Court of Tax Appeals · Special Second Division

Philippine Mining Service Corporation vs. Commissioner of Internal Revenue

CTA Case No. 10494 July 8, 2024

REPUBLIC OF THE PHILIPPINES

COURT OFT~ APPEALS

QUEZON CITY

SPECIAL SECOND DIVISION

PHILIPPINE MINING

SERVICE

CORPORATION,

Petitioner,

-versus-

CTA Case No. 10494

Members:

BACO~~RO-VILLENA, Acting Chairperson,

and

CUI-DAVID,]].

Promulgated:

COMMISSIONER OF

INTERNAL REVENUE,

x---------- ~~~~0~~~~~·-------- ----------~~l- ~ ~ -1~1/ --- ---- x

¥ ?·.cJ (/"

DECISION

BACORRO-VILLENA, L:

At bar is a Petition for Revi9w 1 filed by petitioner Philippine Mining Service Corporation (petitioner /PMSC) pursuant to Section · 3(a) 2 , Rule 8 in relation to Section 3(a)(2)3, Rule 4 of the Revised Rule0 Filed on 17 May 2021, Division Docket, pp. 7-21. SEC. 3. Who may appeal; period to file petition. -

(a) A party adversely affected by a decision, ruling or the inaction of the Commissioner of Internal Revenue on disputed assessments or claims for refund of internal revenue taxes, or by a decision or ruling of the Commissioner of Customs, the Secretary of Finance, the Secretary of Trade and Industry, the Secretary of Agriculture, or a Regional Trial Court in the exercise of its original jurisdiction may appeal to the Court by petition for review filed within thirty days after receipt of a copy of such decision or ruling, or expiration of the period fixed by law for the Commissioner of Internal Revenue to act on the disputed assessments. In case of inaction of the Commissioner of Internal Revenue on claims for refund of internal revenue taxes erroneously or illegally collected, the taxpayer must file a petition for review ithin the two-year period prescribed by law from payment or collection of the taxes. SEC. 3. Cases within the jurisdiction of the Court in Divisions. - The Court in Division shall exercise:

(a) Exclusive original over or appellate jurisdiction to review by appeal the following:

CT A Case No. 1 0494 Philippine Mining Service Corporation v. Commissioner of Internal Revenue of the Court ofTaxAppeals (RRCTA). It seeks the refund or issuance of tax credit certificate (TCC) in the total amount of PI04,888,177·67, representing excess and unutilized input Value-Added Tax (VAT) on purchases of goods and services attributable to zero-rated sales for the first (15t) to fourth (4th) quarters of calendar year (CY) 2019.

PARTIES OF THE CASE

Petitioner is a domestic corporation duly organized and existing under Philippine laws with registered address at 5th floor, Mercedes- Benz Tower, Mindanao Avenue, Cebu Business Park, Barrio Luz, Cebu City.4 It is engaged principally to enter into a service contract with Dolomite Mining Corporation in accordance with law for financial, technical, management and other forms of assistance relative to the exploration, development, exploitation or utilization of the dolomite mining claims of said corporation in the Province of Cebu, including the marketing of such dolomite and its products, and for this purpose to the extent permitted by law to import, purchase, install, construct and/ or operate such mills, factories, building, machinery, equipment, structures and works of all kinds, facilities, tools, ships, vessels, lighters, submarines, docks, piers, warehouses, storage and shipping facilities, instruments and apparatus and other properties as may be necessary or convenient for carrying on the business of the corporation, and to pay or receive payment for the foregoing either on cash or in stock, bonds, debentures or other securities.s Petitioner is also registered with the Bureau of Internal Revenue (BIR) as a VAT taxpayer with Taxpayer Identification No. (TIN) ooo-136-814-ooo as evidenced by Certificate of Registration (COR) No. OCN 2RCooo1045342.6 It has two (2) registered branches: one in Pugalo Alcoy, Cebu, with TIN ooo-136-814-0027; and, one in West Canayaon Garcia-Hernandez, Bohol, with TIN ooo-136-814- oo3.s g 6 7

(2) Inaction by the Commissioner oflnternal Revenue in cases involving disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties in relation thereto, or other matters arising under the National Internal Revenue Code or other laws administered by the Bureau of Internal Revenue, where the National Internal Revenue Code or other applicable law provides a specific period for action ... Provided, still further, that in the case of claims for refund of taxes erroneously or illegally collected, the taxpayer must file a petition for review with the Court prior to the expiration of the two-year period under Section 229 of the National Internal Revenue Code[.] See Amended Articles oflncorporation, Exhibit "P-1-A", Division Docket, pp. 413-427. I d.

Exhibit "P-2", id., p. 428. Exhibit "P-2-A", id., p. 429. Exhibit "P-2-B", id., p. 430.

Philippine Mining Service Corporation v. Commissioner of Internal Revenue

Respondent, on the other hand, is the duly appointed Commissioner of Internal Revenue (respondent/CIR) who is tasked to assess and collect all national internal revenue taxes, fees, and charges, and enforce all forfeitures, penalties, and fines connected therewith, with authority, among others, to deCide, approve, and grant tax credits and/ or refunds of unutilized/ excess input VAT. Respondent holds office at the BIR National Office Building, BIR Road, Diliman, Quezon City.9

FACTS OF THE CASE

For CY 2019, petitioner filed its Quarterly VAT Returns (BIR Form No. 2550-Q) through the BIR's Electronic Filing and Payment System (eFPS) on the following dates: Return Date filed Amended VAT Return for the First Quarter10 September 23, 2019 Amended VAT Return for the Second Quarter11 September 15, 2019 Amended VAT Return for the Third Quarter12 October 30, 2019 Amended VAT Return for the Fourth Quarter13 January 27, 2020 Petitioner avers that it incurred input VAT in the aggregate amount of P141A63,505·78 for the four (4) quarters of CY 2019 attributable to zero-rated sales and sales subject to VAT. The breakdown14 is as follows: Input VAT Amount Input VAT from local purchases P128,317,8o7.39 Input VAT from interest on loans 4.574>582.39 Input VAT from importation 8,571,116 Total Input VAT P141.463, 505.78 Petitioner explains that out of its total sales of P1,583,231,247·2415, So. 76% is zero-rated sales of goods to nonresident foreign corporations ( (NRFC) and Philippine Economic Zone Authority (PEZA) or Board ofrJ 9 10

I I

12 13 14 15 Paragraph 2, Admitted Facts, Joint Stipulation of Facts and Issues (JSFI), id., p. 315. Exhibit "P-1 0-4", USB. w Exhibit "P-1 0-9", id. Exhibit "P-10-13", id. Exhibit "P-1 0-18", id. Table lifted from Petition for Review, Division Docket, p. 9. Amount lifted from Petition for Review, id. The above amount of total sales exempt sales of f'l ,300,000.00

Philippine Mining Service Corporation v. Commissioner of Internal Revenue

Investment (BOI) registered entitles, while the remaining 19.24% is sales subject to VAT.16 With the foregoing ratio, petitioner allocated its total input VAT and deducted the remaining output VAT payable to determine its claim for refund17: Total Input VAT for CY 2019 p 141>463 , 505·78 1 ~ Percentage of sales attributable to zero-rated sales 80.76°/c Input VAT attributable to zero-rated sales 114,245,927.27 Less: Output VAT payable (9.357,749.6o) Total Output VAT P36,575.328.u Less: Input VAT attributable to (27,217,578.51) sales subject to VAT Total Input VAT P141,463,sos.78 P1o4,888,177.6-:

On 17 December 2020, petitioner filed with the BIR its Application for Tax Credits or Refunds (BIR Form No. 1914) 19, an Affidavit of Breakdown of Claim for VAT Refund 2 0 , and the Revised Checklist of Mandatory Requirements on Claims for VAT Refund (Checldist). 21 It requested for the refund of its excess and unutilized input VAT for CY 2019 in the total amount of Pio4,888,177·67. On the same day, respondent issued a Tax Verification Notice with No. TVN2o18 oo14300022 authorizing Revenue Officers (ROs) Marjorie C. Dioso (Dioso) and Michele J. Alonzo-Bucayu (Alonzo-Bucayu) to verify the supporting documents to petitioner's claim for VAT refund. Within the 9o-day period to decide on the refund claim, respondent issued the VAT Refund Notice dated 15 February 2o2123 (with the attached Annex "A") denying the entire claim for lack of factual and legal basis.

Dissatisfied, petitioner filed before this Court the instant Petition for Review24 on 17 May 2021. On 22 July 2021, respondent filed his or her 4 Answer 25 wherein he or she alleged that the judicial appeal must becJ 16 17 18 19 20 21 22 23 24 25 Percentage lifted from Petition for Review, id. Table is lifted from Petition for Review, id., p. I 0. Petitioner excluded the input VAT on Domestic Purchases of Capital Goods not exceeding P I million amounting to P750,537.39. Exhibit "P-3", Division Docket, p. 43 1. Exhibit "P-3-A", id., pp. 432-433 . Exhibit "P-3-8", id., p. 434. Exhibit "P-3-C", id., p. 435. Exhibit "P-4", id., pp. 436-472. Supra at note I.

Division Docket, pp. 182-190.

CT A Case No. 1 0494 Philippine Mining Service Corporation v. Commissioner of Internal Revenue denied on the ground that petitioner failed to fully substantiate its refund claim.

The Pre-Trial Conference was then set for 29 September 202126 and was later moved to 29 November 2o2127 and prior thereto, respondent filed his or her Pre-Trial Brief on 14 October 2021. 28 On the other hand, petitioner filed its Pre-Trial Brief on 22 November 2021. 29 During the Pre-Trial Conference, the Court granted both parties thirty (30) days within which to file their Joint Stipulation of Facts and Issues (JSFI).3° On n January 2022, the parties filed their JSFP 1 through registered mail. Approving the same and setting the hearing dates, the Court issued its Pre-Trial Order dated 03 March 2022Y In the trial that ensued subsequently, petitioner presented its witnesses, namely: (1) Ian John M. Guillena (Guillena), the Accounting Department Manager; (2) June Sun M. Pugoy (Pugoy), the Accounting Section Manager; and, (3) Katherine 0. Constantino (Constantino), the Court-commissioned Independent Certified Public Accountant (ICPA). On the witness stand, Guillena identified his Judicial Affidavit33, where he declared essentially that: (1) petitioner's new address as indicated in the COR is 5 th floor, Mercedes-Benz Tower, Mindanao Avenue, Cebu Business Park, Barrio Luz, Cebu City; (2) there are few documents showing petitioner's previous address at Rm. 8os Keppel Ctr., Samar Loop cor. Cardinal Rosales Ave., Cebu Business Park, Cebu City as reflected in its old COR which was surrendered to the BIR; (3) as Accounting Department Manager, he oversees petitioner's tax matters such as refunds; (4) petitioner incurred input VAT attributable to its zero-rated sales arising from its sales to PEZA-registered entities (as evidenced by sales invoices, bill of ladings, credit memos) and sales to NRFC (as evidenced by sales agreements); (s) with the excess input VAT, petitioner filed an administrative claim for refund for TY 2019 on ( 17 December 2020 with the BIR VAT Credit Audit Division (VCAD);!J 26 27 28 29 30 3 1 32 33 See Notice of Pre-Trial Conference, id., pp. 192- 193. See Notice of Resetting, id., p. 194. Id., pp. 195-1 98.

1d., pp. 202-218.

See Order dated 29 November 2021, id., p. 220. Id., pp. 315-319.

Id., pp. 323-326.

See Judicial Affidavit of Ian John M. Guillena, Exhibit "P-5", id., pp. 82-90.

Philippine Mining Service Corporation v. Commissioner of Internal Revenue

(6) however, BIR denied the whole claim for refund; and (7) due to the denial, petitioner filed its judicial appeal before this Court. In his cross-examination34, Guillena declared that although petitioner submitted the complete requirements as required in the checldist, respondent still denied the refund claim. No redirect examination was conducted. As for Pugoy, he testified through his Judicial Affidavit3s that as the Accounting Section Manager: (1) he is familiar with the circumstances of the case since he prepares and reviews the documents related to petitioner's tax matters such as refunds; (2) petitioner is engaged in both VA Table and zero-rated sales; (3) petitioner's total taxable sales forTY 2019 were P1,584,531,247·24, comprised of 8o.76% of zero-rated sales (amounting to P1,279,736,846.23) and 19.24% of taxable sales (amounting to P3o4,794A01.01 with output taxes ofP36,575,328.12);

(4) the total input tax incurred in TY 2019 amounted to P141A63,5os.78 (which when ratably allocated between zero-rated sales and taxable sales amounts to Pn4,245,927.27 and P27,217,578.s1 respectively);

(5) after deducting the input taxes (attributable to taxable sales) from the output taxes, petitioner still had an output tax liability of P9,357,749.6o; (6) petitioner deducted the said output tax liability from the input tax attributable to zero-rated sales and the remaining amount ofP1o4,888,177·67 was claimed for VAT refund; (7) the claimed amount was deducted from the 2nd quarter VAT return of TY 2020, thus it was not carried over and unutilized in the succeeding quarters;

(8) petitioner submitted complete documents to substantiate its claim as enumerated in Annex A of Revenue Memorandum Circular (RMC) No. 54-201436; (g) based on the letter, respondent allegedly found:

(i) insertions and alterations in the documents submitted; and, (ii) discrepancies in the bank statements, statement of accounts (SOAs) and other documents, which led to the denial of the claim; (1o) however, contrary to respondent's findings, there are no alterations or insertions in the documents; and, (n) for the alleged discrepancies, petitioner submitted to the BIR the complete set of bank statements. g 34 35 36 TSN dated 21 February 2022, pp. 8-9. See Judicial Affidavit of June Sun M. Pugoy, Exhibit "P-6", Division Docket, pp. 151-161. Clarifying Issues Relative to the Application for Value Added Tax (VAT) Refund/Credit under Section 112 of the Tax Code, as amended.

CT A Case No. 1 0494 Philippine Mining Service Corporation v. Commissioner of Internal Revenue

During his cross-examination37, Pugoy stated that petitioner submitted documents without alterations. No redirect examination was conducted.

Last to assume the witness stand is Constantino where she testified in her Judicial Affidavit38 that: (1) she is the Court- commissioned ICPA; (2) as such, she prepared the amended ICPA Report39 (which she submitted to the Court on 22 June 2022) enclosing the audit procedures performed and the findings of the verification, and a USB40 containing the scanned copies of the documents examined;

(3) petitioner only provided the computer print-out of the copy of the letter from PEZA certifying and confirming its VAT zero-rating;

(4) petitioner failed to provide any certification from the BOI; and,

(5) should petitioner provide the original certifications from PEZA and BOI, she recommends the amount ofP84,)13,656.23 as VAT refund. During cross-examination4\ Constantino confirmed that her recommendation for refund is anchored on whether petitioner could provide the originals of the PEZA and BOI Certifications. Responding to the Court's inquiry, Constantino corrected her Judicial Affidavit and changed the word "original" to "computer print-out" which she referred to in Answer No. 9 and Question No. n.42 No redirect examination was conducted.

On 30 September 2022, petitioner filed its Formal Offer of Evidence43 (FOE) consisting of Exhibits "P-1" to "P-34", inclusive of sub-markings. Respondent interposed his or her objection on the admission of Exhibit "P-4o" for being a scanned copy.44 In the Resolution dated 22 November 20224s, the Court admitted all exhibits except Exhibits "P-32" to "P-32-5"46 and "P-3o" to "P-30-256"47 for failure ( of identification; and "P-20-51173"48 for failure to locate the markeiY 37 38 39 40 41 42 43 44 45 46 47 48 TSN dated 21 February 2022, pp. 12-13. See Judicial Affidavit of Katherine 0. Constantino (as Independent Certified Public Accountant), Exhibit "P-41 ", Division Docket, pp. 353-365. Exhibit "P-39".

Exhibit "P-39-1 ".

TSN dated 3 I August 2022, pp. 9-11. Id., pp. 12-13.

Division Docket, pp. 374-411 . See Comment (Re: Formal Offer of Evidence), id., pp. 474-476. !d., pp. 479-481.

Offered as Cash Receipts Journal Vouchers, and Credit Memos and Debit Memos. Offered as Mate's Receipt. Offered as Sales Invoices for CY 2019.

Philippine Mining Service Corporation v. Commissioner of Internal Revenue document. After petitioner filed its Motion for Partial Reconsideration49 (MPR), and without respondent's commentso, the Court admitted the denied exhibitsY Later, respondent proceeded to present his or her lone witness, RO Orlando B. Torre (Torre) who testified through his Judicial Affidavit5 2 that: (1) petitioner filed an administrative claim for refund and submitted documents in accordance with the Checklist; (2) based on the Memorandum Report dated 15 February 2o21s3, the entire claim was denied mostly because petitioner allegedly failed to substantiate it; and, (3) petitioner was notified of the denial of its refund claim. No cross-examination was conducted.s4 Still later, or on 02 March 2022, respondent filed his or her FOE.ss Over petitioner's objectionss6, the Court admitted all the offered exhibits.s7 The Court then directed the parties to file their respective memoranda.s8 On 02 May 2023, respondent filed his or her Memorandum59 while petitioner filed its Memorandum60 on 24 May 2023. Accordingly, on 26 May 2023, the Court considered the case submitted for decision. 61 ISSUE As culled from the JSFI6\ the main Issue for this Court's determination is -3 49 50 51 52 53 54 55 56 57 58 59 60 61 62 See Motion for Partial Reconsideration (of the Resolution dated 22 November 2022), Division Docket, pp. 482-485.

See Records Verification dated 27 January 2023, id., p. 490. See Resolution dated 08 February 2023, id., pp. 492-493. See Judicial Affidavit of Orlando B. Torre, Exhibit "R-6", id., pp. 334-339. BIR Records, pp. 493-495. See Order dated 22 February 2023, Division Docket, pp. 494-495. Id., pp. 499-502.

See Comment/Opposition (to Respondent's Formal Offer of Evidence dated 28 February 2023), id., pp. 504-507.

See Resolution dated 18 April 2023, id., pp. 510-511 . I d.

!d., pp. 512-519.

Id., pp. 521-564.

See Resolution dated 26 May 2023, id., p. 566. Supra at note 31.

Philippine Mining Service Corporation v. Commissioner of Internal Revenue

WHETHER PETITIONER PHILIPPINE MINING SERVICE CORPORATION IS ENTITLED TO A REFUND OR ISSUANCE OF A

TAX CREDIT CERTIFICATE (TCC) IN THE AGGREGATE AMOUNT

OF Pw4,888,177·67, REPRESENTING ITS EXCESS AND UNUTILIZED INPUT VALUE-ADDED TAX (VAT) FOR THE FIRST TO FOURTH

QUARTERS OF CALENDAR YEAR (CY) 2019 ATTRIBUTABLE TO

ZERO-RATED SALES.

ARGUMENTS Summarizing several jurisprudences63 in support of its instant petition, it enumerates the following requirements for a claim for input VAT refund/TCC (attributable to zero-rated sales) to prosper, thus: 1.

The refund claim is filed with BIR within two (2) years after the close of taxable quarter when the sales were made; 2.

In case of full or partial denial of the refund claim rendered within a period of ninety (go) days from the date of submission of the ORs or invoices and other documents in support of the application, the judicial claim shall be filed with the Court within thirty (30) days from receipt of the decision; 3· The taxpayer is a VAT-registered person; 4· The taxpayer is engaged in zero-rated or effectively zero-rated sales;

5· For zero-rated sales under Sections w6(A)(2)(1) and (2); w6(B) and w8(B)(1) and (2), the acceptable foreign currency exchange proceeds have been duly accounted for in accordance with Bangko Sentral ng Pilipinas (BSP) rules and regulations; 6.

The input taxes are due or paid; 7· The input taxes claimed are attributable to zero-rated or effectively zero-rated sales; 8.

The input taxes have not been applied against output taxes during and in the succeeding quarters; Petitioner maintains that, with its testimonial and documentary evidence, it was able to establish that it complied with all the aforementioned conditions. g· 63 The enumeration came from the cases of Tetra Pak Philippines, Inc. v. Commissioner of Internal Revenue, CTA Case No. 10113, 23 November 2022; Intel Technology Philippines, Inc. v. Commissioner of Internal Revenue, G.R. No. 166732, 27 April 2007; AT&T Communications Services Philippines, Inc. v. Commissioner of Internal Revenue, G.R. No. 182364, 03 August 20 I 0; Silicon Philippines, Inc. v. Commissioner of Internal Revenue, G.R. No. 172378, 17 January 2011.

CT A Case No. 1 0494 Philippine Mining Service Corporation v. Commissioner of Internal Revenue

Petitioner also avers that the ICPA validated the zero-rated sales transactions and the supporting documents which are all reflected in the ICPA Report. Similarly, the ICPA verified the related input taxes on the zero-rated sales, thus recommending an estimate of P84 million for VAT refund. With the foregoing, respondent's disallowances due to insufficient documentation, unreadable documents, alterations without countersignatures and violation of invoicing requirements have no basis to stand on.

Lastly, petitioner asserts that cases before this Court are litigated de novo, thus this Court is not precluded from considering evidence even if not presented in the administrative level. Expectedly, respondent debunks every ground that petitiOner relies on in its pursuit of a refund. Contrary to petitioner's claim and relying on the Memorandum Report of 15 February 2021, respondent emphasizes on petitioner's failure to fully substantiate the refund sought. Moreover, respondent insists that this Court should confine itself on the findings of denial and only consider pieces of evidence which were submitted in the administrative level. Lastly, respondent points out that claims for refund are construed strictly against the taxpayer. With petitioner's failure to comply with the refund's documentary and evidentiary requirements, it must necessarily be denied.

RULING OF THE COURT

After a careful and thorough evaluation of the applicable laws, rules and regulations and the evidence presented by petitioner, the Court finds the instant petition partly meritorious. Petitioner anchors its claim on Sections no(B), n2(A) and (C) of the National Internal Revenue Code (NIRC) of1997, as amended, which are all quoted hereunder: ( ~~C. no. Tax Credits. - {J CT A Case No. 1 0494 Philippine Mining Service Corporation v. Commissioner of Internal Revenue

64 (B) Excess Output or Input Tax. - If at the end of any taxable quarter the output tax exceeds the input tax, the excess shall be paid by the VAT-registered person. If the input tax exceeds the output tax, the excess shall be carried over to the succeeding quarter or quarters: Provided, however, That any input tax attributable to zero-rated sales by a VAT-registered person may at his option be refunded or credited against other internal revenue taxes, subject to the provisions of Section 112.

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: Provided, however, That in the case of zero-rated sales under Section w6(A)(2)(a)(1), (2) and (b) and Section w8(B)(1) and (2), the acceptable foreign currency exchange proceeds thereof had been duly accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP): Provided, further, That where the taxpayer is engaged in zero-rated or effectively zero- rated sale and also in taxable or exempt sale of goods or properties or services, and the amount of creditable input tax due or paid cannot be directly and entirely attributed to any one of the transactions, it shall be allocated proportionately on the basis of the volume of sales: Provided, finally, That for a person making sales that are zero-rated under Section w8(B)(6), the input taxes shall be allocated ratably between his zero-rated and non-zero-rated sales. (C) 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 one hundred twenty (12o) days from the date of submission of complete documents in support of the application filed in accordance with Subsection (A) 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 ofTax Appeals 6 • 3' Italics in the original text.

Philippine Mining Service Corporation v. Commissioner of Internal Revenue

In Commissioner of Internal Revenue v. Deutsche Knowledge Services Pte. Ltd. 65 (Deutsche Knowledge Services), the Supreme Court laid down the requisites for the entitlement to tax refund or credit of excess input VAT attributable to zero-rated sales, to wit: Under Section 4.112-1(a) of Revenue Regulations No. (RR) 16-os, otherwise known as the Consolidated VAT Regulations of 2005, in relation to Section 112 of the Tax Code, a claimant's entitlement to a tax refund or credit of excess input VAT attributable to zero-rated sales hinges upon the following requisites: "(1) the taxpayer must be VAT-registered; (2) the taxpayer must be engaged in sales which are zero-rated or effectively zero-rated; (3) the claim must be filed within two 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." Applying the foregoing principle, the Court will proceed to determine whether petitioner complied with the aforementioned requisites. Since the Court's jurisdiction over the instant case is material, We shall first determine the third (3rd) requisite.

THIRD (3R0 ) REQUISITE:

THE CLAIM MUST BE FILED WITHIN

TWO (2) YEARS AFTER THE CLOSE OF

THE TAXABLE QUARTER WHEN SUCH

SALES ARE MADE.

In accordance with Section n2(A) and ( C)66 of the NIRC of 1997, as amended by Republic Act (RA) No. 10963 or Tax Reform for Acceleration and Inclusion (TRAIN), the administrative claim for refund ofunutilized input VAT must be filed with the BIR within two (2) years after the close of the taxable quarter when the zero-rated or effectively zero-rated sales are made. Petitioner's present claim covers the 15t, 2nd, 3rd and 4th quarters of CY 2019. Counting two (2) years from the respective close of the said . quarters, the last day for the filing of the administrative claim for th(:::j' 65 66 G.R. No. 234445, 15 July 2020; Citations omitted. Supra at p. II .

CT A Case No. 1 0494 Philippine Mining Service Corporation v. Commissioner of Internal Revenue said four (4) quarters, vis-a-vis the date of filing of the administrative claim by petitioner, pursuant to Section n2(A) of the NIRC of 1997, as amended, are shown below, viz: Last day for filing Quarter Close of taxable an administrative Date of filing of

(CY 2019)

quarter claim claim for refund 15t Quarter 31 March 2019 31 March 2021 2nd Quarter 30 June 2019 30 June 2021 17 December 202067 3rd Quarter 30 September 2019 30 September 2021 4th Quarter 31 December 2019 31 December 2021 Clearly, petitioner's administrative claim was timely filed. As to the timeliness of petitioner's judicial claim, Section 112( C) of the NIRC of 1997, as amended, necessitates that it must have been filed within thirty (3o) days from its receipt of respondent's decision or after the expiration of the ninety (9o)-day period. Thus, from the filing of petitioner's administrative claim, respondent had 90 days to act on the said claim.

Relative thereto, Section 7(a)(1) and (2) of RA 112568, as amended by RA 928269, provides that CTA has exclusive appellate jurisdiction over decisions or inactions of CIR on refund cases: 67 68 69 SEC. 7· Jurisdiction . -The CTA shall exercise:

(a) Exclusive appellate jurisdiction to review by appeal, as herein provided:

(1) Decisions of the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties in relation thereto, or other matters arising under the National Internal Revenue or other laws administered by the Bureau of!nternal Revenue; J Supra at notes 19,20 and 21. AN ACT CREATING THE COURT OF TAX APPEALS. AN ACT EXPANDING THE JURISDICTION OF THE COURT OF TAX APPEALS (CT A), ELEVATING ITS RANK TO THE LEVEL OF A COLLEGIATE COURT WITH SPECIAL JURISDICTION AND ENLARGING ITS MEMBERSHIP, AMENDING FOR THE PURPOSE CERTAIN SECTIONS OR REPUBLIC ACT NO. 1125, AS AMENDED, OTHERWISE KNOWN AS THE LAW CREATING THE COURT OF TAX APPEALS, AND FOR OTHER PURPOSES.

CT A Case No. 1 0494 Philippine Mining Service Corporation v. Commissioner of Internal Revenue

(2) Inaction by the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties in relations thereto, or other matters arising under the National Internal Revenue Code or other laws administered by the Bureau of Internal Revenue, where the National Internal Revenue Code provides a specific period of action, in which case the inaction shall be deemed a denial(.]7° Based on the foregoing, petitioner's administrative claim was timely filed on 17 December 2020. As such, respondent had 90 days from the said date or until17 March 2021 to act on the said claim. Accordingly, respondent issued the VAT Refund Notice of 15 February 2021 which petitioner received on 01 March 2021. Counting 30 days from receipt thereof, petitioner had until 31 March 2021 to file the judicial claim. However, within the period allowed by law to file its respective Petition for Review, the Supreme Court issued the following administrative circulars in view of the surge of cases of COVID-19 in the National Capital Judicial Region and nearby provinces which ordered courts to be physically closed, and the period of filing of pleadings and other court submissions to be suspended until14 May 2021, to wit71 : Administrative Circular Issued on (AC) No.

Contents AC No. 14-2021 March 28, 2021 Re:

Extension of Filing Periods for Pleadings/Court Submissions for Courts in the National Capital judicial Region and Nearby Provinces Placed under Enhanced Community Quarantine from March 29 to April4, 2021. "The filing periods of pleadings and other court submissions that fall during the period from March 29 to March 31, 2021 are hereby extended for three (3) calendar days, counted from April 5 , 2021."

AC No. 15-2021 April 3 , 2021 "RE: Extension of the Physical Closure of Courts and the filing periods for pleadings and other court submissions in light of the further extension of the enhanced community quarantine from Aprils to Apriln, 2021. " 70 71 "The filing periods of pleadings and other court submissions that fell due or would fall du~~ Italics in the original text and emphasis supplied. Table lifted from Philippine Geothermal Production Company, Inc. v. Commissioner of Internal Revenue, CTA EB Case Nos. 2455 & 2460, 09 January 2023.

Philippine Mining Service Corporation v. Commissioner of Internal Revenue

AC No. 21-2021 Aprilw, 2021 AC No. 22-2021 April14, 2021 AC No. 29-2021 April 30, 2021 AC No. 33-2021 May 14, 2021 during the period beginning from March 29 to April u, 2021 are hereby EXTENDED for seven

(7) calendar days, counted from April12, 2021. Accordingly, Administrative Circular No. 14- 2o21 is hereby modified in this respect." "RE: Extension of Physical Closure of Courts" "ALL the courts and the judicial offices in the National Capital Region and the provinces of Bulacan, Cavite, Laguna, and Rizal (NCJR+) shall remain physically closed until April18, 2021. The time for filing and service of pleadings and motions during this period is suspended and shall resume seven ( 7) calendar days counted from the first day of physical reopening of the relevant court."

"RE: Physical Closure of Courts in Enhanced Community Quarantine and Modified Enhanced Community Quarantine Areas" "The physical closure of courts in the areas of NCR among others is likewise extended to April 30, 2021.

The time for filing and service of pleadings and motions during this period is suspended and shall resume seven ( 7) calendar days counted from the first day of physical reopening of the relevant court."

"RE: Work arrangements in Courts on May 3-14, 2021 " "The time for filing and service of pleadings and motions during this period in these areas is suspended and shall resume after seven (7) calendar days counted from the first day of the physical reopening of the relevant court." "RE: Court operations starting May q , 2021 " "All first and second level courts, and appellate collegiate courts (except the Supreme Court), and the judicial offices in these areas under GCQ shall be physically opened with a skeleton force of at least thirty percent (3o%) to at most fifty percent (so%), beginning 17 May 2021 until further notice."

Based on the foregoing circulars, the courts reopened on 17 May 2021. Thus, counting seven ( 7) days therefrom, the deadline for the filing of the Petition for Review fell on 24 May 2021. Petitioner filed its Petition for Review on 17 May 202172., thus, the fd requisite is satisfied. a' 72 Supra at note I.

Philippine Mining Service Corporation v. Commissioner of Internal Revenue

FIRST (IST) REQUISITE:

PETITIONER MUST BE VALUE-ADDED

TAX (VAT)-REGISTERED. Indisputably, petitioner is a VAT -registered taxpayer with TIN ooo-136-814-ooo, as evidenced by BIR COR No. OCN 2RCooo1045342.73 Also, it has two (2) registered branches as evidenced by BIR COR Nos. OCN 2RCooo156656174 and OCN 2RCoooos87843J5

SECOND (2N°) REQUISITE:

PETITIONER MUST BE ENGAGED IN

SALES WHICH ARE ZERO-RATED OR

EFFECTIVELY ZERO-RATED. The 2nd requzszte requires that the taxpayer is engaged in zero-rated or effectively zero-rated sales and, for zero-rated sales . under Sections 1o6(A)(2)(a)(1) and (3)76, and 1o8(B)(1) and (2)77 of tht::' 73 74 75 76 77 Supra at note 6.

Supra at note 7.

Supra at note 8.

SEC. 106. Value-Added Tax on Sale of Goods or Properties.- (A) Rate and Base of Tax. -There shall be levied, assessed and collected on every sale, barter or exchange of goods or properties, a value-added tax equivalent to twelve percent ( 12%) of the gross selling price or gross value in money of the goods or properties sold, bartered or exchanged, such tax to be paid by the seller or transferor.

(2) The following sales by VAT-registered persons shall be subject to zero percent (0%) rate:

(a) Export Sales.- The term 'export sales' means: (I) The sale and actual shipment of goods from the Philippines to a foreign country, irrespective of any shipping arrangement that may be agreed upon which may influence or determine the transfer of ownership of the goods so exported and paid for in acceptable foreign currency or its equivalent in goods or services, and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (SSP);

(3) Sale of raw materials or packaging materials to a nonresident buyer for delivery to a resident local export-oriented enterprise to be used in manufacturing, processing, packing or repacking in the Philippines of the said buyer's goods and paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP)[.] SEC. 108. Value-Added Tax on Sale ofServices and Use or Lease of Properties.- (B) Transactions Subject to Zero Percent (0%) Rate. - The following services performed in the Philippines by VAT-registered persons shall be subject to zero percent (0%) rate: ( 1) Processing, manufacturing or repacking goods for other persons doing business outside the Philippines which goods are subsequently exported, where the services are paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP);

Philippine Mining Service Corporation v. Commissioner of Internal Revenue

NIRC of 1997, as amended, the acceptable foreign currency exchange proceeds must have been duly accounted for in accordance with Bangko Sentral ng Pilipinas (BSP) rules and regulations. As reflected in the 1st to 4th Amended Quarterly VAT Returns for CY 201978, petitioner reported its total sales amounting to PI,s84,531,247·24 which is comprised ofVATable sales, zero-rated sales, and exempt sales:

Quarter Total Sales Vatable Zero-rated Exempt 1St P437,242,862.64 P69, 712,925.27 P367,529,937.37 - 2nd 386,457,757·42 67,672,494·70 318,785,262.72 - 3fd 4l1,384,230.88 88,183, 728.6o 321,900,502.28 P1aoo,ooo.oo 4th 349,446,396·30 79,225,252·44 270,221,143·86 - Total PI,584,531,247·24 PJo4,794,401.0I PI,278,436,846.23 PI,Joo,ooo.oo Of the PI,278,436,846.23 that petitiOner claims to have been derived from its zero-rated sales, P638,235,837·84 consisted of direct exports, or sales of goods to NRFCs; while the remaining P64o,2oi,oo9.1979 is composed of indirect exports, or sales of goods to PEZA-registered and HOI-registered entities. As summarized in the amended ICP A Report80: 8' 1" quarter of CY J'd quarter of CY 4111 quarter of CY 2019 covering 2"d quarter of CY 2019 covering 2019 covering January to March 2019 covering April July to September October to 2019 to May 2019 2019 December 2019 Total Zero-rated sales per Amended Quarterly VAT returns for the CY 2019 (Exhibits P-10-4, P-10-9, P-10-13 and P-10-18) ~367 , 529 , 937.37 ~318,785 ,262 . 72 P32l ,900,502.28 ~2 70,221 ' 143.86 ~ l ,278,436,846.23 Zero-rated sales per Schedule of Sales for the CY 20 19

a. Export Sales- Schedule of Zero- rated Sales of Goods - Direct Export Sales (Exhibit P-11) 202,338,445.40 125,234,195.36 149,548,779.60 161 ,114,416.68 638,235,837.04

(2) Services other than those mentioned in the preceding paragraph, rendered to a person engaged in business conducted outside the Philippines or to a nonresident person not engaged in business who is outside the Philippines when the services are performed, the consideration for which is paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP)[.] 78 79 80 Supra at notes 10, 11 , 12 and 13. With an insignificant discrepancy ofP0.80. Table lifted from amended ICPA Report, p. 13, Exhibit "P-39", USB.

Philippine Mining Service Corporation v. Commissioner of Internal Revenue b. Sale to PEZA and BOI registered customers- Schedule of Zero- rated Sales of Goods - Indirect Export Sales (Exhibit P-Il-l) 165,191,49 1.97 193,55 1,067.36 172,35 1,722.68 109,106,727. 18 640,201,009.1 9 Subtotal 367,529,93 7.3 7 318,785,262.72 321,900,502.28 270,221 ,143.86 I ,278,436,846.23 Difference ll- ll- P- P- Thus, based on the breakdown, petitioner has two (2) sources of zero-rated sales, namely: 81 (i) Actual export sale of goods under Section 1o6(A)(2)(a)(1) of the NIRC of1997, as amended; and, (ii) Sale to PEZA-registered entities under 1o6(A)(2)(a)(s) of the NIRC of1997, as amended. i.

Actual export sales of goods under Section 106(A)(2)(a)(t) of the NIRC of 1997, as amended (P638,235,837·84) Section Section 106(A)(2)(a)(1) of the NIRC of1997, as amended, states: SEC.106. Value-Added Tax on Sale of Goods or Properties. - (A) Rate and Base ofTax. - ...

(2) The following sales by VAT -registered persons shall be subject to zero percent (o%) rate:

(a) Export Sales. - The term 'export sales' means:

(1) The sale and actual shipment of goods from the Philippines to a foreign country, irrespective of any shipping arrangement that may be agreed upon which may influence or determine the transfer of ownership of the goods so exported and paid for in acceptable foreign currency or its equivalent in goods or services, and accounted for in accordance with the rules and regulations of the Bangko Sentral ng ~~lipinas (BSP)[.]

8 ' {j Italics in the original text and emphasis supplied. P- CT A Case No. 1 0494 Philippine Mining Service Corporation v. Commissioner of Internal Revenue

Based on the foregoing, in order for an export sale of goods to qualify as zero-rated under the said provision, the following essential elements must be present:

1. The sale was made by a VAT -registered person;

2. There was a sale and actual shipment of goods from the Philippines to a foreign country; and, 3· The sale was paid for in acceptable foreign currency accounted for in accordance with the rules and regulations of the BSP. As for the first essential element, it has already been settled that petitioner is a VAT -registered entity. As for the second essential element, Sections 113(A)(1), (B)(1) and (2)(c) of the NIRC of1997, as amended, and Sections 4·113-1(A)(1), (B)(1) and (2)(c) of Revenue Regulations (RR) No. 16-200582, as amended, respectively provide: 82 NIRC of 1997. as amended SEC. 113. Invoicing and Accounting Requirements for VAT- Registered Persons. - (A) Invoicing Requirements.- A VAT-registered person shall issue:

(1) A VAT invoice for every sale, barter or exchange of goods or properties; and (B) Information Contained in the VAT Invoice or VAT Official Receipt. - The following information shall be indicated in the VAT invoice or VAT official receipt:

(1) A statement that the seller is a VAT-registered person, followed by his Taxpayer's Identification Number (TIN)J Consolidated Value-Added Tax Regulations of2005.

Philippine Mining Service Corporation v. Commissioner of Internal Revenue

(2) The total amount which the purchaser pays or is obligated to pay to the seller with the indication that such amount includes the value-added tax: Provided, That:

(c) If the sale is subject to zero percent (o%) value- added tax, the term 'zero-rated sale' shall be written or printed prominently on the invoice or receipt[.] 83 RR No. 16-2oo5 SEC. 4·113-L Invoicing Requirements. - (A) A VAT-registered person shall issue:- (1) A VAT invoice for every sale, barter or exchange of goods or properties; and Only VAT-registered persons are required to print their TIN followed by the word 'VAT' in their invoice or official receipts. Said documents shall be considered as a 'VAT Invoice' or VAT official receipt. All purchases covered by invoices/receipts other than VAT Invoice/VAT Official Receipt shall not give rise to any input tax. VAT invoice/ official receipt shall be prepared at least in duplicate, the original to be given to the buyer and the duplicate to be retained by the seller as part of his accounting records. (B) Information contained in VAT invoice or VAT official receipt. -The following information shall be indicated in VAT invoice or VAT official receipt: (1) A statement that the seller is a VAT-registered person, followed by his TIN;

(2) The total amount which the purchaser pays or is obligated to pay to the seller with the indication that such amount includes the VAT; Provided, That: '!J Italics in the original text, emphasis and underscoring supplied.

Philippine Mining Service Corporation v. Commissioner of Internal Revenue

(c) Ifthe sale is subject to zero percent (o%) VAT, the term 'zero-rated sale' shall be written or printed prominently on the invoice or receipt[.] 84 In addition to the above requirements, the sales invoices supporting the export sales must be duly registered with the BIR and must contain all the required information, pursuant to Sections 237 and 238 of the NIRC of1997, as amended, viz: SEC. 237. Issuance of Receipts or Sales or Commercial Invoices. -All persons subject to an internal revenue tax shall, for each sale or transfer of merchandise or for services rendered valued at Twenty-five pesos (P25.oo) or more, issue duly registered receipts or sales or commercial invoices, prepared at least in duplicate, showing the date of transaction, quantity, unit cost and description of merchandise or nature of service ... SEc. 238. Printing of Receipts or Sales or Commercial Invoices. - All persons who are engaged in business shall secure from the Bureau of Internal Revenue an authority to print receipts or sales or commercial invoices before a printer can print the same. No authority to print receipts or sales or commercial invoices shall be granted unless the receipts or invoices to be printed are serially numbered and shall show, among other things, the name, business style, Taxpayer Identification Number (TIN) and business address of the person or entity to use the same, and such other information that may be required by rules and regulations to be promulgated by the Secretary of Finance, upon recommendation of the Commissioner.8s To summarize the foregoing requirements, the following information should be reflected in the VAT invoice: 84 85

1. A statement that the seller is a VAT -registered person, followed by its TIN; {5 Italics in the original text and underscoring supplied. Italics in the original text and underscoring supplied.

CT A Case No. 1 0494 Philippine Mining Service Corporation v. Commissioner of Internal Revenue

2. The total amount which the purchaser pays or is obligated to pay to the seller with the indication that such amount includes the VAT, provided that: (a) the amount of tax shall be shown as a separate item in the invoice or receipt; (b) if the sale is exempt from VAT, the term "VAT exempt sale" shall be written or printed prominently on the invoice or receipt; (c) if the sale is subject to zero percent (o%) VAT, the term "zero-rated sale" shall be written or printed prominently on the invoice or receipt; or, (d) if the sale involves goods, properties or services, some of which are subject to and some of which are VAT zero- rated or VAT -exempt, the invoice or receipt shall clearly indicate the breakdown of the sale price between its taxable, exempt and zero-rated components, and the calculation of the VAT on each portion of the sale shall be shown on the invoice or receipt. The seller has the option to issue separate invoices or receipts for the taxable, exempt, and zero-rated components of the sale;

3· In the case of sales in the amount of one thousand pesos (P1,ooo.oo) or more, where the sale or transfer is made to a VAT-registered person, the name, business style, if any, address and TIN of the purchaser, customer or client; 4· Date of transaction; and, 5· Quantity, unit cost and description of merchandise or nature of service.

Corollarily, Revenue Memorandum Circular (RMC) No. 42-0386 expressly provides that a taxpayer's failure to comply with the invoicing requirements will result in the disallowance of the claim for input tax, as follows:

Q-13: Should penalty be imposed on TCC application for failure of claimant to comply with certain invoicing requirements, (e.g., sales invoices must bear the TIN of the seller)? !!f 86 Clarifying Certain Issues Raised Relative to the Processing of Claims for Value-Added Tax (VAT) Credit/Refund, Including Those Filed with the Tax and Revenue Group, One-Stop Shop Inter- Agency Tax Credit and Duty Drawback Center, Department of Finance (OSS) by Direct Exporters.

Philippine Mining Service Corporation v. Commissioner of Internal Revenue

A-13:

Failure by the supplier to comply with the invoicing requirements on the documents supporting the sale of goods and services will result to the disallowance of the claim for input tax by the purchaser-claimant. If the claim for refund/TCC is based on the existence of zero- rated sales by the taxpayer but it fails to comply with the invoicing requirements in the issuance of sales invoices (e.g., failure to indicate the TIN), its claim for tax credit/refund of VAT on its purchases shall be denied considering that the invoice it is issuing to its customers does not depict its being a VAT -registered taxpayer whose sales are classified as zero-rated sales. Nonetheless, this treatment is without prejudice to the right of the taxpayer to charge the input taxes to the appropriate expense account or asset account subject tb depreciation, whichever is applicable. Moreover, the case shall be referred by the processing office to the concerned BIR office for verification of other tax liabilities of the taxpayer. 87 Based on the foregoing, any VAT -registered person claiming for VAT zero-rating in relation to export sales of goods must present the following documents, to wit: (1) sales invoice as proof of sale of goods;

(2) bill oflading or airway bill as proof of actual shipment of goods from the Philippines to a foreign country; and, (3) documents showing inward remittances as proof that the sale was paid for in acceptable foreign currency in accordance with the rules and regulations of the BSP. In the VAT Refund Notice, respondent averred that the following direct sales must be disallowed88:

1. No remittance- P3,426,769.73;

2. Bill of Lading not in customer's name- P364,883,742.97; and, 3· Customer is not the remitter- Pio,s68,1s6.25. The Court shall now evaluate whether it shall affirm respondent's findings and observations vis-a-vis petitioner's pieces of evidence.! 87 88 Italics in the original text, emphasis and underscoring supplied. See Annex "A.5'', Part I, VAT Refund Notice, Exhibit "P-4", Division Docket, p. 472.

CT A Case No. 1 0494 Philippine Mining Service Corporation v. Commissioner of Internal Revenue

DIRECT SALES WITHOUT REMITTANCE- P3,426,769.73 The ICPA observed that the direct sales without remittance pertained to dispatch amounts that shall be paid by the customer to petitioner per day for laytime saved in the delivery of the goods or pro rata offset against penalty fees for delays in the delivery of the goods based on presentation of laytime statements by petitioner. These sales adjustments are evidenced by supporting debit memos and bank transactions history which the ICPA verified. However, these remittances were not collected in 2019, or the subject period claim. 89 Thus, We upheld respondent's disallowance ofP3,426,769.73-90 2.

DIRECT SALES WITH BILL OF

LADING NOT IN CUSTOMER'S

NAME - P364,883,742.97 The ICPA noted that respondent disallowed direct sales with bill of lading not in customer's name in the amount of P364,883,742-97· However, the amount could not be verified or traced in BIR's notices and annexes. Notwithstanding, the ICPA conducted its own audit and found that the following export sales with bills of lading not in customer's name amounted to P461A64,926.3o:91 Annex 1st Quarter 2nd Quarter 3rd Quarter Description Reference Zero-rated Zero-rated Zero-rated sales sales sales Zero-rated sales pertaining to Annex 2- export sales properly supported IQ-a by original zero-rated Shipping Annex 2- Invoice and bank certification of 2Q-a tll34,438,069.71 tl94,094,996.90 tll 03,350,536.96 inward remittances. This is An nex 2- further supported by original Bill 3Q-a of Lading not in the name of the Annex 2- customer.

4Q-a 89 90 See amended ICPA Report, p. 69, Exhibit "P-39", USB. Annex Reference Amount Annex 2-2Q-e P973,858.14 Annex 2-2Q-d 1,125,121.10 Annex 2-3Q-d 755,874.27 Annex 2-4Q-e 571 ,9 16.22 Total P3,426,769.73 4th Quarter Zero-rated sales tll l4,441 ,379.93 9 1 Table extracted from the amended !CPA Report, p. 14, Exhibit "P-39", USB. Total tl446,324,983.50 h 0

Philippine Mining Service Corporation v. Commissioner of Internal Revenue

Zero-rated sales pertaining to export sales properly supported by original zero-rated Shipping Annex 2- Invoice and bank certification of IQ-c 9,349,840.50 2,858,914.80 inward remittances. This is Annex 2- - - 12,208,755.30 further supported by certified 4Q-c true copy of Bill of Lading not in the name of the customer. Zero-rated sales pertaining to export sales supported by original zero-rated Shipping Invoice and bank certification of Annex 2- 2,931 '187.50 2,931 ' 187.50 inward remittances. This is IQ-e - - - further supported by original Bill of Lading not in the name of the customer.

Total fl46 1 ,464,926.30 As examined, the following are export sales with bills oflading not in customer's name but are properly verified and supported by the following documents92 : Name of Buyer

SUN JIN C& S

CO. LTD. (a)

JFE SHOJI

TRADE CORPORATION (JSTC) (b) 92 Sales in USD Sale in JPY $32,447,072.20 JPY- 4,96 1,282.09 64,027,390.00 Sales in Peso ~156 , 762,262.34 Supporting Documents The sales to Sun Jin C&S Co. Ltd. are raw materials further sold by Sun Jin to PT Krakatau Posco, an NRFC organized and existing under the laws of Indonesia and the end user of the purchased goods. The zero-rated sales were verified with the Sale and Purchase Agreement with Sunjin C and S Co., Ltd. dated June 28, 2019. In the said agreement, it is provided that payment shall be made by irrevocable letter of credit at sight by first class international bank with mode on submission of the shipping documents to the bank for drawing I 00% of cargo value against letter of credit. Thus, the bill of lading is the issuing bank rather than the buying entity due to the payment procedures and terms as indicated in the agreement. There is a Service Agreement for Shipments in Taiwan and noted that JFE Shoji Trade Corporation have concluded a Comprehensive Agreement with the Petitioner for the supply of Limestone and Dolomite to China Steel Corporation (CSC) and Dragon Steel Corporation (DSC) which are the buying entities. The consignee named in the bill of lading is the buying entity.

There are also bill of ladings in which consignee is named "To Order of the Shipper" and the Notify Party is JSTC. As represented by the Petitioner, Notify Party is the payor of the goods and also the shipper. There is a Sale and Purchase Contract of Bohol Limestone Philippines Origin with Contract No. JFE- EB-18FS-2 and noted that under "Letter A of Clause 6 Documents" Seller shall issue complete set of"Clean on Board" shipped Bill of Lading made out of order. !CPA also noted that there is bill oflading in which the consignee is named "Blue Scope Steel Limited" and 287,528,61 1.56 counterchecked with the Sales and Purchase Contract of See amended ICPA Report, pp. 69-70, Exhibit "P-39", USB.

CT A Case No. 1 0494 Philippine Mining Service Corporation v. Commissioner of Internal Revenue

Alcoy Dolomite Philippines Origin with Contract No. JFE-BiueScope-19FS-I and noted that the bill of lading is made out to "The Order." In addition, Petitioner represented that the contract is for the supply to Blue Scope Steel Limited as its name is indicated in the contract number.

- There is a Sale and Purchase Agreement with Megalogics Co., Ltd. dated February 7, 2019 and noted MEGALOGICS that the buyer needs such limestone for its supply to CO. LTD. (c) Hyundai Steel as raw material for their steel making process. Thus, Hyundai Steel is the consignee under the 143,000.00 7,458,880.00 bill oflading.

- The consignee under the bill of lading is "To the Order

JFE MINERAL

of the Shipper" and Notify Party is JFE Mineral Company, Ltd. It is verified in the Sales and Purchase COMPANY Agreement between JFE Mineral Company, Ltd. that LTD. (d) the destination is either in Chiba, Keihin, Fukuyama and 130,086.00 6, 783,984.90 Kurashiki, Japan.

JFE SHOJI

- !CPA recommends the disallowance of the sale for lack TRADE of supporting documents MALAYSIA SON. BHD.

56,250.00 2,93 1,187.50 TOTAL $37,737,690.29 JPY64,027,390.00 ~ 461,464,926.30 Thus, out of the zero-rated sales with bill of lading not in the customer's name amounting to P461,464,926.3o, only P4s8,533,738.8o were verified to sales contracts and agreements, and customers identified as Notify Party in the bill of lading. The amount of P2,93I,I87.50 (or the sale made to JFE SHOJI TRADE MALAYSIA SDN. BHD) shall be disallowed for failure of substantiation. 3· DIRECT SALES WITH

CUSTOMER WHO IS NOT THE

REMITTER- Pw,s68,156.25 The ICPA also noted that the sales made to Heidelbergcernent Bangladesh Ltd. is supported with a bill of lading named "to the order of Standard Chartered Bank". However, in the bank certifications, it was noted that the name of the remitter is the Ocean Trade Shipping, Inc. Other than petitioner's representation that Ocean Trade Shipping, Inc. is the owner of the vessel, no other supporting documents were presented. For such, We are constrained to disallow the sales of Pio,s68,156.2593 for failure of substantiation. With the foregoing disallowances, we shall now proceed to ..

determine the valid zero-rated export sales. !J 93 See Exhibits "P-17-142", "P-18-16" and "P-16-2", USB.

Ex hi bit SINo.

No.

17-6 928 17-8 930 17-135 1784 17-24 946 17-181 1834 17 922 17-1 923 17-127 1776 17-3 925 17-4 926 17-9 93 1 17-11 933 17-12 934 17-15 937

Philippine Mining Service Corporation v. Commissioner of Internal Revenue

To support the said zero-rated sales, pet1t10ner submitted in evidence the (1) sales invoices94; (2) bills of lading9s; and, (3) bank certifications issued by RCBC dated 02 September 202096 and 23 February 202297, and Mizuho Bank Ltd., Manila branch dated 16 July 202098 reflecting the buyers' inward remittances, which the I CPA had all examined. Upon scrutiny of the supporting documents and the amended ICPA Report99, after removing the above disallowances, the following table summarizes petitioner's valid zero-rated sales arising from direct exports which are duly supported and verified with supporting documents: Date 0 l/ 18/2019 Ol/22/20I9

OI/24/20 I9

03/05/2019 03/15/2019 01108/20 19 01/08/2019 0 !/08/20 19 01/14/2019 01 /14/2019 01/23/2019 01/28/2019 01/28/2019 02/08/2019 94 95 96 97 98 99 Schedule of zero-rated sales Amount Name of Buyer (in USD)

JFE SHOJI

TRADE 03/29/20 19 CORPORATION $ 118,224.00 6,239,862.72 18-32 ACPTT-2 MEGALOGICS 03/08/2019 CO. LTD.

$ 143,000.00 7,458,880.00 18-24 GHPHD

JFE SHOJI

18-3 GHBPTI-28 TRADE 01/ 11/20 19 CORPORATION $ I 02,300.00 5 336,991 .00 18-4 GHBPTI-IB

JFE SHOJI

18-5 GHBPTI-IA TRADE 0 Il l I/20I 9 CORPORATION $ 87,420.00 4,560,70 1.40 I8-6 GHBPTI-2A

JFE MINERAL

COMPANY 02/25/2019 LTD.

$ 130,086.00 6,783,984.90 18-22 ACPKJ-I . VALE NOUVELLE

OI /27/20I9

CALEDONIE $ 64, I59.20 3,383,114.62 VALE NOUVELLE 01127/2019 CALEDONIE $ 208,462.66 I 0,992,236.06 18-13 GHBPPNC-1 VALE NOUVELLE 02/04/2019 CALEDONIE $ 132,997.28 6,947,777.9 I VALE NOUVELLE 02/04/2019 CALEDONIE $ 160,058.85 8,361 ,474.32 18-17 GHBPPNC-1 VALE NOUVELLE

03/ 18/20I 9

CALEDONIE $ 131,355.36 6,921,1 13.92 YALE NOUVELLE 03118/20 19 CALEDONIE $ 160 286.10 8,445.474.61 18-27 GHBPPNC-1

JFE SHOJI

TRADE 03/ 18/2019 CORPORATION $ 177,450.00 9 349 840.50 18-26

ACPPKA- 1

1st Quarter valid zero-rated sales 188,839,101.65

SUNJIN C AND

17-204 1859 04/25/2019 S CO., LTD.

$ 281,050.00 14 670,810.00 18-37 GHPHCI-1

JFE SHOJI

TTO IOOOI I I9206

14/05/2019 001 -3615431 I7-39 96I I7-40 962 I7-52 974 17-53 975 17-238 1895 17-246 1903 17-68 990 17-69 991 17-56 978 17-212 1867 17-249 1906

TRADE 06/ 16/2019 CORPORATION $ 138,600.00 7,194,726.00 18-46

GHBFJ- 1

JFE SHOJI

TRADE 06/28/2019 CORPORATION $ 88,800.00 4,574,976.00 18-49 ACPKT-1

JFE SHOJI

TRADE 06/28/2019 CORPORATION $ 59,200.00 3 049,984.00 18-49 ACPKT-1

JFE SHOJI

TRADE 06/1 1/2019 CORPORATION $ 179,820.00 9,309,281.40 I8-45 ACPTT-1 VALE NOUVELLE 05/07/2019 CALEDONIE $ 139,033.31 7 231 ,122.45 VALE NOUVELLE 05/07/2019 CALEDONIE $ 165,57 1.98 8,611 ,398.68 18-39 GHBPPNC-1 VALE NOUVELLE 06/20/2019 CALEDONIE $ 160,942.95 8,351,329.68 VALE NOUVELLE 06/20/2019 CALEDONIE $ 140,297.70 7,280,04 7.65 18-47 GHBPPNC-1 2nd quarter valid zero-rated sales 125,568,895.36

SUNJINC AND

17-258 19 17 07/01 /2019 S CO., LTD.

$ 281,050.00 14,398,191.50 18-50

GHPHC1- 1

SUNJIN CAND

17-288 I949 08/07/20I9 S CO., LTD.

$ 28 1,050.00 14,614,600.00 I8-58 GHPHCI-1

JFE SHOJI

TRADE 17-81 I003 08/09/2019 CORPORATION ¥5,155,740.00 2,514,514.20 18-59 ACPOJ-1

JFE SHOJI

01/08/20 I9

F60730181739000 23/07/2019 BCA-789-900031 09/09/2019 BCA-789-900045 28/08/2019 001-3724614 12/09/20 19

TTO IOOOI304664

25/09/2019 BCA-789-900046 23/08/2019 001-3719630 19/08/2019 TTOIOOOI224887

27/08/20 I9

I 0/07/2019

S CO., LTD.

$ 281 ,050.00 14 533 095.50 18-70 GHPHCI-1 SUNJfN C AND 17-337 2004

I 0/25/2019

S CO., LTD.

$ 255,500.00 13,045,830.00 18-76 GHPHCI-1

JFE SHOJI

TRADE 17-1 05 1028 11/07/2019 CORPORA T!ON ¥5,271 ,120.00 2,419,855.20 18-77 ACPOJ-1 SUNJfN C AND 17-348 2017 11/17/2019 S CO., LTD.

$ 282,758.20 14 304,737.34 18-81 GHPHCI-1

JFE SHOJI

TRADE 17-119 1043 12/19/2019 CORPORATION ¥6,146,840.00 2 827,074.60 18-88 ACPKJ-1 SUNJfN C AND 17-363 2032 12/28/2019 S CO., LTD.

1042 17-331 1996 17-343 2010 17-364 2033 17-101 1024 CT A Case No. 1 0494 Philippine Mining Service Corporation v. Commissioner of Internal Revenue

Page 31 of 11 9

JFE SHOJI

TRADE 12118/2019 CORPORATION $ 74,000.00 3,745,140.00 18-87 ACPTT-2 VALE NOUVELLE

I 0/ 18/2019

CALEDONIE $ 131 ,870.97 6, 790,036.25 YALE NOUVELLE 10/18/20 19 CALEDONIE $ 162,22 I. 90 8,352,805.63 18-71 GHBPPNC-I VALE NOUVELLE 11/08/20 19 CALEDONIE $ I40,917.00 7,123,354.35 VALE NOUVELLE 11 /08/2019 CALEDONIE $ 168,020.75 8 493,448.91 18-78 GHBPPNC-1 VALE NOUVELLE 12/31 /2019 CALEDONIE $ 152,064.08 7,715,731.42 VALE NOUVELLE 12/31/2019 CALEDONIE $ 156,645.16 7,948,175.42 18-90 GHBPPNC-1

JFE SHOJI

TRADE

I 0/23/2019

CORPORATION ¥6 083,700.00 2,858,914.80 18-75 ACPKJ-1 29/ 11/2019

F61 I28138564000

1911212019 F61217246233000 28/02/2020 F60226389642000 12/ 11/2019

TTO I 000140664

4th Quarter valid zero-rated sales 163,723,846.71 Total valid zero-rated sales 628,760,986.65 Ex h.

No.

19- 77 19- 79 19- 2 1 SI No.

CM 2268 CM The ICPA also noted the price adjustments on the above sales pertaining to moisture penalties which are duly supported by credit memos:

Sales in Amount of Date Name of Foreign Sales No.

Date Reference Debit Buyer Currency (in Php)

JFE SHOJI

TRADE DEMURRAGE CORPORAT CMGJ

MY PORT

05/ 17/2019 ION $ (2,375 .00) (124,473 .75) 0000002268 17/05/2019 BOTANY 124,473.75 $ (3, 753. 75) (198,085.39) $ (7 ,507 .50) (394,8 19.43) PT KRAKATAU

SUNJIN C

$ (II ,261.25) (587,837.25) POSCO- ANDS CO , CMGJ

UN DERSIZE

2275 05/31/2019 LTD.

$ (15,015.00) (787,987.20) 0000002275 31 /05/2019 PENALTY I ,968, 729.27

JFE SHOJI

TRADE esc CM CORPORAT DMGJ DEMURRAGE 2306 06/28/2019 ION $ (6,57290) (340,476.22) 0000002306 28/06/20 19

SI# 958 & 959

340,476.22 2nd Quarter credit memos due to moisture 1 enalties (Annex 2-2Q-c) PT KRAKATAU

SUNJIN C

POSCO- 19- CM ANDS CO., CMGJ UNDERSIZE 28

235 I

07/31/2019 LTD.

$ (15,0I5.00) (769,218.45) 0000002351 31/07/2019 PENALTY 769,218.45 PT $ (7,507.50) (390,390.00) KRAKATAU POSCO-

SUNJIN C

UNDERSIZE 19- CM ANDSCO., CMGJ PENALTY 41 2371 08/30/2019 LTD.

$ (I 0,23 7.50) (535, 114.13) 0000002371 30/08/2019

AUG 2019

925,504.13 SUNJIN

SUNJIN C

DEMURRAGE 19- CM ANDS CO., CMGJ

MY BENE

42 2372 08/30/2019 LTD.

$ (9,427.08) (482,949.3 1) 0000002372 30/08/2019

AUG 2019

482 949.3 1 Credit 2,433,679.24 )?1-' u CT A Case No. 1 0494 Philippine Mining Service Corporation v. Commissioner of Internal Revenue

PT KRAKATAU POSCO SUNJfN C DESPATCH 19· DM ANDSCO., DMGJ MVNANJfNG 49 2396 09/30/2019 LTD.

$ 3,359.38 174,687.76 0000002396 30/09120 19

SEPT 2019

PT KRAKATAU POSCO DESPATCH SUNJfN C MVTS 19- DM ANDSCO., DMGJ JASMfNE 50 2397 09/30/2019 LTD.

$3,190.1 0 166,746.53 0000002397 30/09/2019

SEPT 2019

Total amount 3rd quarter credit memos due to moisture r enalties (Annex 2-3Q-c) PT KRAKATAU POSCO SUNJfN C $ (11 ,261.25) (582,3 19.24) UNDERSIZE 19- CM ANDSCO., CMGJ PENALTY 59 2444

I 0/31 /2019

LTD.

$ ( 13,650.00) (696,969.00) 0000002444 31/ 10/2019

OCT 2019

JFE SHOJI

PRICE ADJ

TRADE !NV# 966, 969, 19- CM CORPORAT CMGJ 989, 998, I 003, 60 2452 11/26/2019 ION $ (2, 460. 00) (l24,9I8.80) 0000002452

26/ II/20 I9

1009 PT $ 3,588.54 I85,563.40 KRAKATAU SUNJfN C POSCO I9- DM ANDS CO., DMGJ DESPATCH 63 2470 11/29/2019 LTD.

$2,679.69 136,824.97 0000002470

30/ I I/2019

NOV'l9 PT KRAKATAU POSCO SUNJfN C UNDERSIZE 19- CM ANDSCO., CMGJ PENALTY 66 2472 11/29/2019 LTD.

$ ( 15, I 06.26) (764,225 .69) 0000002472 29/ 11/2019 NOV 'l 9 PT KRAKATAU SUNJfN C POSCO 19- DM AND S CO.,

DM GJ

DESPATCH 67 2514 12/27/2019 LTD.

$4,028.82 203,818.00 0000002514 27/12/2019

MY BEIRA

PT KRAKATAU POSCO UNDERSIZE SUNJfN C PENALTY 19- DM AND S CO., CMGJ

MY OCEAN

68 2515 12/27/20 19 LTD.

$ (I 0,959.20) (556,069.8 1) 0000002515 27/ 12/2019 PEACE

MY JOSCO

NANJfNG/ MVTS SUNJfN C $ (3,465 .00) ( 180, 180.00) JASMINE 19- CM ANDS CO., CMGJ UNDERSIZED 71 2490 12/2712019 LTD.

$ (!6,362.50) (855,267 87) 0000002490 27112/20 19 PENALTIES MY GUILlA V.Ol/ MY SPRING SUNJfN C $ 288.75 14,93 1.26 BREEZE 19- DM ANDS CO., DMGJ UNDERSIZED 72 2491 12/27/2019 LTD.

$ 350.00 17,871.00 0000002491 27112/2019 PENALTY

MY BEIRA

SUNJfN C V.Ol 19- DM ANDSCO., DMGJ UNDERSIZE 73 2492 12/27/2019 LTD.

$ 387.34 19,595.53 0000002492 27/12/2019 PENALTY Total amount 4th quarter credit memos due to moisture penalties (Annex 2-4Q-d) Total credit memo for CY 2019 174,687.76 166,746.53 2,177,67 1.89 34 1,434.29 1,836,237.60 I ,279,288.24 124,9I8.80 322,388.37 764,225.69 203,818.00 556,069.81 I ,035,44 7.87 32,802.26 19,595.53 3,759,950.4 1 578,604.1 6 3,181,346.25 7,451 ,263..09 tf

Philippine Mining Service Corporation v. Commissioner of Internal Revenue

With the foregoing, petitioner has a total of P621,)09,723.56 pertaining to valid zero-rated sales attributable to direct exports, or sales of goods to NRFCs as computed below: Total valid zero-rated sales duly supported with p 628,760,986.70 documents Less: Credit memos 7>451,263.09 Total valid zero-rated sales for CY 2019 arising from p 621,309,723·56 direct export sales n.

Sales to PEZA-registered entities under Section w6(A)(2)(a)(s) of the NIRC of 1997, as amended (P640120I,009.19).

Section 1o6(A)(2)(a)(5) of the NIRC of 1997, as amended100 , states:

SEC. 106. Value-Added Tax on Sale of Goods or Properties. - (A) Rate and Base ofTax. - ... (2) The following sales by VAT-registered persons shall be subject to zero percent (o%) rate: (a) Export Sales.- The term 'export sales' means:

(s) Those considered export sales under Executive Order No. 226, otherwise known as the Omnibus Investment Code of 1987, and other speciallaws. 101 Relative thereto, Section 4.1o6-s(a)(5) of RR No. 16-2005, as amended by RR No. 04-200710\ which implements the foregoing provision, provides -t 100 101 102 Before the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Law. Italics in the original text and emphasis supplied. Amending Certain Provisions of Revenue Regulations No. 16-2005, As Amended, Otherwise Known as the Consolidated Value-Added Tax Regulations of2005.

Philippine Mining Service Corporation v. Commissioner of Internal Revenue

103 SEC. 4.106-s. Zero-Rated Sales of Goods or Properties.- ... The following sales by VAT -registered persons shall be subject to zero percent (o%) rate:

(a) Export sales.- 'Export Sales' shall mean:

(s) Transactions considered export sales under Executive Order No. 226, otherwise known as the Omnibus Investments Code of 1987, and other special laws. "Considered export sales under Executive Order No. 226" shall mean the Philippine port F.O.B. value determined from invoices, bills of lading, inward letters of credit, landing certificates, and other commercial documents, of export products exported directly by a registered export producer, or the net selling price of export products sold by a registered export producer to another export producer, or to an export trader that subsequently exports the same; Provided, That sales of export products to another producer or to an export trader shall only be deemed export sales when actually exported by the latter, as evidenced by landing certificates or similar commercial documents; Provided, further, That pursuant to EO 226 and other special laws. even without actual exportation, the following shall be considered constructively exported: (1) sales to bonded manufacturing warehouses of export-oriented manufacturers; (2) sales to export processing zones pursuant to Republic Act (RA) Nos. 7916. as amended. 7903. 7922 and other similar export processing zones; (3) sale to enterprises duly registered and accredited with the Subic Bay Metropolitan Authority pursuant to RA 7227; (4) sales to registered export traders operating bonded trading warehouses supplying raw materials in the manufacture of export products under guidelines to be set by the Board in consultation with the Bureau of Internal Revenue (BIR) and the Bureau of Customs (BOC); fsl sales to diplomatic missions and other agencies and/or instrumentalities granted tax immunities, of locally manufactured, assembled or :~packed products whether paid for in foreign currency or not.'"' !J Italics in the original text, emphasis and underscoring supplied.

Philippine Mining Service Corporation v. Commissioner of Internal Revenue

The special law applicable to this case is RA 791610 4, as amended by RA 8748105, otherwise known as "The Special Economic Zone Act of 1995". Sections 8 and 24 thereof read: SEC. 8. ECOZONE to be Operated and Managed as Separate Customs Territory. - The ECOZONES shall be managed and operated by the PEZA as separate customs territory. The PEZA is hereby vested with the authority to issue certificates of origin for products manufactured or processed in each ECOZONE in accordance with the prevailing rules of origin, and the pertinent regulations of the Department ofTrade and Industry and/or the Department of Finance. SEC. 24. Exemption from National and Local Taxes. -Except for real property taxes on land owned by developers, no taxes, local and national, shall be imposed on business establishments operating within the ECOZONE. In lieu thereof, five percent (s%) of the gross income earned by all business enterprises within the ECOZONE shall be paid and remitted as follows:

(a) Three percent (3%) to the National Government;

(b) Two percent (2%) which shall be directly remitted by the business establishments to the treasurer's office of the municipality or city where the enterprise is located.106 Since the ecozone is viewed as a foreign territory by legal fiction, sales of goods and services made by a VAT -registered person in the Philippine customs territory to an entity registered and operating within the ecozone are considered exports to a foreign country subject to zero percent (o%) VAT. In the case of Commissioner of Internal Revenue v. Toshiba Information Equipment (Phils.), Inc. 107, the Supreme Court elucidated thusly -J 104 105 106 107 AN ACT PROVIDING FOR THE LEGAL FRAMEWORK AND MECHANISMS FOR THE CREATION, OPERATION, ADMINISTRATION, AND COORDINATION OF SPECIAL ECONOMIC ZONES IN THE PHILIPPINES, CREATING FOR THIS PURPOSE, THE PHILIPPINE ECONOMIC ZONE AUTHORITY (PEZA), AND FOR OTHER PURPOSES. AN ACT AMENDING REPUBLIC ACT NO. 7916, OTHERWISE KNOWN AS THE "SPECIAL ECONOMIC ZONE ACT OF 1995". Emphasis supplied and italics in the original text. G.R. No. 1501 54, 09 August 2005; Citations omitted and emphasis supplied.

CT A Case No. 1 0494 Philippine Mining Service Corporation v. Commissioner of Internal Revenue

This Court agrees, however, that PEZA-registered enterprises, which would necessarily be located within ECOZONES, are VAT-exempt entities, not because of Section 24 of Rep. Act No. 7916, as amended, which imposes the five percent (s%) preferential tax rate on gross income of PEZA-registered enterprises, in lieu of all taxes; but, rather, because of Section 8 of the same statute which establishes the fiction that ECOZONES are foreign territory.

... An ECOZONE or a Special Economic Zone has been described as- ... [S]elected areas with highly developed or which have the potential to be developed into agro- industrial, industrial, tourist, recreational, commercial, banking, investment and financial centers whose metes and bounds are fixed or delimited by Presidential Proclamations. An ECOZONE may contain any or all of the following: industrial estates (IEs), export processing zones (EPZs), free trade zones and tourist/recreational centers.

The national territory of the Philippines outside of the proclaimed borders of the ECOZONE shall be referred to as the Customs Territory.

Section 8 of Rep. Act No. 7916, as amended, mandates that the PEZA shall manage and operate the ECOZONES as a separate customs territory; thus, creating the fiction that the ECOZONE is a foreign territory. As a result, sales made by a supplier in the Customs Territory to a purchaser in the ECOZONE shall be treated as an exportation from the Customs Territory. Conversely, sales made by a supplier from the ECOZONE to a purchaser in the Customs Territory shall be considered as an importation into the Customs Territory. Given the preceding discussion, what would be the VAT implication of sales made by a supplier from the Customs Territory to an ECOZONE enterprise? The Philippine VAT system adheres to the Cross Border Doctrine, according to which, no VAT shall be imposed to form part of the cost of goods destined for consumption outside of the territorial border of the taxing authority. Hence, actual export of goods and services from the Philippines to a foreign country must be free of VAT; while, those destined for use orJ CT A Case No. 1 0494 Philippine Mining Service Corporation v. Commissioner of Internal Revenue consumption within the Philippines shall be imposed with ten percent (w%) VAT. 108 Based on the foregoing, in order for an export sale to qualify for VAT zero-rating under Section 1o6(A)(2)(a)(5) of the NIRC of 1997, as amended, the following essential elements must be present -

1. The sale was made by a VAT registered person; and,

2. The sale of goods must be to an entity entitled to incentives under Executive Order (EO) No. 226, otherwise known as the Omnibus Investment Code of 1987 (OIC), and other special laws.

As determined earlier, petitioner is a VAT-registered entity. Hence, the first essential element was already fulfilled. Relative to the second essential element, the case records show that petitioner had sold goods to the following companies:

1. Philippine Sinter Corporation;

2. Visayas Slaked Lime Corporation; 3· Taganito Hpal Nickel Corporation; 4· Coral Bay Nickel Corporation; 5· Unichamp Mineral Philippines, Inc.;

6. Pioneer Float Glass Manufacturing, Inc.; 7· PEBA Tandem and Manufacturing, Inc.; and,

8. Carmen Copper Corporation. To prove that its clients are duly registered with the PEZA and the BOI, petitioner presented the following certifications (as summarized in the amended !CPA Report): 3 108 Now at 12% VAT rate.

CT A Case No. 1 0494 Philippine Mining Service Corporation v. Commissioner of Internal Revenue

Customers Proof of Zero-Rating Exhibit Reference109 Confirmation letter from BOI dated January 28, Carmen Copper 2019; Certificate No. 2019- Corporation 048 P-14 PEZA certification dated Coral Bay Nickel January 9, 2019; Certificate Corporation Nos. 2019-0440, 2019-0474 P-14-1, P-14-2 PEZA certification dated Peba Tandem & July 12, 2019; Certificate Manufacturing, Inc.

No. 2019-2388 P-14-3 PEZA certification dated January 30, 2019;

Certificate No. 2019-0710, Philippine Sinter 2019-0963 P-14-4, P-14-5 Corporation PEZA certification dated May 15, 2019; Certificate No. 2019-0710-0169, 2019- 0963 P-14-6, P-14-7 PEZA certification dated Pioneer Float Glass January 21, 2019;

Manufacturing Inc.

Certificate No. 2019-1195 P-14-8 PEZA certification dated Taganito Hpal Nickel January 9, 2019; Certificate Corporation No. 2019-0427, 2019-0476 P-14-9, P-14-10 PEZA certification dated Unichamp Mineral January 9, 2019; Certificate Philippines, Inc.

No. 2019-0214, 2019-0327 P-14-n, P-14-12 PEZA certifications dated February 26, 2019;

Certificate No. 2019-1295, Visayas Slaked Lime 2019-1447 P-14-13, P-14-14 Corporation PEZA certification dated August 1, 2019; Certificate No. 2019-1295-1002, 2019- 1447 P-14-15, P-14-16 Covered Period January 1 to December 31, 2019 For the year 2019 July 1 to December 31, 2019 January 1 to June 30, 2019 July 1 to December 31, 2019 For the year 2019 For the year 2019 For the year 2019 January 1 to June 30, 2019 July 1 to December 31, 2019 In addition, petitioner presented and offered as evidence (Exhibit "P-4o") a photocopy of PEZA letter dated 22 June 2021 confirming the VAT zero-rating certification of petitioner's PEZA clients. Both Exhibits "P-14" series and "P-4o"no w.ere admitted pursuant to the Resolution of ' 22 November 2022.

1113 109 11 0 Ill USB.

Division Docket, p. 473. Supra at note 45.

CT A Case No. 1 0494 Philippine Mining Service Corporation v. Commissioner of Internal Revenue

However, since what is being proved with the said certifications are the contents thereof, i.e. whether the said enterprises are duly registered with PEZA within the subject period of claim, thus, enjoys VAT- zero rating with local purchases of goods, properties and services needed in its registered activities and actually delivered and consumed inside the PEZA registered facilities, the presentation of the original documents is necessary pursuant to the original document rule. Relative thereto, Section 3, Rule 130 of the Revised Rules of Evidence 112 provides - 112 11 3 114 SEC. 3· Original Document Must be Produced; Exceptions. - When the subject of inquiry is the contents of a document, writing. recording. photograph or other record, no evidence is admissible other than the original document itself ... 113 Section 4 of the same rule defines !(original of document" to be - SEC. 4- Original of Document. - ill An "original" of a document is the document itself or any counterpart intended to have the same effect by a person executing or issuing it. An "original" of a photograph includes the negative or any print therefrom. If data is stored in a computer or similar device. any printout or other output readable by sight or other means. shown to reflect the data accurately. is an "original." fhl A "duplicate" is a counterpart produced by the same impression as the original. or from the same matrix. or by means of photography. including enlargements and miniatures. or by mechanical or electronic re-recording. or by chemical reproduction. or by other equivalent techniques which accurately reproduce the original.

f.cl A duplicate is admissible to the same extent as an original unless (I) a genuine question is raised as to the authenticity of the original. or (2) in the circumstances, it is unjust or inequitable to ~~mit the duplicate in lieu ofthe original."'!!' A.M. No. 19-08-15-SC. Italics and underscoring in the original text. Italics and underscoring in the original text.

Philippine Mining Service Corporation v. Commissioner of Internal Revenue

Based on the foregoing, when the subject of inquiry is the contents of a document, writing, recording, photograph or other record, no evidence is admissible other than the original document itself.ns Formerly called the best evidence rule, the original document rule is required to prevent any mistransmissions or inaccuracies that may be reflected by a mere copy or reproduction of the evidence sought to be entered. The rule ensures that the exact contents of the document are brought before the court.116 Here, although it appears that Exhibit "P-14" series and Exhibit "P-4o" are merely faithful reproduction of a scanned copy and a scanned copy respectively, these were admitted in the Resolution of 22 November 2022. However, a perusal of the docket reveals that these were not even compared to the original documents, thus, We cannot ascertain if the contents of the duplicates are of the same impression as their originals. Evident is the fact that in the amended I CPA report and in ICPA Constantino's testimony, she asserted that the PEZA and BOI certifications are mere print-out or scanned copies, and her recommendation as to the amount of refund claim depends on whether petitioner will be able to produce the originals or at least the certified true copies thereof. Hence, the admissibility of the said exhibits cannot be equated with the weight of evidence as these are entirely different concepts. To admit evidence and not to believe it is not incompatible with each other. The weight accorded to it still depends on the evaluation of the court in accordance with the Rules.117 In Fernando Manco!, Jr. v. Development Bank of the Philippines118, the Supreme Court differentiated admissibility with probative value in this wise:

115 11 6 11 7 11 8 "The admissibility of evidence depends on its relevance and competence, while the weight of evidence pertains to evidence already admitted and its tendency to convince and persuade." The admissibility of a particular item of evidence has to do with whether it meets various tests by which its reliability is to be determined, so as to be considered with other evidence admitted in the case in arriving Kuwait Airways Corporation v. The Tokio Marine and Fire Insurance Co., Ltd., et al. , G.R. No. 213931 , 17 November 2021. Republic of the Philippines v. Honorable Sandiganbayan, 5th Division, eta!., G.R. No. 195837, 03 October 2023.

• Heirs of Arturo E. Bandoy, eta!. v. A lex~nd~r E. Ba.ndoy, G.R. No. 255258, 19 October 2022. ~ · G.R. No. 204289,22 November 201 7; CitatiOns omitted. (.)

Philippine Mining Service Corporation v. Commissioner of Internal Revenue at a decision as to the truth. The weight of evidence is not determined mathematically by the numerical superiority of the witnesses testifying to a given fact, but depends upon its practical effect in inducing belief on the part of the judge trying the case. "Admissibility refers to the question of whether certain pieces of evidence are to be considered at all, while probative value refers to the question of whether the admitted evidence proves an issue." "Thus, a particular item of evidence may be admissible, but its evidentiary weight depends on judicial evaluation within the guidelines provided by the rules of evidence."

Further, Courts are not precluded to amend its previous ruling pursuant to the inherent powers under Section s(g), Rule 135 of the Rules of Court, which provides: Sec. 5· Inherent powers of court. - Every court shall have power:

g) To amend and control its process and orders so as to make them conformable to law and justice; Thus, to conform to the original document rule, although Exhibits "P-14" series and "P-4o" are admitted, We are constrained not to give any probative value to the contents thereof. Thus, for failure to prove that the said sales qualify for VAT -zero rating, the sales of goods made to abovementioned entities are disallowed for failure of substantiation. To recapitulate, out of the total zero-rated sales for CY 2019 amounting to P1,278,436,846.23, only the amount of P621,309,723.56 represents petitioner's valid zero-rated sales for the same period, to wit: Total zero-rated sales for CY 2019 1,278,436,846.23 Less:

Direct sales without remittance 3.426,769·73 Direct sales with bill oflading not in customer's name which is not properly substantiated 2,931,187.50 Direct sales with customer who is not the remitter 10,568,156.25 Zero-Rated Sales made to PEZA and BOT registered entities not supported with original PEZA or BOT certifications 640,201,009.19 (657,127,122.67) Total valid zero-rated sales for CY 2019 62I,J097723·56 30[\ 0

Philippine Mining Service Corporation v. Commissioner of Internal Revenue

FOURTH (4TH) REQUISITE:

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.

To satisfy the fourth requisite, the following conditions must concur:

a. 1st condition: the input taxes are due or paid;

b. 2nd condition: the input taxes claimed are attributable to zero- rated or effectively zero-rated sales and where there are both zero-rated or effectively zero-rated sales and taxable or exempt sales, and the input taxes cannot be directly and entirely attributable to any of these sales, the input taxes shall be proportionately allocated on the basis of sales;

c. 3rd condition: the input taxes are not transitional input taxes; and,

d. 4th condition: the input taxes have not been applied against output taxes during and in the succeeding quarters. Petitioner complied with 3rd and 4th conditions, considering that its input taxes do not appear to be transitional input taxes since they operate to benefit only newly VAT -registered persons. Also, petitioner is deemed to have complied with the same after it was established that petitioner deducted the input VAT claim of P104,888,177·67 as a "VAT Refund/TCC Claimed" (line 23D) in its Amended VAT Return for the 2nd quarter of CY 202o 119 preventing thus the carry-over of the said amount in the succeeding taxable quarters.3

I 19

Exhibit "P-I 0-26", USB.

Philippine Mining Service Corporation v. Commissioner of Internal Revenue

As to the 1st condition, petitioner claims that for CY 2019, it had a total allowable input tax of PI42,214,043·17 arising from its current:

(1) domestic purchases of goods other than capital goods; (2) domestic purchases of capital goods not exceeding P1 million; (3) domestic purchases of services;

(4) services rendered by nonresidents;

(s) importations; and, (6) domestic purchases of capital goods. Out of the said amount, petitioner applies for VAT credits/refund Pio4,888,177·67, as shown below120: Amended 151 Amended 2nd Amended 3rd Quarterly VAT Quarterly VAT Quarterly VAT return"' return'22 return123 Input VAT on Domestic Purchases of 1'15,195,148·37 1'13,607,260.26 1'13,812,065-48 Goods other than Capital Goods Input VAT on Domestic Purchases of 31,608.34 83,587-29 40,914.64 Capital Goods not exceeding ~I Million Input VAT on Domestic 21,956,oo9.85 15,284,414.23 19,993,8o8.s5 Purchases of Services Input VAT on Services rendered - 3,160,076·72 - by Nonresidents Input VAT on 1,164,)67.00 482,688.oo Importations 1,934,052.00 Input VAT on Domestic Purchases of 287,892.86 - Capital Goods - exceeding 1'1Million Total Input VAT PJ8,6Js,o26.42 I"J2,6I8,o26.5o PJs,78o,84o.67 Output VAT charged against the input VAT ( 6,112,533·09) (5,711,416.44) ( 7,667,834·16) allocated to VA Table sales Output VAT charged against the input VAT (2,25J,017.94) (2,409,282.92) (2,914,213.27) allocated to zero- rated sales 120 12 1 See amended !CPA Report, pp. 30-31 , Exhibit "P-39", USB. Exhibit "P-I 0-4", USB. 122 123 124 Exhibit "P-1 0-9", id. Exhibit "P-10-13", id. Exhibit "P-10-18", id. Amended 4th Total Input Quarterly VAT VAT return124 1'12,570,735·71 P55,185,2o9.82 - 156,no.27 15, 742,254·67 72,976,487·3 1,414,505.67 4>574>582.39 4·990,009.00 8,571,n6.oo 462,644·53 750,537·39 I"JS,I80,149.58 Pl42,214,043·17 ( 7,870,458·39) (27,)62,242.08) (1,636,571·90) (9,213,086.03) .

V1- u

Philippine Mining Service Corporation v. Commissioner of Internal Revenue

Excess Input VAT allocated to zero- 3°·269>475·39 24>497.)27.14 25,198.793-24 25,673,119.29 rated sales Excluded input VAT on Domestic Purchases of (287,892.86) (462,644·53) Capital Goods not - - exceeding f'1Million Input VAT claim per Petition for P29·981,582.53 P24,497>327·14 P25,198·793·24 P25,210,474·76 Review 105,638,715.06 (750,537·39) P104,888,177.67 However, respondent, in his or her VAT Refund Notice125, disallowed Pio9,531,58I.o1 resulting in the complete denial of its claim. The detailed breakdown of the amount of claim that respondent disallowed is shown below: Local Importation Total VAT Refund Claimed ~104,888,177.67 Jl- Jllo4,888,177.67 Deductions from Claim Insufficient documentations (No billing statement, OR, SI nor proof of payment) 7,165,o66.10 - 7,165,o66.w Out of Period 202.)46.26 - 202,346.26 Unreadable document 16>402.50 - 16>402.50 Document with alteration but not countersigned 26,330>497·58 - 26,330>497·58 Overclaimed 8,325.00 - 8,325.00 Violation of invoicing requirements pursuant to Section 113 of the NIRC of 1997, as amended 742,542.14 - 742,542.14 Disallowed input tax on "Big Ticket" Purchases 12,959·16).80 - 12,959,16).80 Deferred input tax on CG from local purchases and importation 1>431,253·16 1, 769,724.16 3,200,977·32 Disallowed VAT on importation due to overclaim and failure to submit SSDT - 281,727.00 281,727.00 Disallowed input VAT on purchase of CG with no supporting documentation 6.405.00 - 6.4o5.oo Output VAT on other VA Table Sales 273.884.22 - 273.884.22 Output VAT on unqualified exempt sales 156,ooo.oo - 156,ooo.oo Output VAT on proceeds from disposal of property and equipment 12,000.00 - 12,000.00 Adjustment on previously deducted output VAT on importation 2,051>451.16 {2,051>451.16) - IT attributable to zero-rated sales with insufficient documentations 58,151,244.09 - 58,151,244.09 Compromise penalty 25,000.00 - 25,000.00 Total Deductions 109·531,581.01 - 109,531,581.01 Excess Deductions Over Input Tax Claimed (P4,643•403-34) Jl- (P4,643•403-34) For purposes of satisfying the aforesaid condition, it is of crucial importance that petitiOner provides documents to support its declaration that the input VAT claimed during the subject period wa'{J 125 Supra at note 23.

Philippine Mining SeNice Corporation v. Commissioner of Internal Revenue actually due or paid in accordance with Section no(A) of the NIRC of 1997, as amended, which provides: SEC. 110. Tax Credits. - (A) Creditable Input Tax. -

(1) Any input tax evidenced by a VAT invoice or official receipt issued in accordance with Section 113 hereof on the following transactions shall be creditable against the output tax:

a. Purchase or importation of goods: 1.

For sale; or u.

For conversion into or intended to form part of a finished product for sale including packaging materials; or m.

For use as supplies in the course of business; or 1v.

For use as materials supplied in the sale of service; or v.

For use in trade or business for which deduction for depreciation or amortization is allowed under this Code.

b. Purchase of services on which a value-added tax has actually been paid.

(2) The input tax on domestic purchase or importation of goods or properties by a VAT -registered person shall be creditable: a.

To the purchaser upon consummation of sale and on importation of goods or properties; and

b. To the importer upon payment of the value-added tax prior to the release of the goods from the custody of the Bureau of Customs. Provided, That the input tax on goods purchased or imported in a calendar month for use in trade or business for which deduction for depreciation is allowed under this Code shall be spread evenly over the month of acquisition and the fifty-nine (59) succeeding months if the aggregate acquisition cost for such goods, excluding the VAT component thereof, exceeds One million pesos (P1,ooo,ooo): Provided, however, That if the estimated useful life of the capital good is less than five (s) years, as used for depreciation purposes, then the input VAT shall be spread over such a shorter period: Provided, further, That the amortization of the input VAT shall only be allowed until December 31, 2021 after which taxpayers with unutilized input VAT on capital goods purchased or imported shall be allowed to apply the same as scheduled until fully utilized. Provided, finally, That in the ( case of purchase of services, lease or use of properties, the input taxe

Philippine Mining Service Corporation v. Commissioner of Internal Revenue shall be creditable to the purchaser, lessee or licensee upon payment of the compensation, rental, royalty or free. 126 The above provisions are implemented by Sections 4.110-1 to 4.110-3 of RR No. 16-2005, as amended by RR No. 13-2018127 , which provide as follows:

126 127 SEC. 4.110-1. Credits For Input Tax. - 'Input tax' means the VAT due on or paid by a VAT -registered person on importation of goods or local purchases of goods, properties, or services, including lease or use of properties, in the course ofhis trade or business. It shall also include the transitional input tax and the presumptive input tax determined in accordance with Sec. m of the Tax Code. It includes input taxes which can be directly attributed to transactions subject to the VAT plus a ratable portion of any input tax which cannot be directly attributed to either the taxable or exempt activity. Any input tax on the following transactions evidenced by a VAT invoice or official receipt issued by a VAT -registered person in accordance with Sees. 113 and 237 of the Tax Code shall be creditable against the output tax:

a. Purchase or importation of goods 1.

For sale; or

2. For conversion into or intended to form part of a finished product for sale, including packaging materials; or 3· For use as supplies in the course of business; or 4· For use as raw materials supplied in the sale of services; or 5· For use in trade or business for which deduction for depreciation or amortization is allowed under the Tax Code.

b. Purchase of real properties for which a VAT has actually been paid;

c. Purchase of services in which a VAT has actually been paid;

d. Transactions "deemed sale" under Sec. 106 (B) of the Tax Code;

e. Transitional input tax allowed under Sec. 4-m (a) of these Regulations;

Presumptive input tax allowed under Sec. 4-m (b) of these Regulations;

Emphasis supplied and italics in the original text. Regulations Implementing the Value-Added Tax Provisions under the Republic Act (RA) No. I 0963 , or the "Tax Reform for Acceleration and Inclusion (TRAIN)," Further Amending Revenue 1 Regulations (RR) No. 16-2005 (Consolidated Value-Added Tax Regulations of2005), as AmendtJ-

Philippine Mining Service Corporation v. Commissioner of Internal Revenue g. Transitional input tax credits allowed under the transitory and other provisions of these Regulations. SEC. 4.110-2. Persons Who Can Avail of the Input Tax Credit.- The input tax credit on importation of goods or local purchases of goods, properties or services by a VAT-registered person shall be creditable:

a. To the importer upon payment ofVAT prior to the release of goods from customs custody;

b. To the purchaser of the domestic goods or properties upon consummation ofthe sale; or

c. To the purchaser of services or the lessee or licensee upon payment of the compensation, rental, royalty or fee. SEC. 4.110-3. Claims for Input Tax on Depreciable Goods. - Where a VAT-registered person purchases or imports capital goods, which are depreciable assets for income tax purposes, the aggregate acquisition cost of which (exclusive of VAT) in a calendar month exceeds One Million pesos (P1,ooo,ooo.oo), regardless of the acquisition cost of each capital good, shall be claimed as credit against output tax in the following manner: (a) If the estimated useful life of a capital good is five (s) years or more- The input tax shall be spread evenly over a period of sixty ( 6o) months and the claim for input tax credit will commence in the calendar month when the capital good is acquired. The total input taxes on purchases or importations of this type of capital goods shall be divided by 6o and the quotient will be the amount to be claimed monthly. (b) If the estimated useful life of a capital good is less than five (s) years - The input tax shall be spread evenly on a monthly basis by dividing the input tax by the actual number of months comprising the estimated useful life of the capital good. The claim for input tax credit shall commence in the calendar month that the capital goods were acquired. Where the aggregate acquisition cost (exclusive of VAT) of the existing or finished depreciable capital goods purchased or imported during any calendar month does not exceed One million pesos (PI,ooo,ooo.oo), the total input taxes will be allowable as credit against output tax in the month of acquisition. (c) The amortization of the input VAT shall only be allowed until December 31, 2021 after which taxpayers with unutilized input VAT on capital goods purchased or imported shall be allowed to apply the same as scheduled until fully utilized: Provided, That in , the case of purchase of services, lease or use of properties, th~

Philippine Mining Service Corporation v. Commissioner of Internal Revenue input tax shall be creditable to the purchaser, lessee or licensee upon payment of the compensation, rental, royalty or fee. 128 Meanwhile, Section 4-110-8 of RR No. 16-2005 provides for the substantiation requirements of input tax credits, as follows: SEC. 4.no-8. Substantiation of Input Tax Credits.-

a. Input taxes for the importation of goods or the domestic purchase of goods, properties or services is made in the course of trade or business, whether such input taxes shall be credited against zero- rated sale, non-zero-rated sales, or subjected to the s% Final Withholding VAT, must be substantiated and supported by the following documents, and must be reported in the information returns required to be submitted to the Bureau: 1.

For the importation of goods - import entry or other equivalent document showing actual payment of VAT on the imported goods.

2. For the domestic purchase of goods and properties - invoice showing the information required under Sees. 113 and 237 of the Tax Code. 3· For the purchase of real property- public instrument i.e., deed of absolute sale, deed of conditional sale, contract/agreement to sell, etc., together with VAT invoice issued by the seller. 4· For the purchase of services- official receipt showing the information required under Sees. 113 and 237 of the Tax Code.

A cash register machine tape issued to a registered buyer shall constitute valid proof of substantiation of tax credit only if it shows the information required under Sees. 113 and 237 of the Tax Code. 129 The documents also need to comply with the invoicing requirements 13° provided under Sections 113(A)(1), (B)(1) and (2)(c) of the NIRC of 1997, as amended, and Sections 4.113-1(A)(1), (B)(1) and (2)(c) ofRR No. r6-2oo5, as amended. J 128 129 130 Emphasis supplied and italics in the original text. Emphasis supplied and italics in the original text. Supra at page 22.

Philippine Mining Service Corporation v. Commissioner of Internal Revenue

Petitioner submitted invoices and/or official receipts (ORs) for the following disputed disallowances that respondent has made: Amount of Input Deductions VAT A. Insufficient documentations (No billing statement, OR, SI nor proof of payment) P7,165,o66.10 B. Out of Period 202,)46.26

c. Unreadable document 16,402.50 D. Document with alteration but not countersigned 26,·BOA97·58 E. Overclaimed 8,)25.00 F.

Violation of invoicing requirements pursuant to Section 113 of the NIRC of 1997, as amended 742,542.14 G. Disallowed input tax on "Big Ticket" Purchases 12,959,163.80 H. Deferred input tax on capital goods from local purchases and importation 1,200,977·32 I.

Disallowed VAT on importation due to overclaim and failure to submit SSDT 281,727.00 J.

Disallowed input VAT on purchase of capital goods with no supporting documentation 6,405.00 The Court shall now evaluate whether petitioner's p1eces of evidence comply with the 1st condition.

A INSUFFICIENT

DOCUMENTATIONS (NO BILLING STATEMENT, OFFICIAL RECEIPT, SALES INVOICE NOR

PROOF OF PAYMENT)

An examination of the amended ICPA Report and petitioner's voluminous supporting documents shows that the disallowance of input VAT amounting to P 632,464.08131 must be upheld since the supporting 131 Supporting Registered Name of Supplier Document Reference Findings Supported only by

WILLIAMS COMMERCIAL

scanned VAT REG TIN

COMPANY INCORPORATED

234486 Annex 7-IQ-ah invoices Supported only by

WILLIAMS COMMERCIAL

scanned VAT REG TIN

COMPANY INCORPORATED

234980 Annex 7-1 Q-ah invoices Amount of input VAT 942.86 522.32

Philippine Mining Service Corporation v. Commissioner of Internal Revenue

Not supported by a VAT OR/invoice.

Supporting document is not valid for claiming

BPI/MS INSURANCE

input VAT and does not CORPORATION Policy RN738348 Annex 7-1 Q-ci bear petitioner's TIN Not supported by a VAT OR/invoice.

Supporting document is not valid for claiming input VAT and does not G08 CARGO MOVERS, INC. 763 Annex 7-1 Q-ck bear petitioner's TIN Has alterations without

SOS REAL ESTATE LESSOR

1336 Annex 7-1 Q-co countersign Has alterations without SOS Real Estate Lessor 1399 Annex 7-1 O-cr countersign Smart Communications, Inc. 652232226 Annex 7-10-cs Smart Communications, Inc. 652040000 Annex 7-1 Q-cs Smart Communications, Inc. 652312148 Annex 7-1 Q-cs Smart Communications, Inc. 652232452 Annex 7-lQ-cs Smart Communications, Inc. 652323283 Annex 7 -I Q-cs Smart Communications, Inc. 652312342 Annex 7-1 Q-cs Smart Communications, Inc. 652322427 Annex 7-IQ-cs Smart Communications, Inc. 652040112 Annex 7-1 Q-cs Smart Communications, Inc. 652283889 Annex 7-1 Q-cs Smart Communications, Inc. 652040822 Annex 7-1 0-cs No petitioner's TIN Smart Communications, Inc. 652042836 Annex 7-1 Q-cs Smart Communications, Inc. 652335300 Annex 7-1 Q-cs Smart Communications, Inc. 652338856 Annex 7-1 Q-cs Smart Communications, Inc. 652335561 Annex 7-1 Q-cs Smart Communications, Inc. 652336144 Annex 7-1 Q-cs Smart Communications, Inc. 652335766 Annex 7-1 Q-cs Smart Communications, Inc. 652336357 Annex 7-1 Q-cs Smart Communications, Inc. 652325819 Annex 7-1 Q-cs Smart Communications, Inc. 652329546 Annex 7-1 Q-cs Smart Communications, Inc. 652336143 Annex 7-1 Q-cs -· 0 200.60 1,926.00 1,480.37 1,480.37 535.71 535.71 535.71 535.71 535.71 571.71 535.71 535.71 535.71 535.71 179.45 535.71 267.81 226.60 262.99 350.23 111.54 128.57 85.71 128.57 CT A Case No. 1 0494 Philippine Mining Service Corporation v. Commissioner of Internal Revenue

Smart Communications, Inc. 652336145 Annex 7-1 Q-cs Smart Communications, inc. 652324741 Annex 7-1 Q-cs Smart Communications, Inc. 652335763 Annex 7-1 Q-cs Smart Communications, lnc. 652322694 Annex 7- 1 Q-cs Smart Communications, lnc. 652321982 Annex 7 - I Q-cs Domestic purchase of services supported by VAT REG TIN ORs with incorrect SCANNER MAGNEDYNE INC. Annex 7- 1 Q-ct J:letitioner's TIN G08 CARGO MOVERS, INC. 766 Annex 7-1 Q-db G08 CARGO MOVERS, INC. 765 Annex 7-1Q-db Domestic purchase of services supported by G08 CARGO MOVERS, INC. 762 Annex 7-10-db VAT REG TIN billing statement with support G08 CARGO MOVERS, INC. 764 Annex 7-1 Q-db not valid for claim of input tax G08 CARGO MOVERS, INC. 790 Annex 7-1 Q-db GOB CARGO MOVERS, INC. 789 Annex 7-1 Q-db Domestic purchase of services supported by VAT REG TIN billing G08 CARGO MOVERS, INC. 867-869 Annex 7-2Q-bv statement only Domestic purchase of services supported by VAT REG TIN ORs with inserted petitioner's name SOS Real Estate Lessor 1439 Annex 7-2Q-cc without countersign Domestic purchase of services supported by VAT REG TIN ORs with inserted petitioner's name SOS Real Estate Lessor 1486 Annex 7-2Q-cc without countersign Domestic purchase of services supported by VAT REG TIN statement of account with incomplete petitioner's name, without TIN, address, VAT breakdown, BIR

CEBU CASTLE PEAK HOTEL

permit to print and CORPORATION Annex 7-2Q-cf printing date indicated 128.57 535.71 535.71 535.71 160.71 12,696.43 4,560.00 1,326.00 I ,386.00 4,146.00 I I, 184.14 2,586.00 1,542.00 1,480.37 1,480.37 ' 728.57 CT A Case No. 1 0494 Philippine Mining Service Corporation v. Commissioner of Internal Revenue

Domestic purchase of services supported by VAT REG TIN ORs without petitioner's TIN and reason for payment indicated, with incorrect address and Philippine Long Distance 109727121, with underclaimed Telephone Company 109739 184 Annex 7-20-cg VAT Domestic purchase of services supported by VAT REG TIN billing statements with no petitioner's TIN and VAT breakdown indicated and with

CITY TRAVEL & TOURS

support not valid for CORPORATION 8956 Annex 7-20-ch claim of in out tax Domestic purchase of services supported by VAT REG TIN billing statements with INSTITUTIONAL SYNERGY, incorrect petitioner's INC.

8324 Annex 7-20-ci TIN Domestic purchase of goods other than capital goods supported by VAT REG TIN sales invoice included in the schedule of services with petitioner's TIN and address written on a computer printed

LAKE ANN ENTERPRISES

invoice without CORPORATION 852 1 Annex 7-20-cn countersign Domestic purchase of services supported by VAT REG TIN ORs with altered petitioner's address without SOS Real Estate Lessor Annex 7-20-cn countersign Domestic purchase of services supported by VAT REG TIN ORs with altered petitioner's address without countersign and with VAT breakdown

FAST AUTOWORLD

written on a different

PHILIPPINES CORPORATION

ROB22392 Annex 7-20-cq ink Domestic purchase of services supported by Statement of Account and not valid for claim of input tax, without petitioner's TIN, BIR Permit to print and

EXPRESS INN CORPORATION

E l20 19-020 Annex 7-20-an printing date indicated 10,662.00 360.00 1,200.00 169.71 1,480.37 769.86 ~, 0 12 . 93 F

Philippine Mining Service Corporation v. Commissioner of Internal Revenue

Domestic purchase of goods other than capital goods supported by photocopied VAT REG TIN invoices with incomplete petitioner's address, with altered without countersign and written on different ink VAT breakdown, Annex 7-3Q-an with overclaimed VAT Domestic purchase of goods other than capital goods supported by photocopied VAT REG TIN invoices with incomplete petitioner's address, with altered without countersign and written on different

LA-CAUDAD COMPUTER

FOR ink VAT breakdown,

SUPPLIES & SERVICES

CLARIFICATION Annex 7-3Q-an with overclaimed VAT Domestic purchase of services supported by VAT REG TIN ORs with inserted petitioner's name SOS Real Estate Lessor Annex 7-3Q-ci without countersign Domestic purchase of services supported by VAT REG TIN ORs with inserted petitioner's name SOS Real Estate Lessor Annex 7-3Q-ci without countersign Domestic purchase of services supported by VAT REG TIN billing invoice without petitioner's TIN and address, BIR permit to print and printing date indicated, with support not valid for claim of SEAHA WK TRANSPORT INC. 13677 Annex 7-3Q-cp input tax Domestic purchase of services supported by photocopied VAT REG LBC EXPRESS, INC.

4 139 Annex 7-3Q-cv TIN billing statement Domestic purchase of 947, 734, 926, services supported by 703, 927, 704, VAT REG TIN billing G08 CARGO MOVERS, INC. 928, 705, 948, 735 Annex 7-3Q-cw statement Domestic purchase of services supported by VAT REG TIN statement of account Sycip Salazar Hernandez & not valid to claim for Gatmaitan Law Offices 87095 Annex 7-30-cx input tax 417.86 455.36 1,480.37 1,480.37 738.00 851.99 8,370.00 ' 300.00

Philippine Mining Service Corporation v. Commissioner of Internal Revenue

Annex 7-3Q-as incomplete address 58.56 53 .76 53.76 53.76 115.20 53.76 115.20 ' 115.20 CT A Case No. 1 0494 Philippine Mining Service Corporation v. Commissioner of Internal Revenue

Domestic purchase of services supported by VAT REG TIN ORs without petitioner's TIN indicated and with Malayan Insurance Co., Inc.

I 00705298-3

Annex 7-30-as incomplete address Domestic purchase of services supported by Philippine Long Distance 110577576, statement of account Telephone Company 110589771 Annex 7-30-ai only Domestic purchase of goods other than capital goods supported by scanned VAT REG TIN

CHESTER ENTERPRISES

Annex 7 -40-ap invoices Domestic purchase of goods other than capital goods supported by TIN VAT invoices with altered date, petitioner's name and VAT breakdown without countersign, with VAT

WAND L TRADING

breakdown written on a CORPORATION 14-11811 Annex 7-40-av different ink Domestic purchase of services supported by VAT REG TIN statement of account without petitioner's TIN and VAT breakdown, Philippine Long Distance and with incorrect Telephone Company 112750929 Annex 7-40-ci address indicated Domestic purchase of services supported by VAT REG TIN statement of account without petitioner's TIN Philippine Long Distance and breakdown Telephone Company 112603993 Annex 7-40-ck indicated Domestic purchase of services supported by VAT REG TIN statement of account without petitioner's TIN, VAT breakdown and reason for payment indicated and support Philippine Long Distance 112192338, not valid to claim for Telephone Company 112321559 Annex 7-40-cl input tax Domestic purchase of services supported by VAT REG TIN billing statement without petitioner's TIN and NNRGLOBAL support not valid to LOGISTICS(PHILS)INC ISI7264 Annex 7-40-cm claim for input tax 115.20 I 0,899.39 2,500.72 4,121.36 10,662.00 153.87 10,998.87 \ 300.00

Philippine Mining Service Corporation v. Commissioner of Internal Revenue

Domestic purchase of services supported by VAT REG TIN PF with incorrect petitioner's TIN and support not

PLA TON MARTINEZ FLORES

valid to claim for input

SAN PEDRO & LEANO

127266 Annex 7-4Q-cn tax Domestic purchase of services supported by VAT REG TIN PF with incorrect petitioner's TIN and support not

PLA TON MARTINEZ FLORES

valid to claim for input

SAN PEDRO & LEANO

127227 Annex 7 -40-cn tax Domestic purchase of services supported by VAT REG TIN credit PRIMEX TRADE SALES, INC. 336231,341837 Annex 7-4Q-co invoice Domestic purchase of services supported by VAT REG TIN sales

LA-CAUDAD COMPUTER

invoice with

SUPPLIES & SERVICES

2169, '0085 Annex 7-4Q-cp overclaimed VAT Domestic purchase of services supported by "K" LINE LOGISTICS (PHILS.), photocopied VAT REG INC.

1032 Annex 7-4Q-cq TIN billing invoice Domestic purchase of services supported by photocopied VAT REG TIN billing invoice "K" LINE LOGISTICS (PHILS.), with support not valid INC.

I806 Annex 7-40-cr to claim for input tax Domestic purchase of services supported by photocopied VAT REG TIN billing invoice Sycip Salazar Hernandez & with support not valid Gatmaitan Law Offices 95544 Annex 7-4Q-cr to claim for input tax Domestic purchase of services photocopied supported by VAT REG TIN statement of reimbursable charges without VAT "K" LINE LOGISTICS (PHILS.), breakdown and ·reason INC.

5115 Annex 7-40-cs for payment indicated Domestic purchase of services photocopied supported by TIN statement of account without petitioner's TIN, BIR Permit to print and printing date Skycable Corporation Annex 7 -4Q-ct indicated 360.00 600.00 2,460.00 1,414.29 840.00 840.00 300.00 840.00 ' 375.00

Philippine Mining Service Corporation v. Commissioner of Internal Revenue

Domestic purchase of services supported by VAT REG TIN ORs with inserted petitioner's name with SOS Real Estate Lessor Annex 7-4Q-dd countersign Domestic purchase of services supported by VAT REG TIN ORs with inserted petitioner's name SOS Real Estate Lessor Annex 7-4Q-de without countersign Domestic purchase of services supported by VAT REG TIN ORs with inserted

WATERFRONT CEBU CITY

petitioner's name CASINO HOTEL. INC.

Annex 7-4Q-df without countersign Domestic purchase of services supported by photocopied VAT REG TIN ORs without petitioner's TIN and Smart Communications, Inc. Annex 7-4Q-dg with overclaimed VAT Domestic purchase of services supported by photocopied VAT REG TIN ORs without petitioner's TIN and Smart Communications, Inc. Annex 7-4Q-dg with overclaimed VAT Domestic purchase of services supported by photocopied VAT REG TIN ORs without petitioner's TIN and Smart Communications, Inc. Annex 7-4Q-dg with overclaimed VAT Domestic purchase of services supported by photocopied VAT REG TIN ORs without petitioner's TIN and Smart Communications, Inc. Annex 7-4Q-dg with overclaimed VAT Domestic purchase of services supported by photocopied VAT REG TIN ORs without petitioner's TIN and Smart Communications, Inc. Annex 7-4Q-dg with overclaimed VAT Domestic purchase of services supported by photocopied VAT REG TIN ORs without petitioner's TIN and Smart Communications, Inc. Annex 7-4Q-dg with overclaimed VAT I ,480.37 I ,480.37 I ,856.25 273.61 535.71 504.38 234.70 535.72 \ 535.71 (J

Philippine Mining Service Corporation v. Commissioner of Internal Revenue

Domestic purchase of services supported by photocopied VAT REG TIN ORs without petitioner's TIN and Smart Communications, Inc. Annex 7-4Q-dg with overclaimed VAT Domestic purchase of services supported by photocopied VAT REG TIN ORs without petitioner's TIN and Smart Communications, Inc. Annex 7-40-dg with overclaimed VAT Domestic purchase of services supported by photocopied VAT REG TIN ORs without petitioner's TIN and Smart Communications, Inc. Annex 7-40-dg with overclaimed VAT Domestic purchase of services supported by photocopied VAT REG TIN ORs without petitioner's TIN and Smart Communications, Inc. Annex 7-40-dg with overclaimed VAT Domestic purchase of services supported by photocopied VAT REG TIN ORs without petitioner's TIN and Smart Communications, Inc. Annex 7-40-dg with overclaimed VAT Domestic purchase of services supported by photocopied VAT REG TIN ORs without petitioner's TIN and Smart Communications, Inc. Annex 7-40-dg with overclaimed VAT Domestic purchase of services supported by photocopied VAT REG TIN ORs without petitioner's TIN and Smart Communications, Inc. Annex 7-4Q-dg with overclaimed VAT Domestic purchase of services supported by photocopied VAT REG TIN ORs without petitioner's TIN and Smart Communications, Inc. Annex 7-4Q-dg with overclaimed VAT 535.71 535.71 535.71 535.71 128.57 128.57 214.29 • 535.71 !J

Philippine Mining Service Corporation v. Commissioner of Internal Revenue

Domestic purchase of services supported by photocopied VAT REG TIN ORs without petitioner's TIN and Smart Communications, Inc. Annex 7-40-dg with overclaimed VAT Domestic purchase of services supported by photocopied VAT REG TIN ORs without petitioner's TIN and Smart Communications, Inc. Annex 7-4Q-dg with overc1aimed VAT Domestic purchase of services supported by photocopied VAT REG TIN ORs without petitioner's TIN and Smart Communications, Inc. Annex 7-4Q-dg with overclaimed VAT Domestic purchase of services supported by photocopied VAT REG TIN ORs without petitioner's TIN and Smart Communications, Inc. Annex 7-40-dg with overclaimed VAT Domestic purchase of services supported by photocopied VAT REG TIN ORs without petitioner's TIN and Smart Communications, Inc. Annex 7-4Q-dg with overclaimed VAT Domestic purchase of services supported by photocopied VAT REG TIN ORs without petitioner's TIN and Smart Communications, Inc. Annex 7-4Q-dg with overclaimed VAT Domestic purchase of services supported by photocopied VAT REG TIN ORs without petitioner's TIN and Smart Communications, Inc. Annex 7-40-dg with overclaimed VAT Domestic purchase of services supported by photocopied VAT REG TIN ORs without petitioner's TIN and Smart Communications, Inc. Annex 7-40-dg with overclaimed VAT 535.7 1 535.71 535.71 85.7I 535.71 261.38 312.76 "' 314.91 3 CT A Case No. 1 0494 Philippine Mining Service Corporation v. Commissioner of Internal Revenue Page 60 of 11 9 Domestic purchase of services supported by photocopied VAT REG TIN ORs without petitioner's TIN and Smart Communications, Inc. Annex 7-40-dg with overclaimed VAT Domestic purchase of services supported by photocopied VAT REG TIN ORs without petitioner's TIN and Smart Communications, Inc. Annex 7-40-dg with overclaimed VAT Domestic purchase of services supported by photocopied VAT REG TIN ORs without petitioner's TIN and Smart Communications, Inc. Annex 7-40-dg with overclaimed VAT Domestic purchase of services supported by photocopied VAT REG TIN ORs without petitioner's TIN and Smart Communications, Inc. Annex 7-40-dg with overclaimed VAT Domestic purchase of services supported by VAT REG TIN official receipts with altered VAT breakdown without countersign 2631 -33, 27 12, and written on a JTB ASIA PACIFIC PHIL. CORP. 2578 Annex 7-40-ar different ink Domestic purchase of services supported by VAT REG TIN official receipts with altered VAT breakdown without countersign

ROSRICH DEVELOPMENT

and written on a CORPORATION Annex 7-40-ar different ink Domestic purchase of services supported by VAT REG TIN official receipts with altered VAT breakdown without countersign

WATERFRONT CEBU CITY

and written on a CASINO HOTEL. INC.

Annex 7-40-ar different ink Domestic purchase of services supported by statement of account 18340-19, 18341 - without petitioner's 19, 18330-19, TIN, address, with 18331-19, 18332- support not valid to A TJ Travel & Tours, Inc. 19 Annex 7-40-dm claim for input tax 1.91 1.91 333.24 99.82 554.62 2,520.00 1,325.89 480.00 s CT A Case No. 1 0494 Philippine Mining Service Corporation v. Commissioner of Internal Revenue

Domestic purchase of services supported by statement of account without petitioner's TIN, address, with 18362-19, 18363- support not valid to A TJ Travel & Tours, Inc. 19 Annex 7-40-dm claim for inout tax Domestic purchase of services without Cignal TV, Inc.

Annex 7-1 0-dh supporting document Domestic purchase of services without Cignal TV, Inc.

Annex 7-1 0 -dh supporting document Domestic purchase of services without Cignal TV, Inc.

Annex 7-1 Q-dh supporting document Domestic purchase of

ASIAN AEROSPACE

services without CORPORATION Annex 7-1 0-dh supporting document Domestic purchase of

ASIAN AEROSPACE

services without CORPORATION Annex 7-1 0 -dh supporting document Domestic purchase of services without SGV & Co.

PHLO 100290575

Annex 7-1 Q-dh supporting document Domestic purchase of services without BBMAX TECH INC.

c/o Sir Moching Annex 7-1 Q-dh supporting document Domestic purchase of services without BBMAX TECH INC.

Annex 7-1 0-dh supporting document 048263, 052265, 052278, 052493, 056077, 056356, 057966, 058170, 059866, 062621 ' 063107' 065966, 066056, 066455, 068104, 070762, 070966, 071721' Domestic purchase of 075110, 075396, goods other than capital 076540, 79580, goods without 81716,82487, supporting document 84974, 8497 1' 86802, 87984, 90576, 92322, 92583, 94436, 94921 , 95175, 95957, 97117, I 02224, I 02634, I 04855, I 04643, Leciann Ventures 105103 Annex 7-20-ct 456.00 215.88 119.46 215.88 119.46 31 ,962.86 31,962.86 1,558.56 3,240.00 3,240.00 7 804.08 15 CT A Case No. 1 0494 Philippine Mining Service Corporation v. Commissioner of Internal Revenue

Page 62 of 11 9

Domestic purchase of services without Cignal TV Inc.

Annex 7-2Q-cu supporting document Domestic purchase of services without Cignal TV Inc.

Annex 7-2Q-cu supporting document Domestic purchase of services without Cignal Tv, Inc.

Annex 7-20-cu supporting document Domestic purchase of services without Cignal Tv, Inc.

Annex 7-2Q-cu supporting document Domestic purchase of services without Toyota Talisay Cebu 31981 Annex 7-20-cu supporting document Domestic purchase of services without Cignal TV, Inc.

Annex 7-2Q-cu supporting document Domestic purchase of services without Cignal TV, Inc.

Annex 7-20-cu supporting document Domestic purchase of services without G08 CARGO MOVERS, INC. 810-812 Annex 7-20-cu supporting document 827404, 909859, 923472, 154531 , 909858, 827403, 919906, 21276, 920330, 880933, Domestic purchase of 932866, 21 786, 20681 , 942092, services without 934256,93705 1, supporting document 933884, 932923, 923465, 934082, 927343, 92 1428, 933477, 945 126, Smart Communications, Inc. 919351 Annex 7-2Q-cu 119.46 215.88 215.88 119.46 19,866.09 119.46 215.88 7,398.00 9,435.80

Philippine Mining Service Corporation v. Commissioner of Internal Revenue

69048372 1, 690413 793, 690600605, 690575742, 690601505, 690566063, 690484078, 690282660, 690573562, 690282182, 690563663, Domestic purchase of 690572726, 690550082, services without 690416082, supporting document 690587634, 690601700, 690586699, 690587269, 690595092, 690595091 , 690572156, 690579961 , 6905861 10, Smart Communications, Inc. 690574282 Annex 7-2Q-cu Domestic purchase of goods other than capital goods without Touchart Trading Enterprises Inc. 2874 Annex 7-3Q-at supporting document Domestic purchase of 22650, 22654, goods other than capital TOYOTA MANDAUE SOUTH, 22689, 22638, goods without CEBU 22770 Annex 7-30-at supporting document Domestic purchase of services without Cignal TV Inc.

Annex 7-30-at supporting document Domestic purchase of services without Cional TV Inc.

Annex 7-3Q-di supporting document Domestic purchase of services without Cignal TV Inc.

Annex 7-30-di supporting document Domestic purchase of services without Cignal TV Inc.

Annex 7-30-di supporting document Domestic purchase of services without Toyota Talisav Cebu

3631 1

Annex 7-30-di supporting document Domestic purchase of

DUN & BRADSTREET

services without PHILIPPINES, INC.

c/o Ms. Chris Annex 7-3Q-di supporting document Domestic purchase of Philippine-Japan Marine Surveyors services without & Sworn Measures Corporation 47915-18 Annex 7-3Q-di supporting document 9,565.85 37,800.00 4,137.32 119.46 215.88 215.88 119.46 1,654.26 720.00 32,081 .53

Philippine Mining Service Corporation v. Commissioner of Internal Revenue

Domestic purchase of

ROSRJCH DEVELOPMENT

services without CORPORATION Annex 7-30-di supporting document Domestic purchase of services without Smart Communications, Inc. Annex 7-30-di supporting document 683009630,

6830 14682,

682899967, 682900428, 660609604, 660606895, 660250495, Domestic purchase of 660249108, services without 668 195870, supporting document 66819 1042, 66832 1353, 66832 1969, 675643 171, 675545001 , 67565 124 1, Smart Communications, Inc. 675544194 Annex 7-30-di Domestic purchase of services without SGV & Co.

Annex 7-30-di supporting document 39982, 8382 16, 114164, 39559, 126966, 836933, 138911 , 942390, 114163, 153596, Domestic purchase of 126580, 139098, services without 87533, 156028, supporting document 141481 , 139488, 138509, 15589 1, 138713, 139490, 125326, 125737, Smart Communications, Inc. 124723, 133308 Annex 7-30-di Domestic purchase of

ASIAN AEROSPACE

services without CORPORATION Annex 7-30-di supporting document Domestic purchase of

ASIAN AEROSPACE

services without

CORPORA TJON

Annex 7-30-di supporting document Domestic purchase of services without CEBU COUNTRY CLUB, INC. Annex 7-30-di supporting document Domestic purchase of services without Malayan Insurance Co., Inc. 100673253-0 Annex 7-30-di supporting document Domestic purchase of

ROCOCO GLOBAL

services without TECHNOLOGIES CORP.

Annex 7-30-di supporting document 2,520.00 1,712.64 9,509.15 2,914.28 9,529.99 27,000.00 27,000.00 24,480.00 115.45 88,639.20

Philippine Mining Service Corporation v. Commissioner of Internal Revenue

713826947, 713843265, 713812971 , 713938881 , 713942167, 713827632, 713809774, 713898704, 713910597, 71394 1396, 713871 150, Domestic purchase of 713921 752, services without 713921287, supporting document 713944954, 713924332, 713922721' 713923067, 713923066, 713941632, 713943471 , 713907760, 713944957, 713921358, Smart Communications, Inc. 713941185 Annex 7-30-di Domestic purchase of 637424, 628188, services without Smart Communications, Inc. 754622 Annex 7-30-di supporting document Domestic purchase of goods other than capital

LA-CAUDAD COMPUTER

goods without

SUPPLIES & SERVICES

2122, 0083 Annex 7-40-bh supporting document Domestic purchase of goods other than capital

FAMILY HEALTH AND

goods without BEAUTY CORP.

Annex 7-40-bh supporting document Domestic purchase of services without Smart Communications, Inc. Annex 7-40-dw supporting document Domestic purchase of

CEBU CASTLE PEAK HOTEL

services without CORPORATION Annex 7-40-dw supporting document Domestic purchase of services without SEAHA WK TRANSPORT INC. 14119 Annex 7-40-dw supporting document Domestic purchase of services without SEAHA WK TRANSPORT INC. 14234 Annex 7-40-dw supporting document Domestic purchase of services without SEAHA WK TRANSPORT INC. 14152 Annex 7-40-dw supporting document Domestic purchase of services without SGV & Co.

PHLO 1 00311603

Annex 7-40-dw supporting document 9,502.87 642.24 5,625.00 24,910.71 192.86 728.57 I ,058.04 738.00 850.80 1,583.76

Philippine Mining Service Corporation v. Commissioner of Internal Revenue

721705260, 721689969, 721788968, 721703692, 721777492, 721800504, 721689040, 721686238, 72176692, 721786595, 721748754, 721799676, 721788407, 721802694, 721819916, 72179915, 721800132, 721800290, 721799344, 721817957, 721794514, 721819915, Domestic purchase of services without supporting document 721786142, Annex 7-4Q-dw 9,544.39 Smart Communications, Inc. 721787086 4Q 4Q 714437027, Domestic purchase of 714431631, services without 714565165, supporting document Smart Communications, Inc. 714565771 Annex 7-4Q-dw 642.24 Domestic purchase of PLATON MARTINEZ FLORES services without SAN PEDRO & LEANO 124931, 124970 Annex 7-4Q-dw_ | Supporting document 960.00 Domestic purchase of ae services without Skycable Pacific CATV, Inc. Annex 7-4Q-dw_| Supporting document 375.00 737552250, 737539611, 737583886, 737636935, 737648450, 737623511, 737537793, 737535710, 737595742, 737664466, 737634332, 737634272, 737636190, 737671880, 737660957, 737648109, 737648298, 737640374, 737670830, 737648299, 737649908, 737648658, 737648452, 737648659 Domestic purchase of services without supporting document Smart Communications, Inc. Annex 7-4Q-dw

Philippine Mining Service Corporation v. Commissioner of Internal Revenue documents proffered by petitioner do not satisfy the invoicing requirements.

B. OUT OF PERIOD A thorough review of both the amended ICPA Report and the supporting documents provided by petitioner indicates that the input VAT disallowance of P8s,891.22 is justified, as shown below: Registered Name Sales OR No.

Reference Findings Amount of of Supplier Invoice No.

Input VAT Top-Rigid Industrial Domestic purchase Safety Supply Inc.

125174 Annex 7-1Q-aj of goods other than P2,28o.96 capital goods supported by VAT Plan & Do Billing Annex 7-1Q-cj REG TIN invoices 0001 Construction Statement dated not within the period of claim 71,250.00 Domestic purchase Vanguard of services supported [Assessments] and by VAT REG TIN ORs with altered Behavioral 3°3 0203 Annex 7-1Q-cn date without Dynamics Int'l countersign and Corp.

without specific day indicated 420.00 Domestic purchase of services supported Aldo Service Center, Annex 7-1Q-dd by VAT REG TIN Inc.

31452 31120 ORs without stating the nature of the services 932.14 Domestic purchase of goods other than Dalaguete Gas capital goods 106909 Annex 7-4Q-at supported by VAT Station REG TIN invoices dated not within the period of claim 372.65 FAST Domestic purchase AUTOWORLD PHILIPPINES ROB24949 35840 Annex 7-4Q-cw of services supported by VAT REG TIN CORPORATION ORs dated not 818.74 TOYOTA within the period of MANDAUE 76946 1-66o58 Annex 7-4Q-cw claim SOUTH, CEBU 1,322.07 Domestic purchase of services without SOS Real Estate Lessor Annex 7-4Q-dw supporting document Difference due to overclaimed VAT , TOTAL \71 0 I ,480.37 9,142.88 632,464.08

Philippine Mining Service Corporation v. Commissioner of Internal Revenue

TOYOTA MANDAUE 76212 1-66059 Annex 7-4Q-cw SOUTH, CEBU ABLE SERVlCES, 31949. 31948, 39845 Annex 7-4Q-cw INC.

31648 Domestic purchase of services supported by VAT REG TIN ORs dated not PRIMARY within the period of SOFTWARE 6849 claim, with altered DEVELOPMENT Annex 7-4Q-cx date, petitioner's CORPORATION name, and VAT breakdown without countersign, without reason for payment indicated Domestic purchase GERISONIC of services supported

ELECTRONIC AND

by VAT REG TIN COMMUNICATION 10106, ORs dated not SYSTEM- 10109 16036 Annex 7-4Q-cy within the period of MARMITO, claim, with altered

GERALD R

petitioner's address, VAT breakdown without countersign Domestic purchase UPS-Delbros of services supported International 1-1297815 41786 Annex 7-4Q-cz by photocopied VAT Express Ltd., Inc.

REG TIN ORs dated not within the period of claim Domestic purchase BPI/MS RN74212o, ADo76024, of services supported INSURANCE RN741753 ADo76024 Annex 7-4Q-da by photocopied VAT CORPORATION REG TIN ORs dated not within the period BPI/MS RN742120, ADo76024, of claim and with INSURANCE RN741753 ADo76024 Annex 7-4Q-da incorrect Petitioner's CORPORATION TIN Domestic purchase of services supported PRIMARY by VAT REG TIN SOFTWARE 6848 Annex 7-4Q-db ORs with altered DEVELOPMENT date countersigned CORPORATION not by the cashier or the authorized representative TOTAL C. UNREADABLE DOCUMENT 1,570.69 1,930·79 1,767.86 257·14 8o.8o 198.18 197·06 2.492.14 PS5,s 91.22.

As ICPA Constantino verified, the purchase of goods previously identified by respondent, as evidenced by an unreadable document, is properly supported and compliant with the invoicing requirements. Thus, the previous disallowance of!'t6,4o2.50 must be reversed.''' !J·

132 See Exhibit "P-23-13 13", USB.

Philippine Mining Service Corporation v. Commissioner of Internal Revenue

D. DOCUMENTS WITH ALTERATION BUT NOT COUNTERSIGNED Per respondent's VAT Refund Notice and its attachments, this pertains to alterations, erasures, or additions of amounts, addresses, or business names without the required countersignature. For this kind of disallowance, the time that the countersignature was made is of crucial importance. It is incumbent upon petitioner to show that it was already countersigned at the time of respondent's review and not after respondent rendered a decision. It bears noting that an appeal of an unsuccessful administrative claim, the taxpayer has to convince this Court that respondent had no reason to deny its claim.133 It is thus, important that petitioner was able to show that such disallowance has no basis. Consequently, petitioner cannot rectify the lapse by filing 'cured' documents before this Court. After all, basic is the rule that the party producing a document which has been altered must account for any alteration.134 As such, respondent's disallowance of input VAT due to alterations made to the ORs or invoices without any countersignature, in the aggregate ofP26,)30A97·S8, must be upheld.135 E. OVERCLAIMED INPUT VALUE-

ADDED TAX (VAT)

Upon ICPA Constantino's examination, it was confirmed that the amount ofP8,325.oo was appropriately disallowed by respondent. It was based on the discrepancy found between the supporting document (i.e., OR No. 2803136) and the amount of input VAT claimed by petitioner in its return, which resulted in an overclaimed input VAT amount. 133 134 135 136 F. VIOLATION OF INVOICING

REQUIREMENTS PURSUANT TO

SECTION 113 OF THE NIRC OF

'997• AS AMENDED 8 Pilipinas Total Gas, Inc. v. Commissioner of Internal Revenue, G.R. No. 20711 2, 08 December 20 15.

Rules of Court, Rule 132, Section 3 1. See Annex 9-d for the list of exhibits which BIR disallowed due to alterations without countersignature, USB. Exhibit "P-24- 1345", USB.

Philippine Mining Service Corporation v. Commissioner of Internal Revenue

Upon reviewing the purchases flagged by respondent for invoicing requirements violations (e.g., no name/TIN/address provided, incomplete addresses, incorrect TIN, unregistered sales invoices, invalid Authority to Print [ATP], incomplete dates, or no separate billing of VAT amounts), totaling P742,542.14 in the VAT Refund Notice, it was determined that only P133A77.86137 of input VAT should be disallowed 137 Per VAT Refund Notice Annex "A.2" (Exhibit P-4) Sales Registered Name of Invoice OR No.

Supplier No.

Reference ICPA Findings TABEL ENTERPRISES- 79833 TABEL, JAIME J Annex 7-l_Q_-ao TABEL ENTERPRISES-

7984 1

TABEL, JAIME J Annex 7-1 Q-ao TABEL ENTERPRISES- 79843 T ABEL, JAIME J Annex 7- l_Q_-ao TABEL ENTERPRISES- 79844 T ABEL, JAIME J Annex 7- l_Q_-ao TABEL ENTERPRISES- 97852 TABEL, JAIME J Annex 7- I_Q-ao purchase of TABEL Domestic ENTERPRISES- 97855 goods other than capital TABEL, JAIME J Annex 7-1 Q-ao goods supported by VAT REG TIN invoices with TABEL inserted Petitioner's name ENTERPRISES- 79684 without countersign, with TABEL, JAIME J Annex 7-1 Q-ao expired printing date for TABEL BIR Permit and with altered ENTERPRISES- 97856 VAT breakdown without TABEL, JAIME J Annex 7-1 Q-ao countersign TABEL ENTERPRISES- 79845 T ABEL, JAIME J Annex 7- ]_Q-ao TABEL ENTERPRISES- 97872 T ABEL, JAIME J Annex 7- ]_Q-ao TABEL ENTERPRISES- 97887 T ABEL, JAIME J Annex 7-1 Q-ao TABEL

ENTERPRISES -

79695 T ABEL, JAIME J Annex 7-1 Q-ao TABEL

ENTERPRISES -

99018 T ABEL, JAIME J Annex 7-1 Q-ao

BOHOL QUALITY

Domestic purchase of 2099994 CORPORATION Annex 7-1 Q-aw goods other than capital goods supported by TIN

BOHOL QUALITY

2099952 invoices with inserted CORPORATION Annex 7- 1 Q-aw Petitioner's TIN without Findings 3,750.00 4,875.00 3,803.57 2,569.29 951.43 1,017.86 80.36 535.71 6,964.29 187.50 85.71 482.14 I ,500.00 332.04 - '118.93 6 ' CT A Case No. 1 0494 Philippine Mining Service Corporation v. Commissioner of Internal Revenue

883751 Leciann Ventures Annex 7-1 Q-ba 884249 Leciann Ventures Annex 7- I Q-ba 886375 Leciann Ventures Annex 7-1Q-ba 890711 Leciann Ventures Annex 7-1 Q-ba 890876 Leciann Ventures Annex 7-1 Q-ba 891287 Leciann Ventures Annex 7-1 Q-ba 893004 Leciann Ventures Annex 7-1 Q-ba 894256 Leciann Ventures Annex 7- I Q-ba 894919 Leciann Ventures Annex 7-1 Q-ba 895707 Leciann Ventures Annex 7-1 Q-ba 902585 Leciann Ventures Annex 7-1Q-ba 903894 Leciann Ventures Annex 7-1 Q-ba 905279 Leciann Ventures Annex 7- I Q-ba 907316 Leciann Ventures Annex 7-1 Q-ba 907408 Leciann Ventures Annex 7-1 Q-ba Domestic purchase of goods other than capital goods supported by 870754 reprinted VAT REGISTERED TIN tape receipts without Petitioner's Leciann Ventures Annex 7-1 Q-bb name, TIN and address 909188 Domestic purchase of Leciann Ventures Annex 7-2Q-as goods other than capital 910795 goods supported by VAT Leciann Ventures Annex 7-2Q-as REG TIN tape receipts 91 1513 without Petitioner's name, Leciann Ventures Annex 7-2Q-as TIN, and address, without 213.18 173.62 154.72 160.71 220.98 217.68 142.96 216.50 127.65 205.94 I 75.3 1 164.76 88.28 240.85 71.97 291.90 162.17 230.21 \ 296.52

Philippine Mining Service Corporation v. Commissioner of Internal Revenue

912786 BIR permit Leciann Ventures Annex 7-20-as indicated 915048 supporting Leciann Ventures Annex 7-20-as receipt Leciann Ventures 917655 Annex 7-2Q-as Leciann Ventures 918690 Annex 7-2Q-as Leciann Ventures 918903 Annex 7-20-as Leciann Ventures 2348 Annex 7-2Q-as Leciann Ventures 3776 Annex 7-20-as Leciann Ventures 3934 Annex 7-2Q-as Leciann Ventures 5885 Annex 7-2Q-as Leciann Ventures 6820 Annex 7-20-as Leciann Ventures 8418 Annex 7-20-as Leciann Ventures 10845 Annex 7-2Q-as Leciann Ventures 122 13 Annex 7-2Q-as Leciann Ventures 14613 Annex 7-20-as Leciann Ventures 15366 Annex 7-2Q-as Leciann Ventures 19058 Annex 7-2Q-as Leciann Ventures 21953 Annex 7-2Q-as Leciann Ventures

2386 1

Annex 7-20-as Leciann Ventures 24113 Annex 7-20-as Leciann Ventures 24364 Annex 7-2Q-as Leciann Ventures 26707 Annex 7-2Q-as Leciann Ventures 27784 Annex 7-2Q-as Leciann Ventures 33562 Annex 7-2Q-as Leciann Ventures 34568 Annex 7-2Q-as Leciann Ventures 35121 Annex 7-2Q-as Leciann Ventures 35220 Annex 7-2Q-as Leciann Ventures 35726 Annex 7-2Q-as Leciann Ventures 37164 Annex 7-2Q-as Leciann Ventures 37943 Annex 7-2Q-as printing date and with 195.22 VAT official 167.53 177.19 25 1.55 191.7 1 151.24 247.75 225.46 185.98 163.88 126.92 199.64 218.14 205.44 177.91 230.85 176.51 113.81 208.39 152.81 177.93 202.48 360.23 207.86 213.96 151.48 163.45 266.83 _\ 104.82 (J'

Philippine Mining Service Corporation v. Commissioner of Internal Revenue

Leciann Ventures 39602 Annex 7-2Q-as Leciann Ventures 40 11 9 Annex 7-2Q-as Leciann Ventures 41758 Annex 7-2Q-as Leciann Ventures 42785 Annex 7-20-as Leciann Ventures 43729 Annex 7-2Q-as Leciann Ventures 45 149 Annex 7-2Q-as Leciann Ventures 107094 Annex 7-2Q-as Leciann Ventures 110563 Annex 7-2Q-as Leciann Ventures 109653 Annex 7-20-as Leciann Ventures 11 2413 Annex 7-2Q-as Leciann Ventures 11 5063 Annex 7-20-as Leciann Ventures 115564 Annex 7-2Q-as Leciann Ventures 117440 Annex 7-2Q-as Leciann Ventures 119283 Annex 7-2Q-as Leciann Ventures 119023 Annex 7-2Q-as Leciann Ventures 121452 Annex 7-2Q-as Leciann Ventures 121513 Annex 7-20-as Leciann Ventures 121613 Annex 7-2Q-as Leciann Ventures 122689 Annex 7-20-as Leciann Ventures 124857 Annex 7-2Q-as Leciann Ventures 123828 Annex 7-2Q-as Leciann Ventures 125856 Annex 7-2Q-as Leciann Ventures 128770 Annex 7-2Q-as Leciann Ventures 127990 Annex 7-20-as Leciann Ventures 129185 Annex 7-2Q-as Leciann Ventures 131578 Annex 7-20-as Leciann Ventures 134419 Annex 7-2Q-as Leciann Ventures 135306 Annex 7-2Q-as Leciann Ventures 137828 Annex 7-2Q-as 199.77 207.33 130.95 247.69 134.70 178.10 199.03 191.60 94.86 266.03 275.62 211.36 147.96 165.86 265.53 183.21 163.46 156.45 2 18.64 170.41 199.59 142.04 231.94 274.24 203.94 176.13 316.77 140.61 201.27

Philippine Mining Service Corporation v. Commissioner of Internal Revenue weer ee ee ee we we ee ee ee Ke ee we ee ee ee ee ee ee ee ee ee ee ee ee xX Leciann Ventures 137130 Annex 7-2Q-as 203.61 Leciann Ventures 137834 Annex 7-2Q-as 103.01 Leciann Ventures 138929 182.93 Leciann Ventures Leciann Ventures Leciann Ventures Leciann Ventures 1 138338 140712 149356 54742 Leciann Ventures 152291 Annex 7-2Q-as

152299 Q

Leciann Ventures Annex 7-2Q-as 105,15 Leciann Ventures 146418 Annex 7-2Q-as 199.95 Leciann Ventures 146616 Annex 7-2Q-as 213.63 Leciann Ventures 145054 Annex 7-2Q-as 133.64 Leciann Ventures 147400 Annex 7-2Q-as 251.05 Leciann Ventures 97.93 Leciann Ventures 148594 Annex 7-2Q-as 101.00 Annex 7-2Q-as Annex 7-2Q-as Annex 7-2Q-as Leciann Ventures | Leciann Ventures Leciann Ventures 144050 Annex 7-2Q-at Leciann Ventures 166197 Annex 7-3Q-ak | Leciann Ventures 157841 Annex 7-2Q-as | 183.53 Leciann Ventures 158403 Annex 7-2Q-as 180.67 Leciann Ventures 161801 — Annex 7-2Q-as 209.55 ee |__ = Leciann Ventures | 162380 Annex 7-2Q-as 160.24 Leciann Ventures _|_ 164228 _| Annex 7-2Q-as 99.79 164966 Annex 7-2Q-as 1 77097 Leciann Ventures 169752 Annex 7-3Q-ak 120.06 Leciann Ventures 171548 —_} Annex 7-3Q-ak | 261.23 Leciann Ventures 173239 Annex 7-3Q-ak 189.53 Leciann Ventures 173643 Annex 7-3Q-ak 222.49 Leciann Ventures 173300 | Annex 7-3Q-ak 82.87 Leciann Ventures 174269 | 162.14 Annex 7-3Q-ak E 322.81 237.89 E 166.16 :

163.36 j 215.53 166.50 192.98 170.33 HERE 116.52 y CT A Case No. 1 0494 Philippine Mining Service Corporation v. Commissioner of Internal Revenue

Leciann Ventures 178 104 Annex 7-30-ak Leciann Ventures 179359 Annex 7-30-ak Leciann Ventures 181460 Annex 7-30-ak Leciann Ventures 182540 Annex 7-30-ak Leciann Ventures 185223 Annex 7-3Q-ak Leciann Ventures 185129 Annex 7-30-ak Leciann Ventures 185693 Annex 7-30-ak Leciann Ventures 185985 Annex 7-3_Q-ak Leciann Ventures 192629 Annex 7-3Q-ak Leciann Ventures 194896 Annex 7-30-ak Leciann Ventures 194911 Annex 7-30-ak Leciann Ventures 195858 Annex 7-30-ak Leciann Ventures 196685 Annex 7-30-ak Leciann Ventures

2035 10

Annex 7-30-ak Leciann Ventures 203866 Annex 7-3Q-ak Leciann Ventures 204324 Annex 7-3Q-ak Leciann Ventures 206233 Annex 7-30-ak Leciann Ventures 208049 Annex 7-30-ak Leciann Ventures 208621 Annex 7-30-ak Leciann Ventures 208666 Annex 7-3Q-ak Leciann Ventures 213655 Annex 7-3Q-ak Leciann Ventures 218180 Annex 7-3Q-ak Leciann Ventures 218724 Annex 7-3Q-ak Leciann Ventures 218934 Annex 7-3Q-ak Leciann Ventures 219940 Annex 7-3Q-ak Leciann Ventures 220643 Annex 7-3Q-ak Leciann Ventures 227589 Annex 7-30-ak Leciann Ventures 227589 Annex 7-30-ak Leciann Ventures 229807 Annex 7-30-ak 198.79 137.88 214.69 190.50 302.88 188.18 159.39 181.56 248.33 194.57 216.57 187.69 172. 18 150.27 103.92 247.65 203.17 197.27 196.41 159.71 220.16 290.49 193.89 167.58 191. 12 199.69 127.70 127.70 .\ 201.63 ()

Philippine Mining Service Corporation v. Commissioner of Internal Revenue

Leciann Ventures 228934 Annex 7-3Q-ak Leciann Ventures 229431 Annex 7-3Q-ak Leciann Ventures 251604 Annex 7-30-ak Leciann Ventures 244266 Annex 7-3Q-ak Leciann Ventures 237661 Annex 7-3Q-ak Leciann Ventures 232012 Annex 7-3Q-ak Leciann Ventures 254246 Annex 7-30-ak Leciann Ventures 246064 Annex 7-3Q-ak Leciann Ventures 240319 Annex 7-3Q-ak Leciann Ventures 266343 Annex 7-3Q-ak Leciann Ventures 263700 Annex 7-3Q-ak Leciann Ventures 258794 Annex 7-3Q-ak Leciann Ventures 227954 Annex 7-3Q-ak Leciann Ventures 235493 Annex 7-30-ak Leciann Ventures 245457 Annex 7-3Q-ak Leciann Ventures 252373 Annex 7-30-ak Leciann Ventures 261959 Annex 7-3Q-ak Leciann Ventures 258 149 Annex 7-3Q-ak Leciann Ventures 249951 Annex 7-3Q-ak Leciann Ventures 076963 Annex 7-3Q-ak Leciann Ventures 239296 Annex 7-30-ak Leciann Ventures 286764 Annex 7-3Q-ak Leciann Ventures 279039 Annex 7-30-ak Leciann Ventures 275334 Annex 7-3Q-ak Leciann Ventures 266640 Annex 7-3Q-ak Leciann Ventures 257355 Annex 7-30-ak Leciann Ventures 265526 Annex 7-3Q-ak Leciann Ventures 270393 Annex 7-3Q-ak Leciann Ventures 277590 Annex 7-3Q-ak 182.50 168.97 151.39 158.30 132.15 171.19 230.24 147.27 221.02 211.78 128.88 184.51 226.60 165.39 189.82 178.14 182.43 194.75 206.42 52.07 129.22 240.48 132.81 197.00 133.26 148.78 198.73 123.57 ... \187.29 6

Philippine Mining Service Corporation v. Commissioner of Internal Revenue

Leciann Ventures 270980 Annex 7-3Q-ak Leciann Ventures 280193 Annex 7-3Q-ak Leciann Ventures 287163 Annex 7-3Q-ak Leciann Ventures 274423 Annex 7-30-ak Leciann Ventures 259719 Annex 7-30-ak Leciann Ventures 247998 Annex 7-3Q-ak Leciann Ventures 232186 Annex 7-3Q-ak Leciann Ventures 284954 Annex 7-30-ak Leciann Ventures 286607 Annex 7-3Q-ak Leciann Ventures 275705 Annex 7-3Q-ak Leciann Ventures 295317 Annex 7-30-ak Leciann Ventures 293657 Annex 7-3Q-ak Leciann Ventures 297041 Annex 7-30-ak Leciann Ventures 297485 Annex 7-3Q-ak Leciann Ventures 298170 Annex 7-3Q-ak Leciann Ventures 299961 Annex 7-3Q-ak Leciann Ventures 301666 Annex 7-3Q-ak Leciann Ventures 301760 Annex 7-3Q-ak Leciann Ventures 305316 Annex 7-30-ak Leciann Ventures 306265 Annex 7-3Q-ak Leciann Ventures 308599 Annex 7-30-ak Leciann Ventures 311 224 Annex 7-3Q-ak Leciann Ventures 314955 Annex 7-3Q-ak Leciann Ventures 314650 Annex 7-30-ak Leciann Ventures 317074 Annex 7-30-ak Leciann Ventures 317129 Annex 7-3Q-ak Leciann Ventures 32 1813 Annex 7-30-ak Leciann Ventures 323736 Annex 7-3Q-ak Leciann Ventures 324294 Annex 7-3Q-ak Leciann Ventures 325039 Annex 7-3Q-ak 199.68 183.74 208.46 221.8 1 267.33 228.35 183.73 211.77 161.89 199.37 182.76 77.88 223.23 122.15 183.49 160.53 149.43 205.43 249.57 207.79 240.78 196.49 20 1.40 172.51 218.00 175.76 97.15 180.75 199.10 .. 189.44

Philippine Mining Service Corporation v. Commissioner of Internal Revenue

Leciann Ventures 326510 Annex 7-3Q-ak Leciann Ventures 334034 Annex 7-3Q-ak Leciann Ventures 334127 Annex 7-3Q-ak Leciann Ventures 337236 Annex 7-3Q-ak Leciann Ventures 338902 Annex 7-3Q-ak Leciann Ventures 342332 Annex 7-3Q-ak Leciann Ventures 343016 Annex 7-3Q-ak Leciann Ventures 347134 Annex 7-3Q-ak Leciann Ventures 347306 Annex 7-3Q-ak Leciann Ventures 347934 Annex 7-3Q-ak Leciann Ventures 351625 Annex 7-3Q-ak Leciann Ventures 353053 Annex 7-3Q-ak Leciann Ventures 352603 Annex 7-3Q-ak Leciann Ventures 354767 Annex 7-3Q-ak Leciann Ventures 349138 Annex 7-3Q-ak Leciann Ventures 355673 Annex 7-3Q-ak Leciann Ventures 357715 Annex 7-3Q-ak Leciann Ventures 358751 Annex 7-4Q-bf Leciann Ventures 360769 Annex 7-40-bf Leciann Ventures 361895 Annex 7-4Q-bf Leciann Ventures 362836 Annex 7-4Q-bf Leciann Ventures 363575 Annex 7-4Q-bf Domestic purchase of 363636 goods other than capital Leciann Ventures Annex 7-4Q-bf goods supported by VAT 363706 REG TIN tape receipts Leciann Ventures Annex 7-4Q-bf without petitioner's name, 366015 TIN, and address Leciann Ventures Annex 7-4Q-bf Leciann Ventures 366877 Annex 7-4Q-bf Leciann Ventures 369382 Annex 7-4Q-bf Leciann Ventures 376809 Annex 7-4Q-bf Leciann Ventures 376867 Annex 7-4Q-bf 206.53 163.13 206.55 201.99 207.55 181.32 160.67 180.93 89.40 117.10 159.98 212.8 1 186.50 184.48 138.30 246.63 193.53 266.70 177.53 2 16.54 183.45 188.08 209.64 239.60 153.03 210.39 215.88 150.64 22 1.76

Philippine Mining Service Corporation v. Commissioner of Internal Revenue

Page 83 of 11 9

Leciann Ventures 377432 Annex 7-4Q-bf Leciann Ventures 377544 Annex 7-4Q-bf Leciann Ventures 380452 Annex 7-4Q-bf Leciann Ventures 385257 Annex 7-4Q-bf Leciann Ventures 386691 Annex 7-4Q-bf Leciann Ventures 387254 Annex 7-4Q-bf Leciann Ventures 387580 Annex 7-4Q-bf Leciann Ventures 389918 Annex 7-4Q-bf Leciann Ventures 393401 Annex 7-40-bf Leciann Ventures 397833 Annex 7-40-bf Leciann Ventures 397958 Annex 7-4Q-bf Leciann Ventures 403531 Annex 7-40-bf Leciann Ventures 404230 Annex 7-40-bf Leciann Ventures 406 109 Annex 7-40-bf Leciann Ventures 408327 Annex 7-40-bf Leciann Ventures 411058 Annex 7-40-bf Leciann Ventures 411619 Annex 7-4Q-bf Leciann Ventures 4 12928 Annex 7-4Q-bf Leciann Ventures 414053 Annex 7-4Q-bf Leciann Ventures 419693 Annex 7-4Q-bf Leciann Ventures 422293 Annex 7-4Q-bf Leciann Ventures 488120 Annex 7-4Q-bf Leciann Ventures 490223 Annex 7-40-bf Leciann Ventures 491740 Annex 7-40-bf Leciann Ventures 493888 Annex 7-4Q-bf Leciann Ventures 497296 Annex 7 -4Q-bf Leciann Ventures 498086 Annex 7-4Q-bf Leciann Ventures 498705 Annex 7-40-bf Leciann Ventures 502726 Annex 7-4Q-bf 266.52 194. 19 187.02 197.22 196.97 145.15 187.79 323.52 178.98 185.49 232.49 94.61 206.16 229.44 223.95 238.45 223.29 157.74 202.36 204.13 161.52 187.06 126.28 126. 12 220.44 192.87 191.05 159.49 214.09 {f·

Philippine Mining Service Corporation v. Commissioner of Internal Revenue

Leciann Ventures 502965 Annex 7-4Q-bf Leciann Ventures 504064 Annex 7-4Q-bf Leciann Ventures 506118 Annex 7-40-bf Leciann Ventures 507289 Annex 7-4Q-bf Leciann Ventures 509039 Annex 7-4Q-bf Leciann Ventures 511164 Annex 7-4Q-bf Leciann Ventures 51 1681 Annex 7-4Q-bf Leciann Ventures 512974 Annex 7-4Q-bf Leciann Ventures 517780 Annex 7-4Q-bf Leciann Ventures 518403 Annex 7-4Q-bf Leciann Ventures 518590 Annex 7-40-bf Leciann Ventures 521363 Annex 7-4Q-bf Leciann Ventures 521841 Annex 7-4Q-bf Leciann Ventures 526157 Annex 7-4Q-bf Leciann Ventures 527928 Annex 7-4Q-bf Leciann Ventures 528265 Annex 7-4Q-bf Leciann Ventures 530590 Annex 7-4Q-bf Leciann Ventures 536805 Annex 7-4Q-bf Leciann Ventures 537086 Annex 7-4Q-bf Leciann Ventures 539047 Annex 7-4Q-bf Leciann Ventures 541371 Annex 7-4Q-bf Leciann Ventures 542380 Annex 7-4Q-bf Leciann Ventures 542934 Annex 7-4Q-bf Leciann Ventures 544487 Annex 7-4Q-bf Leciann Ventures 550219 Annex 7-40-bf Leciann Ventures 550608 Annex 7-40-bf Domestic purchase of services supported by VAT ROSR.ICH 41 REG TIN ORs with altered DEVELOPMENT VAT breakdown without CORPORATION Annex 7-4Q-dq countersign 179.36 164.78 112.45 274.86 203.38 184.36 133.07 20 1.61 202.62 154.38 172.36 179.83 189.99 189.09 195.74 319.86 228.98 184.22 225.44 208.85 214.65 130.45 237.11 288.40 188.69 181.50 I ,890.00 CT A Case No. 1 0494 Philippine Mining Service Corporation v. Commissioner of Internal Revenue

- Page 85 of 11 9 s1nce only those purchases clearly demonstrated violations of the invoicing requirements. G. DISALLOWED INPUT TAX ON

"BIG TICKET" PURCHASES

An exhaustive examination of petitioner's supporting documents and the Amended ICPA Report shows that the input VAT disallowance of PI0,770,911.43 must be upheld since petitioner failed to account the alterations noted by respondent for the following purchases: Registered Name of Supplier OR No.

GEO-TRANSPORT AND

CONSTRUCTION INC

22054 MARMEELEC CONSTRUCTION

PHILS INC

2496 MARMEELEC CONSTRUCTION

PHILS INC

2499 MARMEELEC CONSTRUCTION

PHILS INC

2')00 Marmeelec Construction Phils, Inc.

3037 Marmeelec Construction Philippines Inc.

2817 Marmeelec Construction Philippines Inc.

2816 Difference due to overclaimed VAT Total Invoice Input Tax Amount 1, 780,679-44 16,619,674.77 4.490-90 41,915.07 6,}04.63 58,84).21 24'5,91').02 2,295,2o6.8s C)OO .OO 8,400.00 88.15 822.73 15,457·59 144,270.84 Annex BIR Findings Reference Alteration not countersigned Annex 7-2Q-cr Alteration not Annex 7-2Q- countersigned bw Alteration not countersigned; Invalid proof of payment (photocopy certified by authorized representative of issuing bank) Annex 7-3Q-l Alteration not countersigned Annex 7-3Q-l Alteration not countersigned; Invalid proof of payment (photocopy certified by authorized representative of issuing bank) Annex 7-3Q-cl Alteration not countersigned; Invalid proof of payment (photocopy certified by authorized representative Annex 7-3Q- of issuing bank) cq Alteration not countersigned; Invalid proof of payment (photocopy certified by authorized representative Annex 7-3Q- of issuing bank) cq 103 .52 TOTAL 133,;}

Philippine Mining Service Corporation v. Commissioner of Internal Revenue

Alteration not countersigned; Invalid proof of payment (photocopy certified by

GEO-TRANSPORT AND

authorized representative Annex 7-3Q-

CONSTRUCTION INC

22081 3,324,6)2.71 31,02C),C)0'5.2C) of issuing bank) db Alteration not countersigned; Invalid proof of payment (photocopy certified by

GEO-TRANSPORT AND

authorized representative Annex 7-3Q-

CONSTRUCTION INC

22085 2,Q4Q,'l'57.2'i 27,527.334·33 of issuing bank) db Alteration not countersigned; Invalid proof of payment (photocopy certified by

GEO-TRANSPORT AND

authorized representative Annex 7-4Q-

CONSTRUCTION INC

22901 2,44'!,08'5.74 22,802,133·59 of issuing bank) dv TOTAL w,no,g11.43 As to the other noted findings of respondent, We find that petitioner has sufficiently provided the required invoices or ORs that are compliant with the invoicing requirements. H. DEFERRED INPUT TAX ON

CAPITAL GOODS FROM LOCAL

PURCHASES IMPORTATION AND Respondent disallowed input VAT ofP3,200,977·32 on the ground that the same relates to purchase of capital goods exceeding PI million thus, should have been amortized and not claimed outright. ICPA Constantino traced the said alleged purchases of capital goods exceeding PI million to the following accounts of petitioner's General Ledger:

Domestic purchases Total Allowable Disallowed Annex Amount of Input Tax Current Input tax by Traced to this Account Reference Purchases Input tax BIR

CONSTRUCTION IN

Annex 7-1Q-dg P1,16o, 714.29 P139,285.71 P25,535.71 Pn3,7<;o.oo PROGRESS FURN, FIXT & OFC Annex 7-1Q-ai 65,178.57 7,821.43 1>433·93 6,387.'50 EQUIPT FURN, FIXT & OFC Annex 7-1Q-q 156,428.56 18,771.4'1 '1,441.4'\ 1'),3)0.00 EQUIPT ~ · ()

Philippine Mining Service Corporation v. Commissioner of Internal Revenue

Domestic purchases Annex Total Allowable Disallowed Reference Amount of Input Tax Current Input tax by Traced to this Account Purchases Input tax BIR FURN, FIXT & OFC Annex 7-3Q-b 77,1,-~.9~ 9,256.07 1,2~4.14 8,021.93 EQUIPT FURN, FIXT & OFC Annex 7-~Q-n 125,178·57 15,021.43 1,001.43 14,020.00 EQUIPT Annex 7-3Q- FURN, FIXT & OFC am m,6o6.2c;

13,392.75 1,562.49 11,830.26 EQUIPT Annex 7-4Q- FURN, FIXT & OFC ba 137.589.29 16,510.71 825·54 1~,483.75 EQUIPT

MACHINERY & HEAVY

Annex 7-1Q-aq 6,2<:;0,000.00 750,000.00 150,000.00 6oo,ooo.oo EQUIPT Annex 7-2Q-b 108, ~()2 . 86 13,007.14 1,517.50 11,48().64 PPE-WAREHOUSE Annex 7-2Q-d ~.4~7.4~7.84 412,492·55 49.907.27 ~62,c;8c; . 28 PPE-WAREHOUSE Annex 7-3Q-d 826,607.15 99,192.8') 8,730.00 C)0,462.8c;

PPE-WAREHOUSE Annex 7-4Q-c ~70,'i~'i · 71 44.464.29 2,223.21 4,287.7() PPE-WAREHOUSE Annex 7-1Q-d ~c;c;,267 . 86 42,632.14 7,81').89 ~4.816.2')

SMALL TOOLS & EQUIPT

Annex 7-1Q-q 73.62<;.()0 8,835·11 1,767.02 7,068.09

SMALL TOOLS & EQUIPT

BODEGA INVTY -SPARE

Annex 7-3Q-dj 82'),')89.29 99,070.71 8,255·89 90,814.82 PARTS TRANSPORTATION 2, 399,107.14 287,892.86 52,780.36 46,905.00 EQUIPMENT SUBTOTAL PI.6,480, 393.21 Pl,977,647·18 PJ18, 031.81 Pl.,4Jl,253·15 Importations Annex 8-1Q-b 4,143,158·33 497.179·00 99.435.80 397.743.20 Annex 8-3Q-b 2,028,766.67 243.452.00 20,287.67 223,164.33 PPE-Warehouse Annex 8-4Q-c 9,90~ , 'iC}l.67 1,188,431.00 39,614·37 1,148,816.63 PPE-Warehouse SUBTOTAL PI.6,07'i,t;l6.67 Pl,929,062.00 Plt;9, 337.84 PI.,769,724.16 TOTAL 32,')')'),<)0<}.88 3·906,709.18 477·369.65 3,200,977·31 Section no of the NIRC of 1997, as amended, states: SEC. no. Tax Credits. - A. Creditable Input Tax. - Provided, that the input tax on goods purchased or imported in a calendar month for use in trade or business for which deduction for depreciation is allowed under this Code shall be spread evenly over the month of acquisition and the fifty-nine (59) succeeding months if the aggregate acquisition cost for such goods, excluding the VAT component thereof, exceeds One million pesos (PI,ooo,ooo): Provided, however, That if the estimated useful life of the capital good is less than five (s) years, as used for depreciation purposes, then the input VAT shall be spread over such a shorter period: Provided, further, That the amortization of the input VAT shall only be allowed until December 31, 2021 after which taxpayers with unutilized input VAT on capital goods purchased or imported shall be allowed to apply the same as ( scheduled until fully utilized: Provided, finally, That in the case o(J!'

Philippine Mining Service Corporation v. Commissioner of Internal Revenue purchase of services, lease or use of properties, the input tax shall be creditable to the purchaser, lessee or licensee upon payment of the compensation, rental, royalty or free. 138 Section 4.110-3 of RR No. 16-2005, as amended by RR No. 13-2018, provides:

138 SEC. 4.110-3. Claims for Input Tax on Depreciable Goods. - Where a VAT-registered person purchases or imports capital goods. which are depreciable assets for income tax purposes, the aggregate acquisition cost of which (exclusive of VAT) in a calendar month exceeds One Million pesos (PI,ooo,ooo.oo), regardless of the acquisition cost of each capital good, shall be claimed as credit against output tax in the following manner:

(a) If the estimated useful life of a capital good is five (s) years or more -The input tax shall be spread evenly over a period of sixty ( 6o) months and the claim for input tax credit will commence in the calendar month when the capital good is acquired. The total input taxes on purchases or importations of this type of capital goods shall be divided by 6o and the quotient will be the amount to be claimed monthly.

(b) If the estimated useful life of a capital good is less than five

(s) years - The input tax shall be spread evenly on a monthly basis by dividing the input tax by the actual number of months comprising the estimated useful life of the capital good. The claim for input tax credit shall commence in the calendar month that the capital goods were acquired.

Where the aggregate acquisition cost (exclusive ofVAT) of the existing or finished depreciable capital goods purchased or imported during any calendar month does not exceed One million pesos (P1,ooo,ooo.oo), the total input taxes will be allowable as credit against output tax in the month of acquisition. Capital goods or properties refers to goods or properties with estimated useful life greater than one (1) year and which are treated as depreciable assets under Sec. 34(F) of the Tax Code, used directly or indirectly in the production or sale of taxable goods or services.;j' Italics in the original text, emphasis and underscoring supplied.

Philippine Mining Service Corporation v. Commissioner of Internal Revenue

The aggregate acquisition cost of depreciable assets in any calendar month refers to the total price, excluding the VAT, agreed upon for one or more assets acquired and not on the payments actually made during the calendar month. Thus, an asset acquired on installment for an acquisition cost of more than P1,ooo,ooo.oo, excluding the VAT, will be subject to the amortization of input tax despite the fact that the monthly payments/installments may not exceed P1,ooo,ooo.oo. Construction in progress (CJP) is the cost of construction work which is not yet completed. CIP is not depreciated until the asset is placed in service. Normally, upon completion, a CIP item is reclassified and the reclassified asset is capitalized and depreciated. CIP is considered, for purposes of claiming input tax, as a purchase of service, the value of which shall be determined based on the progress billings. Until such time the construction has been completed, it will not qualify as capital goods as herein defined, in which case, input tax credit on such transaction can be recognized in the month the payment was made: Provided, that an official receipt of payment has been issued based on the progress billings. In case of contract for the sale of service where only the labor will be supplied by the contractor and the materials will be purchased by the contractee from other suppliers, input tax credit on the labor contracted shall still be recognized on the month the payment was made based on a progress billings while input tax on the purchase of materials shall be recognized at the time the materials were purchased.

Once the input tax has already been claimed while the construction is still in progress, no additional input tax can be claimed upon completion of the asset when it has been reclassified as a depreciable capital asset and depreciated.

(c) The amortization of the input VAT shall only be allowed until December 31, 2021 after which taxpayers with unutilized input VAT on capital goods purchased or imported shall be allowed to apply the same as scheduled until fully utilized: Provided, That in the case of purchase of services, lease or use of properties, the input tax shall be creditable to the purchaser, lessee or licensee upon payment of the compensation, rental, royalty or fee. 139 As can be gleaned from the foregoing, if purchase/ s and/ or · importation/s of depreciable goods exceed P1 million in a month, th(:j' 139 Emphasis omitted, italics and underscoring in the original text and supplied.

Philippine Mining Service Corporation v. Commissioner of Internal Revenue related input VAT should be amortized over 60 months or its useful life, whichever is shorter.

Applying the same, respondent correctly disallowed the deferred input VAT on capital goods of P2,996,483.27, to wit:

Month of Purchase or Importation Subtotal Annex Reference Annex 7-10-q Annex 7-1Q-aq Total Amount of Purchases 6,250,000.00 4:143,158.33 10,466,784.2 Annex 7-10-dg 1,160,714.29 Input Tax [A] 497:179.00 Allowable Current Input tax Disallowed Input tax [A-B] February Annex 7-1Q-ai 65,178.57 7,821.43 1,433-93 6,387.50 Februa Annex 7-1Q- 156,428.56 18,771.43 441.4 15,330.00 Februa Annex 7-1Q-d 55,267.86 42,632.14 7,815.89 4,816.2 Februa 2,399,107.14 287,892.86 2,780.36 -140 170,283.75 Ma Annex 7-3Q-b 77:133-9 9,256.07 9,256.07 - Ma 106,988.57 | _ 106,988.57 - Subtotal 968,705.36 - June Annex 7-2Q-d 303.57 6,396.43 746.2 5,650.18 June Annex 7-2Q-d 293,900.00 35,268.00 4,114.60 1,153.40 June Annex 7-2Q-d 353,571-42 42,428.57 4,950.00 7,478.57 June Annex 7-2Q-d 143,127.14 17,175.26 2,003.78 15,171.48 June Annex 7-2Q-d 08,750.00 61,050.00 1927.50 June Annex 7-2Q-d 08,750.00 61,050.00 7,122.50 1927.50 June Annex 7-2Q-d 08,750.00 1927-50 June Annex 7-2Q-d 20,535.71 2,464.29 287.50 2,176.79 June Annex 7-2Q-d 20,535-71 2,464.29 2,179.79 June Annex 7-2Q-d __ 134,642.86 16,157.14 1,885.00 14,272.14 June Annex 7-2Q-b 108,392.86 13,007.14 1,517.50 11,489.64 June Annex 7-3Q-am 111,606.25 1,562.4 11,830.26 Subtotal 2,765, 865.52 July Annex 7-3Q-d 22,142.86 2,657.14 - July Annex 7-3Q-d 209,821.43 _ 25,178.57 = 140 2 Subtotal 231,964.29 August Annex 7-3Q-d 594,642.86 71,357: August Annex 7-3Q-dj 825,589.29 99,070.71 August Annex 8-3Q-b 2,028,766.67 243,452.00 Subtotal 448,998.82 September Annex 7-3Q-n 125,178.57 Annex 7-4Q-ba 137,589.29 16,510.71 October Annex 7-4Q-c | Subtotal __ 508,125.00 November Annex 8-4Q-c 9,903,591.67 8,255.89 20,287.67 15,021.43 16,510.71 223,164.3 79,389.86 9,614.37 379,535-71 44,464.29 44,464.29 1,188,431.00 816.6 No input VAT may be disallowed since petitioner chose not to include in its claim for refund the amount of input VAT relating to Purchases of Capital Goods Exceeding P] Million, supra at p. 43.

CT A Case No. 1 0494 Philippine Mining Service Corporation v. Commissioner of Internal Revenue

DISALLOWED VALUE-ADDED

TAX (VAT) ON IMPORTATION

DUE TO OVERCLAIM AND FAILURE TO SUBMIT

STATEMENT OF SETTLEMENT

OF DUTIES AND TAXES (SSDT)

Per ICPA Constantino's checking of the related documents of importations shows that the importation amounted to P281,39o.oo was properly supported by SSDT141 Hence, the disallowance must be reversed.

DISALLOWED INPUT VALUE-

ADDED TAX (VAT) ON

PURCHASE OF CAPITAL GOODS

WITH NO SUPPORTING DOCUMENTATION As I CPA Constantino noted, petitioner was not able to provide any document to support such purchase. Hence, respondent's disallowance of P6,4o5.oo must be upheld. Similarly, the Court is constrained to disallow the following purchases which the ICPA noted: Amount of Input Findings Annex Reference VAT Annex 7-1Q-r to Annex 7-1Q-u, Annex 7-1Q-w to Annex 7- 1Q-ag, Annex 7-2Q- q, Annex 7-2Q-s to Annex 7-2Q-ae, Annex 7-3Q-r to Annex 7-3Q-q, Annex 7-3Q-s to Annex 7-3Q-ag, Annex 7-4Q-t to Annex 7-4Q-x, Annex 7-4Q-z to Domestic purchases of goods other than capital goods with input Annex 7-4Q-ag, VAT amount ofPwo,ooo and below whose supporting documents Annex 7-4Q-ai, are not in compliance with invoicing requirements and/or with Annex 7-4Q-ak to alterations Annex 7-4Q-ao 9'5'),'318.24 Domestic purchase of goods other than capital goods supported by Annex 7-1Q-v VAT REG TIN invoices with altered/inserted Petitioner's name and Annex 7-2Q-r address without countersign and with altered VAT breakdown Annex 7-3Q-r without countersign and written on a different ink Annex 7-4Q:-y_ '360,'374·90 l,l Domestic purchase of goods other than capital goods without Annex 7-1Q-bc )60.00 v

141 Exhibit "P-39", pp. 58-59 and 67, USB.

Philippine Mining Service Corporation v. Commissioner of Internal Revenue

Page 92 of 11 9 supporting document at the time of verification Annex 7-2Q-ax Annex 7-1Q-af, Annex 7-1Q-ba, Annex 7-1Q-bb, Annex 7-2Q-t, Annex 7-2Q-at, Annex 7- 2Q-au, Annex 7-3Q- an, Annex 7-3Q-ak, Annex 7-4Q-an, Difference due to overclaimed VAT Annex 7-4Q-bf Annex 7-1Q-bd to Annex 7-1Q-bf, Annex 7-1Q-bh to Annex 7-1Q-bu, Annex 7-1Q-bw, Annex 7-1Q-by to Annex 7-1Q-ch, Annex 7-1Q-cq, Annex 7-2Q-ay to Annex 7-2Q-bm, Annex 7-2Q-bo to Annex 7-2Q-bu, Annex 7-3Q-au to Annex 7-3Q-ax, Annex 7-3Q-az to Annex 7-3Q-bo, Annex 7-3Q-bq to Annex 7-3Q-br, Annex 7-3Q-bu, Annex 7-3Q-bw to Annex 7-3Q-by, Annex 7-3Q-ca to Annex 7-3Q-ch, Annex 7-4Q-bi to Annex 7-4Q-bx, Annex 7-4Q-bz, Annex 7-4Q-ca, Annex 7-4Q-cc, Annex 7-4Q-cd, Domestic purchase of services with input VAT amount of f>wo,ooo Annex 7-4Q-cf, and below whose supporting documents are not in compliance Annex 7-4Q-cg, with invoicing requirements and/or with alterations Annex 7-4Q-ci Domestic purchase of services supported by VAT REG TIN ORs with altered/inserted petitioner's name, TIN, address, VAT Annex 7-1Q-bg breakdown without countersign, with VAT breakdown written on a Annex 7-3Q-ay different ink and with/without reason for payment indicated Domestic purchase of services supported by VAT REG TIN ORs Annex 7-1Q-bv with altered VAT breakdown without countersign, with Annex 7-4Q-by overclaimed VAT and with/without reason for payment indicated Annex 7-1Q-bx Annex 7-2Q-bn Domestic purchase of services supported by VAT REG TIN ORs Annex 7-3Q-bt without nature of payment Annex 7-4Q-cb Domestic purchase of services supported by VAT REG TIN ORs with altered VAT breakdown without countersign and written on a Annex 7-3Q-bp different ink and with/without nature of payment Domestic purchase of services supported by TIN VAT REG ORs with VAT breakdown written in a different ink and with/without Annex 7-3Q-bv reason for payment indicated Domestic purchase of services supported by photocopied VAT REG Annex 7-3Q-bz TIN ORs and with nature of payment indicated Annex 7-4Q-ce Domestic purchase of services supported by VAT REG TIN ORs with altered/inserted petitioner's name, TIN and VAT breakdown Annex 7-4Q-bm without countersign, with VAT breakdown written on a different ink and with/without reason for payment indicated c;,258.44 1,2')9,184.07 271,oocp8 428,802.66 465,645-40 1')1,9')0.12 186,11'i-10 187.583·94 ll5,o66.39 I

Philippine Mining Service Corporation v. Commissioner of Internal Revenue

Domestic purchase of services supported by VAT REG TIN billing statement with support not valid to claim for input tax and with Annex 7-4Q-ch nature of payment indicated Annex 7-1Q-br, Annex 7-1Q-bv, Annex 7-1Q-ce, Annex 7-1Q-cw, Annex 7-1Q-cz, Annex 7-1Q-de, Annex 7-2Q-ak, Annex 7-3Q-be, Annex 7-3Q-bq, Annex 7-3Q-ct, Annex 7-4Q-bt, Annex 7-4Q-by, Annex 7-4Q-bz, Annex 7-4Q-cp, Annex 7-4Q-dg, Annex 7-4Q-dj, Difference due to overclaimed VAT Annex 7-4Q-dn 130,69o.s2 16,409.29 TOTAL p 4·535·988.45 Further, in the VAT Refund Notice, respondent made additional deductions comprising of output VAT on other VATable sales of P273,884.22 and output VAT on proceeds from disposal of property of P12,ooo.oo. However, as the I CPA noted, respondent did not provide any breakdown on the said findings, hence petitioner was not able to identify them and present any supporting documents to controvert them.142 In Winebrenner & Inigo Insurance Brokers, Inc. v. Commissioner of Internal Revenue143, the Supreme Court ruled that once a taxpayer- claimant complies with the requirements for tax refund, the burden of proof shifts to the opposing party to disprove the claim by presenting contrary evidence:

142 143 It must be emphasized that once the requirements laid down by the NIRC have been met, a claimant should be considered successful in discharging its burden of proving its right to refund. Thereafter, the burden of going forward with the evidence, as distinct from the general burden of proof, shifts to the opposing party, that is, the CIR. It is then the turn of the CIR to disprove the claim by presenting contrary evidence which could include the pertinent ITRs easily obtainable from its own files . ... Yet, nothing was produced during trial to destroy the prima 1 facie right of the petitioner by counterchecking the claims with th3 See amended ICPA Report, pp. 67-68, Exhibit "P-39", USB. G.R. No. 206526, 28 January 20 15; Citations omitted, emphasis in the original text and underscoring supplied.

Philippine Mining Service Corporation v. Commissioner of Internal Revenue quarterly ITRs the CIR has on its file. To the Court, it seems that the CIR languished on its duties to ascertain the veracity of the claims and just hoped that the burden would fall on the petitioner's head once the issue reaches the courts. This mindset ignores the rule that the CIR has the equally important responsibility of contradicting petitioner's claim by presenting proof readily on hand once the burden of evidence shifts to its side. Claims for refund are civil in nature and as such, petitioner, as claimant, though having a heavy burden of showing entitlement, need only prove preponderance of evidence in order to recover excess credit in cold cash. To review, "[P]reponderance of evidence is [defined as] the weight, credit, and value of the aggregate evidence on either side and is usually considered to be synonymous with the term 'greater weight of the evidence' or 'greater weight of the credible evidence.' It is evidence which is more convincing to the court as worthy of belief than that which is offered in opposition thereto. Hence, absent evidence to support respondent's claim, We are constrained to disregard the disallowances. As for the exempt sale of'Piaoo,ooo.oo, per VAT Refund Notice, respondent made an output VAT deduction ofP156,ooo.oo, alleging that the exempt sale should be imposed with a 12% VAT. However, the said imposition is tantamount to an assessment which should have undergone under a formal assessment procedure under Section 228144 of the NIRC of 1997, as amended. In addition, taxes cannot be the subject of compensation because the government and taxpayer are not mutually creditors and debtors of each other and a claim for taxes is not such a debt, demand, contract or judgment as is allowed to be set-off. 145 Thus, We shall reverse the said imposition. Moreso over, We cannot allow the deduction of the compromise penalty of P2s,ooo.oo. In Wonder Mechanical Engineering Corporation

v. The Han. Court ofT ax Appeals, et aU46, the Supreme Court ruled that a compromise penalty cannot be imposed without an agreement or conformity of a taxpayer. In fact, the imposition of the same withoui:J' 144 145 146 SEC. 228. Protesting of Assessment. Caltex Philippines, Inc. v. The Honorable Commission on Audit, et at., G.R. No. 92585, 08 May 1992.

G.R. Nos. L-22805 & L-27858, 30 June 1975.

Philippine Mining Service Corporation v. Commissioner of Internal Revenue the conformity of the taxpayer is illegal and unauthorized.147 It is well- settled that the Court has no jurisdiction to compel a taxpayer to pay the compromise penalty because by its very nature, it implies a mutual agreement between the parties in respect to the thing or subject matter which is so compromised, and the choice of paying or not paying it distinctly belongs to the taxpayer. 148 Absent a showing that herein petitioner consented to the imposition of compromise penalty, the amount of P25,ooo.oo should not have been deducted from petitioner's refund claim.

Thus, out of petitioner's "Declared Input VAT" (or "Total Available Input VAT" for CY 2019) of P141A63,sos.78149, only P9s,963,o61.89 pertains to "Substantiated or Valid Input VAT", after deducting the Court-validated disallowances by the ICPA totalling P4s,soo,443·89, as summarized below:

Total Available Input VAT Deductions:

A. Insufficient documentations (no billing statement, OR, SI nor proof of payment) B.

Out of Period C. Unreadable document D. Document with alteration but not countersigned readable document E. Overclaimed F.

Violation of invoicing requirements pursuant to Section 113 of the NIRC of 1997, as amended G. Disallowed input tax on "Big Ticket" Purchases H. Deferred input tax on capital goods from local purchases and importation I.

Disallowed VAT on importation due to overclaim and failure to submit SSDT J.

Disallowed input VAT on purchase of capital goods with no supporting documentation Additional disallowance by the ICPA Total Deductions Total Substantiated or Valid Input VAT s5,891.22 133A77·86 45>500,443·89 fu'j.96J.06I.89.

147 Commissioner of Internal Revenue v. Lianga Bay Logging Co., Inc., et at., G.R. L-35266, 21 January 1991.

148 The Philippines International Fair, Inc. v. The Collector of Internal Revenue, et. at., G.R. Nos. L-12928 and L-12932, 31 March 1962. 149 Petitioner excluded the input VAT on Domestic Purchases of Capital Goods not exceeding Pl million amounting to P750,537.39.

CT A Case No. 1 0494 Philippine Mining Service Corporation v. Commissioner of Internal Revenue

We shall now proceed with the determination of the 2nd condition in light of the Supreme Court decision in Chevron Holdings, Inc. (Formerly Caltex Asia Limited) v. Commissioner of Internal Revenue 1so (Chevron), which provided pivotal guidelines for computing the refundable excess and unutilized input VAT attributable to zero-rated sales when the taxpayer-claimant is engaged in mixed transactions.

Fundamentally, the Supreme Court made a definitive declaration in Chevron that a VAT-registered taxpayer has two (2) options with respect to its input VAT attributable to zero-rated sales, it may:

(1) charge the same against output VAT from VA Table sales, and claim for refund or issuance of a TCC any unutilized or "excess" input VAT; or,

(2) claim the same for refund or issuance of a TCC in its entirety, viz: 150 [T]he input tax attributable to zero-rated sales may, at the option of the VAT-registered taxpayer, be: (1) charged against output tax from regular 12% VAT-able sales, and any unutilized or "excess" input tax may be claimed for refund or the issuance of tax credit certificate; or (2) claimed for refund or tax credit in its entirety. It must be stressed that the remedies of charging the input tax against the output tax and applying for a refund or tax credit are alternative and cumulative. Furthermore, the option is vested with the taxpayer-claimant. It goes without saying that the CTA, and even the Court, may not, on its own, deduct the input tax attributable to zero-rated sales from the output tax derived from the regular twelve percent (12%) VAT-able sales first and use the resultant amount as the basis in computing the allowable amount for refund. The courts cannot condition the refund of input taxes allocable to zero-rated sales on the existence of "excess" creditable input taxes, which includes the input taxes carried over from the previous periods, from the output taxes. These procedures find no basis in law and jurisprudence.

First, Section 112 (A) of the [NIRC of 1997, as amended] merely requires that the input tax claimed for refund or the issuance of tax credit certificate "has not been applied against [the] output tax[.]" Section 4.112-1 (a) of RR No. 16-2005 states that "[t]he input tax that may be subject of the claim shall exclude the portion of input tax that h~.~ been applied against the output tax." ·J· G.R. No. 2151 59, 05 July 2022.

Philippine Mining Service Corporation v. Commissioner of Internal Revenue

The law and rules are clear and need no interpretation. The taxpayer only needs to prove non-application or non-charging of the input-VAT subject of the claim. There is nothing in the law and rules that mandate the taxpayer to deduct the input tax attributable to zero-rated sales from the output tax from regular twelve percent (12%) VAT-able sales first and only the "excess" may be refunded or issued a tax credit certificate. To reiterate, these remedies accorded by law to the taxpayer are alternatives. Requiring taxpayers to prove that they did not charge the input tax claimed for refund against the output tax is one thing; requiring them to prove that they have "excess" input tax after offsetting it from output tax is another. The former is essential to the entitlement of the refund under Section 112 (A); the latter is not. The reason is that a taxpayer who enjoyed a lower (or zero) output tax payable because it deducted the input tax from zero-rated sales from the output tax cannot benefit twice by applying for the refund or tax credit of the same input tax used to reduce its output tax liability. Proof of non- charging the input tax subject to the refund or credit against the output tax is to avert double recovery . ... [B]efore the input tax from zero-rated sales may even form part of the total allowable or creditable input taxes to be charged against the output taxes and undergo the computation of "excess output or input tax" in Section 110 (B), it may already be removed from the formula once the taxpayer opted to claim the entire amount for refund.

These were echoed by Associate Justice Japar B. Dimaampao, opining that "nowhere in Section 112 (A) does it require that the taxpayer must first offset its input tax with any output tax before its claim for refund may prosper. Notably, the word "excess" does not even appear in this section. Instead, what recurs is the refundability of input tax that has not been applied against output tax or that has simply remained unused." Moreover, the crediting of input taxes, including input tax attributable to zero-rated sales, from the output tax should be discretionary to the taxpayer as it is the taxpayer who is more interested in reducing its output tax payable. In fact, the legislature put a cap on the input tax that may be deducted from the output tax to generate cash flow for the government. Therefore, to require entities engaged in zero-rated transactions to charge their input tax from zero-rated sales against their output VAT from regular twelve percent (12%) VAT-able sales would defeat the very object of the tax measure, which is to generate more income for the government. ,--

Philippine Mining Service Corporation v. Commissioner of Internal Revenue

Second, Congress referred to "any input tax" in the proviso of Section no (B), which could mean one, some, or all input tax from zero-rated sales. Had the legislature intended the charging of the input tax attributable to zero-rated sales against the output tax as a preliminary step to the refund or issuance of a tax credit certificate, it would have used the phrase "excess input tax" in the provision.

To be sure, the lawmakers had contemplated the input tax attributable to zero-rated sales as an amount that will be refunded or credited and not offset against the output tax .... If the Congress intended the crediting of input tax against the output tax as a condition precedent to the refund or issuance of a tax credit certificate, they could have stressed this during the deliberations. They did not. Instead, it was clarified that when the taxpayer is engaged in both regular and zero-rated transactions, as in Chevron Holdings' case, the ratable portion allocable to zero- rated sales is "immediately refundable" or creditable. Third, to call the refundable input tax in Section 110 (B), in relation to Section 112 (A), "excess" input tax is a misnomer since what is being applied for a refund or tax credit is the unutilized or unused input VAT from zero-rated sales. As a matter of fact, there is no "excess" input tax attributable to zero-rated sales as there is no related output tax from which the input tax may be charged against. For context, in zero-rated transactions, the tax rate is set at zero percent. Consequently, the seller charges zero output tax. However, the seller may have incurred input taxes from its purchases of goods and/or services related to its sales. The input taxes previously charged by suppliers remain unutilized or unused until charged against the output tax from the non-zero-rated sale transactions in the same quarter that the input taxes were incurred or applied for a refund or the issuance of tax credit certificate within two (2) years from the close of the taxable quarter when the related sales were made. Fourth, that the taxpayer failed to prove that it had sufficient creditable input taxes to cover or "pay" its output tax liability in a given period, hence, there is no refundable "excess" input tax, which is an issue distinct, separate, and independent from a claim for refund or issuance of tax credit certificate of unutilized input VAT attributable to zero-rated sales. For one, the taxpayer-claimant is not asking to refund the "excess" creditable input taxes from the output tax. To be sure, the "excess" input tax may only be carried over to the , succeeding periods and cannot be refunded. But, on the other~

Philippine Mining SeNice Corporation v. Commissioner of Internal Revenue hand, the taxpayer is asking to refund the unutilized or unused input tax from zero-rated sales.'5' Clearly from the foregoing, a VAT -registered taxpayer has the discretion to decide whether to charge its input VAT attributable to zero-rated sales against output VAT. In this respect, the CTA cannot impose its own methods for calculating the refund, such as compelling the crediting of input VAT against output VAT as a condition precedent to the refund or issuance of a TCC. This is especially true when the taxpayer-claimant opts to claim the input VAT attributable to zero- rated sales for a refund or issuance of a TCC in its entirety. Furthermore, regardless of which option the taxpayer-claimant chooses, the Supreme Court's ruling in Chevron clarifies that since the taxpayer-claimant is requesting a refund of unutilized or unused input VAT from zero-rated sales (as opposed to the "excess" creditable input VAT from the output VAT), this amount is inherently immediately refundable, given that there is no related output VAT to offset it against. Therefore, the CT A's proper preliminary step in determining the refundable excess and unutilized input VAT attributable to valid zero- rated sales should be computing the ratable portion of the taxpayer- claimant's input VAT allocable to zero-rated sales, assuming the input VAT cannot be directly attributed to zero-rated activities. It is only when the taxpayer-claimant chooses the first option, i.e., to charge the input VAT attributable to zero-rated sales against output VAT from VA Table sales and claim for refund or issuance of a TCC any unutilized or "excess" input VAT that the CTA may require the offsetting of such ratable portion of the taxpayer-claimant's input VAT attributable to zero-rated sales against "Output VAT Still Due" as a condition precedent to the refund or issuance of a TCC. In this case, petitioner credited its output VAT of P36,575,328.n against its "Declared Input VAT" of Pl4IA63,sos.78 and applied for refund the remaining "Excess Input VAT" of Pio4,888,177·67. Clearly, petitioner has chosen the first option. (j' 151 Supra at note 150; Citations omitted, italics in the original text, emphasis in the original text and supplied, and underscoring supplied.

CT A Case No. 1 0494 Philippine Mining Service Corporation v. Commissioner of Internal Revenue

Additionally, besides clarifying the nature of a taxpayer-claimant's claim for a refund of input VAT attributable to zero-rated sales-that the option to choose either of the two (2) remedies belongs to the taxpayer-claimant and that the method for calculating the refundable amount depends on the chosen option-in Chevron, the Supreme Court also introduced a fresh perspective on the substantiation requirement for input VAT that can be credited against output VAT. It established that delving into input tax substantiation pertains to the assessment of potential deficiency output VAT, which is not within the Court's authority in a judicial claim for refund under Section n2(A) of the NIRC of 1997, as amended, viz: [T]he substantiation of input taxes that can be credited against the output tax is an issue relevant to the assessment for potential deficiency output VAT liability. In turn, it is not for the CTA and the Court to determine and rule in a judicial claim for refund under Section 112 (A) of the [NIRC of 1997, as amended) that the taxpayer had insufficient or unsubstantiated input taxes to cover its output tax liability. This is for the BIR to determine in an administrative proceeding for assessment of deficiency taxes.

It is true, in several cases, the Court has ruled that it will not grant a refund if the taxpayer has pending tax liability to the government because "[t]o award the refund despite the existence of deficiency assessment is an absurdity and a polarity in conceptual effects" and that "to grant the refund without determination of the proper assessment and the tax due would inevitably result in a multiplicity of proceedings or suits." We explained in Commissioner of Internal Revenue v. Court of Appeals, to wit: ... If the deficiency assessment should subsequently be upheld, the Government will be forced to institute anew a proceeding for the recovery of erroneously refunded taxes which recourse must be filed within the prescriptive period of ten years after [the] discovery of the falsity, fraud[,] or omission in the false or fraudulent return involved. This would necessarily require and entail additional efforts and expenses on the part of the Government, impose a burden on a drain of government funds, and impede or delay the collection of much-needed revenue for governmental operations.

Thus, to avoid multiplicity of suits and unnecessary difficulties or expenses, it is both logically necessary and legally appropriate that the issue of the deficiency tax ~ assessment against Citytrust be resolved jointly with its claim I

Philippine Mining Service Corporation v. Commissioner of Internal Revenue for [the] tax refund, to determine once and for all in a single proceeding the true and correct amount of tax due or refundable.

But in these cases, the taxpayer's liability for deficiency taxes is related to and intertwined with the resolution of the claim for refund. Such a situation is not present here. The records do not show that Chevron Holdings is delinquent for output VAT or that it is being assessed for deficiency output tax in the first, second, third, and fourth quarters of the taxable year 2006.'52 Without qualifying as to the option chosen by the taxpayer- claimant, the Supreme Court held that it is not for the CTA, nor even the High Court, to rule on the sufficiency or substantiation of input taxes in a refund claim under Section n2(A) of the NIRC of 1997, as amended. The authority to determine and assess deficiency taxes rests with the BIR; hence, courts cannot substitute their judgment for that of the BIR (in assessing tax deficiencies) in judicial proceedings. The foregoing declaration aligns with the ruling in SMI-ED Philippines Technology, Inc. v. Commissioner of Internal Revenue153 (SMI-ED), where the Supreme Court explained that, as a rule, the CTA has no power to make an assessment, directly or indirectly, as its jurisdiction over matters such as tax collection, tax refund, and others related to the national internal revenue taxes is appellate in nature. This implies that the BIR must have had a prior determination of the taxpayer-claimant's deficiency tax liability before the Court can adjudicate the same in a judicial proceeding for a refund claim. The relevant portions of the ruling in SMI-ED are quoted below: 152 153 The term "assessment" refers to the determination of amounts due from a person obligated to make payments. In the context of national internal revenue collection, it refers the determination of the taxes due from a taxpayer under the National Internal Revenue Code ofi997· The power and duty to assess national internal revenu~ taxes are lodged with the BIR. ···!J Supra at note 150; Citations omitted, italics in the original text, emphasis and underscoring supplied. G.R. No. 175410, 12 November2014.

Philippine Mining Service Corporation v. Commissioner of Internal Revenue

Page 1 02 of 119

The Court of Tax Appeals has no power to make an assessment at the first instance. On matters such as tax collection, tax refund, and others related to the national internal revenue taxes, the Court of Tax Appeals' jurisdiction is appellate in nature.

Thus, the BIR first has to make an assessment of the taxpayer's liabilities. When the BIR makes the assessment, the taxpayer is allowed to dispute that assessment before the BIR. If the BIR issues a decision that is unfavorable to the taxpayer or if the BIR fails to act on a dispute brought by the taxpayer, the BIR's decision or inaction may be brought on appeal to the Court of Tax Appeals. The Court of Tax Appeals then acquires jurisdiction over the case. When the BIR's unfavorable decision is brought on appeal to the Court of Tax Appeals, the Court of Tax Appeals reviews the correctness of the BIR's assessment and decision. In reviewing the BIR's assessment and decision, the Court of Tax Appeals had to make its own determination of the taxpayer's tax liabilities. The Court of Tax Appeals may not make such determination before the BIR makes its assessment and before a dispute involving such assessment is brought to the Court of Tax Appeals on appeal.

As earlier established, the Court of Tax Appeals has no assessment powers. In stating that petitioner's transactions are subject to capital gains tax, however, the Court of Tax Appeals was not making an assessment. It was merely determining the proper category of tax that petitioner should have paid, in view of its claim that it erroneously imposed upon itself and paid the s% final tax imposed upon PEZA-registered enterprises. The determination of the proper category of tax that petitioner should have paid is an incidental matter necessary for the resolution of the principal issue, which is whether petitioner was entitled to a refund.

The issue of petitioner's claim for tax refund is intertwined with the issue of the proper taxes that are due from petitioner. A claim for tax refund carries the assumption that the tax returns filed were correct. If the tax return filed was not proper, the correctness of the amount paid and, therefore, the claim for refund become questionable. In that case, the court must determine if a taxpayer claiming refund of erroneously paid taxes is more properly liable for ' taxes ot.her than that paid"8" CT A Case No. 1 0494 Philippine Mining Service Corporation v. Commissioner of Internal Revenue

Any liability in excess of the refundable amount, however, may not be collected in a case involving solely the issue of the taxpayer's entitlement to refund. The question of tax deficiency is distinct and unrelated to the question of petitioner's entitlement to refund. Tax deficiencies should be subject to assessment procedures and the rules of prescription. The court cannot be expected to perform the BIR's duties whenever it fails to do so either through neglect or oversight. Neither can court processes be used as a tool to circumvent laws protecting the rights of taxpayers .'54 Indeed, since the CTA is precluded from making a judicial assessment for deficiency tax, it cannot determine and rule in a judicial claim for a refund under Section 112(A) of the NIRC of1997, as amended, that the taxpayer-claimant had insufficient or unsubstantiated input VAT to cover its output VAT liability. This pronouncement inevitably impacts the Court's formula for calculating: (1) the "Output VAT Still Due", which is the net amount of output VAT payable after deducting the ratable portion of input VAT allocable to VA Table sales; and, (2) ultimately, the "Refundable Excess and Unutilized Input VAT Attributable to Zero-Rated Sales."

The impact can be summarized as follows: what should be the proper basis for allocating input VAT-is it the "Declared Input VAT" (or the "Total Available Input VAT" for the period of claim) or the "Substantiated or Valid Input VAT" (after deducting disallowances)? z.

The apportionment of input VAT for purposes of computing the ((Output VAT Still Due" should be based on the ((Declared Input VAT." As regards the computation of "Output VAT Still Due", the 'no judicial assessment rule' necessarily prevents the Court from reducing the ratable portion of input VAT allocable to VA Table sales for failure of substantiation. Thus, instead of the "Substantiated or Valid Input VAT", , which is what the Court typically uses in apportioning input VAT based LJ· 154 Citations omitted, emphasis and underscoring supplied.

CT A Case No. 1 0494 Philippine Mining Service Corporation v. Commissioner of Internal Revenue

Page 1 04 of 119 on sales volume, it should be the "Declared Input VAT" for the period of claim.

To reiterate, as held in Chevron, "the substantiation of input taxes that can be credited against the output tax is an issue relevant to the assessment for potential deficiency output VAT liability." Given that the ratable portion of input VAT allocable to VA Table sales is credited against output VAT to arrive at "Output VAT Still Due", the Court is bound to apportion the taxpayer-claimant's declaration of"Total Available Input VAT" in the relevant VAT Return for the period of claim. Reducing this amount to only the substantiated portion would be tantamount to an indirect judicial assessment for deficiency VAT.

Recognizing the fact that the Court's longstanding practice of using the "Substantiated or Valid Input VAT", which is typically lower than the "Declared Input VAT", in apportioning input VAT for purposes of calculating the portion allocable to VA Table sales inevitably leads to an indirect assessment for deficiency VAT without prior determination from the BIR (through an assessment or any other tax collection effort), the Court must conscientiously change its approach. This is particularly relevant in refund cases where the ratable portion of input VAT allocable to VA Table sales is insufficient to cover the output VAT on VA Table sales for the period of claim or where there is an "Output VAT Still Due."

This impact is exacerbated when the amounts involved corresponding to VA Table sales are significant and the disallowed input VAT, ascertained during judicial proceedings, is substantial. To avoid the risk of reducing the amount of creditable input VAT, which unwittingly sanctions a judicial assessment for deficiency VAT-an outcome the Supreme Court sought to correct through its pronouncement in Chevron-this Court is henceforth constrained to modify the formula for computing the "Output VAT Still Due." This new formula or method of computing "Output VAT Still Due" ensures that the risk of judicially sanctioning an indirect deficiency VAT assessment is completely avoided, aligning the Court's practice with the ratio decidendi of the Supreme Court's ruling in Chevron. fj

Philippine Mining Service Corporation v. Commissioner of Internal Revenue

We shall now compute the "Output VAT Still Due" in this case using the new formula (i.e. , the apportionment of "Declared Input VAT" among the different sales transactions based on sales volume). In this case, petitioner sought the refund or issuance of a TCC of its "Excess Input VAT" for CY 2019 amounting to P104,888,177·67. This amount represents the net difference between the "Declared Input VAT" (or the "Total Available Input VAT" for CY 2019) ofP141,463,sos.78 1ss and the "Output VAT" on VA Table sales for the period of claim amounting to P36,575,J28.n.

However, considering that (1) petitioner has mixed transactions (i.e., VA Table sales, zero-rated sales and exempt sales), (2) the "Declared Input VAT" cannot be directly and entirely attributed among these three

(3) types of sales transactions, and (3) only the "Excess Input VAT" corresponding to zero-rated sales may be applied for refund or tax credit under Section n2(A) 156 of the NIRC of 1997, as amended, it is necessary to first proportionately allocate the "Declared Input VAT" among the different sales transactions based on sales volume. This allocation is required to determine the ratable portion of input VAT allocable to VA Table sales, which, in turn, will be offset against the "Output VAT" to arrive at the "Output VAT Still Due", as shown below: Table 1. Declared Input VAT Allocation Allocation Allocated Type of Sales Amount Factor Declared Transactions (c)= (a) I (b) Input VAT (e)= (c) x (d) I Zero-Rated Sales P1,278,436,846.23 8o.68% Pn4,136,o62.95 rA"-- 155 156 0 Petitioner excluded the input VAT on Domestic Purchases of Capital Goods not exceeding PI million amounting to P750,537.39. 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: Provided, however, That in the case of zero-rated sales under Section I 06(A)(2)(a)(l ),(2) and (B) and Section I 08 (B)( I) and (2), the acceptable foreign currency exchange proceeds thereof had been duly accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP): Provided, further, That where the taxpayer is engaged in zero-rated or effectively zero-rated sale and also in taxable or exempt sale of goods or properties or services, and the amount of creditable input tax due or paid cannot be directly and entirely attributed to any one of the transactions, it shall be allocated proportionately on the basis of the volume of sales. (Emphasis and underscoring supplied.)

CT A Case No. 1 0494 Philippine Mining Service Corporation v. Commissioner of Internal Revenue

Allocation Allocated Type of Sales Amount Factor Declared Transactions (c)= (a) I (b) Input VAT (e)= (c) x (d) VAT -able Sales 304,794,401.01 19.24% 27,211,381.65 Exempt Sales 1,300,000.00 o.o8% 116,061.17 Total Sales PI,ss4,sJI,24 7.24 (h) wo.oo% PI41,463,S05·78 Table 2. Computation of Output VAT Still Due Output VAT P36,575,328.11 Less: Declared Input VAT allocated to VAT-able Sales 27,211,381.65 Output VAT Still Due P9,J63,946.46 (d) From the foregoing computation, petitioner's "Output VAT Still Due" is P9,363,946.46. This amount will be offset against the ratable portion of input VAT allocable to zero-rated sales to determine the unutilized "Excess Input VAT" attributable to zero-rated sales. u.

The apportionment of input VAT for purposes of computing the "Refundable Excess and Unutilized Input VAT Attributable to Zero-Rated Sales" should also be based on the "Declared Input VAT." Regarding the computation of the "Refundable Excess and Unutilized Input VAT Attributable to Zero-Rated Sales", the next logical step would be to determine how much of the ratable portion of input VAT allocable to zero-rated sales will be offset against the "Output VAT Still Due."

This aspect of the computation raises a similar question about the proper basis for allocating input VAT. Should it be the "Declared Input VAT" (or the "Total Available Input VAT" for the period of claim), consistent with the computation of the "Output VAT Still Due," or the. "Substantiated or Valid Input VAT" (after deducting disallowances)? {J

Philippine Mining Service Corporation v. Commissioner of Internal Revenue

The Court's primary consideration for its longstanding practice of using the "Substantiated or Valid Input VAT" is that the evaluation of the merits of a refund claim should be limited to the substantiated portion of input VAT attributable to zero-rated sales. Since the "Substantiated or Valid Input VAT," like the "Declared Input VAT", is an undivided amount, the apportionment of input VAT based on sales volume should begin with this amount. On this note, the Court must, therefore, examine the rationale of both approaches to determine whether the allocation of input VAT should be based on the declared amount or the substantiated amount after adjustments.

There are two (2) contrasting interpretations of the 'no judicial assessment rule' enunciated in Chevron insofar as the ratable portion of input VAT allocable to zero-rated sales is concerned. The first interpretation treats the 'no judicial assessment rule' as applicable to both options of the taxpayer-claimant. Regardless of whether the input VAT attributable to zero-rated sales is charged against the "Output VAT Still Due," the Court should not reduce this ratable portion for any disallowances, as this would also be tantamount to an indirect judicial assessment for deficiency VAT. In other words, when determining the ratable portion of input VAT allocable to zero-rated sales that will be offset against the "Output VAT Still Due," as sanctioned under Section n2(A)157 of the NIRC of1997, as amended, the Court should not examine the substantiation of the "Declared Input VAT" (or the "Total Available Input VAT" for the period of claim). Instead, the apportionment of input VAT based on sales volume between that allocable to VA Table sales and zero-rated sales (and/or any other type of sales, as applicable) should consistently be based on the "Declared Input VAT.t 157 SEC. 112. Rejimds 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[.] (Emphasis and underscoring supplied) CT A Case No. 1 0494 Philippine Mining Service Corporation v. Commissioner of Internal Revenue The resulting amount of "Excess and Unutilized Input VAT attributable to Declared Zero-Rated Sales", in turn, may be reduced to equal the "Substantiated or Valid Input VAT" (after deducting disallowances), as only such portion corresponding to transactions "incurred or paid" may be refunded to the taxpayer-claimant pursuant to Section n2(A) 1S8 of the NIRC of1997, as amended. Correspondingly, the basis for computing the refundable amount in relation to what the taxpayer-claimant is able to establish as valid zero-rated sales would be the lower amount between the resulting "Excess and Unutilized Input VAT attributable to Declared Zero-Rated Sales" and the "Substantiated or Valid Input VAT." Notably, in the event that the lower amount is the "Substantiated or Valid Input VAT", the whole amount is deemed attributable to zero-rated sales, i.e., it will no longer be re-apportioned based on sales volume. The final step would be to compute for the "Refundable Excess and Unutilized Input VAT Attributable to Zero-Rated Sales", which is the amount corresponding only to valid zero-rated sales. The amount corresponding to the invalid zero-rated sales, although duly substantiated, is no longer refundable since under Section u2(A) 159 of the NIRC of 1997, as amended, the right to apply for refund or issuance of a TCC only covers valid zero-rated sales. Following the first interpretation, the "Output VAT Still Due" of P9,363,946.46160 shall be offset against the ratable portion of input VAT allocable to zero-rated sales using the "Declared Input VAT" amounting to Pn4,136,o62.9516\ resulting in the "Excess and Unutilized Input VAT attributable to Declared Zero-Rated Sales" of P1o4,772,n6.so. Since thej 158 159 160 161 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[.] (Emphasis and underscoring supplied) 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[.] (Emphasis and underscoring supplied) See Table 2, supra at p. I 06. See Table I, id.

Philippine Mining Service Corporation v. Commissioner of Internal Revenue

"Substantiated or Valid Input VAT" (after deducting disallowances) is only P9s,963,o61.89, the whole amount is deemed attributable to zero- rated sales. Lastly, given that petitioner was only able to establish valid zero-rated sales of P62I,)09,723.56 (or 48.6o%) of the declared zero- rated sales of P1,278A36,846.23, the "Refundable Excess and Unutilized Input VAT Attributable to Zero-Rated Sales" would be P46,6J7,253.64. Below is table summary of the computation of"Refundable Excess and Unutilized Input VAT Attributable to Zero-Rated Sales" under the first interpretation: Table 3· Refundable Excess and Unutilized Input VAT Attributable to Zero-Rated Sales (first interpretation) Declared Input VAT allocated to Declared Zero-Rated Sales Less: Output VAT Still Due Excess and Unutilized Input VAT attributable to Declared Zero-Rated Sales Less: Unsubstantiated or Invalid Input VAT Substantiated or Valid Input VAT deemed attributable to Zero-Rated Sales Divided by Declared Zero-Rated Sales for CY 2019 Multiplied by Valid Zero-Rated Sales for CY 2019 Refundable Excess and Unutilized Input VAT Attributable to Valid Zero-Rated Sales Pu4,136, o62. 95 9·363,946-46 Plo4,772,n6.5o 8,809.054·61 P9s,96J,o61.89'62 1,278.436,846.23 621,309,723·56 p 46,637 ,253·64 On the other hand, the second interpretation considers the 'no judicial assessment rule' as applicable only to the second option, where the taxpayer claims the input VAT attributable to zero-rated sales for a refund or issuance of a TCC in its entirety. The rationale for this interpretation is that the factual milieu in Chevron, where therein taxpayer-claimant chose the second option, is not on all fours with refund cases where the taxpayer-claimant chose the first option. Additionally, it can be argued that the CTA may examine the substantiation of the "Declared Input VAT" (or the "Total Available Input VAT" for the period of claim) in determining the ratable portion of input VAT allocable to zero-rated sales as an exception to the 'no judicial assessment rule,' since this function is inherent in the Court's authority to determine the merits of a refund claim anchored in Section ' n2(A) of the NIRC of 1997, as amended. !J

162 Supra at p. 95.

Philippine Mining Service Corporation v. Commissioner of Internal Revenue

Since it is well settled that "a claim for tax refund or credit is similar to a tax exemption and should be strictly construed against the taxpayer. The burden of proof to show that he [or she] is ultimately entitled to the grant of such tax refund or credit rests on the taxpayer".163 It thus stands to reason that the taxpayer-claimant must overcome the burden of substantiating the "Declared Input VAT" for the period of claim as a whole, rather than only the amount claimed for refund or the net input VAT (after deducting the output VAT from the "Declared Input VAT" for the period of claim). Failure of substantiation merits the outright denial of the unsubstantiated portion of the "Declared Input VAT" for the period of claim such that only the substantiated portion thereof or the "Substantiated or Valid Input VAT" is apportioned based on sales volume in determining the ratable portion of input VAT allocable to the taxpayer-claimant's zero-rated sales. Following the second interpretation, the "Output VAT Still Due" ofP9,J63,946.46 shall be offset against the ratable portion of input VAT allocable to valid zero-rated sales (using the "Substantiated or Valid Input VAT" of P9s,96J,o61.89). Then, as petitioner was only able to establish valid zero-rated sales of P62I,J09,723.s6 (or 48.6o%) of the declared zero-rated sales ofr1,278,436,846.23, the resulting "Excess and Unutilized Input VAT attributable to Valid Zero-Rated Sales" is P)7,628,o26.)L Ultimately, after offsetting thereto the "Output VAT Still Due" of P9,363,946.46, the "Refundable Excess and Unutilized Input VAT Attributable to Valid Zero-Rated Sales" would be P28,264,o79·85.164 Below is table summary of the computation of"Refundable Excess and Unutilized Input VAT Attributable to Zero-Rated Sales" under the .

second interpretation: ~ 163 164 Coral Bay Nickel Corporation v. Commissioner of Internal Revenue, G.R. No. 190506, 13 June 20 16, citing BPI Leasing Corporation v. The Honorable Court of Appeals, et a!., G.R. No. 127624, 18 November 2003.

This amount is lower by P 18,373,173.79 compared to the P46,637,253.64 refundable amount computed under the first interpretation.

CT A Case No. 1 0494 Philippine Mining Service Corporation v. Commissioner of Internal Revenue

Table 1. Substantiated Input VAT Allocation Allocation Allocated Type of Sales Amount Factor Substantiated Transactions (c)= (a) I (b) Input VAT (e)= (c) x (d) Zero-Rated Sales P1,278,436,846.23 8o.68% P77,425,241.32 VA Table Sales 304,794>401.01 19.24% 18,459,089·41 Exempt Sales 1,300,000.00 o.o8% 78,731.16 Total Sales PI,584,S31,247·24 (b) 10o.oo% P9s,963,o61.s9 (d) Table 2. Computation of Output VAT Still Due Output VAT P36,575,328.n Less: Declared Input VAT allocated to VAT-able Sales 27,211,381.65 Output VAT Still Due P9>363,946.46 Table 3· Refundable Excess and Unutilized Input VAT Attributable to Zero-Rated Sales (second interpretation) Substantiated or Valid Input VAT allocated to Declared Zero-Rated Sales P77>425,241. 32 Divided by Declared Zero-Rated Sales for CY 2019 1,278>436,846.23 Multiplied by Valid Zero-Rated Sales for CY 2019 621,309,723·56 Substantiated or Valid Input VAT allocated to Valid Zero-Rated Sales P37 ,628,o26. 31 Less: Output VAT Still Due 9,363,946-46 Refundable Excess and Unutilized Input VAT Attributable to Valid Zero-Rated Sales rz8,z64,079·85 In contrast to the Court's previous approach, where the "Output VAT Still Due" was first offset against the ratable portion of input VAT allocable to declared zero-rated sales before computing the refundable amount based on what petitioner was able to establish as valid zero- rated sales, resulting in "Refundable Excess and Unutilized Input VAT Attributable to Zero-Rated Sales" amounting to P28,823,684.2816s, the 165 The Court's previous computation of "Refundable Excess and Unutilized Input VAT Attributable to Zero-Rated Sales" is as follows: Substantiated or Valid Input VAT allocated to Declared Zero-Rated Sales P77,425,241 .32 Less: Output VAT Still Due* 18,116,238.70 Excess and Unutilized Input VAT attributable to Declared Zero-Rated Sales P59,309,002.62 Divided by Declared Zero-Rated Sales for CY 2019 I ,278,436,846.23 Multiplied by Valid Zero-Rated Sales for CY 2019 621 ,309,723.56 ( Refundable Excess and Unutilized Input VAT Attributable to Valid Zero-Rated Sales P28,823,684.28 ~) CT A Case No. 1 0494 Philippine Mining Service Corporation v. Commissioner of Internal Revenue foregoing computation under the second interpretation is more consistent with the Supreme Court's method of computing "Refundable Excess and Unutilized Input VAT Attributable to Zero-Rated Sales" in Chevron, citing Section 4-110-4166 of Revenue Regulations (RR) No. 16-2005167, as amended by RR No. 4-2ooi68: 166 167 168 This amount is higher by P559,604.43 compared to the P28,264,079.85 refundable amount computed under the second interpretation. *The Court's previous computation of"Output VAT Still Due" is as follows: Output VAT f'36,575,328.11 .

Less: Substantiated or Valid Input VAT allocated to VA Table Sales** 18,459,089.41 Output VAT Still Due PP18,116,238.70 SEC. 4.110-4. Apportionment of Input Tax on Mixed Transactions. - .. .

Illustration: ERA Corporation has the following sales during the month: Sale to private entities subject to 12% Sale to private entities subject to 0% Sale of exempt goods Sale to gov't. subjected to 5% final VAT Withholding Total Sales for the month f' I 00,000.00 100,000.00 100,000.00 100,000.00 j> 400,000.00 The following input taxes were passed on by its VAT suppliers: Input tax on taxable goods 12% Input tax on zero-rated sales Input tax on sale of exempt goods Input tax on sale to government Input tax on depreciable capital good not attributable to any specific activity (monthly amortization for 60 months) f' 5,000.00 3,000.00 2,000.00 4,000.00 20,000.00 B. The input tax attributable to zero-rated sales for the month shall be computed as follows: Input tax directly attributable to zero-rated sale Ratable portion of the input tax not directly attributable to any activity: Taxable sales (0%) x Amount of input tax not directly Total Sales attributable to any activity PlOO.OOO.OO 400,000.00 X ?20,000.00 Total input tax attributable to zero-rated sales for the month - f' 3,000.00 - f' 5,000.00 f' 8,000.00 Consolidated Value-Added Tax Regulations of2005. ( Amending Certain Provisions of Revenue Regulations No. 16-2005, As Amended, Otherwise~ Known as the Consolidated Value-Added Tax Regulations of2005. p

Philippine Mining Service Corporation v. Commissioner of Internal Revenue

169 Computation of refundable input tax attributable to zero- rated sales when the taxpayer- claimant is engaged in mixed transactions.

The manner of apportionment of the input tax is provided in Section 4.110-4 of RR No. 16-2oos, as amended by RR No. 4-2007[.] Thus, the refundable input VAT is computed by getting the percentage of valid zero-rated sales over total reported sales (taxable, zero-rated, and exempt) multiplied by the properly substantiated input taxes not directly attributable to any of the transactions.

Accordingly, Chevron Holdings is entitled to the refund of unutilized input tax allocable to its zero-rated sales for January 1 to December 31, 2oo6, in the total amount of P1,140,38L22, computed as follows:

First Second Third Fourth Quarter Quarter Quarter Quarter Valid zero-rated sales 5,762,ou.7o 4,669,743·23 66,091,331.71 79,131,661.58 Divided by: Total reported sales 313,164,583.06 272AOOA38.61 299,5oo,84o.65 501,152,183.16 Multiplied by: Valid input tax not directly attributable to any activity 1,276,656.14 1,650,503.65 1,86oa85.53 4,294,269.68 Input tax attributable to zero-rated sales 23,489·59 28,294·48 410634·26 678,062.88 TOTAL P1,J.40,J81.22 Claims for the tax refund, like tax exemptions, are construed strictissimi juris against the taxpayer. However, when the claim for refund has a clear legal basis and is sufficiently supported by evidence, as in the present case, then the Court shall not hesitate to ~:ant the refund.'~ Supra at note 150; Citations omitted, italics in the original text, and emphasis in the original text and supplied.

CT A Case No. 1 0494 Philippine Mining Service Corporation v. Commissioner of Internal Revenue

As expressly stated in Chevron, "refundable input VAT is computed by getting the percentage of valid zero-rated sales over total reported sales (taxable, zero-rated, and exempt) multiplied by the properly substantiated input taxes not directly attributable to any of the transactions." This means that only the valid portion of the "Substantiated or Valid Input VAT allocated to Declared Zero-Rated Sales" may be applied for refund or issuance of a TCC and creditable against the "Output VAT Still Due." It must be stressed that the taxpayer-claimant should no longer benefit from the invalid portion in terms of applying or crediting it against "Output VAT Still Due," as it should only be claimed as expense or recorded as part of an asset account subject to depreciation, whichever is applicable, as provided under Q-13 and A-13 of Revenue Memorandum Circular (RMC) No. 42-03170, to wit: 170 17 1 Q-13: Should penalty be imposed on TCC application for failure of claimant to comply with certain invoicing requirements, (e.g., sales invoices must bear the TIN of the seller)? A-13:

Failure by the supplier to comply with the invoicing requirements on the documents supporting the sale of goods and services will result to the disallowance of the claim for input tax by the purchaser-claimant. If the claim for refund/TCC is based on the existence of zero-rated sales by the taxpayer but it fails to comply with the invoicing requirements in the issuance of sales invoices (e.g. failure to indicate the TIN), its claim for tax credit/refund ofVAT on its purchases shall be denied considering that the invoice it is issuing to its customers does not depict its being a VAT- registered taxpayer whose sales are classified as zero-rated sales. Nonetheless, this treatment is without prejudice to the right of the taxpayer to charge the input taxes to the appropriate expense account or asset account subject to depreciation, whichever is applicable. Moreover, the case shall be referred by the processing office to the concerned BIR office for verification of other ~~x liabilities of the taxpayer. 17/ ClarifYing Certain Issues Raised Relative to the Processing of Claims for Value-Added Tax (VAT) Credit/Refund, Including Those Filed with the Tax and Revenue Group, One-Stop Shop Inter- Agency Tax Credit and Duty Drawback Center, Department of Finance (OSS) by Direct Exporters. Emphasis and underscoring supplied.

CT A Case No. 1 0494 Philippine Mining Service Corporation v. Commissioner of Internal Revenue

It goes without saying that deducting the "Output VAT Still Due" from the "Substantiated or Valid Input VAT allocated to Declared Zero-Rated Sales", rather than only from the "Substantiated or Valid Input VAT allocated to Valid Zero-Rated Sales" would result in a double tax benefit to the taxpayer-claimant insofar as "Substantiated or Valid Input VAT allocated to Invalid Zero-Rated Sales" is concerned, as a portion thereof may be charged against the "Output VAT Still Due" and only the remainder is claimed as expense (when the whole amount corresponding to invalid zero-rated sales should just be claimed as expense), as illustrated below: Substantiated Amount Offset Refundable Input VAT Amount/ Against Output Tax Allocated to Allocated to VAT Still Due Amount Claimed Benefit Zero-Rated Sales as Expense (a) (b) (c)= (a)- (b) Valid Zero-Rated Sales P37,628,o26.31 P 4,55o,8oo-46 P33,077,225.85 l. Credited against (48.6o%) the "Output VAT Still Due"; and,

2. Applied for refund or tax credit Invalid Zero-Rated Sales 39.797,215.01 4,8131146.oo 34.984,069.01 1. Credited against (51.40%) the "Output VAT Still Due"; and,

2. Claimed as Expense Declared Zero-Rated Sales 177,425,241.32 Pg,J63,946.46 P68,o61,294·86 Whereas, under the second interpretation, there is no such double tax benefit with respect to the "Substantiated or Valid Input VAT allocated to Invalid Zero-Rated Sales" since no amount thereof is offset against "Output VAT Still Due" or only the "Substantiated or Valid Input VAT allocated to Valid Zero-Rated Sales" is charged against the "Output VAT Still Due," as follows: Substantiated Amount Offset Refundable Amount/ Input VAT Amount Claimed as Against Output Tax Allocated to Allocated to VAT Still Due Expense Benefit Zero-Rated Sales (a) (b) (c)= (a)- (b) Valid Zero-Rated Sales P37,628,o26.31 P9.J63,946-46 P28,264,079·85 l. Credited against (48.6o%) the "Output VAT Still Due"; and,

2. Applied for refund or tax credit Invalid Zero-Rated Sales 39.797,215.01 - 39.797,215.01 l. Claimed as (51.40%) Expense ...../~ ~

Philippine Mining Service Corporation v. Commissioner of Internal Revenue

Substantiated Amount Offset Refundable Amount/ Input VAT Allocated to Allocated to Against Output Amount Claimed as Zero-Rated Sales VAT Still Due Expense (a) (b) (c)= (a)- (b) Declared Zero-Rated Sales 177>4-25,241·32 f'g,J63,946.46 P68,o61,294·86 Tax Benefit Notably, the computation of "Refundable Excess and Unutilized Input VAT Attributable to Zero-Rated Sales" under the second interpretation aims to rectify the above-illustrated double tax benefit by only granting a refund if and only if there is an excess of "Substantiated or Valid Input VAT allocated to Valid Zero-Rated Sales" after applying the "Output VAT Still Due." Having discussed the merits and logic behind the first and second interpretations of the 'no judicial assessment rule' enunciated in Chevron, as it pertains to the ratable portion of input VAT allocable to zero-rated sales, We shall now determine which interpretation shall be applied.

This Court finds it more prudent to apply the first interpretation: the 'no judicial assessment rule' is applicable to both options of the taxpayer-claimant regarding input VAT attributable to zero-rated sales.

It bears noting that in declaring that it is not for the CTA to rule on the sufficiency or substantiation of input taxes in a refund claim under Section 112(A) of the NIRC, as amended, the Supreme Court did not expressly state that this rule applies only to the second option. In other words, the Supreme Court plainly ruled that the Court is precluded from inquiring into the nature and substance of a taxpayer's input VAT from various sources for the purpose of determining the ratable portion allocable to zero- rated sales and chargeable against the "Output VAT Still Due." This ruling was made without specifying any distinctions or exceptions (such as not applying the rule with respect to the first , option as suggested by the second interpretation)./ The principle of stare decisis et non quieta movere (to adhere to precedents and not to unsettle things which are established), as

Philippine Mining Service Corporation v. Commissioner of Internal Revenue ordained in Article 8 17 2 of the Civil Code, enjoins adherence by this Court to doctrinal rules established by the Supreme Court in its final decisions173, such as the recent pronouncement in Chevron regarding the proper formula for computing the "Refundable Excess and Unutilized Input VAT Attributable to Zero-Rated Sales." This principle is based on the notion that once a question of law has been examined and decided, it should be considered settled and closed to further argument.I74 The High Court's interpretation of a statute becomes part of the law as of the date it was originally passed because such interpretation simply establishes the contemporaneous legislative intent that the interpreted law carries into effect.17s Settled is the rule that where the law does not distinguish, courts should not distinguish.176 Ubi lex non distinguit, nee nos distinguere debemos.

Accordingly, since the Supreme Court's 'no judicial assessment rule' enunciated in Chevron already forms part of the law on the matter (i.e., Section n2[A] of the NIRC, as amended, which governs claims for refund or tax credit of excess and unutilized input VAT attributable to zero-rated or effectively zero-rated sales) as of its effective date, and, as aforesaid, this pronouncement does not distinguish between a taxpayer- claimant's two (2) options with respect to input VAT attributable to zero-rated sales, this Court should not make such a distinction and is thus constrained to apply the first interpretation. Having thus established that there is a refundable excess input VAT attributable to valid zero-rated sales in the amount of P46,637,253.64177, following the pronouncements in Chevron (i.e., the 'no judicial assessment rule' regarding both the computation of"Output VAT Still Due" and the "Refundable Excess and Unutilized Input VAT Attributable to Zero-Rated Sales" under the first interpretation), and . since this amount is well within the input VAT claim ofP1o4,888,177·6~ 172 173 174 175 176 177 ART. 8. Judicial decisions applying or interpreting the laws or the Constitution shall form part of the legal system of the Philippines. See Benjamin G. Ting v. Carmen M. Velez-Ting, G.R. No. 166562, 31 March 2009. I d.

Philippine Long Distance Telephone Company v. Abigail R. Razon Alvarez, eta!., G.R. No. 179408, 05 March 2014.

Pension and Gratuity Management Center (PGMC), eta!. v. AAA, G.R. No. 201 292, 01 August 2018.

Supra at p. 109.

Philippine Mining Service Corporation v. Commissioner of Internal Revenue that remained unutilized until the same was deducted as part of the "VAT Refund/TCC Claimed" in respondent's Amended Quarterly VAT Return for the 2nd Quarter of CY 2020178, respondent has sufficiently proven its entitlement to a refund or issuance of a TCC in the said amount.

It is well established that claims for tax refund, like tax exemptions, are construed strictissimi juris against the taxpayer. However, when the claim for refund has a clear legal basis and is sufficiently supported by evidence, as in the present case, then the Court shall not hesitate to grant the refund. 179

WHEREFORE, premises considered, the instant Petition for Review filed on 17 May 2021 by petitioner Philippine Mining Service Corporation is hereby PARTIALLY GRANTED.

Accordingly, respondent Commissioner of Internal Revenue is ORDERED TO REFUND or TO ISSUE A TAX CREDIT CERTIFICATE in the amount of FORTY-SIX MILLION, SIX HUNDRED THIRTY-SEVEN THOUSAND, TWO HUNDRED FIFTY-THREE PESOS and 64/1oo (P 46,637,253.64), representing its unutilized excess input Value-Added Tax for the four (4) taxable quarters of CY 2019 which is attributable to its zero-rated sales for the same period.

SO ORDERED.

JEAN MAR

As ociate Justice

I CONCUR:

178 179 ~ LANEE S. CUI-DAVID Associate Justice Supra at note 11 9.

See Chevron Holdings, Inc. (Formerly Caltex Asia Limited) v. Commissioner of Internal Revenue, supra at note 150; citing San Roque Power Corporation v. Commissioner of Internal Revenue, G .R. No. 180345, 25 November 2009; Commissioner of Internal Revenue v. Philippine Air Lines, Inc., G.R. No. 180043, 14 July 2009.

CT A Case No. 1 0494 Philippine Mining Service Corporation v. Commissioner of Internal Revenue

ATTESTATION I attest that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court's Division. ,_ JEAN ~~-VILLENA ~s~~ciate Justice Special 2nd Division Acting Chairperson CERTIFICATION Pursuant to Section 13, Article VIII of the Constitution, and the Special 2nd Division Acting Chairperson's Attestation, it is hereby certified that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court's Division. Presiding Justice