and 237 of the Tax Code.

xxxx

SEC. 4.113-1. Invoicing Requirements. -

(A) A VAT-registered person shall issue: -

xxxx

(2) A VAT official receipt for every lease of goods or properties, and for every sale,
barter or exchange of services.

Only VAT-registered persons are required to print their TIN followed by the word "VAT"
in their invoice or official receipts. Said documents shall be considered as a "VAT
Invoice" or VAT official receipt. All purchases covered by invoices/receipts other than
VAT Invoice/VAT Official Receipt shall not give rise to any input tax.

xxxx

(B) Information contained in VAT invoice or VAT official receipt. - The following

information shall be indicated in VAT invoice or VAT official receipt:
(1) A statement that the seller is a VAT-registered person, followed by his TIN;

(2) The total amount which the purchaser pays or is obligated to pay to the seller with
the indication that such amount includes the VAT; Provided, That:

xxxx

(c) If the sale is subject to zero percent (0%) VAT, the term "zero-rated sale" shall be
written or printed prominently on the invoice or receipt[.] x x x. (Emphases supplied.)
From the foregoing, it is apparent that importation of non-capital goods must be
evidenced by import entry declarations or any equivalent document; and the domestic
purchase of services, by VAT official receipts showing: (1) that the seller is a VAT-
registered person; (2) the Tax Identification Number (TIN) of the seller; (3) the word
"zero-rated sale" was written or printed prominently on the receipt in case of zero-rated
sales; (4) the date of transaction, nature of service, as well as the name, business
style, if any, and address of the purchaser; and (5) the TIN of the purchaser. 39 Case law
states that failure to comply with the invoicing requirements is sufficient ground to deny
the claim for refund or tax credit.40 Too, Revenue Memorandum Circular No. 42-
200341 only provides for non-compliance with the invoicing requirements as a ground
for denial of the claim for refund or credit, viz.: cralawred

Q- Should penalty be imposed on TCC application for failure of claimant to comply with
13: certain invoicing requirements, (e.g., sales invoices must bear the TIN of the seller)?
A- Failure by the supplier to comply with the invoicing requirements on the documents
13 supporting the sale of goods and services will result to the disallowance of the claim for
input tax by the purchaser-claimant.
If the claim for refund/TCC is based on the existence of zero-rated sales by the taxpayer
but it fails to comply with the invoicing requirements in the issuance of sales invoices
(e.g. failure to indicate the TIN), its claim for tax credit/refund of VAT on its purchases
shall be denied considering that the invoice it is issuing to its customers does not depict its
being a VAT-registered taxpayer whose sales are classified as zero-rated sales. x x x.
(Emphases supplied.)
The reason for strict compliance with invoicing requirements is only a "VAT
invoice/official receipt" can give rise to any input tax from domestic purchase of goods
or service.42 Without input tax, there is nothing to refund. On the other hand, the
particulars recorded in the subsidiary journals do not affect the character of an invoice
or receipt as a "VAT invoice/official receipt." A taxpayer's books of accounts include the
journal and the ledger and their subsidiaries, or their equivalents. 43 The general journal
is a book of original entry in which the transactions affecting the taxpayer's business
are recorded consecutively day by day as they occur.44 It is a chronological, or date
order, record of the transactions of a business. The general journal may consist of
several books such as sales book, purchase book, cash book, and such other books as
the taxpayer may find convenient for his business.45 A subsidiary sales journal is a
repository of day-to-day sales, while a subsidiary purchase journal records all
purchases. Evidently, subsidiary journals may be sources of information from which the
CIR may utilize in making assessments 46 but their submission is not indispensable to
substantiate the input taxes.

The language used in Section 110 is plain, clear, and unambiguous. To be creditable,
the input taxes must be evidenced by validly issued invoices and/or official receipts
containing the information enumerated in Sections 113 and 237. The law does not
require that subsidiary journals where the sales and purchases (and the output taxes
and their corresponding input taxes) were recorded, are also kept. Indeed, courts may
not, in the guise of interpretation, enlarge the scope of a statute and include therein
situations not provided nor intended by the lawmakers. To do so would be to do
violence to the language of the law and to invade the legislative sphere. 47

In Western Mindanao Power Corp. v. Commissioner of Internal Revenue 48 (Western

Mindanao Power Corp.), the Court held that "[t]he taxpayer claiming the refund must x
x x comply with the invoicing and accounting requirements mandated by the NIRC,
as well as by revenue regulations implementing them." 49 We reiterated this rule
in Bonifacio Water Corp. v. Commissioner of Internal Revenue 50 (Bonifacio), and most
recently, in Sitel Phils. Corp. v. Commissioner of Internal Revenue 51 (Sitel). This
pronouncement, however, cannot support the CIR's position that prior compliance with
the accounting requirements under Section 4.113-3 of RR No. 16-2005 is a condition
precedent to the claim for refund or credit. In all these cases, the taxpayer's failure to
maintain subsidiary journals was not raised as an issue.

In Western Mindanao Power Corp., the CTA denied the taxpayer's claim for a refund
because the taxpayer's official receipts do not contain the word "zero-rated." In
sustaining the CTA, we ruled that the failure to print the phrase "zero-rated" on the VAT
official receipts was fatal to the claim for refund of input VAT on zero-rated sales.
In a claim for tax refund or tax credit, the applicant must prove not only entitlement to
the grant of the claim under substantive law. It must also show satisfaction of all the
documentary and evidentiary requirements for an administrative claim for a refund or
tax credit. Hence, the mere fact that petitioner's application for zero-rating has been
approved by the CIR does not, by itself, justify the grant of a refund or tax credit. The
taxpayer claiming the refund must further comply with the invoicing and
accounting requirements mandated by the NIRC, as well as by revenue
regulations implementing them.

xxxx

In fact, this Court has consistently held as fatal the failure to print the word "zero-
rated" on the VAT invoices or official receipts in claims for a refund or credit of input
VAT on zero-rated sales, even if the claims were made prior to the effectivity of R.A.
9337. Clearly then, the present Petition must be denied. 52 (Emphasis supplied.)
In Bonifacio, the taxpayer indicated in its official receipts a name not approved by the
Securities and Exchange Commission (SEC). The Court ruled that the absence of official
receipts issued in a name approved and authorized by the SEC was tantamount to non-
compliance with the substantiation requirements under the law. Thus: cralawred

From the foregoing, it is clear that petitioner must show satisfaction of all the
documentary and evidentiary requirements before an administrative claim for refund or
tax credit will be granted. Perforce, the taxpayer claiming the refund must
comply with the invoicing and accounting requirements mandated by the Tax
Code, as well as the revenue regulations implementing them.

Thus, the change of petitioner's name to "Bonifacio GDE Water Corporation," being
unauthorized and without approval of the SEC, and the issuance of official receipts
under that name which were presented to support petitioner's claim for tax refund,
cannot be used to allow the grant of tax refund or issuance of a tax credit certificate in
petitioner's favor. The absence of official receipts issued in its name is tantamount to
non-compliance with the substantiation requirements provided by law and, hence, the
CTA En Banc's partial grant of its refund on that ground should be upheld. 53 (Emphasis
supplied; citation omitted.)
Meanwhile, the invoices and official receipts issued by the taxpayer-claimant
in Sitel were not imprinted with its TIN followed by the word "VAT." We ruled that the
invoices and official receipts cannot be considered as VAT invoices or official receipts
that would give rise to any creditable input VAT in favor of Sitel.
The CTA Division also did not err when it denied the amount of P2,668,852.55,
allegedly representing input taxes claimed on Sitel's domestic purchases of goods and
services which are supported by invoices/receipts with pre-printed TIN-V. In Western
Mindanao Power Corp. v. Commissioner of Internal Revenue, the Court ruled
that in a claim for tax refund or tax credit, the applicant must prove not only
entitlement to the grant of the claim under substantive law, he must also show
satisfaction of all the documentary and evidentiary requirements for an
administrative claim for a refund or tax credit and compliance with the
invoicing and accounting requirements mandated by the NIRC, as well as by
revenue regulations implementing them. The NIRC requires that the creditable
input VAT should be evidenced by a VAT invoice or official receipt, which may
only be considered as such when the TIN-VAT is printed thereon, as required
by Section 4.108-1 of RR 7-95.

xxxx

In the same vein, considering that the subject invoice/official receipts are not imprinted
with the taxpayer's TIN followed by the word VAT, these would not be considered as
VAT invoices/official receipts and would not give rise to any creditable input VAT in
favor of Sitel.54 (Emphasis supplied; citations omitted.)
In the foregoing cases, the issue was limited to non-compliance with the invoicing
requirements. The Court's statement that accounting requirements must be complied
with in addition to the invoicing requirements to entitle the claimant for refund or credit
is, at best, merely an obiter dictum that is not binding as a precedent. An obiter
dictum is an opinion expressed by a court upon some question of law, which is not
necessary to the decision of the case before it. It is a remark made, or opinion
expressed, by a judge, in his decision upon a cause, "by the way," that is, incidentally
or collaterally, and not directly upon the question before him, or upon a point not
necessarily involved in the determination of the cause, or introduced by way of
illustration, or analogy or argument. 55]

Likewise, the CIR's reliance on Taganito Mining Corp. v. Commissioner of Internal

Revenue56 is misplaced. In that case, Taganito was asking for the refund of input tax
related to its importation of dump trucks, which it claimed to be a capital good. In
denying the refund, the Court explained: cralawred

Assuming arguendo that Taganito had submitted the valid import entries, its claim
would still fail. Its claim of refund of input VAT relates to its importation of dump trucks,
allegedly a purchase of capital goods. In this regard, Sections 4.110-3 and 4.113-3 of
R.R. No. 16-05, as amended by R.R. No. 4-2007, provide: cralawred
SECTION. 4.-110-3. Claim for Input Tax on Depreciable Goods. - Where a VAT-
registered person purchases or imports capital goods, which are depreciable assets for
income tax purposes, the aggregate acquisition cost of which (exclusive of VAT) in a
calendar month exceeds one million pesos (P1,000,000.00), regardless of the
acquisition cost of each capital good, shall be claimed as credit against output tax in the
following manner:

(a) If the estimated useful life of a capital good is five (5) years or more - The input tax
shall be spread evenly over a period of sixty (60) months and the claim for input tax
credit will commence in the calendar month when the capital good is acquired. The total
input taxes on purchases or importations of this type of capital goods shall be divided
by 60 and the quotient will be the amount to be claimed monthly.

(b) If the estimated useful life of a capital good is less than five (5) years - The input
tax shall be spread evenly on a monthly basis by dividing the input tax by the actual
number of months comprising the estimated useful life of a capital good. The claim for
input tax credit shall commence in the month that the capital goods were acquired.

Where the aggregate acquisition cost (exclusive of VAT) of the existing or finished
depreciable capital goods purchased or imported during any calendar month does not
exceed one million pesos (P1,000,000.00), the total input taxes will be allowable as
credit against output tax in the month of acquisition.

Capital goods or properties refers to goods or properties with estimated useful

life greater than 1 year and which are treated as depreciable assets under Sec.
34(F) of the tax Code, used directly or indirectly in the production or sale of
taxable goods or services.

xxxx

SECTION 4.113-3. Accounting Requirements. - x x x

A subsidiary record in ledger form shall be maintained for the acquisition,

purchase or importation of depreciable assets or capital goods which shall
contain, among others, information on the total input tax thereon as well as
the monthly input tax claimed in VAT declaration or return. (Emphases in the
original.)
Taganito argues that the report of the independent CPA shows that purchases and input
VAT paid/incurred were properly recorded in its books of accounts. In addition, it avers
that the Balance Sheet in its 2006 Audited Financial Statements showing an account
item for property and equipment under its non-current assets indicates that details are
found on Note 7 on page 19 of the Notes to Financial Statements, which provide the
complete details of its subsidiary ledger. It also alleges that the pertinent IERIDs were
reviewed by the independent CPA and they clearly state that the items imported were
dump trucks, and that its Vice-President for Finance testified what consists of its
purchases of capital goods.

These arguments cannot be given credence.

First, Taganito failed to prove that the importations pertaining to the input VAT are in
the nature of capital goods and properties as defined in [Sections 4.110-3 and 4.113-
3]. It points to the report of the independent CPA which allegedly reviewed the IERIDs
and subsidiary ledger containing the description of the dump trucks. Nonetheless, the
petitioner failed to present the actual IERIDs and subsidiary ledger, which would
constitute the best evidence rather than a report merely citing them. It did not give any
reason either to explain its failure to present these documents. The testimony of its
Vice-President for Finance would be insufficient to prove the nature of the importation
without these supporting documents.

Second, even assuming that the importations were duly proven to be capital

goods, Taganito's claim still would not prosper because it failed to present
evidence to show that it properly amortized the related input VAT over the
estimated useful life of the capital goods in its subsidiary ledger, as required
by [Sections 4.110-3 and 4.113-3]. This is made apparent by the fact that
Taganito's claim for refund is for the full amount of the input VAT on the
importation, rather than for an amortized amount, and by its failure to present
its subsidiary ledger.57 (Emphasis supplied.)
The Court required Taganito to submit the subsidiary ledger, an accounting requirement
under Section 4.113-3 of RR No. 16-2005, because the importation of dump trucks was
alleged to be a purchase of capital goods. As such, the related input tax on the
purchase must be amortized over the estimated useful life of the goods under Section
4.110-3 of RR No. 16-2005. The subsidiary ledger contained the information on the
total input tax on the importation and the monthly input tax claimed. It is the best
evidence to establish the proper amortization of claimed input tax. Since Taganito failed
to introduce in evidence the subsidiary ledger, the Court denied the claim for refund.

Distinct from the foregoing, the presentation of subsidiary journals in the instant case is
not indispensable. For one, the subject of the claim for refund is input tax on the
importation of goods other than capital goods and domestic purchases of
services.58 Also, the CTA was able to determine the existence of Philex Mining's valid
creditable input VAT attributable to its zero-rated sales by probing all the official
receipts, quarterly VAT returns, and the import entry declarations submitted. The CTA
evaluated the ICPA's report and concluded that Philex Mining incurred input taxes in
connection with its zero-rated sales and the input taxes were not applied against any of
its output tax liability.59

Similarly, there was nothing in Section 112 (A) and RR No. 16-2005 that require prior
filing of monthly VAT declarations as a condition precedent to the entitlement for
refund. While admittedly, Section 114 (A)60 of the Tax Code, as implemented by Section
4.114-161 of RR No. 16-2005, requires the taxpayer to pay VAT on a monthly basis, the
Tax Code and relevant revenue regulations do not provide denial of the claim as a
consequence of non-compliance. The failure to pay VAT every month may give rise to
the payment of penalties but it does not affect the taxpayer's entitlement to its claim
for refund as long as it has sufficiently shown that the VAT has in fact been paid. Here,
the CTA examined the voluminous documents submitted by Philex Mining and
concluded that Philex Mining sufficiently proved payment of creditable input VAT for the
second and third quarters of TY 2010.

In all, Philex Mining's failure to maintain subsidiary sales and purchase journals or to
file the monthly VAT declarations should not result in the outright denial of its claim
for refund or credit of unutilized input VAT attributable to its zero-rated sales. These are
not part of the requirements for Philex Mining to be entitled thereto. Section 112 (A) of
the Tax Code is very clear; no construction or interpretation is needed. The Court may
not construe a statute that is free from doubt; neither can we impose conditions or
limitations when none is provided for.62 While tax refunds are in the nature of tax
exemptions and are construed strictissimi juris against the taxpayer, tax statutes shall
be construed strictly against the taxing authority and liberally in favor of the taxpayer,
for taxes, being burdens, are not to be presumed beyond what the statute expressly
and clearly declares.63 Verily, the CTA did not err in ruling that the absence of
subsidiary sales journal, subsidiary purchase journal, and monthly VAT declarations is
not sufficient to deprive Philex Mining of its right to a refund.

In any event, the CIR's allegation that Philex Mining failed to prove its creditable input
tax attributable to its zero-rated sales necessarily involves factual issue and, thus, is
evidentiary in nature which cannot be entertained in the present petition where only
questions of law may be generally raised. The Court is not a trier of facts; it is not our
duty to look into the documents submitted during trial in order to test the truthfulness
of their contents.64 Besides, the findings of fact of the CTA, which, by the very nature of
its functions, dedicated exclusively to the study and consideration of tax problems and
has necessarily developed an expertise on the subject, are generally regarded as final,
binding, and conclusive upon this Court. The findings shall not be reviewed nor
disturbed on appeal unless a party can show that these are not supported by evidence,
or when the judgment is premised on a misapprehension of facts, or when the lower
courts overlooked certain relevant facts which, if considered, would justify a different
conclusion. Here, we find no cogent reason to depart from this general principle.

FOR THESE REASONS, the Petition for Review on Certiorari is DENIED.

SO ORDERED.
Pilipinas Total Gas v CIR
EN BANC

G.R. No. 207112, December 08, 2015

PILIPINAS TOTAL GAS, INC., Petitioner, v. COMMISSIONER OF INTERNAL

REVENUE, Respondent.

DECISION

MENDOZA, J.:

Before the Court is a petition for review on certiorari1 under Rule 45 of the Rules of
Court assailing the October 11, 2012 Decision2 and the May 8, 2013 Resolution3 of the
Court of Tax Appeals (CTA) En Banc, in CTA EB Case No. 776, which affirmed the
January 13, 2011 Decision4 of the CTA Third Division (CTA Division) in CTA Case No.
7863.

The Facts

Petitioner Pilipinas Total Gas, Inc. (Total Gas) is engaged in the business of selling,
transporting and distributing industrial gas. It is also engaged in the sale of gas
equipment and other related businesses. For this purpose, Total Gas registered itself
with the Bureau of Internal Revenue (BIR) as a Value Added Tax (VAT) taxpayer.

On April 20, 2007 and July 20, 2007, Total Gas filed its Original Quarterly VAT Returns
for the First and Second quarters of 2007, respectively with the BIR.

On May 20, 2008, it filed its Amended Quarterly VAT Returns for the first two quarters
of 2007 reflecting its sales subject to VAT, zero-rated sales, and domestic purchases of
non-capital goods and services.

For the First and Second quarters of 2007, Total Gas claimed it incurred unutilized input
VAT credits from its domestic purchases of noncapital goods and services in the total
amount of P8,124,400.35. Of this total accumulated input VAT, Total Gas claimed that
it had P7,898,433.98 excess unutilized input VAT.

On May 15, 2008, Total Gas filed an administrative claim for refund of unutilized input
VAT for the first two quarters of taxable year 2007, inclusive of supporting documents.

On August 28, 2008, Total Gas submitted additional supporting documents to the BIR.

On January 23, 2009, Total Gas elevated the matter to the CTA in view of the inaction
of the Commissioner of Internal Revenue (CIR).

During the hearing, Total Gas presented, as witnesses, Rosalia T. Yu and Richard Go,
who identified documentary evidence marked as Exhibits "A" to "ZZ-1," all of which
were admitted. Respondent CIR, on the other hand, did not adduce any evidence and
had the case submitted for decision.

Ruling of the CTA Division

In its January 13, 2011 Decision,5 the CTA Division dismissed the petition for being
prematurely filed. It explained that Total Gas failed to complete the necessary
documents to substantiate a claim for refund of unutilized input VAT on purchases of
goods and services enumerated under Revenue Memorandum Order (RMO) No. 53-98.
Of note were the lack of Summary List of Local Purchases and the certifications from
the Office of the Board of Investment (BOD), the Bureau of Customs (BOC), and the
Philippine Economic Zone Authority (PEZA) that the taxpayer had not filed any similar
claim for refund covering the same period. 6

Believing that Total Gas failed to complete the necessary documents to substantiate its
claim for refund, the CTA Division was of the view that the 120-day period allowed to
the CIR to decide its claim under Section 112 (C) of the National Internal Revenue Code
of 1997 (NIRC), had not even started to run. With this, the CTA Division opined that the
petition for review was prematurely filed because Total Gas failed to exhauist the
appropriate administrative remedies. The CTA Division stressed that tax refunds
partake of the nature of an exemption, putting into operation the rule of strict
interpretation, with the taxpayer being charged with the burden of proving that he had
satisfied all the statutory and administrative requirements. 7

Total Gas sought for reconsideration8 from the CTA Division, but its motion was denied
for lack of merit in a Resolution, dated April 19, 2011. 9 In the same resolution, it
reiterated that "that the complete supporting documents should be submitted to the
BIR before the 120-day period for the Commissioner to decide the claim for refund shall
commence to run. It is only upon the lapse of the 120-day period that the taxpayer can
appeal the inaction [to the CTA.]"10 It noted that RMO No. 53-98, which provides a
checklist of documents for the BIR to consider in granting claims for refund, also serves
as a guideline for the courts to determine if the taxpayer had submitted complete
supporting documents.11 It also stated that Total Gas could not invoke Revenue
Memorandum Circular (RMC) No. 29-09 because it was issued after the administrative
claim was filed and could not be applied retroactively. 12 Thus, the CTA Division
disposed:
WHEREFORE, premises considered, the present Petition for Review is hereby DENIED
DUE COURSE, and, accordingly DISMISSED for having been prematurely filed.

SO ORDERED.13 ChanRoblesVirtualawlibrary

Ruling of the CTA En Banc

In its assailed decision, the CTA En Banc likewise denied the petition for review of Total
Gas for lack of merit. It condensed its arguments into two core issues, to wit: (1)
whether Total Gas seasonably filed its judicial claim for refund; and (2) whether it was
unable to substantiate its administrative claim for refund by failing to submit the
required documents that would allow respondent to act on it.14

As to the first issue, the CTA En Banc ruled that the CTA Division had no jurisdiction
over the case because Total Gas failed to seasonably file its petition. Counting from the
date it filed its administrative claim on May 15, 2008, the CTA En Banc explained that
the CIR had 120 days to act on the claim (until September 12, 2008), and Total Gas
had 30 days from then, or until October 12, 2008, to question the inaction before the
CTA. Considering that Total Gas only filed its petition on January 23, 2009, the CTA En
Banc concluded that the petition for review was belatedly filed. For the tax court, the
120-day period could not commence on the day Total Gas filed its last supporting
document on August 28, 2008, because to allow such would give the taxpayer unlimited
discretion to indefinitely extend the 120-day period by simply filing the required
documents piecemeal.15

As to the second issue, the CTA En Banc affirmed the CTA Division that Total Gas failed
to submit the complete supporting documents to warrant the grant of its application for
refund. Quoting the pertinent portion of the decision of its division, the CTA En
Banc likewise concurred in its finding that the judicial claim of Total Gas was
prematurely filed because the 120-day period for the CIR to decide the claim had yet to
commence to run due to the lack of essential documents. 16

Total Gas filed a motion for reconsideration,17 but it was denied in the assailed
resolution of the CTA En Banc.18

Hence, the present petition.

ISSUES

(a) whether the judicial claim for refund was belatedly filed on 23 January
2009, or way beyond the 30-day period to appeal as provided in Section
112(c) of the Tax Code, as amended; and

(b) whether the submission of incomplete documents at the adminstrative

level (BIR) renders the judicial claim premature and dismissible for lack of
jurisdiction.19ChanRoblesVirtualawlibrary

In its petition, Total Gas argues that its judicial claim was filed within the prescriptive
period for claiming excess unutilized input VAT refund as provided under Section 112 of
the NIRC and expounded in the Court's ruling in CIR v. Aichi Forging Company of
Asia20 (Aichi) and in compliance with Section 112 of the NIRC. In addition to citing
Section 112 (C) of the Tax Code, Total Gas points out that in one of its previous claims
for refund of excess unutilized input VAT, the CTA En Banc in CTA En Banc Case No.
674,21 faulted the BIR in not considering that the reckoning period for the 120-period
should be counted from the date of submission of complete documents. 22 It then adds
that the previous ruling of the CTA En Banc was in accordance with law because Section
112 (C) of the Tax Code is clear in providing that the 120-day period should be counted
from the date of its submission of the complete documents or from August 28, 2008
and not from the date it filed its administrative claim on May 15, 2008. 23 Total Gas
argues that, since its claim was filed within the period of exception provided in CIR v.
San Roque Power Corporation24 (San Roque), it did not have to strictly comply with
120+30 day period before it could seek judicial relief. 25
cralawred

Moreover, Total Gas questions the logic of the CTA En Banc which stated that the
petition was filed both belatedly and prematurely. Total Gas points out that on the one
hand, the CTA En Banc ruled that it filed the judicial claim belatedly as it was way
beyond the 120+30 day period. Yet, it also affirmed the findings of its division that its
petition for review was prematurely filed since the 120-day period did not even
commence to run for lack of complete supporting documents. 26

For Total Gas, the CTA En Banc violated the doctrine of stare decisis because the tax
tribunal had, on numerous occassions, held that the submission of incomplete
supporting documents should not make the judicial appeal premature and dismissible
for lack of jurisdiction. In these decisions, the CTA En Banc had previously held that
non-compliance with RMO No. 53-98 should not be fatal since the requirements listed
therein refer to requirements for refund or tax credit in the administrative level for
purposes of establishing the authenticity of a taxpayer's claim; and that in the judicial
level, it is the Rules of Court that govern and, thus, whether or not the evidence
submitted by the party to the court is sufficient lies within the sound discretion of the
court. Total Gas emphasizes that RMO No. 53-98 does not state that non-submission of
supporting documents will nullify the judicial claim. It posits that once a judicial claim is
filed, what should be examined are the evidence formally offered in the judicial
proceedings.27

Even assuming that the supporting documents submitted to the BIR were incomplete,
Total Gas argues that there was no legal basis to hold that the CIR could not decide or
act on the claim for refund without the complete supporting documents. It argues that
under RMC No. 29-09, the BIR is tasked with the duty to notify the taxpayer of the
incompleteness of its supporting documents and, if the taxpayer fails to complete the
supporting supporting documents despite such notice, the same shall be denied. The
same regulation provides that for purposes of computing the 120-day period, it should
be considered tolled when the taxpayer is notified. Total Gas, however, insists that it
was never notified and, therefore, was justified in seeking judicial relief. 28

Although Total Gas admits that RMC No. 29-09 was not yet issued at the time it filed its
administrative claim, the BIR still erred for not notifying them of their lack of supporting
documents. According to Total Gas, the power to notify a taxpayer of lacking
documents and to deny its claim if the latter would not comply is inherent in the CIR's
power to decide refund cases pursuant to Section 4 of the NIRC. It adds "[s]ound policy
also dictates that it should be the taxpayer who should determine whether he has
already submitted all documents pertinent to his claim. To rule otherwise would result
into a never-ending conflict/issue as to the completeness of documents which, in turn,
would delay the taxpayer's claim, and would put to naught the protection afforded by
Section 112 (C) of the Tax Code."29

In her Comment,30 the CIR echoed the ruling of the CTA En Banc, that Total Gas filed its
petition out of time. She countered that the 120-day period could not be counted from
the time Total Gas submitted its additional documents on August 28, 2008 because
such an interpretation of Section 112(D) would indefinitely extend the prescriptive
period as provided in favor of the taxpayer.

In its Reply,31 Total Gas insisted that Section 112(C) stated that the 120-day period
should be reckoned from the date of submission of complete documents, and not from
the date of the filing of the administrative claim.

Ruling of the Court

The petition has merit.

Judicial claim timely filed

Section 112 (C) of the NIRC provides: chanRoblesvirtualLawlibrary

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

xxxx

(C) Period within which Refund or Tax Credit of Input Taxes shall be Made. - In proper
cases, the Commissioner shall grant a refund or issue the tax credit certificate for
creditable input taxes within one hundred twenty (120) days from the date of
submission of complete documents in support of the application filed in accordance
with 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.

xxxx

[Emphasis and Underscoring Supplied]

From the above, it is apparent that the CIR has 120 days from the date of
submission of complete documents to decide a claim for tax credit or refund of
creditable input taxes. The taxpayer may, within 30 days from receipt of the denial of
the claim or after the expiration of the 120-day period, which is considered a "denial
due to inaction," appeal the decision or unacted claim to the CTA.

To be clear, Section 112(C) categorically provides that the 120-day period is counted
"from the date of submission of complete documents in support of the
application." Contrary to this mandate, the CTA En Banc counted the running of the
period from the date the application for refund was filed or May 15, 2008, and, thus,
ruled that the judicial claim was belatedly filed.

This should be corrected.

Indeed, the 120-day period granted to the CIR to decide the administrative claim under
the Section 112 is primarily intended to benefit the taxpayer, to ensure that his claim is
decided judiciously and expeditiously. After all, the sooner the taxpayer successfully
processes his refund, the sooner can such resources be further reinvested to the
business translating to greater efficiencies and productivities that would ultimately uplift
the general welfare. To allow the CIR to determine the completeness of the documents
submitted and, thus, dictate the running of the 120-day period, would undermine these
objectives, as it would provide the CIR the unbridled power to indefinitely delay the
administrative claim, which would ultimately prevent the filing of a judicial claim with
the CTA.
A hypothetical situation illustrates the hazards of granting the CIR the authority to
decide when complete documents have been submitted - A taxpayer files its
administrative claim for VAT refund/credit with supporting documents. After 121 days,
the CIR informs the taxpayer that it must submit additional documents. Considering
that the CIR had determined that complete documents have not yet been submitted,
the 120-day period to decide the administrative claim has not yet begun to run. In the
meantime, more than 120 days have already passed since the application with the
supporting documents was filed to the detriment of the taxpayer, who has no
opportunity to file a judicial claim until the lapse of the 120+30 day period in Section
112(C). With no limitation to the period for the CIR to determine when complete
documents have been submitted, the taxpayer may be left in a limbo and at the mercy
of the CIR, with no adequate remedy available to hasten the processing of its
administrative claim.

Thus, the question must be asked: In an administrative claim for tax credit or refund of
creditable input VAT, from what point does the law allow the CIR to determine when it
should decide an application for refund? Or stated differently: Under present law, when
should the submission of documents be deemed "completed" for purposes of
determining the running of the 120-day period?

Ideally, upon filing his administrative claim, a taxpayer should complete the necessary
documents to support his claim for tax credit or refund or for excess utilized VAT. After
all, should the taxpayer decide to submit additional documents and effectively extend
the 120-period, it grants the CIR more time to decide the claim. Moreover, it would be
prejudicial to the interest of a taxpayer to prolong the period of processing of his
application before he may reap the benefits of his claim. Therefore, ideally, the CIR has
a period of 120 days from the date an administrative claim is filed within which to
decide if a claim for tax credit or refund of excess unutilized VAT has merit.

Thus, when the VAT was first introduced through Executive Order No. 273, 32 the
pertinent rule was that:
(e) Period within which refund of input taxes may be made by the Commissioner. The
Commissioner shall refund input taxes within 60 days from the date the application
for refund was filed with him or his duly authorized representative. No refund or
input taxes shall be allowed unless the VAT-registered person files an application for
refund within the period prescribed in paragraphs (a), (b) and (c), as the case maybe.

[Emphasis supplied]
Here, the CIR was not only given 60 days within which to decide an administrative
claim for refund of input taxes, but the beginning of the period was reckoned "from the
date the application for refund was filed."

When Republic Act (R.A.) No. 771633 was, however, enacted on May 5, 1994, the law
was amended to read:
(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 for creditable input
taxes within sixty (60) days from the date of submission of complete documents
in support of the application filed in accordance with sub-paragraphs (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 sixty-day period, appeal the
decision or the unacted claim with the Court of Tax Appeals.

[Emphasis supplied]
Again, while the CIR was given only 60 days within which to act upon an administrative
claim for refund or tax credit, the period came to be reckoned "from the date of
submission of complete documents in support of the application." With this
amendment, the date when a taxpayer made its submission of complete documents
became relevant. In order to ensure that such date was at least determinable, RMO No.
4-94 provides:
REVENUE MEMORANDUM ORDER NO. 40-94

SUBJECT : Prescribing the Modified Procedures on the Processing of Claims for Value-
Added Tax Credit/Refund

III. Procedures
     REGIONAL OFFICE
     A. Revenue District Office
     In General:chanRoblesvirtualLawlibrary

1. Ascertain the completeness of the supporting documents prior to the receipt of the
application for VAT credit/refund from the taxpayer.

2. Receive application for VAT Credit/Refund (BIR Form No. 2552) in three (3) copies in
the following manner:
a. stamp the word "RECEIVED" on the appropriate space provided in all copies of
application;

b. indicate the claim number;

c. indicate the date of receipt; and

d. initial by receiving officer.

The application shall be received only if the required attachments prescribed in RAMO
1-91 have been fully complied with x x x.
Then, when the NIRC34 was enacted on January 1, 1998, the rule was once more
amended to read:
(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 compete 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]
This time, the period granted to the CIR to act upon an admmistrative claim for refund
was extended to 120 days. The reckoning point however, remained "from the date of
submission of complete documents."

Aware that not all taxpayers were able to file the complete documents to allow the CIR
to properly evaluate an administrative claim for tax credit or refund of creditable input
taxes, the CIR issued RMC No. 49-2003, which provided:
Q-18: For pending claims with incomplete documents, what is the period within which
to submit the supporting documents required by the investigating/processing office?
When should the investigating/processing office officially receive claims for tax
credit/refund and what is the period required to process such claims?

A-18: For pending claims which have not been acted upon by the

investigating/processing office due to incomplete documentation, the taxpayer-
claimants are given thirty (30) days within which to submit the documentary
requirements unless given further extension by the head of the processing
unit, but such extension should not exceed thirty (30) days.

For claims to be filed by claimants with the respective investigating/processing office of

the administrative agency, the same shall be officially received only upon submission
of complete documents.

For current and future claims for tax credit/refund, the same shall be processed within
one hundred twenty (120) days from receipt of the complete documents. If, in the
course of the investigation and processing of the claim, additional documents are
required for the proper determination of the legitimate amount of claim, the taxpayer-
claimants shall submit such documents within thirty (30) days from request of the
investigating/processing office, which shall be construed as within the one
hundred twenty (120) day period.

[Emphases Supplied]
Consequently, upon filing of his application for tax credit or refund for excess creditable
input taxes, the taxpayer-claimant is given thirty (30) days within which to complete
the required documents, unless given further extension by the head of the processing
unit. If, in the course of the investigation and processing of the claim, additional
documents are required for the proper determination of the legitimate amount of claim,
the taxpayer-claimants shall submit such documents within thirty (30) days from
request of the investigating/processing office. Notice, by way of a request from the tax
collection authority to produce the complete documents in these cases, became
essential. It is only upon the submission of these documents that the 120-day period
would begin to run.

Then, when R.A. No. 933735 was passed on July 1, 2005, the same provision under the
NIRC was retained. With the amendment to Section 112, particularly the deletion of
what was once Section 112(B) of the NIRC, Section 112 (D) was amended and renamed
112(C). Thus:
(C) Period within which Refund or Tax Credit of Input Taxes shall be Made. - In proper
cases, the Commissioner shall grant a refund or issue the tax credit certificate for
creditable input taxes within one hundred twenty (120) days from the date of
submission of complete documents in support of the application filed in accordance
with Subsection (A) hereof.

In case of full or partial denial of the claim for tax refund or tax credit, or the failure on
the part of the Commissioner to act on the application within the period prescribed
above, the taxpayer affected may, within thirty (30) days from the receipt of the
decision denying the claim or after the expiration of the one hundred twenty day-
period, appeal the decision or the unacted claim with the Court of Tax Appeals.
With the amendments only with respect to its place under Section 112, the Court finds
that RMC No. 49-2003 should still be observed. Thus, taking the foregoing changes to
the law altogether, it becomes apparent that, for purposes of determining when the
supporting documents have been completed — it is the taxpayer who ultimately
determines when complete documents have been submitted for the purpose of
commencing and continuing the running of the 120-day period. After all, he may have
already completed the necessary documents the moment he filed his administrative
claim, in which case, the 120-day period is reckoned from the date of filing.

The taxpayer may have also filed the complete documents on the 30 th day from filing of
his application, pursuant to RMC No. 49-2003. He may very well have filed his
supporting documents on the first day he was notified by the BIR of the lack of the
necessary documents. In such cases, the 120-day period is computed from the date the
taxpayer is able to submit the complete documents in support of his application.

Then, except in those instances where the BIR would require additional documents in
order to fully appreciate a claim for tax credit or refund, in terms what additional
document must be presented in support of a claim for tax credit or refund - it is the
taxpayer who has that right and the burden of providing any and all documents that
would support his claim for tax credit or refund. After all, in a claim for tax credit or
refund, it is the taxpayer who has the burden to prove his cause of action. As such, he
enjoys relative freedom to submit such evidence to prove his claim.

The foregoing conclusion is but a logical consequence of the due process guarantee
under the Constitution. Corollary to the guarantee that one be afforded the opportunity
to be heard, it goes without saying that the applicant should be allowed reasonable
freedom as to when and how to present his claim within the allowable period.

Thereafter, whether these documents are actually complete as required by law

- is for the CIR and the courts to determine. Besides, as between a taxpayer-
applicant, who seeks the refund of his creditable input tax and the CIR, it cannot be
denied that the former has greater interest in ensuring that the complete set of
documentary evidence is provided for proper evaluation of the State.

Lest it be misunderstood, the benefit given to the taxpayer to determine when it should
complete its submission of documents is not unbridled. Under RMC No. 49-2003, if in
the course of the investigation and processing of the claim, additional documents are
required for the proper determination of the legitimacy of the claim, the taxpayer-
claimants shall submit such documents within thirty (30) days from request of the
investigating/processing office. Again, notice, by way of a request from the tax
collection authority to produce the complete documents in these cases, is
essential.
Moreover, under Section 112(A) of the NIRC, 36 as amended by RA 9337, a taxpayer has
two (2) years, after the close of the taxable quarter when the sales were made, to
apply for the issuance of a tax credit certificate or refund of creditable input tax due or
paid attributable to such sales. Thus, before the adminstrative claim is barred by
prescription, the taxpayer must be able to submit his complete documents in support of
the application filed. This is because, it is upon the complete submission of his
documents in support of his application that it can be said that the application was,
"officially received" as provided under RMC No. 49-2003.

To summarize, for the just disposition of the subject controversy, the rule is that from
the date an administrative claim for excess unutilized VAT is filed, a taxpayer has thirty
(30) days within which to submit the documentary requirements sufficient to support
his claim, unless given further extension by the CIR. Then, upon filing by the taxpayer
of his complete documents to support his application, or expiration of the period given,
the CIR has 120 days within which to decide the claim for tax credit or refund. Should
the taxpayer, on the date of his filing, manifest that he no longer wishes to submit any
other addition documents to complete his administrative claim, the 120 day period
allowed to the CIR begins to run from the date of filing.

In all cases, whatever documents a taxpayer intends to file to support his claim must
be completed within the two-year period under Section 112(A) of the NIRC. The 30-day
period from denial of the claim or from the expiration of the 120-day period within
which to appeal the denial or inaction of the CIR to the CTA must also be respected.

It bears mentioning at this point that the foregoing summation of the rules should only
be made applicable to those claims for tax credit or refund filed prior to June 11, 2014,
such as the claim at bench. As it now stands, RMC 54-2014 dated June 11, 2014
mandates that:
The application for VAT refund/tax credit must be accompanied by complete
supporting documents as enumerated in Annex "A" hereof. In addition, the taxpayer
shall attach a statement under oath attesting to the completeness of the submitted
documents (Annex B). The affidavit shall further state that the said documents are the
only documents which the taxpayer will present to support the claim. If the taxpayer is
a juridical person, there should be a sworn statement that the officer signing the
affidavit (i.e., at the very least, the Chief Financial Officer) has been authorized by the
Board of Directors of the company.

Upon submission of the administrative claim and its supporting documents, the claim
shall be processed and no other documents shall be accepted/required from the
taxpayer in the course of its evaluation. A decision shall be rendered by the
Commissioner based only on the documents submitted by the taxpayer. The application
for tax refund/tax credit shall be denied where the taxpayer/claimant failed to submit
the complete supporting documents. For this purpose, the concerned
processing/investigating office shall prepare and issue the corresponding Denial Letter
to the taxpayer/claimant.
Thus, under the current rule, the reckoning of the 120-day period has been withdrawn
from the taxpayer by RMC 54-2014, since it requires him at the time he files his claim
to complete his supporting documents and attest that he will no longer submit any
other document to prove his claim. Further, the taxpayer is barred from submitting
additional documents after he has filed his administrative claim.

On this score, the Court finds that the foregoing issuance cannot be applied
rectroactively to the case at bar since it imposes new obligations upon taxpayers in
order to perfect their administrative claim, that is, [1] compliance with the mandate to
submit the "supporting documents" enumerated under RMC 54-2014 under its "Annex
A"; and [2] the filing of "a statement under oath attesting to the completeness of the
submitted documents," referred to in RMC 54-2014 as "Annex B." This should not
prejudice taxpayers who have every right to pursue their claims in the manner provided
by existing regulations at the time it was filed.

As provided under Section 246 of the Tax Code:

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:chanRoblesvirtualLawlibrary

(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 and Italics Supplied]

Applying the foregoing precepts to the case at bench, it is observed that the CIR made
no effort to question the inadequacy of the documents submitted by Total Gas. It
neither gave notice to Total Gas that its documents were inadequate, nor ruled to deny
its claim for failure to adequately substantiate its claim. Thus, for purposes of counting
the 120-day period, it should be reckoned from August 28, 2008, the date when Total
Gas made its "submission of complete documents to support its application" for refund
of excess unutilized input VAT. Consequently, counting from this later date, the BIR had
120 days to decide the claim or until December 26, 2008. With absolutely no action or
notice on the part of the BIR for 120 days, Total Gas had 30 days or until January 25,
2009 to file its judicial claim.

Total Gas, thus, timely filed its judicial claim on January 23, 2009.

Anent RMO No. 53-98, the CTA Division found that the said order provided a checklist
of documents for the BIR to consider in granting claims for refund, and served as a
guide for the courts in determining whether the taxpayer had submitted complete
supporting documents.

This should also be corrected.

To quote RMO No. 53-98:

REVENUE MEMORANDUM ORDER NO. 53-98
SUBJECT: Checklist of Documents to be Submitted by a Taxpayer upon Audit of his Tax
Liabilities as well as of the Mandatory Reporting Requirements to be Prepared by a
Revenue Officer, all of which Comprise a Complete Tax Docket.

TO: All Internal Revenue Officers, Employees and Others Concerned

I. BACKGROUND

It has been observed that for the same kind of tax audit case, Revenue Officers differ in
their request for requirements from taxpayers as well as in the attachments to the
dockets resulting to tremendous complaints from taxpayers and confusion among tax
auditors and reviewers.

For equity and uniformity, this Bureau comes up with a prescribed list of requirements
from taxpayers, per kind of tax, as well as of the internally prepared reporting
requirements, all of which comprise a complete tax docket.

II. OBJECTIVE

This order is issued to: chanRoblesvirtualLawlibrary

a. Identify the documents to be required from a taxpayer during audit, according to

particular kind of tax; and

b. Identify the different audit reporting requirements to be prepared, submitted and

attached to a tax audit docket.

III. LIST OF REQUIREMENTS PER TAX TYPE

Income Tax/ Withholding Tax

- Annex A (3 pages)

Value Added Tax

- Annex B (2 pages)
- Annex B-1 (5 pages)

xxxx
As can be gleaned from the above, RMO No. 53-98 is addressed to internal revenue
officers and employees, for purposes of equity and uniformity, to guide them as to what
documents they may require taxpayers to present upon audit of their tax liabilities.
Nothing stated in the issuance would show that it was intended to be a benchmark in
determining whether the documents submitted by a taxpayer are actually complete to
support a claim for tax credit or refund of excess unutilized excess VAT. As expounded
in Commissioner of Internal Revenue v. Team Sual Corporation (formerely Mir ant Sual
Corporation):37
The CIR's reliance on RMO 53-98 is misplaced. There is nothing in Section 112 of the
NIRC. RR 3-88 or RMO K3-Q8 itself that requires submission of the complete
documents enumerated in RMO 53-98 for a grant of a refund or credit of input VAT. The
subject of RMO 53-98 states that it is a "Checklist of Documents to be Submitted by a
Taxpayer upon Audit of his Tax Liabilities x x x." In this case, TSC was applying for a
grant of refund or credit of its input tax. There was no allegation of an audit being
conducted by the CIR. Even assuming that RMO 53-98 applies, it specifically states that
some documents are required to be submitted by the taxpayer "if applicable."

Moreover, if TSC indeed failed to submit the complete documents in support of its
application, the CIR could have informed TSC of its failure, consistent with Revenue
Memorandum Circular No. (RMC) 42-03. However, the CIR did not inform TSC of the
document it failed to submit, even up to the present petition. The CIR likewise raised
the issue of TSC's alleged failure to submit the complete documents only in its motion
for reconsideration of the CTA Special First Division's 4 March 2010 Decision.
Accordingly, we affirm the CTA EB's finding that TSC filed its administrative claim on 21
December 2005, and submitted the complete documents in support of its application for
refund or credit of its input tax at the same time.

[Emphasis included. Underlining Ours.]

As explained earlier and underlined in Team Sual above, taxpayers cannot simply be
faulted for failing to submit the complete documents enumerated in RMO No. 53-98,
absent notice from a revenue officer or employee that other documents are required.
Granting that the BIR found that the documents submitted by Total Gas were
inadequate, it should have notified the latter of the inadequacy by sending it a request
to produce the necessary documents in order to make a just and expeditious resolution
of the claim.

Indeed, a taxpayer's failure with the requirements listed under RMO No. 53-98 is not
fatal to its claim for tax credit or refund of excess unutilized excess VAT. This holds
especially true when the application for tax credit or refund of excess unutilized excess
VAT has arrived at the judicial level. After all, in the judicial level or when the case is
elevated to the Court, the Rules of Court governs. Simply put, the question of whether
the evidence submitted by a party is sufficient to warrant the granting of its prayer lies
within the sound discretion and judgment of the Court.

At this point, it is worth emphasizing that the reckoning of the 120-day period from
August 28, 2008 cannot be doubted. First, a review of the records of the case
undubitably show that Total Gas filed its supporting documents on August 28, 2008,
together with a transmittal letter bearing the same date. These documents were
then stamped and signed as received by the appropriate officer of the BIR. Second,
contrary to RMO No. 40-94, which mandates officials of the BIR to indicate the date of
receipt of documents received by their office in every claim for refund or credit of VAT,
the receiving officer failed to indicate the precise date and time when he received these
documents. Clearly, the error is attributable to the BIR officials and should not
prejudice Total Gas.

Third, it is observed that whether before the CTA or this Court, the BIR had never
questioned the date it received the supporting documents filed by Total Gas, or the
propriety of the filing thereof. In contrast to the contiuous efforts of Total Gas to
complete the necessary documents needed to support its application, all that was
insisted by the CIR was that the reckoning period should be counted from the date
Total Gas filed its application for refund of excess unutilized input VAT. There being no
question as to whether these documents were actually received on August 28, 2008,
this Court shall not, by way of conjecture, cast doubt on the truthfullness on such
submission. Finally, in consonance with the presumption that a person acts in
accordance with the ordinary course of business, it is presumed that such documents
were received on the date stated therein.

Verily, should there be any doubt on whether Total Gas filed its supporting documents
on August 28, 2008, it is incumbent upon the CIR to allege and prove such assertion.
As the saying goes, contra preferentum.

If only to settle any doubt, this Court is by no means setting a precedent by leaving it
to the mercy of the taxpayer to determine when the 120- day reckoning period should
begin to run by providing absolute discretion as to when he must comply with the
mandate submitting complete documents in support of his claim. In addition to the
limitations thoroughly discussed above, the peculiar circumstance applicable herein, as
to relieve Total Gas from the application of the rule, is the obvious failure of the BIR
to comply with the specific directive, under RMO 40-94, to stamp the date it
received the supporting documents which Total Gas had submitted to the BIR for its
consideration in the processing of its claim. The utter failure of the tax administrative
agency to comply with this simple mandate to stamp the date it receive the documents
submitted by Total Gas - should not in any manner prejudice the taxpayer by casting
doubt as to when it was able to submit its complete documents for purposes of
determing the 120-day period.

While it is still true a taxpayer must prove not only his entitlement to a refund but also
his compliance with the procedural due process38 - it also true that when the law or rule
mandates that a party or authority must comply with a specific obligation to perform an
act for the benefit of another, the non-compliance therof by the former should not
operate to prejudice the latter, lest it render the nugatory the objective of the rule.
Such is the situation in case at bar.

Judicial claim not prematurely filed

The CTA En Banc curiously ruled in the assailed decision that the judicial claim of Total
Gas was not only belatedly filed, but prematurely filed as well, for failure of Total Gas to
prove that it had submitted the complete supporting documents to warrant the grant of
the tax refund and to reckon the commencement of the 120-day period. It asserted
that Total Gas had failed to submit all the required documents to the CIR and, thus, the
120-day period for the CIR to decide the claim had not yet begun to run, resulting in
the premature filing of the judicial claim. It wrote that the taxpayer must first submit
the complete supporting documents before the 120-day period could commence, and
that the CIR could not decide the claim for refund without the complete supporting
documents.

The Court disagrees.

The alleged failure of Total Gas to submit the complete documents at the administrative
level did not render its petition for review with the CTA dismissible for lack of
jurisdiction. First, the 120-day period had commenced to run and the 120+30 day
period was, in fact, complied with. As already discussed, it is the taxpayer who
determines when complete documents have been submitted for the purpose of the
running of the 120-day period. It must again be pointed out that this in no way
precludes the CIR from requiring additional documents necessary to decide the claim,
or even denying the claim if the taxpayer fails to submit the additional documents
requested.

Second, the CIR sent no written notice informing Total Gas that the documents were
incomplete or required it to submit additional documents. As stated above, such notice
by way of a written request is required by the CIR to be sent to Total Gas. Neither was
there any decision made denying the administrative claim of Total Gas on the ground
that it had failed to submit all the required documents. It was precisely the inaction of
the BIR which prompted Total Gas to file the judicial claim. Thus, by failing to inform
Total Gas of the need to submit any additional document, the BIR cannot now argue
that the judicial claim should be dismissed because it failed to submit complete
documents.

Finally, it should be mentioned that the appeal made by Total Gas to the CTA cannot be
said to be premature on the ground that it did not observe the otherwise mandatory
and juridictional 120+30 day period. When Total Gas filed its appeal with the CTA on
January 23, 2009, it simply relied on BIR Ruling No. DA-489-03, which, at that time,
was not yet struck down by the Court's ruling in Aichi. As explained in San Roque,
this Court recognized a period in time wherein the 120-day period need not be strictly
observed. Thus:
To repeat, a claim for tax refund or credit, like a claim for tax exemption, is construed
strictly against the taxpayer. One of the conditions for a judicial claim of refund or
credit under the VAT System is compliance with the 120+30 day mandatory and
jurisdictional periods. Thus, strict compliance with the 120+30 day periods is necessary
for such a claim to prosper, whether before, during, or after the effectivity of the Atlas
doctrine, except for the period from the issuance of BIR Ruling No. DA-489-03
on 10 December 2003 to 6 October 2010 when the Aichi doctrine was adopted,
which again reinstated the 120+30 day periods as mandatory and
jurisdictional.

xxxx

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.
At this stage, a review of the nature of a judicial claim before the CTA is in order.
In Atlas Consolidated Mining and Development Corporation v. CIR, it was ruled -
x x x First, a judicial claim for refund or tax credit in the CTA is by no means an original
action but rather an appeal by way of petition for review of a previous, unsuccessful
administrative claim. Therefore, as in every appeal or petition for review, a petitioner
has to convince the appellate court that the quasi-judicial agency a quo did not have
any reason to deny its claims. In this case, it was necessary for petitioner to show the
CTA not only that it was entitled under substantive law to the grant of its claims but
also that it satisfied all the documentary and evidentiary requirements for an
administrative claim for refund or tax credit. Second, cases filed in the CTA are
litigated de novo. Thus, a petitioner should prove every minute aspect of its case by
presenting, formally offering and submitting its evidence to the CTA. Since it is crucial
for a petitioner in a judicial claim for refund or tax credit to show that its administrative
claim should have been granted in the first place, part of the evidence to be submitted
to the CTA must necessarily include whatever is required for the successful prosecution
of an administrative claim.39

[Underscoring Supplied]
A distinction must, thus, be made between administrative cases appealed due to
inaction and those dismissed at the administrative level due to the failure of the
taxpayer to submit supporting documents. If an administrative claim was dismissed by
the CIR due to the taxpayer's failure to submit complete documents despite
notice/request, then the judicial claim before the CTA would be dismissible, not for lack
of jurisdiction, but for the taxpayer's failure to substantiate the claim at the
administrative level. When a judicial claim for refund or tax credit in the CTA is an
appeal of an unsuccessful administrative claim, the taxpayer has to convince the CTA
that the CIR had no reason to deny its claim. It, thus, becomes imperative for the
taxpayer to show the CTA that not only is he entitled under substantive law to his claim
for refund or tax credit, but also that he satisfied all the documentary and evidentiary
requirements for an administrative claim. It is, thus, crucial for a taxpayer in a judicial
claim for refund or tax credit to show that its administrative claim should have been
granted in the first place. Consequently, a taxpayer cannot cure its failure to submit a
document requested by the BIR at the administrative level by filing the said document
before the CTA.

In the present case, however, Total Gas filed its judicial claim due to the inaction of the
BIR. Considering that the administrative claim was never acted upon; there was no
decision for the CTA to review on appeal per se. Consequently, the CTA may give
credence to all evidence presented by Total Gas, including those that may not have
been submitted to the CIR as the case is being essentially decided in the first instance.
The Total Gas must prove every minute aspect of its case by presenting and formally
offering its evidence to the CTA, which must necessarily include whatever is required
for the successful prosecution of an administrative claim. 40

The Court cannot, however, make a ruling on the issue of whether Total Gas is entitled
to a refund or tax credit certificate in the amount of P7,898,433.98. Considering that
the judicial claim was denied due course and dismissed by the CTA Division on the
ground of premature and/or belated filing, no ruling on the issue of Total Gas
entitlement to the refund was made. The Court is not a trier of facts, especially when
such facts have not been ruled upon by the lower courts. The case shall, thus, be
remanded to the CTA Division for trial de novo.

WHEREFORE, the petition is PARTIALLY GRANTED. The October 11, 2012 Decision
and the May 8, 2013 Resolution of the Court of Tax Appeals En Banc, in CTA EB No. 776
are REVERSED and SET ASIDE.

The case is REMANDED to the CTA Third Division for trial de novo.

SO ORDERED. chanroblesvirtuallaw