G.R. No. 193301 & G.R. No. 194637; March 11, 2013
Mindanao II Geothermal Partnership and Mindanao I Geothermal Partnership, Petitioners, vs. Commissioner of Internal Revenue, Respondent.
FACTS
Mindanao I and Mindanao II are generation companies that entered into Build-Operate-Transfer contracts to supply power to the National Power Corporation. Pursuant to the Electric Power Industry Reform Act (EPIRA), which subjects sales of power by generation companies to a zero percent VAT rate, they filed administrative claims for refund or tax credit of their unutilized input VAT for the four quarters of taxable year 2003. These administrative claims were filed with the Bureau of Internal Revenue on April 13, 2005. Subsequently, they filed judicial claims with the Court of Tax Appeals (CTA) on various dates in 2005.
The CTA First Division partially granted Mindanao II’s claims, ordering a refund only for the third and fourth quarters of 2003, while denying the claims for the first and second quarters as filed out of time. It wholly denied Mindanao I’s claims. The CTA En Banc, in its amended decision, ultimately denied all claims of both petitioners. The central procedural dispute revolved around the timeliness of filing the judicial claims for refund.
ISSUE
Whether the judicial claims for refund of unutilized input VAT were filed within the prescriptive period prescribed under the National Internal Revenue Code.
RULING
The Supreme Court denied the petitions, affirming the CTA En Banc’s denial of the refund claims. The Court held that the claims were filed beyond the mandatory two-year prescriptive period. The legal logic is anchored on the clear statutory requirement under Section 112(A) of the Tax Code, which states that a VAT-registered person whose sales are zero-rated may, within two years after the close of the taxable quarter when the sales were made, apply for a refund or credit of input taxes. This provision establishes a dual prescriptive period: the administrative claim must be filed with the Commissioner within two years from the close of the taxable quarter, and the judicial claim must be filed with the CTA within thirty days from the Commissioner’s denial or, if the Commissioner does not act, from the expiration of the 120-day period for the Commissioner to decide.
The Court meticulously applied this rule. For the first and second quarters of 2003, the two-year period to file the administrative claim ended on June 30, 2005, and September 30, 2005, respectively. The petitioners filed their administrative claim on April 13, 2005, which was timely. However, the 120-day period for the Commissioner to act expired on August 11, 2005. The judicial claims for these quarters were filed only on April 22, 2005 (for Q1) and July 7, 2005 (for Q2), which were before the expiration of the 120-day period on August 11, 2005. Following the doctrine in Commissioner of Internal Revenue v. Aichi Forging Company of Asia, Inc., a judicial claim filed before the expiration of the 120-day period is premature and must be dismissed for lack of jurisdiction. Since the claims were not refiled after August 11, 2005, they were correctly denied. For the third and fourth quarters, the administrative claim filed on April 13, 2005, was itself filed beyond the two-year period, which ended on September 30, 2005, and December 31, 2005, respectively. Consequently, all claims were properly denied for being filed out of time.