Monday, January 13, 2014

Commissioner of Internal Revenue vs. Dash Engineering Philippines, Inc., G.R. NO. 184145, Dec. 11, 2013

Preview of RELEVANT LAWS - this won't be reproduced below - Actual case digest is further down.

SEC. 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 x x
       (C) 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 subsection A hereof. (As amended by R.A. No. 9337)
       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 one hundred twenty day-period, appeal the decision or the unacted claim with the Court of Tax Appeals. (Emphasis supplied)

SEC. 204. Authority of the Commissioner to Compromise, Abate, and Refund or Credit Taxes. – The Commissioner may –

       (C) Credit or refund taxes erroneously or illegally received or penalties imposed without authority,  x  x  x . No credit or refund of taxes or penalties shall be allowed unless the taxpayer files in writing with the Commissioner a claim for credit or refund within two (2) years after the payment of the tax or penalty: Provided, however, That a return filed showing an overpayment shall be considered as a written claim for credit or refund. (Emphasis Supplied)
SEC. 229. Recovery of Tax Erroneously or Illegally Collected.

          x  x  x

       In any case, no such suit or proceeding shall be filed after the expiration of two (2) years from the date of payment of the tax or penalty regardless of any supervening cause that may arise after payment.


COMMISSIONER’S PETITION IS MERITORIOUS. The Commissioner’s petition is GRANTED and DASH’s judicial claim for refund is DENIED. 
– Sec. 229 is inapplicable because the unutilized input VAT attributable to zero-rated sales is not erroneously or illegally collected; The two-year period in Sec. 112 refers only to administrative claims and not to judicial claims for refund. 

The 120+30 day period under Sec. 112 is mandatory and jurisdictional. Hence, the CTA had no jurisdiction because DASH's claim for refund was filed beyond the 120+30 day period. (Aichi, G.R. NO. 184823, and San Roque, GR 187485)



Respondent DASH ENGINEERING PHILIPPINES, INC. (DASH) filed its monthly and quarterly value-added tax (VAT) returns for the period from January 1, 2003 to June 30, 2003. On August 9, 2004, it filed a claim for tax credit or refund in the amount of P2,149,684.88 representing unutilized input VAT attributable to its zero-rated sales.

Because petitioner Commissioner of Internal Revenue (CIR) failed to act upon the said claim, DASH was compelled to file a petition for review with the CTA on May 5, 2005. The 120-day period within which the CIR should have acted expired on December 7, 2004. 30 days from the lapse of the said period is on January 6, 2005.


Whether or not respondent’s judicial claim for refund was filed within the
prescriptive period provided under the Tax Code.


DASH's petition was filed out of time because following Section 112(C) of the NIRC, it should have been filed on or before January 6, 2005. The 30-day period to appeal under Section 112(C) is mandatory and jurisdictional. Hence, the CTA had no jurisdiction to entertain it.


DASH argues that the petition was seasonably filed before the CTA according to Section 112, in relation to Section 229. DASH argues that the taxpayer has the option to appeal to the CTA within 30 days from receipt of the CIR's denial and within the two-year period OR to appeal the unacted claim to the CTA anytime after the 120-day period so long as it is within the two-year period.


– Sec. 229 is inapplicable; two-year period in Sec. 112 refers only to administrative claims.

Sections 204 and 229 of the NIRC pertain to the refund of erroneously or illegally collected taxes. In Commissioner v. San Roque Power Corporation (GR 187485, Feb. 12, 2013), the Court clarified that input VAT is not ‘excessively’ collected as understood under section 229 because at the time the input VAT is collected the amount paid is correct and proper. Section 112 is the more specific and appropriate provision of law for claims for excess input VAT.

The two-year prescriptive period referred to in Section 112(A) applies only to the filing of administrative claims with the CIR and not to the filing of judicial claims with the CTA.  In other words, for as long as the administrative claim is filed with the CIR within the two-year prescriptive period, the 30-day period given to the taxpayer to file a judicial claim with the CTA need not fall in the same two year period. At any rate, respondent’s compliance with the two-year prescriptive period under Section 112(A) is not an issue. What is being questioned in this case is DASH’s failure to observe the requisite 120+30-day period as mandated by Section 112(C) of the NIRC.

The 120+30 day period under Sec. 112 is mandatory and jurisdictional. (Aichi, G.R. NO. 184823, and San Roque, GR 187485)

In the present case, DASH’s claim for refund was filed after the expiration of the 30-day period from the failure of the Commissioner to make a decision within 120 days from the submission of the documents in support of respondent’s administrative claim. Hence, DASH's judicial claim for refund must be denied for having been filed late. Although DASH filed its administrative claim with the BIR on August 9, 2004 before the expiration of the two-year period in Section l12(A), it undoubtedly failed to comply with the 120+ 30-day period in Section l l2(C) which requires that upon the inaction of the CIR for 120 days after the submission of the documents in support of the claim, the taxpayer has to file its judicial claim within 30 days after the lapse of the said period.

The 120 days granted to the CIR to decide the case ended on December 7, 2004.
Thus, DASH had 30 days therefrom, or until January 6, 2005, to file a petition for review with the CTA. Unfortunately, DASH only sought judicial relief on May 5, 2005 when it belatedly filed its petition to the CTA, despite having had ample time to file the same, almost four months after the period allowed by law. As a consequence of DASH's late filing, the CTA did not properly acquire jurisdiction over the claim.

The Commissioner’s petition is GRANTED and DASH’s judicial claim for refund is DENIED. 
(Disclaimer: Although this digest was copy-pasted from the actual decision, they are not identical. Copy at your own risk for your pleadings or for classroom purposes.)

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