CBK POWER COMPANY LIMITED v. COMMISSIONER OF INTERNAL REVENUE

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CI1Y ENBANC CBK POWER COMPANY LIMITED, CTA EB CASE No. 759 Petitioner, (CTA Case Nos. 8043 and 8116) -versus- Members: ACOSTA, P.J., CASTANEDA, JR., BAUTISTA, UY, CASANOVA, PALANCA- ENRIQUEZ, FASON -VICTORINO, MINDARO-GRULLA, and COTANGCO-MANALASTAS, JJ. COMMISSIONER OF INTERNAL Promulgated: REVENUE, OECZ O Z01Z ~ Respondent. I. X- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - X DECISION Casanova, J.: This is an appeal, by way of a verified Petition for Review1, under Section 3(b), Rule 8 of the Revised Rules of the Court of Tax Appeals, seeking the reversal of the Resolutions dated March 3, 20112 and April 11, 2011 3 (Assailed Resolutions) rendered by the CTA Second Division in CTA Case No~ 1 En Bane Rollo, pp. 29-57. 2 Annex "A" of Petition for Review, Ibid. , pp. 60-67. 3 Annex " B" of Petition for Review, ld , pp. 68-71.

CTA EB CASE NO. 759 (CTA Case Nos. 8043 & 8116) DECISION 8116 entitled "CBK Power Company Limited vs. Commissioner of Internal Revenue," granting respondent's Motion to Dismiss and denying petitioner's Motion for Reconsideration of the said resolution. Petitioner prays for this Honorable Court to proceed with the trial of its claim for refund or issuance of tax credit certificate in the amount of Forty Seven Million Four Hundred Twenty Five Thousand Three Hundred Six and 79/100 Pesos (P47,425,306. 79), representing its alleged unutilized input value added tax (VAT) for the second to fourth (2nd_4th) quarters of the calendar year (CY) 2008. The facts of the case, as culled from the records, are briefly narrated as follows: Petitioner is a partnership duly organized and existing under and by virtue of the laws of the Philippines with principal office at the NPC Compound, Kalayaan, Laguna .4 Respondent is the duly appointed Commissioner of Internal Revenue vested with authority to act as such, including inter alia, the power to decide, approve and grant refunds or tax credit of erroneously or illegally collected internal revenue taxes as provided by law, with office at the BIR National Office Building, BIR Road, Diliman, Quezon City. 5 Petitioner is registered as a VAT entity with TIN/VAT No. 205-760-474- 000 in accordance with the Tax Code, as amended. ~ 4 Par. I, Petition for Review, Division Docket (CTA Case No. 8116), p. I. 5 Par. 2, Ibid, p. 1-2. 6 Par. 4, ld , p. 2.

CTA EB CASE NO. 759 (CTA Case Nos. 8043 & 8116) DECISION For the period April 1, 2008 to December 31, 2008, petitioner filed with the BIR its Monthly VAT Declarations and Quarterly VAT Returns. Petitioner filed its original Quarterly VAT Returns for the Second, Third and Fourth Quarters of CY 2008 on July 23, 2008; October 24, 2008; and January 26, 2009, respectively. 7 Subsequently, petitioner amended its Monthly VAT Declarations and Quarterly VAT Returns for the period April 1, 2008 to December 31, 2008 on March 25, 2009; and again on June 24, 2010.8 On June 25, 2010, petitioner filed its administrative claim for the issuance of tax credit certificate for the total amount of P47,425,306.79 for its unutilized input taxes all attributable to its zero-rated sales for the period April 1, 2008 to December 31, 2008.9 On June 28, 2010, petitioner filed its Petition for Review before the Second Division of the Court of Tax Appeals. On December 20, 2010, respondent filed her Motion to Dismiss10 on the ground of lack of jurisdiction. In a Resolution 11 dated March 3, 2011, the CTA Second Division granted respondent's Motion, the dispositive portion of the same states: "WHEREFORE, premises considered, respondent's "Motion to Dismiss" is hereby GRANTED. Accordingly, the Petition for Review~ 7 Par. 8, !d , p. 3. 8 Par. 9, ld , p. 4. 9 Par. 16, /d. , p. 8. 10 Vol. II , Division Docket, (CTA Case Nos. 8043 & 8 11 6), pp. 758-763. 11 See Note 2.

erA EB CASE NO. 759 (erA Case Nos. 8043 & 8116) DECISION docketed as erA Case No. 8116 is hereby DISMISSED for lack of jurisdiction. On the other hand, set the hearing on petitioner's "Motion for the Adoption of Procedures on the Presentation of Voluminous Documents Pursuant to Rules 12 and 13 of The Revised Rules of the Court of Tax Appeals" and the initial presentation of evidence for the petitioner for erA Case No. 8043 on April 11, 2011 at 9:00 a.m. SO ORDERED." Petitioner filed its Motion for Reconsideration 12 on March 16, 2011. Respondent filed her Comment on March 21, 2011. In a Resolution 13 dated April 11, 2011, the CTA Second Division denied petitioner's Motion, to wit: "WHEREFORE, premises considered, petitioner's "Motion for Reconsideration" is hereby DENIED for lack of merit. SO ORDERED." Hence, petitioner filed the instant Petition for Review alleging that the CTA Second Division erred in the following respects: a. Respondent's Motion To Dismiss should be denied for having been filed in violation of Rule 16, Section 1 of the Revised Rules of Court which provides that a Motion to Dismiss may be filed "within the time for but before filing the answer to the complaint or a pleading asserting a claim X X X X X x; " b. Petitioner had timely and duly filed its administrative and judicial claims for the issuance of a tax credit certificate amounting to P47,425,306.79, representing unutilized input taxes on its local purchases and importations of goods other than capital goods, local purchases of services, payments for services rendered by non-residents, local purchases of capital goods not exceeding P1 Million including unutilized amortized input~ ------------------- - 12 Vol. II , Division Docket, (CTA Case Nos. 8043 & 81 16), pp. 794-8 14. 13 See Note 3.

CTA EB CASE NO. 759 (CTA case Nos. 8043 & 8116) DECISION taxes on capital goods exceeding P1 Million, for the period April 1, 2008 to December 31, 2008, all attributable to zero-rated sales for the period April 1, 2008 to December 31, 2008, pursuant to Section 112(A) of the Tax Code of 1997, as amended; and c. Under Section 5(5), Article VIII of the 1987 Philippine Constitution, it is provided that Rules of Procedure shall not diminish, increase or modify substantive rights (Land Bank of the Philippines vs. Arlene De Leon and Bernardo De Leon G.R. No. 143275, En Bane, March 2~ 2003). Further, following the principle of prospectivity of statutes, which had been applied to judicial decisions and considering that Petitioner had followed in good faith the prevailing jurisprudence when it filed its administrative and judicial claims for its unutilized input taxes for the period April 1, 2008 to December 31, 2008, the Supreme Court ruling in the case of Commissioner of Internal Revenue v. Aichi Forging Company of Asia, Inc. with G.R. No. 184823 and promulgated on October 6, 2010, which ruled that the filing of the judicial claim therein with the CTA was premature since the administrative and judicial claims therein were simultaneously filed, should not be applied in the instant case. (Albino S. Co v. Court of Appeals and People of the Philippine~ G.R. No. 100776 dated October 28, 1993) On September 12, 2011, this Court issued a Resolution 14 ordering respondent to file her Comment within ten (10) days from the receipt thereof. On October 5, 2011, respondent filed her Comment15� In a Resolution 16 dated October 24, 2011, this Court ordered the parties to submit their respective memorandum within thirty (30) days from receipt thereof. On November 11, 2011, respondent filed a Manifestation17 stating that she is adopting the arguments in her Comment as her Memorandum in this case while petitioner filed its Memorandum on Decem be~ 14 CTA En Bane Ro llo, pp. 73-74. 15 Ibid. , pp. 78-86. 16 !d. , pp. 88-89. 17 !d. , pp. 90-92 .

CTA EB CASE NO. 759 (CTA Case Nos. 8043 & 8116) DECISION 1, 2011. 18 On January 11, 2012, the instant case was submitted for Decision. 19 After a careful and thorough evaluation and consideration of the records of the case, including both parties' arguments in their respective pleading, the CTA En Bane finds no new matters which have not yet been considered and passed upon by the CTA Second Division in the Assailed Resolutions. We affirm the CTA Second Division's ruling granting respondent's Motion to Dismiss. The requirement that a motion to dismiss should be filed within the time for filing the answer is not absolute. A defendant can still file a motion to dismiss even after an answer has been filed if founded on lack of jurisdiction, litis pendencia, lack of cause of action and discovery during trial of evidence that would constitute a ground for dismissal. 20 Anent the issue on premature filing and lack of jurisdiction, this Court finds that the premature filing of the instant Petition for Review is tantamount to a violation of the doctrine of exhaustion of administrative remedies. Petitioner filed its judicial claim before the CTA in division without giving the respondent ample opportunity to decide on its claim for refund at the administrative level, in violation of the procedure and periods clearly prescribed in the 1997 NIRC. ~ 18 !d. , pp. 94-142. 19 !d. , pp. 144-145. �2 Felizardo S. Obando and the Estates of Jose Figueras and Dofia Alegria Strebel Vda. De Figueras, vs. Eduardo F. Figueras and Amigo Realty Corporation as represented by Antonio A. Kaw, G.R. No. 134854, January 18, 2000.

CTA EB CASE NO. 759 (CTA Case Nos. 8043 & 8116) DECISION Petitioner filed its Petition for Review barely three days after it filed its administrative claim. Hence, it is crystal clear that it failed to exhaust its administrative remedies. It is apparent that petitioner filed its judicial appeal without waiting for the lapse of the 120-day period provided for under Section 112(0) [now Section 112(C)] of the NIRC of 1997, as amended . Consequently, petitioner's premature filing of the Petition for Review on June 28, 2010, failed to confer on this Court with jurisdiction to take cognizance of the instant case. As its petition is prematurely filed, there is no case over which the Court may acquire jurisdiction . Finally, as regards the contention of petitioner on the retroactive application of the doctrine in the Aichi case, it is likewise settled that the law takes effect from the time of its effectivity. It is only upon effectivity of the statute that legal rights and obligations become available to those entitled by the language of the statute. The provisions of Section 112 have been effective as of January 1, 1998 when the said law took place. The fact that the cases interpreting the same were promulgated years after its effectivity does not mean that the Court implements a retroactive application of law. In sum, the CTA En Bane finds no cogent justification to disturb the findings and conclusion spelled out in the Assailed Resolutions. What the instant petition seeks is for the Court En Bane to view and appreciate the arguments/discussions raised by the petitioner in its own perspective of things, which unfortunately had already been considered and passed upon by the Court.~

erA EB CASE NO. 759 (erA Case Nos. 8043 & 8116) DECISION WHEREFORE, the instant Petition for Review is hereby DISMISSED for lack of merit. Accordingly, the Assailed Resolutions dated March 3, 2011 and April 11, 2011 in CTA Case No. 8116 entitled "CBK Power Company Limited vs. Commissioner of Internal Revenue '; are hereby AFFIRMED in toto. SO ORDERED. CAESA~OVA Associate Justice WE CONCUR: (On Leave) ERNESTO D. ACOSTA Presiding Justice q~loc. ~~ .Q . JR.: 1'UANITO C. CASTANEDA( Associate Justice

CTA EB CASE NO. 759 OLGA PALANCA-ENRIQUEZ (CTA case Nos. 8043 & 8116) Associate Justice DECISION ... EA:s~~~.stUicYe (Joins t e nc rring and Dissenting ~ N . M~~ . C~ rpini nof ustice Manalastas) CIELITO N. MINDARO-GRULLA N7/A R. FASON-VICTORINO Associate Justice Associate Justice /4-r:-4--/~ (With Concurring and Dissenting Opinion) AMELIA R. COTANGCO-MANALASTAS 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. cQJUA...~ NITO~ C. Cc ASTA~ NEDAQ ~~.' Acting Presiding Justice

REPUBLIC O F THE PHILIPPINES Court of Tax Appeals QUEZON CITY En Bane CBK POWER COMPANY LIMITED, CTA EB CASE NO. 759 Petitioner, (CTA Case Nos. 8043 & 8116) -versus- Present: Acosta, P.J. Castaneda, Jr., Bautista, Uy, Casanova, Pa Zanca-Enriquez, Fabon- Vict orino, Mindaro-Gntlla, and Cotangco-Mana lastas, JJ. COMMISSIONER OF INTERNAL P romulgate d : REVENUE, Respondent. x----------------------------------------------------------------------------------------------------x DISSENTING OPINION BA UTISTA, I. : The majority of the Court sitting En Bane dismissed the Petition for Review for lack of merit, and accordingly, affirmed the assailed Resolutions dated March 3, 2011 and April 11, 2011, granting the Motion to Dismiss filed by respondent; however, this ponencia is of the view that the factual circumstances present in the case at bench supports the application of the then prevailing jurisprudence at the time the clai~s ~ weremade. }

DISSENTING OPINION CTA EB Case No. 759 (CTA Case Nos. 8043 & 8116) Page 2 of4 Based on the records of the case, petitioner filed its judicial claim for issuance of tax credit certificate for unutilized input taxes covering the period from April 1, 2008 to December 31, 2008 before this Court, docketed as CTA Case No. 8116, raffled to the Second Division of the Court on June 28, 2010, notwithstanding that its administrative claim was filed only on June 25, 2010. It may not be amiss to note that all during the aforementioned dates, the then controlling doctrine is the case of Commissioner of Internal Revenue v. Mirant Pagbilao Corporation [Formerly Sou thern Energy Quezon, Inc.).l I submit that the ruling in the case of Commissioner of Internal Revenue v. Aichi Forging Company of Asia, Inc.,2 is more in accordance with the letter and spirit of Section 112 of the 1997 National Internal Revenue Code, as amended, nonetheless, it would be the height of injustice to impose a new ruling, on the basis of the so-called "adherence to precedence," for the same is clearly promulgated after the taxpayer- claimant had faithfully relied and complied with the Court's former ruling. The same way that the two (2)-year prescriptive period provided under Section 2293 of the same Code must also be considered.4 1 G.R. No. 172129, September 12, 2008, 565 SCRA 154. 2 G.R. No. 184823, October 6, 2010. 3 SEC. 229. Recoven; 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 clain1ed 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, f 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. 4 Commissioner of Internal Revenue v. Aichi Forging Company of Asia, Inc., CTA EB Case No. 416, February 4, 2009.

DISSENTING OPINION CIA EB Case No. 759 (CIA Case Nos. 8043 & 8116) Therefore, it must be borne in mind that no claim can be had, whether in the administrative or judicial fora, beyond the two (2)-year period provided under Section 112 of the 1997 National Internal Revenue Code, as amended, in relation to Section 229 of the same Code. Stated differently, if the two (2)-year prescriptive period is about to expire, there is no need to wait for the denial of the claim by the Commissioner of Internal Revenue or its inaction after the expiration of the one hundred twenty (120)-day period before the taxpayer can lodge its appeal to this Court.5 Otherwise, this Court will be deprived of jurisdiction to entertain the case.6 In the landmark case of Albino S. Co, v. Court of Appeals, et al.,7 the Supreme Court aptly penned the following disquisitions, to wit: The principle of prospectivity of statutes, original or amendatory, has been applied in many cases. These include: Buyco v. PNB, 961 2 SCRA 682 (June 30, 1961), holding that Republic Act No. 1576 which divested the Philippine National Bank of authority to accept back pay certificates in payment of loans, does not apply to an offer of payment made before effectivity of the act; Largado v. Masaganda, et al., 5 SCRA 522 (June 30, 1962), ruling that RA 2613, as amended by RA 3090 on June, 1961, granting to inferior courts jurisdiction over guardianship cases, could not be given retroactive effect, in the absence of a saving clause; Larga v. Ranada, Jr., 64 SCRA 18, to the effect that Sections 9 and 10 of Executive Order No. 90, amending Section 4 of PD 1752, could have no retroactive application; People v . Que Po Lay, 94 Phil. 640, holding that a person cannot be convicted of violating Circular No. 20 of the Central, when the alleged violation occurred before publication of the Circular in the Official Gazette; Baltazar v . C.A ., 104 SCRA 619, denying retroactive application to P.D. No. 27 decreeing the emancipation of tenants from the bondage of the soil, and P.D. No. 316 prohibiting ejectment of tenants s Commissioner of Internal Revenue v. CE Cebu Geothermal Power Company, Inc., crA EB Case No. 426, May 29, 2009. 6 Commissioner of Internal Revenue v. Accenture, Inc., crA EB Case No. 410 (CfA Case No. 7387), Marcih8, 2009. 7 G.R. No. 100776, October 28, 1993, 277 SCRA 444.

DISSENTING OPINION CTA EB Case No. 759 (CTA Case Nos. 8043 & 8116) from rice and corn farmholdings, pending the promulgation of rules and regulations implementing P.D. No. 27; Nilo v. Court of Appeals, 128 SCRA 519, adjudging that RA 6389 which removed "personal cultivation" as a ground for the ejectment of a tenant cannot be given retroactive effect in the absence of a statutory statement for retroactivity; Tac-An v. CA, 129 SCRA 319, ruling that the repeal of the old Administrative Code by RA 4252 could not be accorded retroactive effect; Ballardo v . Borromeo, 161 SCRA 500, holding that RA 6389 should have only prospective application; (see also Bonifacio v. Dizon, 177 SCRA 294 and Balatbat v . CA, 205 SCRA 419). The prospectivity principle has also been made to apply to administrative rulings and circulars, to wit: ABS-CBN Broadcasting Corporation v. CTA, Oct. 12, 1981, 108 SCRA 142, holding that a circular or ruling of the Commissioner of Internal Revenue may not be given retroactive effect adversely to a taxpayer; Sanchez v. COMELEC, 193 SCRA 317, ruling that Resolution No. 90-0590 of the Commission on Elections, which directed the holding of recall proceedings, had no retroactive application; Romualdez v. CSC, 197 SCRA 168, where it was ruled that CSC Memorandum Circular No. 29, s. 1989 cannot be given retrospective effect so as to entitle to permanent appointment an employee whose temporary appointment had expired before the Circular was issued. The principle of prospectivity has also been applied to judicial decisions which, "although in themselves not laws, are nevertheless evidence of what the laws mean, ... (this being) the reason why under Article 8 of the New Civil Code, 'Judicial decisions applying or interpreting the laws or the Constitution shall form a part of the legal system ..."' (Boldfacing supplied.) Applying the above disquisitions, I find the adminish�ative and judicial claims filed within the then prevailing jurisprudence at the time the claims were made. Accordingly, I vote that the Petition for Review be GRANTED. The Petition for Review, docketed as CTA Case No. 8116 should be REINSTATED and be GIVEN DUE COURSE. LO

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY ENBANC CBK POWER COMPANY LIMITED, CTA EB No. 759 Petitioner, (CTA Case Nos. 8043 and8116) - versus- Present: Acosta, PJ, Castafleda,J r., Bautista, Uy, Casanova, Pabon -Victorino, Mindaro-Grulla, and Cotangco-Manalastas, JJ. COMMISSIONER OF INTERNAL Promulgate d: REVENUE, Respondent. :~ X- - - - - - - - - - - - - - - - - - - - - - - - - - - - CONCURRING AND DISSENTING OPINION With due respect, I dissent from the majority opinion and hold that prematurity is not jurisdicitional. The assailed Resolution grants the Motion to Dismiss on the ground of lack of jurisdiction based on pre maturity since the judicia l claim was prematurely fil ed , having been filed a mere three days (wi th only one working day) after the administrative claim. While I concur with the dismissal, I hold that th e pre ma ture filing of the judicial claim for refund is not jurisdictional but still subjects the petition to possible dismissal. Premature invocation of the Court's intervention is fatal to one 's cause of action. Accordingly,

Concurring and Di sse ntin g Opinion Page 2 of2 CTA EB No. 759 (C.T.A. Case Nos. 8043 & 8116) C BK Power Company Ltd . vs. Comm iss io ner of Internal Revenue absent any finding of waiver or estoppel, the case is susceptible of dismissal for lack of cause of action. 1 Thus, the pre m ature filing of th e subject Petition for Rev iew is only La nla moun t Lo lac k of cause of action. Th e pre m a lure filing of th e judic ia l claim for refund or failure Lo exh aust a dminislra tive re m edi e s does not a ffecl Lh e jurisdiction of a Court.2 Since Lhe pre mature filin g of the claim for refund or failure Lo exh a ust a dministrative remedies is not jurisdictiona l, such d e fe n se 1s thus waivable pursua nl to Section 1, Rule 9 of th e Rules of Court. Given Lhat res pond e nt a ll eged in her Answe r in C .T.A. Case No . 8116, the special and affirmative d e fe nse of pre m atu rity of petition e r 's judicial c la im for re fund 3, a nd again in its MoLion to Dismi ss, it cannot be said Lh at rcspond c nl waived such defe nse of pre malure filing. In sum, I concur wilh th e majority in a ffirmin g th e dis mi ssal o f pe Lition e r's judici a l c laim buL on the ground of pre m aturity res ul t in g to lac k of cause of cause of action and not du e to lac k of jurisdiction. ~A/-~-./#- AMELIA R. COTANGCO-MANALASTAS Associate Justice CONCURS: (On leave) ERNESTO D. ACOSTA Associate ,Justice 1 Montanez vs. PARA D. et a/. , G.R. No . 183 14 2, Septe mber 17, 2009. 2 Merida Wat er District, et a/. vs. Francisco Bacarro, eta/. , G.R . No. 165993, September 30, 2008 . 3 An swer, dated A ug ust 3, 20 I0, p. 5.