Commissioner of Internal Revenue vs. Burmeister and Wain Scandinavian Contractor Mindanao, Inc.

The two-year prescriptive period under Section 112(A) of the National Internal Revenue Code applies solely to administrative claims for VAT refund or tax credit filed with the Commissioner of Internal Revenue, and not to judicial claims filed with the Court of Tax Appeals. The judicial claim must strictly comply with the mandatory and jurisdictional 120+30-day period under Section 112(D) (now Section 112[C]), reckoned from the filing of the administrative claim; non-compliance with this period deprives the Court of Tax Appeals of jurisdiction, and this jurisdictional defect may be raised at any stage of the proceedings, even for the first time on appeal.

The case arises from the statutory framework governing the recovery of unutilized input VAT on zero-rated sales under Sections 112(A) and 112(D) of the Tax Reform Act of 1997 (RA 8424). It addresses the doctrinal evolution regarding the reckoning of the two-year prescriptive period—from the date of payment of output VAT (Atlas doctrine, effective briefly from June 2007 to September 2008) to the "close of the taxable quarter when the sales were made" (Mirant/San Roque doctrines)—and clarifies the strict, mandatory nature of the procedural timeframes governing the administrative and judicial stages of tax refund claims.

• Respondent Burmeister and Wain Scandinavian Contractor Mindanao, Inc. is a domestic corporation registered as a VAT taxpayer, engaged in the construction, operation, and maintenance of power-generating plants for the National Power Corporation and other government entities.
• Respondent subcontracted from a consortium of non-resident foreign corporations the operation and maintenance of two 100-megawatt power barges owned by the National Power Corporation, which services were certified as subject to zero percent (0%) VAT pursuant to BIR Ruling No. 023-95 and VAT Review Committee Ruling No. 003-99.
• On January 21, 1999, respondent filed its Quarterly VAT Return for the fourth quarter of 1998, declaring zero-rated sales of ₱68,761,361.50 and input VAT of ₱1,834,388.55 paid on domestic purchases of goods and services.
• On July 21, 1999, respondent filed an Application for Tax Credit/Refund with the Bureau of Internal Revenue for the period July to December 1998 in the amount of ₱4,154,969.51, which the Commissioner of Internal Revenue did not act upon.
• On January 9, 2001, respondent filed a petition for review with the Court of Tax Appeals seeking a refund or tax credit certificate in the amount of ₱1,834,388.55.
• The Court of Tax Appeals First Division determined that the administrative claim filed on July 21, 1999 and the judicial claim filed on January 9, 2001 both fell within the two-year prescriptive period reckoned from January 21, 1999, the date of filing the Quarterly VAT Return, and partially granted the refund claim.
• The Commissioner of Internal Revenue raised the issue of prescription based on the 120+30-day mandatory period for the first time on appeal before the Court of Tax Appeals En Banc, arguing that the judicial claim should have been filed by December 18, 1999.

• The Commissioner of Internal Revenue contended that both the administrative and judicial claims must fall within the two-year prescriptive period under Section 112(A) of the National Internal Revenue Code, reckoned from the close of the taxable quarter when the sales were made (December 31, 1998), rendering the judicial claim filed on January 9, 2001 untimely.
• The Commissioner argued that Section 112(D) establishes a mandatory and jurisdictional 120+30-day period, requiring the taxpayer to file a judicial claim within 30 days after the expiration of the 120-day period for the Commissioner to decide, or by December 18, 1999 in this case, which respondent failed to observe.
• The Commissioner maintained that the issue of compliance with the mandatory 120+30-day period may be raised at any stage of the proceedings because it is jurisdictional in nature, and jurisdiction cannot be waived, forfeited, or barred by estoppel, silence, or failure to object.
• The Commissioner cited CIR v. Mirant Pagbilao Corp. to support the interpretation that the two-year prescriptive period should be counted from the close of the taxable quarter when the sales were made rather than from the date of filing the VAT return.

• Burmeister and Wain Scandinavian Contractor Mindanao, Inc. argued that the administrative claim filed on July 21, 1999 and the judicial claim filed on January 9, 2001 both complied with the two-year prescriptive period under Section 112(A), reckoned from January 21, 1999, the date when the Quarterly VAT Return was filed.
• Respondent contended that the Commissioner of Internal Revenue was estopped from raising the issue regarding the 120+30-day period for the first time on appeal before the Court of Tax Appeals En Banc, as the Commissioner had ample opportunity to raise the issue during the proceedings before the Court of Appeals and the Court of Tax Appeals First Division but failed to do so for more than eight years.
• Respondent asserted that the Commissioner's silence and failure to object to the timeliness of the judicial claim during the initial proceedings constituted a waiver of the right to assert the procedural defect regarding the mandatory periods.

• Procedural Issues: Whether the Commissioner of Internal Revenue may raise for the first time on appeal the jurisdictional issue that the taxpayer's judicial claim for VAT refund was filed beyond the mandatory 120+30-day period under Section 112(D) of the National Internal Revenue Code.
• Substantive Issues: Whether the two-year prescriptive period under Section 112(A) of the National Internal Revenue Code applies to both administrative and judicial claims, or only to administrative claims filed with the Commissioner; whether the judicial claim was filed within the mandatory 120+30-day period required for the Court of Tax Appeals to acquire jurisdiction.

• Procedural: The Supreme Court held that the issue of compliance with the mandatory 120+30-day period is jurisdictional and may be raised at any stage of the proceedings, including for the first time on appeal. Jurisdiction is conferred by law and cannot be waived by the parties' consent, objection, silence, or acts; consequently, the Court of Tax Appeals' lack of jurisdiction due to the late filing of the judicial claim can be questioned at any time, and the Commissioner is not estopped from raising the issue despite prior silence.
• Substantive: The Court ruled that the two-year prescriptive period under Section 112(A) applies exclusively to administrative claims filed with the Commissioner of Internal Revenue, not to judicial claims filed with the Court of Tax Appeals, based on the plain language of the statute and the rulings in CIR v. Aichi Forging Company of Asia, Inc. and CIR v. San Roque Power Corporation. While the administrative claim filed on July 21, 1999 was timely (within two years from December 31, 1998 or January 21, 1999), the judicial claim filed on January 9, 2001 was filed one year and 22 days beyond the mandatory period, as it should have been filed by December 18, 1999 (30 days after the 120-day period expired on November 18, 1999). The Court consequently denied the claim for refund or tax credit due to lack of jurisdiction on the part of the Court of Tax Appeals.

• Verba Legis Rule in Statutory Construction — The principle that when the language of a statute is clear, plain, and unambiguous, it must be applied according to its terms without judicial interpretation; applied to hold that Section 112(A)'s phrase "within two (2) years... apply for the issuance of a tax credit certificate or refund" refers only to administrative claims with the Commissioner, not judicial claims with the Court of Tax Appeals.
• Doctrinal Metamorphosis regarding VAT Prescriptive Periods — The recognized evolution in jurisprudence regarding the reckoning of the two-year prescriptive period for VAT refund claims: the Atlas doctrine (counting from date of payment of output VAT, effective only from June 8, 2007 to September 12, 2008) and the subsequent Mirant/San Roque doctrines (counting from the close of the taxable quarter when sales were made, applicable prior to and after the Atlas interregnum).
• Mandatory and Jurisdictional Nature of Statutory Periods — The principle that statutory periods fixed by law for the exercise of judicial or quasi-judicial jurisdiction are mandatory and jurisdictional, not merely procedural or directory; non-compliance with such periods deprives the court of jurisdiction and renders the action barred.
• Incapacity to Waive Jurisdiction — The principle that jurisdiction over the subject matter is determined by law and cannot be conferred by consent, waived, forfeited, or barred by estoppel, silence, or failure to object; jurisdictional objections may be raised at any stage of the proceedings, even for the first time on appeal or before the Supreme Court.

• "Taxes are the lifeblood of the government and, consequently, tax laws must be faithfully and strictly implemented as they are not intended to be liberally construed."
• "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."
• "Jurisdiction cannot be waived because it is conferred by law and is not dependent on the consent or objection or the acts or omissions of the parties or any one of them."
• "The two-year prescriptive period is a grace period in favor of the taxpayer and he can avail of the full period before his right to apply for a tax refund or credit is barred by prescription."

• Atlas Consolidated Mining and Dev't. Corp. v. CIR — Cited as the source of the short-lived doctrine (June 8, 2007 to September 12, 2008) that the two-year prescriptive period is counted from the date of payment of output VAT; distinguished as no longer applicable to claims filed prior to June 2007.
• CIR v. Mirant Pagbilao Corp. — Cited as the case that abandoned the Atlas doctrine and adopted the verba legis rule, holding that the two-year period is counted from the close of the taxable quarter when the sales were made.
• CIR v. San Roque Power Corporation — Cited as the definitive ruling that the two-year prescriptive period applies only to administrative claims, not judicial claims, and that the Atlas doctrine had limited effectivity; followed as controlling precedent.
• CIR v. Aichi Forging Company of Asia, Inc. — Cited to support the interpretation that the phrase "within two (2) years... apply for the issuance of a tax credit certificate or refund" in Section 112(A) refers only to applications filed with the Commissioner (administrative claims).
• Nippon Express (Philippines) Corporation v. CIR — Cited to support the principle that the 120+30-day period under Section 112(D) is jurisdictional and may be raised at any stage of the proceedings, even on appeal.
• CIR v. Dash Engineering Philippines, Inc. — Cited to support the strict construction of tax laws and the mandatory nature of statutory periods for tax refunds.

• Section 112 of Republic Act No. 8424 (Tax Reform Act of 1997) — The primary statutory provision governing refunds or tax credits of input tax, specifically Subsection (A) regarding the two-year prescriptive period for zero-rated or effectively zero-rated sales, and Subsection (D) regarding the 120-day period for the Commissioner to decide applications and the 30-day period for taxpayers to appeal to the Court of Tax Appeals; noted as renumbered as Section 112(C) by Republic Act No. 9337.
• Section 7 of Republic Act No. 1125, as amended by Republic Act No. 9282 — Cited to establish the exclusive appellate jurisdiction of the Court of Tax Appeals over decisions or inaction of the Commissioner of Internal Revenue in cases involving refunds of internal revenue taxes, where inaction is deemed a denial.