Commissioner of Internal Revenue v. Visayas Geothermal Power
REITERATIONFacts
The Antecedents: Respondent Visayas Geothermal Power Company, Inc. (VGPCI), engaged in the generation and sale of electricity, incurred input value-added tax (VAT) totaling P20,213,044.50 on its purchases and importations for the third and fourth quarters of 2001 and the entire year of 2002. Following the enactment of Republic Act No. 9136, VGPCI's sales became zero-rated, meaning they were no longer subject to the 10% VAT. Procedural History: VGPCI filed claims for a refund of unutilized input VAT with the Bureau of Internal Revenue (BIR) on June 26, 2003, and December 18, 2003. Due to the BIR's inaction, VGPCI filed separate petitions for review with the Court of Tax Appeals (CTA) on September 30, 2003, and December 19, 2003. The CTA First Division partially granted these petitions, ordering the Commissioner of Internal Revenue (CIR) to refund or issue a tax credit certificate for P16,355,749.74. The CIR appealed to the CTA En Banc, which dismissed the petition and affirmed the First Division's decision. The CIR then filed the present petition for review on certiorari with the Supreme Court. The Petition: The CIR filed a Petition for Review on Certiorari under Rule 45 of the Rules of Civil Procedure, assailing the CTA En Banc's decision. The sole ground raised is that the CTA erred in assuming jurisdiction and giving due course to VGPCI's petition because VGPCI allegedly failed to file an application for refund in due course before the BIR and did not observe the proper prescriptive period before appealing to the CTA. Specifically, the CIR argues that VGPCI prematurely filed its judicial claim before the lapse of the 120-day period granted to the CIR to act on the administrative claim, as mandated by Section 112(D) of the National Internal Revenue Code.
Issue(s)
Whether VGPCI prematurely filed its petition for review with the Court of Tax Appeals by not waiting for the 120-day period for the Commissioner of Internal Revenue to act on its claim for refund; including the exception based on BIR Ruling No. DA-489-03. Whether Section 229 of the National Internal Revenue Code (NIRC) or Section 112 of the NIRC is the applicable provision for claims of refund of unutilized input VAT.
Ruling
The petition is partly granted. The decision of the CTA En Banc is reversed and set aside regarding CTA Case No. 6790, and the claim for refund therein is denied. However, the claim pertaining to CTA Case No. 6838 is remanded to the CTA for proper determination.
Ratio Decidendi
On the prematurity of the judicial claim and the exception based on BIR Ruling No. DA-489-03: The Court affirmed that the 120-day period granted to the CIR to act on applications for tax refunds or tax credits under Section 112(D) is mandatory and jurisdictional. If the CIR denies the claim or fails to act within 120 days, the taxpayer has 30 days to appeal to the CTA. The filing of a judicial claim before the lapse of the 120-day period, as done by VGPCI in CTA Case No. 6790, renders the appeal premature and deprives the CTA of jurisdiction. The Court stated that VGPCI's assertion that filing both administrative and judicial claims within the two-year period is sufficient has no legal basis and would render Section 112(D) nugatory. The jurisdiction of the CTA is appellate, requiring a prior decision or inaction by the CIR after the prescribed period. Despite the mandatory nature of the 120+30 day period, the Court recognized BIR Ruling No. DA-489-03, issued on December 10, 2003, which allowed taxpayers to file judicial claims without waiting for the 120-day period. This ruling provided a valid basis for equitable estoppel under Section 246 of the Tax Code. Consequently, the judicial claim filed on December 19, 2003 (CTA Case No. 6838), which was made after the issuance of this BIR Ruling, was considered valid, even though it was filed shortly after the administrative claim. The Court held that this exception applies to judicial claims filed from December 10, 2003, until October 6, 2010 (promulgation of Aichi). Therefore, while CTA Case No. 6790 was prematurely filed and denied, CTA Case No. 6838 was remanded for further proceedings. On the applicability of Section 112 vs. Section 229 of the NIRC: The Court held that Section 112 of the NIRC, specifically its subsections (A) and (D), is the applicable provision for claims of refund or tax credit of unutilized input VAT, not Section 229. Section 229 pertains to taxes erroneously or illegally collected, whereas Section 112(A) deals with creditable input tax and provides a two-year period from the close of the taxable quarter for administrative claims. The Court clarified that the two-year period in Section 112(A) applies only to administrative claims filed with the CIR, not to appeals filed with the CTA. The Court reiterated its rulings in Commissioner of Internal Revenue v. Mirant Pagbilao Corporation and Commissioner of Internal Revenue v. Aichi Forging Company of Asia, Inc., and Commissioner of Internal Revenue v. San Roque Power Corporation, emphasizing that input VAT is not "excessively" collected as understood under Section 229. Therefore, VGPCI's reliance on Gibbs v. Collector of Internal Revenue and College of Oral & Dental Surgery v. Court of Tax Appeals was misplaced as these cases predated the enactment of Section 112.
Main Doctrine
The 120-day period granted to the Commissioner of Internal Revenue to act on claims for refund or tax credit of input VAT is mandatory and jurisdictional. However, judicial claims filed during the period from the issuance of BIR Ruling No. DA-489-03 (December 10, 2003) until the promulgation of Commissioner of Internal Revenue v. Aichi Forging Company of Asia, Inc. (October 6, 2010) are exceptions, where the taxpayer need not wait for the lapse of the 120-day period.