CE Luzon is one of the generating companies recognized by the Department of Energy – and pursuant to RA 9136 – it treated the delivery and supply of electric energy to the Philippine National Oil Company-Energy Development Corporation (PNOC-EDC) as VAT zero-rated
CE Luzon timely filed its VAT return for the third and fourth quarters of 2001, in which it declared unutilized input VAT in the amounts of 2,921,085.31, and ₱21,229,990.80 respectively.
CE Luzon filed an administrative claim for refund of unutilized input VAT for the third and fourth quarters of 2001 and all quarters of 2002 before the BIR. Alleging inaction on the part of the CIR, it filed two separate judicial claims for refund before the CTA.
In its answer, the CIR alleged, inter alia, that CE Luzon’s claims for refund are subject to its administrative investigation/examination; and that CE Luzon has the burden to prove its entitlement thereto.
The CTA Division partially granted CE Luzon’s claims for refund, ordering the CIR to refund or issue a tax credit certificate in favor of CE Luzon in the amount of ₱13,926,697.51, representing the unutilized input VAT attributable to its zero-rated sales for the third and fourth quarters of 2001 and all quarters of 2002.
Both parties moved for partial reconsideration, which were, however, denied.
Aggrieved, the CIR appealed to the CTA En Banc, contending that CE Luzon filed its judicial claims prematurely in violation of Section 112 (D) of the NIRC.
The CTA En Banc denied the CIR’s appeal, and affirmed the CTA Division’s Ruling.
The CIR moved for reconsideration which was, however, denied, hence, this petition.
Whether or not CE Luzon prematurely filed its judicial claims for refund.
The petition is partly meritorious.
Since CE Luzon’s claims for refund covered periods before the effectivity of RA 9337, Section 112 of the NIRC, as amended by RA 8424, should apply, to wit:
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:
x x x x
(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 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 120 day-period, appeal the decision or the unacted claim with the CTA.
x x x x
In CIR v. Aichi, the Court held that the observance of the 120-day period is a mandatory and jurisdictional requisite to the filing of a judicial claim for refund before the CTA. Consequently, its non-observance would lead to the dismissal of the judicial claim on the ground of lack of jurisdiction.
In CIR v. San Roque Power Corp., the Court categorically recognized an exception to the mandatory and jurisdictional nature of the 120-day period.
It ruled that BIR Ruling No. DA-489-03 provided a valid claim for equitable estoppel under Section 246 of the NIRC. The aforesaid BIR Ruling stated that “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.”
While both claims for refund were filed within the two-year prescriptive period, CE Luzon failed to comply with the 120-day period as it filed its judicial claim in C.T.A. Case No. 6792 four (4) days after the filing of the administrative claim. As such, the aforementioned rule on equitable estoppel operates in its favor, thereby shielding it from any supposed jurisdictional defect which would have attended the filing of its judicial claim before the expiration of the 120-day period.
For this purpose, the Court deems it proper to remand the instant case to the CTA.