The Supreme Court affirmed that strict adherence to the 120+30 day periods for VAT refund claims is mandatory, reinforcing taxpayers’ responsibility to comply with these timelines. This ruling emphasizes that failure to observe these statutory deadlines will result in the dismissal of claims, underscoring the jurisdictional nature of the periods. The decision serves as a critical reminder for businesses to meticulously track and manage their tax refund filings to avoid forfeiting their claims due to procedural missteps.

VAT Refund Timelines: Did San Roque Miss the Deadline?

San Roque Corporation sought a refund or tax credit for excess input taxes from 2006, arguing entitlement due to zero-rated sales and National Power Corporation’s (NPC) tax exemption. The Commissioner of Internal Revenue (CIR) failed to act, leading San Roque to file petitions with the Court of Tax Appeals (CTA). The CTA First Division dismissed these claims, citing San Roque’s failure to comply with the 120+30 day periods mandated by Section 112 of the National Internal Revenue Code (NIRC). The core legal question revolved around whether San Roque adhered to the strict prescriptive periods for claiming VAT refunds, as stipulated in the NIRC.

The case hinged on the interpretation and application of Section 112 of the NIRC, which outlines the procedures and timelines for VAT refund claims. This section specifies that the CIR has 120 days from the submission of complete documents to grant a refund or issue a tax credit certificate. It further stipulates that if the CIR denies the claim (fully or partially) or fails to act within the 120-day period, the taxpayer has 30 days from receipt of the denial or after the expiration of the 120-day period to appeal to the CTA. The Supreme Court, in its analysis, emphasized the mandatory nature of these periods, drawing heavily from its previous ruling in Commissioner of Internal Revenue v. Aichi Forging Company of Asia, Inc., which strictly interpreted the 120+30 day rule.

SEC. 112. Refunds or Tax Credits of Input Tax. –
(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 Subsection (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 Appeal.

The Court examined San Roque’s compliance with both the administrative and judicial claim timelines. It acknowledged that San Roque had filed its administrative claims within the two-year prescriptive period under Section 112(A) of the NIRC. However, the critical issue was San Roque’s failure to file its judicial claims within the 30-day period following the CIR’s inaction on its administrative claims. The Supreme Court underscored that this 30-day period is jurisdictional, meaning that failure to comply deprives the CTA of its authority to hear the case.

The Court noted that San Roque’s judicial claims were filed beyond the 30-day mandatory period, thereby depriving the CTA First Division of jurisdiction. San Roque attempted to argue against this strict application, citing the supposed retroactive effect of the Aichi ruling. However, the Court dismissed this argument, clarifying that the 120+30 day periods were already prescribed in the NIRC when San Roque filed its claims. Aichi merely clarified the interpretation of these existing provisions, emphasizing their mandatory nature.

San Roque also sought to rely on a previous case, San Roque Power Corporation v. Commissioner of Internal Revenue [San Roque (2009)], which had granted the company’s refund claims for 2002. The Court distinguished the present case, emphasizing that the primary issue in San Roque (2009) was whether San Roque had zero-rated sales, not compliance with prescriptive periods. Furthermore, the legal landscape had changed since 2002, with the enactment of Republic Act No. 9337, which repealed the provision that explicitly zero-rated sales of electric power by generation companies to the NPC.

In its analysis, the Court also addressed the issue of amended administrative claims. San Roque had filed amended claims after the initial 120+30 day periods had expired. The Court held that considering these amended claims would essentially revive already prescribed judicial claims, which is impermissible. However, the Court clarified the impact of BIR Ruling No. DA-489-03, which created an exception to the strict 120-day rule before the Aichi decision. This ruling allowed taxpayers to seek judicial relief without waiting for the 120-day period to lapse. The Court specified that this exception applied only to taxpayers who prematurely filed their claims between December 10, 2003, and October 6, 2010, and did not excuse the late filing of judicial claims beyond the 30-day period.

The Court drew a parallel between San Roque’s situation and that of Philex Mining Corporation in San Roque (2013), another case involving VAT refund claims. Like San Roque, Philex had failed to comply with the 30-day period for filing its judicial claim. The Court reiterated that the failure to file a judicial claim within the prescribed period renders the CIR’s decision final and unappealable, underscoring the importance of strict adherence to the statutory timelines.

The Supreme Court’s decision reinforces the principle that tax refunds are a matter of statutory privilege, not a constitutional right. Consequently, taxpayers must strictly comply with all conditions attached by the statute for the exercise of this privilege. The Court also addressed the contention that the Aichi ruling should be applied prospectively, clarifying that while the ruling would not retroactively affect taxpayers who relied on previous interpretations, it applied to cases like San Roque’s, which involved claims filed before the promulgation of Aichi and outside the scope of BIR Ruling No. DA-489-03.

What was the key issue in this case?	The main issue was whether San Roque Corporation complied with the mandatory 120+30 day periods under Section 112 of the NIRC for filing judicial claims for VAT refund.
What are the 120+30 day periods?	These are the prescribed timelines under the NIRC for the CIR to process administrative claims (120 days) and for taxpayers to appeal to the CTA after denial or inaction (30 days).
Why did the CTA dismiss San Roque’s claims?	The CTA dismissed the claims because San Roque filed its judicial claims beyond the 30-day period after the CIR’s inaction, thus depriving the CTA of jurisdiction.
What is the significance of the Aichi ruling?	The Aichi ruling clarified the mandatory and jurisdictional nature of the 120+30 day periods, which the Supreme Court applied in this case.
Did the Supreme Court apply the Aichi ruling retroactively?	No, the Court clarified that the Aichi ruling was not applied retroactively, as the 120+30 day periods were already prescribed in the NIRC when San Roque filed its claims.
What was the effect of BIR Ruling No. DA-489-03?	This ruling allowed taxpayers to file judicial claims prematurely before the 120-day period lapsed, but it only applied from December 10, 2003, to October 6, 2010, and did not excuse late filings.
How does this case affect taxpayers seeking VAT refunds?	It emphasizes the importance of strict compliance with the 120+30 day periods, as failure to comply will result in the dismissal of their claims.
Can amended administrative claims revive already prescribed judicial claims?	No, the Court held that considering amended claims filed after the initial 120+30 day periods would revive claims that had already prescribed, which is not permissible.

In conclusion, the Supreme Court’s decision in San Roque Power Corporation v. Commissioner of Internal Revenue underscores the necessity for taxpayers to meticulously adhere to the prescriptive periods outlined in the NIRC when pursuing VAT refund claims. This ruling serves as a stark reminder that failure to comply with these statutory timelines will result in the loss of their right to claim refunds or tax credits.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: SAN ROQUE CORPORATION VS. COMMISSIONER OF INTERNAL REVENUE, G.R. No. 205543, June 30, 2014