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APPLIED FOOD INGREDIENTS COMPANY v. CIR

FACTS:

Applied Food Ingredients, Company, Inc. (petitioner) filed a Petition for Review on Certiorari to challenge the Decision and Resolution of the Court of Tax Appeals En Banc (CTA En Banc) in C.T.A. EB No. 359. The CTA En Banc affirmed the Decision and Resolution of the CTA First Division in C.T.A. Case No. 6513, which denied petitioner's claim for a tax credit certificate representing its excess input taxes attributable to zero-rated sales for the period of April 1, 2000, to December 31, 2000.

Petitioner is registered as a VAT taxpayer engaged in the importation and exportation business. It claimed that it paid a total of P9,528,565.85 in input taxes from September 1998 to December 31, 2000, for its importation of food ingredients. These imported food ingredients were exported during the period of April 1, 2000, to December 31, 2000, generating export sales amounting to P114,577,937.24. Petitioner contended that these export sales were zero-rated sales under the NIRC of 1997.

Petitioner applied for the issuance of tax credit certificates in the amounts of P5,385,208.32 and P4,143,357.53 on March 26, 2002, and June 28, 2002, respectively. When respondent failed to act on the applications, petitioner filed a Petition for Review with the CTA. Respondent argued that the request for tax credit certificate was still under examination and that taxes paid and collected were presumed to be in accordance with the law, thus not refundable. The CTA First Division denied petitioner's claim for failure to comply with invoicing requirements, and the CTA En Banc affirmed this decision, stating that the sales did not meet the invoicing requirements for zero-rating.

ISSUES:

  1. Whether the petitioner's claim for tax refund was timely filed.

  2. Whether the Commissioner of Internal Revenue exceeded the 120-day period to decide on the administrative claim.

  3. Whether the premature filing of petitioner's claim for refund/credit of input VAT before the Court of Tax Appeals (CTA) warrants a dismissal due to lack of jurisdiction.

  4. Whether the CTA has jurisdiction to entertain claims for the refund or credit of creditable input tax without a decision or an "inaction deemed a denial" of the Commissioner of Internal Revenue (CIR).

  5. Whether or not the petitioners have the personality to file the present petition.

  6. Whether or not the petitioners have sufficiently complied with the requirements for a valid petition for certiorari.

  7. Whether or not the Court of Appeals erred in dismissing the petition on procedural grounds.

RULING:

  1. The Court held that petitioner's claim for tax refund was timely filed. Section 112(A) of the NIRC of 1997 provides for a two-year prescriptive period after the close of the taxable quarter when the sales were made, within which a VAT-registered person may apply for the issuance of a tax credit certificate or refund of creditable input tax. Petitioner filed its claim within the prescribed period for its zero-rated sales.

  2. The Court ruled that the Commissioner of Internal Revenue exceeded the 120-day period to decide on the administrative claim. The 120-day period started to run from the date of submission of complete documents in support of the application. Since petitioner attached complete supporting documents necessary to prove its entitlement to a refund, the 120-day period commenced on the dates of filing.

  3. The premature filing of petitioner's claim for refund/credit of input VAT before the CTA warrants a dismissal due to lack of jurisdiction. Failure to comply with the mandatory 120-day waiting period violates a mandatory provision of law and the doctrine of exhaustion of administrative remedies. The CTA does not acquire jurisdiction over the taxpayer's petition in such case.

  4. The CTA, being a court of special jurisdiction, does not have jurisdiction to entertain claims for the refund or credit of creditable input tax without a decision or an "inaction deemed a denial" of the CIR. The taxpayer can only appeal to the CTA for review after a decision or an inaction deemed a denial by the CIR.

  5. The petitioners, being legal representatives of the deceased employees, have the personality to file the present petition.

  6. The petitioners have sufficiently complied with the requirements for a valid petition for certiorari.

  7. The Court of Appeals erred in dismissing the petition on procedural grounds.

PRINCIPLES:

  • Tax refunds or credits are strictly construed against taxpayers, and the burden is on the taxpayer to prove strict compliance with the conditions for the grant of the tax refund or credit.

  • The VAT method of taxation allows VAT-registered persons to subtract the VAT charged on their sales or outputs from the VAT paid on their purchases, inputs, and imports.

  • Section 112 of the NIRC of 1997 provides for the manner and period within which the refund or credit of input tax may be made.

  • The issue of jurisdiction over the subject matter may be raised at any time, and the court may consider it motu proprio.

  • Failure to comply with the 120-day waiting period violates a mandatory provision of law and the doctrine of exhaustion of administrative remedies, rendering the petition premature and without a cause of action (San Roque Power Corporation v. Commissioner of Internal Revenue).

  • The CTA, as a court of special jurisdiction, can only take cognizance of matters that are clearly within its jurisdiction. Without a decision or an "inaction deemed a denial" of the Commissioner, the CTA has no jurisdiction over a petition for review (San Roque Power Corporation v. Commissioner of Internal Revenue).

  • The period of 120 days is a prerequisite for the commencement of the 30-day period to appeal to the CTA. Failure to observe the 120-day period prior to the filing of a judicial claim is considered not just a non-exhaustion of administrative remedies, but also jurisdictional (San Roque Power Corporation v. Commissioner of Internal Revenue).

  • Strict compliance with the 120+30 day periods is necessary for a claim for tax refund or credit under the VAT System to prosper. Failure to observe the mandatory 120-day period is fatal to the claim and renders the CTA devoid of jurisdiction over the judicial claim (San Roque Power Corporation v. Commissioner of Internal Revenue).

  • Legal representatives have the personality to file a petition on behalf of deceased individuals, particularly when it involves matters of public interest.

  • The requirements for a valid petition for certiorari must be strictly complied with, including the payment of docket fees and the submission of necessary documents and pleadings.

  • The Court of Appeals must not dismiss a petition on procedural grounds when there is substantial compliance with the rules and when the case involves matters of public importance.