CARMEN COPPER CORPORATION v. COMMISSIONER OF INTERNAL REVENUE

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY ENBANC ********* CARMEN COPPER CTA EB No. 1651 CORPORATION, (CTA Case No. 8873) Petitioner, Present: -versus- DEL ROSARIO, P.J., CASTANEDA, JR., UY, FASON-VICTORINO, MINDARO-GRULLA, RINGPIS-LIBAN, and MANAHAN, JJ. COMMISSIONER OF INTERNAL Promulgated: REVENUE , Respondent. ~D:.C..w..1.L-_1...~9___.2"'"0"'~18#------ ~- -!_ �~~~/-~x :df! x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - DECISION UY, J.: The instant Petition for Review1 filed on May 11, 2017 by Carmen Copper Corporation against the Commissioner of Internal Revenue, seeks to set aside the Decision dated December 16, 20162 and the Resolution dated April 20, 20173, promulgated by the Second Division and Special Second Division of this Court (Court in Division), respectively, in CTA Case No. 8873, entitled "Carmen Copper Corporation, Petitioner, vs. Commissioner of Internal Revenue, Respondent," the dispositive portions of which respectively read as follows: Decision dated December 16, 2016: "WHEREFORE, prem1ses considered, the instant 1 EB Docket, pp. 1 to 13. 2 EB Docket, pp. 15 to 35 . 3 EB Docket, pp. 37 to 42.

DECISION CTA EB No. 1651 (CTA Case No. 8873) Petition for Review is hereby DISMISSED for lack of jurisdiction. SO ORDERED." Resolution dated April 20, 2017: "WHEREFORE, premises considered, petitioner's Motion for Reconsideration is DENIED for lack of merit. SO ORDERED." THE FACTS Petitioner Carmen Copper Corporation is a corporation duly organized and existing under the laws of the Philippines with Securities and Exchange Commission (SEC) Registration No. CS200414509, and with office address at the 9th Floor, Quad Alpha Centrum Building, 125 Pioneer Street, Mandaluyong City. It is engaged in the business of mining ores and other mineral resources, and is also a duly registered value-added tax (VAT) enterprise with Certificate of Registration No. 8RC0000048993 dated April 4, 2014. Petitioner is likewise registered with the Board of Investments (BOI) pursuant to Executive Order No. 226, otherwise known as the Omnibus Investments Code of 1997, as a new producer of copper concentrate with non-pioneer status. Respondent is the duly appointed Commissioner of the Bureau of Internal Revenue (BIR), empowered to perform the duties of the said office, including, among others, the power to decide, approve, and grant refunds or tax credits of erroneously or excessively paid taxes as provided by law. He holds office at the BIR National Office Building, BIR Road, Diliman, Quezon City. Petitioner filed its Quarterly VAT Returns for taxable year 2011 on the following dates: Quarter Date of Filing of Date of Filing of (Taxable Year [TY] 2011) Original Return Amended Return First May 4, 2011 April 20, 2012 Second July 25, 2011 May 3, 2012 October 25, 2011 May 4, 2012 Third January 25, 2012 May 7, 2012 Fourth

DECISION CTA EB No. 1651 (CTA Case No. 8873) Thereafter, petitioner filed with the BIR Large Taxpayers Service - Excise Tax Division administrative claims for refund of its excess and unutilized input VAT payments for the first to fourth quarters of TY 2011, as follows: Period Date of Filing of Amount of Claim (TY 2011) Administrative ~ 43,195,247.76 First Quarter Claim for Refund ~ 51,958,347.12 Second Quarter November 19, 2012 ~ 42,784,743.40 Third Quarter December 5, 2012 ~ 49,408,165.66 Fourth Quarter December 13, 2012 fit187,346,503.94 December 13, 2012 Total On May 23, 2013, petitioner received the letter dated April 1, 2013 from respondent partially denying its claim for refund of its VAT payments for TY 2011. In the said letter, respondent, through Ole- Assistant Commissioner of BIR Large Taxpayers Service Alfredo V. Misajon, informed petitioner that only the amount of ~114,709,091.64 was recommended for the issuance of tax credit certificate, computed as follows: Unutilized input tax per VAT return P191 ,048,446.00 Less input tax applied to output tax (3, 701 ,942.02) Claim for TCC 187,346,503.98 Less disallowed input tax P 1,836,165.30 -Non-compliance with invoicing 128,698.60 requirements -No supporting documents 70,673,548.44 72,637,412.34 -Current portion of P114,709,091.64 amortized/deferred input tax on Capital Goods Net allowable for Tax Credit Certificate In view of the partial denial of its administrative claims for refund, petitioner filed a letter-request with the BIR Large Taxpayers Service on May 30, 2013, requesting for reconsideration of the disallowance of the input VAT amounting to ~72,637,412.34. On July 18, 2014, respondent issued a letter denying petitioner's letter-request for reconsideration for lack of legal basis. Petitioner then filed a Petition for Review before the Court in Division on August 18, 2014 docketed as CTA Case No. 8873.

DECISION CTA EB No. 1651 (CTA Case No. 8873) In his Answer filed on September 11, 2014 in CTA Case No. 8873, respondent raised certain Special and Affirmative Defenses. After the pre-trial conference held on October 23, 2014 in said case, the parties filed their Joint Stipulation of Facts and Issues on November 12, 2014. The Court in Division subsequently issued the Pre-Trial Order on November 17, 2014, which terminated the pre-trial. On December 1, 2014, upon motion of petitioner, the Court in Division commissioned Joseph Cedric V. Calica, as the Independent Certified Public Accountant (I CPA) for CTA Case No. 8873. In support of its claim, petitioner presented the following witnesses: Jesus Caparida, petitioner's Comptroller; Joseph Cedric V. Calica, the Court-commissioned ICPA; and Adrian Paulino S. Ramos, petitioner's Executive Vice President. Thereafter, petitioner filed its Formal Offer of Evidence on March 16, 2015. In the Resolution dated June 24, 2015, the Court in Division admitted petitioner's Exhibits, with the exception of those denied for: 1) failure of the actual exhibits to correspond to the description in the Formal Offer of Evidence; and 2) for not being found in the records. Petitioner filed a Motion for Reconsideration (Re: Resolution dated 24 June 2015) on July 14, 2015, requesting the admission of Exhibits "P-61-1" to "P-61-10" with sub-markings and "P-75." On the other hand, respondent filed a Request for Admission on July 20, 2015, requesting petitioner to admit, by sworn statement, the receipt on August 13, 2014 of the attached letter of the BIR denying its motion for reconsideration of the disallowed portion of its claim for refund. In the Resolution dated September 28, 2015, the Court in Division granted petitioner's Motion for Reconsideration and admitted Exhibits "P-61-1" to "P-61-10" with sub-markings and "P-75". In the same Resolution, the Court in Division denied respondent's Request for Admission. During the hearing on November 16, 2015, counsel for respondent manifested that she has no witness to present. Thus, the parties were ordered to file their memoranda.

DECISION CTA EB No. 1651 (CTA Case No. 8873) Respondent filed his Memorandum on December 7, 2015; while petitioner filed its Memorandum on January 15, 2016. CTA Case No. 8873 was submitted for decision in the Resolution dated January 21, 2016. In the assailed Decision dated December 16, 2016, the Court in Division dismissed the Petition for Review in CTA Case No. 8873 for lack of jurisdiction.4 Aggrieved, petitioner filed its Motion for Reconsideration on January 6, 2017,5 to which respondent filed his Comment/Opposition (Re: Motion for Reconsideration) filed on February 1, 2017.6 In the assailed Resolution dated April 20, 2017, 7 the Court in Division denied petitioner's Motion for Reconsideration for lack of merit. Undaunted, petitioner filed the instant Petition for Review on May 11, 20178 docketed as CTA EB 1651. As directed by the Court En Bane in the Resolution dated June 2, 2017,9 respondent filed his Comment (Re: Petition for Review) on June 21, 2017. 10 In the Resolution dated July 7, 2017, 11 the parties were ordered to submit their respective memorandum within a period of thirty (30) days from receipt thereof. Pursuant thereto, respondent filed his Memorandum on August 31, 2017, 12 while petitioner filed its Memorandum on September 19, 2017. 13 Thereafter, the instant case was deemed submitted for decision on October 25, 2017. 14 Hence, this Decision. 4 EB Docket, pp. 15 to 35; Division Docket (CTA Case No. 8873)- Vol. II, pp. 947 to 966. 5 Division Docket (CTA Case No. 8873)- Vol. II, pp. 967 to 972. 6 Division Docket (CTA Case No. 8873)- Vol. II, pp. 977 to 981. 7 EB Docket, pp. 37 to 42; Division Docket (CTA Case No. 8873)- Vol. II, pp. 984 to 989. 8 EB Docket, pp. 1 to 13. 9 EB Docket, pp. 45 to 46. 10 EB Docket, pp. 47 to 49. 11 EB Docket, pp. 52 to 53. 12 EB Docket, pp. 63 to 68. 13 EB Docket, pp. 71 to 82. � 14 Resolution dated October 25, 2017, EB Docket, pp. 86 to 87.

DECISION CTA EB No. 1651 (CTA Case No. 8873) THE ISSUE Petitioner raises the following issue for resolution, to wit: "WHETHER OR NOT THE COURT IN DIVISION HAS JURISDICTION TO ACT ON PETITIONER'S JUDICIAL CLAIM FOR REFUND IN CTA CASE NO. 8873." In determining said issue, the Court En Bane shall look into the following sub-issue: "WHETHER OR NOT PETITIONER TIMELY FILED ITS JUDICIAL CLAIM WITH THIS HONORABLE COURT IN ACCORDANCE WITH SECTION 112(C) OF THE TAX CODE." 15 Petitioner's arguments: Petitioner contends that it had thirty (30) days from the denial of its request for reconsideration to file its judicial claim. Allegedly, Section 112(C) of the Tax Code specifically provides that petitioner has a period of thirty (30) days from the decision of respondent within which to file its judicial claim with the Court in Division. According to petitioner, it filed with the BIR Large Taxpayers Service on May 30, 2013 its request for reconsideration, which was subsequently denied on July 18, 2014. Petitioner submits that it is this decision of respondent, acting through Nestor S. Valeroso, OIC - Assistant Commissioner, that is appealable to the Court in Division, pursuant to the doctrine on exhaustion of administrative remedies. The thirty (30) day period in Section 112 (C) of the Tax Code must therefore be reckoned from the receipt of said decision of respondent. Under the doctrine of exhaustion of administrative remedies, administrative agencies must be allowed to carry out their functions and discharge their responsibilities within the specialized areas of their respective competence. Guided by this principle, it filed its Request with respondent owing to their familiarity with the 15 Petitioner's Memorandum, EB Docket, p. 76.

DECISION CTA EB No. 1651 (CTA Case No. 8873) administrative claim, and the fact that respondent already had custody of the various documentary requirements previously submitted by petitioner. Allegedly, the Request filed with respondent, acting through Nestor S. Valeroso, OIC - Assistant Commissioner, was necessary because under the doctrine of exhaustion of administrative remedies, before a party is allowed to seek the intervention of the court, he should have availed himself of all the means of administrative processes afforded him. Hence, if a resort to a remedy within the administrative machinery can still be made by giving the administrative officer concerned every opportunity to decide on a matter that comes within his or her jurisdiction, then such remedy should be exhausted first before the court's judicial power can be sought. In the case at bar, the Request was filed with respondent's alter-ego, Nestor S. Valeroso, OIC - Assistant Commissioner, who had the delegated power to decide refunds of internal revenue taxes, for the purpose of deciding on the reconsideration sought by the petitioner on the portion of the administrative claim that was partially denied. Moreover, according to petitioner, it raised new matters to respondent in support of its Request and in relation to the appeal of the partial denial of its administrative claim. In its Request, petitioner argued that respondent's partial denial of its administrative claim for refund representing the current portion of amortized/deferred input VAT on capital goods is erroneous. Allegedly, respondent must first be allowed to resolve relevant matters coming within his jurisdiction, pursuant to the doctrine of administrative remedies. Otherwise, the alternative would be to effectively require the petitioner to immediately appeal its partial denial to the Court in Division in a trial de novo without allowing respondent a chance to discharge its responsibilities within the specialized areas of their respective competence. In fact, respondent took cognizance of the Request and even ruled on the new issues raised by petitioner in relation to the partial denial of its administrative claim. Thus, petitioner points out that it would be contrary to the sound administration of the laws and inconsistent with the elementary principles of right dealing and good

DECISION CTA EB No. 1651 (CTA Case No. 8873) faith if its judicial claim is dismissed only because both parties complied with the doctrine of exhaustion of administrative remedies with respect to the resolution of the Request. The necessity for exhausting all administrative remedies allegedly demands that a motion for reconsideration should first be filed, before resort to the courts is made. This gives the administrative officer every opportunity to decide on a matter that comes within his jurisdiction. Given the foregoing, petitioner submits that it timely filed its judicial claim for refund on August 18, 2014 with this Court, which is well within the thirty (30) days from July 21, 2014 or the date of petitioner's receipt of the decision denying its administrative claim, in accordance with Section 112 (C) of the Tax Code. Respondent's counter-arguments: In his Comment filed on June 21, 2017, respondent points out that the Petition for Review should have been dismissed outright for lack of the requisite affidavit of service, pursuant to Section 13, Rule 13 of the 1997 Rules on Civil Procedure. In his Memorandum filed on August 31, 2017, respondent counter-argues that petitioner's contention that the instant petition for review was filed on time within thirty (30) days from denial of its administrative claim is untenable. Allegedly, on May 23, 2013, petitioner received the letter dated April 1, 2013 from respondent, partially denying its administrative claim for refund. However, it was only on August 18, 2014 when petitioner filed its judicial claim before the Court in Division. As categorically ruled by the Second Division in its Decision, counting 30 days from April 1, 2013 within which to appeal the partial denial of its administrative claim before the Court of Tax Appeals. Since June 22, 2013 fell on a Saturday, petitioner had until June 24, 2013, the next working day, within which to file its judicial claim. However, instead of filing its judicial claim with this Court, petitioner opted to file a letter-request with the BIR Large Taxpayers Service on May 30, 2013, requesting reconsideration of the disallowance of the input VAT amounting to P72,637,412.34. ~

DECISION CTA EB No. 1651 (CTA Case No. 8873) Allegedly, petitioner only filed the present Petition for Review on August 18, 2014, after it received a letter from respondent on July 18, 2014, denying his letter-request for reconsideration for lack of legal basis. Thus, petitioner's judicial claim was belatedly filed as it was filed 242 days after the lapse of the 30-day period to appeal. Moreover, respondent stresses that tax refunds are strictly construed against the claimant and cannot be allowed unless granted in the most explicit and categorical language. THE COURT EN BANC'S RULING The instant Petition for Review lacks merit. At the outset, this Court would like to address respondent's argument that the instant Petition for Review .should be dismissed due to petitioner's failure to file an Affidavit of Service. A perusal of the records in this case show that in addition to Registry Receipt No. RD 755 957 722 ZZ, 16 an Affidavit of Service dated May 11, 2017, 17 executed by Teofilo L. Salido, Jr., was attached to the subject Petition for Review. Thus, this Court finds that petitioner has sufficiently complied with Section 13, Rule 13 of the 1997 Rules on Civil Procedure. Anent the determination of whether or not petitioner's judicial claim was timely filed before the Court in Division, reference must be made to Section 112 (A) and (C) of the National Internal Revenue Code (NIRC) of 1997, as amended, which governs the filing of administrative and judicial claims for refund or tax credit of excess and unutilized input tax attributable to zero-rated or effectively zero- rated sales. The said provision reads: "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 years after the close of the taxable quarter when the sales were made, apply for the issuance of a tax credit certificate or 16 EB Docket, p. 9. 17 EB Docket, p. 43.

DECISION CTA EB No. 1651 (CTA Case No. 8873) 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(8)(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 of 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: Provided, finally, That for a person making sales that are zero-rated under Section 108(8)(6), the input taxes shall be allocated ratably between his zero-rated and non-zero-rated sales. XXX XXX XXX (C) Period within which Refund or Tax Credit of Input Taxes shall be Made. - In proper cases, the Commissioner shall grant a refund or issue the tax credit certificate for creditable input taxes within one hundred twenty (120) days from the date of. submission of complete documents in support of the application filed in accordance with Subsection (A) hereof. In case of full or partial denial of the claim for tax refund or tax credit, or the failure on the part of the Commissioner to act on the application within the period prescribed above, the taxpayer affected may, within thirty (30) days from the receipt of the decision denying the claim or after the expiration of the one hundred twenty day-period, appeal the decision or the unacted claim with the Court of Tax Appeals." Based on the foregoing provision, an administrative claim for refund must be filed with the BIR within two (2) years after the close of the taxable quarter when the zero-rated or effectively zero-rated sales were made. Thereafter, the taxpayer is given a 30-day period, either from the receipt of the adverse decision of respondent or from the lapse of the 120-day period for respondent to act on the claim,

DECISION CTA EB No. 1651 (CTA Case No. 8873) within which to file its judicial claim, through a Petition for Review with this Court in Division. In this case, petitioner's claim includes the four quarters of taxable year 2011, which closed on March 31, 2011, June 30, 2011, September 30, 2011 and December 31, 2011, respectively. Applying Section 112(A) of the NIRC of 1997, as amended, petitioner had two (2) years from the said dates or until March 31, 2013, June 30, 2013, September 30, 2013 and December 31, 2013, respectively, within which to file its administrative claim for tax refund or tax credit for the quarter concerned. Thus, as correctly found by the Court in Division, the filing of the administrative claims for refund for the four (4) quarters of TY 2011, are well within the respective two-year prescriptive period, as shown below: Quarter Close of the Taxable Last Day to File Date of Filing of (TV 2011) Quarter Administrative Administrative First March 31, 2011 Claim Claim Second June 30, 2011 March 31,2013 November 19, 2012 September 30, 2011 June 30, 2013 December 5, 2012 Third December 31, 2011 September 30, 2013 December 13, 2012 Fourth December 31,2013 December 13, 2012 Anent petitioner's judicial claim, however, this Court finds that it was not filed within the reglementary period prescribed by Section 112(C) of the NIRC of 1997, as amended. The said provision speaks of two periods: (1) the period of 120 days, which serves as a waiting period to give time for respondent to act on the administrative claim for refund or tax credit; and (2) the period of 30 days, which refers to the period for filing a judicial claim with this Court. 18 It bears stressing that the 120+30-day prescriptive periods are both jurisdictional and mandatory. In fact, it was emphasized in the case of Commissioner of Internal Revenue vs. San Roque Power Corporation, etseq., 19 that strict compliance with the 120+30-day periods is necessary for a claim for refund or tax credit to prosper, to wit: "To repeat, a claim for tax refund or credit, like a claim for tax exemption, is construed strictly against the 18 ROHM Apollo Semiconductor Philippines vs. Commissioner ofInternal Revenue, G.R. No. 168950, January 14, 2015. 19 G.R. No. 187485, 196113, 197156, February 12,2013.

DECISION CTA EB No. 1651 (CTA Case No. 8873) taxpayer. 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." (Emphases and underscoring supplied.) Based on the foregoing, it is clear that for a claim for tax refund of input VAT to prosper, the 120+30-day periods should have been strictly complied with. In this case, the determination of the 120+30-day periods are shown as follows: Quarter Date of Filing of End of the 120- End of the 30-day (TV 2011) Administrative Claim day period period First November 19, 2012 March 19, 2013 April 18, 2013 Second December 5, 2012 April 4, 2013 May 4, 2013 December 13, 2012 AQril12, 2013 May12,2013 Third December 13, 2012 April12, 2013 May 12, 2013 Fourth A review of the records of this case, however, shows that petitioner's Petition for Review in CTA Case No. 8873 covering the � said four (4) quarters of TY 2011 was filed only on August 18, 2014. 2 Correspondingly, petitioner's judicial claim was not timely filed. The issuance of respondent's letter dated April 1, 2013, which was received by petitioner only on May 23, 2013,21 and the subsequent denial of petitioner's request for reconsideration of the said letter as embodied in the letter dated July 18, 2014,22 are of no moment. This is so because the 30-day period cannot be reckoned from any of the said dates. 20 Docket (CTA Case No. 8837)- Vol. I, pp. 6 to 21. 21 Exhibit "P-29". 22 Exhibit "P-31 ".

DECISION CTA EB No. 1651 (CTA Case No. 8873) In Silicon Philippines, Inc. (Formerly Intel Philippines Manufacturing, Inc.) vs. Commissioner of Internal Revenue, 23 the Supreme Court said: "The judicial claim shall be filed within a period of 30 days after the receipt of respondent's decision or ruling or after the expiration of the 120-day period, whichever is sooner. Aside from a specific exception to the mandatory and jurisdictional nature of the periods provided by law, 24 any claim filed in a period less than or beyond the 120+30 days provided by the NIRC is outside the jurisdiction of the CTA." (Emphases and underscoring supplied) Based on the foregoing, the 30-day period provided by law can only be reckoned from receipt of respondent's decision/ruling or after the expiration of the 120-day period, whichever is sooner. Furthermore, it is clear that any judicial claim filed in a period less than or beyond the said 120+30-day period is outside the jurisdiction of this Court. As already intimated herein, the expiration of the 120-day period in this case, came sooner than the date of receipt of respondent's decision/ruling. Thus, the 30-day period should have been reckoned from the expiration of the said 120-day period, not on any other date. Since the filing of petitioner's judicial claim was filed beyond the 120+30-day period, the same is outside the jurisdiction of the Court in Division. WHEREFORE, in light of the foregoing considerations, the instant Petition for Review is DENIED for lack of merit. The Decision dated December 16, 2016 and the Resolution dated April 20, 2017 rendered by the Court in Division in CTA Case No. 8873 are hereby AFFIRMED. 23 G.R. No. 182737, March 2, 2016. 24 In CIR vs. San Roque Power Corporation, etseq. (G.R. Nos. 187485, 196113 & 197156, February 12, 2013, the Supreme Court applied the equitable principle of estoppel and ruled that judicial claims filed from the issuance of BIR Ruling No. DA- 489-03 on December 10, 2003 up to its reversal in CIR vs. Aichi Forging Company of Asia, Inc. (G.R. No. 184823) on October 6, 2010 need not wait for the lapse of the 120+30-day period.

DECISION � CTA EB No. 1651 (CTA Case No. 8873) ER~.UY Associate Justice SO ORDERED. WE CONCUR: Presiding Justice a(JiwA ;t., c CLr-~ Sl. JllANITO c. CASTANEOJ(, JR. Associate Justice ~ N. M~_�~ .. C~ MA. BELEN M. RINGPIS-LIBAN Associate Justice CIELITO N. MINDARO-GRULLA Associate Justice c~�J�~ CATHERINE T. MANAHAN Associate Justice CERTIFICATION Pursuant to Article VIII, Section 13 of the Constitution, it is hereby certified that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court. Presiding Justice