CIR - v - AICHI FORGING COMPANY OF ASIA, INC.

G.R. No. 184823, October 6, 2010, DEL CASTILLO, J.

Facts:

-         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. It is registered with the BIR as a VAT entity and its products, close impression die steel forgings and tool and dies, are registered with the BOI as a pioneer status.

-         On September 30, 2004, respondent filed a claim for refund/credit of input VAT for the period July to September 2002 in the total amount of P3,891,123.82 with the petitioner CIR, through the DOF One-Stop Shop Inter-Agency Tax Credit and Duty Drawback Center.

CTA Second Division

-         On even date, respondent filed a Petition for Review with the CTA for the refund/credit of the same input VAT. 

-         petitioner filed his Answer raising the following special and affirmative defenses

-         the Second Division of the CTA rendered a Decision partially granting respondents claim for refund/credit. 

-          Dissatisfied with the above-quoted Decision, petitioner filed a Motion for Partial Reconsideration, 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. 

o   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. 

o   Article 13 of the Civil Code, which provides that when the law speaks of a year, it is equivalent to 365 days. 

o   petitioner argued that the simultaneous filing of the administrative and the judicial claims contravenes Sections 112 and 229 of the NIRC.

o   a prior filing of an administrative claim is a condition precedent before a judicial claim can be filed. 

-         The Second Division of the CTA, however, denied petitioners Motion for Partial Reconsideration for lack of merit. 

Ruling of the CTA En Banc

-         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 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.

-         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.

Issue: Whether or not the 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.    

               

Ruling:

Unutilized input VAT must be claimed within two years after the close of the taxable quarter when the sales were made

-         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. 

-      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

-                  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.  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 30, 2004. Hence, respondents administrative claim was timely filed.

The filing of the judicial claim was premature

-         notwithstanding the timely filing of the administrative claim, we are constrained to deny respondents claim for tax refund/credit for having been filed in violation of Section 112(D) of the NIRC. 

-         Section 112(D) of the NIRC clearly provides that the CIR has 120 days, from the date of the submission of the complete documents in support of the application [for tax refund/credit], within which to grant or deny the claim. In case of full or partial denial by the CIR, the taxpayers recourse is to file an appeal before the CTA within 30 days from receipt of the decision of the CIR. However, if after the 120-day period the CIR fails to act on the application for tax refund/credit, the remedy of the taxpayer is to appeal the inaction of the CIR to CTA within 30 days.

-         In this case, the administrative and the judicial claims were simultaneously filed on September 30, 2004. Obviously, respondent did not wait for the decision of the CIR or the lapse of the 120-day period. For this reason, we find the filing of the judicial claim with the CTA premature.

-         applying the two-year period to judicial claims would render nugatory Section 112(D) of the NIRC. 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.

-         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.             

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