Commissioner of Internal Revenue vs. San Roque Power Corporation.txt

CIR v San Roque 690 SCRA 336

This involves three cases with similar issues: 1) CIR v San Roque Power Corp (SRPC), 2) Taganito Mining Corp (TMC) vs CIR, and 3) Philex Mining Corp (PMC) vs CIR

SRPC, TMC, and PMC are all registered with the BIR and the BOI; all are also VAT registered. All three cases concern with the application for refund for unutilized input VAT.

San Roque Case

In the case of SRPC, SRPC allegedly incurred excess input VAT in the amount of P560 M M for taxable year 2001 which it declared in its Quarterly VAT Returns filed for the same year. San Roque duly filed with the BIR claims for refund in the total amount of P560M representing unitilized input taxes as declared in its VAT returns for taxable year 2001.

But, on March 28, 2003, San Roque filed an amended Quarterly Vat returns for year 2001 since it increased its unutilized input VAT to the amount of P560.2 M.

Because of CIR's inaction, San Roque filed a Petition for Review with the CTA on April 10, 2003. On March 8 2006, the CTA 2nd Division denied San Roque's claim because a) it lacked of recorded zero-rated or effectively zero-rated sales, b) it failed to submit documents identifying the purchased goods/services related to the claimed input VAT, and c) it failed to prove that the related construction costs were capitalized in its books of account and subjected to depreciation. Also, it was raised that SRPC filed the claim prematurely. The CTA en banc ruled otherwise citing Commissioner of Internal Revenue v. Toledo Power, Inc. and Rev Memo Cir. No. 49-03 as its bases for ruling that San Roque's judicial claim was not prematurely filed.

TMC Case

TMC filed all its Monthly VAT declarations and Quarterly VAT Returns for the period Jan 1, 2005 to Dec 31, 2005.

On November 14, 2006, TMC filed with the CIR through BIR's Large Taxpayers Audit and Investigation Division II (LTAID II), a letter dated November 13, 2006 claiming a tax credit/refund of its supposed input VAT amounting to 8.4 M for the period covering Jan 1 2004 - Dec 31 2004. On the same date, TMC also filed an application for tax credit/refund for the period covering Jan 1 2005 - Dec 31 2005.

On November 29, 2006, [Taganito] sent again another letter dated November 29, 2004 to [the CIR], to correct the period of the above claim for tax credit/refund in the said amount of P8,365,664.38 as actually referring to the period covering January 1, 2005 to December 31, 2005.

As the statutory period within which to file a claim for refund for said input VAT is about to lapse without action on the part of the [CIR], TGM filed the instant Petition for Review on February 17, 2007.

CTA 2nd Division partially granted TMC's claim. CTA found that TMC complied with the requirements of Sec 112(A) of RA 8424 to be entitled to tax refund/credit of input VAT attributable to zero-rated or effectively zero-rated sales.

The case reached the CTA en banc where it declared that Section 112 (A) and (B) of the 1997 Tax Code both set forth the reckoning of the 2-year prescriptive period for filing a claim for tax refund or credit over input VAT to be the close of the taxable quarter when the sales were made. It relied on the rulings in CIR v. Aichi Forging Company of Asia, Inc and CIR v. Mirant Pagbilao Corporation. Both cases ruled that the 2-year prescriptive period to file a refund for input VAT arising from zero-rated sales should be reckoned from the close of the taxable quarter when the sales were made. Aichi further emphasized that the failure to await the decision of the Commissioner or the lapse of 120-day period prescribed in Section 112(D) amounts to a premature filing.

The CTA en banc found the TMC's judicial claim was prematurely filed because TMC filed its judicial claim on 14 Feb 2007. A lapse of only 92 days from the filing of its administrative claim before the CIR in violaiton of Sec 112(D).

PMC Case

On October 21, 2005, PMC filed its Original VAT Return for the third quarter of taxable year 2005 and Amended VAT Return for the same quarter on December 1, 2005.

On March 20, 2006, PMC filed its claim for refund/tax credit of the amount of P24 M with the One Stop Shop Center of the Department of Finance. CIR failed to act on the claim so on October 17, 2007, pursuant to Sections 112 and 229 of the NIRC of 1997, as amended, PMC filed a Petition for Review.

CTA 2nd Division denied PMC's claim because it has prescribed. CTA en banc affirmed the 2nd division.

Issues

All pertaining to VAT !!

Whether the petition or appeal from an adverse decision of the Commisioner was premature or late.

SRPC and TMC:

The petition was prematurely filed. In both cases, the petition was filed before the expiraiton of the 120-day waiting period. The SC held that "[i]t is indisputable that compliance with the 120-day waiting period is mandatory and jurisdictinoal." The Court stated that the failure to comply with the 120-day period renders the petition premature and thus without a cause of action. The effect of which no jurisdiction is acquired by the CTA.

PMC:

The petition was filed late, being filed more than 1 year after the expiration of the 30 day period after the 120-day waiting period. Thus, the claim already prescribed.

When should the taxpayer apply for a tax refund/credit?

Within 2 years after the close of the taxable quarter when the sales were made.

The two-year presecriptive period in Sec. 112(A) refers to the period within which the taxpayer can file an administrative claim for tax refund or credit. Stated otherwise, the 2-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.

When should the taxpayer appeal his tax claim?

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 Court of Tax Appeals within 30 days from the expiration of the 120-day period.

Should the Court grant a meritorious claim despite the non-compliance with mandatory and jurisdictional conditions?

No. The Court held:

This Court cannot disregard mandatory and jurisdictional conditions mandated by law simply because the Commissioner chose not to contest the numerical correctness of th eclaim for tax refund or credit of the taxpayer. Non-compliance with mandatory periods, non-observance of prescriptive periods, and non-adherence to axhausetion of administrative remedies bar a taxpayer's claim for teax refund or credit, whether or not the Commissioner questions the numerical correctness of the claim of the taxpayer. This Court should not establish the precedent that non-compliance with mandatory and jurisdictional conditions can be excused if the claim is otherwise meritorious, particularly in claims for tax refunds or credit [emphasis mine]