Visayas Geothermal Power v. Commissioner of Internal Revenue
REITERATIONFacts
The Antecedents: Petitioner Visayas Geothermal Power Company (VGPC) is engaged in the business of power generation and sale of generated power. For the taxable year 2005, VGPC filed its Quarterly VAT Returns and subsequently filed an administrative claim for refund with the Bureau of Internal Revenue (BIR) for P14,160,807.95, representing excess and unutilized input VAT payments. VGPC asserted entitlement to this refund based on Republic Act No. 9136, which treats sales of generated power as subject to a zero percent (0%) VAT rate. Procedural History: While its administrative claim was pending, VGPC filed a judicial claim with the Court of Tax Appeals (CTA) Second Division, seeking the same refund amount. The CTA Second Division partially granted the petition, ordering a refund of P7,699,366.37, finding this amount duly substantiated and ruling that both administrative and judicial claims were filed within the two-year prescriptive period. Both VGPC and the Commissioner of Internal Revenue (CIR) appealed to the CTA En Banc. The CTA En Banc reversed the Second Division's decision, dismissing VGPC's petition for having been filed prematurely, citing the mandatory 120-day period for the CIR to act before a judicial claim can be filed. The Petition: VGPC filed a petition for review on certiorari under Rule 45 of the Rules of Court, assailing the CTA En Banc's decision. VGPC argues that the 120-day and 30-day periods under Section 112(D) of the National Internal Revenue Code (NIRC) are not jurisdictional, that the doctrine in Atlas should prevail over Aichi, that the CIR is estopped from questioning the CTA's jurisdiction, and that Aichi should not be applied retroactively. VGPC seeks the refund of P14,160,807.95, or alternatively, the tax credit certificate for the amount awarded by the CTA Second Division.
Issue(s)
Whether the CTA En Banc erred in finding that the 120-day and 30-day periods prescribed under Section 112(D) of the 1997 Tax Code are jurisdictional and mandatory. Whether the CTA En Banc erred in finding that CIR v. Aichi Forging Company of Asia, Inc. prevails over the doctrine in Atlas Consolidated Mining v. CIR, and the relevance of Section 229 vs. Section 112 of the NIRC. Whether the CTA En Banc erred in finding that Respondent CIR is not estopped from questioning the jurisdiction of the CTA. Whether the CTA En Banc erred in applying CIR v. Aichi Forging Company of Asia, Inc. to Petitioner VGPC’s claim for refund, and the prospective application of CIR v. Aichi Forging Company of Asia, Inc.
Ruling
The petition is PARTIALLY GRANTED. The Decision and Resolution of the CTA En Banc are REVERSED and SET ASIDE, and the Decision and Resolution of the CTA Second Division are REINSTATED. The CIR is ORDERED TO REFUND or, in the alternative, TO ISSUE A TAX CREDIT CERTIFICATE to VGPC in the amount of ₱7,699,366.37.
Ratio Decidendi
On the mandatory and jurisdictional nature of the 120-day and 30-day periods: The Court reiterated that Section 112(D) of the National Internal Revenue Code (NIRC) mandates that the Commissioner of Internal Revenue (CIR) must act on a claim for refund or tax credit within 120 days from the submission of complete documents. If the CIR denies the claim or fails to act within this period, the taxpayer has 30 days to appeal to the Court of Tax Appeals (CTA). This 120+30 day period is considered mandatory and jurisdictional, as established in CIR v. Aichi Forging Company of Asia, Inc. and affirmed in CIR v. San Roque Power Corporation. Resorting to the CTA before the lapse of the 120-day period constitutes a violation of the doctrine of exhaustion of administrative remedies, rendering the judicial claim premature. The Court acknowledged an exception to the mandatory and jurisdictional nature of the 120+30 day period, as recognized in CIR v. San Roque Power Corporation. This exception stems from BIR Ruling No. DA-489-03, issued on December 10, 2003, which explicitly stated that taxpayers need not wait for the lapse of the 120-day period before seeking judicial relief. This ruling was considered a general interpretative rule applicable to all taxpayers acting in good faith, and its effectivity extended until its reversal by this Court in CIR v. Aichi Forging Company of Asia, Inc. on October 6, 2010. Consequently, judicial claims filed between December 10, 2003, and October 6, 2010, were not considered premature for failing to wait for the 120-day period. On the applicability of Section 229 vs. Section 112 of the NIRC and the relevance of the Atlas Consolidated Mining v. CIR doctrine: The Court clarified that Section 112 of the NIRC, specifically its subsections (A) and (D), governs claims for tax credit certificates and refunds arising from zero-rated or effectively zero-rated sales, which pertain to unutilized creditable input VAT. Section 229, on the other hand, applies to the recovery of taxes erroneously, illegally, or excessively collected. The Court emphasized that input VAT is not considered 'excessively' collected at the time of payment, as it is a proper and correct payment. Therefore, the two-year prescriptive period under Section 229 does not apply to appeals before the CTA concerning claims for refund or tax credit for unutilized creditable input VAT; Section 112 is the applicable provision. The Court explained that the doctrine in Atlas Consolidated Mining v. CIR pertains to the reckoning point of the two-year prescriptive period for filing administrative claims under Section 112(A), specifically counting from the date of payment of the output VAT. It does not pertain to, nor does it have relevance to, the 120+30 day period for filing a judicial claim under Section 112(D). The Atlas doctrine was also limited in effectivity from its promulgation on June 8, 2007, to its abandonment on September 12, 2008. The Court noted that the Atlas doctrine was decided under the old Tax Code and did not account for the 30-day period for appeal to the CTA, making it inapplicable to the current framework. No specific ratio was provided for the issue of estoppel. Therefore, this entry is intentionally left blank. On the prospective application of CIR v. Aichi Forging Company of Asia, Inc.: The Court held that CIR v. Aichi Forging Company of Asia, Inc. should not be applied prospectively. Judicial decisions interpreting the law form part of the legal system and retroact to the date the statute was enacted. Since Aichi was the first case to settle the mandatory and jurisdictional nature of the 120+30 day period, it did not overturn a prior doctrine, and thus, its interpretation applies retroactively. The petitioner's reliance on CTA cases, which do not constitute binding precedent, was also deemed misplaced.
Main Doctrine
The 120-day period for the Commissioner of Internal Revenue to act on a claim for refund or tax credit, and the subsequent 30-day period for the taxpayer to appeal to the Court of Tax Appeals, are mandatory and jurisdictional. However, BIR Ruling No. DA-489-03 created an exception, allowing judicial claims to be filed before the lapse of the 120-day period for claims filed between December 10, 2003, and October 6, 2010.