SC resolves with finality rules for VAT refund claims

IN A Supreme Court (SC) resolution dated Oct. 8, the SC rejected with finality the claim of San Roque Power to recover a P400 million excess input value added tax (VAT) refund from the Bureau of Internal Revenue (BIR). The SC denied the motion for reconsideration filed by San Roque Power in a last ditch effort to save its claim for refund which was earlier denied by the SC.

In the consolidated cases of GR No. 187485, GR No. 196113 and GR No. 197156, the SC laid down the rule that a judicial claim for excess input VAT refund can be made only within 30 days after the lapse of 120 days (known as the 120-30-day rule) from the filing of the claim and complete documents with the BIR. San Roque Power failed to observe this rule.

San Roque Power, in its motion for reconsideration, appealed for a prospective application of this SC decision arguing that the administrative practice in the BIR as well as decisions of both the Court of Tax Appeals (CTA) and Court of Appeals (CA) at the time of filing its refund claim did not require strict observance of the 120-30-day rule. Applying it prospectively will have adverse effects on the national economy.

In turning down this argument, the SC emphasized that the CTA or CA decisions, unlike those of the SC, do not form part of the law of the land and are not binding precedents to persons other than parties to the case. More so, they are not binding on the SC. To hold that CTA or CA decisions, even if reversed by the SC, should still prevail is to turn upside down our legal system and hierarchy of courts with effects far worse than the doomsday scenario predicted by San Roque Power on the national economy.

In the same resolution, the separate motion for reconsideration filed by the BIR questioning the relief granted to refund claims filed from Dec. 10, 2003 to Oct. 6, 2010 has also been rejected by the SC. The BIR argues that the ruling relied upon to grant the relief is void as it was issued only by a Deputy Commissioner and not by the Commissioner himself. In striking out this argument, the SC cited the provision of the Tax Code which states that the Commissioner can validly delegate the issuance of a ruling to his Deputy Commissioner.

In its Resolution, the SC reiterated and confirmed with finality its earlier decision laying down the following rules in a judicial claim for excess input VAT refund:

1. The rule requires strict observance of the "120-30-day rule" in a judicial claim for excess input VAT refund for the court to acquire jurisdiction.

2. An exception to A (the 120-30-day rule) applies on claims for refund that were prematurely filed within the window of relief from Dec. 10, 2003 to Oct. 6, 2010. Thus, even if the taxpayer does not wait for the 120-day period for the Commissioner to decide the administrative claim before elevating it to the courts, the judicial claim is considered filed on time and not premature;

3. Judicial claims filed beyond (not within) the "120-30-day rule" after the filing of the administrative claim for refund with the BIR should be denied on the ground of late filing.

The San Roque Power case clarified the mandatory nature of the 120-30-day rule. For refund claims involving excess Input VAT, it should be filed with the BIR within two years from the end of a taxable quarter the sales were made. If not acted upon by the BIR within 120-days from submission of complete documents, the claimant can file a judicial claim with the CTA within 30 days from the expiration of the 120-day period. The observance of the 120 days is mandatory and jurisdictional, non-compliance of which will not vest the court with jurisdiction.

But other pressing issues haunting the validity of refund claims remain unresolved. Clarification of these issues is necessary, otherwise, claimants may suffer the same fate as San Roque Power. For example, the reckoning point for counting the 120 days is not yet clear. Is it from the filing of the claim? Or from submission of complete documents? What kind of documentation is considered complete? BIR issuances are lacking on this matter. The CTA has, in some cases, given its position on this issue but as ruled by the SC in its resolution, CTA decisions could not be relied upon for guidance as they are not binding precedents. So, where should taxpayers turn to?

Tax refunds are in the nature of exemptions which must be strictly contrued against the taxpayer making the claim. I agree. But on this premise, shouldn’t it also be the prime responsibility of the government -- legislative, executive and judiciary -- to provide clarity and guidance if they are to expect proper compliance?

I tend to agree with the dissenting opinion of Chief Justice Sereno in saying that in the case at hand, there was confusion in the application of the rules and the BIR as well as the Courts participated, allowed and contributed to this confusion. And for this reason alone, shouldn’t the rules, now that they are clarified, be applied prospectively? This is the rule in a game where equity and fair play matters. After all, the highest form of law is one anchored on the universal laws of fairness, equity and justice.

(The author is Chair of the Tax Committee of the Management Association of the Philippines [MAP], Governor and Secretary of MAP for 2014, and the Managing Partner and CEO of Du-Baladad and Associates [BDB Law]. Send feedback to map@globelines.com.ph and dick.du-baladad@bdblaw.com.ph. For previous articles, visit www.map.org.ph.)
 

source:  Businessworld