CIR v. AICHI FORGING COMPANY OF ASIA, INC.

G.R. No. 184823 October 6, 2010

FACTS
Respondent Aichi, a corporation duly organized and existing under the
laws of the Philippines, is engaged in the manufacturing, producing, and
processing of steel and its by-products. It is registered with the BIR as a VAT
entity and its products, "close impression die steel forgings" and "tool and
dies," are registered with the Board of Investments (BOI) as a pioneer status.
On September 30, 2004, Aichi filed a claim for refund/credit of input
VAT for the period July 1, 2002 to September 30, 2002 in the total amount of
P3,891,123.82 with the petitioner CIR, through the DOF One-Stop Shop Inter-
Agency Tax Credit and Duty Drawback Center.
Proceedings before the Second Division of the CTA.
Aichi filed a Petition for Review with the CTA for the refund/credit of the
same input VAT.
In the Petition for Review, Aichi alleged that for the period July 1, 2002
to September 30, 2002, it generated and recorded zero-rated sales in the
amount of P131,791,399.00, which was paid pursuant to Section 106(A) (2)
(a) (1), (2) and (3) of the NIRC; that for the said period, it incurred and paid
input VAT amounting to P3,912,088.14 from purchases and importation
attributable to its zero-rated sales; and that in its application for
refund/credit filed with the DOF One-Stop Shop Inter-Agency Tax Credit and
Duty Drawback Center, it only claimed the amount of P3,891,123.82.
In response, the CIR filed his Answer raising the following special and
affirmative defenses, to wit:
4. Aichis alleged claim for 5. Aichis must prove that it
refund is subject to paid VAT input taxes for the
administrative investigation by period in question;
the Bureau; 6. Aichis must prove that its
sales are export sales
contemplated under Sections taxpayer to establish its right
106(A) (2) (a), and 108(B) (1) to refund, and failure to
of the Tax Code of 1997; sustain the burden is fatal to
7. Aichis must prove that the the claim for refund; and
claim was filed within the 2 9. Claims for refund are
year period prescribed in Sec. construed strictly against the
229 of the Tax Code; claimant for the same partake
8. In an action for refund, the of the nature of exemption
burden of proof is on the from taxation.
 The Second Division of the CTA rendered a Decision partially
granting Aichis claim for refund/credit. It ruled:
For a VAT registered entity whose sales are zero-rated, to validly claim
a refund, Section 112 (A) of the NIRC of 1997, as amended, provides:
SEC. 112. Refunds or Tax Credits of Input Tax.
(A) Zero-rated or Effectively Zero-rated Sales. Any VAT-registered
person, whose sales are zero-rated or effectively zero-rated may, within two
(2) years after the close of the taxable quarter when the sales were made,
apply for the issuance of a tax credit certificate or refund of creditable input
tax due or paid attributable to such sales, except transitional input tax, to
the extent that such input tax has not been applied against output tax: x x x
Hence, Aichi must comply with the ff req: (1) the taxpayer is engaged
in sales which are zero-rated or effectively zero-rated; (2) the taxpayer is
VAT-registered; (3) the claim must be filed within 2 years after the close of
the taxable quarter when such sales were made; and (4) the creditable input
tax due or paid must be attributable to such sales, except the transitional
input tax, to the extent that such input tax has not been applied against the
output tax.
The Court finds that the first three requirements have been complied
by Aichi.
With regard to the first requisite, the evidence presented by petitioner,
such as the Sales Invoices shows that it is engaged in sales which are zero-
rated.
The second requisite has likewise been complied with. The Certificate
of Registration with OCN 1RC0000148499 with the BIR proves that Aichi is a
registered VAT taxpayer.
In compliance with the third requisite, Aichi filed its administrative
claim for refund and the present Petition for Review, both within the 2 year
prescriptive period from the close of the taxable quarter when the sales were
made, which is from September 30, 2002.
 As regards, the fourth requirement, the Court finds that there are some
documents and claims of Aichi that are baseless and have not been
satisfactorily substantiated.
xxxx
In sum, Aichi has sufficiently proved that it is entitled to a refund or
issuance of a tax credit certificate representing unutilized excess input VAT
payments for the period July 1, 2002 to September 30, 2002, which are
attributable to its zero-rated sales for the same period, but in the reduced
amount of P3,239,119.25, computed as follows:
Amount of Claimed Input VAT P 3,891,123.82
Less:
Exceptions as found by the ICPA 41,020.37
Net Creditable Input VAT P 3,850,103.45
Less:
Output VAT Due 610,984.20
Excess Creditable Input VAT P 3,239,119.25
Hence, the present Petition for Review is PARTIALLY GRANTED. The CTA
ORDERED the CIR TO REFUND OR ISSUE A TAX CREDIT CERTIFICATE in favor
of Aichi in the reduced amount of P3,239,119.25, representing the unutilized
input VAT incurred for the months of July to September 2002.
The CIR filed a Motion for Partial Reconsideration, insisting that the
administrative and the judicial claims were filed beyond the two-year period
to claim a tax refund/credit provided for under Sections 112(A) and 229 of
the NIRC. He reasoned that since the year 2004 was a leap year, the filing of
the claim for tax refund/credit on September 30, 2004 was beyond the two-
year period, which expired on September 29, 2004. He cited as basis Article
13 of the Civil Code, which provides that when the law speaks of a year, it is
equivalent to 365 days. In addition, he argued that the simultaneous filing of
the administrative and the judicial claims contravenes Sections 112 and 229
of the NIRC. According to the him, a prior filing of an administrative claim is a
"condition precedent" before a judicial claim can be filed. He explained that
the rationale of such requirement rests not only on the doctrine of
exhaustion of administrative remedies but also on the fact that the CTA is an
appellate body which exercises the power of judicial review over
administrative actions of the BIR.
The Second Division of the CTA, however, denied the Motion for Partial
Reconsideration for lack of merit. Thus, the case was elevated to the CTA En
Banc via a Petition for Review.
Ruling of the CTA En Banc.
The CTA En Banc affirmed the Second Divisions Decision allowing the
partial tax refund/credit in favor of Aichi. However, as to the argument of the
CIR on the reckoning point for counting the two-year period, the CTA En Banc
was not persuaded.
SEC. 114. Return and Payment of Value-added Tax.
(A) In General. Every person liable to pay the value-added tax
imposed under this Title shall file a quarterly return of the amount of his
gross sales or receipts within twenty-five (25) days following the close of
each taxable quarter prescribed for each taxpayer: Provided, however, That
VAT-registered persons shall pay the value-added tax on a monthly basis.
[x x x x ]
Based on the above-stated provision, a taxpayer has 25 days from the
close of each taxable quarter within which to file a quarterly return of the
amount of his gross sales or receipts. In the case at bar, the taxable quarter
involved was for the period of July 1, 2002 to September 30, 2002. Applying
Section 114 of the 1997 NIRC, Aichi has until October 25, 2002 within which
to file its quarterly return for its gross sales or receipts, which it complied
when it filed its VAT Quarterly Return on October 20, 2002.
In relation to this, the reckoning of the two-year period provided under
Section 229 of the 1997 NIRC should start from the payment of tax subject
claim for refund. As stated above, Aichi filed its VAT Return for the taxable
third quarter of 2002 on October 20, 2002. Thus, Aichi's administrative and
judicial claims for refund filed on September 30, 2004 were filed on time
because AICHI has until October 20, 2004 within which to file its claim for
refund.
In addition, the court does not agree with the CIRs contention that the
NIRC requires the previous filing of an administrative claim for refund prior to
the judicial claim. This should not be the case as the law does not prohibit
the simultaneous filing of the administrative and judicial claims for refund.
What is controlling is that both claims for refund must be filed within the 2-
year prescriptive period.
The CIRs MR was denied by the CTA En Banc.

ISSUE
Whether respondents judicial and administrative claims for tax
refund/credit were filed within the two-year prescriptive period provided in
Sections 112(A) and 229 of the NIRC.

RULING
The petition has merit.
Unutilized input VAT must be claimed within two years after the close
of the taxable quarter when the sales were made.
In CIR v. Mirant Pagbilao Corporation, the Court ruled that Section
112(A) of the NIRC is the applicable provision in determining the start of the
two-year period for claiming a refund/credit of unutilized input VAT, and that
Sections 204(C) and 229 of the NIRC are inapplicable as "both provisions
apply only to instances of erroneous payment or illegal collection of internal
revenue taxes." The Court explained that:
Section 112 (A) of the NIRC clearly provides in no uncertain terms that
unutilized input VAT payments not otherwise used for any internal revenue
tax due the taxpayer must be claimed within two years reckoned from the
close of the taxable quarter when the relevant sales were made pertaining to
the input VAT regardless of whether said tax was paid or not. The reckoning
frame would always be the end of the quarter when the pertinent sales or
transaction was made, regardless when the input VAT was paid.
Reckoning for prescriptive period under Secs. 204(C) and 229 of the
NIRC inapplicable.
Sec. 204(C) or 229 of the NIRC cannot be availed which, for the
purpose of refund, prescribes a different starting point for the two-year
prescriptive limit for the filing of a claim therefor. Secs. 204(C) and 229
respectively provide:
Sec. 204. Authority of the Commissioner to Compromise, Abate and
Refund or Credit Taxes. The Commissioner may
xxxx
(c) Credit or refund taxes erroneously or illegally received or penalties
imposed without authority, refund the value of internal revenue stamps when
they are returned in good condition by the purchaser, and, in his discretion,
redeem or change unused stamps that have been rendered unfit for use and
refund their value upon proof of destruction. No credit or refund of taxes or
penalties shall be allowed unless the taxpayer files in writing with the
Commissioner a claim for credit or refund within 2 years after the payment of
the tax or penalty: Provided, however, That a return filed showing an
overpayment shall be considered as a written claim for credit or refund.
xxxx
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.
Notably, the above provisions also set a two-year prescriptive period,
reckoned from date of payment of the tax or penalty, for the filing of a claim
of refund or tax credit. Notably too, both provisions apply only to instances of
erroneous payment or illegal collection of internal
In view of the foregoing, we find that the CTA En Banc erroneously
applied Sections 114(A) and 229 of the NIRC in computing the two-year
prescriptive period for claiming refund/credit of unutilized input VAT. To be
clear, Section 112 of the NIRC is the pertinent provision for the refund/credit
of input VAT. Thus, the two-year period should be reckoned from the close of
the taxable quarter when the sales were made.
The administrative claim was timely filed.
Relying on Article 13 of the Civil Code, which provides that a year is
equivalent to 365 days, and taking into account the fact that the year 2004
was a leap year, petitioner submits that the two-year period to file a claim
for tax refund/ credit for the period July 1, 2002 to September 30, 2002
expired on September 29, 2004.
The Court does not agree.
In CIR v. Primetown Property Group, Inc., we said that as between the
Civil Code, which provides that a year is equivalent to 365 days, and the
Administrative Code of 1987, which states that a year is composed of 12
calendar months, it is the latter that must prevail following the legal maxim,
Lex posteriori derogat priori. Thus:
Both Article 13 of the Civil Code and Section 31, Chapter VIII, Book I of
the Administrative Code of 1987 deal with the same subject matter the
computation of legal periods. Under the Civil Code, a year is equivalent to
365 days whether it be a regular year or a leap year. Under the
Administrative Code of 1987, however, a year is composed of 12 calendar
months. Needless to state, under the Administrative Code of 1987, the
number of days is irrelevant.
There obviously exists a manifest incompatibility in the manner of
computing legal periods under the Civil Code and the Administrative Code of
1987. For this reason, we hold that Section 31, Chapter VIII, Book I of the
Administrative Code of 1987, being the more recent law, governs the
computation of legal periods. Lex posteriori derogat priori.
Applying this to the present case, the two-year period to file a claim for
tax refund/credit for the period July 1, 2002 to September 30, 2002 expired
on September 30, 2004. Hence, respondents administrative claim was
timely filed.
The filing of the judicial claim was premature.
However, the Court denies Aichis claim for tax refund/credit for having
been filed in violation of Section 112(D) of the NIRC, which provides that:
SEC. 112. Refunds or Tax Credits of Input Tax.
xxxx
(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 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 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.
Section 112(D) of the NIRC clearly provides that the CIR has "120 days,
from the date of the submission of the complete documents in support of the
application for tax refund/credit," within which to grant or deny the claim. In
case of full or partial denial by the CIR, the taxpayers recourse is to file an
appeal before the CTA within 30 days from receipt of the decision of the CIR.
However, if after the 120-day period the CIR fails to act on the application for
tax refund/credit, the remedy of the taxpayer is to appeal the inaction of the
CIR to CTA within 30 days.
In this case, the administrative and the judicial claims were
simultaneously filed on September 30, 2004. Obviously, respondent did not
wait for the decision of the CIR or the lapse of the 120-day period. For this
reason, we find the filing of the judicial claim with the CTA premature.
In fine, the premature filing of respondents claim for refund/credit of
input VAT before the CTA warrants a dismissal inasmuch as no jurisdiction
was acquired by the CTA.
MINDANAO II GEOTHERMAL PARTNERSHIP v. CIR
G.R. No. 193301 March 11, 2013
x-----------------------x
MINDANAO I GEOTHERMAL PARTNERSHIP v. CIR
G.R. No. 194637

FACTS
 CIR v. SAN ROQUE POWER CORPORATION
G.R. No. 187485 October 8, 2013

FACTS
San Roque prays that the rule established in our 12 February 2013
Decision be given only a prospective effect, arguing that "the manner by
which the BIR and the CTA actually treated the 120 + 30 day periods
constitutes an operative fact the effects and consequences of which cannot
be erased or undone."
The CIR, on the other hand, asserts that Taganito Mining Corporation's
judicial claim for tax credit or refund was prematurely filed before the CTA
and should be disallowed because BIR Ruling No. DA-489-03 was issued by a
Deputy Commissioner, not by the Commissioner of Internal Revenue.

ISSUE
WON the doctrine of operative fact applies.
WON the 120+30 day period is mandatory.

RULING
The Court denies both motions.
The Doctrine of Operative Fact
The general rule is that a void law or administrative act cannot be the
source of legal rights or duties. Article 7 of the Civil Code provides: "Laws are
repealed only by subsequent ones, and their violation or non-observance
shall not be excused by disuse, or custom or practice to the contrary. When
the courts declared a law to be inconsistent with the Constitution, the former
shall be void and the latter shall govern. Administrative or executive acts,
orders and regulations shall be valid only when they are not contrary to the
laws or the Constitution."
The doctrine of operative fact is an exception to the general rule, such
that a judicial declaration of invalidity may not necessarily obliterate all the
effects and consequences of a void act prior to such declaration. In Serrano
de Agbayani v. Philippine National Bank, the application of the doctrine of
operative fact was discussed as follows:
x x x
prior to the declaration of nullity such challenged legislative or
executive act must have been in force and had to be complied with. This is
so as until after the judiciary, in an appropriate case, declares its invalidity, it
is entitled to obedience and respect... It is now accepted as a doctrine that
prior to its being nullified, its existence as a fact must be reckoned with It
would be to deprive the law of its quality of fairness and justice then, if there
be no recognition of what had transpired prior to such adjudication.
In the language of an American Supreme Court decision: "The actual
existence of a statute, prior to such a determination of unconstitutionality, is
an operative fact and may have consequences which cannot justly be
ignored. The past cannot always be erased by a new judicial declaration. The
effect of the subsequent ruling as to invalidity may have to be considered in
various aspects, with respect to particular relations, individual and corporate,
and particular conduct, private and official."
Clearly, for the operative fact doctrine to apply, there must be a
"legislative or executive measure," meaning a law or executive issuance,
that is invalidated by the court. From the passage of such law or
promulgation of such executive issuance until its invalidation by the court,
the effects of the law or executive issuance, when relied upon by the public
in good faith, may have to be recognized as valid. In the present case,
however, there is no such law or executive issuance that has been
invalidated by the Court except BIR Ruling No. DA-489-03.
To justify the application of the doctrine of operative fact as an
exemption, San Roque asserts that "the BIR and the CTA in actual practice
did not observe and did not require refund seekers to comply with
the120+30 day periods." This is glaring error because an administrative
practice is neither a law nor an executive issuance. Moreover, in the present
case, there is even no such administrative practice by the BIR as claimed by
San Roque.
In BIR Ruling No. DA-489-03 dated 10 December 2003, the DOFs One-
Stop Shop Inter-Agency Tax Credit and Duty Drawback Center (DOF-OSS)
asked the BIR to rule on the propriety of the actions taken by Lazi Bay
Resources Development, Inc. (LBRDI). LBRDI filed an administrative claim for
refund for alleged input VAT for the four quarters of 1998. Before the lapse of
120 days from the filing of its administrative claim, LBRDI also filed a judicial
claim with the CTA on 28March 2000 as well as a supplemental judicial claim
on 29 September 2000. In its Memorandum, the DOF-OSS pointed out that
LBRDI is "not yet on the right forum in violation of the provision of Section
112(D) of the NIRC" when it sought judicial relief before the CTA. Section
112(D) provides for the 120+30 day periods for claiming tax refunds.
The DOF-OSS itself alerted the BIR that LBRDI did not follow
the120+30 day periods. In BIR Ruling No. DA-489-03, Deputy Commissioner
Jose Mario C. Buag ruled that "a 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." Deputy Commissioner Buag, citing the
7February 2002 decision of the CA in CIR v. Hitachi Computer Products (Asia)
Corporation (Hitachi), stated that the claim for refund with the Commissioner
could be pending simultaneously with a suit for refund filed before the CTA.
Before the issuance of BIR Ruling No. DA-489-03 on 10 December
2003, there was no administrative practice by the BIR that supported
simultaneous filing of claims. Prior to BIR Ruling No. DA-489-03, the BIR
considered the 120+30 day periods mandatory and jurisdictional.
Thus, prior to BIR Ruling No. DA-489-03, the BIRs actual administrative
practice was to contest simultaneous filing of claims at the administrative
and judicial levels, until the CA declared in Hitachi that the BIRs position was
wrong. The CAs Hitachi decision is the basis of BIR Ruling No. DA-489-03
dated 10 December 2003 allowing simultaneous filing. From then on
taxpayers could rely in good faith on BIR Ruling No. DA-489-03 even though
it was erroneous as this Court subsequently decided in Aichi that the 120+30
day periods were mandatory and jurisdictional.
We reiterate our pronouncements in our Decision as follows:
At the time San Roque filed its petition for review with the CTA, the
120+30 day mandatory periods were already in the law. Section112(C)
expressly grants the Commissioner 120 days within which to decide the
taxpayers claim. The law is clear, plain, and unequivocal: "x x x 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." Following the verbalegis doctrine, this
law must be applied exactly as worded since it is clear, plain, and
unequivocal. The taxpayer cannot simply file a petition with the CTA without
waiting for the Commissioners decision within the 120-day mandatory and
jurisdictional period. The CTA will have no jurisdiction because there will be
no "decision" or "deemed a denial" decision of the Commissioner for the CTA
to review. In San Roques case, it filed its petition with the CTA a mere 13
days after it filed its administrative claim with the Commissioner.
Indisputably, San Roque knowingly violated the mandatory 120-day period,
and it cannot blame anyone but itself.
Section 112(C) also expressly grants the taxpayer a 30-day period to
appeal to the CTA the decision or inaction of the Commissioner x x x.
xxxx
To repeat, a claim for tax refund or credit, 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.
 San Roques argument must, therefore, fail. The doctrine of operative
fact is an argument for the application of equity and fair play. In the present
case, we applied the doctrine of operative fact when we recognized
simultaneous filing during the period between 10 December 2003, when BIR
Ruling No. DA-489-03 was issued, and 6 October 2010, when this Court
promulgated Aichi declaring the 120+30 day periods mandatory and
jurisdictional, thus reversing BIR Ruling No. DA-489-03.
The doctrine of operative fact is in fact incorporated in Section 246 of
the Tax Code, which provides:
SEC. 246. Non-Retroactivity of Rulings. - Any revocation, modification
or reversal of any of the rules and regulations promulgated in accordance
with the preceding Sections or any of the rulings or circulars promulgated by
the Commissioner shall not be given retroactive application if the revocation,
modification or reversal will be prejudicial to the taxpayers, except in the
following cases:
a) Where the taxpayer deliberately misstates or omits material facts
from his return or any document required of him by the BIR;
b) Where the facts subsequently gathered by the BIR are materially
different from the facts on which the ruling is based; or
c) Where the taxpayer acted in bad faith.
Under Section 246, taxpayers may rely upon a rule or ruling issued by
the Commissioner from the time the rule or ruling is issued up to its reversal
by the Commissioner or this Court. The reversal is not given retroactive
effect. This, in essence, is the doctrine of operative fact. There must,
however, be a rule or ruling issued by the Commissioner that is relied upon
by the taxpayer in good faith. A mere administrative practice, not formalized
into a rule or ruling, will not suffice because such a mere administrative
practice may not be uniformly and consistently applied. An administrative
practice, if not formalized as a rule or ruling, will not be known to the general
public and can be availed of only by those within formal contacts with the
government agency.
 Since the law has already prescribed in Section 246 of the Tax Code
how the doctrine of operative fact should be applied, there can be no
invocation of the doctrine of operative fact other than what the law has
specifically provided in Section 246. In the present case, the rule or ruling
subject of the operative fact doctrine is BIR Ruling No. DA-489-03 dated 10
December 2003. Prior to this date, there is no such rule or ruling calling for
the application of the operative fact doctrine in Section 246. Section246,
being an exemption to statutory taxation, must be applied strictly against
the taxpayer claiming such exemption.
San Roque insists that this Court should not decide the present case in
violation of the rulings of the CTA; otherwise, there will be adverse effects on
the national economy. In effect, San Roques doomsday scenario is a protest
against this Courts power of appellate review. San Roque cites cases
decided by the CTA to underscore that the CTA did not treat the 120+30 day
periods as mandatory and jurisdictional. However, CTA or CA rulings are not
the executive issuances covered by Section 246 of the Tax Code, which
adopts the operative fact doctrine. CTA or CA decisions are specific rulings
applicable only to the parties to the case and not to the general public. CTA
or CA decisions, unlike those of this Court, do not form part of the law of the
land. Decisions of lower courts do not have any value as precedents.
Obviously, decisions of lower courts are not binding on this Court. To hold
that CTA or CA decisions, even if reversed by this Court, should still prevail is
to turn upside down our legal system and hierarchy of courts, with adverse
effects far worse than the dubious doomsday scenario San Roque has
conjured.
Authority of the Commissioner to Delegate Power.
In asking this Court to disallow Taganitos claim for tax refund or credit,
the CIR repudiates the validity of the issuance of its own BIR Ruling No. DA-
489-03. "Taganito cannot rely on the pronouncements in BIR Ruling No. DA-
489-03, being a mere issuance of a Deputy Commissioner."
 Although Section 4 of the 1997 Tax Code provides that the "power to
interpret the provisions of this Code and other tax laws shall be under the
exclusive and original jurisdiction of the Commissioner, subject to review by
the Secretary of Finance," Section 7 of the same Code does not prohibit the
delegation of such power. Thus, "the Commissioner may delegate the powers
vested in him under the pertinent provisions of this Code to any or such
subordinate officials with the rank equivalent to a division chief or higher,
subject to such limitations and restrictions as may be imposed under rules
and regulations to be promulgated by the Secretary of Finance, upon
recommendation of the Commissioner."
 PEOPLE v. SANDIGANBAYAN, TAN
G.R. No. 152532. August 16, 2005

FACTS
Pursuant to a LOA No., an investigation was conducted by BIR
examiners on the ad valorem and specific tax liabilities of SMC covering the
period from January 1, 1985 to March 31, 1986. The result of the
investigation showed that SMC has a deficiency on specific and ad valorem
taxes totaling P342,616,217.88 broken down as follows: Specific Tax P
33,817,613.21 and Ad Valorem Tax P308,798,604.67
On the basis of these findings, the BIR sent a letter dated July 13, 1987
to SMC demanding the payment of its deficiency tax in the amount of
P342,616,217.88. Apparently, the letter was received by the SMC, as it
protested the assessment in its letter dated August 10, 1987 with the
information: 1) that the alleged specific tax deficiency was already paid when
the BIR approved SMCs request that its excess ad valorem payments be
applied to its specific tax balance; 2) that the computation of the ad valorem
tax deficiency was erroneous since the BIR examiners disallowed the
deduction of the price differential (cost of freight from brewery to warehouse)
and ad valorem tax.
The protest was denied by the BIR thru a letter dated October 8, 1987
signed by accused Commissioner Bienvenido Tan, Jr., but the original
assessment of P342,616,217.88 was reduced to P302,051,048.93 due to the
crediting of the taxpayers excess ad valorem tax deposit of P21,805,409.10
with a reiteration of the payment of the x x x assessed specific and ad
valorem tax as reduced.
On October 27, 1987, herein accused referred the matter to Jaime M.
Maza, Assistant BIR Commissioner, Legal Service Division and thereafter
different BIR officials also reviewed the case of SMC and rendered varying
legal opinions on the issue x x x
 On the part of Alicia P. Clemeno, Chief, Legislative Ruling and Research
Division, she recommended the reduction of SMCs tax liability, first to
P21,856,985.29, and later to P22,000,000.00. Balbino E. Gatdula, Jr.,
Assistant Revenue Service Chief, Legal Service, supported the demand for ad
valorem tax deficiency from SMC. In a letter dated August 31, 1988, SMC,
thru a certain Avendano offered the amount of P10,000,000.00 for the
settlement of the assessment. This was concurred in by Juanito Urbi, Chief,
Prosecutor Division, BIR. Jaime Maza, Assistant Commissioner, Legal Service,
BIR, also gave his concurrence to the recommendation that the offer of SMC
for P10,000,000.00 in compromise settlement be accepted. The
recommendation was approved by accused Bienvenido Tan; and accordingly,
in a letter dated December 20, 1988, SMC was informed that its offer to
compromise was accepted.
Subsequently, the SB reversed its original March 2, 2001 Decision with
its now assailed January 23, 2002 Resolution. The antecedents leading to the
Petition before this Court are narrated by the SB in this manner:
In our Decision of March 2, 2001, herein accused Bienvenido A. Tan,
former Commissioner of the BIR, was convicted for violation of Section 3(e)
of RA No. 3019 as amended, otherwise known as the Anti-Graft and Corrupt
Practices Act as the Court finds the compromise agreement to have been
entered into illegally, the BIR is hereby ordered to collect from [SMC] the
amount of P292,951,048.93 representing its tax liabilities covering the period
from January 1, 1985 to March 31, 1986.
In his Motion for Reconsideration, accused seeks to reconsider
aforesaid Decision and posits the following grounds: (1) the Court erred in
holding that the assessment contained in the letter of accused dated 08
October 1987 was final and executory; (2) corollarily, the Court erred in
holding that the referral of the 08 October 1987 assessment to the Assistant
Commissioner for further study was uncalled for, given that there was no
request for a reconsideration of the 08 October 1987 assessment; (3) the
Court erred in not holding that the specific tax assessment of
[P]33,817,613.21 had been paid through the application of SMCs excess ad
valorem tax deposits to its unpaid specific tax; (4) the Court erred in not
holding that the abatement of SMCs ad valorem tax was proper on the
ground that there exists a reasonable doubt as to the correctness of said
assessment; 5 the Court erred in holding that accused exercise of his
authority under Section 204 of the NIRC to abate the assessment of ad
valorem tax was improper; and (6) the Court erred in holding that there was
a compromise of the SMC tax case which resulted in undue injury to the
government.
The Motion is impressed with merit. We reconsider our Decision dated
March 2, 2001 and hereby acquit the accused of the charge in the instant
case.
Ruling of the Sandiganbayan.
In acquitting herein private respondent, the SB adduced several
reasons.
First, the SB failed to give weight to the October 27, 1987 meeting
between Commissioner Tan and SMCs representatives -- a meeting which
resulted in the referral of the assessment to Tans subordinates for further
review and study. The referral showed that the disputed assessment had not
yet become final and executory.
Second, notwithstanding the prosecutions observation that the BIR
rejected SMCs protest against the inclusion of the water component of beer,
private respondent unequivocally approved SMCs application of its excess ad
valorem deposit to complete the payment of its specific tax deficiency.
Third, the abatement of SMCs ad valorem taxes is proper. The tax base
for computing them should not include the ad valorem tax itself and the
price differential. Reliance upon EO 273 is not misplaced, because that law
simply affirms general principles of taxation as well as BIRs long-standing
practice and policy not to impose a tax on a tax. Moreover, nothing precludes
private respondent from applying EO 273 on an assessment made prior to its
effectivity, because that law was merely intended to formalize such long-
standing practice and policy.
Fourth, the SB found no reason to conclude that he had acted contrary
to law or been impelled by any motive other than honest good faith. The
compromise he had entered into regarding SMCs tax did not result in any
injury to the government. No genuine compromise is impeccable, since the
parties to it must perforce give up something in exchange for something
else. No basis existed to hold him liable for violation of Section 3(e) of RA
3019.
Hence, this Petition.

ISSUES
WON the respondent court acted with grave abuse of discretion
amounting to lack or excess of jurisdiction when
a) in upholding private respondents act in ruling upon SMCs Motion for
Reconsideration, it disregarded Section 228 (previously Section 246)
of the NIRC.
b) in upholding private respondents act in accepting SMCs offer of
compromise of P10,000,000.00 for its tax liability of
P302,051,048.93, it disregarded Sections 124 and 228 of the NIRC.
c) when it declared the validity of private respondents act of approving
SMCs application of the excess ad valorem to its specific tax
deficiency despite its being contrary to law.
d) when it acquitted private respondent for violation of Sec. 3(e) of RA
3019 despite the overwhelming evidence proving his guilt beyond
reasonable doubt.

RULING
The Petition has no merit.
First Issue: Viability of SMCs Motion for Reconsideration.
Section 229 of the NIRC provides thus:
 Sec. 229. Protesting of assessment. -- When the CIR 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 implementing regulation within 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 CTA within 30 days from receipt of the said decision; otherwise, the
decision shall become final, executory and demandable.
Petitioner argues that on October 8, 1987, a final decision was
rendered by private respondent as to SMCs tax liability totaling
P302,051,048.93 x x x. Since SMC did not appeal to the CTA, this decision
became final and could no longer be compromised by private respondent.
We disagree.
A careful reading of the quoted tax provision readily shows that the
Motion for Reconsideration filed by SMC was aptly ruled upon by private
respondent. Despite the use of the phrase finally decided, his October 8,
1987 letter to SMC did not constitute a final assessment.
First, the phrase finally decided referred not to the total amount of
deficiency specific and ad valorem taxes, but to the reduction of such
assessment. The reduction was the result of SMCs protest, by way of two
requests for reconsideration dated June 9, 1987 and August 10, 1987.
Contrary to petitioners assertion, the rules on statutory construction did not
apply; the October 8, 1987 letter was not even a law. Grantia argumenti that
the letter partook of the nature of a final assessment, its finality was
suspended by private respondents handwritten note on the bottom left of the
second page, extending the tender of payment for another 15 days from
October 27, 1987, because of a referral of the assessment to the BIRs Legal
Service.
Second, SMC filed on November 2, 1987 a timely request for
reinvestigation -- technically not a motion for reconsideration. Under Section
229 of the NIRC, this request was a proper administrative protest done within
30 days from receipt of the assessment and substantiated by facts and law.
The assessment was received by SMC only on October 26, 1987. Its request
for reinvestigation was in turn received by the BIR on November 10, 1987,
well within the 30-day period allowed by Section 229; thus, the assessment
had not yet become final.
Moreover, a day after SMCs receipt of the assessment, the SB found
that a meeting had indeed been held between private respondent and the
representatives of SMC, resulting in the suspension of the alleged finality of
the assessment. The meeting partook of the nature of an oral, in advance of
the written, request for reinvestigation. In both instances, the taxpayers
request was not merely pro forma; it had the effect of suspending -- not
interrupting -- the 30-day period for appeal.
We do not agree with petitioners contention that, contrary to the
finding of the SB in its March 2, 2001 Decision, no conference had been held
on that date. A careful perusal of the Decision would, however, reveal that
the date of the supposed conference was not indicated with certainty. And
even if it were, the conference was supposed to have been held between
SMCs representatives and BIR officials, other than private respondent, on the
computation (not the assessment) that was followed by SMC and that bore
the alleged approval by the BIR.
Third, after SMCs request for reinvestigation, no other issuance
emanated from the BIR that could be considered a decision. Therefore, no
appeal to the Tax Court could have been made under Section 229 of the
NIRC, since the protest filed with the BIR had not been acted upon.
Appealable to the Tax Court is a decision that refers not to the assessment
itself, but to one made on the protest against such assessment. The
commissioner of internal revenues action in response to a taxpayers request
for reconsideration or reinvestigation of the assessment constitutes the
decision, the receipt of which will start the 30-day period for appeal.
Section 229 does not prevent a taxpayer from exhausting
administrative remedies by filing a request for reconsideration, then a
request for reinvestigation. Furthermore, under Section 7(1) of RA 1125 as
amended, the Tax Court exercised exclusive appellate jurisdiction to review
not the assessments themselves, but the decisions involving disputed ones
arising under the NIRC.
Fourth, quite obviously, no decision could as yet be made by the BIR,
because the protest filed by SMC had been referred by private respondent to
several top BIR officials for further review. In fact, various intra-office
Memoranda were issued in 1988 involving the chiefs of the (1) Legislative
Ruling and Research and (2) Prosecution Divisions of the BIR, as well as its
assistant commissioners for legal service and excise tax. Had the
assessment already become final in 1987, there would then be no more
reason to reinvestigate and study the merits of SMCs protest in 1988.
Fifth, totally misplaced is petitioners reference to the 180-day period
from the submission of documents, within which time the BIR should act
upon the protest, followed by a 30-day period of appeal to the Tax Court. This
provision did not exist in either 1987 or 1988. It appeared only in a much
later law, RA 8424, as Section 228 -- again erroneously referred to by
petitioner as the basis for the present controversy.
Consequently, there was no legal impediment either to the referral of
the protest by private respondent to his subordinates or to the action taken
by them -- a process that lasted for more than 180 days. Neither was there a
need to make a 30-day appeal to the Tax Court due to the BIRs inaction on
the protest within the 180-day period.
 The assessment was clearly not yet final, executory or demandable.
While it is pending with the commissioner of internal revenue, it cannot yet
serve as the basis of collection by distraint or levy or by judicial action. No
grave abuse of discretion can be attributed to the SB for upholding private
respondents act of reinvestigation upon SMCs request.
Second Issue: Application of the Ad Valorem Tax to the Specific Tax
Deficiency.
No grave abuse of discretion was committed when the SB upheld
private respondents approval of SMCs application of its excess ad valorem
tax deposits to its specific tax deficiency.
First, the approval given by private respondent was correct. Ad valorem
taxes and specific taxes are both excise taxes on alcohol products. The
payment by installment of a portion of the total specific tax deficiency of
SMC, in addition to the application of its excess and unused ad valorem tax
deposits to the remaining portion, fully covered the total net specific tax
shortfall. BIR committed an oversight in failing to credit the amount of
deposits to the specific tax deficiency, as well as an error in crediting the
same amount to a subsequent ad valorem tax liability. A confusion was thus
created when it issued a later assessment for the same specific tax
deficiency, this time inclusive of increments. Proper was the BIR officials
abatement or cancellation of the specific taxes of SMC, after the amount of
its ad valorem tax deposits had already been credited to it.
To state that the balances of accounts pertaining to different tax
deposits could only be applied to cover certain tax liabilities upon the
approval of a request for tax credit is to validate the proposition that the
acceptance of payment by installment of a portion of the specific tax
deficiency was indeed tantamount to the approval of the request. No law or
regulation prevented such approval.
Private respondents letter states a condition: should the final
computation of specific and ad valorem taxes yield a different result, the
difference plus penalties would be paid in addition to them. Obviously, this
condition referred solely to the discrepancy, not to the application, and had
nothing to do with the approval that was given.
Second, such approval had the concurrence of top tax officials within
the Bureau. Not only was there a presumption of regularity in the
performance of official functions; also, their collective conclusion was
controlling. Besides, the disclosure of the change in beer formulation was
timely and voluntary; no attribution of bad faith or fraud could be made. A
change in technology that would result in a change in the manner of
computing taxes was well within the realm of tax administration, on which
private respondent had reasonable discretion to rule.
Third, the law and revenue regulations allowed pre-payment schemes,
whereby excise taxes on alcohol products could be paid in advance of the
dates they were due. Since the equivalent value of specific taxes by way of
advance ad valorem tax deposits had already been paid, the government
lost nothing. It was a simple request properly granted for applying the
advance deposits made on one type of excise tax to another type. Granting
such request was well within private respondents authority to administer tax
laws and regulations. Again, the assessment was not final, demandable or
executory at the time.
Fourth, in a letter to the Blue Ribbon Committee of the Senate, no less
than the succeeding commissioner of internal revenue declared that the
abatement of the specific tax deficiency through the proposed application
was proper. Even if the new commissioner had admittedly been advised by
private respondent, there remained the unrebutted presumptions of good
faith and regularity in the performance of official functions.
Abatement, Not Compromise
Although referred to in the pleadings as a compromise, the matter at
hand is actually an abatement or a cancellation. Abatement is the diminution
or decrease in the amount of tax imposed; it refers to the act of eliminating
or nullifying; x x x of lessening or moderating x x x. To abate is to nullify or
reduce in value or amount; while to cancel is to obliterate, cross out, or
invalidate; and to strike out; x x x delete; x x x erase; x x x make void or
invalid; x x x annul; x x x destroy; x x x revoke or recall.
The BIR may therefore abate or cancel the whole or any unpaid portion
of a tax liability, inclusive of increments, if its assessment is excessive or
erroneous; or if the administration costs involved do not justify the collection
of the amount due. No mutual concessions need be made, because an
excessive or erroneous tax is not compromised; it is abated or canceled. Only
correct taxes should be paid.
Fourth Issue: Violation of Section 3(e) of RA 3019
Clearly, the court a quo did not commit grave abuse of discretion in
upholding private respondent in his act of ruling upon the request of SMC for
reinvestigation, leading, first, to his approval of its application of the excess
tax deposit to its tax deficiency; and, second, to his acceptance of its offer to
pay for its tax liability, which was a little over the assessed amount, inclusive
of increments. It necessarily follows that his acquittal is proper and
inevitable.
Basic is the rule that no person shall be twice put in jeopardy of
punishment for the same offense. It is a constitutional guarantee repeated in
Section 7 of Rule 117 of the Rules of Court. A judgment of acquittal cannot
be reopened, absent a grave abuse of discretion or a denial of due process to
the State.
As aptly put by private respondent, error in the exercise of jurisdiction
is not the same as error in judgment. The latter is not reviewable by
certiorari, since evidence has been duly considered and passed upon by the
SB.
 Php500,000 or less to be decided by the Regional Evaluation Board
(RD, ARD, Chiefs of the legal and assessment and collection, and
concerned revenue district officer); take note who issued the
assessment. If the assessment was issued by the national officer, it
shall be decided by the NEB/Commissioner (depende sa amount)
Exceeding Php500,000 but Not exceeding 1m- Commissioner or the
NEB (in practice, dili siya ga decide sa iyang own gina forward jud niya
sa NEB)
Exceeding 1m NEB (Commissioner, 4 deputy Commissioners)
See RR 9 2013
Minimum requirement for approval of the compromise agreement at
least the approval of 2 deputy commissioners + Commissioner
Differentiate compromise and abatement
Why is the withholding tax not subject to compromise? Because there
is failure lang man of the agent to do his job to withhold the tax. Its
not its tax.
Pag naan a judgment, no more authority to compromise ang BIR kay
agent naman siya sa government in enforcing the judgment.
Estate tax cases where compromise is requested on the ground of
financial incapacity of the taxpayer dili subject to compromise kay
presumed man man na kwarta ang estate kay if wala, wala untay
estate tax ginabayad.
If filing a request for reconsideration, na na ang valid assessment. And
it doesnt toll or suspend the prescriptive period to collect.
Any other cases* doubtful validity of assessment aha nang provision
oy?

Refund
Strictly against the taxpayer
Instances where naa credit or refund under article 204 (c) NIRC: 1)
Credit or refund taxes erroneously or 2) illegally received or 3)
penalties imposed without authority or 4) Refund the value of internal
revenue stamps when they are returned in good condition by the
purchaser, and, in his discretion, redeem or change unused stamps
that have been rendered unfit for use and refund their value upon
proof of destruction
 There is still a need to file a written claim even though the sec 204
NIRC has already provided that a return filed showing overpayment
shall be considered as a written claim in order to avail of the judicial
remedies (Sec 229)
Can the commissioner may refund the taxpayer even beyond 2 years
from payment (229 par2)
204 and 229 ang judicial remedy must be filed within the 2 year
prescriptive period
sec 58(d) is different lang because it is the withholding agent is paying
the tax and the taxpayer can claim for tax credit or refund.
In case of income tax return, the reckoning point of the 2 year period is
from the filing of the taxpayers ITR, dili ang date of payment sa
withholding agent.
Sec 58 Actual filing or deadline? (ASSIGNMENT) I compare nimo sa sec
204 na 2 years from

REFUND 112
Actual filing is not required
Transitional input tax granted to taxpayer who shift from non-vat to
vat
RA8424 before it was amended capital goods locally purchased. But RA
9337, that provision has deleted. Zero rated sales nalang karon
The 120 days is jurisdictional
OCT. 6, 2010. Aichi Case

Next Meeting:
Jurisdiction of CTA
Formulate questions