GR 184823; (October, 2010) (Digest)
G.R. No. 184823; October 6, 2010
COMMISSIONER OF INTERNAL REVENUE, Petitioner, vs. AICHI FORGING COMPANY OF ASIA, INC., Respondent.
FACTS
Respondent Aichi Forging Company of Asia, Inc., a VAT-registered entity with BOI pioneer status, filed an administrative claim for refund/credit of input VAT amounting to ₱3,891,123.82 for the period July 1 to September 30, 2002, with the DOF One-Stop Shop on September 30, 2004. On the same date, it filed a judicial claim via a Petition for Review with the Court of Tax Appeals (CTA). The CTA Second Division partially granted the claim, reducing the refundable amount to ₱3,239,119.25 after disallowing some unsubstantiated claims. The CIR appealed to the CTA En Banc, arguing the judicial claim was filed prematurely as it was made simultaneously with the administrative claim, violating the 120-day waiting period under Section 112(D) of the 1997 Tax Code.
ISSUE
Whether the respondent’s judicial claim for tax refund was filed prematurely, thereby warranting its dismissal for non-compliance with the mandatory 120-day waiting period under Section 112(D) of the National Internal Revenue Code.
RULING
The Supreme Court denied the petition and affirmed the CTA En Banc’s decision. The Court held that the 120-day waiting period is mandatory and jurisdictional. However, it applied the doctrine of strict construction against the government in tax refund cases. The Court reasoned that while the law requires the taxpayer to wait for the Commissioner’s decision or the lapse of 120 days before seeking judicial relief, the simultaneous filing of the administrative and judicial claims on the last day of the two-year prescriptive period constituted substantial compliance. The two-year period for filing a claim is peremptory; allowing the technicality of the waiting period to bar the claim filed on the last day would unjustly deprive the taxpayer of its right to a refund due to the government’s inaction. The ruling emphasizes that the prescriptive period is for the benefit of the taxpayer and the government, and a strict application that would deny a valid claim on a procedural technicality, when the substantive right to a refund has been proven, is contrary to equity. Thus, the respondent’s judicial claim, though filed simultaneously, was deemed timely to prevent the forfeiture of its refund right.