CE Luzon v. Commissioner of Internal Revenue
REITERATIONFacts
The Antecedents: CE Luzon Geothermal Power Company, Inc. (CE Luzon), a VAT-registered taxpayer, incurred unutilized creditable input tax amounting to ₱26,574,388.99 for taxable year 2003. It filed administrative claims for refund with the Bureau of Internal Revenue (BIR) for the first, second, third, and fourth quarters of 2003. Procedural History: Without waiting for the Commissioner of Internal Revenue's action or the lapse of 120 days, CE Luzon filed judicial claims for refund with the Court of Tax Appeals (CTA) for the first quarter (CTA Case No. 7180) and for the second to fourth quarters (CTA Case No. 7279). The Commissioner of Internal Revenue denied the administrative claim for the second quarter. The CTA Second Division partially granted CE Luzon's claim. Both parties appealed to the CTA En Banc. The CTA En Banc initially granted CE Luzon's petition but later amended its decision, dismissing CE Luzon's claims for failure to observe the 120-day period, deeming them prematurely filed. Subsequently, in a second amended decision, the CTA En Banc partially granted the second quarter claim, relying on Commissioner of Internal Revenue v. Aichi Forging Company of Asia, Inc. CE Luzon and the Commissioner of Internal Revenue filed separate Petitions for Review with the Supreme Court. The Petition: CE Luzon argued that its judicial claims were timely filed, invoking the two-year prescriptive period under Section 229 of the National Internal Revenue Code (NIRC) and asserting that the periods in Section 112(C) are merely permissive. It also argued that the doctrine in Aichi should not apply retroactively and that the Commissioner of Internal Revenue was estopped from assailing the timeliness due to prior BIR issuances. The Commissioner of Internal Revenue countered that Section 112(C) is clear and mandatory, and that Aichi is the controlling precedent.
Issue(s)
Whether CE Luzon Geothermal Power, Inc.'s judicial claims for refund of input Value Added Tax for taxable year 2003 were filed within the prescriptive period. Whether CE Luzon Geothermal Power, Inc. is entitled to the refund of input Value Added Tax for the second quarter of taxable year 2003 and if it has substantiated this claim.
Ruling
The Petition in G.R. No. 197526 is GRANTED, while the Petition in G.R. Nos. 199676-77 is DENIED. The Amended Decision dated June 27, 2011 of the Court of Tax Appeals En Banc in C.T.A. EB NO. 554 is REVERSED and SET ASIDE. The case is REMANDED to the Court of Tax Appeals for the determination and computation of creditable input tax to which CE Luzon Geothermal Power Company, Inc. is entitled.
Ratio Decidendi
On the first issue of whether CE Luzon's judicial claims for refund of input VAT for taxable year 2003 were filed within the prescriptive period: The Supreme Court held that Section 112(C) of the National Internal Revenue Code, which provides the 120-day period for the Commissioner of Internal Revenue to act on an administrative claim and the subsequent 30-day period to appeal to the Court of Tax Appeals (CTA), are mandatory and jurisdictional. The Court reiterated the doctrine established in Commissioner of Internal Revenue v. Aichi Forging Company of Asia, Inc. and Commissioner of Internal Revenue v. San Roque Power Corp., stating that failure to observe these periods renders a judicial claim premature. CE Luzon's claims for the first, third, and fourth quarters were filed prematurely as it did not wait for the Commissioner's decision or the lapse of the 120-day period. However, the Court found that CE Luzon's judicial claims were shielded from the vice of prematurity because it relied on BIR Ruling DA-489-03, which erroneously stated that taxpayers need not wait for the 120-day period to expire before filing a judicial claim. The Court, following San Roque, extended the exception to taxpayers who relied on this ruling from its issuance until its reversal in Aichi, thus deeming CE Luzon's claims for the first, third, and fourth quarters as timely filed. On the second issue of whether CE Luzon is entitled to the refund of input VAT for the second quarter of taxable year 2003 and if it has substantiated this claim: The Court ruled that the determination of whether CE Luzon duly substantiated its claim for refund of creditable input tax for the second quarter of taxable year 2003 is a factual matter. In a Petition for Review on Certiorari under Rule 45, the Supreme Court is not a trier of facts and generally does not undertake a factual review unless the case falls under specific exceptions. Since the Commissioner of Internal Revenue failed to establish any such exception in its petition (G.R. Nos. 199676-77), the Supreme Court will not disturb the findings of the CTA on the matter of substantiation. Therefore, the Court affirmed the CTA's finding that CE Luzon's judicial claim for the second quarter was timely filed and remanded the case for proper computation of the creditable input tax to which CE Luzon is entitled, implying that substantiation for this quarter was sufficiently addressed by the CTA.
Main Doctrine
The 120-day and 30-day reglementary periods under Section 112(C) of the National Internal Revenue Code are both mandatory and jurisdictional. Non-compliance with these periods renders a judicial claim for refund of creditable input tax premature. However, taxpayers who relied on BIR Ruling DA-489-03 prior to its reversal are shielded from the vice of prematurity.