PILIPINAS TOTAL GAS, INC., PETITIONER, VS. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

Pilipinas Total Gas versus Commissioner of Internal Revenue

The Case

This is a petition for review on certiorari under Rule 45 of the Rules of Court filed by Pilipinas Total Gas, Incorporated against the Commissioner of Internal Revenue. The petitioner is a value added tax registered taxpayer engaged in the sale, transport, and distribution of industrial gas, and it sought a refund of its unutilized input value added tax for the first two quarters of taxable year 2007. The case matters because it settles a recurring and highly examinable question in tax procedure: from what point does the one hundred twenty day period for the Commissioner to act on an administrative claim for refund of input value added tax begin to run, and who determines when the supporting documents are complete. The Court also resolves the apparent contradiction in the tax court's twin rulings that the judicial claim was at once belated and premature.

Procedural History

Pilipinas Total Gas filed its administrative claim for refund of unutilized input value added tax with the Bureau of Internal Revenue on May 15, 2008, and submitted additional supporting documents on August 28, 2008. Because the Commissioner took no action, the taxpayer elevated the matter to the Court of Tax Appeals on January 23, 2009.

The Third Division of the Court of Tax Appeals dismissed the petition as prematurely filed, holding that the taxpayer failed to complete the documents required under Revenue Memorandum Order No. 53-98, so that the one hundred twenty day period had not even begun to run. Its motion for reconsideration was denied. On appeal, the Court of Tax Appeals En Banc affirmed in its Decision of October 11, 2012, but on a different theory: counting from the filing of the administrative claim, the one hundred twenty day period ended on September 12, 2008, and the thirty day period to appeal ended on October 12, 2008, so the petition filed on January 23, 2009 was belated. Its motion for reconsideration having been denied in the Resolution of May 8, 2013, the taxpayer came to the Supreme Court by petition for review on certiorari.

Facts

Pilipinas Total Gas registered with the Bureau of Internal Revenue as a value added tax taxpayer. On April 20, 2007 and July 20, 2007, it filed its original quarterly value added tax returns for the first and second quarters of 2007. On May 20, 2008, it filed amended quarterly returns for those two quarters reflecting its sales subject to value added tax, its zero rated sales, and its domestic purchases of non capital goods and services.

For the first two quarters of 2007, the taxpayer claimed unutilized input value added tax credits from domestic purchases of non capital goods and services totaling 8,124,400.35 pesos, of which it claimed 7,898,433.98 pesos as excess unutilized input value added tax. On May 15, 2008, it filed its administrative claim for refund with supporting documents, and on August 28, 2008, it submitted additional supporting documents.

With the Commissioner silent, the taxpayer filed its petition for review with the Court of Tax Appeals on January 23, 2009. During the hearing, the taxpayer presented two witnesses who identified its documentary exhibits, all of which were admitted. The Commissioner offered no evidence and submitted the case for decision.

Issues

• Whether or not the judicial claim for refund was belatedly filed on January 23, 2009, or beyond the thirty day period to appeal under Section 112 of the Tax Code.
• Whether or not the submission of incomplete documents at the administrative level renders the judicial claim premature and dismissible for lack of jurisdiction.

Applicable Provisions

Section 112, paragraph C of the National Internal Revenue Code of 1997, as amended, provides:

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.

This is the provision whose reckoning point the Court construes, and it is the basis for holding that the one hundred twenty days run from the submission of complete documents, not from the filing of the administrative claim.

Revenue Memorandum Circular No. 49-2003, which the Court ordered still observed, provides:

For pending claims which have not been acted upon by the investigating/processing office due to incomplete documentation, the taxpayer-claimants are given thirty (30) days within which to submit the documentary requirements unless given further extension by the head of the processing unit, but such extension should not exceed thirty (30) days.

This circular supplies the mechanism by which the taxpayer is given a period to complete documents and by which notice from the Bureau becomes essential before the one hundred twenty day period begins to run.

Ruling

On the first issue, the Court ruled that the judicial claim was timely filed. Section 112, paragraph C categorically provides that the one hundred twenty day period is counted from the date of submission of complete documents in support of the application. The Court held that the tax court erred in counting the period from May 15, 2008, the date the administrative claim was filed. The Court explained that the one hundred twenty day period is primarily intended to benefit the taxpayer, and that to allow the Commissioner to determine the completeness of documents and thereby dictate the running of the period would give the Commissioner unbridled power to indefinitely delay the administrative claim and prevent the filing of a judicial claim.

On the second issue, the Court ruled that the taxpayer ultimately determines when complete documents have been submitted for purposes of commencing the running of the one hundred twenty day period. The taxpayer may have completed the documents upon filing the administrative claim, or on the thirtieth day under Revenue Memorandum Circular No. 49-2003, or on the day he was notified by the Bureau of the lack of necessary documents. The Court grounded this on the due process guarantee, since the applicant should be allowed reasonable freedom as to when and how to present his claim within the allowable period. It also noted that the taxpayer bears the burden of proving his claim and enjoys relative freedom to submit evidence in support of it.

Doctrine

First, under Section 112, paragraph C of the National Internal Revenue Code, the one hundred twenty day period for the Commissioner to decide an administrative claim for refund or tax credit of input value added tax is counted from the date of submission of complete documents, not from the date the administrative claim was filed.

Second, it is the taxpayer who ultimately determines when complete documents have been submitted, subject to the thirty day period and extension under Revenue Memorandum Circular No. 49-2003, and notice from the Bureau of the lack of documents is essential before the period may be reckoned from a later submission.

Third, the submission of incomplete documents at the administrative level does not render the judicial claim premature, because the taxpayer bears the burden of proving the claim and is given reasonable freedom, consistent with due process, to present evidence in support of it.

Disposition

The petition was granted; the Court set aside the rulings of the Court of Tax Appeals En Banc and remanded the case for further proceedings, the taxpayer having prevailed on the threshold procedural questions.

Remember This

Memorize the line that the one hundred twenty day period runs from the date of submission of complete documents, and that it is the taxpayer, not the Commissioner, who determines when those documents are complete. Examiners use this case to test the reckoning of the one hundred twenty plus thirty day period in value added tax refund claims and the distinction between a belated and a premature judicial claim.