CIR VS.

AICHI FORGING COMPANY OF ASIA

Facts:

Aichi Forging Company of Asia is engaged in the
manufacturing, producing and processing of steel
and its by-products. It registered as a VAT entity
and its products, “close impression die steel
forgings” and “tool and dies” are registered with
the BOI as pioneer status.

Aichi filed a claim for refund/credit of input VAT
for the period of July 1, 2002 to September 30,
2002 in the total amount of P2,891,123.82 with
CIR, through the DOF One-Stop Shop Inter-
Agency Tax Credit and Duty Drawback Center.

On the same date, Aichi filed a Petition for
Review with the CTA for the refund/credit of the
same input VAT. Aichi alleged that for the period
above, it generated and recorded zero-rated
sales of P131,791,399 which was paid. It also
incurred and paid input VAT of P3,912,088.14
from purchases and importation attributable to its
zero-rated sales. It also said that in its application
for refund/credit filed with the DOF, it only
claimed the amount of P3,891,123.82.

CIR raised a number of defenses, among others,
1) that Aichi must prove that the claim was filed
within the 2-year period prescribed in Sec. 229 iof
the NIRC; 2) that the burden of proof is on the
taxpayer to establish its right to refund, and
failure to sustain the burden is fatal to the claim
for refund; 3) that claims for refund are construed
strictly against the claimant.

Issue:
In computing the 2-year prescriptive period for
claiming a refun/credit of unutilized input VAT,
which provision should apply: Sec. 112(A) or Sec.
229 of the NIRC?

Ruling:

Sec. 112(A) is the applicable provision in
determining the start of the 2-year period for
claiming a refund credit of unutilized input VAT.
Secs. 204(C) and 229 are inapplicable because
they apply only to instances of erroneous
payment or illegal collection of internal revenue
taxes. (CIR vs. Mirant)

Unutilized input VAT must be claimed within 2
years after the close of the taxable quarter when
the sales were made pertaining to the input VAT
regardless of whether said tax was paid or not.

Prescriptive period commences from the close of
the taxable quarter when the sales were made
and not from the time the input VAT was paid nor
from the time the official receipt was issued.

Sec. 204(C) or 229 of the NIRC is inapplicable in
this case. The two-year period in these provisions
is reckoned from the date of payment of tax or
penalty, for the filing of a claim of refund or tax
credit. Both provisions apply only to instances of
erroneous payment or illegal collection of internal
revenue taxes.