LAPANDAY FOODS CORPORATION v. COMMISSIONER OF INTERNAL REVENUE

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY First Division LAPANDAY FOODS CTA Case No. 10122 CORPORATION, Petitioner, Members: -versus- DEL ROSARIO, P.J., Chairperson, FABON-VICTORINO , and MANAHAN, JJ. COMMISSIONER OF INTERNAL Promulgated: REVENUE, Respondent. FEB 21 9 ;3 <(e-. X - - - - - - - - - - - - - - - - - - - - - - - - - - -- - - - -~~ -----X RESOLUTION This resolves respondent's Motion for Early Resolution on t he Issue of Jurisdiction of the Honorable Court1 filed on November 31, 2019 praying that the case be dismissed for being time-barred and/or lack of jurisdiction. Respondent argues that the filing of petitioner's Petition for Review on December 12, 2018 was beyond the mandatory and jurisdictional 120+30-day period under Section 112(D) of the 1997 National Internal Revenue Code (NIRC), as amended, based on the following relevant dates cited by him in the said motion, to wit: Quarter Date of Filing 120-day 30-days after Date of 2010 of period the denial Filing of (Deemed Petition for Second Administrative Denied) 25 September Review Third Claim 26 August 2008 2008 19 July Fourth 28 April 2008 26 August 25 September 2019 2008 2008 28 April 2008 08 November 2008 08 December 11 July 2008 2008 Respondent further argues that the subsequent letter of denial for the said administrative claim is of no moment I Docke t , CTA Ca se No. 101 22 , pp. 246- 252.

RESOLUTION CTA Case No. 10122 because of the mandatory nature of aforesaid period under the 1997 NIRC, as amended, and Revenue Memorandum Circular (RMC) No. 54-2014. On the other hand, petitioner in its Comment/ Opposition2, which was filed on December 20, 2019, argues that the 120+30-day period under RMC No. 54-2014 does not apply in cases where the respondent issues a decision on the value-added tax (VAT) refund after the lapse of the 120-day period. It also insists that under Section 2 of Revenue Regulations (RR) No. 1-2017 dated January 3, 2017, administrative claims for refund filed prior to the effectivity of RMC No. 54-2014 shall continue to be processed administratively. Petitioner also insists that Section 112(C) of the 1997 NIRC, as amended, clearly provides two options to the taxpayer on how to appeal the decision of the respondent denying the claim for refund or tax credit just like the latter's decision in tax assessment cases citing the case of Lascona Land Co., Inc. v. Commissioner of Internal Revenue3 (Lascona case). It claims the right to await the decision of the respondent and subsequently appeal in case the latter renders an adverse decision against such claim for refund. Petitioner further argues that the failure of the taxpayer to comply with the "120+30-day period" does not deprive the CTA of its jurisdiction to adjudicate the assailed "Letter of Denial" since Section 112(C) of the 1997 NIRC, as amended is a claim-processing rule which does not restrict the subject matter jurisdiction of this Court. The factual antecedents of this case as alleged by petitioner reveal that its Quarterly Value-Added Tax (VAT) Return or BIR Form No. 2550Q were filed on April 24, 2008, April 15, 2008, and July 11, 2008 for the second, third, and fourth quarter of taxable year (TY) 2006, respectively. 4 Petitioner also alleged that it filed an administrative claim for refund of input VAT incurred attributable to its zero-rated ' Docket, Comment/ Opposition, pp. 438-462. 3 G.R. No. 171251, March 05,2012. 4 Docket, Petition for Review, p.13.

RESOLUTION CTA Case No. 10122 export sales for the three (3) quarters of TY 2006 on the following dates with the corresponding amount of claim, to wit: 5 Quarter Date of Filing of Amount 2006 Administrative Claim 3,808,812.15 2nd 3,109,594.98 3rd 28 April 2008 5,4 71,432.66 4th 28 April 2008 11 July 2008 Php 12,389,839.79 Total On June 20, 2019, petitioner received a Letter of Denial dated February 14, 2019 on its administrative claim for refund. Hence, petitioner filed its Petition for Review before this Court on July 19, 2019. Respondent's arguments are tenable. It is true that under Section 7(a)(1) of Republic Act (RA) No. 1125, as amended by RA Nos. 9282 and 9503, that this Court may take cognizance of cases pertaining to "other matters arising under the National Internal Revenue or other laws administered by the Bureau of Internal Revenue (BIR)" and considering that the instant case is grounded on the Notice of Denial issued by BIR, this Court has jurisdiction based on its subject matter. However, the parties should also be aware that the jurisdiction of this Court is not limited to the subject matter only but it must also take into account the aspect of prescription. In this case, the period to file an appeal from respondent's action is already barred by prescription. Section 112(C) of the 1997 NIRC, as amended, provides for the period when the respondent should act on taxpayer's claim for input VAT refund/credit as well the period when the latter may appeal the action or inaction of the former on such claim, to wit: SEC. 112. Refunds or Tax Credits of Input Tax. - s Supra., Note 4.

RESOLUTION CTA Case No. 10122 (A) XXX XXX XXX (8) 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 Subsections (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. (Emphasis and underscore ours) XXX XXX XXX As shown in the above-cited provision, the respondent has 120 days from the date of submission of the complete supporting documents of such application to act on the same. As such, the law provides for two scenarios before a judicial claim for refund may be filed with the CTA: (1) the full or partial denial of the claim within the 120-day period, or (2) the lapse of the 120-day period without the CIR having acted on the claim. It is only from the happening of either one may a taxpayer-claimant file its judicial claim for refund or tax credit for unutilized input VAT. Consequently, failure to observe the said period renders the judicial claim premature, divesting the CTA of jurisdiction to act on it. 6 In the case of Pilipinas Total Gas, Inc. v. Commissioner of Internal Revenue7 , the Supreme Court laid down the procedure pertaining to claims for refund prior to the issuance of RMC No. 54-2014 on June 11, 2014 where the subject claims for refund were filed, to wit: "To summarize, for the just disposition of the subject controversy, the rule is that from the date an administrative claim for excess unutilized VAT is filed, a taxpayer has thirty (30) days within which to submit the documentary requirements sufficient to support his claim, unless given 6 Team Sual Corporation (fonnerly Mirant Sual Corporation) v. Commissioner ofInternal Revenue, G.R. Nos. 201225-26,201132, and 201133, April18, 2018. 7 G.R. No. 207112, December 08,2015.

RESOLUTION CTA Case No. 10122 further extension by the CIR. Then, upon filing by the taxpayer of his complete documents to support his application, or expiration of the period given, the CIR has 120 days within which to decide the claim for tax credit or refund. Should the taxpayer, on the date of his filing, manifest that he no longer wishes to submit any other addition documents to complete his administrative claim, the 120 day period allowed to the CIR begins to run from the date of filing. In all cases, whatever documents a taxpayer intends to file to support his claim must be completed within the two- year period under Section 112{A) of the NIRC. The 30-day period from denial of the claim or from the expiration of the 120-day period within which to appeal the denial or inaction of the CIR to the CTA must also be respected. It bears mentioning at this point that the foregoing summation of the rules should only be made applicable to those claims for tax credit or refund filed prior to June 11, 2014, such as the claim at bench..." In the instant case, the petitioner did not allege any other dates when it submitted its complete supporting documents. Thus, the reckoning date for the 120-day period shall be counted from the date of filing of the administrative claim for VAT refund/credit, to wit: Quarter Date of Filing of Last day of the 2010 Administrative Claim 120-day period August 26, 2008 2nd April 28, 2008 August 26, 2008 3rd April 28, 2008 November 8, 2008 July 11, 2008 4th Now the question is whether the petitioner has the option either to file an appeal within 30 days after the lapse of the 120-period without action from the respondent or to wait until the latter issues a ruling on the said claims for VAT refund/ credit? We rule in the negative. In Commissioner of Internal Revenue v. San Roque Power Corporation, Taganito Mining Corporation v. Commissioner of Internal Revenue, and Philex Mining Corporation v. Commissioner of Internal Revenues, the Supreme Court ruled that the 30-day period of filing an appeal is mandatory and s G.R. Nos. 187485, 196113, and 197156, February 12, 2013.

RESOLUTION CTA Case No. 10122 jurisdictional after the expiration of the 120-day period if the applicant/ claimant will opt to file an appeal, to wit: "When Section 112{C) states that "the taxpayer affected may, within thirty (30) days from 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," the law does not make the 120+30 day periods optional just because the law uses the word "may." The word "may'' simply means that the taxpayer may or may not appeal the decision of the Commissioner within 30 days from receipt of the decision, or within 30 days from the expiration of the 120-day period. Certainly, by no stretch of the imagination can the word "may'' be construed as making the 120+30 day periods optional, ... xxxxxxxxx To repeat, a claim for tax refund or credit, like a claim for tax exemption, is construed strictly against the 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..." The doctrine on the mandatory and jurisdictional nature of the 120+30-day period is also reiterated in several subsequent rulings of the Supreme Court.9 In Commissioner of Internal Revenue v. Mindanao II Geothermal Partnership10 (Mindanao II case), the Supreme Court provides a summary of rules on prescriptive periods for claiming refunds or credit of input VAT, to wit: SUMMARY OF RULES ON PRESCRIPTIVE PERIODS FOR CLAIMING REFUND OR CREDIT OF INPUT VAT The lessons of this case may be summed up as follows: A. Two-Year Prescriptive Period 1. It is only the administrative claim that must be filed within the two-year prescriptive period. (Aicht) 9 Mindanao II Geothermal Partnership v. Commissioner of Internal Revenue, G.R. Nos. 193301 and 194637, March 11, 2013; Silicon Philippines, Inc. (fonnerly Intel Philippines Manufacturing, Inc.) v. Commissioner of Internal Revenue, G.R. No. 173241, March 25, 2015; Commissioner of Internal Revenue v. Toledo Power Company, G.R. Nos. 196415 and 196451, December 02, 2015; Team Sual Corporation (fonnerly Mirant Sual Corporation) v. Commissioner of Internal Revenue, G.R. Nos. 201225-26, 201132, and 201133, April 18, 2018. 10 G.R. No. 191498, January 15, 2014.

RESOLUTION CTA Case No. 10122 2. The proper reckoning date for the two-year prescriptive period is the close of the taxable quarter when the relevant sales were made. (San Roque) 3. The only other rule is the Atlas ruling, which applied only from 8 June 2007 to 12 September 2008. Atlas states that the two-year prescriptive period for filing a claim for tax refund or credit of unutilized input VAT payments should be counted from the date of filing of the VAT return and payment of the tax. (San Roque) B. 120+30 Day Period 1. The taxpayer can file an appeal in one of two ways: (1) file the judicial claim within thirty days after the Commissioner denies the claim within the 120-day period, or (2) file the judicial claim within thirty days from the expiration of the 120-day period if the Commissioner does not act within the 120-day period. 2. The 30-day period always applies, whether there is a denial or inaction on the part of the CIR. 3. As a general rule, the 30-day period to appeal is both mandatory and jurisdictional. (Aichi and San Roque) 4. As an exception to the general rule, premature filing is allowed only if filed between 10 December 2003 and 5 October 2010, when BIR Ruling No. DA-489- 03 was still in force. (San Roque) 5. Late filing is absolutely prohibited, even during the time when BIR Ruling No. DA-489-03 was in force. (San Roque) As shown above, the only exception to the doctrine of 120+30-day period is when the claim for refund or credit of input VAT was filed between December 10, 2003 and October 5, 2010, when BIR Ruling No. DA-489-03 was still in force. Although the instant case is within the period covered by the aforesaid ruling, the period for the submission of the complete documents to support the applications or claims for refund is not an issue in the instant case, hence, the application of the exception is not relevant.

RESOLUTION CTA Case No. 10122 Likewise, petitioner is totally mistaken in relying on the Lascona case wherein the ruling was based on Section 228 of the 1997 NIRC, as amended, and the issue pertains to a tax assessment and not an input VAT refund or credit claim. In Section 228, the provision for the 30-day period to appeal is worded as "the taxpayer adversely affected by the decision or inaction may appeal to the Court of Tax Appeals within (30) days from receipt of the said decision, or from the lapse of the one hundred eighty (180)-day period." The option given to the taxpayer is to file an appeal either from the lapse of the 180-day period or from the date of the receipt of the decision, which may occur during or after the 180-day period when the respondent may take action on taxpayer's protest on a particular tax assessment. Further, in Lascona case, one of the bases of such ruling is Section 3(a)(2), Rule 4 of the Revised Rules of the Court of Tax Appeals (RRCTA) which provides: SEC. 3. Cases within the jurisdiction of the Court in Divisions. -The Court in Divisions shall exercise: (a) Exclusive original or appellate jurisdiction to review by appeal the following: (1) XXX XXX (2) Inaction by the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties in relation thereto, or other matters arising under the National Internal Revenue Code or other laws administered by the Bureau of Internal Revenue, where the National Internal Revenue Code or other applicable law provides a specific period for action: Provided, that in case of disputed assessments, the inaction of the Commissioner of Internal Revenue within the one hundred eighty day-period under Section 228 of the National Internal revenue Code shall be deemed a denial for purposes of allowing the taxpayer to appeal his case to the Court and does not necessarily constitute a formal decision of the Commissioner of Internal Revenue on the tax case; Provided, further, that should the taxpayer opt to await the final decision of the Commissioner of Internal Revenue on the disputed assessments beyond the one hundred eighty day-period abovementioned, the taxpayer may appeal such final decision to the Court under Section 3(al. Rule 8 of these Rules; and Provided, still further, that in the case of claims for refund of taxes

RESOLUTION CTA Case No. 10122 erroneously or illegally collected, the taxpayer must file a petition for review with the Court prior to the expiration of the two-year period under Section 229 of the National Internal Revenue Code; (Underscore ours) Unlike such provision wherein the taxpayer can wait for the decision of the respondent on disputed assessment, the RRCTA did not provide for an equivalent provision for claims of refund/credit particularly on input VAT. Hence, Lascona is not applicable in this case. In the instant case, therefore, the petitioner had only 30 days to file its appeal from the last day of the 120-day period or until September 25, 2008 for the second and third quarters of TY 2006 while it had until December 8, 2008 for the fourth quarter of TY 2008. The filing of the petition for review on July 19, 2018 is beyond the 30-day period under Section 112(C) of the 1997 NIRC, as amended, and as provided in the Mindanao II case, the "late filing is absolutely prohibited" even during the period covered by its exception. Thus, the Court has no jurisdiction to continue hearing the instant case. In view of the foregoing, this Court will no longer discuss the other issues raised by the petitioner for the same reason above-cited. On a separate matter, petitioner filed a Manifestation on January 27, 2020 wherein it clarified that the appearance of Atty. Romelia J. Ongayo was only for the limited purpose of conducting the direct examination on the Judicial Affidavit of its witness, Mr. Terencio R. Tangaran, hence, notices, orders, resolutions, and decisions in relation to this case need not be addressed to her. WHEREFORE, premises considered, respondent's Motion for Early Resolution on the Issue ofJurisdiction ofthe Honorable Court is hereby GRANTED and petitioner's Manifestation is NOTED. Accordingly, the Petition for Review under CTA Case No. 10122 is DISMISSED for lack of jurisdiction by reason of prescription.

RESOLUTION CTA Case No. 10122 SO ORDERED. Presiding Justice � ~' (l: ~"... ~ --......._ CATHERINE T. MANAHAN Associate Justice