Wednesday, October 19, 2016

Cargill vs. Commissioner of Internal Revenue, G.R. No. 203774, March 11, 2015

Facts:
Cargill, a VAT-registered domestic corporation, filed two petitions in the Court of Tax Appeals for the refund of unutilized input taxes attributable to zero-rated sales.

On June 27, 2003, Cargill filed an administrative claim for refund of unutilized input taxes with the BIR. Three days after, on June 30, 2003, Cargill filed the first petition with the Court of Tax Appeals.

The second petition was filed on May 31, 2005, which was the same date when Cargill filed an administrative claim with the BIR.

Issue:
Whether or not Cargill’s petitions for refund of unutilized input VAT before the CTA should be dismissed on the ground of prematurity?


Ruling:
The first petition was filed prematurely while the second petition was properly filed because it was exempted from the mandatory 120-day period.

Sec. 112(A) of RA 8424 provides that claims for tax credit or tax refund of unutilized input taxes attributable to zero-rated sales can be claimed within two years after the close of the taxable quarter when the sales were made. Sec. 112(D) of RA 8424 also provides that the Commissioner shall grant a refund or issue the tax credit certificate for creditable input taxes within one hundred twenty days from the date of submission of complete documents. Within thirty (30) days from receipt of the Commissioner’s decision or after the expiration of the 120-day period, the taxpayer may appeal the decision or the unacted claim with the CTA.

In the landmark case of Aichi Forging vs. CIR, it was 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. As such, its non-observance would warrant the dismissal of the dismissal of the judicial claim for lack of jurisdiction. In Aichi, it was held that the two-year period only applies to administrative claims, and not judicial claims. Once the administrative claim is filed within the 2-year period, the taxpayer must wait for the lapse of the 120-day period before filing a judicial claim for refund, even if the 120-day period is beyond the original 2-year period abovementioned.

However, the Supreme Court held in CIR v. San Roque that a valid claim for equitable estoppel by the taxpayer because of reliance of an earlier ruling issued by the BIR is an exception to the mandatory nature of the 120-day period. BIR Ruling No. DA-489-03 stated that the taxpayer-claimant need not wait for the lapse of the 120-day period before seeking judicial relief. Taxpayers did not need to observe the stringent 120-day period for the period December 10, 2003 to October 6, 2010 because the BIR Ruling (DA-489-03) was still effective at that time. However, for the periods BEFORE and AFTER the abovementioned period (December 10, 2003 to October 6, 2010) the 120-day period was mandatory and jurisdictional.

Hence, in this case, the first petition, which was filed on June 30, 2003, was prematurely filed because Cargill did not wait for the lapse of the 120-day period before seeking relief with the CTA. The first petition is not covered by the exception based on estoppel because it was filed before the BIR issued Ruling No. DA-489-03. The CTA did not have jurisdiction over the first petition.

The second petition, however, fell within the exemption from the 120-day period because it was filed within the effectivity of BIR Ruling No. DA-489-03 (within Dec. 10, 2003 to Oct. 6, 2010). Since the second petition was timely filed, it was reinstated and remanded to the CTA for its resolution on the merits. 

Note: this case applies to claims for tax credits or tax refunds of unutilized input taxes attributable to zero-rated sales of the VAT.