Philex Mining Corporation v CIR (1998)

Philex Mining Corporation v CIR GR No 125704, August 28, 1998

FACTS:
BIR sent a letter to Philex asking it to settle its tax liabilities amounting to P124 million. Philex protested the demand for payment stating that it has pending claims for VAT input credit/refund amounting to P120 million. Therefore, these claims for tax credit/refund should be applied against the tax liabilities.
In reply the BIR found no merit in Philex’s position. On appeal, the CTA reduced the tax liability of Philex.

ISSUES:

1. Whether legal compensation can properly take place between the VAT input credit/refund and the excise tax liabilities of
   Philex Mining Corp;
   
2. Whether the BIR has violated the NIRC which requires the refund of input taxes within 60 days
   
3. Whether the violation by BIR is sufficient to justify non-payment by Philex
   

RULING:

1. No, legal compensation cannot take place. The government and the taxpayer are not creditors and debtors of each other.
   
2. Yes, the BIR has violated the NIRC. It took five years for the BIR to grant its claim for VAT input credit. Obviously, had the
   BIR been more diligent and judicious with their duty, it could have granted the refund
   
3. No, despite the lethargic manner by which the BIR handled Philex’s tax claim, it is a settled rule that in the performance of
   government function, the State is not bound by the neglect of its agents and officers. It must be stressed that the same is not a valid reason for the non-payment of its tax liabilities.