Title
Procter and Gamble Asia Pte. Ltd. vs. Commissioner of Internal Revenue
Case
G.R. No. 205652
Decision Date
Sep 6, 2017
P&G sought VAT refunds for 2005, filing claims under BIR Ruling DA-489-03. CTA dismissed claims citing Aichi ruling, but SC ruled P&G’s claims fell within San Roque exception, validating reliance on DA-489-03.
refund
timely filed
new ruling
A

Case Summary (G.R. No. 205652)

Factual Background

P&G was VAT-registered and covered by BIR Certificate of Registration No. 9RC0000071787. It filed its Monthly VAT Declarations and Quarterly VAT Returns for the relevant taxable periods in 2005, with the quarterly returns for the taxable quarters ending March and June filed in late April and late July, respectively. P&G subsequently filed applications and letters with BIR Revenue District Office (RDO) No. 49 seeking a refund or the issuance of tax credit certificates (TCCs) of its input VAT attributable to zero-rated sales for the periods covering January 2005 to March 2005, and April 2005 to June 2005. For the first quarter, P&G filed a judicial claim with the CTA on March 28, 2007, docketed as CTA Case No. 7581, for a refund or issuance of TCC in the amount of P23,090,729.17. For the second quarter, it filed another judicial claim with the CTA on June 8, 2007, docketed as CTA Case No. 7639, seeking refund or issuance of TCC in the amount of P19,006,753.58.

The CTA Division consolidated CTA Case No. 7581 and CTA Case No. 7639 on July 30, 2007, reasoning that the cases involved the same parties and common questions of law and/or facts. During proceedings before the CTA Division, P&G presented testimonial and voluminous documentary evidence to establish its claimed entitlement to the refund amounts. The CIR submitted the case for decision based on the pleadings because the administrative claim was still pending before the BIR RDO.

The Administrative-to-Judicial Timeline and the Triggering Doctrine

While P&G’s refund claim was still pending administratively before the BIR RDO, the Court promulgated Commissioner of Internal Revenue v. Aichi Forging Company of Asia, Inc. (Aichi) on October 6, 2010. In Aichi, the Court held that compliance with the 120-day period granted to the CIR under Section 112(C), within which to act on an administrative claim for refund or credit of unutilized input VAT, was mandatory and jurisdictional for the purpose of filing an appeal with the CTA. In line with Aichi, the CTA Division, in a Decision dated November 17, 2010, dismissed P&G’s judicial claims for being prematurely filed. The CTA Division reasoned that P&G had filed its judicial petitions on March 28, 2007 and June 8, 2007—only six days and thirty-seven days from the filing of the administrative applications—thus failing to observe the 120-day mandatory waiting period.

P&G moved for reconsideration, but the CTA Division denied it in a Resolution dated March 9, 2011. P&G then elevated the matter to the CTA En Banc, contending, among others, that Aichi should not be given retroactive effect. On September 21, 2012, the CTA En Banc affirmed the CTA Division’s rulings in toto and likewise dismissed the claims on prematurity. P&G’s subsequent motion for reconsideration was denied by the CTA En Banc for lack of merit.

Post-Aichi Development: San Roque and the BIR Ruling Exception

During the pendency of P&G’s case, the Court decided Commissioner of Internal Revenue v. San Roque Power Corporation, Taganito Mining Corporation v. Commissioner of Internal Revenue, and Philex Mining Corporation v. Commissioner of Internal Revenue (San Roque) on February 12, 2013. In San Roque, the Court recognized BIR Ruling No. DA-489-03 as an exception to the mandatory and jurisdictional nature of the 120+30-day waiting periods under Section 112(C), on the theory of equitable estoppel arising from the BIR’s general interpretative rule that had misled taxpayers into prematurely filing judicial claims.

Issues

The Supreme Court framed a singular issue: whether the CTA En Banc erred in dismissing P&G’s judicial claims for refund on the ground of prematurity.

The Parties’ Contentions

P&G argued that its judicial claims were filed on March 28, 2007 and June 8, 2007, after the issuance of BIR Ruling No. DA-489-03 on December 10, 2003, but before the promulgation of Aichi on October 6, 2010. Thus, P&G maintained that under the doctrine in San Roque, its judicial claims were deemed timely filed and should not have been dismissed. P&G further asserted that the CTA En Banc gravely erred in applying Aichi retroactively, which, according to P&G, would violate its constitutional right to due process and unjustly enrich the CIR. Lastly, P&G argued in the alternative that even if the claims were prematurely filed, the failure to observe the 120-day period should not be treated as jurisdictional; P&G claimed that the issue, at most, related to exhaustion of administrative remedies, which had been effectively waived when the CIR did not file a motion to dismiss and instead participated in the trial.

The CIR countered that the plain text of Section 112(C) of the NIRC, as amended, demanded mandatory compliance with the 120+30-day rule, and that P&G could not invoke good faith reliance on BIR Ruling No. DA-489-03 to cure prematurity. The CIR insisted that the judicial claims were filed without waiting for the lapse of the mandatory period and that no estoppel could arise to defeat the statutory requirements.

Legal Basis and Reasoning

The Court reproduced the pertinent text of Section 112(C), emphasizing that it gives the CIR one hundred twenty (120) days from the submission of complete documents to grant or deny the claim for refund or issuance of a tax credit certificate. If the CIR denies the claim or fails to act within the 120-day period, the taxpayer may, within thirty (30) days, appeal to the CTA. In Aichi, the Court had characterized compliance with these periods as mandatory and jurisdictional, so that a judicial claim filed before the expiration of the 120-day period would be fatal to the CTA’s acquisition of jurisdiction.

The Court then explained that while Aichi had established the general rule, San Roque introduced a critical exception. The Court reiterated that San Roque recognized two exception scenarios to the rule that CTA does not acquire jurisdiction over a judicial claim filed before the lapse of the 120-day period: first, where the CIR, through a specific ruling, misleads a particular taxpayer into filing prematurely; second, where the CIR, through a general interpretative rule issued under Section 4 of the Tax Code, misleads all taxpayers. Under San Roque, BIR Ruling No. DA-489-03 fell under the second category because it was treated as a general interpretative rule. The Court reasoned that the ruling was issued in response to a query made by a government agency—the One Stop Shop Inter-Agency Tax Credit and Drawback Center of the Department of Finance—and thus could be relied upon by all taxpayers similarly situated. Accordingly, all taxpayers could rely on BIR Ruling No. DA-489-03 from its issuance on 10 December 2003 until its reversal in Aichi on 6 October 2010. The Court further noted that in Visayas Geothermal Power Company v. Commissioner of Internal Revenue, it outlined the operative guidelines derived from San Roque, including the exception that a judicial claim need not await the expiration of the 120-day period if filed from December 10, 2003 (issuance of BIR Ruling No. DA-489-03) to October 6, 2010 (promulgation of Aichi).

Applying these doctrines to P&G, the Court found that P&G filed its judicial claims for refund on March 28, 2007 and June 8, 2007, dates that fell squarely within the excepted period recognized in San Roque. Therefore, even though P&G filed its judicial claims without waiting for the expiration of the 120-day period, the CTA could take cognizance of the cases because the filings were made within the window in which reliance on BIR Ruling No. DA-489-03 was recognized as valid. The Court thus held that the CTA had erred in dismissing the claims for prematurity.

The Court then addressed the CIR’s argument that BIR Ruling No. DA-489-03 had been repealed or superseded by Revenue R

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