Astrazeneca Pharmaceuticals Inc. vs. Commissioner of Internal Revenue

DECISION

CTA CASE NO. 10725 Page 2 of23 The Facts The controversy began when petitioner imported the subject medicines and paid 12o/o VAT thereon, during the period January 2020 to April2020 and on August 2020.2 Believing the subject medicines to be exempt from VAT, petitioner filed an administrative claim with respondent, through the Regular Large Taxpayer Audit Division I, on December 21, 2021, following this up with a Supplemental Letter filed on December 29, 2021.3 Respondent did not immediately act upon the administrative claim,4 prompting petitioner to file the instant Petition on February 2, 2022. Respondent filed his Answer5 thereto on April 14, 2022. The Court then conducted a full-blown trial. Petitioner presented witnesses Raul N. Rivera, Jr., on February 22, 2022,6 Amelia A. Fernandez, and the Court-appointed Independent Certified Public Accountant ("ICP A") Glenn Ian D. Villanueva, both on August 1, 2023.7 Respondent, meanwhile, presented witness Revenue Officer Jeremeh Pefiarejo on April2, 2024.8 ICPA Villanueva submitted both a Partial ICPA Report,9 on March 24, 2023, and a Final ICPA Report, 10 on April 13, 2023. The Court admitted all of petitioner's 11 and respondent's 12 respective offered evidence. Respondent filed a Memorandum 13 on July 29, 2024, while petitioner filed its Memorandum 14 on August 12, 2024. The Court thus submitted this case for decision on August 20, 2024. 15 Hence, this Decision. f Petition for Review, p. 4-6, Rollo Vol. I, pp. 11-13. Petition for Review, p. II, id. at 18. !d. It should be noted that respondent eventually issued a Denial Letter on May 13, 2022, after the instant Petition had been filed. See Letter, dated May 13, 2022, BIR Records, pp. 1-2. !d. at 452-460.

6 Minutes ofthe Hearing, held on February 22, 2023, Rollo Vol. 2, p. 644. Minutes ofthe Hearing, held on August I, 2023, Rollo Vol. 4, p. 1458. Minutes of the Hearing, held on April 2, 2024, id. at 1720. 9 Raffo Vol. 2, pp. 668-680. 10 !d. at 841-884.

11 Resolution, dated February 15,2024, Rollo Vol. 4, pp. 1716-1717. 12 Resolution, dated June 21, 2024, id. at 1738. 13 /d.atl739-1751.

14 /d.atl755-1809.

CT A CASE NO. I 0725

The Issues The sole issue for this Court's resolution is whether petitioner is entitled to a refund of the VAT it paid on its importation of the subject medicines. 16 Arguments of the Parties Petitioner's Arguments Petitioner raises the following arguments: ( 1) Petition is a VAT -registered taxpayer and a duly accredited importer; 17 (2) Beginning January 1, 2020, the subject medicines are all exempt from

VAT· 18

' (3) Despite this exemption, the government illegally collected VAT on the importation of the subject medicines; 19 ( 4) Petitioner's administrative claim complied with all relevant requirements;20 and (5) The imported subject medicines were not reported and/or claimed as either input tax credit or as deductions against petitioner's gross income.21 Respondent's Arguments Respondent counters the above with the following: (¹) The Court lacks jurisdiction over this case;22 ! 16 Pre-Trial Order, p. 5, Rollo Vol. 2, p. 630. 17 Petition for Review, p. 15, Rollo Vol. I, p. 22; Memorandum for Petitioner, pp. 27-28, Rollo Vol. 4, pp. 1781-1782.

18 Petition for Review, pp. 15-22, Rollo Vol. I, p. 22-29; Memorandum for Petitioner, pp. 28-36, Rollo Vol. 4, pp. 1782-1790. 19 Petition for Review, pp. 22-27, Rollo Vol. I, p. at 29-34; Memorandum for Petitioner, pp. 36-43, Rollo Vol.4,pp, 1790-1797.

20 Petition for Review, pp. 27-29, Rollo Vol. I, p. 34-36; Memorandum for Petitioner, pp. 43-51, Rollo Vol.4,pp. 1797-1805.

21 Petition for Review, pp. 29-30, Rollo Vol. I, p. 36-37; Memorandum for Petitioner, pp. 51-53, Rollo Vol. 4, pp. 1805-1807. 22 Answer, pp. 3-5, Rollo Vol. I, pp. 454-456; Memorandum for Respondent, pp. 3-6, Rollo Vol. 4, pp. 1741-1744.

CT A CASE NO. I 0725

(2) Refunds are strictly construed against claimants, so petitioner is not entitled to the refund sought;23 and (3) As observed by the revenue officer that handled petitioner's case, petitioner reported and claimed the imported subject medicine as input tax credit. 24 The Ruling of the Court The Court finds partial merit in the Petition for Review. This Court has jurisdiction over the present Petition for Review. Under Section 7(c) of Republic Act ("RA") No. 1125, as amended, the Court of Tax Appeals has the authority to review appeals from the CIR's inaction on claims for refunds of internal revenue taxes: SEC. 7. Jurisdiction.- The CTA shall exercise: (a) Exclusive appellate jurisdiction to review by appeal, as herein provided:

(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 provides a specific period for action, in which case the inaction shall be deemed a denial; (Italics supplied.)

Meanwhile, Section 229 of the National Internal Revenue Code of 1997, as amended ("NIRC'), lays down requirements and constraints for claiming such refunds: Section 229. Recovery of Tax Erroneously or Illegally Collected.- No suit or proceeding shall be maintained in any court for the recovery of any national internal revenue tax hereafter alleged to have been erroneously or illegally assessed or collected, or of any penalty claimed to have been collected without authority, or of any sum alleged to have been excessively or in any manner wrongfully collected, until a claim for refund or credit has f 23 Answer, pp. 5-7, Rollo Vol. I, pp. 456-458; Memorandum for Respondent, pp. 10-I I, Rollo Vol. 4, pp. I 748- I 749.

CT A CASE NO. 10725 been duly filed with the Commissioner; but such suit or proceeding may be maintained whether or not such tax, penalty, or sum has been paid under protest or duress.

In any case, no such suit or proceeding shall be filed after the expiration of two (2) years from the date o..f payment of the tax or penalty regardless of any supervening cause that may arise after payment; Provided, however, That the Commissioner may, even without a written claim therefor, refund or credit any tax, where on the face of the return upon which payment was made, such payment appears clearly to have been erroneously paid. (Italics supplied.)

From the above two provisions, this Court can take cognizance of a judicial claim for refund when an administrative claim was first filed with the CIR, whether acted upon or otherwise, provided that the judicial claim was filed within two years from the payment of the tax sought to be refunded. The VAT on the subject medicines were paid during the period from January 2020 to April2020 and on August 2020. The earliest of the Statement of Settlement of Duties and Taxes ("SSDT")/Bureau of Customs ("BOC") Official Receipts ("OR") presented by petitioner is dated January 20, 2020 (for SSDT/BOC OR No. 37575), while the latest of these is dated August 19, 2020 (for SSDT/BOC OR No. 1 053509).25 Meanwhile, the earliest Single Administrative Documents ("SAD") presented, SAD Nos. C 7180 and 7035, are both dated January 17,2020.26 Petitioner thus had until around January 17, 2022, two years from January 2020, within which to raise a judicial claim that covers all of the subject medicines. However, on January 10, 2022, the Supreme Court issued Administrative Circular No. 01-2022, which declared that "the filing periods of any and all pleadings and other court submissions falling due in the month of January 2022 in all courts [would be] EXTENDED until February 1, 2022." Note that, despite being issued on January 10, 2022, the extension applied to all submissions falling due during that month. As such, the deadline for petitioner's judicial claim was extended to February 1, 2022. Further extending this was Proclamation No. 1236, issued on October 29,2021, which declared February 1, 2022 as a Special (Non-Working) Day. The final deadline for the judicial claim thus fell on February 2, 2022. Considering that (1) this case involves a claim for refund of an internal revenue tax; (2) petitioner first filed an administrative claim with respondent, who did not act upon it; and (3) the judicial claim was timely filed, the Court clearly has jurisdiction over the Petition. f

CTA CASE NO. 10725

Despite this, respondent claims that petltwner failed to exhaust administrative remedies, preventing this Court from assuming jurisdiction over the Petition. He bases this contention on the fact that petitioner filed its administrative claim on December 21, 2021, with a follow-up letter on December 29, 2021, but filed its Petition on February 2, 2022. This gave respondent too little time to consider the administrative claim, which he consequently sees as a failure on petitioner's part to genuinely exhaust administrative remedies. The Court cannot accept this argument. In cases such as CBK Power Company Limited v. Commissioner of Internal Revenue27 ("CBK') and Commissioner of Internal Revenue v. Carrier Air Condition Philippines, Inc. 28 ("Carrier"), the Supreme Court has held that Sections 204 and 229 of the NIRC require only that ( 1) an administrative claim was filed before the judicial claim; and (2) both claims are filed within two years from that payment of the tax sought to be refunded. The amount of time between the filing of the administrative and judicial claims is not significant, however, as no such constraint is included in the aforementioned provisions: they do not provide a specific period of time for the CIR' s action on the administrative claim, unlike, say, Section 112(c) of the NIRC. A taxpayer can file its judicial claim only 10 days after its administrative claim, as in Carrier, or even only five days after its administrative claim, as in CBK, and this Court would still have jurisdiction over the judicial claim. That said, the Supreme Court, in Carrier, does acknowledge this to be a problem. It notes that the lack of a period for action can deprive the CIR of "the opportunity to act on [a] matter within their jurisdiction." Nonetheless, they ultimately conclude that the problem calls for a legislative solution, not a judicial one. This Court thus follows this interpretation, assuming jurisdiction over the Petition while once again emphasizing that the pertinent provisions may benefit from further legislative review. Petition must prove that it paid the VAT on the subject medicines and that such payment was erroneous and/or illegal.

Based on Section 229 of the NIRC, a tax can be refunded if it was erroneously and/or illegally collected. Petitioner must thus, at minimum, show that the subject VAT was actually collected (that it actually paid said VAT) and that such collection was erroneous and/or illegal. The Court finds that petitioner proved both for most of the subject medicines and is thus partially entitled to the refund it seeks. I

CTA CASE NO. 10725

Petitioner paid ?42,470,863.68 zn VAT on the subject medicines Petitioner seeks to claim P42,470,863.68, representing VAT that was allegedly illegally collected on its importation of the subject medicines. To substantiate its payment of said amount of VAT, primarily petitioner presented certified true copies ("CTC") and photocopies of the relevant SADs, as well as VAT Payment Certifications issued by the Bureau of Customs ("BOC"). The Certifications were offered to supplement the SADs, as petitioner had yet to secure CTCs of all the relevant SADs from the BOC.29 In her Amended Judicial Affidavit, witness Fernandez summarized the amounts of VAT paid, matched with the relevant SAD Number.30 The Court has reviewed this summary, and Our findings are summarized below: SAD No.

Exh.

Subject Medicine(s) VAT Paid, as VAT Paid, as No.

claimed by recorded in witness exhibit c 9255 15 F orxiga Tab 1 Omg P4,743,316.50 P4,998,456.00 Crestor Tab 1 Omg Inderal Tab 1 Omg Plendil Tab 5mg Bricantyl Tab 2.5mg c 7180 16 Rhea Rosuvastatin Tab 678,467.00 678,467.00 10mg c 7035 17 Rhea Rosuvastatin Tab 462,651.00 470,296.00 20mg c 37576 18 Xigduo XR Tab 1,733,376.00 1,733,376.00 5mg/1000mg Xigduo XR Tab 1 Omg/ 1 OOOmg c 32886 19 Xigduo XR Tab 2,537,668.00 2,537,668.00 10mg/500mg Xigduo XR Tab 1 Omg/1 OOOmg Xigduo XR Tab 5mg/1000mg Kombigl~ze 5mgll OOOmg c 11364 20 Zestril Tab 20mg 6,689,808.00 6,689,808.00 Crestor Tab 1 Omg Betaloc Tab 50mg Crestor 5mg Forxiga Tab 1 Omg c 37557 21 Xigduo XR Tab 1,798,221.00 1 '798,221.00 10mg/500mg Xigduo XR Tab 1 Omg/1 OOOmg c 19460 22 Qtem 5/lOmg 523,592.00 523,592.00 c 28322 23 Crestor 20mg 1,709,206.00 1,709,206.00 c 29166 24 Betazok 1 OOmg 677,005.00 677,005.00 29 Amended Judicial Affidavit of Ms. Amalia A. Fernandez, pp. 18-20, Rollo Vol. 4, pp. 1413-1415. 30 Amended Judicial Affidavit of Ms. Amalia A. Fernandez, pp. 21-22, id. at 1416-1417. t DECISIO\' CT A CASE NO. I 0725 Page 8 of23 c 33111 25 c 33849 26 c 20753 27 c 63134 28 c 38306 29 c 39425 30 c 39745 31 c 42348 32 c 42255 33 c 42256 34 c 42194 35 c 43431 36 c 41503 37 c 42254 38 c 55006 39 c 25982 40 c 55370 41 c 1036820 42 TOTAL Plendil Tab 1 Omg Rhea Rosuvastatin Tab 10mg Logimax Tab Forxiga Tab 10mg Plendil ER Xigduo XR Tab 10mg/500mg Xigduo XR Tab 1 Omg/1 OOOmg Qtern Tab 5/1 Omg Inderal Tablets 1 Omg Betazok 25mg Inderal Tablets 40mg Rhea Rosuvastatin Tenormin Zestril Rhea Rosuvastatin 20mg Kombiglyze 5mg/1 OOOmg Tab Betaloc 1 OOmg Bricanyl25mg Plendil Tab 5mg Nexium Tab 100mg Betaloc 50mg Zestril Forxiga Inderal Betazok Plendil Tab 2.5mg Crestor 20mg Inderal Tablets 1 Omg Plendil Tab 5mg Betaloc Tab 1 OOmg 319,228.00 319,228.00 996,991.00 996,991.00 2,059,105.00 2,059,105.00 2,668,330.00 2,668,330.00 987,019.00 987,019.00 1,023,421.00

CT A CASE NO. I 0725

Indeed, ICPA Villanueva also observed this discrepancy, but found, through his discussions with petitioner, that the underclaim can be attributed to mixed importations which included medicines that were not VAT exempt, as in the payment of VAT for the importation of Bricanyl, covered by SAD Nos. C 9255 and C 41503, and Nexium, covered by SAD No. 42254, and input VAT on the adjustment of freight for the subject importation, as in the case of the VAT paid covered by SAD No. C 7035.31 A review of the relevant records reveals this to be correct. His finding that the difference does not disturb the total claim thus aligns with Ours. The next issue to tackle is whether respondent's collection of the subject amount was erroneous and/or illegal. This can be determined by answering the specific question: were the subject medicines exempt from VAT?

Various rules were issued to govern the VAT exemption of the subject medicines.

Before determining the VAT exemption of the subject medicines, it would be helpful to review the relevant issuances released to govern said exemptions.

On January 22, 2020, RA No. 11467 amended the NIRC to include the sale and importation of prescription drugs and medicines for diabetes, high cholesterol, and hypertension in the list ofVAT exempt transactions, starting January 1, 2020.

To implement this, then-CIR Caesar R. Dulay issued Revenue Memorandum Circular ("RMC") No. 62-2020. Attached to the Circular was a list of relevant medicines that were made VAT exempt, sent by the Food and Drug Administration. Notably, the Circular said that the exemption would take effect starting January 27, 2020. Then-CIR Dulay would later issue RMC No. 81-2021 on June 6, 2021, in response to the amendments made by RA No. 11534 to the NIRC. This time, he set the effectivity date of the relevant medicines' VAT exemption to January 1, 2020, in line with the actual text of the NJRC. Finally, the list would be modified multiple times after its original issuance. Relevant to the case at bar are RMC 124-2022, issued on August 22, 2022, and FDA Advisory No. 2023-1338, issued on June 14, 2023/

CTA CASE NO. 10725

The most subject medicines are included in the list of VAT-exempt medicines.

Crucial to petitioner's case is the determination of whether the subject medicines it imported are actually listed by the FDA as VAT exempt. After comparing the medicines identified in the SADs with the list ofVAT-exempt medicine attached to RMC No. 81-2021, as well as the product information submitted in evidence by petitioner as Exhibits P-136 to P-149, the Court arrived at the following preliminary findings: SAD Name on Dosage on Generic Name and No.

SAD SAD Type c 9255 Forxiga Tab lOmg Dapagliflozin (Film- Coated Tablet)32 Crestor Tab lOmg Rosuvastatin (Film- Coated Tablet)33 Inderal Tab lOmg Propranolol Hydrochloride (Tablet)34 Plendil Tab ·5mg Felodipine (Extended- Release Tablet)35 c 7180 Rhea lOmg Rosuvastatin (Film- Rosuvastatin Coated Tablet)36 Tab c 7035 Rhea 20mg Rosuvastatin (Film- Rosuvastatin Coated Tablet) c 37576 Xigduo XR 51J1gll OOOmg Dapagliflozin [as Tab Propanediol Monohydrate] /Metformin Hydrochloride (Film- Coated Tablet)37 1 Omg/1 OOOmg Dapagliflozin [as Propanediol Monohydrate] /Metformin Hydrochloride (Film- Coated Tablet) c 32886 Xigduo XR 10mg/500mg Dapagliflozin [as Tab Propanediol Monohydrate] 32 Exhibit P-140, Folder for Petitioner's Formal Offer of Evidence, unpaginated. 33 Exhibit P-139, id., unpaginated. 34 Exhibit P-141, id., unpaginated. 35 Exhibit P-144, id., unpaginated. 36 Exhibit P-146, id., unpaginated. Name Dosage and in List Type in List Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes No No No No Yes Yes 37 Exhibit P-148, id., unpaginated. While the title ofthe product information for Xigduo XR identifies it as "Dapagliflozin/Metformin HCI", the description clarifies that (I) the medicine contains Dapagliflozin and Metformin Hydrochloride; and (2) the Dapagliflozin is included as Propanediol Monohydrate, matching the name "Dapaglitlozin (As Propanediol Monohydrate)+ Metformin Hydrochloride", as written in certain entries in the list of exempted medicines. r DECISION CT A CASE NO. I 0725 Page II of23 Kombiglyze c 11364 Zestril Tab Crestor Tab Betaloc Tab Crestor Tab Forxiga Tab c 37557 Xigduo XR Tab c 19460 Qtern c 28322 Crestor c 29166 Betazok Plendil Tab 1 Omg/1 OOOmg 5mg/1000mg 5mg/1000mg 20mg lOmg 50mg 5mg lOmg 10mg/500mg 1 Omg/1 OOOmg 5/lOmg 20mg 100mg lOmg /Metformin Hydrochloride (Film- Coated Tablet) Dapagliflozin [as No No Propanediol Monohydrate] /Metformin Hydrochloride (Film- Coated Tablet) Dapagliflozin [as No No Propanediol Monohydrate] /Metformin Hydrochloride (Film- Coated Tablet) Saxagliptin!Metformin Yes Yes Hydrochloride (Film- Coated Tablet)38 Lisinopril (Tablet)39 Yes Yes Rosuvastatin (Film- Yes Yes Coated Tablet) Metoprolol Tartrate Yes Yes (Tablet)40 Rosuvastatin (Film- Yes Yes Coated Tablet) Dapagliflozin (Film- Yes Yes Coated Tablet) Dapagliflozin [as Yes Yes Propanediol Monohydrate] /Metformin Hydrochloride (Film- Coated Tablet) Dapagliflozin [as No No Propanediol Monohydrate] /Metformin Hydrochloride (Film- Coated Tablet) Saxagliptin/Dapagliflozin Yes Yes (Film-Coated Tablet)41 Rosuvastatin (Film- Yes Yes Coated Tablet) Metoprolol Succinate No No (Controlled-Release Tablet)42 Felodipine (Extended- Yes Yes Release Tablet) 38 Exhibit P-142, id., unpaginated. While the title of the product information identifies Kombiglyze as a "Tablet", the section under the header "Pharmaceutical Form" clarifies that the medicine comes in Flim-Coated Tablets.

39 Exhibit P-149, id., unpaginated. 40 Exhibit P-136, id., unpaginated. 41 Exhibit P-145, id., unpaginated. 42 Exhibits P-137 & P-138, id., unpaginated. Note that the product information submitted by petitioner lists 23.75mg and 95mg variants but not a I OOmg variant. r

CT A CASE NO. I 0725 c 33111 Rhea Rosuvastatin Tab c 33849 Logimax Tab c 20753 Forxiga Tab Plendil ER c 63134 Xigduo XR Tab c 38306 Qtern Tab c 39425 Inderal Tablets c 39745 Betazok c 42348 Inderal Tablets c 42255 Rhea Rosuvastatin c 42256 Tenormin Zestril c 42194 Rhea Rosuvastatin c 43431 Kombiglyze Tab c 41503 Betaloc c 42254 Plendil Tab c 55006 Betaloc c 25982 Zestril Forxiga 10mg N/A 10mg N/A 10mg/500mg 1 Omg/1 OOOmg 5/lOmg 10mg 25mg 40mg N/A N/A N/A 20mg Smg/lOOOmg lOOmg 5mg 50mg N/A N/A -- Rosuvastatin (Film- Yes Yes Coated Tablet) Felodipine [/] Metoprolol No No Succinate (Extended Release Tablet)43 Dapagliflozin (Film- Yes Yes Coated Tablet) Felodipine (Extended- Yes No Release Tablet) Dapagliflozin [as Yes Yes Propanediol Monohydrate] /Metformin Hydrochloride (Film- Coated Tablet) Dapagliflozin [as No No Propanediol Monohydrate] /Metformin Hydrochloride (Film- Coated Tablet) Saxagliptin/Dapagliflozin Yes Yes (Film-Coated Tablet) Propranolol Yes Yes Hydrochloride (Tablet) Metoprolol Succinate No No (Controlled-Release Tablet) Propranolol Yes Yes Hydrochloride (Tablet) Rosuvastatin (Film- Yes No Coated Tablet) Atenolol (Film-Coated Yes No Tablet)44 LisinQPril (Tablet) Yes No Rosuvastatin (Film- Yes Yes Coated Tablet) Saxagli ptin/Metformin Yes Yes Hydrochloride (Film- Coated Tablet) Metoprolol Tartrate Yes Yes (Tablet) Felodipine (Extended- Yes Yes Release Tablet) Metoprolol Tartrate Yes Yes (Tablet) Lisinopril (Tablet) Yes No Dapagliflozin (Film- Yes No Coated Tablet) 43 Exhibit P-143, id., unpaginated. While the title ofthe product information for Logimax simply identifies it as "Felodipine Metoprolol Succinate", the description clarifies that the medicine contains Felodipine and Metoprolol Succinate. 44 Exhibit P-147, id., unpaginated. While the title of the product information identifies Tenormin as a "Tablet", the section under the header "Pharmaceutical Form" clarifies that the medicine comes in Flim-Coated Tablets.

r

CT A CASE NO. I 0725

Inderal Betazok c 55370 Plendil Tab c Crestor 1036820 Inderal Tablets Plendil Tab Betaloc Tab N/A N/A 2.5mg 20mg lOmg 5mg lOOmg Propranolol Yes Hydrochloride (Tablet) Metoprolol Succinate No (Controlled-Release Tablet) Felodipine (Extended- Yes Release Tablet) Rosuvastatin (Film- Yes Coated Tablet) Propranolol Yes Hydrochloride (Tablet) Felodipine (Extended- Yes Release Tablet) Metoprolol Tartrate Yes (Tablet) From the above, the Court observes two major discrepancies: No No Yes Yes Yes Yes Yes ( 1) Xigduo XR, Logimax, and Betazok do not have exact matches in the list; and (3) A number of SADs do not identify the dosage of the imported medicine, raising the possibility that these included dosages that are not exempt. Anent Xigduo XR, the list of exempt medicines specifies the 5mg/1 OOOmg and 1 Omg/1 OOOmg dosages of "Dapagliflozin + Metformin Hydrochloride" as being in "Tablet" form but not in "Film-Coated Tablet" form. Petitioner's product information for Xigduo XR, meanwhile, lists its 5mgll OOOmg and 1 Omg/1 OOOmg versions of the medicine as Flim-Coated Tablets, excluding them from the list. Another discrepancy can be found when exammmg the product information for Xigduo XR. Said information clarifies that the Dapagliflozin is included in the medicine as Propanediol Monohydrate. On the other hand, the entries for 5mgll OOOmg and 1 OOmg/1 OOOmg dosages of "Dapagliflozin + Metformin Hydrochloride" in the list of VAT -exempt medicines do not include the specification "As Propanediol Monohydrate". This specification is included in other items on the list, implying that the list differentiates Dapagliflozin included as Propanediol Monohydrate and Dapagliflozin that is not included as such. This further excludes the 5mg/l OOOmg and 10mg/1000mg variants of Xigduo XR from the list of VAT-exempt medicines.

However, on August 22, 2022, then-CIR Lilia Catris Guillermo issued RMC No. 124-2022. Attached thereto was a letter from then-Director General of the FDA, Dr. Samuel A. Zacate. The letter enacted a number of new inclusions to the list but also corrected the list. The first relevant correction(

CT A CASE NO. 10725 here is the change from Tablets being the allowed form of the relevant dosages of Dapagliflozin + Metformin Hydrochloride to Film-Coated Tablets. The second is the inclusion of the parenthetical phrase "As Propanediol Monohydrate". These match the variants of Xigduo XR at issue here, which have consequently been exempt from VAT since January 1, 2020. To emphasize, these changes were included as corrections to the original list and must be considered as already included in said list at the time it came into effectivity.

The same is true of Logimax. While Felodipine with Metorpolol Succinate was not included in the original list, RMC No. 124-2022 corrected the entry for "Metoprolol + Felodipine" at a dosage of 50mg/5mg to "Felodipine + Metoprolol Succinate" at a dosage of 5mg/47.5mg, which matches Logimax.

Concerning Betazok, Metoprolol Succinate is not included in the list in any form. However, and as observed by petitioner, FDA Advisory No. 2023- 1338 corrected the naming of certain items on the list from "Metoprolol" to "Metoprolol Succinate", which matches Betazok's generic name. Like Xigduo XR, it should thus be included in the list. A different problem arises for the importation of Betazok covered by SAD No. C 29166, however. There, the dosage of the imported medicine was identified as "100mg". Similarly, the Betazok covered under SAD No. C 39745 is identified as having a dosage of "25mg". These dosages of Metoprolol Succinate are not included in the list of VAT-exempt medicine attached to RMC No. 81-2021. Neither are they included in the corrections, or even the new inclusions, made by RMC No. 124-2022 or FDA Advisory 2023- 1338. The list attached to RMC No. 81-2021 does include 100mg doses of Metoprolol in Tablet, Film-Coated Tablet, and Extended-Release Tablet, but it does not include 1 OOmg doses of Metoprolol Succinate. Furthermore, the relevant corrections made by FDA Advisory 2023-1338 only cover the 23.75mg and 95mg dosages of Metoprolol Succinate in Controlled-Release Tablet form but do not mention 1 OOmg or 25mg doses. As these dosages of Metoprolol Succinate are neither in the original list nor in its corrections, the importation of Betazok covered by said SADs are not VAT exempt. This issue of uncertain dosages also affects petitioner's importation of various medicines under SAD Nos. 20753, 42255, 42256, and 25982. While these SADs identify the names of the imported medicines, they do not include the dosage of these. Without the dosage, the Court cannot confirm if the medicines imported match the specific dosages made exempt from VAT/

CTA CASE NO. 10725

Fortunately for petitioner, it submitted various commercial invoices related to the SADs. These contain more thorough information about the imported medicines, crucially including their respective dosages. We can thus fill in the blanks as so: SAD No.

Exh.

Commercial Exh. No.

Medicine Dosage No.

Invoice No.

c 33849 P-26 9799026990 P-94 Logimax 5/47.5mg c 20753 P-27 9799026769 P-96 Plendil 5mg c 42255 P-33 5600650148 P-103 Rhea 10mg c 42256 P-34 5600650143 P-104 Tenormin 50mg 5600650144 P-105 Zestril 5mg c 25982 P-40 N/A N/A Zestril N/A 5600649932 P-112 Forxiga 10mg N/A N/A Inderal N/A N/A N/A Betazok N/A Reference to the commercial invoices gave this Court the dosages of most the medicines at issue. We must note SAD No. C 25982, however. It identified its corresponding invoices as invoice nos. 5600649932, 560064993, and 9799028230. Commercial invoice no. 5600649932 showed that the imported Forxiga came in 1 Omg and is thus unproblematic. Meanwhile, petitioner did not submit any commercial invoice with the specific number 560064993. We thus cannot use it to verify the dosages of the imported medicines.

This might be assumed to be a typographical error. The other two commercial invoice numbers have ten digits, after all, whereas 560064993 only has nine. Assuming arguendo that this is the case, the Court still has no indication of whether this final digit was supposed to be 0, 1, 3, etc. It could refer to commercial invoice no. 5600649931, which covers 1 Omg Zestril tablets, but it could also refer to commercial invoice no. 5600649933 or 5600649934, which cover two different dosages of lnderal tablets. Without any certainty on the matter, the Court cannot use the submitted commercial invoices to verify the dosages of the subject Zestril, lnderal, or Betazok. Finally, commercial invoice no. 9799028230 was submitted by petitioner. However, it covers a medicine called "Seloken Zok", which was not mentioned in SAD No. C 25982. The product information for Zestril, F orxiga, Inderal, and Betazok do not mention this as an alternate name for said medicines either. We thus cannot use this commercial invoice to determine the unknown dosages. Y

CTA CASE NO. 10725

Considering that SAD No. C 25982 does not include a break down of the VAT imposed and how this was distributed among the subject medicines, the Court shall disallow the entire VAT charged in the SAD. The same applies to SAD No. C 29166, which included Betazok in a non-exempt dosage. From the above, We can thus arrive at this final list of matches: SAD Name on Dosage on Generic Name and Name Dosage No.

SAD SAD or Type & in List Commercial Type Invoice in List c 9255 Forxiga Tab lOmg Dapagliflozin (Film- Yes Yes Coated Tablet) Crestor Tab lOmg Rosuvastatin (Film- Yes Yes Coated Tablet) Inderal Tab 10mg Propranolol Yes Yes Hydrochloride (Tablet) Plendil Tab 5mg Felodipine (Extended- Yes Yes Release Tablet) c 7180 Rhea lOmg Rosuvastatin (Film- Yes Yes Rosuvastatin Coated Tablet) Tab c 7035 Rhea 20mg Rosuvastatin (Film- Yes Yes Rosuvastatin Coated Tablet) c 37576 Xigduo XR 5mg/1000mg Dapagliflozin [as Yes Yes Tab Propanediol Monohydrate] /Metformin Hydrochloride (Film- Coated Tablet) 1 Omg/1 OOOmg Dapagliflozin [as Yes Yes Propanediol Monohydrate] /Metformin Hydrochloride (Film- Coated Tablet) c 32886 Xigduo XR 10mg/500mg Dapagliflozin [as Yes Yes Tab Propanediol Monohydrate] /Metformin Hydrochloride (Film- Coated Tablet) 1 Omg/1 OOOmg Dapagliflozin [as Yes Yes Propanediol Monohydrate] /Metformin Hydrochloride (Film- Coated Tablet) 5mg/1000mg Dapagliflozin [as Yes Yes Propanediol Monohydrate] /Metformin Hydrochloride (Film- Coated Tablet) !

CTA CASE NO. 10725

Kombiglyze c 11364 Zestril Tab Crestor Tab Betaloc Tab Crestor Tab Forxiga Tab c 37557 Xigduo XR Tab c 19460 Qtern c 28322 Crestor c 29166 Betazok Plendil Tab c 33111 Rhea Rosuvastatin Tab c 33849 Logimax Tab c 20753 Forxiga Tab Plendil ER c 63134 Xigduo XR Tab 5mg/1000mg 20mg lOmg 50mg 5mg lOmg 10mg/500mg 1 Omg/1 OOOmg 5/lOmg 20mg lOOmg lOmg lOmg 5/47.5mg lOmg 5mg 10mg/500mg 1 Omg/1 OOOmg Saxagli ptin/Metformin Yes Yes Hydrochloride (Film- Coated Tablet) Lisinopril (Tablet) Yes Yes Rosuvastatin (Film- Yes Yes Coated Tablet) Metoprolol Tartrate Yes Yes (Tablet) Rosuvastatin (Film- Yes Yes Coated Tablet) Dapagliflozin (Film- Yes Yes Coated Tablet) Dapagliflozin [as Yes Yes Propanediol Monohydrate] /Metformin Hydrochloride (Film- Coated Tablet) Dapagliflozin [as Yes Yes Propanediol Monohydrate] /Metformin Hydrochloride (Film- Coated Tablet) Saxagliptin/Dapagliflozi Yes Yes n (Film-Coated Tablet) Rosuvastatin (Film- Yes Yes Coated Tablet) Metoprolol Succinate Yes No (Controlled-Release Tablet) Felodipine (Extended- Yes Yes Release Tablet) Rosuvastatin (Film- Yes Yes Coated Tablet) Felodipine [/] Yes Yes Metoprolol Succinate (Extended Release Tablet) Dapagliflozin (Film- Yes Yes Coated Tablet) Felodipine (Extended- Yes Yes Release Tablet) Dapagliflozin [as Yes Yes Propanediol Monohydrate] /Metformin Hydrochloride (Film- Coated Tablet) Dapagliflozin [as Yes Yes Propanediol Monohydrate] /Metformin Hydrochloride (Film- Coated Tablet) !

CTA CASE NO. 10725 c 38306 Qtern Tab c 39425 Inderal Tablets c 39745 Betazok c 42348 Inderal Tablets c 42255 Rhea Rosuvastatin c 42256 Tenormin Zestril c 42194 Rhea Rosuvastatin c 43431 Kombiglyze Tab c 41503 Betaloc c 42254 Plendil Tab c 55006 Betaloc c 25982 Zestril Forxiga lnderal Betazok c 55370 Plendil Tab c Crestor 1036820 Inderal Tablets Plendil Tab Betaloc Tab 5/lOmg 10mg 25mg 40mg lOmg 50mg 5mg 20mg 5mg/1000mg 100mg 5mg 50mg N/A lOmg N/A N/A 2.5mg 20mg lOmg Smg lOOmg Saxagliptin/Dapagliflozi Yes Yes n (Film-Coated Tablet) Propranolol Yes Yes Hydrochloride (Tablet) Metoprolol Succinate Yes No (Controlled-Release Tablet) Propranolol Yes Yes Hydrochloride (Tablet) Rosuvastatin (Film- Yes Yes Coated Tablet) Atenolol (Film-Coated Yes Yes Tablet) Lisinopril (Tablet) Yes Yes Rosuvastatin (Film- Yes Yes Coated Tablet) Saxagliptin/Metformin Yes Yes Hydrochloride (Film- Coated Tablet) Metoprolol Tartrate Yes Yes (Tablet) Felodipine (Extended- Yes Yes Release Tablet) Metoprolol Tartrate Yes Yes (Tablet) Lisinopril (Tablet) Yes No Dapagliflozin (Film- Yes Yes Coated Tablet) Propranolol Yes No Hydrochloride (Tablet) Metoprolol Succinate No No (Controlled-Release Tablet) Felodipine (Extended- Yes Yes Release Tablet) Rosuvastatin (Film- Yes Yes Coated Tablet) Propranolol Yes Yes Hydrochloride (Tablet) Felodipine (Extended- Yes Yes Release Tablet) Metoprolol Tartrate Yes Yes (Tablet) This leaves us with the following importations that petitioner failed to fully prove was VAT -exempt: SAD No.

Medicine(s) Reason for Disallowance c 29166 Betazok 1 OOmg not exempt c 39745 Betazok 25mg not exempt c 25982 Zestril, Forxiga, Inderal, Uncertain dosages and Betazok !

CT A CASE NO. I 0725

The Court now turns to the question of whether the subject medicines were exempt from VAT when they were imported. The VAT exemptions were in effect when the exempt medicines were imported.

As discussed above, there was originally uncertainty regarding the effectivity date of the relevant VAT exemptions. Former CIR Dulay had set this to January 27, 2020, to recall. Considering, however, that (1) the NIRC set the date to January 1, 2020; and (2) then-CIR Dulay himself later conformed to the NIRC's date when he issued RMC No. 81-2021, the Court agrees with petitioner that the exemptions came into effect starting January 1, 2020. With this in mind, petitioner must prove that it paid VAT on the subject medicines on or after January 1, 2020. A review of the SADs reveals that the earliest relevant VAT payment was made on January 17, 2020, the recorded date of both SAD Nos. C 7180 and 7035, as discussed earlier. As such, all VAT payments were made when the exemptions were already in effect. To reiterate, this applies to Xigduo XR and Logimax as well. The relevant variants of these medicines were included as corrections to the original list. As such, they must be considered as having already been included when the original list came into effect. 45 Petitioner did not claim the VAT paid on the subject medicines as input VAT credit.

While the Court has established that most of the subject medicines were, indeed, exempt from VAT, respondent raises a final roadblock to the sought refund. According to him, petitioner reported and claimed the VAT as input tax credits. This bars petitioner from claiming a refund of the VAT, under Revenue Regulations ("RR") No. 18-2020. Petitioner is consequently not entitled to the refund. Reviewing the records, respondent's argument is based on the Memorandum,46 issued by the handling revenue officer on April 28, 2022. Said officer found that petitioner did, in fact, report and claim and the subject VAT as input tax credits. He also found that petitioner was attempting to use RMC No. 99-2021, which allowed taxpayers to reflect relevant importations! 45 This technically also applies to Betazok, but it seems the Betazok relevant to this claim came in dosages not included in the list of VAT-exempt medicines, as discussed.

CTA CASE NO. 10725 as "Purchases Not Qualified for Input Tax", to evade the aforementioned requirement of RR No. 18-2020, despite said RMC not having been in effect when petitioner amended its declarations and returns. This reasoning, however, is mistaken. The Court first notes that in petitioner's December 21, 2021 administrative claim, petitioner argues against the application of RMC No. 99-2021 to its case, noting that the use of the word "may" renders the suggestion there as optional and that it should not be retroactively applied to its refund application.47 Furthermore, in the same administrative claim, petitioner showed that in its returns for the 1st and 3rd Quarter of Calendar Year 2020 and for the months of April and May 2020, it deducted its "Input Tax Allocable to Exempt Sales" from its available input tax for "Importation of Goods Other than Capital Goods" .48 This was further corroborated by ICPA Villanueva, who found that petitioner did, in fact, refrain from reporting and claiming the subject VAT as input tax credit by treating the same as a reduction to its total available input VAT.49 Upon review ofthe records, the Court adopts the findings ofthe ICPA. Petitioner proved that it complied with the requirement at issue in RR No. 18- 2020 and did not report and claim the subject VAT as input tax credit. The subject VAT was illegally collected; petitioner is partially entitled to the r~fund sought. To review, the Court has determined the following: 1) Petitioner exhausted administrative remedies as much as required by law and jurisprudence; 2) Petitioner paid the claimed VAT on the subject medicines; 3) Most subject medicines are included in the list of VAT- exempt medicines;

4) The applicable subject medicines were already VAT- exempt when petitioner paid VAT on their importation; and}' 47 Letter, dated December 21, 2021, pp. 9-12, id. at 59-62. 48 Letter, dated December 21, 2021, pp. 6-9, id. at 56-59. 49 Final !CPA Rep01i, p. 14-15, Rollo Vol. 2, pp. 855-856.

DECISION CT A CASE NO. I 0725 Page 2 I of23 5) Petitioner did not report and claim the VAT as input tax credits.

By (3) and ( 4 ), petitioner has proven that the collection of most of the subject VAT was illegal. As the subject medicines were exempt from VAT, petitioner should not have had to pay VAT on their importation. Considering this with (1 ), (2), and (5), petitioner has sufficiently proven that it is partially entitled to the refund sought. The disallowed amounts are the VAT paid covered by SAD Nos. C 29166 and C 39745, amounting to P677,005.00 and P85,700.00, respectively, as the specific 25mg and 1 OOmg doses of the imported Betazok are not exempt, and SAD No. 25982, amounting to P4,556,103.00, as the dosages of the imported Zestril, Inderal, and Betazok are uncertain, for a total disallowed amount ofP5,318,808.00. We summarize the final refundable amount below: SAD No.

Subject Medicine(s) VAT Claimed Amount Allowed c 9255 Forxiga Tab 1 Omg P4,743,316.50 P4,743,316.50 Crestor Tab 10mg Inderal Tab 1 Omg Plendil Tab 5mg BricantyJ Tab 2.5mg c 7180 Rhea Rosuvastatin Tab 1 Omg 678,467.00 678,467.00 c 7035 Rhea Rosuvastatin Tab 20mg 462,651.00 462,651.00 c 37576 Xigduo XR Tab 5mg/1 OOOmg 1,733,376.00 1,733,376.00 Xigduo XR Tab 1 Omg/1 OOOmg c 32886 Xigduo XR Tab 1 Omg/500mg 2,537,668.00 2,537,668.00 Xigduo XR Tab 1 Omg/ 1 OOOmg Xigduo XR Tab 5mgll OOOmg Kombiglyze Smg/1 OOOmg c 11364 Zestril Tab 20mg 6,689,808.00 6,689,808.00 Crestor Tab 10mg Betaloc Tab 50mg Crestor 5mg F orxiga Tab 1 Omg c 37557 Xigduo XR Tab 1 Omg/500mg 1,798,221.00 1,798,221.00 Xigduo XR Tab 1 Omg/ 1 OOOmg c 19460 Qtern 5/lOmg 523,592.00 523,592.00 c 28322 Crestor 20mg 1,709,206.00 1,709,206.00 c 29166 Betazok 1 OOmg 677,005.00 0.00 (Betazok Plendil Tab 1 Omg dosage not exempt) c 33111 Rhea Rosuvastatin Tab 1 Omg 319,228.00 319,228.00 c 33849 Logimax Tab 996,991.00 996,991.00 c 20753 Forxiga Tab lOmg 2,059,105.00 2,059,105.00 Plendil ER 1

CT A CASE NO. I 0725 c 63134 Xigduo XR Tab 1 Omg/500mg Xigduo XR Tab , 1 Omg/1 OOOmg c 38306 Qtern Tab 511 Omg c 39425 Inderal Tablets 1 Omg c 39745 Betazok 25mg c 42348 Inderal Tablets 40mg c 42255 Rhea Rosuvastatin c 42256 Tenormin Zestril c 42194 Rhea Rosuvastatin 20mg c 43431 Kombiglyze 5mg/1 OOOmg Tab c 41503 Betaloc 1 OOmg Bricanyl25mg c 42254 Plendil Tab 5mg Nexium Tab 100mg c 55006 Betaloc 50mg c 25982 Zestril Forxiga Inderal Betazok c 55370 Plendil Tab 2.5mg c 1036820 Crestor 20mg Inderal Tablets 10mg Plendil Tab 5mg Betaloc Tab 1 OOmg TOTAL:

2,668,330.00 2,668,330.00 987,019.00 987,019.00 1,023,421.00 1,023,421.00 85,700.00 0.00 (Dosage not exempt) 468,110.00 468,110.00 339,988.00 339,988.00 787,492.00 787,492.00 264,185.00 264,185.00 146,162.00 146,162.00 106,951.42 106,951.42 576,016.95 576,016.95 749,839.00 749,839.00 4,556,103.00 0.00 (Uncertain dosages) 336,502.00 336,502.00 4,446,409.81 4,446,409.81 P42,4 70,863.68 P37,152,055.68 ACCORDINGLY, the instant Petition for Review, filed on February 2, 2022, is hereby PARTIALLY GRANTED. Respondent is ORDERED to refund or issue a tax credit certificate to petitioner in the amount of P37 ,152,055.68, representing the illegally collected VAT on petitioner's importation of the subject medicines.

WE CONCUR:

ON LEAVE

MA. BELEN M. RINGPIS-LIBAN Associate Justice ~#'~~ CORA£"ON G. FERRER-:-FLJ}RES Associate Justice CT A CASE NO. I 0725 ATTESTATION I attest that the conclusion in the above Decision were reached in consultation before the case was assign to t writer of the opinion of the Court's Division.

cia Justice Acting Chairperson CERTIFICATION Pursuant to Article VIII, Section 13 of the Constitution and the Division 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 ofthe opinion of the Court. ----...L Presiding Justice