FIRST DIVISION

G.R. No. 185115, February 18, 2015

NORTHERN MINDANAO POWER CORPORATION, Petitioner, v. COMMISSIONER OF INTERNAL REVENUE, Respondents.
DECISION
SERENO, C.J.:
This is a Petition for Review on Certiorari1 under Rule 45 of the 1997 Rules of Civil Procedure filed by Northern Mindanao Power
Corporation (petitioner). The Petition assails the Decision 2 dated 18 July 2008 and Resolution3 dated 27 October 2008 issued by the
Court of Tax Appeals En Banc (CTA En Banc) in C.T.A. EB No. 312.
The Facts

Petitioner is engaged in the production sale of electricity as an independent power producer and sells electricity to National Power
Corporation (NPC). It allegedly incurred input value-added tax (VAT) on its domestic purchases of goods and services that were used
in its production and sale of electricity to NPC. For the 3 rd and the 4th quarters of taxable year 1999, petitioners input VAT totaled to
P2,490,960.29, while that incurred for all the quarters of taxable year 2000 amounted to
P3,920,932.55.4chanroblesvirtuallawlibrary
Petitioner filed an administrative claim for a refund on 20 June 2000 for the 3 rd and the 4th quarters of taxable year 1999, and on 25
July 2001 for taxable year 2000 in the sum of P6,411,892.84. 5chanroblesvirtuallawlibrary
Thereafter, alleging inaction of respondent on these administrative claims, petitioner filed a Petition 6with the CTA on 28 September
2001.
The CTA First Division denied the Petition and the subsequent Motion for Reconsideration for lack of merit. The Court in Division found
that the term zero-rated was not imprinted on the receipts or invoices presented by petitioner in violation of Section 4.108-1 of
Revenue Regulations No. 7-95. Petitioner failed to substantiate its claim for a refund and to strictly comply with the invoicing
requirements of the law and tax regulations.7 In his Concurring and Dissenting Opinion, however, then Presiding Justice Ernesto D.
Acosta opined that the Tax Code does not require that the word zero-rated be imprinted on the face of the receipt or invoice. He
further pointed out that the absence of that term did not affect the admissibility and competence of the receipt or invoice as evidence
to support the claim for a refund.8chanroblesvirtuallawlibrary
On appeal to the CTA En Banc, the Petition was likewise denied. The court ruled that for every sale of services, VAT shall be computed
on the basis of gross receipts indicated on the official receipt. Official receipts are proofs of sale of services and cannot be
interchanged with sales invoices as the latter are used for the sale of goods. Further, the requirement of issuing duly registered VAT
official receipts with the term zero-rated imprinted is mandatory under the law and cannot be substituted, especially for input VAT
refund purposes. Then Presiding Justice Acosta maintained his dissent.
Hence, this appeal before us.
Issues

Petitioners appeal is anchored on the following grounds:chanRoblesvirtualLawlibrary

Section 4.108-1 of Revenue Regulations (RR) No. 7-95 which expanded the statutory requirements for the issuance of official receipts
and invoices found in Section 113 of the 1997 Tax Code by providing for the additional requirement of the imprinting of the terms
zero-rated is unconstitutional.
Company invoices are sufficient to establish the actual amount of sale of electric power services to the National Power Corporation
and therefore sufficient to substantiate Petitioners claim for refund.9
The Courts Ruling

To start with, this Court finds it appropriate to first determine the timeliness of petitioners judicial claim in order to determine
whether the tax court properly acquired jurisdiction, although the matter was never raised as an issue by the parties. Well-settled is
the rule that the issue of jurisdiction over the subject matter may, at any time, be raised by the parties or considered by the
Court motu proprio.10 Therefore, the jurisdiction of the CTA over petitioners appeal may still be considered and determined by this
Court.
Section 112 of the National Internal Revenue Code (NIRC) of 1997 laid down the manner in which the refund or credit of input tax may

be made. For a VAT-registered person whose sales are zero-rated or effectively zero-rated, Section 112(A) specifically provides for a
two-year prescriptive period after the close of the taxable quarter when the sales were made within which such taxpayer may apply
for the issuance of a tax credit certificate or refund of creditable input tax. In the consolidated tax casesCommissioner of Internal
Revenue v. San Roque Power Corporation, Taganito Mining Corporation v. Commissioner of Internal Revenue, and Philex Mining
Corporation v. Commissioner of Internal Revenue11 (hereby collectively referred to as San Roque), the Court clarified that the two-year
period refers to the filing of an administrative claim with the BIR.
In this case, petitioner had until 30 September 2001 and 31 December 2001 for the claims covering the 3 rd and the 4th quarters of
taxable year 1999; and 31 March, 30 June, 30 September and 31 December in 2002 for the claims covering all four quarters of
taxable year 2000 - or the close of the taxable quarter when the zero-rated sales were made - within which to file its administrative
claim for a refund. On this note, we find that petitioner had sufficiently complied with the two-year prescriptive period when it filed its
administrative claim for a refund on 20 June 2000 covering the 3 rd and the 4thquarters of taxable year 1999 and on 25 July 2001
covering all the quarters of taxable year 2000.
Pursuant to Section 112(D) of the NIRC of 1997, respondent had one hundred twenty (120) days from the date of submission of
complete documents in support of the application within which to decide on the administrative claim. The burden of proving
entitlement to a tax refund is on the taxpayer. Absent any evidence to the contrary, it is presumed that in order to discharge its
burden, petitioner attached to its applications complete supporting documents necessary to prove its entitlement to a refund. 12Thus,
the 120-day period for the CIR to act on the administrative claim commenced on 20 June 2000 and 25 July 2001.
As laid down in San Roque, judicial claims filed from 1 January 1998 until the present should strictly adhere to the 120+30-day period
referred to in Section 112 of the NIRC of 1997. The only exception is the period 10 December 2003 until 6 October 2010. Within this
period, BIR Ruling No. DA-489-03 is recognized as an equitable estoppel, during which judicial claims may be filed even before the
expiration of the 120-day period granted to the CIR to decide on a claim for a refund.
For the claims covering the 3rd and the 4th quarters of taxable year 1999 and all the quarters of taxable year 2000, petitioner filed a
Petition with the CTA on 28 September 2001.
Both judicial claims must be disallowed.
a) Claim for a refund of input VAT covering the 3 rd and the 4th quarters of taxable year 1999
Counting 120 days from 20 June 2000, the CIR had until 18 October 2000 within which to decide on the claim of petitioner for an input
VAT refund attributable to its zero-rated sales for the period covering the 3 rd and the 4th quarters of taxable year 1999. If after the
expiration of that period respondent still failed to act on the administrative claim, petitioner could elevate the matter to the court
within 30 days or until 17 November 2000.
Petitioner belatedly filed its judicial claim with the CTA on 28 September 2001. Just like in Philex, this was a case of late filing. The
Court explained thus:chanRoblesvirtualLawlibrary
Unlike San Roque and Taganito, Philexs case is not one of premature filing but of late filing. Philex did not file any petition with the
CTA within the 120-day period. Philex did not also file any petition with the CTA within 30 days after the expiration of the 120-day
period. Philex filed its judicial claim long after the expiration of the 120-day period, in fact 426 days after the lapse of the 120-day
period. In any event, whether governed by jurisprudence before, during, or after the Atlas case, Philexs judicial claim
will have to be rejected because of late filing. Whether the two-year prescriptive period is counted from the date of payment of
the output VAT following the Atlasdoctrine, or from the close of the taxable quarter when the sales attributable to the input VAT were
made following the Mirant and Aichi doctrines, Philexs judicial claim was indisputably filed late.
The Atlas doctrine cannot save Philex from the late filing of its judicial claim. Theinaction of the Commissioner on Philexs claim
during the 120-day period is, by express provision of law, deemed a denial of Philexs claim. Philex had 30 days from the expiration
of the 120-day period to file its judicial claim with the CTA. Philexs failure to do so rendered the deemed a denial decision of the
Commissioner final and inappealable. The right to appeal to the CTA from a decision or deemed a denial decision of the
Commissioner is merely a statutory privilege, not a constitutional right. The exercise of such statutory privilege requires strict
compliance with the conditions attached by the statute for its exercise. Philex failed to comply with the statutory conditions and must
thus bear the consequences.
xxxx
Philexs situation is not a case of premature filing of its judicial claim but of late filing, indeed very late filing. BIR Ruling No. DA-48903 allowed premature filing of a judicial claim, which means non-exhaustion of the 120-day period for the Commissioner to act on an
administrative claim. Philex cannot claim the benefit of BIR Ruling No. DA-489-03 because Philex did not file its judicial claim
prematurely but filed it long after the lapse of the 30-day period following the expiration of the 120-day period. In fact, Philex
filed its judicial claim 426 days after the lapse of the 30-day period.13 (Emphasis in the original)
Petitioners claim for the 3rd and the 4th quarters of taxable year 1999 was filed 319 days after the expiration of the 30-day period. To
reiterate, the right to appeal is a mere statutory privilege that requires strict compliance with the conditions attached by the statute
for its exercise. Like Philex, petitioner failed to comply with the statutory conditions and must therefore bear the consequences. It

already lost its right to claim a refund or credit of its alleged excess input VAT attributable to zero-rated or effectively zero-rated sales
for the 3rd and the 4th quarters of taxable year 1999 by virtue of its own failure to observe the prescriptive periods.
b) Claim for the refund of input VAT covering all quarters of taxable year 2000
For the year 2000, petitioner timely filed its administrative claim on 25 July 2001within the two-year period from the close of the
taxable quarter when the zero-rated sales were made. Pursuant to Section 112(D) of the NIRC of 1997, respondent had 120 days or
until 22 November 2001 within which to act on petitioners claim. It is only when respondent failed to act on the claim after the
expiration of that period that petitioner could elevate the matter to the tax court.
Records show, however, that petitioner filed its Petition with the CTA on 28 September 2001 without waiting for the expiration of the
120-day period. Barely 64 days had lapsed when the judicial claim was filed with the CTA. The Court in San Roque has already settled
that failure of the petitioner to observe the mandatory 120-day period is fatal to its judicial claim and renders the CTA devoid of
jurisdiction over that claim. On
28 September 2001 the date on which petitioner filed its judicial claim for the period covering
taxable year 2000 - the 120+30 day mandatory period was already in the law and BIR Ruling No. DA-489-03 had not yet been issued.
Considering this fact, petitioner did not have an excuse for not observing the 120+30 day period. Again, as enunciated in San Roque,
it is only the period between 10 December 2003 and 6 October 2010 that the 120-day period may not be observed. While the
ponente had disagreed with the majority ruling in San Roque, the latter is now the judicial doctrine that will govern like cases.
The judicial claim was thus prematurely filed for failure of petitioner to observe the 120-day waiting period. The CTA therefore did not
acquire jurisdiction over the claim for a refund of input VAT for all the quarters of taxable year 2000.
In addition, the issue of the requirement of imprinting the word zero-rated has already been settled by this Court in a number of
cases. In Western Mindanao Power Corporation v. CIR,14 we ruled:chanRoblesvirtualLawlibrary
RR 7-95, which took effect on 1 January 1996, proceeds from the rule-making authority granted to the Secretary of Finance by the
NIRC for the efficient enforcement of the same Tax Code and its amendments. In Panasonic Communications Imaging Corporation of
the Philippines v. Commissioner of Internal Revenue, we ruled that this provision is reasonable and is in accord with the efficient
collection of VAT from the covered sales of goods and services. Moreover, we have held in Kepco Philippines Corporation v.
Commissioner of Internal Revenue that the subsequent incorporation of Section 4.108-1 of RR 7-95 in Section 113 (B) (2) (c) of R.A.
9337 actually confirmed the validity of the imprinting requirement on VAT invoices or official receipts a case falling under the
principle of legislative approval of administrative interpretation by reenactment.
In fact, this Court has consistently held as fatal the failure to print the word zero-rated on the VAT invoices or official receipts in
claims for a refund or credit of input VAT on zero-rated sales, even if the claims were made prior to the effectivity of R.A. 9337. Clearly
then, the present Petition must be denied.cralawred
Finally, as regards the sufficiency of a company invoice to prove the sales of services to NPC, we find this claim is without sufficient
legal basis. Section 113 of the NIRC of 1997 provides that a VAT invoice is necessary for every sale, barter or exchange of goods or
properties, while a VAT official receipt properly pertains to every lease of goods or properties; as well as to every sale, barter or
exchange of services.
The Court has in fact distinguished an invoice from a receipt in Commissioner of Internal Revenue v. Manila Mining Corporation:15
A sales or commercial invoice is a written account of goods sold or services rendered indicating the prices charged therefor or a list
by whatever name it is known which is used in the ordinary course of business evidencing sale and transfer or agreement to sell or
transfer goods and services.
A receipt on the other hand is a written acknowledgment of the fact of payment in money or other settlement between seller and
buyer of goods, debtor or creditor, or person rendering services and client or customer.cralawred
A VAT invoice is the sellers best proof of the sale of goods or services to the buyer, while a VAT receipt is the buyers best evidence of
the payment of goods or services received from the seller. A VAT invoice and a VAT receipt should not be confused and made to refer
to one and the same thing. Certainly, neither does the law intend the two to be used alternatively. 16chanroblesvirtuallawlibrary
WHEREFORE, premises considered, the instant Petition is DENIED.
SO ORDERED.

FIRST DIVISION
G.R. No. 185666, February 04, 2015
NIPPON EXPRESS (PHILIPPINES) CORP., Petitioner, v. COMMISSIONER OF INTERNAL REVENUE,Respondents.
DECISION
PEREZ, J.:
Before the Court is a Petition for Review on Certiorari seeking to reverse and set aside the 20 August 2008 Decision 1 and the 16
December 2008 Resolution2 of the Court of Tax Appeals (CTA) En Banc in C.T.A. E.B. No. 335 which affirmed in toto the Decision and
Resolution dated 15 June 20073 and 13 November 2007,4respectively, of the First Division of the CTA (CTA in Division) 5 in C.T.A. Case
No. 6464, denying due course petitioners claim for the issuance of a Tax Credit Certificate (TCC) in the amount of P24,826,667.61
allegedly representing accumulated excess or unutilized input taxes attributable to its zero-rated sales for the calendar year 2000,
and therefore dismissing the petition for failure to comply with the substantiation requirements.

The Facts

As aptly found by the CTA in Division, the factual antecedents of the case are undisputed:chanRoblesvirtualLawlibrary
Petitioner is a corporation duly organized and existing under the laws of the Republic of the Philippines, registered with the Securities
and Exchange Commission (SEC) under Certificate of Registration No. ASO95-005669, and with principal office at U-2701 Yuchengco
Tower, RCBC Plaza, 6819 Ayala Ave., Salcedo Village, Makati City.
Likewise, petitioner is registered with the Large Taxpayers District Office of the Bureau of Internal Revenue in Makati City as, among
others, a Value-Added Tax (VAT) taxpayer rendering freight forwarding services.
Respondent, on the other hand, is the duly appointed Commissioner of Internal Revenue vested with power to decide, approve, and
grant refunds or tax credits of overpaid internal revenue taxes as provided by law and holds office and may be served with summons,
orders, pleadings, and other processes at BIR Revenue Region 8, 5/F Atrium Bldg., Makati Ave., Makati City.
The precedent facts, as culled from the records are as follows:chanRoblesvirtualLawlibrary
For the calendar year 2000, petitioners gross receipts were primarily derived from rendering its services to Philippine Economic Zone
Authority (PEZA)-registered clients. Likewise, it incurred total sales of P1,063,357,608.74, which as shown in petitioners Amended
Quarterly VAT Return, is made up of the following:chanRoblesvirtualLawlibrary
Taxable Sales
1st quarter (Annex B, Petition for Review)

P19,416,405.90

2nd quarter (Annex C, Petition for Review)

21,727,369.30

3rd quarter (Annex D, Petition for Review)

25,478,221.80

4th quarter (Annex E, Petition for Review)

19,106,829.00

P85,728,826.00

Zero-Rated Sales
1st quarter (Annex B, Petition for Review)

163,837,757.11

2nd quarter (Annex C, Petition for Review)

189,237,849.49

3rd quarter (Annex D, Petition for Review)

228,507,608.58

4th quarter (Annex E, Petition for Review)

247,387,949.22

828,971,164.40

Exempt Sales
1st quarter (Annex B, Petition for Review)

45,234,485.51

2nd quarter (Annex C, Petition for Review)

27,632,934.35

3rd quarter (Annex D, Petition for Review)

49,971,632.54

4th quarter (Annex E, Petition for Review)

25,818,565.94

Grand Total

148,657,618.34

P1,063,357,608.74

Also, for the same year, petitioner paid input taxes amounting to P31,846,253.57 and apportioning this amount with its total sales
above in accordance with Section 112 of the 1997 Tax Code, as amended; the amount of total sales attributable to zero-rated sales
would be P24,826,667.61.
Under the premise that it is entitled to a refund of the amount of P24,826,667.61, petitioner filed four separate applications for tax
credit/refund with the One-Stop Shop Inter-Agency Tax Credit and Duty Drawback Center of the Department of Finance (OSSAC-DOF)
on September 24, 2001.
Receiving no resolution from OSSAC-DOF, petitioner filed the instant petition for review on April 24, 2002 pursuant to Section 112 in
relation to Section 229 of the 1997 Tax Code, as amended.6

Docketed as C.T.A. Case No. 6464, trial ensued having both parties submitted various documentary and testimonial evidence during
the proceedings, as well as rebuttal and sur-rebuttal evidence, in order to establish their respective claim.
The Ruling of the CTA in Division

In a Decision dated 15 June 2007,7 the CTA in Division denied due course and accordingly dismissed petitioners claim for the
issuance of a TCC on the ground of its failure to comply with the substantiation requirements. It explained that the sales invoices,
transfer slips, and credit memos presented in support thereof did not comply with the substantiation requirements provided for under
Sections 106, 108, and 1138 of the National Internal Revenue Code (NIRC) of 1997, as amended, considering that petitioners sales
are sales of services which should only be supported by official receipts. Consequently, without the VAT official receipts evidencing its
zero-rated revenues, the input VAT payment alleged to be directly attributable thereto cannot be refunded or a TCC cannot be issued
in its favor in accordance with Revenue Memorandum Circular (RMC) No. 42-2003. Having rendered such ruling, the CTA in Division
decided not to pass upon other incidental issues raised before it for being moot.
On 13 November 2007, the CTA in Division denied both petitioners Motion for Reconsideration and Supplemental Motion for
Reconsideration for lack of merit.9chanroblesvirtuallawlibrary
Aggrieved, petitioner appealed to the CTA En Banc by filing a Petition for Review under Section 18 of Republic Act (R.A.) No. 1125, as
amended by R.A. No. 9282,10 on 21 December 2007, docketed as C.T.A. E.B. No. 335.
The Ruling of the CTA En Banc

The CTA En Banc affirmed in toto both the aforesaid Decision and Resolution rendered by the CTA in Division in CTA Case No. 6464,
pronouncing that although Sections 113 and 237 of the NIRC of 1997, as amended, and Section 4.108-1 of Revenue Regulations (RR)
No. 7-95 use the words invoice and receipt without distinction, nevertheless, the NIRC of 1997, as amended, provides separate
provisions, which must be read in relation thereto: Section 106 for VAT on sale of goods or properties, and Section 108 for VAT on sale
of services and use or lease of properties. 11 Clearly therefore, the CTA En Banc agreed with the courta quos findings that the
evidence submitted by petitioner, i.e. sales invoices, transfer slips, credit memos, cargo manifests, and credit notes, as well as formal
report of the independent certified public accountant (ICPA), to prove its zero-rated sales, were insufficient so as to entitle it to the
issuance of a TCC since the aforesaid legal provisions do not provide for any other document that can be used as an alternative to, or
in lieu of an invoice and official receipts.12 Ultimately, it ruled that petitioners sales, being sales of services, shall properly be
supported by VAT official receipts only, which unfortunately were not presented and submitted as evidence by petitioner during trial.
Upon denial of petitioners Motion for Reconsideration thereof, it filed the instant Petition for Review onCertiorari before this Court
seeking the reversal of the aforementioned Decision and the 16 December 2008 Resolution 13 rendered in C.T.A. E.B. No. 335, based
on the following grounds:chanRoblesvirtualLawlibrary
1.

That nowhere in the NIRC of 1997, as amended, and its regulations does it state that only official receipts support the sale of
services or that only sales invoices support the sale of goods;chanrobleslaw

2.

That the NIRC of 1997, as amended, its implementing regulations, and well-established jurisprudence allow other
documentary evidence to prove the zero-rated sales;chanrobleslaw

3.

That amendment in the law that requires the issuance of sales invoice for every sale of goods and the issuance of official
receipt for every sale of services cannot be given retroactive effect;chanrobleslaw

4.

That the majority of the CTA En Banc committed grave abuse of discretion amounting to lack or want of jurisdiction when
they made an erroneous interpretation and application of the applicable law and regulations;chanrobleslaw

5.

That denial of petitioners just and valid claim constitutes unjust enrichment at the expense of the taxpayer and should not
be sustained;chanrobleslaw

6.

That even assuming for the sake of argument that the majority of the CTA En Banc is correct, petitioner should at least be
allowed to introduce its existing official receipts in the interest of justice and equity; and

7.

That petitioner has fully complied with all requirements for its claim for refund or TCC considering
that:chanRoblesvirtualLawlibrary
a.

Petitioner filed both administrative and judicial claims for refund/TCC within the two (2) year prescriptive
period;chanrobleslaw

b.

Petitioners input taxes amounting to P31,846,253.87 were incurred for the period from January 1, 2000 to
December 31, 2000 of which P24,826,667.61 remained unutilized and unapplied against its output
tax;chanrobleslaw

c.

Petitioners input taxes subject of the present case were not applied against any of its output tax
liability;chanrobleslaw

d.

Petitioners input taxes subject of the present case are directly attributable to zero-rated sales;chanrobleslaw

e.

Petitioners zero-rated sales are supported by documentary evidence in accordance with the NIRC of 1997, as
amended, and its implementing regulations; and

f.

The input taxes being claimed are supported by VAT invoices or official receipts in accordance with Section 4.108-5
of RR No. 7-95 in relation to Sections 110 and 237 of the NIRC of 1997, as amended. 14

The Issue

The sole issue for this Courts consideration is whether or not petitioner is entitled to a TCC in the amount of P24,826,667.61 allegedly
representing its excess and unutilized input VAT for the taxable year 2000, in accordance with the provisions of the NIRC of 1997, as
amended, other pertinent laws, and applicable jurisprudential proclamations.
Our Ruling

At the outset, in a petition for review on certiorari under Rule 45 of the Rules of Court, only questions of law may be raised. 15 The

Court is not a trier of facts and does not normally undertake the re-examination of the evidence presented by the contending parties
during the trial of the case considering that the findings of facts of the (CTA) are conclusive and binding on the Court 16 and they
carry even more weight when the (CTA En Banc) affirms the factual findings of the trial court. 17 However, this Court had recognized
several exceptions to this rule,18 including instances when the appellate court manifestly overlooked relevant facts not disputed by
the parties, which, if properly considered, would probably justify a different conclusion.
In 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 case),19 this Court has finally settled the
issue on proper observance of the prescriptive periods in claiming for refund of creditable input tax due or paid attributable to any
zero-rated or effectively zero-rates sales. In view of the foregoing jurisprudential pronouncements, there appears to be an imperious
need for this Court to review the factual findings of the CTA in order to attain a complete determination of the issue presented.
Records reveal that the CTA in Division in C.T.A. Case No. 6464 merely focused on the compliance with the substantiation
requirements, which particularly ruled that the evidence submitted by petitioner to prove its zero-rated sales were insufficient so as
to entitle it to the issuance of a TCC. The same findings were adopted and affirmed in toto by the CTA En Banc in the assailed 20
August 2008 Decision.20chanroblesvirtuallawlibrary
While it is true that the substantiation requirements in establishing a refund claim is a valid issue, the Court finds it imperative to first
and foremost determine whether or not the CTA properly acquired jurisdiction over petitioners claim covering taxable year 2000,
taking into consideration the timeliness of the filing of its judicial claim pursuant to Section 112 of the NIRC of 1997, as amended, and
consistent with the pronouncements made in the San Roque case. Clearly, the claim of petitioner for the TCC can proceed only upon
compliance with the aforesaid jurisdictional requirement.
Relevant to the foregoing, Section 7 of R.A. No. 1125, 21 which was thereafter amended by R.A. No. 9282,22clearly defined the appellate
jurisdiction of the CTA, to wit:chanRoblesvirtualLawlibrary
Section 7. Jurisdiction. - The Court of Tax Appeals shall exercise exclusive appellate jurisdiction to review by appeal, as herein
provided.
(1) Decisions of the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of internal
revenue taxes, fees or other charges, penalties imposed in relation thereto, or other matters arising under the National Internal
Revenue Code or other law or part of law administered by the Bureau of Internal Revenue;chanrobleslaw
x x x.23 (Emphasis supplied)

Moreover, Section 11 of the same law prescribes how the said appeal should be taken. It reads:chanRoblesvirtualLawlibrary
Section 11. Who may appeal; effect of appeal. Any person, association or corporation adversely affected by a decision or
ruling of the Collector of Internal Revenue, the Collector of Customs or any provincial or city Board of Assessment Appeals may file
an appeal in the Court of Tax Appeals within thirty days after the receipt of such decision or ruling. 24x x x (Emphasis and
underscoring supplied)

The timeliness in the administrative and judicial claims can be found in Section 112 of the NIRC of 1997, as amended, which
reads:chanRoblesvirtualLawlibrary
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: x x x.
xxxx
(D)25Period 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) 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.
x x x x. (Emphasis and underscoring supplied)

As mentioned earlier, the proper interpretation of the afore-quoted provision was finally settled in the San Roque case26 by this Court
sitting En Banc. The relevant portions of the discussion pertinent to the focal issue in the present case are quoted hereunder as
follows:chanRoblesvirtualLawlibrary
To repeat, a claim for tax refund or credit, like a claim for tax refund exemption, is construed strictly against the taxpayer. One of the
conditions for a judicial claim of refund or credit under the VAT System is compliance with the 120+30 day mandatory and
jurisdictional periods. Thus, strict compliance with the 120+30 day periods is necessary for such a claim to prosper,
whether before, during, or after the effectivity of the Atlas doctrine, except for the period from the issuance of BIR
Ruling No. DA-489-03 on 10 December 2003 to 6 October 2010 when the Aichi doctrine was adopted, which again
reinstated the 120+30 day periods as mandatory and jurisdictional. 27 (Emphasis supplied)

The same disposition was declared in Mindanao II Geothermal Partnership v. Commissioner of Internal Revenue, and Mindanao I
Geothermal Partnership v. Commissioner of Internal Revenue,28 which, for emphasis, further provided a Summary of Rules on
Prescriptive Periods Involving VAT as a guide for all parties concerned, to wit:chanRoblesvirtualLawlibrary
We summarize the rules on the determination of the prescriptive period for filing a tax refund or credit of unutilized input
VAT as provided in Section 112 of the 1997 Tax Code, as follows:chanRoblesvirtualLawlibrary
(1) An administrative claim must be filed with the CIR within two years after the close of the taxable quarter when the zero-rated or
effectively zero-rated sales were made.
(2) The CIR has 120 days from the date of submission of complete documents in support of the administrative claim within which to
decide whether to grant a refund or issue a tax credit certificate. The 120-day period may extend beyond the two-year period from
the filing of the administrative claim if the claim is filed in the later part of the two-year period. If the 120-day period expires
without any decision from the CIR, then the administrative claim may be considered to be denied by inaction.
(3) A judicial claim must be filed with the CTA within 30 days from the receipt of the CIRs decision denying the
administrative claim or from the expiration of the 120-day period without any action from the CIR.
(4) All taxpayers, however, can rely on BIR Ruling No. DA-489-03 from the time of its issuance on 10 December 2003 up
to its reversal by this Court in Aichi on October 6, 2010, as an exception to the mandatory and jurisdictional 120+30
day periods.29(Emphasis supplied)

Certainly, it is evident from the foregoing jurisprudential pronouncements that a taxpayer-claimant only had a limited period of thirty
(30) days from the expiration of the one hundred twenty (120)-day period of inaction of the Commissioner of Internal Revenue (CIR)
to file its judicial claim with the CTA, with the exception of claims made during the effectivity of Bureau of Internal Revenue (BIR)
Ruling No. DA-489-03 (from 10 December 2003 to 5 October 2010).30 Failure to do so, the judicial claim shall prescribe or be
considered as filed out of time.
Applying the foregoing discussion to the present case, although it appears that petitioner has indeed complied with the required twoyear period within which to file a refund/tax credit claim with the BIR (OSSAC-DOF in this case) by filing all its administrative claims on
24 September 2001 (within the period from the close of the taxable quarters for the year 2000, when the sales were made), this
Court finds that petitioners corresponding judicial claim was filed beyond the 30-day period, detailed hereunder as
follows:chanRoblesvirtualLawlibrary
Taxable year 2000 (close Filing date of the
Last day of the 120-day
of taxable quarters)
administrative claim
period under Section
(within the 2-year period) 112(D) from the date of
submission of complete
documents in support of
its application
1st Quarter
(31 March 2000)
2nd Quarter
(30 June 2000)
3rd Quarter
(30 September 2000)
4th Quarter
(31 December 2000)

24 September 2001

22 September 2001

Last day of the 30-day

Filing date of the Petition
period to judicially appeal for Review
said inaction

21 February 2002

24 April 2002

Section 112(D) of the NIRC of 1997 categorically states that in case of failure on the part of the respondent to act on the application

within the 120-day period prescribed by law, petitioner only has 30 days after the expiration of the 120-day period to appeal the
unacted claim with the CTA. Since petitioners judicial claim for the aforementioned quarters for taxable year 2000 was filed before
the CTA only on 24 April 2002,32which was way beyond the mandatory 120+30 days to seek judicial recourse, such non-compliance
with the mandatory period of 30 days is fatal to its refund claim on the ground of prescription. Consequently, the CTA had no
jurisdiction over the instant claim of petitioner as the petition was belatedly filed.
It must be emphasized that jurisdiction over the subject matter or nature of an action is fundamental for a court to act on a given
controversy,33 and is conferred only by law and not by the consent or waiver upon a court which, otherwise, would have no
jurisdiction over the subject matter or nature of an action. Lack of jurisdiction of the court over an action or the subject matter of an
action cannot be cured by the silence, acquiescence, or even by express consent of the parties. 34 If the court has no jurisdiction over
the nature of an action, its only jurisdiction is to dismiss the case. The court could not decide the case on the
merits.35chanroblesvirtuallawlibrary
The CTA, even if vested with special jurisdiction, is, as courts of general jurisdiction can only take cognizance of such matters as are
clearly within its statutory authority.36 Relative thereto, when it appears from the pleadings or the evidence on record that the court
has no jurisdiction over the subject matter, the court shall dismiss the claim. 37chanroblesvirtuallawlibrary
Finally for academic discussion, as regards the substantiation requirements, it is worthy to mention that inKepco Philippines
Corporation v. Commissioner of Internal Revenue,38 the High Court ruled that under the law, a VAT invoice is necessary for every sale,
barter or exchange of goods or properties while a VATofficial receipt properly pertains to every lease of goods or properties, and every
sale, barter or exchange of services. In other words, the VAT invoice is the sellers best proof of the sale of the goods or services to
the buyer while the VAT receipt is the buyers best evidence of the payment of goods or services received from the seller. Thus, the
High Court concluded that VAT invoice and VAT receipt should not be confused as referring to one and the same thing. Certainly,
neither does the law intend the two to be used interchangeably.
All told, the CTA has no jurisdiction over petitioners judicial appeal considering that its Petition for Review was filed beyond the
mandatory 30-day period pursuant to Section 112(D)39 of the NIRC of 1997, as amended, and consistent with the ruling in the San
Roque case. Consequently, petitioners instant claim for refund must be denied.
WHEREFORE, the claim for refund is by prescription BARRED. Accordingly, the petition for review filed before the Court of Tax
Appeals docketed as CTA Case No. 6464 is DISMISSED for lack of jurisdiction and the issue on substantiation requirements
rendered MOOT and ACADEMIC. This petition is, for such reason,DISMISSED.
SO ORDERED.
Sereno, CJ., (Chairperson), Leonardo-De Castro, Bersamin, and Perlas-Bernabe, JJ., concur.cr

FIRST DIVISION
G.R. No. 172509, February 04, 2015
CHINA BANKING CORPORATION, Petitioner, v. COMMISSIONER OF INTERNAL REVENUE,Respondent.
DECISION
SERENO, C.J.:
This Rule 45 Petition1 requires this Court to address the question of prescription of the governments right to collect taxes. Petitioner
China Banking Corporation (CBC) assails the Decision 2 and Resolution3of the Court of Tax Appeals (CTA) En Banc in CTA En Banc Case
No. 109. The CTA En Banc affirmed the Decision4 in CTA Case No. 6379 of the CTA Second Division, which had also affirmed the
validity of Assessment No. FAS-5-82/85-89-000586 and FAS-5-86-89-00587. The Assessment required petitioner CBC to pay the
amount of P11,383,165.50, plus increments accruing thereto, as deficiency documentary stamp tax (DST) for the taxable years 1982
to 1986.cralawred
FACTS

Petitioner CBC is a universal bank duly organized and existing under the laws of the Philippines. For the taxable years 1982 to 1986,
CBC was engaged in transactions involving sales of foreign exchange to the Central Bank of the Philippines (now Bangko Sentral ng
Pilipinas), commonly known as SWAP transactions.5 Petitioner did not file tax returns or pay tax on the SWAP transactions for those
taxable years.
On 19 April 1989, petitioner CBC received an assessment from the Bureau of Internal Revenue (BIR) finding CBC liable for deficiency
DST on the sales of foreign bills of exchange to the Central Bank. The deficiency DST was computed as
follows:chanroblesvirtuallawlibrary

Deficiency Documentary Stamp Tax

Amount
For the years 1982 to 1985

P 8,280,696.00

For calendar year 1986

P 2,481 ,975.60

Add : Surcharge

P 620,493.90

P 3,102.469.50
P11 ,383,165.506

On 8 May 1989, petitioner CBC, through its vice-president, sent a letter of protest to the BIR. CBC raised the following defenses:
(1) double taxation, as the bank had previously paid the DST on all its transactions involving sales of foreign bills of exchange to the
Central Bank; (2) absence of liability, as the liability for the DST in a sale of foreign exchange through telegraphic transfers to the
Central Bank falls on the buyer ? in this case, the Central Bank; (3) due process violation, as the banks records were never formally
examined by the BIR examiners; (4) validity of the assessment, as it did not include the factual basis therefore; (5) exemption, as
neither the tax-exempt entity nor the other party was liable for the payment of DST before the effectivity of Presidential Decree Nos.
(PD) 1177 and 1931 for the years 1982 to 1986. 7 In the protest, the taxpayer requested a reinvestigation so as to substantiate its
assertions.8chanRoblesvirtualLawlibrary
On 6 December 2001, more than 12 years after the filing of the protest, the Commissioner of Internal Revenue (CIR) rendered
a decision reiterating the deficiency DST assessment and ordered the payment thereof plus increments within 30 days from receipt of
the Decision.9chanRoblesvirtualLawlibrary
On 18 January 2002, CBC filed a Petition for Review with the CTA. On 11 March 2002, the CIR filed an Answer with a demand
for CBC to pay the assessed DST.10chanRoblesvirtualLawlibrary
On 23 February 2005, and after trial on the merits, the CTA Second Division denied the Petition of CBC. The CTA ruled that a SWAP
arrangement should be treated as a telegraphic transfer subject to documentary stamp tax. 11chanRoblesvirtualLawlibrary
On 30 March 2005, petitioner CBC filed a Motion for Reconsideration, but it was denied in a Resolution dated 14 July 2005.
On 5 August 2005, petitioner appealed to the CTA En Banc. The appellate tax court, however, dismissed the Petition for Review in a
Decision dated 1 December 2005. CBC filed a Motion for Reconsideration on 21 December 2005, but it was denied in a 20 March 2006
Resolution.
The taxpayer now comes to this Court with a Rule 45 Petition, reiterating the arguments it raised at the CTA level and invoking for the
first time the argument of prescription. Petitioner CBC states that the government has three years from 19 April 1989, the date the
former received the assessment of the CIR, to collect the tax. Within that time frame, however, neither a warrant of distraint or levy
was issued, nor a collection case filed in court.
On 17 October 2006, respondent CIR submitted its Comment in compliance with the Courts Resolution dated 26 June 2006. 12 The
Comment did not have any discussion on the question of prescription.
On 21 February 2007, the Court issued a Resolution directing the parties to file their respective Memoranda. Petitioner CBC filed its
Memorandum13 on 26 April 2007. The CIR, on the other hand, filed on 17 April 2007 a Manifestation stating that it was adopting the
allegations and authorities in its Comment in lieu of the required Memorandum. 14chanRoblesvirtualLawlibrary
ISSUE

Given the facts and the arguments raised in this case, the resolution of this case hinges on this issue: whether the right of the BIR to
collect the assessed DST from CBC is barred by prescription.15chanRoblesvirtualLawlibrary
RULING OF THE COURT

We grant the Petition on the ground that the right of the BIR to collect the assessed DST is barred by the statute of limitations.
Prescription Has Set In.
To recall, the Bureau of Internal Revenue (BIR) issued the assessment for deficiency DST on 19 April 1989, when the applicable rule
was Section 319(c) of the National Internal Revenue Code of 1977, as amended. 16 In that provision, the time limit for the government
to collect the assessed tax is set at three years, to be reckoned from the date when the BIR mails/releases/sends the assessment
notice to the taxpayer. Further, Section 319(c) states that the assessed tax must be collected by distraint or levy and/or court
proceeding within the three-year period.

With these rules in mind, we shall now determine whether the claim of the BIR is barred by time.
In this case, the records do not show when the assessment notice was mailed, released or sent to CBC. Nevertheless, the latest
possible date that the BIR could have released, mailed or sent the assessment notice was on the same date that CBC received it, 19
April 1989. Assuming therefore that 19 April 1989 is the reckoning date, the BIR had three years to collect the assessed DST.
However, the records of this case show that there was neither a warrant of distraint or levy served on CBC's properties nor a
collection case filed in court by the BIR within the three-year period.
The attempt of the BIR to collect the tax through its Answer with a demand for CBC to pay the assessed DST in the CTA on 11 March
2002 did not comply with Section 319(c) of the 1977 Tax Code, as amended. The demand was made almost thirteen years
from the date from which the prescriptive period is to be reckoned. Thus, the attempt to collect the tax was made way beyond the
three-year prescriptive period.
The BIRs Answer in the case filed before the CTA could not, by any means, have qualified as a collection case as required by law.
Under the rule prevailing at the time the BIR filed its Answer, the regular courts, and not the CTA, had jurisdiction over judicial actions
for collection of internal revenue taxes. It was only on 23 April 2004, when Republic Act Number 9282 took effect, 17 that the
jurisdiction of the CTA was expanded to include, among others, original jurisdiction over collection cases in which the principal
amount involved is one million pesos or more.
Consequently, the claim of the CIR for deficiency DST from petitioner is forever lost, as it is now barred by time. This Court has no
other option but to dismiss the present case.
The running of the statute of
limitations was not suspended
by the request for reinvestigation.
The fact that the taxpayer in this case may have requested a reinvestigation did not toll the running of the three-year prescriptive
period. Section 320 of the 1977 Tax Code states:chanroblesvirtuallawlibrary
Sec. 320. Suspension of running of statute.The running of the statute of limitations provided in Sections 318 or 319 on the making
of assessment and the beginning of distraint or levy or a proceeding in court for collection, in respect of any deficiency, shall be
suspended for the period during which the Commissioner is prohibited from making the assessment or beginning distraint or levy or a
proceeding in court and for sixty days thereafter; when the taxpayer requests for a re-investigation which is granted by the
Commissioner; when the taxpayer cannot be located in the address given by him in the return filed upon which a tax is being
assessed or collected: Provided, That if the taxpayer informs the Commissioner of any change in address, the running of the statute
of limitations will not be suspended; when the warrant of distraint and levy is duly served upon the taxpayer, his authorized
representative, or a member of his household with sufficient discretion, and no property could be located; and when the taxpayer is
out of the Philippines. (Emphasis supplied)

The provision is clear. A request for reinvestigation alone will not suspend the statute of limitations. Two things must concur: there
must be a request for reinvestigation and the CIR must have granted it. BPI v. Commissioner of Internal Revenue 18 emphasized this
rule by stating:chanroblesvirtuallawlibrary
In the case of Republic of the Philippines v. Gancayco, taxpayer Gancayco requested for a thorough reinvestigation of the assessment
against him and placed at the disposal of the Collector of Internal Revenue all the [evidence] he had for such purpose; yet, the
Collector ignored the request, and the records and documents were not at all examined. Considering the given facts, this Court
pronounced that
x x x. The act of requesting a reinvestigation alone does not suspend the period. The request should first be granted,
in order to effect suspension. (Collector v. Suyoc Consolidated, supra; also Republic v. Ablaza, supra). Moreover, the Collector
gave appellee until April 1, 1949, within which to submit his evidence, which the latter did one day before. There were no
impediments on the part of the Collector to file the collection case from April 1, 1949 x x x.
In Republic of the Philippines v. Acebedo, this Court similarly found that
. . . [T]he defendant, after receiving the assessment notice of September 24, 1949, asked for a reinvestigation thereof on October 11,
1949 (Exh. A). There is no evidence that this request was considered or acted upon. In fact, on October 23, 1950 the then Collector
of Internal Revenue issued a warrant of distraint and levy for the full amount of the assessment (Exh. D), but there was follow-up of
this warrant. Consequently, the request for reinvestigation did not suspend the running of the period for filing an action for
collection. (Emphasis in the original)
The Court went on to declare that the burden of proof that the request for reinvestigation had been actually granted shall be on the
CIR. Such grant may be expressed in its communications with the taxpayer or implied from the action of the CIR or his authorized
representative in response to the request for reinvestigation.

There is nothing in the records of this case which indicates, expressly or impliedly, that the CIR had granted the request for
reinvestigation filed by BPI. What is reflected in the records is the piercing silence and inaction of the CIR on the request for
reinvestigation, as he considered BPI's letters of protest to be.

In the present case, there is no showing from the records that the CIR ever granted the request for reinvestigation filed by CBC. That
being the case, it cannot be said that the running of the three-year prescriptive period was effectively suspended.
Failure to raise prescription at the
administrative level/lower court as a
defense is of no moment.
When the pleadings or the evidence on record
show that the claim is barred by prescription,
the court must dismiss the claim even if prescription
is not raised as a defense.

We note that petitioner has raised the issue of prescription for the first time only before this Court. While we are mindful of the
established rule of remedial law that the defense of prescription must be raised at the trial court that has also been applied for tax
cases.19 Thus, as a rule, the failure to raise the defense of prescription at the administrative level prevents the taxpayer from raising
it at the appeal stage.
This rule, however, is not absolute.
The facts of the present case are substantially identical to those in the 2014 case, Bank of the Philippine Islands (BPI) v.
Commissioner of Internal Revenue.20 In that case, petitioner received an assessment notice from the BIR for deficiency DST based on
petitioners SWAP transactions for the year 1985 on 16 June 1989. On 23 June 1989, BPI, through its counsel, filed a protest
requesting the reinvestigation and/or reconsideration of the assessment for lack of legal or factual bases. Almost ten years later, the
CIR, in a letter dated 4 August 1998, denied the protest. On 4 January 1999, BPI filed a Petition for Review with the CTA. On 23
February 1999, the CIR filed an Answer with a demand for BPI to pay the assessed DST. It was only when the case ultimately reached
this Court that the issue of prescription was brought up. Nevertheless, the Court ruled that the CIR could no longer collect the
assessed tax due to prescription. Basing its ruling on Section 1, Rule 9 of the Rules of Court and on jurisprudence, the Court held as
follows:chanroblesvirtuallawlibrary
In a Resolution dated 5 August 2013, the Court, through the Third Division, found that the assailed tax assessment may be
invalidated because the statute of limitations on the collection of the alleged deficiency DST had already expired, conformably with
Section 1, Rule 9 of the Rules of Court and the Bank of the Philippine Islands v. Commissioner of Internal Revenue decision. However,
to afford due process, the Court required both BPI and CIR to submit their respective comments on the issue of prescription.
Only the CIR filed his comment on 9 December 2013. In his Comment, the CIR argues that the issue of prescription cannot be raised
for the first time on appeal. The CIR further alleges that even assuming that the issue of prescription can be raised, the protest letter
interrupted the prescriptive period to collect the assessed DST, unlike in the Bank of the Philippine Islands case.
xxxx
We deny the right of the BIR to collect the assessed DST on the ground of prescription.
Section 1, Rule 9 of the Rules of Court expressly provides that:ChanRoblesVirtualawlibrary
Section 1. Defenses and objections not pleaded. - Defenses and objections not pleaded either in a motion to dismiss or in the answer
are deemed waived. However, when it appears from the pleadings or the evidence on record that the court has no
jurisdiction over the subject matter, that there is another action pending between the same parties for the same cause, or that the
action is barred by prior judgment or by thestatute of limitations, the court shall dismiss the claim.
If the pleadings or the evidence on record show that the claim is barred by prescription, the court is mandated to
dismiss the claim even if prescription is not raised as a defense. In Heirs of Valientes v. Ramas, we ruled that the CA
maymotu proprio dismiss the case on the ground of prescription despite failure to raise this ground on appeal. The court is imbued
with sufficient discretion to review matters, not otherwise assigned as errors on appeal, if it finds that their consideration is necessary
in arriving at a complete and just resolution of the case. More so, when the provisions on prescription were enacted to benefit and
protect taxpayers from investigation after a reasonable period of time.
Thus, we proceed to determine whether the period to collect the assessed DST for the year 1985 has prescribed.
To determine prescription, what is essential only is that the facts demonstrating the lapse of the prescriptive period were sufficiently
and satisfactorily apparent on the record either in the allegations of the plaintiffs complaint, or otherwise established by the
evidence. Under the then applicable Section 319(c) [now, 222(c)] of the National Internal Revenue Code (NIRC) of 1977, as amended,

any internal revenue tax which has been assessed within the period of limitation may be collected by distraint or levy, and/or court
proceeding within three years following the assessment of the tax. The assessment of the tax is deemed made and the three-year
period for collection of the assessed tax begins to run on the date the assessment notice had been released, mailed or sent by the
BIR to the taxpayer.
In the present case, although there was no allegation as to when the assessment notice had been released, mailed or sent to BPI,
still, the latest date that the BIR could have released, mailed or sent the assessment notice was on the date BPI received the same on
16 June 1989. Counting the three-year prescriptive period from 16 June 1989, the BIR had until 15 June 1992 to collect the assessed
DST. But despite the lapse of 15 June 1992, the evidence established that there was no warrant of distraint or levy served on BPIs
properties, or any judicial proceedings initiated by the BIR.
The earliest attempt of the BIR to collect the tax was when it filed its answer in the CTA on 23 February 1999, which was several years
beyond the three-year prescriptive period. However, the BIRs answer in the CTA was not the collection case contemplated by the law.
Before 2004 or the year Republic Act No. 9282 took effect, the judicial action to collect internal revenue taxes fell under the
jurisdiction of the regular trial courts, and not the CTA. Evidently, prescription has set in to bar the collection of the assessed DST.
(Emphasis supplied)

BPI thus provides an exception to the rule against raising the defense of prescription for the first time on appeal: the exception
arises when the pleadings or the evidence on record show that the claim is barred by prescription.
In this case, the fact that the claim of the government is time-barred is a matter of record. As can be seen from the previous
discussion on the determination of the prescription of the right of the government to claim deficiency DST, the conclusion that
prescription has set in was arrived at using the evidence on record. The date of receipt of the assessment notice was not disputed,
and the date of the attempt to collect was determined by merely checking the records as to when the Answer of the CIR containing
the demand to pay the tax was filed.
Estoppel or waiver prevents the government
from invoking the rule against raising the
issue of prescription for the first time on appeal.

In this case, petitioner may have raised the question of prescription only on appeal to this Court. The BIR could have crushed the
defense by the mere invocation of the rule against setting up the defense of prescription only at the appeal stage. The government,
however, failed to do so.
On the contrary, the BIR was silent despite having the opportunity to invoke the bar against the issue of prescription. It is worthy of
note that the Court ordered the BIR to file a Comment. The government, however, did not offer any argument in its Comment about
the issue of prescription, even if petitioner raised it in the latters Petition. It merely fell silent on the issue. It was given another
opportunity to meet the challenge when this Court ordered both parties to file their respective memoranda. The CIR, however, merely
filed a Manifestation that it would no longer be filing a Memorandum and, in lieu thereof, it would be merely adopting the arguments
raised in its Comment. Its silence spoke loudly of its intent to waive its right to object to the argument of prescription.
We are mindful of the rule in taxation that estoppel does not prevent the government from collecting taxes; it is not bound by the
mistake or negligence of its agents. The rule is based on the political law concept the king can do no wrong, 21 which likens a state
to a king: it does not commit mistakes, and it does not sleep on its rights. The analogy fosters inequality between the taxpayer and
the government, with the balance tilting in favor of the latter. This concept finds justification in the theory and reality that
government is necessary, and it must therefore collect taxes if it is to survive. Thus, the mistake or negligence of government officials
should not bind the state, lest it bring harm to the government and ultimately the people, in whom sovereignty
resides.22chanRoblesvirtualLawlibrary
Republic v. Ker & Co. Ltd.23 involved a collection case for a final and executory assessment. The taxpayer nevertheless raised the
prescription of the right to assess the tax as a defense before the Court of First Instance. The Republic, instead of objecting to the
invocation of prescription as a defense by the taxpayer, litigated on the issue and thereafter submitted it for resolution. The Supreme
Court ruled for the taxpayer, treating the actuations of the government as a waiver of the right to invoke the defense of
prescription. Ker effectively applied to the government the rule of estoppel. Indeed, the no-estoppel rule is not absolute.
The same ingredients in Ker - procedural matter and injustice - obtain in this case. The procedural matter consists in the failure to
raise the issue of prescription at the trial court/administrative level, and injustice in the fact that the BIR has unduly delayed the
assessment and collection of the DST in this case. The fact is that it took more than 12 years for it to take steps to collect the
assessed tax. The BIR definitely caused untold prejudice to petitioner, keeping the latter in the dark for so long, as to whether it is
liable for DST and, if so, for how much.cralawred
CONCLUSION

Inasmuch as the governments claim for deficiency DST is barred by prescription, it is no longer necessary to dwell on the validity of

the assessment.chanrobleslaw
WHEREFORE, the Petition is GRANTED. The Court of Tax Appeals En Banc Decision dated 1 December 2005 and its Resolution dated
20 March 2006 in CTA EB Case No. 109 are herebyREVERSED and SET ASIDE. A new ruling is entered DENYING respondents claim
for deficiency DST in the amount of P11,383,165.50.
SO ORDERED.cralawlawlibrary

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 197525

June 4, 2014

VISAYAS GEOTHERMAL POWER COMPANY, Petitioner,

vs.
COMMISSIONER OF INTERNAL REVENUE, Respondent.
DECISION
MENDOZA, J.:
Before the Court is a petition for review on certiorari under Rule 45 of the Rules of Court assailing the February 7, 2011 Decision 1 and
the June 27, 2011 Resolution2 of the Court of Tax Appeals En Banc (CTA En Banc) in CTA EB Case Nos. 561 and 562, which reversed
and set aside the April 17, 2009 Decision of the CT A Second Division in CTA Case No. 7559.
The Facts:
Petitioner Visayas Geothermal Power Company (VGPC) is a special limited partnership duly organized and existing under Philippine
Laws with its principal office at Milagro, Ormoc City, Province of Leyte. It is principally engaged in the business of power generation
through geothermal energy and the sale of generated power to the Philippine National Oil Company (PNOC),pursuant to the Energy
Conversion Agreement.
VGPC filed with the Bureau of Internal Revenue (BIR)its Original Quarterly VAT Returns for the first to fourth quarters of taxable year
2005 on April 25, 2005, July 25, 2005, October 25, 2006, and January 20, 2006, respectively.
On December 6, 2006, it filed an administrative claim for refund for the amount of 14,160,807.95 with the BIR District Office No. 89 of
Ormoc City on the ground that it was entitled to recover excess and unutilized input VAT payments for the four quarters of taxable
year 2005, pursuant to Republic Act (R.A.) No. 9136, 3 which treated sales of generated power subject to VAT to a zero percent (0%)
rate starting June 26, 2001.
Nearly one month later, on January3, 2007, while its administrative claim was pending, VGPC filed its judicial claim via a petition for
review with the CTA praying for a refund or the issuance of a tax credit certificate in the amount of 14,160,807.95, covering the four
quarters of taxable year 2005.
In its April 17, 2009 Decision, the CTA Second Division partially granted the petition as follows:
WHEREFORE, in view of the foregoing considerations, the Petition for Review is hereby PARTIALLY GRANTED. Accordingly, respondent
is ORDERED TO REFUND or, in the alternative, TO ISSUE A TAX CREDIT CERTIFICATE in favor of petitioner the reduced amount of
SEVEN MILLION SIX HUNDRED NINENTY NINE THOUSAND THREE HUNDRED SIXTY SIX PESOS AND 37/100 (P7,699,366.37)
representing unutilized input VAT paid on domestic purchases of non-capital goods and services, services rendered by non-residents,
and importations of non-capital goods for the first to fourth quarters of taxable year 2005.
SO ORDERED.4
The CTA Second Division found that only the amount of 7,699,366.37 was duly substantiated by the required evidence. As to the
timeliness of the filing of the judicial claim, the Court ruled that following the case of Commissioner of Internal Revenue (CIR) v. Mirant
Pagbilao Corporation (Mirant),5 both the administrative and judicial claims were filed within the two-year prescriptive period provided
in Section 112(A) of the National Internal Revenue Code of 1997 (NIRC),the reckoning point of the period being the close of the
taxable quarter when the sales were made.
In its October 29, 2009 Resolution,6 the CTA Second Division denied the separate motions for partial reconsideration filed by VGPC
and the CIR. Thus, both VGPC and the CIR appealed to the CTA En Banc.
In the assailed February 7, 2011 Decision, 7 the CTA En Banc reversed and set aside the decision and resolution of the CTA Second
Division, and dismissed the original petition for review for having been filed prematurely, to wit:
WHEREFORE, premises considered:
i. As regards CTA EB Case No. 562, the Petition for Review is hereby DISMISSED; and
ii. As regards CTA EB Case No. 561, the Petition for Review is hereby GRANTED.

Accordingly, the Decision, dated April 17, 2009, and the Resolution, dated October 29, 2009, of the CTA Former Second Division are
hereby REVERSED and SET ASIDE, and another one is hereby entered DISMISSING the Petition for Review filed in CTA Case No. 7559
for having been filed prematurely.
SO ORDERED.8
The CTA En Banc explained that although VGPC seasonably filed its administrative claim within the two-year prescriptive period, its
judicial claim filed with the CTA Second Division was prematurely filed under Section 112(D) of the National Internal Revenue Code
(NIRC).Citing the case of CIR v. Aichi Forging Company of Asia, Inc. (Aichi), 9 the CTA En Banc held that the judicial claim filed 28 days
after the petitioner filed its administrative claim, without waiting for the expiration of the 120-day period, was premature and, thus,
the CTA acquired no jurisdiction over the case.
The VGPC filed a motion for reconsideration, but the CTA En Banc denied it in the assailed June 27, 2011 Resolution for lack of merit.
It stated that the case of Atlas Consolidated Mining v. CIR (Atlas) 10 relied upon by the petitioner had long been abandoned.
Hence, this petition.
ASSIGNMENT OF ERRORS
I
The CTA En Banc erred in finding that the 120-day and 30-day periods prescribed under Section 112(D) of the 1997 Tax Code are
jurisdictional and mandatory in the filing of the judicial claim for refund. The CTA-Division should take cognizance of the judicial
appeal as long as it is filed with the two-year prescriptive period under Section 229 of the 1997 Tax Code.
II
The CTA En Banc erred in finding that Aichi prevails over and/or overturned the doctrine in Atlas, which upheld the primacy of the twoyear period under Section 229 of the Tax Code. The law and jurisprudence have long established the doctrine that the taxpayer is
duty-bound to observe the two-year period under Section 229 of the Tax Code when filing its claim for refund of excess and unutilized
VAT.
III
The CTA En Banc erred in finding that Respondent CIR is not estopped from questioning the jurisdiction of the CTA. Respondent CIR,
by her actions and pronouncements, should have been precluded from questioning the jurisdiction of the CTA-Division.
IV
The CTA En Banc erred in applying Aichi to Petitioner VGPCs claim for refund. The novel interpretation of the law in Aichi should not
be made to apply to the present case for being contrary to existing jurisprudence at the time Petitioner VGPC filed its administrative
and judicial claims for refund.11
Petitioner VGPC argues that (1) the law and jurisprudence have long established the rule regarding compliance with the two-year
prescriptive period under Section 112(D) in relation to Section 229 of the 1997 Tax Code; (2) Aichi did not overturn the doctrine in
Atlas, which upheld the primacy of the two-year period under Section 229; (3) respondent CIR is estopped from questioning the
jurisdiction of the CTA and Aichi cannot be indiscriminately applied to all VAT refund cases; (4) applying Aichi invariably to all VAT
refund cases would effectively grant respondent CIR unbridled discretion to deprive a taxpayer of the right to effectively seek judicial
recourse, which clearly violates the standards of fairness and equity; and (5) the novel interpretation of the law in Aichi should not be
made to apply to the present case for being contrary to existing jurisprudence at the time VGPC filed its administrative and judicial
claims for refund. Aichi should be applied prospectively.
Ruling of the Court
Judicial claim not premature
The assignment of errors is rooted in the core issue of whether the petitioners judicial claim for refund was prematurely filed.
Two sections of the NIRC are pertinent to the issue at hand, namely Section 112 (A) and (D) and Section 229, to wit:
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: 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 of 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.
xxx
(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.
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, 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.
[Emphases supplied]
It has been definitively settled in the recent En Banc case of CIR v. San Roque Power Corporation (San Roque), 12that it is Section 112
of the NIRC which applies to claims for tax credit certificates and tax refunds arising from sales of VAT-registered persons that are
zero-rated or effectively zero-rated, which are, simply put, claims for unutilized creditable input VAT.
Thus, under Section 112(A), the taxpayer may, within 2 years after the close of the taxable quarter when the sales were made, via an
administrative claim with the CIR, apply for the issuance of a tax credit certificate or refund of creditable input tax due or paid
attributable to such sales. Under Section 112(D), the CIR must then act on the claim within 120 days from the submission of the
taxpayers complete documents. In case of (a) a full or partial denial by the CIR of the claim, or (b) the CIRs failure to act on the
claim within 120 days, the taxpayer may file a judicial claim via an appeal with the CTA of the CIR decision or unacted claim, within
30 days (a) from receipt of the decision; or (b) after the expiration of the 120-day period.
The 2-year period under Section 229 does not apply to appeals before the CTA in relation to claims for a refund or tax credit for
unutilized creditable input VAT.Section 229 pertains to the recovery of taxes erroneously, illegally, or excessively collected. 13 San
Roque stressed that "input VAT is not excessively collected as understood under Section 229 because, at the time the input VAT is
collected, the amount paid is correct and proper."14 It is, therefore, Section 112 which applies specifically with regard to claiming a
refund or tax credit for unutilized creditable input VAT. 15
Upholding the ruling in Aichi,16 San Roque held that the 120+30 day period prescribed under Section 112(D) mandatory and
jurisdictional.17 The jurisdiction of the CTA over decisions or inaction of the CIR is only appellate in nature and, thus, necessarily
requires the prior filing of an administrative case before the CIR under Section 112. 18 The CTA can only acquire jurisdiction over a case
after the CIR has rendered its decision, or after the lapse of the period for the CIR to act, in which case such inaction is considered a
denial.19 A petition filed prior to the lapse of the 120-day period prescribed under said Section would be premature for violating the
doctrine on the exhaustion of administrative remedies. 20
There is, however, an exception to the mandatory and jurisdictional nature of the 120+30 day period. The Court in San Roque noted
that BIR Ruling No. DA-489-03, dated December 10, 2003, expressly stated that the "taxpayer-claimant need not wait for the lapse of
the 120-day period before it could seek judicial relief with the CTA by way of Petition for Review." 21 This BIR Ruling was recognized as
a general interpretative rule issued by the CIR under Section 4 22 of the NIRC and, thus, applicable to all taxpayers. Since the CIR has
exclusive and original jurisdiction to interpret tax laws, it was held that taxpayers acting in good faith should not be made to suffer for
adhering to such interpretations. Section 24623 of the Tax Code, in consonance with equitable estoppel, expressly provides that a
reversal of a BIR regulation or ruling cannot adversely prejudice a taxpayer who in good faith relied on the BIR regulation or ruling
prior to its reversal. Hence, taxpayers can rely on BIR Ruling No. DA-489-03 from the time of its issuance on December 10, 2003 up to
its reversal by this Court in Aichion October 6, 2010, where it was held that the 120+30 day period was mandatory and jurisdictional.
Accordingly, the general rule is that the 120+30 day period is mandatory and jurisdictional from the effectivity of the 1997 NIRC on
January 1, 1998, up to the present. As an exception, judicial claims filed from December 10, 2003 to October 6, 2010 24 need not wait
for the exhaustion of the 120-day period.

A review of the facts of the present case reveals that petitioner VGPC timely filed its administrative claim with the CIR on December
6, 2006, and later, its judicial claim with the CTA on January 3, 2007. The judicial claim was clearly filed within the period of exception
and was, therefore, not premature and should not have been dismissed by the CTA En Banc.
In the present petition, VGPC prays that the Court grant its claim for refund or the issuance of a tax credit certificate for its unutilized
input VAT in the amount of P14,160,807.95. The CTA Second Division, however, only awarded the amount of P7,699,366.37. The
petitioner has failed to present any argument to support its entitlement to the former amount.
In any case, the Court would have been precluded from considering the same as such would require a review of the evidence, which
would constitute a question of fact outside the Courts purview under Rule 45 of the Rules of Court. The Court, thus, finds that the
petitioner is entitled to the refund awarded to it by the CTA Second Division in the amount of P7,699,366.37.
Atlas doctrine has no relevance
to the 120+30 day period for
filing judicial claim
Although the core issue of prematurity of filing has already been resolved, the Court deems it proper to discuss the petitioners
argument that the doctrine in Atlas, which allegedly upheld the primacy of the 2-year prescriptive period under Section 229,should
prevail over the ruling in Aichi regarding the mandatory and jurisdictional nature of the 120+30 day period in Section 112.
In this regard, it was thoroughly explained in San Roque that the Atlas doctrine only pertains to the reckoning point of the 2-year
prescriptive period from the date of payment of the output VAT under Section 229, and has no relevance to the 120+30 day period
under Section 112, to wit:
The Atlas doctrine, which held that claims for refund or credit of input VAT must comply with the two-year prescriptive period under
Section 229, should be effective only from its promulgation on 8 June 2007 until its abandonment on 12 September 2008 in Mirant.
The Atlas doctrine was limited to the reckoning of the two-year prescriptive period from the date of payment of the output VAT. Prior
to the Atlas doctrine, the two-year prescriptive period for claiming refund or credit of input VAT should be governed by Section 112(A)
following the verba legis rule. The Mirant ruling, which abandoned the Atlas doctrine, adopted the verba legis rule, thus applying
Section 112(A) in computing the two year prescriptive period in claiming refund or credit of input VAT.
The Atlas doctrine has no relevance to the 120+30 day periods under Section 112(C) because the application of the 120+30 day
periods was not in issue in Atlas. The application of the 120+30 day periods was first raised in Aichi, which adopted the verba legis
rule in holding that the 120+30 day periods are mandatory and jurisdictional. The language of Section 112(C) is plain, clear, and
unambiguous. When Section 112(C) states that "the Commissioner shall grant a refund or issue the tax credit within one hundred
twenty (120) days from the date of submission of complete documents," the law clearly gives the Commissioner 120 days within
which to decide the taxpayers claim. Resort to the courts prior to the expiration of the 120-day period is a patent violation of the
doctrine of exhaustion of administrative remedies, a ground for dismissing the judicial suit due to prematurity. Philippine
jurisprudence is awash with cases affirming and reiterating the doctrine of exhaustion of administrative remedies. Such doctrine is
basic and elementary.25
[Underscoring supplied]
Thus, Atlas is only relevant in determining when to file an administrative claim with the CIR for refund or credit of unutilized creditable
input VAT, and not for determining when to file a judicial claim with the CTA. From June 8, 2007 to September 12, 2008, the 2-year
prescriptive period to file administrative claims should be counted from the date of payment of the output VAT tax. Before and after
said period, the 2-year prescriptive period is counted from the close of the taxable quarter when the sales were made, in accordance
with Section 112(A). In either case, the mandatory and jurisdictional 120+30 day period must be complied with for the filing of the
judicial claim with the CTA, except for the period provided under BIR Ruling No. DA-489-03, as previously discussed.
The Court further noted that Atlas was decided in relation to the 1977 Tax Code which had not yet provided for the 30-day period for
the taxpayer to appeal to the CTA from the decision or inaction of the CIR over claims for unutilized input VAT. Clearly then, the Atlas
doctrine cannot be invoked to disregard compliance with the 120+30 day mandatory and jurisdictional period. 26 In San Roque, it was
written:
The old rule that the taxpayer may file the judicial claim, without waiting for the Commissioners decision if the two-year prescriptive
period is about to expire, cannot apply because that rule was adopted before the enactment of the 30-day period. The 30-day period
was adopted precisely to do away with the old rule, so that under the VAT System the taxpayer will always have 30 days to file the
judicial claim even if the Commissioner acts only on the 120th day, or does not act at all during the 120-day period. With the 30-day
period always available to the taxpayer, the taxpayer can no longer file a judicial claim for refund or credit of input VAT without
waiting for the Commissioner to decide until the expiration of the 120-day period. 27
At any rate, even assuming that the Atlas doctrine was relevant to the present case, it could not be applied since it was held to be
effective only from its promulgation on June 8, 2007 until its abandonment on September 12, 2008 when Mirant was promulgated.
The petitioner in this case filed both its administrative and judicial claims outside the said period of effectivity.
Aichi not applied prospectively

Petitioner VGPC also argues that Aichi should be applied prospectively and, therefore, should not be applied to the present case. This
position cannot be given consideration.
Article 8 of the Civil Code provides that judicial decisions applying or interpreting the law shall form part of the legal system of the
Philippines and shall have the force of law. The interpretation placed upon a law by a competent court establishes the
contemporaneous legislative intent of the law. Thus, such interpretation constitutes a part of the law as of the date the statute is
enacted. It is only when a prior ruling of the Court is overruled, and a different view adopted, that the new doctrine may have to be
applied prospectively in favor of parties who have relied on the old doctrine and have acted in good faith. 28
Considering that the nature of the 120+30 day period was first settled in Aichi, the interpretation by the Court of its being mandatory
and jurisdictional in nature retro acts to the date the NIRC was enacted. It cannot be applied prospectively as no old doctrine was
overturned.
The petitioner cannot rely either on the alleged jurisprudence prevailing at the time it filed its judicial claim. The Court notes that the
jurisprudence relied upon by the petitioner consists of CTA cases. It is elementary that CTA decisions do not constitute precedent and
do not bind this Court or the public. Only decisions of this Court constitute binding precedents, forming part of the Philippine legal
system.29
As regards the cases30 which were later decided allegedly in contravention of Aichi, it is of note that all of them were decided by
Divisions of this Court, and not by the Court En Banc.1wphi1 Any doctrine or principle of law laid down by the Court, either rendered
En Bancor in Division, may be overturned or reversed only by the Court sitting En Banc. 31 Thus, the cases cited by the petitioner could
not have overturned the doctrine laid down in Aichi.
CIR not estopped
The petitioners argument that the CIR should have been estopped from questioning the jurisdiction of the CTA after actively
participating in the proceedings before the CTA Second Division deserves scant consideration.
It is a well-settled rule that the government cannot be estopped by the mistakes, errors or omissions of its agents. 32 It has been
specifically held that estoppel does not apply to the government, especially on matters of taxation. Taxes are the nations lifeblood
through which government agencies continue to operate and with which the State discharges its functions for the welfare of its
constituents.33 Thus, the government cannot be estopped from collecting taxes by the mistake, negligence, or omission of its agents.
Upon taxation depends the ability of the government to serve the people for whose benefit taxes are collected. To safeguard such
interest, neglect or omission of government officials entrusted with the collection of taxes should not be allowed to bring harm or
detriment to the people.34
Rules on claims for refund or tax credit of unutilized input VAT
For clarity and guidance, the Court deems it proper to outline the rules laid down in San Roque with regard to claims for refund or tax
credit of unutilized creditable input VAT. They are as follows:
1. When to file an administrative claim with the CIR:
a. General rule Section 112(A) and Mirant Within 2 years from the close of the taxable quarter when the sales were made.
b. Exception Atlas
Within 2 years from the date of payment of the output VAT, if the administrative claim was filed from June 8, 2007 (promulgation of
Atlas) to September 12, 2008 (promulgation of Mirant).
2. When to file a judicial claim with the CTA:
a. General rule Section 112(D); not Section 229
i. Within 30 days from the full or partial denial of the administrative claim by the CIR; or
ii. Within 30 days from the expiration of the 120-day period provided to the CIR to decide on the claim. This is mandatory and
jurisdictional beginning January L 1998 ( effectivity of 1997 NI RC).
b. Exception - BIR Ruling No. DA-489-03
The judicial claim need not await the expiration of the 120-day period, if such was filed from December 10, 2003 (issuance of BIR
Ruling No. DA-489-03) to October 6, 2010 (promulgation of Aichi).
WHEREFORE, the petition is PARTIALLY GRANTED. The February 7, 2011 Decision and the June 27, 2011 Resolution of the Court of Tax
Appeals En Banc, in CT A EB Case Nos. 561 and 562 are REVERSED and SET ASIDE. The April 17, 2009 Decision and the October 29,
2009 Resolution of the CTA Former Second Division in CTA Case No. 7559 are REINSTATED.

Public respondent is hereby ORDERED TO REFUND or, in the alternative, TO ISSUE A TAX CREDIT CERTIFICATE, in favor or the
petitioner the amount of SEVEN MILLION SIX HUNDRED NINETY NINE THOUSAND THREE HUNDRED SIXTY SIX PESOS AND 37/100
(P7,699,366.37) representing unutilized input VAT paid on domestic purchases of non-capital goods and services, services rendered
by nonresidents, and importations of non-capital goods for the first to fourth quarters of taxable year 2005.
SO ORDERED.

SECOND DIVISION
[G.R. No. 118176. April 12, 2000]
PROTECTOR'S SERVICES, INC., petitioner, vs. COURT OF APPEALS AND COMMISSIONER OF INTERNAL
REVENUE, respondents. Korte
DECISION
QUISUMBING, J.:
Assailed in this petition for review is the Decision [1] of the Court of Appeals dated November 28, 1994, in CA-G.R. SP No.31825. It
affirmed the judgment of the Court of Tax Appeals which had dismissed the petition for review of assessments made by the
Commissioner of Internal Revenue imposing deficiency percentage taxes on petitioner for the years 1983, 1984 and 1985. The
dispositive portion of the CTA's decision states:
"WHEREFORE, in all the foregoing, this case is hereby DISMISSED for lack of jurisdiction--the subject assessments having become final
and unappealable."[2]
The facts are as follows:
Petitioner Protector's Services, Inc. (PSI) is a contractor engaged in recruiting security guards for clients. After an audit investigation
conducted by the Bureau of Internal Revenue (BIR), petitioner was assessed for deficiency percentage taxes including surcharges,
penalties and interests thereon, as follows:
YEAR..........AMOUNT..........DEMAND LETTER NO.
1983..........P503,564.59..........18-452-83B-87-B2
1984........... 831,464.30..........18-451-84B-87-B2
1985..........P1,514,047.86.......18-450-85B-87-B2
On December 7, 1987, respondent Commissioner sent by registered mail, demand letters for payment of the aforesaid assessments.
However, petitioner alleged that on December 10, 1987, it only received Demand Letter Nos. 18-452-83B-87 -B2 and 18-451-84B-87
-B2 for the years 1983 and 1984, respectively. It denied receiving any notice of deficiency percentage tax for the year 1985.
Petitioner sent a protest letter dated January 02, 1988, to the BIR regarding the 1983 and 1984 assessments. The petitioner claimed
that its gross receipts subject to percentage taxes should exclude the salaries of the security guards as well as the corresponding
employer's share of Social Security System (SSS), State Insurance Fund (SIP) and Medicare contributions.Sclaw

Without formally acting on the petitioner's protest, the BIR sent a follow-up letter dated July 12, 1988, ordering the settlement of
taxes based on its computation. Additional documentary stamp taxes of two thousand twenty-five (P2,025.00) pesos on petitioner's
capitalization for 1983 and 1984, and seven hundred three pesos and forty-one centavos (P703.41) as deficiency expanded
withholding tax were included in the amount demanded. The total unsettled tax amounted to two million, eight hundred fifty-one
thousand, eight hundred five pesos and sixteen centavos (P2,851,805.16).
On July 21, 1988, petitioner paid the P2,025.00 documentary stamp tax and the P703.41 deficiency expanded withholding tax. On the
following day, July 22, 1988, petitioner filed its second protest on the 1983 and 1984 percentage taxes, and included, for the first
time, its protest against the 1985 assessment.
On November 9, 1990, BIR Deputy Commissioner Eufracio Santos sent a letter to the petitioner which denied with finality the latter's
protests against the subject assessments, stating thus:
"...[T]hat the salaries paid to the security guards form part of your taxable gross receipts in the determination of the 3% and 4%
contractor's tax imposed under Section 191 of the Tax Code prior to its amendment by the provision of Executive Order No.273.
Considering that the security guards are actually your employees and not that of your clients, the salaries corresponding to the
services rendered by your employees form part of your taxable receipts. This contention finds support in the case of Avecilla Building
Corporation versus Commissioner, et al., G.R. L-42395, 17 January 1985 and Resty Arbon Singh versus Commissioner, CTA Case
No.1901, 5 December 1970."[3]
On December 5, 1990, petitioner filed a petition for review before the CTA contending that:
1).....Assessments for documentary stamp tax and expanded withholding tax are without basis since they were paid on July 22, 1988.
2).....The period for collection of the 1985 percentage tax had prescribed, because PSI denied having received any assessment letter
for the same year. Sc lex
3).....Percentage taxes for the three quarters of 1984 were filed as follows: 1st Qtr. -April 23, 1984; 2nd Qtr. -July 20, 1984, and; 3rd
Qtr. - October 19, 1984. The three-year prescriptive period to collect percentage taxes for the 1st, 2nd and 3rd quarters had
prescribed because the BIR sent an assessment letter only on December 10, 1987.
4).....The base amount for computing percentage tax was erroneous because the BIR included in the taxable amount, the salaries of
the security guards and the employer's corresponding remittances to SSS, SIF, and Medicare, which amounts were earmarked for
other persons, and should not form part of PSIs receipts.
The CTA dismissed the petition on the following grounds: (1) The three-year period of limitation for assessment of taxes in 1984
commenced from the date of filing the final return on January 20, 1985, hence assessment made on December 10, 1987, was within
said period. (2) Petitioner could not deny receipt of the 1985 assessment on the same date, December 10, 1987, for as supported by
testimony of the BIR personnel, all the assessment letters for the years 1983, 1984, and 1985 were included in one envelope and
mailed together. (3) Petitioner's protest letter dated January 2, 1988, was filed on January 12, 1988, or thirty-three days from
December 10, 1987, hence, the request for reinvestigation was filed out of time.
Petitioner appealed to the Court of Appeals, which affirmed the decision of the CTA. Hence, the present petition, wherein petitioner
raises the following issues:
"I. WHETHER THE COURT OF TAX APPEALS HAS JURISDICTION TO ACT ON THE PETITION FOR REVIEW FILED BEFORE IT.
II. WHETHER THE ASSESSMENTS AGAINST THE PETITIONER FOR DEFICIENCY PERCENTAGE TAX FOR TAXABLE YEARS 1983 AND 1984
WERE MADE AFTER THE LAPSE OF THE PRESCRIPTIVE PERIOD.
III. WHETHER THE PERIOD FOR THE COLLECTION OF TAXES FOR TAXABLE YEARS 1983,1984, AND 1985 HAS ALREADY PRESCRIBED.
IV. WHETHER THE ASSESSMENTS ARE CORRECT." [4]
As to the first issue, petitioner maintains that the assessments only became final on November 9, 1990, when the CIR denied the
request for reconsideration. Consequently, the CTA had jurisdiction over the appeal filed by the petitioner on December 5, 1990.
Furthermore, the CTA resolved that the assessments became final after thirty days from receipt of demand letters by the petitioner,
without the latter interposing a reconsideration. x law
The pertinent provision of the National Internal Revenue Code of 1977 (NIRC 1977), concerning the period within which to file a
protest before the CIR, reads:
"Section 270. Protesting of assessment. --When the Commissioner of Internal Revenue or his duly authorized representative finds that
proper taxes should be assessed, he shall first notify the taxpayer of his findings. Within a period to be prescribed by implementing
regulations, the taxpayer shall be required to respond to said notice. If the taxpayer fails to respond, the Commissioner shall issue an
assessment based on his findings.

Such assessment may be protested administratively by filing a request for reconsideration or reinvestigation in such form and
manner as may be prescribed by the implementing regulations within thirty (30) days from receipt of the assessment; otherwise, the
assessment shall become final, and unappealable.
If the protest is denied in whole or in part, the individual, association or corporation adversely affected by the decision on the protest
may appeal to the Court of Tax Appeals within thirty (30) days from receipt of the said decision; otherwise, the decision shall become
final, executory and demandable."
We note that indeed on December 10, 1987, petitioner received the BIR's assessment notices. On January 12, 1988, petitioner
protested the 1983 and 1984 assessments and requested for a reinvestigation. From December 10, 1987 to January 12, 1988, thirtythree days had lapsed. Thereafter petitioner may no longer dispute the correctness of the assessments. Hence, in our view, the CTA
correctly dismissed the appeal for lack of jurisdiction.
On the second issue, petitioner argues that the government's right to assess and collect the 1983, 1984 and 1985 taxes had already
prescribed. Relying on Batas Parnbansa (BP) Blg. 700, which reduced the period of limitation for assessment and collection of internal
revenue taxes from five to three years, petitioner asserts that the government was barred from reviewing the 1983 tax starting
December 10, 1987, the expiry date of the three-year limit. Petitioner insists that the reckoning period of prescription should start
from the date when the quarterly percentage taxes were paid and not when the Final Annual Percentage Tax Return for the year was
filed. Moreover, he denies having received the 1985 tax assessment.
Petitioner's contentions lack merit. Sections one and three of BP 700, "An Act Amending Sections 318 and 319 of the National Internal
Revenue Code, which reduced the period of limitation for assessment and collection of internal revenue taxes from five to three
years," provides: Sc
"Sec. 1, Section 318 of the National Internal Revenue Code, as amended, is hereby amended to read as follows:
Sec. 318. Period of limitation upon assessment and collection. --Except as provided in the succeeding sections, internal revenue taxes
shall be assessed within three years after the last day prescribed by law for the filing of the return, and no proceeding in court without
assessment for the collection of such taxes shall be begun after the expiration of such period: Provided, That in a case where a return
is filed beyond the period prescribed by law, the three-year period shall be counted from the day the return was filed. For the
purposes of this section, a return filed before the last day prescribed by law for the filing thereof shall be considered as filed on such
last day.
xxx
"Sec. 3. The period of limitation herein prescribed shall apply to assessments of internal revenue taxes beginning taxable year 1984."
B.P. 700 was approved on April 5, 1984. The three-year prescriptive period for assessment and collection of revenue taxes applied to
taxes paid beginning 1984. Clearly, the tax assessment made on December 10, 1987, for the year 1983 was still covered by the fiveyear statutory prescriptive period. This rule was emphasized in Revenue Memorandum Circular (RMC) No. 33-84, published on
November 12, 1984, which defined the salient features of the application of BP 700, to wit:
"B. Effectivity of Prescriptive Periods of Assessment and Collection
1......Assessment made on or after April 5, 1984 (date, of approval of BP 700) will still be governed by the original five-year period if
the taxes assessed thereby cover taxable years prior to January 1, 1984. (emphasis supplied) Scmis
Corollarily, assessments made before April 5, 1984 shall still be governed by the original five-year period.
However, assessments made on or April 5, 1984 covering taxable years beginning January 1, 1984 shall be under the new three-year
period."
Should the three-year limitation be reckoned at the time of the quarterly payment of contractor's tax or at the due date of the final
annual tax?
Section 2 of Revenue Regulation No.6-81, states:
"Sec. 2. Percentage tax. --In general, unless otherwise specifically provided in the Tax Code, every person conducting business on
which a percentage tax is imposed under Chapter II Title V of the Tax Code must render quarterly declaration on cumulative basis of
the amount of his sales, receipts or earnings or gross value of output actually removed from the factory or near warehouse, compute
and pay the tax due thereon.
(a) Quarterly Percentage Return.-For each of the first three quarters of the taxable year, the tax so computed shall be decreased by the amount of tax previously paid
and by the sum of the tax credits allowed under this Title for the preceding current quarters. The tax due shall be paid not later than
twenty (20) days following the close of each of the first three quarters of the taxable year.

(b) Final Annual Percentage Tax Return -On or before the twentieth day of the second month following the close of the taxable year, a final percentage tax return shall be filed
under BIR Form No. __ covering the entire taxable year. If the sum of the total quarterly percentage tax payments made for the first
three quarters and total tax credit allowable for the taxable year are not equal to the total tax due on the entire gross sales, receipts
or earnings or gross value of the output for that taxable year, the taxpayer shall either:
(1) Pay the tax still due; or Mis sc
(2) Credit to the extent allowable under this Title, the amount of excess tax credits shown in the final adjustment return against the
quarterly percentage tax liabilities for the succeeding taxable quarters."
Only recently in G.R. No.115712, Commission of Internal Revenue vs. Court of Appeals, February 25, 1999, we held, that the threeyear prescriptive period of tax assessment of contractors tax should be computed at the time of the filing of the "final annual
percentage tax return,"[5] when it can be finally ascertained if the taxpayer still has an unpaid tax, and not from the tentative
quarterly payments.
Turning now to petitioner's denial that he received the 1985 assessment, we agree with the factual findings of the CTA that the
assessment letter may be presumed to have been received by petitioner. The CTA found as follows: Mis spped
"The 1985 assessment which petitioner denied as having been received was negated when the respondent introduced documentary
evidence showing that it was mailed by registered mail. It was further buttressed by the testimony of witness Mr. Arnold C. Larroza,
Chief Administrative Branch Mailing Section, Rev. Region No. 4B-1, Quezon City that the 1983, 1984 and 1985 assessments were
placed in one envelope when it was mailed by registered mail. Presumably, it was received in the regular course of the mail. ... The
facts to be proved to raise this presumption are (a) that the letter was properly addressed with postage prepaid; and (b) that it was
mailed. Once these facts are proved, the presumption is that the letter was received by the addressee as soon as it could have been
transmitted to him in the ordinary course of the mails. Such being the case, this Court cannot be made to believe that the 1985
assessment which incidentally has a substantially greater amount involved, was not received by the petitioner. Hence, the same
assessment is also considered final and unappealable for failure of the petitioner to protest the same within the reglementary period
provided by law."[6]
In reviewing administrative decisions, the reviewing court cannot re-examine the factual basis and sufficiency of the evidence. [7] The
findings of fact must be respected, so long as they are supported by substantial evidence. [8]
As a subsidiary defense, petitioner interposes the third issue claiming that since the CIR failed, until now, to commence the collection
of the 1983, 1984, and 1985 deficiency tax, the right to collect had, likewise, prescribed. Petitioner urges us to consider that for the
government's failure to institute collection remedies either by judicial action or by distraint and levy, the right to collect the same has
prescribed pursuant to Section 219 of the NIRC. Note, however, that Section 271 of the 1986 Tax Code provides for the suspension of
running of the statute of limitation of tax collection, as follows: Spped
"Sec. 271. Suspension of running of statute. -- The running of the statute of limitations provided in Sections 268 and 269 on the
making of assessment and the beginning of distraint or levy or a proceeding in court for collection, in respect of any deficiency, shall
be suspended for the period during which the Commissioner is prohibited from making the assessment or beginning
distraint or levy or a proceeding in court and for sixty days thereafter; when the taxpayer request for a reinvestigation which
is granted by the Commissioner; when the taxpayer cannot be located in the address given by him in the return filed upon which a
tax is being assessed or collected: Provided,That, if the taxpayer informs the Commissioner of any change in address, the running of
the statute of limitation will not be suspended; when the warrant of distraint and levy is duly served upon the taxpayer, his
authorized representative, or a member of his household with sufficient discretion, and no property could be located; and when the
taxpayer is out of the Philippines." (Emphasis supplied.)
In the instant case, PSI filed a petition before the CTA to prevent the collection of the assessed deficiency tax. When the CTA
dismissed the case, petitioner elevated the case before us, hoping for a review in its favor. The actions taken by the petitioner before
the CTA and now before us, suspended the running of the statute of limitation. In the old case of Republic of thePhilippines vs. Ker
and Company, Ltd.,[9] we held:
"Under Section 333 (renumbered to 271 during the instant case) of the Tax Code the running of the prescriptive period to collect
deficiency taxes shall be suspended for the period during which the Commissioner of Internal Revenue is prohibited from beginning a
distraint and levy or instituting a proceeding in court, and for sixty days thereafter. In the case at bar, the pendency of the taxpayer's
appeal in the Court of Tax Appeals and in the Supreme Court had the effect of temporarily staying the hands of the said
Commissioner. If the taxpayer's stand that the pendency of the appeal did not stop the running of the period because the Court of Tax
Appeals did not have jurisdiction over the case of taxes is upheld, taxpayers would be encouraged to delay the payment of taxes in
the hope of ultimately avoiding the same. Under the circumstances, the running of the prescriptive period was suspended." [10] Jo
spped
Finally, petitioner contends that the assessments made by the respondent CIR were erroneous because they included in the gross
receipts subject to the contractor's tax the salaries of the security guards and the employer's share in the SSS, SIF and Medicare.

Petitioner claims that it did not benefit from those amounts earmarked for other persons or institutions, hence, they must not be
taxable.
Contractors tax on gross receipts imposed on business agents including private detective watchman agencies, [11] was a tax on the
sale of services or labor, imposed on the exercise of a privilege. [12] The term "gross receipts" means all amounts received by the
prime or principal contractor as the total price, undiminished by the amount paid to the subcontractor under a subcontract
arrangement.[13] Hence, gross receipts could not be diminished by employer's SSS, SIF and Medicare contributions. [14] Furthermore, it
has been consistently ruled by the BIR that the salaries paid to security guards should form part of the gross receipts, subject to tax,
to wit:
"...This Office has consistently ruled that salaries of security guards form part of the taxable gross receipts of a security agency for
purposes of the 4% [formerly 3%] contractors tax under Section 205 of the Tax Code, as amended. The reason is that the salaries of
the security guards are actually the liability of the agency and that the guards are considered their employees; hence, for percentage
tax purposes, the salaries of the security guards are includible in its gross receipts. (BIR Ruling No.271-81 citing BIR Ruling No. 69002)"[15]
These rulings were made by the CIR in the exercise of his power to "make judgments or opinions in connection with the
implementation of the provisions of the internal revenue code." The opinions and rulings of officials of the government called upon to
execute or implement administrative laws, command respect and weight. [16] We see no compelling reason in this case to rule
otherwise. Spped jo
WHEREFORE, the assailed decision of the Court of Appeals, in CA- G.R. SP 31825, is AFFIRMED. Costs against petitioner.
SO ORDERED.

Republic of the Philippines

Supreme Court
Manila

THIRD DIVISION

LASCONA LAND CO., INC.,

G.R. No. 171251

Petitioner,

Present:

VELASCO, JR., J., Chairperson,

PERALTA,
- versus -

ABAD,
VILLARAMA, JR.,* and
MENDOZA, JJ.

Promulgated:
COMMISSIONER OF INTERNAL REVENUE,
March 5, 2012
Respondent.
x----------------------------------------------------------------------------------------x

DECISION

PERALTA, J.:

Before this Court is a Petition for Review on Certiorari under Rule 45 of the Rules of Court seeking the reversal of the Decision [1] dated
October 25, 2005 and Resolution[2]dated January 20, 2006 of the Court of Appeals (CA) in CA-G.R. SP No. 58061 which set aside the
Decision[3] dated January 4, 2000 and Resolution[4] dated March 3, 2000 of the Court of Tax Appeals (CTA) in C.T.A. Case No. 5777 and
declared Assessment Notice No. 0000047-93-407 dated March 27, 1998 to be final, executory and demandable.
The facts, as culled from the records, are as follows:

On March 27, 1998, the Commissioner of Internal Revenue (CIR) issued Assessment Notice No. 0000047-93-407 [5] against Lascona
Land Co., Inc. (Lascona) informing the latter of its alleged deficiency income tax for the year 1993 in the amount of P753,266.56.

Consequently, on April 20, 1998, Lascona filed a letter protest, but was denied by Norberto R. Odulio, Officer-in-Charge (OIC),
Regional Director, Bureau of Internal Revenue, Revenue Region No. 8, Makati City, in his Letter[6] dated March 3, 1999, which reads,
thus:

xxxx

Subject: LASCONA LAND CO., INC.

1993 Deficiency Income Tax

Madam,

Anent the 1993 tax case of subject taxpayer, please be informed that while we agree with the arguments advanced in your letter
protest, we regret, however, that we cannot give due course to your request to cancel or set aside the assessment notice
issued to your client for the reason that the case was not elevated to the Court of Tax Appeals as mandated by the
provisions of the last paragraph of Section 228 of the Tax Code. By virtue thereof, the said assessment notice has become
final, executory and demandable.

In view of the foregoing, please advise your client to pay its 1993 deficiency income tax liability in the amount of P753,266.56.

x x x x (Emphasis ours)

On April 12, 1999, Lascona appealed the decision before the CTA and was docketed as C.T.A. Case No. 5777. Lascona alleged that the
Regional Director erred in ruling that the failure to appeal to the CTA within thirty (30) days from the lapse of the 180-day period
rendered the assessment final and executory.

The CIR, however, maintained that Lascona's failure to timely file an appeal with the CTA after the lapse of the 180-day reglementary
period provided under Section 228 of the National Internal Revenue Code (NIRC) resulted to the finality of the assessment.

On January 4, 2000, the CTA, in its Decision, [7] nullified the subject assessment. It held that in cases of inaction by the CIR on the
protested assessment, Section 228 of the NIRC provided two options for the taxpayer: (1) appeal to the CTA within thirty (30) days
from the lapse of the one hundred eighty (180)-day period, or (2) wait until the Commissioner decides on his protest before he
elevates the case.

The CIR moved for reconsideration. It argued that in declaring the subject assessment as final, executory and demandable, it did so
pursuant to Section 3 (3.1.5) of Revenue Regulations No. 12-99 dated September 6, 1999 which reads, thus:

If the Commissioner or his duly authorized representative fails to act on the taxpayer's protest within one hundred eighty (180) days
from date of submission, by the taxpayer, of the required documents in support of his protest, the taxpayer may appeal to the Court
of Tax Appeals within thirty (30) days from the lapse of the said 180-day period; otherwise, the assessment shall become final,
executory and demandable.

On March 3, 2000, the CTA denied the CIR's motion for reconsideration for lack of merit. [8] The CTA held that Revenue Regulations No.
12-99 must conform to Section 228 of the NIRC. It pointed out that the former spoke of an assessment becoming final, executory and
demandable by reason of the inaction by the Commissioner, while the latter referred to decisions becoming final, executory and
demandable should the taxpayer adversely affected by the decision fail to appeal before the CTA within the prescribed period.Finally,
it emphasized that in cases of discrepancy, Section 228 of the NIRC must prevail over the revenue regulations.

Dissatisfied, the CIR filed an appeal before the CA. [9]

In the disputed Decision dated October 25, 2005, the Court of Appeals granted the CIR's petition and set aside the Decision
dated January 4, 2000 of the CTA and its Resolution dated March 3, 2000. It further declared that the subject Assessment Notice No.
0000047-93-407 dated March 27, 1998 as final, executory and demandable.

Lascona moved for reconsideration, but was denied for lack of merit.

Thus, the instant petition, raising the following issues:

I
THE HONORABLE COURT HAS, IN THE REVISED RULES OF COURT OF TAX APPEALS WHICH IT RECENTLY PROMULGATED, RULED THAT
AN APPEAL FROM THE INACTION OF RESPONDENT COMMISSIONER IS NOT MANDATORY.
II
THE COURT OF APPEALS SERIOUSLY ERRED WHEN IT HELD THAT THE ASSESSMENT HAS BECOME FINAL AND DEMANDABLE BECAUSE,
ALLEGEDLY, THE WORD DECISION IN THE LAST PARAGRAPH OF SECTION 228 CANNOT BE STRICTLY CONSTRUED AS REFERRING ONLY
TO THE DECISION PER SE OF THE COMMISSIONER, BUT SHOULD ALSO BE CONSIDERED SYNONYMOUS WITH AN ASSESSMENT WHICH
HAS BEEN PROTESTED, BUT THE PROTEST ON WHICH HAS NOT BEEN ACTED UPON BY THE COMMISSIONER. [10]

In a nutshell, the core issue to be resolved is: Whether the subject assessment has become final, executory and demandable due to
the failure of petitioner to file an appeal before the CTA within thirty (30) days from the lapse of the One Hundred Eighty (180)-day
period pursuant to Section 228 of the NIRC.

Petitioner Lascona, invoking Section 3,[11] Rule 4 of the Revised Rules of the Court of Tax Appeals, maintains that in case of inaction by
the CIR on the protested assessment, it has the option to either: (1) appeal to the CTA within 30 days from the lapse of the 180-day
period; or (2) await the final decision of the Commissioner on the disputed assessment even beyond the 180-day period in which
case, the taxpayer may appeal such final decision within 30 days from the receipt of the said decision. Corollarily, petitioner posits
that when the Commissioner failed to act on its protest within the 180-day period, it had the option to await for the final decision of
the Commissioner on the protest, which it did.
The petition is meritorious.

Section 228 of the NIRC is instructional as to the remedies of a taxpayer in case of the inaction of the Commissioner on the protested
assessment, to wit:

SEC. 228. Protesting of Assessment. x x x

xxxx

Within a period to be prescribed by implementing rules and regulations, the taxpayer shall be required to respond to said notice. If
the taxpayer fails to respond, the Commissioner or his duly authorized representative shall issue an assessment based on his
findings.
Such assessment may be protested administratively by filing a request for reconsideration or reinvestigation within thirty (30) days
from receipt of the assessment in such form and manner as may be prescribed by implementing rules and regulations.

Within sixty (60) days from filing of the protest, all relevant supporting documents shall have been submitted; otherwise, the
assessment shall become final.

If the protest is denied in whole or in part, or is not acted upon within one hundred eighty (180) days from submission
of documents, the taxpayer adversely affected by the decision or inaction may appeal to the Court of Tax Appeals
within (30) days from receipt of the said decision, or from the lapse of the one hundred eighty (180)-day period;
otherwise the decision shall become final, executory and demandable. (Emphasis supplied).

Respondent, however, insists that in case of the inaction by the Commissioner on the protested assessment within the 180-day
reglementary period, petitioner should have appealed the inaction to the CTA. Respondent maintains that due to Lascona's failure to
file an appeal with the CTA after the lapse of the 180-day period, the assessment became final and executory.

We do not agree.

In RCBC v. CIR,[12] the Court has held that in case the Commissioner failed to act on the disputed assessment within the 180-day
period from date of submission of documents, a taxpayer can either: (1) file a petition for review with the Court of Tax Appeals within
30 days after the expiration of the 180-day period; or (2) await the final decision of the Commissioner on the disputed assessments
and appeal such final decision to the Court of Tax Appeals within 30 days after receipt of a copy of such decision. [13]

This is consistent with Section 3 A (2), Rule 4 of the Revised Rules of the Court of Tax Appeals, [14] to wit:

SEC. 3. Cases within the jurisdiction of the Court in Divisions. The Court in Divisions shall exercise:

(a) Exclusive original or appellate jurisdiction to review by appeal the following:

(1) Decisions of the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of internal revenue taxes,
fees or other charges, penalties in relation thereto, or other matters arising under the National Internal Revenue Code or other laws
administered by the Bureau of Internal Revenue;

(2) Inaction by the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of internal revenue taxes, fees
or other charges, penalties in relation thereto, or other matters arising under the National Internal Revenue Code or other laws
administered by the Bureau of Internal Revenue, where the National Internal Revenue Code or other applicable law provides a specific
period for action: Provided, that in case of disputed assessments, the inaction of the Commissioner of Internal Revenue
within the one hundred eighty day-period under Section 228 of the National Internal revenue Code shall be deemed a
denial for purposes of allowing the taxpayer to appeal his case to the Court and does not necessarily constitute a
formal decision of the Commissioner of Internal Revenue on the tax case; Provided, further, that should the taxpayer
opt to await the final decision of the Commissioner of Internal Revenue on the disputed assessments beyond the one
hundred eighty day-period abovementioned, the taxpayer may appeal such final decision to the Court under Section
3(a), Rule 8 of these Rules; and Provided, still further, that in the case of claims for refund of taxes erroneously or illegally collected,
the taxpayer must file a petition for review with the Court prior to the expiration of the two-year period under Section 229 of the
National Internal Revenue Code;
(Emphasis ours)

In arguing that the assessment became final and executory by the sole reason that petitioner failed to appeal the inaction of the
Commissioner within 30 days after the 180-day reglementary period, respondent, in effect, limited the remedy of Lascona, as a
taxpayer, under Section 228 of the NIRC to just one, that is - to appeal the inaction of the Commissioner on its protested assessment
after the lapse of the 180-day period. This is incorrect.

As early as the case of CIR v. Villa,[15] it was already established that the word "decisions" in paragraph 1, Section 7 of Republic Act
No. 1125, quoted above, has been interpreted to mean the decisions of the Commissioner of Internal Revenue on the protest of the
taxpayer against the assessments. Definitely, said word does not signify the assessment itself. We quote what this Court said aptly in
a previous case:

In the first place, we believe the respondent court erred in holding that the assessment in question is the respondent Collector's
decision or ruling appealable to it, and that consequently, the period of thirty days prescribed by section 11 of Republic Act No. 1125
within which petitioner should have appealed to the respondent court must be counted from its receipt of said assessment. Where a
taxpayer questions an assessment and asks the Collector to reconsider or cancel the same because he (the taxpayer)
believes he is not liable therefor, the assessment becomes a "disputed assessment" that the Collector must decide,
and the taxpayer can appeal to the Court of Tax Appeals only upon receipt of the decision of the Collector on the
disputed assessment, . . . [16]

Therefore, as in Section 228, when the law provided for the remedy to appeal the inaction of the CIR, it did not intend to limit it to a
single remedy of filing of an appeal after the lapse of the 180-day prescribed period. Precisely, when a taxpayer protested an
assessment, he naturally expects the CIR to decide either positively or negatively. A taxpayer cannot be prejudiced if he chooses to
wait for the final decision of the CIR on the protested assessment. More so, because the law and jurisprudence have always
contemplated a scenario where the CIR will decide on the protested assessment.

It must be emphasized, however, that in case of the inaction of the CIR on the protested assessment, while we reiterate the
taxpayer has two options, either: (1) file a petition for review with the CTA within 30 days after the expiration of the 180-day period;
or (2) await the final decision of the Commissioner on the disputed assessment and appeal such final decision to the CTA within 30
days after the receipt of a copy of such decision, these options are mutually exclusive and resort to one bars the application
of the other.

Accordingly, considering that Lascona opted to await the final decision of the Commissioner on the protested assessment, it then has
the right to appeal such final decision to the Court by filing a petition for review within thirty days after receipt of a copy of such
decision or ruling, even after the expiration of the 180-day period fixed by law for the Commissioner of Internal Revenue to act on the
disputed assessments.[17] Thus, Lascona, when it filed an appeal on April 12, 1999 before the CTA, after its receipt of the
Letter[18] dated March 3, 1999 on March 12, 1999, the appeal was timely made as it was filed within 30 days after receipt of the copy
of the decision.

Finally, the CIR should be reminded that taxpayers cannot be left in quandary by its inaction on the protested assessment. It is
imperative that the taxpayers are informed of its action in order that the taxpayer should then at least be able to take recourse to the
tax court at the opportune time. As correctly pointed out by the tax court:

x x x to adopt the interpretation of the respondent will not only sanction inefficiency, but will likewise condone the Bureau's inaction.
This is especially true in the instant case when despite the fact that respondent found petitioner's arguments to be in order, the
assessment will become final, executory and demandable for petitioner's failure to appeal before us within the thirty (30) day period.
[19]

Taxes are the lifeblood of the government and so should be collected without unnecessary hindrance. On the other hand, such
collection should be made in accordance with law as any arbitrariness will negate the very reason for government itself. It is
therefore necessary to reconcile the apparently conflicting interests of the authorities and the taxpayers so that the real purpose of
taxation, which is the promotion of the common good, may be achieved. [20] Thus, even as we concede the inevitability and
indispensability of taxation, it is a requirement in all democratic regimes that it be exercised reasonably and in accordance with the
prescribed procedure.[21]

WHEREFORE, the petition is GRANTED. The Decision dated October 25, 2005 and the Resolution dated January 20, 2006 of the
Court of Appeals in CA-G.R. SP No. 58061 are REVERSED and SET ASIDE. Accordingly, the Decision dated January 4, 2000 of the
Court of Tax Appeals in C.T.A. Case No. 5777 and its Resolution dated March 3, 2000 are REINSTATED.

SO ORDERED.