The Supreme Court ruled that taxpayers who filed judicial claims for VAT refunds between December 10, 2003, and October 6, 2010, are not required to wait for the 120-day period for the Commissioner of Internal Revenue (CIR) to act on their administrative claims before seeking judicial relief. This decision clarifies the application of BIR Ruling No. DA-489-03, which provided an exception to the general rule requiring taxpayers to await the CIR’s decision or inaction for 120 days before appealing to the Court of Tax Appeals (CTA). The ruling provides critical guidance on the timelines for VAT refund claims and protects taxpayers who relied on existing BIR rulings during the specified window period.

Harte-Hanks’ Refund Quest: Did Premature Filing Cost Them Their Claim?

This case revolves around Harte-Hanks Philippines, Inc.’s (petitioner) claim for a refund or tax credit of excess input value-added tax (VAT) for the first and second quarters of 2008. After filing an administrative claim with the Commissioner of Internal Revenue (CIR) on March 23, 2010, the petitioner, feeling unheard, filed a petition for review with the CTA on June 29, 2010, seeking a refund of P2,535,459.48 for the second quarter of 2008. The CIR countered, arguing that Harte-Hanks had prematurely filed its petition, failing to exhaust administrative remedies as required by Section 112(C) of the 1997 Tax Code.

The CTA Second Division agreed with the CIR and dismissed the petition, citing Commissioner of Internal Revenue v. Aichi Forging Company of Asia, Inc. (Aichi), which emphasized the mandatory nature of the “120-30” day period. The CTA En Banc affirmed this decision, emphasizing the lack of jurisdiction due to premature filing. Undeterred, Harte-Hanks elevated the case to the Supreme Court, questioning whether premature filing is truly a jurisdictional issue and whether the CIR had waived the right to raise this defense. The core legal question is whether Harte-Hanks’ judicial claim was indeed premature, stripping the CTA of its jurisdiction, or whether an exception applied, allowing the claim to proceed despite being filed before the expiration of the 120-day period.

The Supreme Court, in its analysis, acknowledged the general rule established in Aichi, which mandates strict adherence to the 120-day period for the CIR to act on a refund claim before a taxpayer can appeal to the CTA. Section 112 (C) of the Tax Code stipulates that the CIR has 120 days to decide on a refund application. Following this, the taxpayer has 30 days from either receiving the CIR’s decision or the lapse of the 120-day period to file an appeal with the CTA. The Court cited the Aichi case, quoting:

Section 112 (D) [now Section 112 (C)] of the NIRC clearly provides that the CIR has “120 days, from the date of the submission of the complete documents in support of the application [for tax refund/credit],” within which to grant or deny the claim. In case of full or partial denial by the CIR, the taxpayer’s recourse is to file an appeal before the CTA within 30 days from receipt of the decision of the CIR. However, if after the 120-day period the CIR fails to act on the application for tax refund/credit, the remedy of the taxpayer is to appeal the inaction of the CIR to CTA within 30 days.

However, the Court also recognized an exception to this general rule, stemming from BIR Ruling No. DA-489-03. This ruling, a general interpretative rule issued by the CIR, stated that a taxpayer-claimant need not wait for the 120-day period to lapse before seeking judicial relief. The landmark case of Commissioner of Internal Revenue v. San Roque Power Corporation, consolidated with Taganito Mining Corporation v. Commissioner of Internal Revenue, and Philex Mining Corporation v. Commissioner of Internal Revenue, clarified that BIR Ruling No. DA-489-03 created a window period where taxpayers could file judicial claims without waiting for the 120-day period to expire.

This window period extended from December 10, 2003, the date of issuance of BIR Ruling No. DA-489-03, to October 6, 2010, the date when the Supreme Court reversed this position in Aichi. Citing Taganito, the Court in San Roque Power Corporation v. Commissioner of Internal Revenue, explained that during the window period from 10 December 2003, upon the issuance of BIR Ruling No. DA-489-03 up to 6 October 2010, or date of promulgation of Aichi, taxpayers need not observe the stringent 120-day period.. The Court, therefore, had to determine whether Harte-Hanks’ claim fell within this window period.

In this case, Harte-Hanks filed its administrative claim on March 23, 2010, and its judicial claim on June 29, 2010, which was 98 days later. Because this fell within the window period of December 10, 2003 to October 6, 2010, the Supreme Court ruled that Harte-Hanks’ claim was timely filed, despite the general rule requiring taxpayers to wait for the full 120-day period.

The Supreme Court emphasized that BIR Ruling No. DA-489-03 applies to all taxpayers who filed their judicial claims within the window period of December 10, 2003 to October 6, 2010, regardless of whether they specifically invoked the ruling in their pleadings. To limit the application of the BIR Ruling only to those who invoked it specifically would unduly strain the pronouncements in San Roque, Taganito and Philex.

Moreover, the Supreme Court referenced Commissioner of Internal Revenue v. Air Liquide Philippines, Inc., which similarly ruled that BIR Ruling No. DA-489-03 was applied even though the taxpayer did not specifically invoke the same. The Court has consistently upheld this doctrine in recent decisions, clarifying that as long as the judicial claim was filed between December 10, 2003 and October 6, 2010, the taxpayer would not be required to wait for the lapse of the 120-day period.

In conclusion, the Supreme Court found that the CTA had jurisdiction over Harte-Hanks’ judicial claim, recognizing the applicability of BIR Ruling No. DA-489-03 and its consistent application in past court rulings. Both the CTA Second Division and En Banc erred in denying Harte-Hanks’ petition for review.

FAQs

What was the key issue in this case?	The key issue was whether Harte-Hanks prematurely filed its judicial claim for a VAT refund with the CTA, thus depriving the CTA of jurisdiction. The court had to determine if the claim fell under the general rule requiring taxpayers to wait 120 days or an exception based on a prior BIR ruling.
What is BIR Ruling No. DA-489-03?	BIR Ruling No. DA-489-03 is a general interpretative rule stating that taxpayers do not need to wait for the 120-day period to lapse before seeking judicial relief with the CTA. This ruling created a “window period” where premature filings were allowed.
What is the “window period” created by BIR Ruling No. DA-489-03?	The window period is the period between December 10, 2003 (issuance of BIR Ruling No. DA-489-03) and October 6, 2010 (the Aichi decision), during which taxpayers could file judicial claims for VAT refunds without waiting for the 120-day period.
What is the significance of the Aichi case?	The Aichi case (Commissioner of Internal Revenue v. Aichi Forging Company of Asia, Inc.) reversed the BIR Ruling No. DA-489-03, effectively ending the window period on October 6, 2010, and reinstating the strict 120-day waiting period.
Did Harte-Hanks specifically invoke BIR Ruling No. DA-489-03 in its claim?	No, Harte-Hanks did not specifically invoke BIR Ruling No. DA-489-03. However, the Supreme Court clarified that the ruling applies to all taxpayers who filed their judicial claims within the window period, regardless of whether they specifically cited the ruling.
What was the Court’s ruling on the CTA’s jurisdiction?	The Supreme Court ruled that the CTA did have jurisdiction over Harte-Hanks’ judicial claim because it was filed within the window period created by BIR Ruling No. DA-489-03, thus the premature filing was not fatal to the claim.
What is the practical implication of this ruling for taxpayers?	This ruling reinforces the principle that taxpayers who acted in reliance on existing BIR rulings during the window period are protected. It clarifies the timelines for VAT refund claims filed between December 10, 2003, and October 6, 2010.
What should taxpayers do if they have similar VAT refund claims filed within the window period?	Taxpayers with similar claims should review their filing dates and ensure they fall within the December 10, 2003, to October 6, 2010, window period. If so, they can argue that their claims were timely filed under the exception provided by BIR Ruling No. DA-489-03.

In conclusion, the Supreme Court’s decision in Harte-Hanks Philippines, Inc. v. Commissioner of Internal Revenue provides valuable clarification on the application of BIR Ruling No. DA-489-03 and its impact on VAT refund claims filed during the specified window period. This ruling serves as a reminder of the importance of adhering to established legal precedents while also recognizing the protection afforded to taxpayers who rely on existing BIR rulings.

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: Harte-Hanks Philippines, Inc. vs. Commissioner of Internal Revenue, G.R. No. 205189, March 07, 2022