FIRST DIVISION

[G.R. No. 184823. October 6, 2010.]

COMMISSIONER OF INTERNAL REVENUE, petitioner, vs. AICHI

FORGING COMPANY OF ASIA, INC., respondent.

DECISION

DEL CASTILLO, J : p

A taxpayer is entitled to a refund either by authority of a statute

expressly granting such right, privilege, or incentive in his favor, or under
the principle of solutio indebiti requiring the return of taxes erroneously or
illegally collected. In both cases, a taxpayer must prove not only his
entitlement to a refund but also his compliance with the procedural due
process as non-observance of the prescriptive periods within which to file the
administrative and the judicial claims would result in the denial of his claim.
This Petition for Review on Certiorari under Rule 45 of the Rules of
Court seeks to set aside the July 30, 2008 Decision 1 and the October 6, 2008
Resolution 2 of the Court of Tax Appeals (CTA) En Banc.
Factual Antecedents
Respondent Aichi Forging Company of Asia, Inc., a corporation duly
organized and existing under the laws of the Republic of the Philippines, is
engaged in the manufacturing, producing, and processing of steel and its by-
products. 3 It is registered with the Bureau of Internal Revenue (BIR) as a
Value-Added Tax (VAT) entity 4 and its products, "close impression die steel
forgings" and "tool and dies," are registered with the Board of Investments
(BOI) as a pioneer status. 5
On September 30, 2004, respondent filed a claim for refund/credit of
input VAT for the period July 1, 2002 to September 30, 2002 in the total
amount of P3,891,123.82 with the petitioner Commissioner of Internal
Revenue (CIR), through the Department of Finance (DOF) One-Stop Shop
Inter-Agency Tax Credit and Duty Drawback Center. 6 cAaDHT

Proceedings before the Second Division of the CTA

On even date, respondent filed a Petition for Review 7 with the CTA for
the refund/credit of the same input VAT. The case was docketed as CTA Case
No. 7065 and was raffled to the Second Division of the CTA.
In the Petition for Review, respondent alleged that for the period July 1,
2002 to September 30, 2002, it generated and recorded zero-rated sales in
the amount of P131,791,399.00, 8 which was paid pursuant to Section 106
(A) (2) (a) (1), (2) and (3) of the National Internal Revenue Code of 1997
(NIRC); 9 that for the said period, it incurred and paid input VAT amounting to
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 P3,912,088.14 from purchases and importation attributable to its zero-rated
sales; 10 and that in its application for refund/credit filed with the DOF One-
Stop Shop Inter-Agency Tax Credit and Duty Drawback Center, it only
claimed the amount of P3,891,123.82. 11
In response, petitioner filed his Answer 12 raising the following special
and affirmative defenses, to wit:
4. Petitioner's alleged claim for refund is subject to administrative
investigation by the Bureau;

5. Petitioner must prove that it paid VAT input taxes for the period in
question;

6. Petitioner must prove that its sales are export sales contemplated
under Sections 106(A) (2) (a), and 108(B) (1) of the Tax Code of
1997;

7. Petitioner must prove that the claim was filed within the two (2) year
period prescribed in Section 229 of the Tax Code;

8. In an action for refund, the burden of proof is on the taxpayer to

establish its right to refund, and failure to sustain the burden is
fatal to the claim for refund; and

9. Claims for refund are construed strictly against the claimant for the
same partake of the nature of exemption from taxation. 13

Trial ensued, after which, on January 4, 2008, the Second Division of

the CTA rendered a Decision partially granting respondent's claim for
refund/credit. Pertinent portions of the Decision read:
For a VAT registered entity whose sales are zero-rated, to validly
claim a refund, Section 112 (A) of the NIRC of 1997, as amended,
provides:

SEC. 112. Refunds or Tax Credits of Input Tax. —

(A) Zero-rated or Effectively Zero-rated Sales. — Any VAT-

registered person, whose sales are zero-rated or effectively zero-
rated may, within two (2) years after the close of the taxable
quarter when the sales were made, apply for the issuance of a
tax credit certificate or refund of creditable input tax due or paid
attributable to such sales, except transitional input tax, to the
extent that such input tax has not been applied against output
tax: . . .

Pursuant to the above provision, petitioner must comply with the

following requisites: (1) the taxpayer is engaged in sales which are
zero-rated or effectively zero-rated; (2) the taxpayer is VAT-registered;
(3) the claim must be filed within two years after the close of the
taxable quarter when such sales were made; and (4) the creditable
input tax due or paid must be attributable to such sales, except the
transitional input tax, to the extent that such input tax has not been
applied against the output tax.

The Court finds that the first three requirements have been
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 complied [with] by petitioner.

With regard to the first requisite, the evidence presented by

petitioner, such as the Sales Invoices (Exhibits "II" to "II-262," "JJ" to "JJ-
431," "KK" to "KK-394" and "LL") shows that it is engaged in sales
which are zero-rated.

The second requisite has likewise been complied with. The

Certificate of Registration with OCN 1RC0000148499 (Exhibit "C") with
the BIR proves that petitioner is a registered VAT taxpayer.

In compliance with the third requisite, petitioner filed its

administrative claim for refund on September 30, 2004 (Exhibit "N")
and the present Petition for Review on September 30, 2004, both
within the two (2) year prescriptive period from the close of the taxable
quarter when the sales were made, which is from September 30, 2002.

As regards the fourth requirement, the Court finds that there are
some documents and claims of petitioner that are baseless and have
not been satisfactorily substantiated.

xxx xxx xxx

In sum, petitioner has sufficiently proved that it is entitled to a

refund or issuance of a tax credit certificate representing unutilized
excess input VAT payments for the period July 1, 2002 to September
30, 2002, which are attributable to its zero-rated sales for the same
period, but in the reduced amount of P3,239,119.25, computed as
follows:

Amount of Claimed Input VAT P3,891,123.82

Less:
Exceptions as found by the
41,020.37
ICPA
—————
Net Creditable Input VAT P3,850,103.45
Less:
Output VAT Due 610,984.20
Excess Creditable Input VAT P3,239,119.25
—————

WHEREFORE, premises considered, the present Petition for

Review is PARTIALLY GRANTED. Accordingly, respondent is hereby
ORDERED TO REFUND OR ISSUE A TAX CREDIT CERTIFICATE in favor of
petitioner [in] the reduced amount of THREE MILLION TWO HUNDRED
THIRTY NINE THOUSAND ONE HUNDRED NINETEEN AND 25/100 PESOS
(P3,239,119.25), representing the unutilized input VAT incurred for the
months of July to September 2002.
SO ORDERED. 14

Dissatisfied with the above-quoted Decision, petitioner filed a Motion

for Partial Reconsideration, 15 insisting that the administrative and the
judicial claims were filed beyond the two-year period to claim a tax
refund/credit provided for under Sections 112 (A) and 229 of the NIRC. He
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 reasoned that since the year 2004 was a leap year, the filing of the claim for
tax refund/credit on September 30, 2004 was beyond the two-year period,
which expired on September 29, 2004. 16 He cited as basis Article 13 of the
Civil Code, 17 which provides that when the law speaks of a year, it is
equivalent to 365 days. In addition, petitioner argued that the simultaneous
filing of the administrative and the judicial claims contravenes Sections 112
and 229 of the NIRC. 18 According to the petitioner, a prior filing of an
administrative claim is a "condition precedent" 19 before a judicial claim can
be filed. He explained that the rationale of such requirement rests not only
on the doctrine of exhaustion of administrative remedies but also on the fact
that the CTA is an appellate body which exercises the power of judicial
review over administrative actions of the BIR. 20
The Second Division of the CTA, however, denied petitioner's Motion
for Partial Reconsideration for lack of merit. Petitioner thus elevated the
matter to the CTA En Banc via a Petition for Review. 21
Ruling of the CTA En Banc
On July 30, 2008, the CTA En Banc affirmed the Second Division's
Decision allowing the partial tax refund/credit in favor of respondent.
However, as to the reckoning point for counting the two-year period, the CTA
En Banc ruled:
Petitioner argues that the administrative and judicial claims were
filed beyond the period allowed by law and hence, the honorable Court
has no jurisdiction over the same. In addition, petitioner further
contends that respondent's filing of the administrative and judicial
[claims] effectively eliminates the authority of the honorable Court to
exercise jurisdiction over the judicial claim.
We are not persuaded.

Section 114 of the 1997 NIRC, and We quote, to wit:

SEC. 114. Return and Payment of Value-added Tax. —

(A) In General. — Every person liable to pay the value-

added tax imposed under this Title shall file a quarterly return of
the amount of his gross sales or receipts within twenty-five (25)
days following the close of each taxable quarter prescribed for
each taxpayer: Provided, however, That VAT-registered persons
shall pay the value-added tax on a monthly basis.
[x x x x ]

Based on the above-stated provision, a taxpayer has twenty five

(25) days from the close of each taxable quarter within which to file a
quarterly return of the amount of his gross sales or receipts. In the case
at bar, the taxable quarter involved was for the period of July 1, 2002
to September 30, 2002. Applying Section 114 of the 1997 NIRC,
respondent has until October 25, 2002 within which to file its quarterly
return for its gross sales or receipts [with] which it complied when it
filed its VAT Quarterly Return on October 20, 2002.

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 In relation to this, the reckoning of the two-year period provided
under Section 229 of the 1997 NIRC should start from the payment of
tax subject claim for refund. As stated above, respondent filed its VAT
Return for the taxable third quarter of 2002 on October 20, 2002. Thus,
respondent's administrative and judicial claims for refund filed on
September 30, 2004 were filed on time because AICHI has until
October 20, 2004 within which to file its claim for refund.

In addition, We do not agree with the petitioner's contention that

the 1997 NIRC requires the previous filing of an administrative claim
for refund prior to the judicial claim. This should not be the case as the
law does not prohibit the simultaneous filing of the administrative and
judicial claims for refund. What is controlling is that both claims for
refund must be filed within the two-year prescriptive period.
In sum, the Court En Banc finds no cogent justification to disturb
the findings and conclusion spelled out in the assailed January 4, 2008
Decision and March 13, 2008 Resolution of the CTA Second Division.
What the instant petition seeks is for the Court En Banc to view and
appreciate the evidence in their own perspective of things, which
unfortunately had already been considered and passed upon.

WHEREFORE, the instant Petition for Review is hereby DENIED

DUE COURSE and DISMISSED for lack of merit. Accordingly, the January
4, 2008 Decision and March 13, 2008 Resolution of the CTA Second
Division in CTA Case No. 7065 entitled, "AICHI Forging Company of
Asia, Inc. petitioner vs. Commissioner of Internal Revenue, respondent"
are hereby AFFIRMED in toto.

SO ORDERED. 22

Petitioner sought reconsideration but the CTA En Banc denied 23 his

Motion for Reconsideration.
Issue
Hence, the present recourse where petitioner interposes the issue of
whether respondent's judicial and administrative claims for tax refund/credit
were filed within the two-year prescriptive period provided in Sections 112
(A) and 229 of the NIRC. 24
Petitioner's Arguments
Petitioner maintains that respondent's administrative and judicial
claims for tax refund/credit were filed in violation of Sections 112 (A) and
229 of the NIRC. 25 He posits that pursuant to Article 13 of the Civil Code,26
since the year 2004 was a leap year, the filing of the claim for tax
refund/credit on September 30, 2004 was beyond the two-year period, which
expired on September 29, 2004. 27
Petitioner further argues that the CTA En Banc erred in applying
Section 114 (A) of the NIRC in determining the start of the two-year period
as the said provision pertains to the compliance requirements in the
payment of VAT. 28 He asserts that it is Section 112, paragraph (A), of the
same Code that should apply because it specifically provides for the period
within which a claim for tax refund/credit should be made. 29
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 Petitioner likewise puts in issue the fact that the administrative claim
with the BIR and the judicial claim with the CTA were filed on the same day.
30 He opines that the simultaneous filing of the administrative and the

judicial claims contravenes Section 229 of the NIRC, which requires the prior
filing of an administrative claim. 31 He insists that such procedural
requirement is based on the doctrine of exhaustion of administrative
remedies and the fact that the CTA is an appellate body exercising judicial
review over administrative actions of the CIR. 32
Respondent's Arguments
For its part, respondent claims that it is entitled to a refund/credit of its
unutilized input VAT for the period July 1, 2002 to September 30, 2002 as a
matter of right because it has substantially complied with all the
requirements provided by law. 33 Respondent likewise defends the CTA En
Banc in applying Section 114 (A) of the NIRC in computing the prescriptive
period for the claim for tax refund/credit. Respondent believes that Section
112 (A) of the NIRC must be read together with Section 114 (A) of the same
Code. 34
As to the alleged simultaneous filing of its administrative and judicial
claims, respondent contends that it first filed an administrative claim with
the One-Stop Shop Inter-Agency Tax Credit and Duty Drawback Center of the
DOF before it filed a judicial claim with the CTA. 35 To prove this, respondent
points out that its Claimant Information Sheet No. 49702 36 and BIR Form No.
1914 for the third quarter of 2002, 37 which were filed with the DOF, were
attached as Annexes "M" and "N," respectively, to the Petition for Review
filed with the CTA. 38 Respondent further contends that the non-observance
of the 120-day period given to the CIR to act on the claim for tax
refund/credit in Section 112 (D) is not fatal because what is important is that
both claims are filed within the two-year prescriptive period. 39 In support
thereof, respondent cites Commissioner of Internal Revenue v. Victorias
Milling Co., Inc. 40 where it was ruled that "[i]f, however, the [CIR] takes time
in deciding the claim, and the period of two years is about to end, the suit or
proceeding must be started in the [CTA] before the end of the two-year
period without awaiting the decision of the [CIR]." 41 Lastly, respondent
argues that even if the period had already lapsed, it may be suspended for
reasons of equity considering that it is not a jurisdictional requirement. 42
Our Ruling
The petition has merit.
Unutilized input VAT must be claimed within two
years after the close of the taxable quarter when
the sales were made
In computing the two-year prescriptive period for claiming a
refund/credit of unutilized input VAT, the Second Division of the CTA applied
Section 112 (A) of the NIRC, which states:
SEC. 112. Refunds or Tax Credits of Input Tax. —

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 (A) Zero-rated or Effectively Zero-rated Sales — Any VAT-
registered person, whose sales are zero-rated or effectively zero-rated
may, within two (2) years after the close of the taxable quarter
when the sales were made, apply for the issuance of a tax credit
certificate or refund of creditable input tax due or paid attributable to
such sales, except transitional input tax, to the extent that such input
tax has not been applied against output tax: Provided, however, That
in the case of zero-rated sales under Section 106(A)(2)(a)(1), (2) and
(B) and Section 108 (B)(1) and (2), the acceptable foreign currency
exchange proceeds thereof had been duly accounted for in accordance
with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP):
Provided, further, That where the taxpayer is engaged in zero-rated or
effectively zero-rated sale and also in taxable or exempt sale of goods
or properties or services, and the amount of creditable input tax due or
paid cannot be directly and entirely attributed to any one of the
transactions, it shall be allocated proportionately on the basis of the
volume of sales. (Emphasis supplied.)

The CTA En Banc, on the other hand, took into consideration Sections
114 and 229 of the NIRC, which read:
SEC. 114. Return and Payment of Value-Added Tax. —
(A) In General. — Every person liable to pay the value-added tax
imposed under this Title shall file a quarterly return of the amount of
his gross sales or receipts within twenty-five (25) days following the
close of each taxable quarter prescribed for each taxpayer: Provided,
however, That VAT-registered persons shall pay the value-added tax on
a monthly basis.
Any person, whose registration has been cancelled in accordance
with Section 236, shall file a return and pay the tax due thereon within
twenty-five (25) days from the date of cancellation of registration:
Provided, That only one consolidated return shall be filed by the
taxpayer for his principal place of business or head office and all
branches.
xxx xxx xxx
SEC. 229. Recovery of tax erroneously or illegally collected. —
No suit or proceeding shall be maintained in any court for the
recovery of any national internal revenue tax hereafter alleged to have
been erroneously or illegally assessed or collected, or of any penalty
claimed to have been collected without authority, or of any sum alleged
to have been excessively or in any manner wrongfully collected, until a
claim for refund or credit has been duly filed with the Commissioner;
but such suit or proceeding may be maintained, whether or not such
tax, penalty or sum has been paid under protest or duress.
In any case, no such suit or proceeding shall be filed after the
expiration of two (2) years from the date of payment of the tax or
penalty regardless of any supervening cause that may arise after
payment: Provided, however, That the Commissioner may, even
without written claim therefor, refund or credit any tax, where on the
face of the return upon which payment was made, such payment
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 appears clearly to have been erroneously paid. (Emphasis supplied.)

Hence, the CTA En Banc ruled that the reckoning of the two-year period
for filing a claim for refund/credit of unutilized input VAT should start from
the date of payment of tax and not from the close of the taxable quarter
when the sales were made. 43
The pivotal question of when to reckon the running of the two-year
prescriptive period, however, has already been resolved in Commissioner of
Internal Revenue v. Mirant Pagbilao Corporation, 44 where we ruled that
Section 112 (A) of the NIRC is the applicable provision in determining the
start of the two-year period for claiming a refund/credit of unutilized input
VAT, and that Sections 204 (C) and 229 of the NIRC are inapplicable as "both
provisions apply only to instances of erroneous payment or illegal collection
of internal revenue taxes." 45 We explained that:
The above proviso [Section 112 (A) of the NIRC] clearly provides
in no uncertain terms that unutilized input VAT payments not otherwise
used for any internal revenue tax due the taxpayer must be claimed
within two years reckoned from the close of the taxable quarter when
the relevant sales were made pertaining to the input VAT regardless of
whether said tax was paid or not. As the CA aptly puts it, albeit it
erroneously applied the aforequoted Sec. 112 (A), "[P]rescriptive
period commences from the close of the taxable quarter when the
sales were made and not from the time the input VAT was paid nor
from the time the official receipt was issued." Thus, when a zero-rated
VAT taxpayer pays its input VAT a year after the pertinent transaction,
said taxpayer only has a year to file a claim for refund or tax credit of
the unutilized creditable input VAT. The reckoning frame would always
be the end of the quarter when the pertinent sales or transaction was
made, regardless when the input VAT was paid. Be that as it may, and
given that the last creditable input VAT due for the period covering the
progress billing of September 6, 1996 is the third quarter of 1996
ending on September 30, 1996, any claim for unutilized creditable
input VAT refund or tax credit for said quarter prescribed two years
after September 30, 1996 or, to be precise, on September 30, 1998.
Consequently, MPC's claim for refund or tax credit filed on December
10, 1999 had already prescribed.

Reckoning for prescriptive period under

Secs. 204 (C) and 229 of the NIRC inapplicable
To be sure, MPC cannot avail itself of the provisions of either Sec.
204(C) or 229 of the NIRC which, for the purpose of refund, prescribes
a different starting point for the two-year prescriptive limit for the filing
of a claim therefor. Secs. 204(C) and 229 respectively provide:

Sec. 204. Authority of the Commissioner to Compromise,

Abate and Refund or Credit Taxes. — The Commissioner may —
xxx xxx xxx
(c) Credit or refund taxes erroneously or illegally received
or penalties imposed without authority, refund the value of
internal revenue stamps when they are returned in good
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 condition by the purchaser, and, in his discretion, redeem or
change unused stamps that have been rendered unfit for use
and refund their value upon proof of destruction. No credit or
refund of taxes or penalties shall be allowed unless the taxpayer
files in writing with the Commissioner a claim for credit or refund
within two (2) years after the payment of the tax or penalty:
Provided, however, That a return filed showing an overpayment
shall be considered as a written claim for credit or refund.
xxx xxx xxx
Sec. 229. Recovery of Tax Erroneously or Illegally
Collected. — No suit or proceeding shall be maintained in any
court for the recovery of any national internal revenue tax
hereafter alleged to have been erroneously or illegally assessed
or collected, or of any penalty claimed to have been collected
without authority, or of any sum alleged to have been excessively
or in any manner wrongfully collected without authority, or of any
sum alleged to have been excessively or in any manner
wrongfully collected, until a claim for refund or credit has been
duly filed with the Commissioner; but such suit or proceeding
may be maintained, whether or not such tax, penalty, or sum has
been paid under protest or duress.

In any case, no such suit or proceeding shall be filed after

the expiration of two (2) years from the date of payment of the
tax or penalty regardless of any supervening cause that may
arise after payment: Provided, however, That the Commissioner
may, even without a written claim therefor, refund or credit any
tax, where on the face of the return upon which payment was
made, such payment appears clearly to have been erroneously
paid.
Notably, the above provisions also set a two-year prescriptive
period, reckoned from date of payment of the tax or penalty, for the
filing of a claim of refund or tax credit. Notably too, both provisions
apply only to instances of erroneous payment or illegal
collection of internal revenue taxes.
MPC's creditable input VAT not erroneously paid
For perspective, under Sec. 105 of the NIRC, creditable input VAT
is an indirect tax which can be shifted or passed on to the buyer,
transferee, or lessee of the goods, properties, or services of the
taxpayer. The fact that the subsequent sale or transaction involves a
wholly-tax exempt client, resulting in a zero-rated or effectively zero-
rated transaction, does not, standing alone, deprive the taxpayer of its
right to a refund for any unutilized creditable input VAT, albeit the
erroneous, illegal, or wrongful payment angle does not enter the
equation.
xxx xxx xxx
Considering the foregoing discussion, it is clear that Sec. 112
(A) of the NIRC, providing a two-year prescriptive period
reckoned from the close of the taxable quarter when the
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 relevant sales or transactions were made pertaining to the
creditable input VAT, applies to the instant case, and not to the
other actions which refer to erroneous payment of taxes. 46
(Emphasis supplied.)

In view of the foregoing, we find that the CTA En Banc erroneously

applied Sections 114 (A) and 229 of the NIRC in computing the two-year
prescriptive period for claiming refund/credit of unutilized input VAT. To be
clear, Section 112 of the NIRC is the pertinent provision for the refund/credit
of input VAT. Thus, the two-year period should be reckoned from the close of
the taxable quarter when the sales were made.
The administrative claim was timely filed
Bearing this in mind, we shall now proceed to determine whether the
administrative claim was timely filed.
Relying on Article 13 of the Civil Code, 47 which provides that a year is
equivalent to 365 days, and taking into account the fact that the year 2004
was a leap year, petitioner submits that the two-year period to file a claim
for tax refund/ credit for the period July 1, 2002 to September 30, 2002
expired on September 29, 2004. 48
We do not agree.
I n Commissioner of Internal Revenue v. Primetown Property Group,
Inc., we said that as between the Civil Code, which provides that a year is
49

equivalent to 365 days, and the Administrative Code of 1987, which states
that a year is composed of 12 calendar months, it is the latter that must
prevail following the legal maxim, Lex posteriori derogat priori. 50 Thus:
Both Article 13 of the Civil Code and Section 31, Chapter VIII,
Book I of the Administrative Code of 1987 deal with the same subject
matter — the computation of legal periods. Under the Civil Code, a year
is equivalent to 365 days whether it be a regular year or a leap year.
Under the Administrative Code of 1987, however, a year is composed
of 12 calendar months. Needless to state, under the Administrative
Code of 1987, the number of days is irrelevant.

There obviously exists a manifest incompatibility in the manner

of computing legal periods under the Civil Code and the Administrative
Code of 1987. For this reason, we hold that Section 31, Chapter VIII,
Book I of the Administrative Code of 1987, being the more recent law,
governs the computation of legal periods. Lex posteriori derogat priori.
Applying Section 31, Chapter VIII, Book I of the Administrative
Code of 1987 to this case, the two-year prescriptive period (reckoned
from the time respondent filed its final adjusted return on April 14,
1998) consisted of 24 calendar months, computed as follows:
Year 1 1st calendar month April 15, 1998 to May 14, 1998
2nd calendar month May 15, 1998 to June 14, 1998
3rd calendar month June 15, 1998 to July 14, 1998
4th calendar month July 15, 1998 to August 14, 1998
August 15, 1998 to September 14,
5th calendar month
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 1998
September 15, 1998 to October
6th calendar month
14, 1998
October 15, 1998 to November 14,
7th calendar month
1998
November 15, 1998 to December
8th calendar month
14, 1998
December 15, 1998 to January 14,
9th calendar month
1999
January 15, 1999 to February 14,
10th calendar month
1999
February 15, 1999 to March 14,
11th calendar month
1999
12th calendar month March 15, 1999 to April 14, 1999
Year 2 13th calendar month April 15, 1999 to May 14, 1999
14th calendar month May 15, 1999 to June 14, 1999
15th calendar month June 15, 1999 to July 14, 1999
16th calendar month July 15, 1999 to August 14, 1999
August 15, 1999 to September 14,
17th calendar month
1999
September 15, 1999 to October
18th calendar month
14, 1999
October 15, 1999 to November 14,
19th calendar month
1999
November 15, 1999 to December
20th calendar month
14, 1999
December 15, 1999 to January 14,
21st calendar month
2000
January 15, 2000 to February 14,
22nd calendar month
2000
February 15, 2000 to March 14,
23rd calendar month
2000
24th calendar month March 15, 2000 to April 14, 2000

We therefore hold that respondent's petition (filed on April 14,

2000) was filed on the last day of the 24th calendar month from the
day respondent filed its final adjusted return. Hence, it was filed within
the reglementary period. 51

Applying this to the present case, the two-year period to file a claim for
tax refund/credit for the period July 1, 2002 to September 30, 2002 expired
on September 30, 2004. Hence, respondent's administrative claim was
timely filed.
The filing of the judicial claim was premature
However, notwithstanding the timely filing of the administrative claim,
we are constrained to deny respondent's claim for tax refund/credit for
having been filed in violation of Section 112 (D) of the NIRC, which provides
that:
SEC. 112. Refunds or Tax Credits of Input Tax. —

xxx xxx xxx

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 (D) 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
Subsections (A) and (B) 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 Appeals.
(Emphasis supplied.)

Section 112 (D) 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.
In this case, the administrative and the judicial claims were
simultaneously filed on September 30, 2004. Obviously, respondent did not
wait for the decision of the CIR or the lapse of the 120-day period. For this
reason, we find the filing of the judicial claim with the CTA premature.
Respondent's assertion that the non-observance of the 120-day period
is not fatal to the filing of a judicial claim as long as both the administrative
and the judicial claims are filed within the two-year prescriptive period 52 has
no legal basis.
There is nothing in Section 112 of the NIRC to support respondent's
view. Subsection (A) of the said provision states that "any VAT-registered
person, whose sales are zero-rated or effectively zero-rated may, within
two years after the close of the taxable quarter when the sales were made,
apply for the issuance of a tax credit certificate or refund of
creditable input tax due or paid attributable to such sales." The phrase
"within two (2) years . . . apply for the issuance of a tax credit certificate or
refund" refers to applications for refund/credit filed with the CIR and not to
appeals made to the CTA. This is apparent in the first paragraph of
subsection (D) of the same provision, which states that the CIR has "120
days from the submission of complete documents in support of the
application filed in accordance with Subsections (A) and (B)" within which
to decide on the claim.
In fact, applying the two-year period to judicial claims would render
nugatory Section 112 (D) of the NIRC, which already provides for a specific
period within which a taxpayer should appeal the decision or inaction of the
CIR. The second paragraph of Section 112 (D) of the NIRC envisions two
scenarios: (1) when a decision is issued by the CIR before the lapse of the
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 120-day period; and (2) when no decision is made after the 120-day period.
In both instances, the taxpayer has 30 days within which to file an appeal
with the CTA. As we see it then, the 120-day period is crucial in filing an
appeal with the CTA.
With regard to Commissioner of Internal Revenue v. Victorias Milling,
Co., Inc. 53 relied upon by respondent, we find the same inapplicable as the
tax provision involved in that case is Section 306, now Section 229 of the
NIRC. And as already discussed, Section 229 does not apply to
refunds/credits of input VAT, such as the instant case.
In fine, the premature filing of respondent's claim for refund/credit of
input VAT before the CTA warrants a dismissal inasmuch as no jurisdiction
was acquired by the CTA.
WHEREFORE, the Petition is hereby GRANTED. The assailed July 30,
2008 Decision and the October 6, 2008 Resolution of the Court of Tax
Appeals are hereby REVERSED and SET ASIDE. The Court of Tax Appeals
Second Division is DIRECTED to dismiss CTA Case No. 7065 for having been
prematurely filed.
SO ORDERED.
Corona, C.J., Velasco, Jr., Leonardo-de Castro and Perez, JJ., concur.

Footnotes
1. Rollo, pp. 31-A-43; penned by Associate Justice Caesar A. Casanova and
concurred in by Presiding Justice Ernesto D. Acosta and Associate Justices
Juanito C. Castañeda, Jr., Lovell R. Bautista, Erlinda P. Uy, and Olga Palanca-
Enriquez.
2. Id. at 44-45.

3. Id. at 13.

4. Id.
5. Id.

6. CTA Second Division rollo, pp. 26-27.

7. Rollo, pp. 79-90.

8. Id. at 82.

9. SEC. 106. Value-added Tax on Sale of Goods or Properties. —

(A) Rate and Base of Tax. — There shall be levied, assessed and collected on
every sale, barter or exchange of goods or properties, a value-added tax
equivalent to ten percent (10%) of the gross selling price or gross value in
money of the goods or properties sold, bartered or exchanged, such tax to be
paid by the seller or transferor.
xxx xxx xxx

(2) The following sales by VAT-registered persons shall be subject to zero

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 percent (0%) rate:

(a) Export Sales. — The term 'export sales' means:

(1) The sale and actual shipment of goods from the Philippines to a foreign
country, irrespective of any shipping arrangement that may be agreed upon
which may influence or determine the transfer of ownership of the goods so
exported and paid for in acceptable foreign currency or its equivalent in
goods or services, and accounted for in accordance with the rules and
regulations of the Bangko Sentral ng Pilipinas (BSP);

(2) Sale of raw materials or packaging materials to a nonresident buyer for

delivery to a resident local export-oriented enterprise to be used in
manufacturing, processing, packing or repacking in the Philippines of the said
buyer's goods and paid for in acceptable foreign currency and accounted for
in accordance with the rules and regulations of the Bangko Sentral ng
Pilipinas (BSP);

(3) Sale of raw materials or packaging materials to export-oriented enterprise

whose export sales exceed seventy percent (70%) of total annual production;
xxx xxx xxx

10. Rollo, p. 82.

11. Id. at 82-83.

12. Id. at 91-94.

13. Id. at 92.

14. Id. at 53-54 and 61-62.

15. Id. at 95-104.

16. Id. at 98.

17. Art. 13. When the law speaks of years, months, days or nights, it shall be
understood that years are of three hundred sixty-five days each; months, of
thirty days; days, of twenty-four hours; and nights from sunset to sunrise.

If months are designated by their name, they shall be computed by the

number of days which they respectively have.
In computing a period, the first day shall be excluded, and the last day
included.

18. Rollo, pp. 98-99.

19. Id. at 101.

20. Id. at 100-101.

21. Id. at 105-118.

22. Id. at 41-43.

23. Id. at 44-45.

24. Id. at 19.
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 25. Id.

26. Supra note 17.

27. Rollo, p. 21.

28. Id. at 22.

29. Id.
30. Id. at 24.

31. Id.

32. Id. at 25.

33. Id. at 161-162.

34. Id. at 164.

35. Id. at 166.

36. CTA Second Division rollo, p. 26.

37. Id. at 27.

38. Rollo, p. 166.

39. Id. at 166.

40. 130 Phil. 12 (1968).

41. Id. at 16.

42. Rollo, p. 167.

43. Id.

44. G.R. No. 172129, September 12, 2008, 565 SCRA 154.

45. Id. at 173.

46. Id. at 171-175.

47. Supra note 17.

48. Rollo, p. 21.

49. G.R. No. 162155, August 28, 2007, 531 SCRA 436.

50. Id. at 444.

51. Id. at 444-445.

52. Rollo, p. 166.

53. Supra note 40.

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