Republic of the Philippines

SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 207843 July 15, 2015

COMMISSION OF INTERNAL REVENUE, Petitioner,

vs.
COURT OF TAX APPEALS (SECOND DIVISION) and PETRON CORPORATION, * Respondents.

DECISION

PERLAS-BERNABE, J.:

The Facts

Petron imports alkylate as a raw material or blending component for the manufacture of ethanol-
blended motor gasoline.4 For the period January 2009 to August 2011, as well as for the month of
April 2012, Petron transacted an aggregate of 22 separate importations for which petitioner the
Commissioner of Internal Revenue (CIR) issued Authorities to Release Imported Goods (ATRIGs),
categorically stating that Petron's importation of alkylate is exempt from the payment of the excise
tax because it was not among those articles enumerated as subject to excise tax under Title VI of
Republic Act No. (RA) 8424,5 as amended, or the 1997 National Internal Revenue Code (NIRC).
With respect, however, to Petron's alkylate importations covering the period September 2011 to
June 2012 (excluding April 2012), the CIR inserted, without prior notice, a reservation for all ATRIGs
issued,6 stating that:

This is without prejudice to the collection of the corresponding excise taxes, penalties and interest
depending on the final resolution of the Office of the Commissioner on the issue of whether this item
is subject to the excise taxes under the National Internal Revenue Code of 1997, as amended.7

In June 2012, Petron imported 12,802,660 liters of alkylate and paid value-added tax (VAT) in the
total amount of ?41,657,533.00 as evidenced by Import Entry and Internal Revenue Declaration
(IEIRD) No. SN 122406532. Based on the Final Computation, said importation was subjected by the
Collector of Customs of Port Limay, Bataan, upon instructions of the Commissioner of Customs
(COC), to excise taxes of ₱4.35 per liter, or in the aggregate amount of ₱55,691,571.00, and
consequently, to an additional VAT of 12% on the imposed excise tax in the amount of
₱6,682,989.00.8 The imposition of the excise tax was supposedly premised on Customs
Memorandum Circular (CMC) No. 164-2012 dated July 18, 2012, implementing the Letter dated
June 29, 2012 issued by the CIR, which states that:

[A]lkylate which is a product of distillation similar to that of naphta, is subject to excise tax under
Section 148( e) of the National Internal Revenue Code (NIRC) of 1997. 9

In view of the CIR's assessment, Petron filed before the CTA a petition for review,10 docketed as CTA
Case No. 8544, raising the issue of whether its importation of alkylate as a blending component is
subject to excise tax as contemplated under Section 148 (e) of the NIRC.
On October 5, 2012, the CIR filed a motion to dismiss on the grounds of lack of jurisdiction and
prematurity.11

Initially, in a Resolution12 dated November 15, 2012, the CTA granted the CIR's motion and
dismissed the case. However, on Petron's motion for reconsideration,13 it reversed its earlier
disposition in a Resolution14 dated February 13, 2013, and eventually denied the CIR's motion for
reconsideration15 therefrom in a Resolution16 dated May 8, 2013. In effect, the CTA gave due course
to Petron's petition, finding that: (a) the controversy was not essentially for the determination of the
constitutionality, legality or validity of a law, rule or regulation but a question on the propriety or
soundness of the CIR's interpretation of Section 148 (e) of the NIRC which falls within the exclusive
jurisdiction of the CTA under Section 4 thereof, particularly under the phrase "other matters arising
under [the NIRC]";17 and (b) there are attending circumstances that exempt the case from the rule on
non-exhaustion of administrative remedies, such as the great irreparable damage that may be
suffered by Petron from the CIR's final assessment of excise tax on its importation.18

Aggrieved, the CIR sought immediate recourse to the Court, through the instant petition, alleging
that the CTA committed grave abuse of discretion when it assumed authority to take cognizance of
the case despite its lack of jurisdiction to do so.19

The Issue Before the Court

The core issue to be resolved is whether or not the CTA properly assumed jurisdiction over the
petition assailing the imposition of excise tax on Petron's importation of alkylate based on Section
148 (e) of the NIRC.

The Court's Ruling

The petition is meritorious.

The CIR asserts that the interpretation of the subject tax provision, i.e., Section 148 (e) of the NIRC,
embodied in CMC No. 164-2012, is an exercise of her quasi-legislative function which is reviewable
by the Secretary of Finance, whose decision, in turn, is appealable to the Office of

the President and, ultimately, to the regular courts, and that only her quasi-judicial functions or the
authority to decide disputed assessments, refunds, penalties and the like are subject to the exclusive
appellate jurisdiction of the CTA.20 She likewise contends that the petition suffers from prematurity
due to Petron 's failure to exhaust all available remedies within the administrative level in accordance
with the Tariff and Customs Code (TCC).21

The CIR's position is well-grounded.

Section 4 of the NIRC confers upon the CIR both: (a) the power to interpret tax laws in the exercise
of her quasi-legislative function; and (b) the power to decide tax cases in the exercise of her quasi-
judicial function. It also delineates the jurisdictional authority to review the validity of the CIR's
exercise of the said powers, thus:

SEC. 4. Power of the Commissioner to Interpret Tax Laws and to Decide Tax Cases. - The power to
interpret the provisions of this Code and other tax laws shall be under the exclusive and original
jurisdiction of the Commissioner, subject to review by the Secretary of Finance.
The power to decide disputed assessments, refunds of internal revenue taxes, fees or other
charges, penalties imposed in relation thereto, or other matters arising under this Code or other laws
or portions thereof administered by the Bureau of Internal Revenue is vested in the Commissioner,
subject to the exclusive appellate jurisdiction of the Court of Tax Appeals. (Emphases and
underscoring supplied)

The CTA is a court of special jurisdiction, with power to review by appeal decisions involving tax
disputes rendered by either the CIR or the COC. Conversely, it has no jurisdiction to determine the
1âwphi 1

validity of a ruling issued by the CIR or the COC in the exercise of their quasi-legislative powers to
interpret tax laws. These observations may be deduced from a reading of Section 7 of RA 1125,22 as
amended by RA 9282,23 entitled "An Act Creating the Court of Tax Appeals," enumerating the cases
over which the CT A may exercise its jurisdiction:

Sec. 7. Jurisdiction. -The CTA shall exercise:

a. Exclusive appellate jurisdiction to review by appeal, as herein provided:

1. Decisions of 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 or other
laws administered by the Bureau of Internal Revenue;

2. Inaction by the Commissioner of Internal Revenue in cases involving disputed

assessments, refunds of internal revenue taxes, fees or other charges, penalties in
relations 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 provides a specific period of action, in which case the
inaction shall be deemed a denial;

3. Decisions, orders or resolutions of the Regional Trial Comis in local tax cases
originally decided or resolved by them in the exercise of their original or appellate
jurisdiction;

4. Decisions of the Commissioner of Customs in cases involving liability for customs

duties, fees or other money charges, seizure, detention or release of property
affected, fines, forfeitures or other penalties in relation thereto, or other matters
arising under the Customs Law or other laws administered by the Bureau of
Customs;

5. Decisions of the Central Board of Assessment Appeals in the exercise of its

appellate jurisdiction over cases involving the assessment and taxation of real
property originally decided by the provincial or city board of assessment appeals;

6. Decisions of the Secretary of Finance on customs cases elevated to him

automatically for review from decisions of the Commissioner of Customs which are
adverse to the Government under Section 2315 of the Tariff and Customs Code;

7. Decisions of the Secretary of Trade and Industry, in the case of nonagricultural

product, commodity or article, and the Secretary of Agriculture in the case of
agricultural product, commodity or article, involving dumping and countervailing
duties under Section 301 and 302, respectively, of the Tariff and Customs Code, and
 safeguard measures under Republic Act No. 8800, where either party may appeal
the decision to impose or not to impose said duties.

b. Jurisdiction over cases involving criminal offenses as herein provided:

1. Exclusive original jurisdiction over all criminal offenses arising from violations of
the National Internal Revenue Code or Tariff and Customs Code and other laws
administered by the Bureau of Internal Revenue or the Bureau of Customs: Provided,
however, That offenses or felonies mentioned in this paragraph where the principal
amount of taxes and fees, exclusive of charges and penalties, claimed is less than
One million pesos (₱1,000,000.00) or where there is no specified amount claimed
shall be tried by the regular Courts and the jurisdiction of the CTA shall be appellate.
Any provision of law or the Rules of Court to the contrary notwithstanding, the
criminal action and the corresponding civil action for the recovery of civil liability for
taxes and penalties shall at all times be simultaneously instituted with, and jointly
determined in the same proceeding by the CT A, the filing of the criminal action being
deemed to necessarily carry with it the filing of the civil action, and no right to reserve
the filling of such civil action separately from the criminal action will be recognized.

2. Exclusive appellate jurisdiction in criminal offenses:

a. Over appeals from the judgments, resolutions or orders of the Regional

Trial Courts in tax cases originally decided by them, in their respective
territorial jurisdiction.

b. Over petitions for review of the judgments, resolutions or orders of the

Regional Trial Courts in the exercise of their appellate jurisdiction over tax
cases originally decided by the Metropolitan Trial Courts, Municipal Trial
Courts and Municipal Circuit Trial Courts in their respective jurisdiction.

c. Jurisdiction over tax collection cases as herein provided:

1. Exclusive original jurisdiction in tax collection cases involving final and executory
assessments for taxes, fees, charges and penalties: Provided, however, That collection
cases where the principal amount of taxes and fees, exclusive of charges and penalties,
claimed is less than One million pesos (₱1,000,000.00) shall be tried by the proper Municipal
Trial Court, Metropolitan Trial Court and Regional Trial Court.

2. Exclusive appellate jurisdiction in tax collection cases:

a. Over appeals from the judgments, resolutions or orders of the Regional Trial
Courts in tax collection cases originally decided by them, in their respective territorial
jurisdiction.

b. Over petitions for review of the judgments, resolutions or orders of the Regional
Trial Courts in the exercise of their appellate jurisdiction over tax collection cases
originally decided by the Metropolitan Trial Courts, Municipal Trial Courts and
Municipal Circuit Trial Courts, in their respective jurisdiction. (Emphasis supplied)

In this case, Petron's tax liability was premised on the COC's issuance of CMC No. 164-2012, which
gave effect to the CIR's June 29, 2012 Letter interpreting Section 148 (e) of the NIRC as to include
alkyl ate among the articles subject to customs duties, hence, Petron's petition before the CTA
ultimately challenging the legality and constitutionality of the CIR's aforesaid interpretation of a tax
provision. In line with the foregoing discussion, however, the CIR correctly argues that the CT A had
no jurisdiction to take cognizance of the petition as its resolution would necessarily involve a
declaration of the validity or constitutionality of the CIR's interpretation of Section 148 (e) of the
NIRC, which is subject to the exclusive review by the Secretary of Finance and ultimately by the
regular courts. In British American Tobacco v. Camacho,24 the Court ruled that the CTA's jurisdiction
to resolve tax disputes excludes the power to rule on the constitutionality or validity of a law, rule or
regulation, to wit:

While the above statute confers on the CTA jurisdiction to resolve tax disputes in general, this does
not include cases where the constitutionality of a law or rule is challenged. Where what is assailed is
the validity or constitutionality of a law, or a rule or regulation issued by the administrative agency in
the performance of its quasi-legislative function, the regular courts have jurisdiction to pass upon the
same. x x x.25

In asserting its jurisdiction over the present case, the CTA explained that Petron's petition filed
before it "simply puts in question" the propriety or soundness of the CIR's interpretation and
application of Section 148 (e) of the NIRC (as embodied in CMC No. 164-2012) "in relation to" the
imposition of excise tax on Petron's importation of alkylate; thus, the CTA posits that the case should
be regarded as "other matters arising under [the NIRC]" under the second paragraph of Section 4 of
the NIRC, therefore falling within the CTA's jurisdiction:26

SEC. 4. Power of the Commissioner to Interpret Tax Laws and to Decide Tax Cases. - The power to
interpret the provisions of this Code and other tax laws shall be under the exclusive and original
jurisdiction of the Commissioner, subject to review by the Secretary of Finance.

The power to decide disputed assessments, refunds of internal revenue taxes, fees or other
charges, penalties imposed in relation thereto, or other matters arising under this Code or other laws
or portions thereof administered by the Bureau of Internal Revenue is vested in the commissioner,
subject to the exclusive appellate jurisdiction of the Court of Tax Appeals. (Emphases and
underscoring supplied)

The Court disagrees.

As the CIR aptly pointed out, the phrase "other matters arising under this Code," as stated in the
second paragraph of Section 4 of the NIRC, should be understood as pertaining to those matters
directly related to the preceding phrase "disputed assessments, refunds of internal revenue taxes,
fees or other charges, penalties imposed in relation thereto" and must therefore not be taken in
isolation to invoke the jurisdiction of the CTA.27 In other words, the subject phrase should be used
only in reference to cases that are, to begin with, subject to the exclusive appellate jurisdiction of the
CTA, i.e., those controversies over which the CIR had exercised her quasi-judicial functions or her
power to decide disputed assessments, refunds or internal revenue taxes, fees or other charges,
penalties imposed in relation thereto, not to those that involved the CIR's exercise of quasi-
legislative powers.

In Enrile v. Court of Appeals,28 the Court, applying the statutory construction principle of ejusdem
generis,29explained the import of using the general clause "other matters arising under the Customs
Law or other law or part of law administered by the Bureau of Customs" in the enumeration of cases
subject to the exclusive appellate jurisdiction of the CTA, saying that: [T]he 'other matters' that may
come under the general clause should be of the same nature as those that have preceded them
applying the rule of construction known as ejusdem generis.30(Emphasis and underscoring supplied)
Hence, as the CIR's interpretation of a tax provision involves an exercise of her quasi-legislative
functions, the proper recourse against the subject tax ruling expressed in CMC No. 164-2012 is a
review by the Secretary of Finance and ultimately the regular courts. In Commissioner of Customs v.
Hypermix Feeds Corporation,31 the Court has held that:

The determination of whether a specific rule or set of rules issued by an administrative agency
contravenes the law or the constitution is within the jurisdiction of the regular courts. Indeed, the
Constitution vests the power of judicial review or the power to declare a law, treaty, international or
executive agreement, presidential decree, order, instruction, ordinance, or regulation in the courts,
including the regional trial courts. This is within the scope of judicial power, which includes the
authority of the courts to determine in an appropriate action the validity of the acts of the political
departments. x x x.32

Besides, Petron prematurely invoked the jurisdiction of the CT A. Under Section 7 of RA 1125, as
amended by RA 9282, what is appealable to the CT A is the decision of the COC over a customs
collector's adverse ruling on a taxpayer's protest:

SEC. 7. Jurisdiction. -The CTA shall exercise:

a. Exclusive appellate jurisdiction to review by appeal, as herein provided:

1. Decisions of 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 or other laws administered by the Bureau of
Internal Revenue;

xxxx

4. Decisions of the Commissioner of Customs in cases involving liability for customs duties, fees or
other money charges, seizure, detention or release of property affected, fines, forfeitures or other
penalties in relation thereto, or other matters arising under the Customs Law or other laws
administered by the Bureau of Customs;

xxxx

Section 11 of the same law is no less categorical in stating that what may be the subject of an
appeal to the CT A is a decision, ruling or inaction of the CIR or the COC, among others:

SEC. 11. Who May Appeal; Mode of Appeal; Effect of Appeal. – Any party adversely affected by a
decision, ruling or inaction of the Commissioner of Internal Revenue, the Commissioner of Customs,
the Secretary of Finance, the Secretary of Trade and Industry or the Secretary of Agriculture or the
Central Board of Assessment Appeals or the Regional Trial Courts may file an appeal with the CTA
within thirty (30) days after the receipt of such decision or ruling or after the expiration of the period
fixed by law for action as referred to in Section 7(a)(2) herein.

xxxx

In this case, there was even no tax assessment to speak of. While customs collector Federico
Bulanhagui himself admitted during the CTA's November 8, 2012 hearing that the computation he
had written at the back page of the IEIRD served as the final assessment imposing excise tax on
Petron's importation of alkylate,33 the Court concurs with the CIR's stance that the subject IEIRD was
not yet the customs collector's final assessment that could be the proper subject of review. And even
if it were, the same should have been brought first for review before the COC and not directly to the
CTA. It should be stressed that the CTA has no jurisdiction to review by appeal, decisions of the
customs collector.34 The TCC prescribes that a party adversely affected by a ruling or decision of the
customs collector may protest such ruling or decision upon payment of the amount due35 and, if
aggrieved by the action of the customs collector on the matter under protest, may have the same
reviewed by the COC.36 It is only after the COC shall have made an adverse ruling on the matter may
the aggrieved party file an

appeal to the CT A.37

Notably, Petron admitted to not having filed a protest of the assessment before the customs collector
and elevating a possible adverse ruling therein to the COC, reasoning that such a procedure would
be costly and impractical, and would unjustly delay the resolution of the issues which, being purely
legal in nature anyway, were also beyond the authority of the customs collector to resolve with
finality.38 This admission is at once decisive of the issue of the CTA's jurisdiction over the petition.
There being no protest ruling by the customs collector that was appealed to the COC, the filing of the
petition before the CTA was premature as there was nothing yet to review.39

Verily, the fact that there is no decision by the COC to appeal from highlights Petron's failure to
exhaust administrative remedies prescribed by law. Before a party is allowed to seek the intervention
of the courts, it is a pre-condition that he avail of all administrative processes afforded him, such that
if a remedy within the administrative machinery can be resorted to by giving the administrative officer
every opportunity to decide on a matter that comes within his jurisdiction, then such remedy must be
exhausted first before the court's power of judicial review can be sought, otherwise, the premature
resort to the court is fatal to one's cause of action.40 While there are exceptions to the principle of
exhaustion of administrative remedies, it has not been sufficiently shown that the present case falls
under any of the exceptions.

WHEREFORE, the petition is GRANTED. The Resolutions dated February 13, 2013 and May 8,
2013 of the Court of Tax Appeals (CTA), Second Division in CTA Case No. 8544 are hereby
REVERSED and SET ASIDE. The petition for review filed by private respondent Petron Corporation
before the CTA is DISMISSED for lack of jurisdiction and prematurity.

SO ORDERED.

ESTELA M. PERLAS-BERNABE

G.R. No. 182582 *

METROPOLITAN BANK & TRUST COMPANY, Petitioner,

vs.
THE COMMISSIONER OF INTERNAL REVENUE, Respondent.
PERLAS-BERNABE, J.:

Assailed in this petition for review on certiorari 1 is the Decision 2 dated April 21, 2008 of the Court of Tax App
consequently, dismissed petitioner Metropolitan Bank & Trust Company's (Metrobank) claim for refund on the

On June 5, 1997, Solidbank Corporation (Solidbank) entered into an agreement with Luzon Hydro Corporatio
corresponding internal revenue taxes required by law to be deducted or withheld on the said loan, as well as
obligations under the aforesaid Agreement. 5

On March 2, 2001 and October 31, 2001, LHC paid Metro bank the total amounts of US$1,538,122.17

6
and US$1,333,268.31, 7 respectively. Pursuant to the Agreement, LHC withheld, and eventually paid to the B
Philippine Peso equivalent of ₱5,296,773.05,9 as evidenced by LHC's Schedules of Final Tax and Monthly Re

According to Metrobank, it mistakenly remitted the aforesaid amounts to the BIR as well when they were inad
refund thereof. Thereafter and in view of respondent the Commissioner of Internal Revenue's (CIR) inaction,

In defense, the CIR averred that: (a) the claim for refund is subject to administrative investigation; (b) Metro b
the taxpayer; and (e) claims for tax refunds are in the nature of tax exemptions, and as such, should be const

In a Decision 13 dated August 13, 2007, the CTA Division denied Metrobank's claims for refund for lack of mer
had until April 25, 2003 to file its administrative and judicial claim for refunds. In this regard, while Metro bank
other hand, the CTA Division also denied Metrobank's claim for refund relative to the October 2001 tax paym

Metrobank moved for reconsideration, 17 which was partially granted in a Resolution18 dated November 14, 200
ground of prescription. 19 Aggrieved, Metrobank filed a petition for partial review20 before the CTA En Banc, do

In a Decision21 dated April 21, 2008, the CTA En Banc affirmed the CTA Division's ruling. It held that since Me
Metro bank's claim for refund had already prescribed as it only filed its judicial claim on September 10, 2003.

Hence, this petition.

The issue for the Court's resolution is whether or not the CTA En Banc correctly held that Metrobank's claim f

The petition is without merit.

Section 204 of the National Internal Revenue Code, as amended, 23 provides the CIR with, inter alia, the autho

Section 204. Authority of the Commissioner to Compromise, Abate and Refund or Credit Taxes. -The Commi
(C) Credit or refund taxes erroneously or illegally received or penalties imposed without authority, refund the v
proof of destruction. No credit or refund of taxes or penalties shall be allowed unless the taxpayer files
1âwphi1

as a written claim for credit or refund. (Emphasis and underscoring supplied)

In this relation, Section 229 of the same Code provides for the proper procedure in order to claim for such ref

Section 229. Recovery of Tax Erroneously or Illegally Collected. - No suit or proceeding shall be maintaine
authority, or of any sum alleged to have been excessively or in any manner wrongfully collected, unti

In any case, no such suit or proceeding shall be filed after the expiration of two (2) years from the date
tax, where on the face of the return upon which payment was made, such payment appears clearly to have b

As may be gleaned from the foregoing provisions, a claimant for refund must first file an administrative claim
the claimant is allowed to file the latter even without waiting for the resolution of the former in order to prevent
the tax or penalty alleged to have been collected erroneously or illegally is refunded. To clarify, Section 229 o
taxpayer's forfeiture of its right to seek judicial recourse should the two (2)-year prescriptive period expire with

In this case, Metrobank insists that the filing of its administrative and judicial claims on December 27, 2002 an
Insurance, Co., 27 and CIR v. CDCP Mining Corporation, 28 Metrobank contends that the aforesaid prescriptive
2002, as it was only at that time when its right to a refund was ascertained. 29

Metrobank's contention cannot be sustained.

As correctly pointed out by the CIR, the cases cited by Metrobank involved corporate income taxes, in which
quarterly income tax should only be considered [as] mere installments of the annual tax due. These quarterly
to be adjusted at the end of the calendar or fiscal year. x x x Consequently, the two-year prescriptive period x
payments" of the annual corporate income tax, there may arise certain situations where such "advance paym
or the Annual Income Tax Return was filed, since it is only at that time that it would be possible to determine w

On the other hand, the tax involved in this case is a ten percent (10%) final withholding tax on Metrobank's in

Section 2.57. Withholding of Tax at Source

(A) Final Withholding Tax. - Under the final withholding tax system[,] the amount of income tax withheld
agent. Thus, in case of his failure to withhold the tax or in case of under withholding, the deficiency tax shall b

The finality of the withholding tax is limited only to the payee's income tax liability on the particular income. It d
shall be subject to a percentage tax. (Emphasis and underscoring supplied)

From the foregoing, it may be gleaned that final withholding taxes are considered as full and final payment of
the discovery by the taxpayer of the erroneous or excessive payment of taxes. 32

In the case at bar, it is undisputed that Metrobank's final withholding tax liability in March 2001 was remitted to
corresponding judicial claim was only filed on September 10, 2003. Therefore, Metrobank's claim for refund h

Finally, the Court finds untenable Metrobank's resort to the principle of solutio indebiti in support of its position

In this regard, petitioner is misguided when it relied upon the six (6)-year prescriptive period for initiating an a
no duty to pay, and the person who received the payment; and (2) the payment is made through mistake, and
a withholding agent of NORD/LB Singapore Branch, the taxpayer. Hence, the first element of solutio i
erroneously paid.

Tax refunds are based on the general premise that taxes have either been erroneously or excessively paid. T
only his entitlement to a refund, but also his compliance with the procedural due process as nonobservance o

In sum, the CT A Division and CT A En Banc correctly ruled that Metrobank's claim for refund in connection w

WHEREFORE, the petition is DENIED. The Decision dated April 21, 2008 of the Court of Tax Appeals En Ba

SO ORDERED.

ESTELA M. PERLAS-BERNABE,
Associate Justice

WE CONCUR:

Pursuant to the Section 13, Article VIII of the Constitution and the Division Chairperson’s Attestation, I certify

MARIA LOURDES P.A. SERENO

Chief Justice

Footnotes

*
Part of the Supreme Court's Case Decongestion Program 2017.

1
Rollo, pp. 7-18.

2
Id. at 19-34. Penned by Associate Justice Olga Palanca-Enriquez with Presiding Justice Ernesto D.

3
Id. at 35-48. Penned by Associate Justice Caesar A. Casanova with Presiding Justice Ernesto D. Ac

4
Id. at 57-61.

5
Id. at 20-21.
6
Id. at 21. Comprised of US$902,545.47 as principal and US$635,576.70 as interest.

7
Id. Comprised ofUS$902,545.45 as principal and US$430,722.86 as interest.

8
See id. at 21-22. US$63, 106.40 in March 2001 and US$43,072.29 in October 2001.

9
See id. P3,060,029.24 in March 2001 and P2,236,743.81 in October 2001.

10
See id.

11
See id. at 22.

12
See id. at 23.

13
Id. at 35-47.

14
Id. at 47.

15
Id. at 41-42.

16
See id. at 42-47.

17
See motion for reconsideration dated September 5, 2007; id. at 49-55.

18
Id.at57-61.

19
See id. at 59.

20
Dated December 6, 2007. Id. at 62-72.

21
Id. at 19-34.

22
Id. at 26-33.

23
Presidential Decree No. 1158, as amended up to Republic Act No. 9504, An Act Amending Sections

24
See CIR v. Goodyear Philippines, Inc., G.R. No. 216130, August 3, 2016.

25
281 Phil. 1060 (1991).

26
282 Phil. 199 (1992).

27
314Phil.349(1995).

28
362 Phil. 7 5 (1999).

29
Seerollo,pp.12-15, 114-117,and 143-147.
 30
Supra note 26, at 207-208.

SUBJECT: Implementing Republic Act No. 8424, "An Act Amending the National Internal Revenue C
31

Tax and Other Percentage Taxes, dated April 17, 1998.

32
See CIR v. Manila Electric Company, G.R. No. 181459, June 9, 2014, 725 SCRA 384, 398.

33
See rollo, pp. 16 and 147.

34
Supra note 32.

35
Id. at 399-400.

The Lawphil Project - Arellano Law Foundation

Tagato Mining v. CIR G.R. No. 197591

Republic of the Philippines

SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 197591 June 18, 2014

TAGANITO MINING CORPORATION, Petitioner,

vs.
COMMISSIONER OF INTERNAL REVENUE, Respondent.

DECISION

PERLAS-BERNABE, J.:

Before the Court is a petition for review on certiorari1 assailing the Decision2 dated January 11, 2011
and the Resolution3 dated June 27, 2011 of the Court of Tax Appeals (CTA) En Banc in CTA EB No.
609 which reversed and set aside the Decision4 dated November 24, 2009 and the Resolution5 dated
March 12, 2010 of the CTA First Division (CTA Division) in C.T.A. Case No. 7428, and ordered the
dismissal of petitioner Taganito Mining Corporation’s (Taganito) claim for refund of excess input
value-added tax (VAT) for having been prematurely filed.

The Facts

Taganito is a duly-registered Philippine corporation and a VATregistered entity primarily engaged in

the business of exploring, extracting, mining, selling, and exporting precious metals, such as nickel,
chromite, cobalt, gold, silver, iron, and all kinds of ores and metals and their byproducts. For the 1st,
2nd, 3rd, and 4th quarters of the year 2004, Taganito filed its Quarterly VAT Returns on April 20,
2004, July 20, 2004, October 20, 2004, and January 18, 2005, respectively. Subsequently, it filed
Amended Quarterly VAT Returns on July 20, 2005 for the 4th quarter of 2004 and on December 28,
2005 for the first three quarters of 2004.6

On December 28, 2005, Taganito filed before the Bureau of Internal Revenue (BIR) an
administrative claim for the refund of input VAT paid on its domestic purchases of taxable goods and
services and importation of goods in the amount of 1,885,140.22 covering the period January 1,
2004 to December 31, 2004, in accordance with Section 112, subsections (A) and (B) of the National
Internal Revenue Code (NIRC).7 Thereafter, or on March 31, 2006, fearing that the period for filing a
judicial claim for refund was about to expire, Taganito proceeded to file a petition for review before
the CTA Division, docketed as C.T.A. Case No. 7428.8

The CTA Division Ruling

In a Decision9 dated November 24, 2009, the CTA Division partially granted Taganito’s claim for
refund, ordering respondent, the Commissioner of Internal Revenue (CIR), to refund to Taganito the
amount of 537,645.43 representing its unutilized input VAT for the period January 1, 2004 to March
9, 2004. It found that Taganito’s export sales qualified as VAT zero-rated sales. However, of the
1,885,140.22 claimed refund for excess input VAT, the CTA Division disallowed 10,263.3710 for being
based on non-VAT official receipts.11

Moreover, it observed that the Board of Investments (BOI) issued a certification in Taganito’s favor,
stating that it is a BOI-registered entity with 100% exports. In effect, for the period March 10, 2004 to
December 31, 2004, Taganito’s local suppliers may avail of zero-rating benefits on their sales to
Taganito, and, thus, no output VAT should be shifted from the former to the latter. Considering the
absence of sufficient proof that said suppliers did not avail of such benefits, Taganito cannot
therefore claim input VAT on its domestic purchases for the aforesaid period.12

Lastly, the CTA Division found that Taganito’s refund claims were filed within the two (2)-year
prescriptive period and the 120-day period provided under Section 112(D) of the NIRC, considering
that its administrative claim was filed on December 28, 2005, and its judicial claim was filed on
March 31, 2006.13

The CIR filed a motion for reconsideration praying for the reversal of the partial refund granted in
Taganito’s favor, which was, however, denied in a Resolution14 dated March 12, 2010.

Dissatisfied, the CIR elevated the matter to the CTA En Banc. Records are bereft of any showing
that Taganito appealed the partial denial of its claim of refund which had, thus, lapsed into finality.

The CTA En Banc Ruling

In a Decision15 dated January 11, 2011, the CTA En Banc reversed and set aside the Decision of the
CTA Division, and ordered that Taganito’s claim of refund be denied in its entire amount. It found
that Taganito filed its judicial claim for refund on March 31, 2006,or a mere 93 days after it filed its
administrative claim on December 28, 2005. Explaining that the observance of the 120-day period
provided under Section 112(D) of the NIRC is mandatory and jurisdictional to the filing of a judicial
claim for refund pursuant to the case of CIR v. Aichi Forging Company of Asia, Inc. (Aichi),16 it held
that Taganito’s filing of a judicial claim was premature, and, thus, the CTA Division had yet to
acquire jurisdiction over the same.17
Aggrieved, Taganito moved for reconsideration, which was, however, denied in a Resolution18 dated
June 27, 2011, hence, this petition.

The Issues Before the Court

The issues for the Court’s resolution are as follows: (a) whether or not the CTA En Banc correctly
dismissed Taganito’s judicial claim for refund of excess input VAT; and (b) whether or not Taganito
should be entitled to its claim for refund in the total amount of ₱1,885,140.22.

The Court’s Ruling

The petition is partly meritorious.

The first provision that allowed the refund or credit of unutilized excess input VAT is found in
Executive Order No. 273, series of 1987,19 the original VAT Law. Since then, this provision was
amended numerous times, by Republic Act No. (RA) 7716,20 RA 8424, and, lastly, by RA
933721 which took effect on July 1, 2005. Since Taganito’s claim for refund covered periods before
the effectivity of RA9337, Section 112 of the NIRC, as amended by RA 8424, should apply.22 The
pertinent parts of the said provision read as follows:

Section 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 (2) years after the close of the taxable
quarter when the sales were made, apply for the issuance of a tax credit certificate or 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: x x x.

xxxx

(D) 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) and (B)
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. (Emphases and underscoring supplied)

xxxx

As correctly pointed out by the CTA En Banc, the Court, in the 2010 Aichi case, ruled that the
observance of the 120-day period is a mandatory and jurisdictional requisite to the filing of a judicial
claim for refund before the CTA. Consequently, non-observance thereof would lead to the dismissal
of the judicial claim due to the CTA’s lack of jurisdiction. The Court, in the same case, also clarified
that the two (2)-year prescriptive period applies only to administrative claims and not to judicial
claims. In other words, the Aichi case instructs that once the administrative claim is filed within the
prescriptive period, the claimant must wait for the 120-day period to end and, thereafter, he is given
a 30-day period to file his judicial claim before the CTA, even if said 120-day and 30-day periods
would exceed the aforementioned two (2)-year prescriptive period.

In the recent case of CIR v. San Roque Power Corporation(San Roque),23 the Court, however,
recognized an exception to the mandatory and jurisdictional treatment of the 120-day period as
pronounced in Aichi. In San Roque, the Court ruled that BIR Ruling No. DA-489-03 dated December
10, 2003 – wherein the BIR stated that the "taxpayer-claimant need not wait for the lapse of the 120-
day period before it could seek judicial relief with the CTA by way of Petition for Review" – provided
taxpayers-claimants the opportunity to raise a valid claim for equitable estoppel under Section
24624 of the NIRC, viz.:

There is no dispute that the 120-day period is mandatory and jurisdictional, and that the CTA does
not acquire jurisdiction over a judicial claim that is filed before the expiration of the 120-day period.
There are, however, two exceptions to this rule. The first exception is if the Commissioner, through a
specific ruling, misleads a particular taxpayer to prematurely file a judicial claim with the CTA. Such
specific ruling is applicable only to such particular taxpayer. The second exception is where the
Commissioner, through a general interpretative rule issued under Section 4 of the Tax Code,
misleads all taxpayers into filing prematurely judicial claims with the CTA. In these cases, the
Commissioner cannot be allowed to later on question the CTA’s assumption of jurisdiction over such
claim since equitable estoppel has set in as expressly authorized under Section 246 of the Tax
Code.25

Section 4 of the Tax Code, a new provision introduced by RA 8424, expressly grants to the
Commissioner the power to interpret tax laws, thus:

Sec. 4. Power of the Commissioner To Interpret Tax Laws and To Decide Tax Cases. – The power
to interpret the provisions of this Code and other tax laws shall be under the exclusive and original
jurisdiction of the Commissioner, subject to review by the Secretary of Finance.

The power to decide disputed assessments, refunds of internal revenue taxes, fees or other
charges, penalties imposed in relation thereto, or other matters arising under this Code or other laws
or portions thereof administered by the Bureau of Internal Revenue is vested in the Commissioner,
subject to the exclusive appellate jurisdiction of the Court of Tax Appeals.

Since the Commissioner has exclusive and original jurisdiction to interpret tax laws, taxpayers acting
in good faith should not be made to suffer for adhering to general interpretative rules of the
Commissioner interpreting tax laws, should such interpretation later turn out to be erroneous and be
reversed by the Commissioner or this Court. Indeed, Section 246 of the Tax Code expressly
1âwphi1

provides that a reversal of a BIR regulation or ruling cannot adversely prejudice a taxpayer who in
good faith relied on the BIR regulation or ruling prior to its reversal. x x x. (Emphases and
underscoring supplied)

Reconciling the pronouncements in the Aichi and San Roque cases, the rule must therefore be that
during the period December 10, 2003 (when BIR Ruling No. DA-489-03 was issued) to October 6,
2010 (when the Aichi case was promulgated), taxpayers-claimants need not observe the 120-day
period before it could file a judicial claim for refund of excess input VAT before the CTA. Before and
after the aforementioned period (i.e., December 10, 2003 to October 6, 2010), the observance of the
120-day period is mandatory and jurisdictional to the filing of such claim. 1âwphi1

In this case, records disclose that Taganito filed its administrative and judicial claims for refund on
December 28, 2005 and March 31, 2006, respectively – or during the period when BIR Ruling No.
DA-489-03 was in place. As such, it need not have waited for the expiration of the 120-day period
before filing its judicial claim for refund before the CTA. In view of the foregoing, the CTA En Banc,
thus, erred in dismissing Taganito's claim on the ground of prematurity.

However, as adverted to earlier, Taganito did not appeal the CTA Division's partial denial of its claim
for refund on the ground that it failed to provide sufficient evidence that its suppliers did not avail of
the benefits of zero-rating. It is well-settled that a party who does not appeal from a judgment can no
longer seek modification or reversal of the same.26 For this reason, Taganito may no longer question
the propriety and correctness of the said partial disallowance as it had lapsed into finality and may
no longer be modified. In fine, Taganito is only entitled to the partial refund of its unutilized input VAT
in the amount of ₱537,645.43, as was originally granted to it by the CTA Division and herein upheld.

WHEREFORE the petition is PARTIALLY GRANTED. The Decision dated January 11, 2011 and the
Resolution dated June 27, 2011 of the Court of Tax Appeals En Banc in CTA EB No. 609 are hereby
REVERSED and SET ASIDE. Accordingly, the Decision dated November 24, 2009 of the Court of
Tax Appeals First Division in C.T.A. Case No. 7428 ordering the refund to petitioner Taganito Mining
Corporation of its unutilized input VAT for the period January 1, 2004 to March 9, 2004, in the
amount of ₱537,645.43, is REINSTATED.

SO ORDERED.

ESTELA M. PERLAS-BERNABE
Associate Justice