REPUBLIC VS GST PHILIPPINES, INCGR # 190870, October 17, 2013

FACTS:GST is a domestic corporation engaged in the business of manufacturing processing, selling and dealing in all kinds of iron, steel and other metals. It is a VAT-registered enterprise which deals with companies registered with BOI, whose manufactured products are 100% exported to foreign countries; and 2) PEZA. It claims unutilized excess input VAT attributable to its zero rated sales. During the taxable year 2004 and 2005, it filed the following returns and claim for refund:PeriodDate of filing of returnDate of filing of refund

1st quarter of 2004April 16, 2004June 9, 2004

2nd quarter of 2004July 15, 2004August 12, 2004

3RD quarter of 2004October 15, 2004February 18. 2005

4th quarter of 2004January 11, 2005February 18, 2005

1st quarter of 2005April 25, 2005May 11, 2005

2nd quarter of 2005July 19, 2005November 18, 2005

3rd quarter of 2005October 26, 2005November 18, 2005

For failure of the CIR to act on its administrative claims, GST filed a petition for review before CTA on March 17, 2006. CTA 1st Division granted GSTs claim but reduced the amount, the CIR was ordered to issue the corresponding tax credit certificate. The motion for reconsideration filed by CIR was denied so it was elevated to CTA En Bank, which affirmed the decision of CTA Division finding that the claims for refund has been filed well within the prescribed periods. Hence, this petition.

ISSUE: W/N GST complied with the prescriptive periods required by the Tax code.

Held:No, it did not comply with the required prescriptive period under the Tax code. The administrative claim for refund filed on June 9, 2004, August 12, 2004, February 18, 2005 and May 11, 2005 has already prescribed. While the claim filed on November 18, 2005 is premature for failure to wait for the 120-day period to expire. It failed to exhaust administrative remedy therefore, it was prematurely filed, however because of BIR Ruling DA 489-03 effective at the time of filing shielded its dismissal. (Note: that BIR Ruling has been reversed in 2010)A table was prepared for easier reference: Taxable PeriodFiling of Administrative claim120th day 30th day Filing of Judicial ClaimRemarksAction on Claim

1stQuarter2004June 9, 2004October 7, 2004November 6, 2004March 17, 2006Filed lateDENYpursuant to Section 112 (C), NIRC of 1997

2ndQuarter2004August 12, 2004December 10, 2004January 9,2005March 17, 2006Filed lateDENYsame reason

3rdQuarter2004February 18, 2005June 18,2005July 18, 2005March 17, 2006Filed lateDENYsame ground

4thQuarter2004February 18,2005June 18,2005July 18, 2005March 17, 2006Filed lateDENYsame ground

1stQuarter2005May 11, 2005September 8,2005October 8,2005March 17, 2006Filed lateDENYsame ground

2ndQuarter2005November 18, 2005March 18, 2006April 17, 2006March 17, 2006PrematurelyfiledGRANTpursuant to BIR Ruling No. DA-489-03

3rdQuarter2005November 18, 2005March 18, 2006April 17, 2006March 17, 2006PrematurelyfiledGRANTpursuant to BIR Ruling No. DA-489-03

The 120+30-day period are mandatory and jurisdictional. The CTA does not acquire jurisdiction over a judicial claim that is filed before the expiration of the 120-day period. There are 2 exceptions to this, first is when the CIR, through a specific ruling, misleads a particular taxpayer to prematurely file a judicial claim with the CTA and second is where the CIR, through a general interpretative rule misleads all taxpayer into filing prematurely judicial claims with CTA. BIR Ruling no. DA 489-03, a general interpretative law, will however benefit GST with respect to its claims for refund of unutilized excess input VAT for the 2nd and 3rd quarter 2005 which were filed on Nov. 18, 2005 but elevated to CTA on Mar 16, 2006 before the expiration of the 120-day period. This ruling effectively shielded the filing of GSTs judicial claim for the vice of prematurity. All taxpayers can rely on the said ruling from the time of its issuance on December 10, 2003 up to its reversal October 6, 2010 where it was held that the 120+30-day period are mandatory and jurisdictional. The 2year prescriptive period applies only to administrative claims and not to judicial claims. NIRC envisions 2 scenarios: 1,) The CIR issues a decision before the lapse of 120-day period; 2.) when no decision is made after the lapse of 120 days. In both instances, the taxpayer has 30 days within which to file an appeal with the CTA. The taxpayer will always have 30 days to file the judicial claim even if the CIR acts only on the 120th day, or does not act at all during the 120-day period. With the 30-day period always available to the taxpayer, the taxpayer can no longer file a judicial claim for refund or tax credit of unutilized excess input Vat without waiting for the CIR to decide until the expiration of the 120-day period. Failure to comply with the 120-day waiting period violates the doctrine of exhaustion of administrative remedies and renders the petition premature and thus without cause of action, with that the effect that the CTA does not acquire jurisdiction over the taxpayers petition.

SAN ROQUE POWER CORPORATION VS CIRGR 180345, November 25, 2009

FACTS: Petitioner entered into a Power Purpose Agreement with NAPOCOR. Petitioner will design, construct, install, complete and test the power station, NPC shall purchase all the electricity generated by the power plant. Petitioner applied as zero rated status from BIR from September 27, 1998-2002. Petitioner filed with BIR separate administrative claims for refund for unutilized input VAT paid for the period of Jan-March 2002, April-June 2002, July-Sept 2002 and Oct-Dec 2002. Respondent failed to act on the request for tax refund or credit of the petitioner, which prompted the latter to file on April 5, 2004 with CTA Division, before it could be barred by prescription. CTA division denied the petition, En Banc affirmed it because it did not present any records of zero-rated or effectively zero-rated transactions.

ISSUE:W/N petitioner is entitled to refund or tax credit representing zero-rated or effectively zero-rated sales.

HELD: Yes, the evidence presented by the petitioner shows compliance with the requirements for refund or credit of VAT.Based on the evidences presented petitioner complied with the abovementioned requirements, first, petitioner had adequately proved that it is a VAT-registered taxpayer when it presented Certificate of Registration. Second, it is unquestionable that petitioner is engaged in providing electricity for NPC, an activity which is subject to zero-rate. Third, petitioner offered as evidence VAT invoices and official receipts. Fourth, the input taxes claimed, which consisted of local purchases and importations made in 2002, are not transitional taxes. Fifth, the audit report affirms that the input VAT claimed for tax refund or credit is net of the input VAT that was already offset against output VAT. Next, the VAT paid by petitioner to local purchases is not transitional input tax. The requirement that to be entitled to tax refund for zero-rated sales, the foreign exchange proceeds must have duly accounted for per BSP rule does not apply where the sale of electricity did not involve any foreign currency. Lastly, the claim for VAT refund was filed within 2 years after the close of the taxable quarter when sales were made. The main issue here is the compliance with 6th requirement, the existence of zero rated or effectively zero rated transaction to which creditable input tax may be attributed. NIRC does not limit the definition of "sale" to commercial transactions in the normal course of business, rather it extends the term to transactions that are "deemed" sale, The fact that it was not transferred through a commercial sale or in the normal course of business does not deflect from the fact that such transaction is deemed as a sale under the law. Petitioner was able to positively show that it was able to accumulate excess input taxes on various importations and local, which were attributable to a transfer of electricity in favor of NPC. The fact that it had filed its claim for refund or credit during the quarter when the transfer of electricity had taken place, instead of at the close of the said quarter does not make petitioner any less entitled to its claim. Given the special circumstances of this case, wherein petitioner was incorporated for the sole purpose of constructing or operating a power plant that will transfer all the electricity it generates to NPC, there is no danger that petitioner would try to fraudulently claim input tax paid on purchases that will be attributed to sale transactions that are not zero-rated. Substantial justice, equity and fair play are on the side of the petitioner. Technicalities and legalisms, however, exalted, should not be misused by the government to keep money not belonging to it, thereby enriching itself at the expense of its law abiding citizens.

Note: To claim refund or tax credit under Section 112(A), petitioner must comply with the following criteria: (1) the taxpayer is VAT registered; (2) the taxpayer is engaged in zero-rated or effectively zero-rated sales; (3) the input taxes are due or paid; (4) the input taxes are not transitional input taxes; (5) the input taxes have not been applied against output taxes during and in the succeeding quarters; (6) the input taxes claimed are attributable to zero-rated or effectively zero-rated sales; (7) for zero-rated sales under Section 106(A)(2)(1) and (2); 106(B); and 108(B)(1) and (2), the acceptable foreign currency exchange proceeds have been duly accounted for in accordance with BSP rules and regulations; (8) where there are both zero-rated or effectively zero-rated sales and taxable or exempt sales, and the input taxes cannot be directly and entirely attributable to any of these sales, the input taxes shall be proportionately allocated on the basis of sales volume; and (9) the claim is filed within two years after the close of the taxable quarter when such sales were made.

BANK OF THE PHILIPPINE ISLADS V COMMISSIONER OF INTERNAL REVENUEGR 139736, October 17, 2005

FACTS: BPI sold to Central Bank US$ 500,000 for the total amount of US$ 1,000,000. The sale was made in two occasions, on June 6, 1985 and on June 14, 1985. Central Bank was exempt from paying documentary stamp tax. On October 10, 1989, BIR assessed BPI for deficiency DST on the ground of the above-mentioned sale. BPI protested the assessment on November 17, 1989, but BPI did not receive any immediate reply. On October 15, 1992, BPI issued a warrant of distraint and levy against Bpi for the deficiency DST. BPI did not again hear from BIR until Sept. 11, 1997 denying its letter/request for reconsideration. BPI filed a petition for review in CTA raising the ground of prescription of the right of BIR to collect the assessed amount.

ISSUE: W/N CIRs right to collect deficiency DST for 1985 has prescribed.W/N BPI is liable to pay DST.

HELD: Yes, the CIRs right to collect the alleged deficiency DST is already barred by prescription. When BIR validly issues an assessment, within wither 3 years or 10 years, the BIR has another 3 years after the assessment within which to collect the tax due. In this case, the assessment was made on time, but the collection was barred already. The assessment was made on October 10, 1989 and was received by PBI on October 20, 1989. BIR has only until October 19, 1992 within which to collect the deficiency DST. Although the warrant of levy was issued previous to the expiration of the 3-yr period, it was receive the BPI only on October 3, 1992, beyond the 30yr prescriptive period. The letter of demand and denial of the request for reconsideration was dated August 1997 which is way beyond the 3yr-prescriptive period. It is well settled that it is request for reinvestigation and not request for reconsideration which tolls the running of prescriptive period to assess or collect. Here, the request made by BPI is only request for reconsideration therefore it did not toll the running of the prescriptive period. Undoubtedly, request for reinvestigation, which entails the reception and evaluation of additional evidence, will take more time than a reconsideration of a tax assessment, which will be limited to the evidence already at hand; this justifies why the former can suspend the running of the statute of limitations on collection of the assessed tax, while the latter cannot.Though the statute of limitations on assessment and collection of national internal revenue taxes benefits both the Government and the taxpayer, it principally intends to afford protection to the taxpayer against unreasonable investigation. The indefinite extension of the period for assessment is unreasonable because it deprives the said taxpayer of the assurance that he will no longer be subjected to further investigation for taxes after the expiration of a reasonable period of time.Considering that the right of BIR to collect already prescribed, then there is no more need to make a determination on the validity or correctness of the said DST assessment foe the latter would be unenforceable.

Note: It was also discussed in this case that the statute of limitations on assessment and collection of national internal revenue taxes may be suspended if the taxpayer executes a valid waiver thereof, as provided in paragraphs (b) and (d) of Section 223 of the Tax Code of 1977, as amended; and in specific instances enumerated in Section 224 of the same Code, which include a request for reinvestigation granted by the BIR Commissioner. Outside of these statutory provisions, however, this Court also recognized one other exception to the statute of limitations on collection of taxes in the case of Collector of Internal Revenue v. Suyoc Consolidated Mining Co. x x x In the Suyoc case, this Court expressly conceded that a mere request for reconsideration or reinvestigation of an assessment may not suspend the running of the statute of limitations. It affirmed the need for a waiver of the prescriptive period in order to effect suspension thereof. However, even without such waiver, the taxpayer may be estopped from raising the defense of prescription because by his repeated requests or positive acts, he had induced Government authorities to delay collection of the assessed tax.