Republic of the Philippines entity and was issued VAT Registration Certificate 1993 is hereby DENIED for insufficiency of

SUPREME COURT No. 32-0-004622 effective August 15, 1990. evidence. No pronouncement as to costs.
Manila
SECOND DIVISION For the first quarter of 1993, Atlas export sales SO ORDERED.[4]
amounted to PhP 642,685,032.24. Its proceeds were
received in acceptable foreign currency and inwardly
ATLAS CONSOLIDATED G.R. No. 159490 remitted in accordance with Central Bank We note that respondent CIR filed his May 24, 1995
MINING AND DEVELOPMENT regulations. For the same period, Atlas paid PhP Answer asserting that Atlas has the burden of proving
CORPORATION, Present: 7,907,662.53 for input taxes, as follows: erroneous or illegal payment of the tax being claimed
Petitioner, for refund, as claims for refund are strictly construed
QUISUMBING, J., Chairperson, Local PhP 7,117,222.53 against the taxpayer. However, the CIR did not
CARPIO, Importation 790,440.00 present any evidence before the CTA nor file a
- versus - CARPIO MORALES, Total PhP 7,907,662.53 memorandum, thus constraining the CTA to resolve
TINGA, and the case before it solely on the basis of the evidence
VELASCO, JR., JJ. Thereafter, Atlas filed a VAT return for the first presented by Atlas.
COMMISSIONER OF Promulgated: quarter of 1993 with the Bureau of Internal Revenue
INTERNAL REVENUE, (BIR) on April 20, 1993, and also filed an amended In denying Atlas claim for tax credit or refund, the
Respondent. February 18, 2008 VAT return. CTA held that Atlas failed to present sufficient
x--------------------------------------------------------------- evidence to warrant the grant of tax credit or refund
--------------------------x On September 20, 1993, Atlas applied with the BIR for the alleged input taxes paid by Atlas. Relying on
for the issuance of a tax credit certificate or refund Revenue Regulation No. (RR) 3-88 which was issued
DECISION under Section 106(b) of the Tax Code. The certificate to implement the then VAT law and list the
would represent the VAT it paid for the first quarter documents to be submitted in actions for refunds or
VELASCO, JR., J.: of 1993 in the amount of PhP 7,907,662.53, which tax credits of input taxes in export sales, it found that
The Case corresponded to the input taxes not applied against the documents submitted by Atlas did not comply
any output VAT. with said regulation. It pointed out that Atlas failed to
Before us is a Petition for Review on Certiorari under submit photocopies of export documents, invoices, or
Rule 45 assailing the May 16, 2003 Decision[1] of Atlas then filed a petition for review with the CTA on receipts evidencing the sale of goods and others.
the Court of Appeals (CA) in CA-G.R. SP No. 46494, February 22, 1995 to prevent the running of the Moreover, the Certification by Atlas bank, Hongkong
which affirmed the October 13, 1997 Decision[2] of prescriptive period under Sec. 230 of the Tax Code. Shanghai Banking Corporation, did not indicate any
the Court of Tax Appeals (CTA) in CTA Case No. conversion rate for US dollars to pesos. Thus, the
5205 entitled Atlas Consolidated Mining and CTA could not ascertain the veracity of the contents
Development Corporation (Atlas) v. The indicated in Atlas VAT return as export sales and
Commissioner of Internal Revenue (CIR), involving creditable or refundable input VAT.
petitioner Atlas application for issuance of tax credit
certificate or refund of value-added tax (VAT)
The Ruling of the Court of Tax Appeals
payments in accordance with Section 106(b) of the Atlas timely filed its Motion for Reconsideration of
Tax Code on zero-rated VAT payers. Also assailed is the above decision contending that it relied on Sec.
the August 11, 2003 Resolution[3] of the CA denying The petition for review before the CTA was docketed 106 of the Tax Code which merely required proof
Atlas motion for reconsideration. as CTA Case No. 5205. On October 13, 1997, the that the foreign exchange proceeds has been
CTA rendered a Decision denying Atlas claim for tax accounted for in accordance with the regulations of
credit or refund. The fallo reads:
The Facts the Central Bank of the Philippines. Consequently,
Atlas asserted that the documents it presented,
WHEREFORE, in the light of all the foregoing, coupled with the testimony of its Accounting and
Atlas is a corporation duly organized and existing
[Atlas] claim for issuance of tax credit certificate or Finance Manager, Isabel Espeno, sufficiently proved
under Philippine laws engaged in the production of
refund of value-added taxes for the first quarter of its case. It argued that RR 3-88 was issued for claims
copper concentrates for export. It registered as a VAT
for refund of input VAT to be processed by the BIR,
that is, for administrative claims, and not for judicial
claims as in the present case. Anyhow, Atlas prayed
for a re-trial, even as it admitted that it has committed
a mistake or excusable negligence when the CTA
ruled that RR 3-88 should be the one applied for
Atlas to submit the basis required under the
regulation.
Atlas motion for reconsideration was rejected by the
CTA through its January 5, 1998 Resolution, ruling
that it is within its discretion to ascertain the veracity
of the claims for refund which must be strictly
construed against Atlas. Moreover, it also rejected
Atlas prayer for a re-trial under Sec. 2 of Rule 37 of
the Rules of Court, as Atlas failed to submit the
required affidavits of merits.
The Ruling of the Court of Appeals
On Atlas appeal, the CA denied and dismissed Atlas
petition on the ground of insufficiency of evidence to
support Atlas action for tax credit or refund. Thus,
through its May 16, 2003 Decision, the CA sustained
the CTA; and consequently denied Atlas motion for
reconsideration.
The CA ratiocinated that the CTA cannot be faulted
in denying Atlas action for tax credit or refund, and in
denying Atlas prayer for a new trial. The CA
concurred with the CTA in the finding that Atlas
failure to submit the required documents in
accordance with RR 3-88 is fatal to Atlas action, for,
without these documents, Atlas VAT export sales
indicated in its amended VAT return and the
creditable or refundable input VAT could not be
ascertained. The CA struck down Atlas contention
that it has sufficiently established the existence of its
export sales through the testimony of its Accounting
and Finance Manager, as her testimony is not
required under RR 3-88 and is self-serving.
Also, the CA rejected Atlas assertion that RR 3-88 is
applicable only to administrative claims and not to a
judicial proceeding, since it is clear under Sec. 245
(now Sec. 244 of the NIRC) that [t]he Secretary of
Finance, upon the recommendation of the
Commissioner, shall promulgate all needful rules and
regulations for the effective enforcement of the
provisions of this Code. Thus, according to the CA,
RR 3-88 implementing the VAT law is applicable to
judicial proceedings as this Court held in Eslao v.
COA that administrative policies enacted by
administrative bodies to interpret the law have the
force of law and are entitled to great weight.[5] The
CA likewise agreed with the CTA in denying a new
trial for Atlas failure to attach the necessary affidavits
of merits required under the rules.
The Issues
Hence, the instant petition of Atlas raising the
following grounds for our consideration:
A. In rendering the assailed Decision and
Resolution, the Court of Appeals failed to decide this
matter in accordance with law or with the applicable
decisions of the Supreme Court.
B. In rendering the assailed Decision and
Resolution the Court of Appeals is guilty of grave
abuse of discretion amounting to a lack or excess of
jurisdiction when it violated Atlas right to due
process and sanctioned a similar error from the Court
of Tax Appeals (CTA), calling for the exercise of this
Honorable Courts power of supervision.[6]
The foregoing issues can be simplified as follows:
first, whether Atlas has sufficiently proven
entitlement to a tax credit or refund; and second,
whether Atlas should have been accorded a new trial.
The Courts Ruling
The petition has no merit.
First Issue: Atlas failed to show sufficient proof
Consistent with its position before the courts a quo,
Atlas argues that the requirements under RR 3-88 are
only applicable in administrative claims for refunds
before the BIR and not for judicial claims, as in the
instant case. And that it is CTA Circular No. 1-95, as
amended by CTA Circular No. 10-97, which applies
and which Atlas asserts it has complied with. It
contends that CTA Circular No. 10-97, being the later
law, is deemed to have qualified RR 3-88. Thus, it
contends that what is only required is a submission of
a summary of the invoices and a certification from an
independent public accountant.
We are not persuaded.
First, we reiterate the prevailing rule that the findings
of fact of the CA are generally conclusive and
binding and the Court need not pass upon the
supporting evidence. For, it is not this Courts
function to analyze or weigh evidence all over again.
[7] Stated a bit differently, the CAs findings of fact
affirming those of the trial court will not be disturbed
by the Court.[8] This is as it should be for the trial
court, as trier of facts, is best equipped to make the
assessment of issues raised and evidence adduced
before it. Therefore, its factual findings are generally
not disturbed on appeal unless it is perceived to have
overlooked, misunderstood, or misinterpreted certain
facts or circumstances of weight, which, if properly
considered, would affect the result of the case and
warrant a reversal of the decision involved. In the
instant case, we find no cogent reason to depart from
this general principle.
Second, the Rules of Court, which is suppletory in
quasi-judicial proceedings, particularly Sec. 34[9] of
Rule 132, Revised Rules on Evidence, is clear that no
evidence which has not been formally offered shall
be considered. Thus, where the pertinent invoices or
receipts purportedly evidencing the VAT paid by
Atlas were not submitted, the courts a quo evidently
could not determine the veracity of the input VAT
Atlas has paid. Moreover, when Atlas likewise failed
to submit pertinent export documents to prove actual
export sales with due certification from accredited
banks on the export proceeds in foreign currency
with the corresponding conversion rate into
Philippine currency, the courts a quo likewise could
not determine the veracity of the export sales as
indicated in Atlas amended VAT return.
It must be noted that the most competent evidence
must be adduced and presented to prove the
allegations in a complaint, petition, or protest before
a judicial court. And where the best evidence cannot
be submitted, secondary evidence may be presented.
In the instant case, the pertinent documents which are
the best pieces of evidence were not presented.
Third, the summary presented by Atlas does not
replace the pertinent invoices, receipts, and export
sales documents as competent evidence to prove the
fact of refundable or creditable input VAT. Indeed,
the summary presented with the certification by an
independent Certified Public Accountant (CPA) and
the testimony of Atlas Accounting and Finance
Manager are merely corroborative of the actual input
VAT it paid and the actual export sales. Otherwise,
the pertinent invoices, receipts, and export sales
documents are the best and competent pieces of
evidence required to substantiate Atlas claim for tax
credit or refund which is merely corroborated by the
summary duly certified by a CPA and the testimony
of Atlas employee on the export sales. And when
these pertinent documents are not presented, these
could not be corroborated as is true in the instant
case.
Fourth, Atlas mere allegations of the figures in its
amended VAT return for the first quarter of 1993 as
well as in its petition before the CTA are not
sufficient proof of the amount of its refund
entitlement. They do not even constitute
evidence[10] adverse to CIR against whom they are
being presented.[11] While Atlas indeed submitted
several documents, still, the CTA could not ascertain
from them the veracity of the figures as the
documents presented by Atlas were not sufficient to
prove its action for tax credit or refund. Atlas has
failed to meet the burden of proof required in order to
establish the factual basis of its claim for a tax credit
or refund. Neither can we ascertain the veracity of
Atlas alleged input VAT taxes which are refundable
nor the alleged actual export sales indicated in the
amended VAT return.
Clearly, it would not be proper to allow Atlas to
simply prevail and compel a tax credit or refund in
the amount it claims without proving the amount of
its claim. After all, [t]ax refunds are in the nature of
tax exemptions,[12] and are to be construed
strictissimi juris against the taxpayer.
Fifth, it is thus academic whether compliance with
the documentary requirements of RR 3-88 is
necessary. Suffice it to say that a revenue regulation
is binding on the courts as long as the procedure
fixed for its promulgation is followed.[13] It has not
been disputed that RR 3-88 has been duly
promulgated pursuant to the rule-making power of
the Secretary of Finance upon the recommendation of
the CIR. As aptly held by the courts a quo, citing
Eslao,[14] these RRs or administrative issuances
have the force of law and are entitled to great weight.
Sixth, it would not be amiss to point out that Atlas
contention on the applicability of CTA Circular No.
10-97 is misplaced. For one, said circular amended
CTA Circular No. 1-95 only in 1997 whereas the
proceedings of the instant case were conducted prior
to 1997. In fact, Atlas Formal Offer of Evidence[15]
was filed before the CTA on September 2, 1996. For
another, even if said circular is retroactively applied
for being procedural, still, it does not afford Atlas
relief as the documentary and testimonial pieces of
evidence adduced before the CTA are insufficient to
prove the claim for refund or tax credit.
Second Issue: No denial of due process
Atlas asserts denial of due process when the courts a
quo denied its prayer to be given the opportunity to
present the required documents, asserting that the
reliance by the courts a quo on Sec. 2 of Rule 37 of
the 1997 Revised Rules on Civil Procedure is
misplaced as said proviso applies only to a motion for
new trial and not to a motion for reconsideration.
We are not convinced.
Clearly, Atlas attempted or showed willingness to
submit the required documents only after the CTA
rendered its decision. Aside from assailing the
applicability of RR 3-88, Atlas argued in its motion
for reconsideration before the CTA that, on the
alternative, the case be re-opened to allow it to
present the required documents as it followed in good
faith the requirement under Sec. 106 of the 1977 Tax
Code, and alleged that it has committed a mistake or
excusable negligence when the CTA ruled that RR 3-
88 should be the one applied requiring Atlas to
submit the documents needed.
Obviously, Atlas reliance on Sec. 106 of the 1977 Tax
Code is unacceptable for such does not constitute
excusable negligence. In short, Atlas is guilty of
inexcusable negligence in the prosecution of its case.
The courts a quo relied on the procedural deficiency
of non-compliance with Sec. 2, Rule 37 of the Rules
of Court in denying a new trial. In doing so, the
courts a quo recognized Atlas motion for
reconsideration also as a motion for new trial, which
was alternatively prayed for by Atlas.
Be that as it may, even if Atlas has complied with the
affidavits-of-merits requirement, its prayer for a new
trial would still not prosper. First, Atlas is guilty of
inexcusable negligence in the prosecution of its case.
It is duty-bound to ensure that all proofs required
under the rules are duly presented. Atlas has indeed
repeatedly asserted that in its action for the instant
judicial claim, the CTA is bound by its rules and
suppletorily by the Rules of Court. It certainly has
not exercised the diligence required of a litigant who
has the burden of proof to present all that is required.
Second, forgotten evidence, not presented during the
trial nor formally offered, is not newly found
evidence that merits a new trial. Third, and most
importantly, it goes against the orderly administration
of justice to allow a party to submit forgotten
evidence which it could have offered with the
exercise of ordinary diligence, more so when a
decision has already been rendered.

In fine, we reiterate our consistent ruling that actions

for tax refund, as in the instant case, are in the nature
of a claim for exemption and the law is not only
construed in strictissimi juris against the taxpayer, but
also the pieces of evidence presented entitling a
taxpayer to an exemption is strictissimi scrutinized
and must be duly proven.

WHEREFORE, we DENY the petition for lack of

merit, and AFFIRM the CAs May 16, 2003 Decision
and August 11, 2003 Resolution in CA-G.R. SP No.
46494. Costs against petitioner.

SO ORDERED.
THIRD DIVISION tax credit certificates in the amounts of
P5,683,035.04 and P8,173,789.60 representing its
input value added tax (VAT) payments for taxable
COMMISSIONER OF INTERNAL REVENUE, year 1991.
Petitioner,
Respondent, a mining corporation duly organized and
existing under Philippines laws, is registered with the
Bureau of Internal Revenue (BIR) as a VAT-
registered enterprise under VAT Registration
-versus-
Certificate No. 32-6-00632.[3]
In 1991, respondents sales of gold to the Central
Bank (now Bangko Sentral ng Pilipinas) amounted to
MANILA MINING CORPORATION, P200,832,364.70.[4] On April 22, 1991, July 23,
Respondent. 1991, October 21, 1991 and January 20, 1992, it filed
G.R. No. 153204 its VAT Returns for the 1st, 2nd, 3rd and 4th quarters
of 1991, respectively, with the BIR through the VAT
Present: Unit at Revenue District Office No. 47 in East
Makati.[5]
PANGANIBAN, Chairman,
SANDOVAL- GUTIERREZ, Respondent, relying on a letter dated October 10,
CORONA, 1988 from then BIR Deputy Commissioner Victor
CARPIO MORALES, and Deoferio that:
GARCIA, JJ.
xxx under Sec. 2 of E.O. 581 as amended, gold sold
to the Central Bank is considered an export sale
Promulgated: which under Section 100(a)(1) of the NIRC, as
amended by E.O. 273, is subject to zero-rated if such
August 31, 2005 sale is made by a VAT-registered person[,][6]
(Underscoring supplied)
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
------------------------------x filed on April 7, 1992 with the Commissioner of
Internal Revenue (CIR), through the BIR-VAT
Division (BIR-VAT), an application for tax
refund/credit of the input VAT it paid from July 1-
DECISION
December 31, 1999 in the amount of P8,173,789.60.
CARPIO MORALES, J.:
Petitioner subsequently filed on March 5, 1991
another application for tax refund/credit of input VAT
Being assailed via petition for review on certiorari is
it paid the amount of P5,683,035.04 from January 1
the April 12, 2002 Decision[1] of the Court of
June 30, 1991. As the CIR failed to act upon
Appeals reversing that of the Court of Tax Appeals
(CTA)[2] which granted the claim of respondent, respondents application within sixty (60) days from
Manila Mining Corporation, in consolidated CTA the dates of filing,[7] it filed on March 22, 1993 a
Case Nos. 4968 and 4991, for refund or issuance of Petition for Review against the CIR before the CTA
which docketed it as CTA Case No. 4968,[8] seeking
the issuance of tax credit certificate or refund in the
amount of P5,683,035.04 covering its input VAT
payments for the 1st and 2nd quarters of 1991. And it
filed on May 24, 1993 another Petition for Review,
docketed as CTA Case No. 4991, seeking the
issuance of tax credit certificates in the amount of
P8,173,789.60 covering its input VAT payments for
the 3rd and 4th quarters of 1991.[9]
To the petition in CTA Case No. 4968 the CIR filed
its Answer[10] admitting that respondent filed its
VAT returns for the 1st and 2nd quarters of 1991 and
an application for credit/refund of input VAT
payment. It, however, specifically denied the veracity
of the amounts stated in respondents VAT returns and
application for credit/refund as the same continued to
be under investigation.
On May 26, 1993, respondent filed in CTA Case No.
4968 a Request for Admissions[11] of, among other
facts, the following:
xxx
5. That the original copies of the Official Receipts
and Sales Invoices, reflected in Annex C ([Schedule
of VAT INPUT on Domestic Purchase of Goods and
Services for the quarter ending March 31, 1991]
consisting of 24 pages) and Annex C-1 (Summary of
Importation, 2 pages) were submitted to BIR-VAT, as
required, for domestic purchases of goods and
services (1st semester, 1991) for a total net claimable
of P5,268,401.90; while its VAT input tax paid for
importation was P679,853.00; (Emphasis and
underscoring supplied)
xxx
By Reply[12] of August 11, 1993, the CIR
specifically denied the veracity and accuracy of the
amounts indicated in respondents Request for
Admissions,[13] among other things.
The CIRs Reply, however, was not verified,
prompting respondent to file on August 30, 1993 a
SUPPLEMENT (To Annotation of Admission)
alleging that as the reply was not under oath, an
implied admission of [its requests] ar[ose] as a
consequence thereof.[14]
On September 27, 1993, the CIR filed a Motion to
Admit Reply, which Reply was verified and attached
to the motion, alleging that its Reply of August 11,
1993 was submitted within the period for submission
thereof, but, however, was incomplete [due to
oversight] as to the signature of the administering
officer in the verification.[15]
By Resolution[16] of February 28, 1994, the CTA,
finding that the matters subject of respondents
Request for Admissions are relevant to the facts
stated in the petition for review and there being an
implied admission by the CIR under Section 2 of
Rule 26 of the then Revised Rules of Court reading:
Section 2. Implied Admission. Each of the matters of
which an admission is requested shall be deemed
admitted unless xxx the party to whom the request is
directed serves upon the party requesting the
admission a sworn statement either denying
specifically the matters of which an admission is
requested xxx. (Emphasis and underscoring
supplied),
granted respondents Request for Admissions and
denied the CIRs Motion to Admit Reply.
With respect to CTA Case No. 4991, respondent also
filed a Request for Admissions dated May 27, 1993
of the following facts:
xxx
2. Petitioners 3rd and 4th Quarters 1991 VAT Returns
were submitted and filed with the BIR-VAT Divisions
on October 21, 1991 and January 20, 1991,
respectively and subsequently, on April 7, 1993
petitioner filed and submitted its application for tax
credit on VAT paid for the 2nd semester of 1990;
xxx
4. That attached to the transmittal letter [forwarded
petitioners application for tax refund credit] of March
31, 1992 (Annex B) are the following documents:
a. Copies of invoices and other supporting
documents;
b. VAT Registration Certificate;
c. VAT returns for the third and fourth quarters of
1990;
d. Beginning and ending inventories of raw materials,
work-in process, finished goods and materials and
supplies;
e. Zero-rated sales to Central Bank of the Philippines;
f. Certification that the Company will not file any tax
credit with the Board of Investments and Bureau of
Customs.
which completely documented the petitioners claim
for refund as required.
5. That the original copies of the Official Receipts
and Sales Invoices, reflected in Annex C (consisting
of 35 pages) and Annex C-1 (Summary of
Importation, 2 pages) were submitted to BIR-VAT, as
required, to show domestic purchases of goods and
services (2nd semester, 1991) which established that
the total net claimable of P7,953,816.38; while its
VAT input tax paid for importation was P563,503.00;
x x x[17]
To the Request for Admission the CIR filed a
Manifestation and Motion alleging that as the issues
had not yet been joined, respondents request is
baseless and premature[18] under Section 1, Rule 26
of the Revised Rules of Court.[19]
In the meantime, the CIR filed on August 16, 1993 its
Answer,[20] it averring that sales of gold to the
Central Bank may not be legally considered export
sales for purposes of Section 100(a) in relation to
Section 100(a)(1)[21] of the Tax Code; and that
assuming that a refund is proper, respondent must
demonstrate that it complied with the provisions of
Section 204(3) in relation to Section 230 of the Tax
Code.[22]
The CIR subsequently filed on March 25, 1992 its
Reply to respondents Request for Admission in CTA
No. 4991, it admitting that respondent filed its VAT
returns and VAT applications for tax credit for the 3rd
and 4th quarters of 1991, but specifically denying the
correctness and veracity of the amounts indicated in
the schedules and summary of importations, VAT
services and goods, the total input and output taxes,
including the amount of refund claimed.[23]
By Resolution[24] of February 22, 1994, the CTA, in
CTA Case No. 4991, admitted the matters covered by
respondents Request for Admission except those
specifically denied by the CIR. In the same
Resolution, the CTA consolidated Case Nos. 4968
and 4991, they involving the same parties and
substantially the same factual and legal issues.
Joint hearings of CTA Case Nos. 4968 and 4991 were
thus conducted.
Through its Chief Accountant Danilo Bautista,
respondent claimed that in 1991, it sold a total of
20,288.676 ounces of gold to the Central Bank
valued at P200,832,364.70, as certified by the
Director of the Mint and Refinery Department of the
Central Bank[25] and that in support of its
application for refund filed with the BIR, it submitted
copies of all invoices and official receipts covering its
input VAT payments to the VAT Division of the BIR,
the summary and schedules of which were certified
by its external auditor, the Joaquin Cunanan & Co.
[26]
Senior Audit Manager of Joaquin Cunanan & Co.,
Irene Ballesteros, who was also presented by
respondent, declared that she conducted a special
audit work for respondent for the purpose of
determining its actual input VAT payments for the
second semester of 1991 and examined every original
suppliers invoice, official receipts, and other
documents supporting the payments;[27] and that
there were no discrepancies or errors between the
summaries and schedules of suppliers invoices
prepared by respondent and the VAT invoices she
examined.[28]
Following the filing by respondent of its formal offer
of evidence in both cases,[29] the CTA, by
Resolution[30] of July 18, 1995, admitted the same.
Upon the issue of whether respondents sales of gold
to the BSP during the four quarters of 1991 are
subject to 10% VAT under Section 100 of the Tax
Code or should be considered zero-rated under
paragraph a(2) of said Section 100, the CTA held that
said sales are not subject to 10% output VAT, citing
Atlas Consolidated Mining and Development
Corporation v. Court of Appeals,[31] Manila Mining
Corporation v. Commissioner of Internal Revenue,
[32] and Benguet Corporation v. Commissioner of
Internal Revenue.[33]
Nonetheless, the CTA denied respondents claim for
refund of input VAT for failure to prove that it paid
the amounts claimed as such for the year 1991, no
sales invoices, receipts or other documents as
required under Section 2(c)(1) of Revenue
Regulations No. 3-88 having been presented.[34] The
CTA explained that a mere listing of VAT invoices
and receipts, even if certified to have been previously
examined by an independent certified public
accountant, would not suffice to establish the
truthfulness and accuracy of the contents of such
invoices and receipts unless offered and actually
verified by it (CTA) in accordance with CTA Circular
No. 1-95, as amended by CTA Circular No. 10-97,
which requires that photocopies of invoices, receipts
and other documents covering said accounts of
payments be pre-marked by the party concerned and
submitted to the court.[35]
Respondents motion for reconsideration[36] of the
CTA decision having been denied by Resolution[37]
of February 11, 1999, respondent brought the case to
the Court of Appeals before which it contended that
the CTA erred in denying the refund for insufficiency
of evidence, it arguing that in light of the admissions
by the CIR of the matters subject of it Requests for
Admissions, it was relieved of the burden of
submitting the purchase invoices and/or receipts to
support its claims.[38]
By Decision[39] of April 12, 2002, the Court of
Appeals reversed the decision of the CTA and granted
respondents claim for refund or issuance of tax credit
certificates in the amounts of P5,683,035.04 for CTA
Case No. 4968 and P8,173,789.60 for CTA Case No.
4991.
In granting the refund, the appellate court held that
there was no need for respondent to present the
photocopies of the purchase invoices or receipts
evidencing the VAT paid in view of Rule 26, Section
2 of the Revised Rules of Court[40] and the
Resolutions of the CTA holding that the matters
requested in respondents Request for Admissions in
CTA No. 4968 were deemed admitted by the CIR[41]
in light of its failure to file a verified reply thereto.
The appellate court further held that the CIRs
reliance on the best evidence rule is misplaced since
this rule does not apply to matters which have been
judicially admitted.[42]
Hence, the present petition for review,[43] the CIR
arguing that respondents failure to submit
documentary evidence to confirm the veracity of its
claims is fatal; and that the CTA, being a court of
record, is not expected to go out of its way and dig
into the records of the BIR to supply the insufficient
evidence presented by a party, and in fact it may set a
definite rule that only evidence formally presented
will be considered in deciding cases before it.[44]
Respondent, in its Comment,[45] avers that it
complied with the provisions of Section 2(c)(1) of
Revenue Regulation No. 3-88 when it submitted the
original receipts and invoices to the BIR, which fact
of submission had been deemed admitted by
petitioner, as confirmed by the CTA in its Resolutions
in both cases granting respondents Requests for
Admissions therein.
To respondents Comment the Office of the Solicitor
General (OSG), on behalf of petitioner, filed its
Reply,[46] arguing that the documents required to be
submitted to the BIR under Revenue Regulation No.
3-88 should likewise be presented to the CTA to
prove entitlement to input tax credit.[47] In addition,
it argues that, contrary to respondents position, a
certification by an independent Certified Public
Accountant (CPA) as provided under CTA Circulars
1-95 and 10-97 does not relieve respondent of the
onus of adducing in evidence the invoices, receipts
and other documents to show the input VAT paid on
its purchase of goods and services.[48]
The pivotal issue then is whether respondent adduced
sufficient evidence to prove its claim for refund of its
input VAT for taxable year 1991 in the amounts of
P5,683,035.04 and P8,173,789.60.
The petition is impressed with merit.
In Commissioner of Internal Revenue v. Benguet
Corporation,[49] this Court had the occasion to note
that as early as 1988, the BIR issued several VAT
rulings to the effect that sales of gold to the Central
Bank by a VAT-registered person or entity are
considered export sales.
The transactions in question occurred during the
period from 1988 and 1991. Under Sec. 99 of the
National Internal Revenue Code (NIRC), as amended
by Executive Order (E.O.) No. 273 s. 1987, then in
effect, any person who, in the course of trade or
business, sells, barters or exchanges goods, renders
services, or engages in similar transactions and any
person who imports goods is liable for output VAT at
rates of either 10% or 0% (zero rated) depending on
the classification of the transaction under Sec. 100 of
the NIRC. xxx
xxx
In January of 1988, respondent applied for and was
granted by the BIR zero-rated status on its sale of
gold to the Central Bank. On 28 August 1988, Deputy
Commissioner of Internal Revenue Eufracio D.
Santos issued VAT Ruling No. 3788-88, which
declared that [t]he sale of gold to Central Bank is
considered as export sale subject to zero-rate
pursuant to Section 100 of the Tax Code, as amended
by Executive Order No. 273. The BIR came out with
at least six (6) other issuances, reiterating the zero-
rating of sale of gold to the Central Bank, the latest of
which is VAT Ruling No. 036-90 dated 14 February
1990.
x x x[50] (Italics in the original; underscoring
supplied)
As export sales, the sale of gold to the Central Bank
is zero-rated, hence, no tax is chargeable to it as
purchaser. Zero rating is primarily intended to be
enjoyed by the seller respondent herein, which
charges no output VAT but can claim a refund of or a
tax credit certificate for the input VAT previously
charged to it by suppliers.[51]
For a judicial claim for refund to prosper, however,
respondent must not only prove that it is a VAT
registered entity and that it filed its claims within the
prescriptive period. It must substantiate the input
VAT paid by purchase invoices or official receipts.
[52]
This respondent failed to do.
Revenue Regulation No. 3-88 amending Revenue
Regulation No. 5-87 provides the requirements in
claiming tax credits/refunds.
Sec.2. Section 16 of Revenue Regulations 5-87 is
hereby amended to read as follows:
Sec. 16. Refunds or tax credits of input tax. -
(a) Zero-rated sales of goods and services Only a
VAT-registered person may be granted a tax credit or
refund of value-added taxes paid corresponding to the
zero-rated sales of goods and services, to the extent
that such taxes have not been applied against output
taxes, upon showing of proof of compliance with the
conditions stated in Section 8 of these Regulations.
For export sales, the application should be filed with
the Bureau of Internal Revenue within two years
from the date of exportation. For other zero-rated
sales, the application should be filed within two years
after the close of the quarter when the transaction
took place.
xxx
(c) Claims for tax credits/refunds. - Application for
Tax Credit/Refund of Value-Added Tax Paid (BIR
Form No. 2552) shall be filed with the Revenue
District Office of the city or municipality where the
principal place of business of the applicant is located
or directly with the Commissioner, Attention: VAT
Division.
A photocopy of the purchase invoice or receipt
evidencing the value added tax paid shall be
submitted together with the application. The original
copy of the said invoice/receipt, however, shall be
presented for cancellation prior to the issuance of the
Tax Credit Certificate or refund. xxx (Emphasis and
underscoring supplied)
Under Section 8 of RA 1125,[53] the CTA is
described as a court of record. As cases filed before it
are litigated de novo, party litigants should prove
every minute aspect of their cases. No evidentiary
value can be given the purchase invoices or receipts
submitted to the BIR as the rules on documentary
evidence require that these documents must be
formally offered before the CTA.[54]
This Court thus notes with approval the following
findings of the CTA:
xxx [S]ale of gold to the Central Bank should not be
subject to the 10% VAT-output tax but this does not
ipso facto mean that [the seller] is entitled to the
amount of refund sought as it is required by law to
present evidence showing the input taxes it paid
during the year in question. What is being claimed in
the instant petition is the refund of the input taxes
paid by the herein petitioner on its purchase of goods
and services. Hence, it is necessary for the Petitioner
to show proof that it had indeed paid the said input
taxes during the year 1991. In the case at bar,
Petitioner failed to discharge this duty. It did not
adduce in evidence the sales invoice, receipts or other
documents showing the input value added tax on the
purchase of goods and services. [55]
xxx
Section 8 of Republic Act 1125 (An Act Creating the
Court of Tax Appeals) provides categorically that the
Court of Tax Appeals shall be a court of record and as
such it is required to conduct a formal trial (trial de
novo) where the parties must present their evidence
accordingly if they desire the Court to take such
evidence into consideration.[56] (Emphasis and
underscoring supplied)
A sales or commercial invoice is a written account of
goods sold or services rendered indicating the prices
charged therefor or a list by whatever name it is
known which is used in the ordinary course of
business evidencing sale and transfer or agreement to
sell or transfer goods and services.[57]
A receipt on the other hand is a written
acknowledgment of the fact of payment in money or
other settlement between seller and buyer of goods,
debtor or creditor, or person rendering services and
client or customer.[58]
These sales invoices or receipts issued by the supplier
are necessary to substantiate the actual amount or
quantity of goods sold and their selling price,[59] and
taken collectively are the best means to prove the
input VAT payments.
Respondent contends, however, that the certification
of the independent CPA attesting to the correctness of
the contents of the summary of suppliers invoices or
receipts which were examined, evaluated and audited
by said CPA in accordance with CTA Circular No. 1-
95 as amended by CTA Circular No. 10-97 should
substantiate its claims.
There is nothing, however, in CTA Circular No. 1-95,
as amended by CTA Circular No. 10-97, which either
expressly or impliedly suggests that summaries and
schedules of input VAT payments, even if certified by
an independent CPA, suffice as evidence of input
VAT payments.
Thus CTA Circular No. 1-95 provides:
1. The party who desires to introduce as evidence
such voluminous documents must present: (a) a
Summary containing the total amount/s of the tax
account or tax paid for the period involved and a
chronological or numerical list of the numbers, dates
and amounts covered by the invoices or receipts; and
(b) a Certification of an independent Certified Public
Accountant attesting to the correctness of the
contents of the summary after making an examination
and evaluation of the voluminous receipts and
invoices. Such summary and certification must
properly be identified by a competent witness from
the accounting firm.
2. The method of individual presentation of each and
every receipt or invoice or other documents for
marking, identification and comparison with the
originals thereof need not be done before the Court or
the Commissioner anymore after the introduction of
the summary and CPA certification. It is enough that
the receipts, invoices and other documents covering
the said accounts or payments must be pre-marked by
the party concerned and submitted to the Court in
order to be made accessible to the adverse party
whenever he/she desires to check and verify the
correctness of the summary and CPA certification.
However, the originals of the said receipts, invoices
or documents should be ready for verification and
comparison in case of doubt on the authenticity of the
particular documents presented is raised during the
hearing of the case.[60] (Underscoring supplied)
The circular, in the interest of speedy administration
of justice, was promulgated to avoid the time-
consuming procedure of presenting, identifying and
marking of documents before the Court. It does not
relieve respondent of its imperative task of pre-
marking photocopies of sales receipts and invoices
and submitting the same to the court after the
independent CPA shall have examined and compared
them with the originals. Without presenting these pre-
marked documents as evidence from which the
summary and schedules were based, the court cannot
verify the authenticity and veracity of the
independent auditors conclusions.[61]
There is, moreover, a need to subject these invoices
or receipts to examination by the CTA in order to
confirm whether they are VAT invoices. Under
Section 21 of Revenue Regulation No. 5-87,[62] all
purchases covered by invoices other than a VAT
invoice shall not be entitled to a refund of input VAT.
The CTA disposition of the matter is thus in order.
Mere listing of VAT invoices and receipts, even if
certified to have been previously examined by an
independent certified public accountant, would not
suffice to establish the truthfulness and accuracy of
the contents thereof unless offered and actually
verified by this Court. CTA Circular No. 1-95, as
amended by CTA Circular No. 10-97, requires that
the photocopies of invoices, receipts and other
documents covering said accounts or payments must
be pre-marked by the party and submitted to this
Court.[63] (Underscoring supplied)
There being then no showing of abuse or improvident
exercise of the CTAs authority, this Court is not
inclined to set aside the conclusions reached by it,
which, by the very nature of its functions, is
dedicated exclusively to the study and consideration
of tax problems and has necessarily developed an
expertise on the subject.[64]
While the CTA is not governed strictly by technical
rules of evidence,[65] as rules of procedure are not
ends in themselves but are primarily intended as tools
in the administration of justice, the presentation of
the purchase receipts and/or invoices is not mere
procedural technicality which may be disregarded
considering that it is the only means by which the
CTA may ascertain and verify the truth of
respondents claims.
The records further show that respondent miserably
failed to substantiate its claim for input VAT refund
for the first semester of 1991. Except for the
summary and schedules of input VAT payments
prepared by respondent itself, no other evidence was
adduced in support of its claim.
As for respondents claim for input VAT refund for the
second semester of 1991, it employed the services of
Joaquin Cunanan & Co. on account of which it
(Joaquin Cunanan & Co.) executed a certification
that:
We have examined the information shown below
concerning the input tax payments made by the
Makati Office of Manila Mining Corporation for the
period from July 1 to December 31, 1991. Our
examination included inspection of the pertinent
suppliers invoices and official receipts and such other
auditing procedures as we considered necessary in
the circumstances. xxx[66]
As the certification merely stated that it used auditing
procedures considered necessary and not auditing
procedures which are in accordance with generally
accepted auditing principles and standards, and that
the examination was made on input tax payments by
the Manila Mining Corporation, without specifying
that the said input tax payments are attributable to the
sales of gold to the Central Bank, this Court cannot
rely thereon and regard it as sufficient proof of
respondents input VAT payments for the second
semester.
Finally, respecting respondents argument that it need
not prove the amount of input VAT it paid for the first
semester of taxable year 1991 as the same was
proven by the implied admission of the CIR, which
was confirmed by the CTA when it admitted its
Request for Admission,[67] the same does not lie.
Respondents Requests for Admission do not fall
within Section 2 Rule 26 of the Revised Rules of
Court.[68] What respondent sought the CIR to admit
are the total amount of input VAT payments it paid
for the first and second semesters of taxable year
1991, which matters have already been previously
alleged in respondents petition and specifically
denied by the CIR in its Answers dated May 10, 1993
and August 16, 1993 filed in CTA Case Nos. 4869
and 4991, respectively.
As Concrete Aggregates Corporation v. Court of
Appeals[69] holds, admissions by an adverse party as
a mode of discovery contemplates of interrogatories
that would clarify and tend to shed light on the truth
or falsity of the allegations in a pleading, and does
not refer to a mere reiteration of what has already
been alleged in the pleadings; otherwise, it
constitutes an utter redundancy and will be a useless,
pointless process which petitioner should not be
subjected to.[70]
the input VAT payments allegedly paid by respondent
for the second semester of 1991.
For failure of respondent then not only to strictly
comply with the rules of procedure but also to
establish the factual basis of its claim for refund, this
Court has to deny its claim. A claim for refund is in
the nature of a claim for exemption and should be
construed in strictissimi juris against the taxpayer and
liberally in favor of the taxing authority.[73]
WHEREFORE, the petition is hereby GRANTED.
The assailed Decision of the Court of Appeals dated
April 12, 2002 is hereby REVERSED and SET
ASIDE. The Court of Tax Appeals Decision dated
November 24, 1998 is hereby REINSTATED.
SO ORDERED.

Petitioner controverted in its Answers the matters set

forth in respondents Petitions for Review before the
CTA the requests for admission being mere
reproductions of the matters already stated in the
petitions. Thus, petitioner should not be required to
make a second denial of those matters it already
denied in its Answers.[71]

As observed by the CTA, petitioner did in fact file its

reply to the Request for Admissions in CTA Case No.
4869 and specifically denied the veracity and
accuracy of the figures indicated in respondents
summary. The Motion to Admit Reply was, however,
denied by the CTA as the original Reply was not
made under oath.

That the Reply was not made under oath is merely a

formal and not a substantive defect and may be
dispensed with.[72] Although not under oath,
petitioners reply to the request readily showed that its
intent was to deny the matters set forth in the Request
for Admissions.

As for respondents Request for Admission in CTA

Case No. 4991, petitioner timely filed its reply and
specifically denied the accuracy and veracity of the
contents of the schedules and summaries which listed
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 184823 October 6, 2010
COMMISSIONER OF INTERNAL REVENUE,
Petitioner,
vs.
AICHI FORGING COMPANY OF ASIA, INC.,
Respondent.
DECISION
DEL CASTILLO, J.:
A taxpayer is entitled to a refund either by authority
of a statute expressly granting such right, privilege,
or incentive in his favor, or under the principle of
solutio indebiti requiring the return of taxes
erroneously or illegally collected. In both cases, a
taxpayer must prove not only his entitlement to a
refund but also his compliance with the procedural
due process as non-observance of the prescriptive
periods within which to file the administrative and
the judicial claims would result in the denial of his
claim.
This Petition for Review on Certiorari under Rule 45
of the Rules of Court seeks to set aside the July 30,
2008 Decision1 and the October 6, 2008 Resolution2
of the Court of Tax Appeals (CTA) En Banc.
Factual Antecedents
Respondent Aichi Forging Company of Asia, Inc., a
corporation duly organized and existing under the
laws of the Republic of the Philippines, is engaged in
the manufacturing, producing, and processing of steel
and its by-products.3 It is registered with the Bureau
of Internal Revenue (BIR) as a Value-Added Tax
(VAT) entity4 and its products, "close impression die
steel forgings" and "tool and dies," are registered
with the Board of Investments (BOI) as a pioneer
status.5
On September 30, 2004, respondent filed a claim for
refund/credit of input VAT for the period July 1, 2002
to September 30, 2002 in the total amount of
P3,891,123.82 with the petitioner Commissioner of
Internal Revenue (CIR), through the Department of
Finance (DOF) One-Stop Shop Inter-Agency Tax
Credit and Duty Drawback Center.6
Proceedings before the Second Division of the CTA
On even date, respondent filed a Petition for Review7
with the CTA for the refund/credit of the same input
VAT. The case was docketed as CTA Case No. 7065
and was raffled to the Second Division of the CTA.
In the Petition for Review, respondent alleged that for
the period July 1, 2002 to September 30, 2002, it
generated and recorded zero-rated sales in the amount
of P131,791,399.00,8 which was paid pursuant to
Section 106(A) (2) (a) (1), (2) and (3) of the National
Internal Revenue Code of 1997 (NIRC);9 that for the
said period, it incurred and paid input VAT amounting
to P3,912,088.14 from purchases and importation
attributable to its zero-rated sales;10 and that in its
application for refund/credit filed with the DOF One-
Stop Shop Inter-Agency Tax Credit and Duty
Drawback Center, it only claimed the amount of
P3,891,123.82.11
In response, petitioner filed his Answer12 raising the
following special and affirmative defenses, to wit:
4. Petitioners alleged claim for refund is subject to
administrative investigation by the Bureau;
5. Petitioner must prove that it paid VAT input taxes
for the period in question;
6. Petitioner must prove that its sales are export sales
contemplated under Sections 106(A) (2) (a), and
108(B) (1) of the Tax Code of 1997;
7. Petitioner must prove that the claim was filed
within the two (2) year period prescribed in Section
229 of the Tax Code;
8. In an action for refund, the burden of proof is on
the taxpayer to establish its right to refund, and
failure to sustain the burden is fatal to the claim for
refund; and
9. Claims for refund are construed strictly against the
claimant for the same partake of the nature of
exemption from taxation.13
Trial ensued, after which, on January 4, 2008, the
Second Division of the CTA rendered a Decision
partially granting respondents claim for
refund/credit. Pertinent portions of the Decision read:
For a VAT registered entity whose sales are zero-
rated, to validly claim a refund, Section 112 (A) of
the NIRC of 1997, as amended, provides:
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
Pursuant to the above provision, petitioner must
comply with the following requisites: (1) the taxpayer
is engaged in sales which are zero-rated or effectively
zero-rated; (2) the taxpayer is VAT-registered; (3) the
claim must be filed within two years after the close of
the taxable quarter when such sales were made; and
(4) the creditable input tax due or paid must be
attributable to such sales, except the transitional input
tax, to the extent that such input tax has not been
applied against the output tax.
The Court finds that the first three requirements have
been complied [with] by petitioner.
With regard to the first requisite, the evidence
presented by petitioner, such as the Sales Invoices
(Exhibits "II" to "II-262," "JJ" to "JJ-431," "KK" to
"KK-394" and "LL") shows that it is engaged in sales
which are zero-rated.
The second requisite has likewise been complied
with. The Certificate of Registration with OCN
1RC0000148499 (Exhibit "C") with the BIR proves
that petitioner is a registered VAT taxpayer.
In compliance with the third requisite, petitioner filed
its administrative claim for refund on September 30,
2004 (Exhibit "N") and the present Petition for
Review on September 30, 2004, both within the two
(2) year prescriptive period from the close of the
taxable quarter when the sales were made, which is
from September 30, 2002.
As regards, the fourth requirement, the Court finds
that there are some documents and claims of
petitioner that are baseless and have not been
satisfactorily substantiated.
xxxx
In sum, petitioner has sufficiently proved that it is
entitled to a refund or issuance of a tax credit
certificate representing unutilized excess input VAT
payments for the period July 1, 2002 to September
30, 2002, which are attributable to its zero-rated sales
for the same period, but in the reduced amount of
P3,239,119.25, computed as follows:
Amount of Claimed Input VAT P 3,891,123.82
Less:
Exceptions as found by the ICPA 41,020.37
Net Creditable Input VAT P 3,850,103.45
Less:
Output VAT Due 610,984.20
Excess Creditable Input VAT P 3,239,119.25
WHEREFORE, premises considered, the present
Petition for Review is PARTIALLY GRANTED.
Accordingly, respondent is hereby ORDERED TO
REFUND OR ISSUE A TAX CREDIT
CERTIFICATE in favor of petitioner [in] the reduced
amount of THREE MILLION TWO HUNDRED
THIRTY NINE THOUSAND ONE HUNDRED
NINETEEN AND 25/100 PESOS (P3,239,119.25),
representing the unutilized input VAT incurred for the
months of July to September 2002.
SO ORDERED.14
Dissatisfied with the above-quoted Decision,
petitioner filed a Motion for Partial
Reconsideration,15 insisting that the administrative
and the judicial claims were filed beyond the two-
year period to claim a tax refund/credit provided for
under Sections 112(A) and 229 of the NIRC. He
reasoned that since the year 2004 was a leap year, the
filing of the claim for tax refund/credit on September
30, 2004 was beyond the two-year period, which
expired on September 29, 2004.16 He cited as basis
Article 13 of the Civil Code,17 which provides that
when the law speaks of a year, it is equivalent to 365
days. In addition, petitioner argued that the
simultaneous filing of the administrative and the
judicial claims contravenes Sections 112 and 229 of
the NIRC.18 According to the petitioner, a prior
filing of an administrative claim is a "condition
precedent"19 before a judicial claim can be filed. He
explained that the rationale of such requirement rests
not only on the doctrine of exhaustion of
administrative remedies but also on the fact that the
CTA is an appellate body which exercises the power
of judicial review over administrative actions of the
BIR. 20
The Second Division of the CTA, however, denied
petitioners Motion for Partial Reconsideration for
lack of merit. Petitioner thus elevated the matter to
the CTA En Banc via a Petition for Review.21
Ruling of the CTA En Banc
On July 30, 2008, the CTA En Banc affirmed the
Second Divisions Decision allowing the partial tax
refund/credit in favor of respondent. However, as to
the reckoning point for counting the two-year period,
the CTA En Banc ruled:
Petitioner argues that the administrative and judicial
claims were filed beyond the period allowed by law
and hence, the honorable Court has no jurisdiction
over the same. In addition, petitioner further contends
that respondent's filing of the administrative and
judicial [claims] effectively eliminates the authority
of the honorable Court to exercise jurisdiction over
the judicial claim.
We are not persuaded.
Section 114 of the 1997 NIRC, and We quote, to wit:
SEC. 114. Return and Payment of Value-added Tax.
(A) In General. Every person liable to pay the
value-added tax imposed under this Title shall file a
quarterly return of the amount of his gross sales or
receipts within twenty-five (25) days following the
close of each taxable quarter prescribed for each
taxpayer: Provided, however, That VAT-registered
persons shall pay the value-added tax on a monthly
basis.
[x x x x ]
Based on the above-stated provision, a taxpayer has
twenty five (25) days from the close of each taxable
quarter within which to file a quarterly return of the
amount of his gross sales or receipts. In the case at
bar, the taxable quarter involved was for the period of
July 1, 2002 to September 30, 2002. Applying
Section 114 of the 1997 NIRC, respondent has until
October 25, 2002 within which to file its quarterly
return for its gross sales or receipts [with] which it
complied when it filed its VAT Quarterly Return on
October 20, 2002.
In relation to this, the reckoning of the two-year
period provided under Section 229 of the 1997 NIRC
should start from the payment of tax subject claim for
refund. As stated above, respondent filed its VAT
Return for the taxable third quarter of 2002 on
October 20, 2002. Thus, respondent's administrative
and judicial claims for refund filed on September 30,
2004 were filed on time because AICHI has until
October 20, 2004 within which to file its claim for
refund.
In addition, We do not agree with the petitioner's
contention that the 1997 NIRC requires the previous
filing of an administrative claim for refund prior to
the judicial claim. This should not be the case as the
law does not prohibit the simultaneous filing of the
administrative and judicial claims for refund. What is
controlling is that both claims for refund must be
filed within the two-year prescriptive period.
In sum, the Court En Banc finds no cogent
justification to disturb the findings and conclusion
spelled out in the assailed January 4, 2008 Decision
and March 13, 2008 Resolution of the CTA Second
Division. What the instant petition seeks is for the
Court En Banc to view and appreciate the evidence in
their own perspective of things, which unfortunately
had already been considered and passed upon.
WHEREFORE, the instant Petition for Review is
hereby DENIED DUE COURSE and DISMISSED
for lack of merit. Accordingly, the January 4, 2008
Decision and March 13, 2008 Resolution of the CTA
Second Division in CTA Case No. 7065 entitled,
"AICHI Forging Company of Asia, Inc. petitioner vs.
Commissioner of Internal Revenue, respondent" are
hereby AFFIRMED in toto.
SO ORDERED.22
Petitioner sought reconsideration but the CTA En
Banc denied23 his Motion for Reconsideration.
Issue
Hence, the present recourse where petitioner
interposes the issue of whether respondents judicial
and administrative claims for tax refund/credit were
filed within the two-year prescriptive period provided
in Sections 112(A) and 229 of
the NIRC.24
Petitioners Arguments
Petitioner maintains that respondents administrative
and judicial claims for tax refund/credit were filed in
violation of Sections 112(A) and 229 of the NIRC.25
He posits that pursuant to Article 13 of the Civil
Code,26 since the year 2004 was a leap year, the
filing of the claim for tax refund/credit on September
30, 2004 was beyond the two-year period, which
expired on September 29, 2004.27
Petitioner further argues that the CTA En Banc erred
in applying Section 114(A) of the NIRC in
determining the start of the two-year period as the
said provision pertains to the compliance
requirements in the payment of VAT.28 He asserts
that it is Section 112, paragraph (A), of the same
Code that should apply because it specifically
provides for the period within which a claim for tax
refund/ credit should be made.29
Petitioner likewise puts in issue the fact that the
administrative claim with the BIR and the judicial
claim with the CTA were filed on the same day.30 He
opines that the simultaneous filing of the
administrative and the judicial claims contravenes
Section 229 of the NIRC, which requires the prior
filing of an administrative claim.31 He insists that
such procedural requirement is based on the doctrine
of exhaustion of administrative remedies and the fact
that the CTA is an appellate body exercising judicial
review over administrative actions of the CIR.32
Respondents Arguments
For its part, respondent claims that it is entitled to a
refund/credit of its unutilized input VAT for the
period July 1, 2002 to September 30, 2002 as a
matter of right because it has substantially complied
with all the requirements provided by law.33
Respondent likewise defends the CTA En Banc in
applying Section 114(A) of the NIRC in computing
the prescriptive period for the claim for tax
refund/credit. Respondent believes that Section
112(A) of the NIRC must be read together with
Section 114(A) of the same Code.34
As to the alleged simultaneous filing of its
administrative and judicial claims, respondent
contends that it first filed an administrative claim
with the One-Stop Shop Inter-Agency Tax Credit and
Duty Drawback Center of the DOF before it filed a
judicial claim with the CTA.35 To prove this,
respondent points out that its Claimant Information
Sheet No. 4970236 and BIR Form No. 1914 for the
third quarter of 2002,37 which were filed with the
DOF, were attached as Annexes "M" and "N,"
respectively, to the Petition for Review filed with the
CTA.38 Respondent further contends that the non-
observance of the 120-day period given to the CIR to
act on the claim for tax refund/credit in Section
112(D) is not fatal because what is important is that
both claims are filed within the two-year prescriptive
period.39 In support thereof, respondent cites
Commissioner of Internal Revenue v. Victorias
Milling Co., Inc.40 where it was ruled that "[i]f,
however, the [CIR] takes time in deciding the claim,
and the period of two years is about to end, the suit or
proceeding must be started in the [CTA] before the
end of the two-year period without awaiting the
decision of the [CIR]."41 Lastly, respondent argues
that even if the period had already lapsed, it may be
suspended for reasons of equity considering that it is
not a jurisdictional requirement.42
Our Ruling
The petition has merit.
Unutilized input VAT must be claimed within two
years after the close of the taxable quarter when the
sales were made
In computing the two-year prescriptive period for
claiming a refund/credit of unutilized input VAT, the
Second Division of the CTA applied Section 112(A)
of the NIRC, which states:
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: Provided, however, That
in the case of zero-rated sales under Section 106(A)
(2)(a)(1), (2) and (B) and Section 108 (B)(1) and (2),
the acceptable foreign currency exchange proceeds
thereof had been duly accounted for in accordance
with the rules and regulations of the Bangko Sentral
ng Pilipinas (BSP): Provided, further, That where the
taxpayer is engaged in zero-rated or effectively zero-
rated sale and also in taxable or exempt sale of goods
or properties or services, and the amount of creditable
input tax due or paid cannot be directly and entirely
attributed to any one of the transactions, it shall be
allocated proportionately on the basis of the volume
of sales. (Emphasis supplied.)
The CTA En Banc, on the other hand, took into
consideration Sections 114 and 229 of the NIRC,
which read:
SEC. 114. Return and Payment of Value-Added Tax.
(A) In General. Every person liable to pay the
value-added tax imposed under this Title shall file a
quarterly return of the amount of his gross sales or
receipts within twenty-five (25) days following the
close of each taxable quarter prescribed for each
taxpayer: Provided, however, That VAT-registered
persons shall pay the value-added tax on a monthly
basis.
Any person, whose registration has been cancelled in
accordance with Section 236, shall file a return and
pay the tax due thereon within twenty-five (25) days
from the date of cancellation of registration:
Provided, That only one consolidated return shall be
filed by the taxpayer for his principal place of
business or head office and all branches.
xxxx
SEC. 229. Recovery of tax erroneously or illegally
collected.
No suit or proceeding shall be maintained in any
court for the recovery of any national internal
revenue tax hereafter alleged to have been
erroneously or illegally assessed or collected, or of
any penalty claimed to have been collected without
authority, or of any sum alleged to have been
excessively or in any manner wrongfully collected,
until a claim for refund or credit has been duly filed
with the Commissioner; but such suit or proceeding
may be maintained, whether or not such tax, penalty
or sum has been paid under protest or duress.
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:
Provided, however, That the Commissioner may,
even without written claim therefor, refund or credit
any tax, where on the face of the return upon which
payment was made, such payment appears clearly to
have been erroneously paid. (Emphasis supplied.)
Hence, the CTA En Banc ruled that the reckoning of
the two-year period for filing a claim for
refund/credit of unutilized input VAT should start
from the date of payment of tax and not from the
close of the taxable quarter when the sales were
made.43
The pivotal question of when to reckon the running
of the two-year prescriptive period, however, has
already been resolved in Commissioner of Internal
Revenue v. Mirant Pagbilao Corporation,44 where we
ruled that Section 112(A) of the NIRC is the
applicable provision in determining the start of the
two-year period for claiming a refund/credit of
unutilized input VAT, and that Sections 204(C) and
229 of the NIRC are inapplicable as "both provisions
apply only to instances of erroneous payment or
illegal collection of internal revenue taxes."45 We
explained that:
The above proviso [Section 112 (A) of the NIRC]
clearly provides in no uncertain terms that unutilized
input VAT payments not otherwise used for any
internal revenue tax due the taxpayer must be
claimed within two years reckoned from the close of
the taxable quarter when the relevant sales were
made pertaining to the input VAT regardless of
whether said tax was paid or not. As the CA aptly
puts it, albeit it erroneously applied the aforequoted
Sec. 112 (A), "[P]rescriptive period commences from
the close of the taxable quarter when the sales were
made and not from the time the input VAT was paid
nor from the time the official receipt was issued."
Thus, when a zero-rated VAT taxpayer pays its input
VAT a year after the pertinent transaction, said
taxpayer only has a year to file a claim for refund or
tax credit of the unutilized creditable input VAT. The
reckoning frame would always be the end of the
quarter when the pertinent sales or transaction was
made, regardless when the input VAT was paid. Be
that as it may, and given that the last creditable input
VAT due for the period covering the progress billing
of September 6, 1996 is the third quarter of 1996
ending on September 30, 1996, any claim for
unutilized creditable input VAT refund or tax credit
for said quarter prescribed two years after September
30, 1996 or, to be precise, on September 30, 1998.
Consequently, MPCs claim for refund or tax credit
filed on December 10, 1999 had already prescribed.
Reckoning for prescriptive period under
Secs. 204(C) and 229 of the NIRC inapplicable
To be sure, MPC cannot avail itself of the provisions
of either Sec. 204(C) or 229 of the NIRC which, for
the purpose of refund, prescribes a different starting
point for the two-year prescriptive limit for the filing
of a claim therefor. Secs. 204(C) and 229 respectively
provide:
Sec. 204. Authority of the Commissioner to
Compromise, Abate and Refund or Credit Taxes.
The Commissioner may

xxxx
(c) Credit or refund taxes erroneously or illegally
received or penalties imposed without authority,
refund the value of internal revenue stamps when
they are returned in good condition by the purchaser,
and, in his discretion, redeem or change unused
stamps that have been rendered unfit for use and
refund their value upon proof of destruction. 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.
xxxx
Sec. 229. Recovery of Tax Erroneously or Illegally
Collected. No suit or proceeding shall be
maintained in any court for the recovery of any
national internal revenue tax hereafter alleged to have
been erroneously or illegally assessed or collected, or
of any penalty claimed to have been collected
without authority, of any sum alleged to have been
excessively or in any manner wrongfully collected
without authority, or of any sum alleged to have been
excessively or in any manner wrongfully collected,
until a claim for refund or credit has been duly filed
with the Commissioner; but such suit or proceeding
may be maintained, whether or not such tax, penalty,
or sum has been paid under protest or duress.
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:
Provided, however, That the Commissioner may,
even without a written claim therefor, refund or credit
any tax, where on the face of the return upon which
payment was made, such payment appears clearly to
have been erroneously paid.
Notably, the above provisions also set a two-year
prescriptive period, reckoned from date of payment
of the tax or penalty, for the filing of a claim of
refund or tax credit. Notably too, both provisions
apply only to instances of erroneous payment or
illegal collection of internal revenue taxes.
MPCs creditable input VAT not erroneously paid
For perspective, under Sec. 105 of the NIRC,
creditable input VAT is an indirect tax which can be
shifted or passed on to the buyer, transferee, or lessee
of the goods, properties, or services of the taxpayer.
The fact that the subsequent sale or transaction
involves a wholly-tax exempt client, resulting in a
zero-rated or effectively zero-rated transaction, does
not, standing alone, deprive the taxpayer of its right
to a refund for any unutilized creditable input VAT,
albeit the erroneous, illegal, or wrongful payment
angle does not enter the equation.
xxxx
Considering the foregoing discussion, it is clear that
Sec. 112 (A) of the NIRC, providing a two-year
prescriptive period reckoned from the close of the
taxable quarter when the relevant sales or
transactions were made pertaining to the creditable
input VAT, applies to the instant case, and not to the
other actions which refer to erroneous payment of
taxes.46 (Emphasis supplied.)
In view of the foregoing, we find that the CTA En
Banc erroneously applied Sections 114(A) and 229 of
the NIRC in computing the two-year prescriptive
period for claiming refund/credit of unutilized input
VAT. To be clear, Section 112 of the NIRC is the
pertinent provision for the refund/credit of input VAT.
Thus, the two-year period should be reckoned from
the close of the taxable quarter when the sales were
made.
The administrative claim was timely filed
Bearing this in mind, we shall now proceed to
determine whether the administrative claim was
timely filed.
Relying on Article 13 of the Civil Code,47 which
provides that a year is equivalent to 365 days, and
taking into account the fact that the year 2004 was a
leap year, petitioner submits that the two-year period
to file a claim for tax refund/ credit for the period
July 1, 2002 to September 30, 2002 expired on
September 29, 2004.48
We do not agree.
In Commissioner of Internal Revenue v. Primetown
Property Group, Inc.,49 we said that as between the
Civil Code, which provides that a year is equivalent
to 365 days, and the Administrative Code of 1987,
which states that a year is composed of 12 calendar
months, it is the latter that must prevail following the
legal maxim, Lex posteriori derogat priori.50 Thus:
Both Article 13 of the Civil Code and Section 31,
Chapter VIII, Book I of the Administrative Code of
1987 deal with the same subject matter the
computation of legal periods. Under the Civil Code, a
year is equivalent to 365 days whether it be a regular
year or a leap year. Under the Administrative Code of
1987, however, a year is composed of 12 calendar
months. Needless to state, under the Administrative
Code of 1987, the number of days is irrelevant.
There obviously exists a manifest incompatibility in
the manner of
computing legal periods under the Civil Code and the
Administrative Code of 1987. For this reason, we
hold that Section 31, Chapter VIII, Book I of the
Administrative Code of 1987, being the more recent
law, governs the computation of legal periods. Lex
posteriori derogat priori.
Applying Section 31, Chapter VIII, Book I of the
Administrative Code of 1987 to this case, the two-
year prescriptive period (reckoned from the time
respondent filed its final adjusted return on April 14,
1998) consisted of 24 calendar months, computed as 22nd calendar month January 15, 2000 to the one hundred twenty day-period, appeal the
follows: February 14, 2000 decision or the unacted claim with the Court of Tax
23rd calendar month February 15, 2000 to Appeals. (Emphasis supplied.)
Year 1 1st calendar month April 15, 1998 to May 14, March 14, 2000
1998 24th calendar month March 15, 2000 to April Section 112(D) of the NIRC clearly provides that the
2nd calendar month May 15, 1998 to June 14, 14, 2000 CIR has "120 days, from the date of the submission
1998 We therefore hold that respondent's petition (filed on of the complete documents in support of the
3rd calendar month June 15, 1998 to July 14, April 14, 2000) was filed on the last day of the 24th application [for tax refund/credit]," within which to
1998 calendar month from the day respondent filed its final grant or deny the claim. In case of full or partial
4th calendar month July 15, 1998 to August adjusted return. Hence, it was filed within the denial by the CIR, the taxpayers recourse is to file an
14, 1998 reglementary period.51 appeal before the CTA within 30 days from receipt of
5th calendar month August 15, 1998 to the decision of the CIR. However, if after the 120-day
September 14, 1998 Applying this to the present case, the two-year period period the CIR fails to act on the application for tax
6th calendar month September 15, 1998 to to file a claim for tax refund/credit for the period July refund/credit, the remedy of the taxpayer is to appeal
October 14, 1998 1, 2002 to September 30, 2002 expired on September the inaction of the CIR to CTA within 30 days.
7th calendar month October 15, 1998 to 30, 2004. Hence, respondents administrative claim
November 14, 1998 was timely filed. In this case, the administrative and the judicial claims
8th calendar month November 15, 1998 to were simultaneously filed on September 30, 2004.
December 14, 1998 The filing of the judicial claim was premature Obviously, respondent did not wait for the decision of
9th calendar month December 15, 1998 to the CIR or the lapse of the 120-day period. For this
January 14, 1999 However, notwithstanding the timely filing of the reason, we find the filing of the judicial claim with
10th calendar month January 15, 1999 to administrative claim, we the CTA premature.
February 14, 1999
11th calendar month February 15, 1999 to are constrained to deny respondents claim for tax Respondents assertion that the non-observance of the
March 14, 1999 refund/credit for having been filed in violation of 120-day period is not fatal to the filing of a judicial
12th calendar month March 15, 1999 to April Section 112(D) of the NIRC, which provides that: claim as long as both the administrative and the
14, 1999 judicial claims are filed within the two-year
Year 2 13th calendar month April 15, 1999 to SEC. 112. Refunds or Tax Credits of Input Tax. prescriptive period52 has no legal basis.
May 14, 1999
14th calendar month May 15, 1999 to June 14, xxxx There is nothing in Section 112 of the NIRC to
1999 support respondents view. Subsection (A) of the said
15th calendar month June 15, 1999 to July 14, (D) Period within which Refund or Tax Credit of provision states that "any VAT-registered person,
1999 Input Taxes shall be Made. In proper cases, the whose sales are zero-rated or effectively zero-rated
16th calendar month July 15, 1999 to August Commissioner shall grant a refund or issue the tax may, within two years after the close of the taxable
14, 1999 credit certificate for creditable input taxes within one quarter when the sales were made, apply for the
17th calendar month August 15, 1999 to hundred twenty (120) days from the date of issuance of a tax credit certificate or refund of
September 14, 1999 submission of complete documents in support of the creditable input tax due or paid attributable to such
18th calendar month September 15, 1999 to application filed in accordance with Subsections (A) sales." The phrase "within two (2) years x x x apply
October 14, 1999 and (B) hereof. for the issuance of a tax credit certificate or refund"
19th calendar month October 15, 1999 to refers to applications for refund/credit filed with the
November 14, 1999 In case of full or partial denial of the claim for tax CIR and not to appeals made to the CTA. This is
20th calendar month November 15, 1999 to refund or tax credit, or the failure on the part of the apparent in the first paragraph of subsection (D) of
December 14, 1999 Commissioner to act on the application within the the same provision, which states that the CIR has
21st calendar month December 15, 1999 to period prescribed above, the taxpayer affected may, "120 days from the submission of complete
January 14, 2000 within thirty (30) days from the receipt of the documents in support of the application filed in
decision denying the claim or after the expiration of
accordance with Subsections (A) and (B)" within
which to decide on the claim.

In fact, applying the two-year period to judicial

claims would render nugatory Section 112(D) of the
NIRC, which already provides for a specific period
within which a taxpayer should appeal the decision or
inaction of the CIR. The second paragraph of Section
112(D) of the NIRC envisions two scenarios: (1)
when a decision is issued by the CIR before the lapse
of the 120-day period; and (2) when no decision is
made after the 120-day period. In both instances, the
taxpayer has 30 days within which to file an appeal
with the CTA. As we see it then, the 120-day period
is crucial in filing an appeal with the CTA.

With regard to Commissioner of Internal Revenue v.

Victorias Milling, Co., Inc.53 relied upon by
respondent, we find the same inapplicable as the tax
provision involved in that case is Section 306, now
Section 229 of the NIRC. And as already discussed,
Section 229 does not apply to refunds/credits of input
VAT, such as the instant case.

In fine, the premature filing of respondents claim for

refund/credit of input VAT before the CTA warrants a
dismissal inasmuch as no jurisdiction was acquired
by the CTA.

WHEREFORE, the Petition is hereby GRANTED.

The assailed July 30, 2008 Decision and the October
6, 2008 Resolution of the Court of Tax Appeals are
hereby REVERSED and SET ASIDE. The Court of
Tax Appeals Second Division is DIRECTED to
dismiss CTA Case No. 7065 for having been
prematurely filed.

SO ORDERED.
Republic of the Philippines
SUPREME COURT San Roque prays that the rule established in our 12
Manila February 2013 Decision be given only a prospective
effect, arguing that "the manner by which the Bureau
EN BANC of Internal Revenue (BIR) and the Court of Tax
Appeals(CTA) actually treated the 120 + 30 day
G.R. No. 187485 October 8, 2013 periods constitutes an operative fact the effects and
consequences of which cannot be erased or
COMMISSIONER OF INTERNAL REVENUE, undone."1
Petitioner,
vs. The CIR, on the other hand, asserts that Taganito
SAN ROQUE POWER CORPORATION, Mining Corporation's (Taganito) judicial claim for
Respondent. tax credit or refund was prematurely filed before the
CTA and should be disallowed because BIR Ruling
x-----------------------x No. DA-489-03 was issued by a Deputy
Commissioner, not by the Commissioner of Internal
G.R. No. 196113 Revenue.
TAGANITO MINING CORPORATION, Petitioner, We deny both motions.
vs.
COMMISSIONER OF INTERNAL REVENUE, The Doctrine of Operative Fact
Respondent.
The general rule is that a void law or administrative
x-----------------------x act cannot be the source of legal rights or duties.
Article 7 of the Civil Code enunciates this general
G.R. No. 197156 rule, as well as its exception: "Laws are repealed only
by subsequent ones, and their violation or non-
PHILEX MINING CORPORATION, Petitioner, observance shall not be excused by disuse, or custom
vs. or practice to the contrary. When the courts declared
COMMISSIONER OF INTERNAL REVENUE, a law to be inconsistent with the Constitution, the
Respondent. former shall be void and the latter shall govern.
Administrative or executive acts, orders and
RESOLUTION regulations shall be valid only when they are not
contrary to the laws or the Constitution."
CARPIO, J.:
The doctrine of operative fact is an exception to the
This Resolution resolves the Motion for general rule, such that a judicial declaration of
Reconsideration and the Supplemental Motion for invalidity may not necessarily obliterate all the
Reconsideration filed by San Roque Power effects and consequences of a void act prior to such
Corporation (San Roque) in G.R. No. 187485, the declaration.2 In Serrano de Agbayani v. Philippine
Comment to the Motion for Reconsideration filed by National Bank,3 the application of the doctrine of
the Commissioner of Internal Revenue (CIR) in G.R. operative fact was discussed as follows:
No. 187485, the Motion for Reconsideration filed by
the CIR in G.R.No. 196113, and the Comment to the The decision now on appeal reflects the orthodox
Motion for Reconsideration filed by Taganito Mining view that an unconstitutional act, for that matter an
Corporation (Taganito) in G.R. No. 196113. executive order or a municipal ordinance likewise
suffering from that infirmity, cannot be the source of
any legal rights or duties. Nor can it justify any
official act taken under it. Its repugnancy to the
fundamental law once judicially declared results in its
being to all intents and purposes a mere scrap of
paper. As the new Civil Code puts it: "When the
courts declare a law to be inconsistent with the
Constitution, the former shall be void and the latter
shall govern. Administrative or executive acts, orders
and regulations shall be valid only when they are not
contrary to the laws of the Constitution." It is
understandable why it should be so, the Constitution
being supreme and paramount. Any legislative or
executive act contrary to its terms cannot survive.
Such a view has support in logic and possesses the
merit of simplicity. It may not however be
sufficiently realistic. It does not admit of doubt that
prior to the declaration of nullity such challenged
legislative or executive act must have been in force
and had to be complied with. This is so as until after
the judiciary, in an appropriate case, declares its
invalidity, it is entitled to obedience and respect.
Parties may have acted under it and may have
changed their positions. What could be more fitting
than that in a subsequent litigation regard be had to
what has been done while such legislative or
executive act was in operation and presumed to be
valid in all respects. It is now accepted as a doctrine
that prior to its being nullified, its existence as a fact
must be reckoned with. This is merely to reflect
awareness that precisely because the judiciary is the
governmental organ which has the final say on
whether or not a legislative or executive measure is
valid, a period of time may have elapsed before it can
exercise the power of judicial review that may lead to
a declaration of nullity. It would be to deprive the law
of its quality of fairness and justice then, if there be
no recognition of what had transpired prior to such
adjudication.
In the language of an American Supreme Court
decision: "The actual existence of a statute, prior to
such a determination of unconstitutionality, is an
operative fact and may have consequences which
cannot justly be ignored. The past cannot always be
erased by a new judicial declaration. The effect of the
subsequent ruling as to invalidity may have to be
considered in various aspects, with respect to
particular relations, individual and corporate, and
particular conduct, private and official." This
language has been quoted with approval in a
resolution in Araneta v. Hill and the decision in
Manila Motor Co., Inc. v. Flores. An even more
recent instance is the opinion of Justice Zaldivar
speaking for the Court in Fernandez v. Cuerva and
Co. (Boldfacing and italicization supplied)
Clearly, for the operative fact doctrine to apply, there
must be a "legislative or executive measure,"
meaning a law or executive issuance, that is
invalidated by the court. From the passage of such
law or promulgation of such executive issuance until
its invalidation by the court, the effects of the law or
executive issuance, when relied upon by the public in
good faith, may have to be recognized as valid. In the
present case, however, there is no such law or
executive issuance that has been invalidated by the
Court except BIR Ruling No. DA-489-03.
To justify the application of the doctrine of operative
fact as an exemption, San Roque asserts that "the BIR
and the CTA in actual practice did not observe and
did not require refund seekers to comply with
the120+30 day periods."4 This is glaring error
because an administrative practice is neither a law
nor an executive issuance. Moreover, in the present
case, there is even no such administrative practice by
the BIR as claimed by San Roque.
In BIR Ruling No. DA-489-03 dated 10 December
2003, the Department of Finances One-Stop Shop
Inter-Agency Tax Credit and Duty Drawback Center
(DOF-OSS) asked the BIR to rule on the propriety of
the actions taken by Lazi Bay Resources
Development, Inc. (LBRDI). LBRDI filed an
administrative claim for refund for alleged input VAT
for the four quarters of 1998. Before the lapse of 120
days from the filing of its administrative claim,
LBRDI also filed a judicial claim with the CTA on
28March 2000 as well as a supplemental judicial
claim on 29 September 2000.In its Memorandum
dated 13 August 2002 before the BIR, the DOF-OSS
pointed out that LBRDI is "not yet on the right forum
in violation of the provision of Section 112(D) of the
NIRC" when it sought judicial relief before the CTA.
Section 112(D) provides for the 120+30 day periods
for claiming tax refunds.
The DOF-OSS itself alerted the BIR that LBRDI did
not follow the120+30 day periods. In BIR Ruling No.
DA-489-03, Deputy Commissioner Jose Mario C.
Buag ruled that "a 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." Deputy Commissioner Buag, citing the
7February 2002 decision of the Court of Appeals
(CA) in Commissioner of Internal Revenue v. Hitachi
Computer Products (Asia) Corporation5 (Hitachi),
stated that the claim for refund with the
Commissioner could be pending simultaneously with
a suit for refund filed before the CTA.
Before the issuance of BIR Ruling No. DA-489-03
on 10 December 2003, there was no administrative
practice by the BIR that supported simultaneous
filing of claims. Prior to BIR Ruling No. DA-489-03,
the BIR considered the 120+30 day periods
mandatory and jurisdictional.
Thus, prior to BIR Ruling No. DA-489-03, the BIRs
actual administrative practice was to contest
simultaneous filing of claims at the administrative
and judicial levels, until the CA declared in Hitachi
that the BIRs position was wrong. The CAs Hitachi
decision is the basis of BIR Ruling No. DA-489-03
dated 10 December 2003 allowing simultaneous
filing. From then on taxpayers could rely in good
faith on BIR Ruling No. DA-489-03 even though it
was erroneous as this Court subsequently decided in
Aichi that the 120+30 day periods were mandatory
and jurisdictional.
We reiterate our pronouncements in our Decision as
follows:
At the time San Roque filed its petition for review
with the CTA, the 120+30 day mandatory periods
were already in the law. Section112(C) expressly
grants the Commissioner 120 days within which to
decide the taxpayers claim. The law is clear, plain,
and unequivocal: "x x x 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." Following the verbalegis doctrine, this
law must be applied exactly as worded since it is
clear, plain, and unequivocal. The taxpayer cannot
simply file a petition with the CTA without waiting
for the Commissioners decision within the 120-
daymandatory and jurisdictional period. The CTA
will have no jurisdiction because there will be no
"decision" or "deemed a denial" decision of the
Commissioner for the CTA to review. In San Roques
case, it filed its petition with the CTA a mere 13 days
after it filed its administrative claim with the
Commissioner. Indisputably, San Roque knowingly
violated the mandatory 120-day period, and it cannot
blame anyone but itself.
Section 112(C) also expressly grants the taxpayer a
30-day period to appeal to the CTA the decision or
inaction of the Commissioner x x x.
xxxx
To repeat, a claim for tax refund or credit, like a
claim for tax exemption, is construed strictly against
the taxpayer.1wphi1 One of the conditions for a
judicial claim of refund or credit under the VAT
System is compliance with the 120+30 day
mandatory and jurisdictional periods. Thus, strict
compliance with the 120+30 day periods is necessary
for such a claim to prosper, whether before, during,
or after the effectivity of the Atlas doctrine, except
for the period from the issuance of BIR Ruling No.
DA-489-03 on 10 December 2003 to 6 October 2010
when the Aichi doctrine was adopted, which again
reinstated the 120+30 day periods as mandatory and
jurisdictional.6
San Roques argument must, therefore, fail. The
doctrine of operative fact is an argument for the
application of equity and fair play. In the present
case, we applied the doctrine of operative fact when
we recognized simultaneous filing during the period
between 10 December 2003, when BIR Ruling No.
DA-489-03 was issued, and 6 October 2010, when
this Court promulgated Aichi declaring the 120+30
day periods mandatory and jurisdictional, thus
reversing BIR Ruling No. DA-489-03.
The doctrine of operative fact is in fact incorporated
in Section 246 of the Tax Code, which provides:
SEC. 246. Non-Retroactivity of Rulings. - Any
revocation, modification or reversal of any of the
rules and regulations promulgated in accordance with
the preceding Sections or any of the rulings or
circulars promulgated by the Commissioner shall not
be given retroactive application if the revocation,
modification or reversal will be prejudicial to the
taxpayers, except in the following cases:
(a) Where the taxpayer deliberately misstates or
omits material facts from his return or any document
required of him by the Bureau of Internal Revenue;
(b) Where the facts subsequently gathered by the
Bureau of Internal Revenue are materially different
from the facts on which the ruling is based; or
(c) Where the taxpayer acted in bad faith. (Emphasis
supplied)
Under Section 246, taxpayers may rely upon a rule or
ruling issued by the Commissioner from the time the
rule or ruling is issued up to its reversal by the
Commissioner or this Court. The reversal is not given
retroactive effect. This, in essence, is the doctrine of
operative fact. There must, however, be a rule or
ruling issued by the Commissioner that is relied upon
by the taxpayer in good faith. A mere administrative
practice, not formalized into a rule or ruling, will not
suffice because such a mere administrative practice
may not be uniformly and consistently applied. An
administrative practice, if not formalized as a rule or
ruling, will not be known to the general public and
can be availed of only by those within formal
contacts with the government agency.
Since the law has already prescribed in Section 246
of the Tax Code how the doctrine of operative fact
should be applied, there can be no invocation of the
doctrine of operative fact other than what the law has
specifically provided in Section 246. In the present
case, the rule or ruling subject of the operative fact
doctrine is BIR Ruling No. DA-489-03 dated 10
December 2003. Prior to this date, there is no such
rule or ruling calling for the application of the
operative fact doctrine in Section 246. Section246,
being an exemption to statutory taxation, must be
applied strictly against the taxpayer claiming such
exemption.
San Roque insists that this Court should not decide
the present case in violation of the rulings of the
CTA; otherwise, there will be adverse effects on the
national economy. In effect, San Roques doomsday
scenario is a protest against this Courts power of
appellate review. San Roque cites cases decided by
the CTA to underscore that the CTA did not treat the
120+30 day periods as mandatory and jurisdictional.
However, CTA or CA rulings are not the executive
issuances covered by Section 246 of the Tax Code,
which adopts the operative fact doctrine. CTA or CA
decisions are specific rulings applicable only to the
parties to the case and not to the general public. CTA
or CA decisions, unlike those of this Court, do not
form part of the law of the land. Decisions of lower
courts do not have any value as precedents.
Obviously, decisions of lower courts are not binding
on this Court. To hold that CTA or CA decisions,
even if reversed by this Court, should still prevail is
to turn upside down our legal system and hierarchy of
courts, with adverse effects far worse than the
dubious doomsday scenario San Roque has conjured.
San Roque cited cases7 in its Supplemental Motion
for Reconsideration to support its position that
retroactive application of the doctrine in the present
case will violate San Roques right to equal
protection of the law. However, San Roque itself
admits that the cited cases never mentioned the issue
of premature or simultaneous filing, nor of
compliance with the 120+30 day period requirement.
We reiterate that "any issue, whether raised or not by
the parties, but not passed upon by the Court, does
not have any value as precedent."8 Therefore, the
cases cited by San Roque to bolster its claim against
the application of the 120+30 day period requirement
do not have any value as precedents in the present
case.
Authority of the Commissioner
to Delegate Power
In asking this Court to disallow Taganitos claim for
tax refund or credit, the CIR repudiates the validity of
the issuance of its own BIR Ruling No. DA-489-03.
"Taganito cannot rely on the pronouncements in BIR
Ruling No. DA-489-03, being a mere issuance of a
Deputy Commissioner."9
Although Section 4 of the 1997 Tax Code provides
that the "power to interpret the provisions of this
Code and other tax laws shall be under the exclusive
and original jurisdiction of the Commissioner, subject
to review by the Secretary of Finance," Section 7 of
the same Code does not prohibit the delegation of
such power. Thus, "the Commissioner may delegate
the powers vested in him under the pertinent
provisions of this Code to any or such subordinate
officials with the rank equivalent to a division chief
or higher, subject to such limitations and restrictions
as may be imposed under rules and regulations to be
promulgated by the Secretary of Finance, upon
recommendation of the Commissioner."
WHEREFORE, we DENY with FINALITY the
Motions for Reconsideration filed by San Roque
Power Corporation in G.R. No. 187485,and the
Commissioner of Internal Revenue in G.R. No.
196113.
SO ORDERED.