Toledo Power Company vs. Commissioner of Internal Revenue

DECISION

CASANOVA,J.:

These consolidated Petitions for Review¹ pray for the refund of the amount of P6,126,105.97, P15,461,554.31, P10,540,887.95, and P49,064,418.84, allegedly representing unutilized value-added tax (VAT) input taxes for the Pt, 2nd, 3rd, and 4th quarters of taxable year (TY) 2010, respectively.

Petitioner is a partnership between GBH Cebu Ltd. Duration Co. and ARB Power Ventures, Inc., 2 which is duly organized and existing under Philippine laws with principal office located at Sangi, Toledo City, Cebu.3 It is a registered taxpayer under Certificate of Registration No. 2RC0000074406 dated January 1, 1997 with Taxpayer's Identification Number (TIN) 003-883-626-0004 and, likewise, registered in the.--

Energy Regulatory Commission as an entity with authority to operate its generation facilities.5 It is represented by its counsel Du-Baladad & Associates with office address at the 20th Floor, Chatham House Building, Rufino corner Valero Streets, Salcedo Village, Makati City. 6 Respondent is the duly appointed Commissioner of Internal Revenue who has the duty and power, among others, to act on and approve claims of refund as provided by law, with business office at Bureau of Internal Revenue (BIR) National Office Building, Diliman, Quezon City. 7 On April 24, 2002, ARB Power Ventures, Inc. and CMS Generation Cebu Limited Duration Company amended their Agreement of General Partnership for the purpose of, among others, acquiring, owning, rehabilitating, maintaining and operating the Sangi coal-fired and oil- fired electrical generation facility located in Sangi, Toledo City, Cebu, Philippines and the Carmen diesel fueled electric generation facility located in Barangay Don Andres Soriano, Toledo City, Cebu, Philippines.8 Petitioner's 1st, 2nd, 3rd, and 4th Quarterly VAT Returns for TY 2010 were filed on April 23, 2010, July 23, 2010, October 26, 2010, and January 25, 2011, respectively.9 Then, petitioner amended its 1st and 2nd Quarterly VAT Returns on July 23, 2010, while its 3rd and 4th Quarterly VAT Returns were amended on March 15, 2011. 10 Petitioner filed its administrative claims for refund of its unutilized input VAT on November 29, 2011, 11 March 5, 2012,12 May 30, 2012,13 and August 23, 201214 for the 1st, 2nd, 3rd, and 4th quarters of TY 2010, respectively.

Due to the inaction of respondent, petitioner filed these Petitions for Review docketed as CTA Case Nos. 8450, 8512, 8547, and 8596 on March 30, 2012, July 6, 2012, September 28, 2012, and December 28, 2012, respectively ..p__

In the Answer15 filed on May 11, 2012 for CTA Case No. 8450, respondent interposed the following special and affirmative defenses: "SPECIAL AND AFFIRMATIVE DEFENSES 7.

She reiterates and re-pleads the preceding paragraphs of this Answer as part of her Special and Affirmative Defenses.

8.

To support its claim, it is imperative for petitioner to prove the following, viz.

a. The registration requirements of a value- added taxpayer in compliance with section 6

(a) and (b) of Revenue Regulations No. 6-97 in relation to Section 4.107-1 (a) of Revenue Regulations No. 7-95, and Section 236 of the Tax Code, as amended;

b. The invoicing and accounting requirements for VAT-registered persons, as well as the filing and payment of VAT in compliance with the provisions of Section 113 and 114 of the Tax Code, as amended;

c. Proof of compliance with the prescribed checklist of requirements to be submitted involving claims for VAT refund pursuant to Revenue Memorandum Order No.

53-98, otherwise there would be no sufficient compliance with the filing of an administrative claim for refund which is a condition sine qua non prior to the filing of a judicial claim in accordance with Section 112 of the Tax Code, as amended.

This

requires the submission of complete documents in support of the application filed with the Bureau of Internal Revenue before the 120-day audit period shall apply, and before the taxpayer could avail of th~

judicial remedies as provided for in the law. Hence, petitioner's failure to submit proof of compliance with the above-stated requirements warrants immediate dismissal of petitioner's petition for review;

d. That the input taxes of P6,126,105.97 allegedly paid by petitioner on its purchases of goods and services for the 1st quarter of 2010 were attributable to its zero-rated sales and such have not been applied against any output tax and were not carried over to the succeeding taxable quarter or quarters;

e. That petitioner's administrative and judicial claims for tax credit or refund of the unutilized input tax (VAT) were filed within the periods provided in Sections 112 (A) and (D) of the Tax Code, as amended;

f. That petitioner's domestic purchases of goods and services were made in the course of its trade or business, properly supported by VAT invoices and/or official receipts and other documents, such as subsidiary purchase Journal showing that it actually paid VAT in accordance with Sections 110 (A) (²) and 113 of the Tax Code, as amended, and pursuant to Section 4.104-5 (a) and (b) of Revenue Regulations No. 7-95 (Re: Substantiation of Claims for Input Tax Credits); g.

The requirements as enumerated under Section 4.104-5 of Revenue Regulations No. 7-

95. (Re: Substantiation of Claims for Input Tax Credits).

9.

Petitioner must prove that the aggregate amount of P6,126,105.97 allegedly representing excess and unutilized input VAT for the 1st quarter of 2010 is properly documented.

10.

As petitioner states in its petition before this Honorable Court, the subject of its claim for refund are,...._ allegedly excess and unutilized input VAT on its purchases of goods and services covering the 1st quarter of 2010. 11.

The instant petition involving petitioner's claim for refund in the amount of Six Million, One Hundred Twenty Six Thousand, One Hundred Five and 97/100 (P6, 126,105. 97) allegedly paid and incurred for the 1st quarter of taxable year 2010 is not warranted for lack of jurisdiction as petitioner failed to exhaust all administrative remedies before elevating this case to the Honorable Court.

12.

Unmistakably, Section 1 (j) of Rule 16 of the 1999 Rules of Civil Procedure provides that:

'MOTION TO DISMISS'

Section 1. Grounds. -Within the time for but before filing the answer to the complaint or pleading asserting a claim, a motion to dismiss may be made on any of the following grounds:

XXX

(j) That a condition precedent for filing the claim has not be complied with.' 13.

Corollary thereto, Section 112 (D) [now Section 112(c) of the Tax Code of 1997] provides as follows, to wit 'SEC. 112. Refunds or Tax Credits of Input Tax.-

X

X

X

(D) Period Within Which Refund or Tax

Credit of Input Taxes Shall be Made. - In proper cases, the Commissioner shall grant a refund or issue the tax credit certificate for creditable input taxes within one hundred twenty (120) days from the date of submission of complete documents i~ support of the application filed in accordance with Subsections (A) and (B) hereof.

In case of full or partial denial of the claim for tax refund or tax credit, or the failure on the part of the Commissioner to act on the application within the period prescribed above, the taxpayer affected may, within 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 deicison or the unacted claim with the Court of Tax Appeals.' (Emphasis supplied) Pursuant to the aforequoted provision of law, the Commissioner of Internal Revenue ('CIR', for brevity) has 120 days from the submission of the complete supporting documents to decide the claim for refund. It logically follows that a taxpayer must first submit the complete supporting documents before the 120-day period should commence. The CIR cannot decide the claim for refund without the complete supporting documents. 14.

The implementing rule for these complete documents required by law is RMO No. 53-98. Annex B-1 of said RMO lists all the required documents as follows:

VALUE-ADDED TAX

(For audit involving Claim for Refund/TCC) A.) Requirements from Taxpayer I. Requirements mention in Annex B II. Additional General Requirements 1) 3 copies of 'Application for VAT Credit/Refund'.

2) Summary List of Local Purchases

specifying the followingi.z_

XXX

XXX

XXX

3) Photocopies of VAT purchase invoices for purchase of goods and official receipts for purchase of services. (The invoices/official receipts must be arranged according to the summary list) 4) Summary of importations made during the period with the following details:

XXX

XXX

XXX

5) Photocopies of invoices, import entry documents, official receipts or confirmation receipts evidencing payment of VAT. (Segregate documents paid by cash from those paid by tax debit memo) 6) VAT Returns filed for the quarter showing that the amount applied for refu nd/TCC has been reflected as a deduction from the total available input tax, as well as VAT Return for the succeeding quarter.

7) Certification of taxpayer showing the amount of Zero-Rated Sales, Taxable Sales and Exempt Sales.

8) A statement showing the amount and description of the sale of goods and services, name of persons or entities (except in case of exports) to whom the goods or services were sold and date of the transaction, where the applicant's zero-rated transactions are regulated by certain government agency.

9) Articles of Incorporation- for first time filers

10) Sales Contract/Agreemen~

11) BOI Certificate of Registration

12) BIR Certificate of. Registration 13) Certification from BOI, DOF, BOC, EPZA, etc., that subject taxpayer has not filed similar claim for refund covering the same period.

14)

Sworn

statement that ending inventory as of the close of the period covered by the Claim has been used directly or indirectly in the products subsequently exported as supported by export documents, if the applicant is 1 00°/o exporter.

15) Documents of liquidation evidencing the actual utilization of the raw materials in the manufacture of goods at least 70°/o of which has been actually exported, if the applicant is an indirect exporter.

16) Copy of the ITR and Certified

Financial Statements, if applicable. 17) Beginning and ending inventory of raw materials, work-in-process, finished goods, supplies and materials.

Additional Specific Requirements

1) For

Zero-Rated

Sales

of

Services

(contractors, mining, etc) a.

Authenticated

copy /ies of the contract/s showing the person/s for whom the services were rendered, amount of consideration, description of the services and documents evidencing actual payments.

b. Photocopies of official receipts and billings together with a summary of the date of billing, name of principal, official,..- receipt number, date of receipt, amount in foreign currency and the corresponding value thereof, date of remittance, name of bank, bank credit memo number and amount remitted in pesos.

c. Bank credit memoranda and certificate from the BSP with information similar to 1-c (export sales) As stated above, the first documentary requirement is that provided in Annex B of the same RMO. Annex B provides for more requirements as follows:

VALUE-ADDED TAX

A)

Requirements from Taxpayers 1) Proof of claimed tax credits 2)

Proof

of

Tax

Compliance

Certificates applied 3) Xerox copy of used Tax Credit Certificate (TCC) with annotation of issued TDM at the back, if applicable 4) Proof of payment of deficiency tax, if any a) current year I period b) previous year I period 5) Certification of the appropriate government agency as to taxpayer's entitlement to tax incentives, if applicable 6) Xerox copies of the Official Receipts evidencing

VAT

payment on imported purchases, if applicable 7) Proof of exemption under special law, if applicable 8) Certification of the appropriate regulatory agency as to the exempt or zero- rated sales of the taxpayer under its regulatory supervision, if applicable 9) Certificate of Registration issued by the appropriate regulatory agency, togethe~ with the conditions attached to such registration, if applicable 10)

Proof of 'Approval for Effective

Zero-Rating of Sales', if applicable 11)

Sample

invoice/s for 'Export/Exempt Sales', if applicable 12) Proof that the acceptable foreign currency exchange proceeds on export sales/foreign currency denominated sales had been duly accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP), if applicable. Indubitably, the law requires the submission of complete documents in support of the application filed with the Bureau of Internal Revenue before the 120-day audit period shall apply, and before the taxpayer could avail of judicial remedies as provided for in the law.

Far

from complying with the checklist of requirements, evidence on record shows that respondent merely submitted sixteen (16) classes of documents in its administrative claim for refund for the quarter. This fact is clearly stated in petitioner's alleged claim for refund dated November 25, 2011. For the 1st quarter of 2010, these documents are enumerated therein as follows: 1.

Application for Tax Refund/Credit; 2.

Authorization Letter issued by the Company; 3.

TPC's Certification showing amount of zero- rated sales, taxable sales and exempt sales; 4.

ERC Certificte of Compliance;

5.

BIR Certificate of Registration; 6.

SEC Certificate of Registration of TPC; 7.

EPPA between CEBECO III and TPC; 8.

MOA between Carmen Cooper and TPC; ~

9.

MOA between Balamban Enerzone Corporation and TPC;

10.

Summary

importations made during the period;

11.

Summary list of purchases/Input tax schedule; 12.

Invoices, official receipts, import entry documents and other documents evidencing payment of input VAT or input taxes incurred on local purchases and importations; 13.

Summary of sales;

14.

Invoices, receipts supporting sales/receipts; 15.

Duly filed quarterly VAT returns (BIR Form No. 2550-Q) for 2010 1st quarter; and 16.

DOF

Certification

of

Non-filing

of

Similar/Previous and/or Outstanding Claim for

the 1st quarter of 2010.

15.

A careful examination of the BIR records shows that petitioner failed to prove that it has submitted complete documents to substantiate its administrative claim for refund and to reckon the commencement of the 120-day period for the CIR.

This is a requirement established by law and jurisprudence. Ergo, respondent humbly submits that failure on the part of petitioner to submit the required complete supporting documents would render the instant petition with this Honorable Court to have been prematurely filed.

16.

This is not a claim for refund of erroneously or illegally collected taxes where petitioner may choose the evidence it wishes to submit to prove its case. This is merely a claim for excess input taxes where the prescribed documentation is needed by the BIR 17.

Petitioner's alleged claim for refund is subject to administrative routinary investigation/examination by the Bureau of Internal Revenue. A claim for refund is not.-..

ipso facto granted because respondent CIR still has to investigate and ascertain the validity of the claim. 18.

Respondent respectfully avers that before judicial inquiry into the issue of whether taxpayers, in general, are entitled to a refund/tax credit under substantive law may be considered, they have an initial burden to discharge. They must prove that they complied with all the administrative requirements continuing up to judicial review.

In other words, before trial de novo proceeds and disposes of the issue of refund entitlement under substantive law, it must first be proved that there was procedural compliance in pursuing the administrative claim leading to the appellate proceedings. As stated by

the Honorable Supreme Court:

'Petitioner's contention that non- compliance with Revenue Regulations 3-88 could not have adversely affected its case in the CT A indicates a failure on its part to appreciate the nature of the proceedings in that court. First, a judicial claim for refund or tax credit in the CTA is by no means an original action but rather an appeal by way of petition for review of a previous, unsuccessful administrative claim.

Therefore, as in every appeal or petition for review, a petitioner has to convince the appellate court that the quasi-judicial agency a quo did not have any reason to deny its claims.

In this case, it was necessary for petitioner to show the CTA not only that it was entitled under substantive law to the grant of its claims but also that it satisfied all the documentary and evidentiary requirements for an administrative claim for refund or tax credit. Second, cases filed in the CTA are litigated de novo. Thus, a respondent should prove every minute aspect of its case by presenting, formally offering and submitting its evidence to the CTA. Since it is crucial for a petitioner in a judicial claim for refund or tax credit to show that its administrative claim should have been 4P- granted in the first olace, part of the evidence to be submitted to the CTA must necessarily include whatever is required for the successful prosecution of an administrative claim.'

(Emphasis

and underscoring supplied) 19.

The doctrine of exhaustion of administrative remedies ensures an orderly procedure which favors a preliminary sifting process, particularly with respect to matters peculiarly within the competence of the administrative agency. After this sifting process comes the availability of judicial review of administrative decisions such as that exercised by the Honorable Court herein. Judicial review of administrative decisions entails the Court to examine the method in which the decision was arrived at, and finding no error, lets the administrative decision stand.

This is precisely because, as previously stated, these are matters peculiarly within the competence of the administrative agency.

20.

Well-settled is the rule that exhaustion of available administrative remedies is a condition sine qua non before taking a judicial action. The Honorable Supreme Court, in a long line of cases, has consistently held that if a remedy within the administrative machinery can still be resorted to by giving the administrative officer every opportunity to decide on a matter that comes within his jurisdiction, then such remedy must be exhausted first before the court's power of judicial review can be sought (Province of Zamboanga del Norte vs. Court of Appeals, 342 SCRA 549, 557 [2000]; Zabat vs. Court of Appeals, 338 SCRA 551, 560 [2000]; Diamonon vs. Department of Labor and Employment, 327 SCRA 283, 291 [2000]; Social Security System Employees Association vs. Bathan-Velasco, 313 SCRA 250, 252 [1999]; Paat vs. Court of Appeals, 266 SCRA 167, 175 [1997]).

21.

Moreso, the Honorable Supreme Court had the occasion to rule that where a remedy is available within the administrative machinery, this should be resorted to before resort can be made to courts, not only to give the administrative agency the opportunity to decide the matter -- by itself correctly, but also to prevent unnecessary and premature resort to courts.

Thus, the party with an administrative remedy must not merely initiate the prescribed administrative procedure to obtain relief but also pursue it to its appropriate conclusion before seeking judicial intervention in order to give the administrative agency an opportunity to decide the matter itself correctly and prevent unnecessary and premature resort to the court.

22.

The doctrine of exhaustion of administrative remedies has practical and legal reasons.

Resort to

administrative remedies entails lesser expenses and provides for speedier disposition of controversies. Thus, for reasons of comity and convenience, courts will shy away from a dispute until the system of administrative redress has been completed and complied with so as to give the administrative agency every opportunity to correct its error and to dispose of the case. The underlying principle of the rule rests on the presumption that the administrative agency, if afforded a complete chance to pass upon the matter, will decide the same correctly (Gorospe vs.

Vinzons-Chato, G.R. No. 132228. January 21, 2003).

23.

Respondent respectfully submits that the 120- day period provided for by law within which the CIR has to act on petitioner's claim for refund has not yet commenced considering petitioner's failure to comply with the duly mandated legal requirements in such claims for refund/tax credit (i.e submission of complete supporting documents). While it is true that petitioner filed an administrative claim for refund, the same is considered merely pro forma as it failed to submit documentary evidence to prove its entitlement thereto. Petitioner here failed to substantiate its administrative claim for refund. 24.

Had

petitioner submitted all relevant documents to substantiate its claim for refund or tax credit, respondent would have the opportunity to determine the veracity of its claim and might refund or issue a tax credit certificate for the claimed amount. Such failure of petitioner to submit relevant documents deprived respondent of the opportunity and time to studyGZ.- petitioner's claim for refund and to fully exercise its function. It must be remembered, that in the case of Jariol vs. Commission on Elections, the Supreme Court reasoned that a party must not merely initiate the prescribed administrative procedure to obtain relief, the party concerned must pursue this relief until the appropriate conclusion takes place before seeking judicial intervention in order to give the administrative an opportunity to decide the matter by itself correctly and prevent unnecessary and premature resort to the court. 25.

It is well settled rule in tax laws, that the taxpayer who feels aggrieved by the actions taken by tax authorities may not seek redress in the courts of justice without first exhausting available administrative remedies, except for certain well-recognized exceptions. It is the policy of the law and good practice to discourage court litigations and encourage resort to administrative action whenever the latter is feasible, adequate and speedy. Another thing, the respect and consideration due to each branch of the government demand that the judicial department abstain, whenever possible from interfering in the acts of the other departments except when the latter transcend their respective shares of action and suitable remedies cannot be obtained by them. (Bagatsing vs. Ramirez, 74 SCRA 306) 26.

Equally noteworthy is the fact that the Highest Tribunal in the case of Atlas Consolidated Mining and Development Corporation vs. Commissioner of Internal Revenue, G.R. No. 145526 promulgated on March 26, 2007 held:

'Petitioner's contention that non-compliance with Revenue Regulations 3-88 could not have adversely affected its case in the CTA indicates a failure on its part to appreciate the nature of the proceeding in that court. First a judicial claim for refund or tax credit in the CTA is by no means an original action but rather an appeal by way of petition for review of a previous, unsuccessful administrative claim. Therefore, as in every appeal or petition for review. a petitioner has to convince the ~ appellate court that quasi-judicial agency a quo did not have reason to deny its claim. In this case, it is necessary for petitioner to show the CTA not only that it was entitled under substantive law to grant of its claim but also that it satisfied all the documentary evidence and evidentiary requirements for administrative claim for refund or tax credits. xxx' (Emphasis and Underscoring provided) Thus, as clearly stated by the above jurisprudence, the necessity for petitioner to submit all relevant documents to substantiate its administrative claim for refund is imperative. The filing of the petition for review to this Honorable Court must be due to the denial of its claim or inaction which is tantamount to a denial of the said action.

Absent these circumstances, the judicial claim merely becomes an attempt by the taxpayer to circumvent the role and duties of the Commissioner in evaluating taxpayer's claim for refund.

27.

Failure

of petitioner to exhaust all administrative remedies is fatal to its claim considering that such non-exhaustion is not merely for purposes of formality but is jurisdictional in nature. 28.

Prescinding from and anent the foregoing considerations, petitioner's failure to exhaust all available administrative remedies which led to the premature filing of the instant petition divests the Honorable Court jurisdiction over the instant petition. 29.

Exemptions from taxation are highly disfavored in law and he who claims exemption must be able to justify his claim by the clearest grant of organic or statutory law. An exemption from the common burden cannot be permitted to exist upon vague implications (Asiatic Petroleum Co. vs Llanes, 49 Phil 466 cited in Collector of Internal Revenue v Manila Jockey Club, Inc., 98 Phil 670).~

CfA CASE NOS. 8450, 8512, 8547 & 8596

30.

In an action for refund, the burden of proof is on the taxpayer to establish its right to refund, and failure to sustain the burden is fatal to the claim for refund. Hence, a taxpayer is charged with the heavy burden of proving that he has complied with and satisfied all the statutory and administrative requirements to be entitled to the tax refund. Failure to comply therewith warrants a dismissal of the taxpayer's claim for refund. Respondent humbly submits that petitioner failed to establish its right to refund.

31.

It can never be emphasized enough that in this jurisdiction tax refunds/credits are in the nature of tax exemptions, hence, laws relating to them call for a strict application against the claimant. As held by the Honorable

Supreme Court:

'Tax refunds are in the nature of tax exemptions, and are to be construed strictissimi juris against the entity claiming the same. Thus, the burden of proof rests upon the taxpayer to establish by sufficient and competent evidence, its entitlement to a claim for refund.' 32.

Taxes collected are presumed to be in accordance with laws and regulations. 33.

Claims for refund are construed strictly against the claimant for the same partake of the nature of exemption from taxation (Commissioner of Internal Revenue vs. Ledesma, 31 SCRA 95) and as such, they are looked upon with disfavor (Western Minolco Corp. vs. Commissioner of Internal Revenue, 124 SCRA 1211). Basic is the rule that tax refunds are regarded as tax exemptions that are in derogation of the sovereign authority and are to be construed in strictissimi juris against the person or entity claiming the exemption (Philippine Phosphate Fertilizer Corporation v. Commissioner of Internal Revenue, G.R.

No.

141973, June 28, 2005). The law does not look with favor on tax exemptions and that he who would seek to be thus privileged must justify it by words too plain to be «- mistaken and too categorical to be misinterpreted (Sea- Land Setvice vs. Court oF Appeals, 357 SCRA 444). 34.

Based on the foregoing, petitioner's claim for refund has no basis in fact and in law. Thus, the instant petition should be dismissed for lack of jurisdiction and/or for lack of merit."

In the Answers filed on September 17, 201216, November 26, 201217, and January 24, 201318 for CTA Case Nos. 8512, 8547, and 8596, respectively, respondent raised substantially the same special and affirmative defenses as cited above. For CTA Case No. 8450, Respondent's Pre-Trial Brief19 was filed on May 31, 2012 and petitioner's Pre-Trial Brief2° was filed on June 4, 2012. Then, the parties submitted their Joint Stipulation of Facts and Issues21 on July 9, 2012, which the Court approved on July 11, 2012.22 Consequently, the pre-trial was deemed terminated.23 On September 13, 2012, petitioner moved that CTA Case No. 8512 pending before the First Division of the CTA be consolidated with CTA Case No. 8450 pending before the Second Division.24 The First Division granted the said consolidation with the conformity of the Second Division; thus, a pre-trial was set. 25 On January 24, 2013, petitioner filed again two motions to consolidate CTA Case No. 8547 and CTA Case No. 8596 which were both pending with the Third Division of the CTA, with CTA Case Nos. 8450 and 8512.26 Since the Third Division granted the aforesaid consolidation with the conformity of the Second Division, CTA Case Nos. 8547 and 8596 were consolidated with CTA Case Nos. 8450 and 8512.~ 16 Docket CTA Case No. 8512, p. 109-123. 17 Docket CTA Case No. 8547, p. 92-113. 18 Docket CTA Case No. 8596, p. 90-101. 19 Docket CTA Case No. 8450 (Vol. I), pp. 131 to 135. 20 Docket CTA Case No. 8450 (Vol. I), pp. 136 to 151. 21 Docket CTA Case No. 8450 (Vol. I), pp. 168 to 171. 22 Resolution, Docket CTA Case No. 8450, (Vol. I), p. 172. 23 Ibid.

24 Motion to Consolidate, Docket CTA Case No. 8450 (Vol. I), pp. 193 to 196. 25 Resolutions dated November 16, 2012 and December 4, 2012, Docket CTA Case No. 8450 (Vol. I), p. 202 and p. 204, respectively. 26 Motions to Consolidate, Docket CTA Case No. 8450 (Vol. I), pp. 208 to 212 and pp. 213 to 217. 27 Resolutions dated February 7, 2013; February 11, 2013; February 15, 2013; and February 21, 2013, Docket CTA Case No. 8450 (Vol. I), p. 224, p. 226, p. 240, and p. 242, respectively.

The parties' Consolidated Pre-Trial Briefs were filed on May 2, 201328 and May 3, 201329 • Petitioner filed a Motion to Avail the Provisions of Rule 13 of the Revised Rules of the Court of Tax Appeals30 on May 3, 2013, which the Court granted on June 10, 2013.31 As such, Mr. Joseph Cedric V. Calica was commissioned as the Independent Certified Public Accountant (CPA) on June 10, 2013.32 The parties submitted anew a Joint Stipulation of Facts and Issues33 on June 6, 2013. Accordingly, the Court issued a Pre-Trial Order34 on June 19, 2013, and terminated the pre-trial. During trial, petitioner presented its witnesses, namely: Ms. Reymonda Aida B. Obrero, Joseph Cedric V. Calica, Mr. Rolando L. Vicente, and Ms. Edita C. Encarnacion. Petitioner formally offered its testimonial evidence, as well as documentary evidence, which were admitted by the Court with the exception of Exhibits "EEEE", "BBB- 3226", and "BBB-3825". 35 On October 8, 2014, petitioner was allowed by the Court to present additional evidence.36 Consequently, petitioner presented Mr. Joseph Cedric V. Calica and Mr. Isidito Camota Desina. Thereafter, petitioner formally offered its supplemental testimonial evidence as well as documentary evidence which the Court admitted in a Resolution37 dated April 16, 2016. On the other hand, respondent's counsels manifested during hearing on April 20, 2015, that they would no longer present evidence.

3~ 28 Docket CTA Case No. 8450 (Vol. I), p. 244-248. 29 Docket CTA Case No. 8450 (Vol. I), p. 407-420. 30 Docket CTA Case No. 8450 (Vol. 1), pp. 426 to 429. 31 Minutes of the Hearing, Docket CTA Case No. 8450 (Vol. I), p. 450. 32 Docket CTA Case No. 8450 (Vol. 1), p. 451. 33 Docket CTA Case No. 8450 (Vol. I), pp. 447 to 449. 34 Docket CTA Case No. 8450 (Vol. 1), pp. 453 to 456. 35 Resolutions dated September 8, 2014 and October 8, 2014, Docket CTA Case No. 8450 (Vol. II), pp. 921 to 922 and pp. 956 to 957, respectively.

erA CASE NOS. 8450, 8512, 8547 & 8596

On May 19, 2015, petitioner filed again a motion to reopen the case, 39 which the Court granted on July 23, 2015.40 As such, petitioner presented anew Mr. Joseph Cedric V. Calica to the witness stand; and the Court admitted the supplemental documentary evidence of petitioner.41 After the Court considered petitioner's Memorandum42 filed on June 17, 2016, and the Report of the Records Division43 dated June 20, 2016, that no memorandum has been filed by the respondent, these cases were deemed submitted for decision on June 23, 2016.44 The parties presented the following issues45 for the Court's determination:

1.

Whether petitioner is entitled to a refund for the alleged unapplied and unutilized input VAT in the total amount of six million one hundred twenty-six thousand one hundred five pesos and 97/100 (P6,126,105.97), fifteen million four hundred sixty- one thousand five hundred fifty-four pesos and 31/100 (P15,461,554.31), ten million five hundred forty thousand eight hundred eighty-seven and 95/100 (P10,540,887.95), forty nine million sixty- four thousand four hundred eighteen and 84/100 (P49,064,418.84) for the Pt, 2nd, 3rd, and 4th quarters, respectively, of taxable year 2010; 2.

Whether petitioner has complied with Sections

112(A) of the National Internal Revenue Code (NIRC)

of 1997, as amended; and 3.

Whether the Court has jurisdiction over the case. The foregoing issues may be summarized into one main issue of whether or not petitioner is entitled to a refund in the amount of P81,192,967.07, representing its alleged unutilized input VAT attributable to its zero-rated sales for the four quarters of TY 2010 . ...:._

Petitioner contends that it is entitled to a refund of unutilized input VAT on its purchases of goods and services attributable to its zero-rated sales, pursuant to Section 112(A) of the National Internal Revenue Code (NIRC) of 1997, as amended, since it complied with all the requisites provided by law to refund, and presented sufficient evidence to prove the same.

Petitioner's claim finds legal basis on Section 112(A) and (C) of the National Internal Revenue Code (NIRC) of 1997, as amended, which reads:

"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 106(A)(2)(a)(1), (2) and (b) and Section 108(8)(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. xxx.

XXX

XXX

XXX

(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 (120) 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 of Tax Appeals."

Pursuant thereto, in order to be entitled to a refund or issuance of a TCC for unutilized input VAT attributable to zero-rated sales, the following requisites must be complied with:

1. the taxpayer must be VAT-registered;

2. the taxpayer must be engaged in zero-rated or effectively zero-rated sales;

3. the input taxes were incurred or paid;

4. the input taxes due or paid must be attributable to zero- rated sales or effectively zero-rated sales;

5. the input taxes were not applied against any output VAT liability; and

6. the claim for refund must be filed within the prescriptive period.

Petitioner's administrative and judicial claims were filed within the prescriptive period The Court shall ascertain first the timeliness of the filing of petitioner's claims as the same will determine whether it is still necessary to resolve petitioner's compliance with the other requisites for input VAT refund.

Applying the above-quoted Section 112(A), the administrative claim for the issuance of a TCC or refund of 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 were made. Thus, petitioner's administrative claims for the four quarters of 2010 were filed within the two-year prescriptive period, as shown below:_

Taxable Quarter

Close of Quarter

1st Qtr of 2010

March 31 2010

2nd Qtr of 2010 Jun. 30 2010 3rd Qtr of 2010 Sept. 30 2010 4th Qtr of 2010 Dec. 31 2010 End of 2-year

Filing of Administrative

period claim

March 31 2012

November 29 2011 46

Jun.30 2012 Mar. 5, 201247 Sept. 30 2012 May 30, 201248 Dec. 31 2012 Aug. 23 201249 As to petitioner's judicial claim, Section 112(C) of the NIRC of 1997, as amended, provides that the Commissioner of Internal Revenue (CIR) has 120 days from the date of the submission of the complete documents in support of the application for tax refund/credit within which to grant or deny the claim. In case of full or partial denial by the CIR, the taxpayer's recourse is to file an appeal before the Court of Tax Appeals within 30 days from receipt of the decision of the CIR. However, if after the 120-day period the CIR fails to act on the application for tax refund/credit, the remedy of the taxpayer is to appeal the inaction of the CIR to the Court of Tax Appeals within 30 days after the expiration of such 120-day period. Applying the same to the instant case, the following are the pertinent dates to petitioner's claim for refund:

Filing of

Administrative

claim/ Submission

Taxable of Supporting

End of 120-day End of 30-day

Filing of Petition

_Quarter

Documents

period period

for Review

pt Qtr of 2010

November 29 2011

March 28 2012

April 27 2012

March 30 2012

2nd Qtr of 2010 March 5, 2012

July 3 2012

August 2 2012

July 6 2012

3rd Qtr of 2010

May30_L 2012

September 27 2012

October 27 2012

September 28 2012

4th _Qtr of 2010

August 23 2012

December 21 2012

January 20 2013

December 28 2012

It is clear that petitioner's judicial claims were, likewise, filed within the period prescribed by law. Petitioner is VAT-registered Indubitably, petitioner is a duly registered VAT taxpayer per BIR Certificate of Registration No. 2RC0000074406 with Tax Identification No. 003-883-626-000.

5~

Petitioner has excess input taxes For the Fourth quarter oF the taxable year 2010 which may be attributed to its declared zero-rated or effectively zero-rated sales For the same quarter In its Quarterly VAT Returns for calendar year (CY) 2010, petitioner reported input VAT in the aggregate amount of P207,584,778.89, out of which, only the amount of P81,192,967.07 is the subject of petitioner's claim, which allegedly consisted of the following:

Input Tax allocated to zero-rated sales net of

Quarter

Total Input Tax

output tax 1st Qtr p 45,772 154.50 p 6,126 105.9751 2nd Qtr 47,220,171.04 15,461,554.3152 3rd Qtr 44,065 265.53 10,540,887.9553 4th Qtr 70,527 187.82 49,064,418.8454

Total

p 207,584,778.89 p 81,192,967.07 The breakdown of the P207,584,778.89 input VAT for CY 2010 is as follows:

1st Qtr 2010 2nd Qtr 2010 3rd Qtr 2010 4th Qtr 2010

(Exhibit K)

_(Exhibit L)

(Exhibit Nl

(Exhibit Pj

Input Tax deferred on Capital Goods exceeding P1M from previous quarter

Total

(Line208)

p 2 419 606.20 p 2 092 150.77 p 1764 695.36 p 1 836 490.61 p 8 112 942.94

Add: Input Tax on Purchase of

Capital Goods exceeding P1M

(Line21D)

- - 420 263.85

Total

p 2 419 606.20 p 2 092 150.77 p 2 184 959.21 p

Less: Input Tax on Purchase of

Capital Goods exceeding P1M deferred for the succeeding period (Line 23A) 2 092 150.77 1 764 695.36 1 836 490.61

Amortized Input Tax on Purchases

of Capital Goods exceeding 1M

I'

327 455.43 p 327 455.41 I' 348 468.60 I'

Add: Input Tax on Current

Purchases

Purchase of Capital Goods not exceedinq P1M (Line 218) p 8 567.14 p 7 719.64 p 58 113.69 Domestic Purchases of goods other than Capital Goods

(Line21F)

32 195 399.88 26 692 932.73 29 448 771.67 51 Petition for Review, Docket CTA Case No. 8450 (Vol. I), pp. 18 to 19. 52 Petition for Review, Docket CTA Case No. 8512, pp. 22 to 23. 53 Petition for Review, Docket CTA Case No. 8547, pp. 17 to 18. 54 Petition for Review, Docket CTA Case No. 8596, pp. 18 to 19. p - 420 263.85 1 836 490.61 p 8 533 206.79

1494 695.34

7 188 032.08 341795.27 p

1345 174.71

32 331.23 p 106 731.70 15 290 207.62 103 627 311.90

Importation of Goods other than Capital Goods (fjne21Hl 9 S72 SS7.00 10 966 818.00 9 S98 019.00 33 876 223.00 64 013 617.00

Domestic Purchase of

Services (Line 21J)

3 668 17S.OS 9 22S 24S.26 4 611892.S7 20 986 630.70 38 491 943.S8 Total Input tax on Current

Purchases

1'45 444 699.07 P46,892 715.63 1'43 716,796.93 1'70,185 392.55 1'206 239 604.18 Total Input Tax for the period 1'45 77~154.50 1'47,220 171.04 P44 065 265.53 1'70 527 187.82 1'207 584 778.89 Petitioner asserts that a portion of these input taxes incurred on purchases were attributable to its zero-rated sales/receipts, and such input taxes were neither fully utilized in the same quarter nor used against its output taxes in the subsequent periods. In support of its reported input VAT, petitioner submitted various invoices and official receipts (0Rs)55, and Import Entry and Internal

Revenue Declarations (IEIRDs)56•

Upon examination of these documents, the Court-commissioned Independent Certified Public Accountant (ICPA), Mr. Joseph Cedric V. Calica, noted the following exceptions:

Exhibit

1st Qtr 2nd Qtr 3rd Qtr 4th Qtr

Domestic Purchases of Goods and Services

No valid supporting documents

FFF-1

p 312 822.94 p 142 81S.37 p 32S 194.82 p 2S³ 802.S⁴ p Supporting documents are not in the period covered bv the claim

FFF-2

1 139 713.9S 93 434.70 - - VAT not separately shown in the documents

FFF-3

430 683.63 404 489.86 3S1149.40 1S8 481.86 Incomplete or no address

FFF-4

- 423.21 6 S70.86 - TIN of the supplier indicate NON-VAT

FFF-S

9S0.28 - 297.4S - No sales invoices/official receipts submitted by the petitioner

FFF-6

224 762.17 3 801379.60 964 168.91 1 363 004.73 subtotal p 2 108 932.97 p 4 442 S42.74 p 1 647 381.44 p 1 77S 289.13 p

Imoortation of Goods and Services

Not in the period covered by the claim

FFF-7

p 2 842 698.00 - - - p

Total

1 034 63S.67 1 233 148.64 1 344 804.7S 6 994.07 1 247.73 6 3S3 31S.41 9 974 146.28 2 842 698.00

Total Exceptions by ICPA

1'4,951 630.97 1'4,442 542.74 1'1 647 381.44 Pl 775,289.13 1'12 816,844.28 The Court subscribes to the above findings of the ICPA on the input VAT disallowances in the amount of P12,816,844.28 for not being properly substantiated by VAT invoices or receipts, as prescribed under Sections 110(A) and 113(A) and (B), and 237 of the NIRC of 1997, as amended, and as implemented by Sections 4.110-1, 4.110-2, 4.110-8 and 4.113-1 of Revenue Regulations (RR) No. 16-05.~ 55 Exhibits "BBB-1" to "BBB-4578", except Exhibits "BBB-3226" and "BBB-3825" which were denied admission

56 Exhibits "CCC-1" to "CCC-51"

Exhibit

In addition, the input VAT in the aggregate amount of P69,838,126.09, broken down hereunder, shall likewise be disallowed for failure to meet the substantiation requirements prescribed under the aforesaid VAT law and regulations:

Invoice/ OR

No.

5UDDiier

1st Otr 2nd Otr 3rd Otr 4th Qtr

1. Domestic purchases of goods and services supported by invoices/DRs wherein the input VAT amounts were not separately indicated A.S. MAPUTI CONSTRUCTION 888-2454 380

AND ENGINEERING SERVICE

p 33 942.86

AC MORENO HAULING

BBB-2877

777

SERVICES

p 4 687.50

RBER INDUSTRIAL & TRADING

888-1980 1137

CORPORATION

p 10 602.73

TELECOMMUNICATIONS

MANAGEMENT AND SERVICES, 888-3134 613868 INC.

1 539.32

TELECOMMUNICATIONS

MANAGEMENT AND SERVICES, 888-3186 614456 INC.

1 589.75 888-3191 7777

UNITED REBUILDERS INC

1 203.60 888-3192 5659

HISPEED INDUSTRIAL CORP

3 535.71 888-3194 11544

HL TRACTOR PARTS

704.79

TELECOMMUNICATIONS

MANAGEMENT AND SERVICES

BBB-3218

not visible

INC

1 871.76

ATLAS COPCO (PHILIPPINES)

888-3317 100446

INC

7 348.05 888-3324 0793

MZJT MARKETING

91 810.93

TELECOMMUNICATIONS

MANAGEMENT AND SERVICES, 888-3361 543412 INC.

1 723.61

AS MAPUTI MANPOWER

888-4430 0022

SERVICES

16 317.34

AS MAPUTI MANPOWER

888-4439 0024

SERVICES

17 949.85 888-4546 0728 DELUXE SALES & IND. CO.

3 342.86

TELECOMMUNICATIONS

MANAGEMENT AND SERVICES

888-4576 616250

INC

1 670.52 subtotal , 33942.86 , 4.687.50 , 121,930.25 , 39.280.57

2. Domestic purchases of goods and services supported bv NON-VAT/TIN-V invoices/ORs 888-68 52763

HL TRACTOR PARTS

p 1 735.50 888-69 52762

HL TRACTOR PARTS

653.57 888-113 53292

HL TRACTOR PARTS

193.93 888-284 52068

HL TRACTOR PARTS

1447.50 888-289 52048

HL TRACTOR PARTS

1178.57 888-338 52806

HL TRACTOR PARTS

60.00 888-601 52909

HL TRACTOR PARTS

20 357.14 888-828 52876

HL TRACTOR PARTS

10 937.14

NATIONAL GRID

CORPORATION OF THE

888-2516 5960

PHILIPPINES

28 328.17 888-765 52900

HL TRACTOR PARTS

p 919.29 888-956 0106

MARNO TRADING

1 928.57 888-957 0105

MARNO TRADING

940.03 888-975 53182

HL TRACTOR PARTS

567.86 888-983 0119

MARNO TRADING

6 857.14 888-1062 53176

HL TRACTOR PARTS

1 714.29

BBB-1068

53148

HL TRACTOR PARTS

552.86 888-1102 53461

HL TRACTOR PARTS

578.57 888-2667 01498

ALAS CUSTOMS BROKERAGE

3 038.85 -

BBB-2670

BBB-2672

BBB-2881

BBB-2882

BBB-2923

BBB-2946

BBB-2947

BBB-2959

BBB-1519

BBB-2411

BBB-2412

BBB-3015

BBB-3016

BBB-3017

BBB-3034

BBB-3267

BBB-3268

BBB-3270

BBB-3272

BBB-3307

BBB-3312

BBB-4233

BBB-4242

BBB-4243

BBB-4247

BBB-4260

BBB-4261

BBB-4262

BBB-4301

BBB-4446

BBB-4447

BBB-4448

BBB-4451

1499

ALAS CUSTOMS BROKERAGE

01S05

ALAS CUSTOMS BROKERAGE

DAKAY CONSTRUCTION AND

2316

DEVELOPMENT CORPORATION

DAKAY CONSTRUCTION AND

2384

DEVELOPMENT CORPORATION

NATIONAL GRID

CORPORATION OF THE

6145

PHILIPPINES

01496

ALAS CUSTOMS BROKERAGE

01497

ALAS CUSTOMS BROKERAGE

DAKAY CONSTRUCTION AND

2313

DEVELOPMENT CORPORATION

PNOC EXPLORATION

19424

CORPORATION

0121

MARNO TRADING

0118

MARNO TRADING

1519

ALAS CUSTOMS BROKERAGE

1520

ALAS CUSTOMS BROKERAGE

1521

ALAS CUSTOMS BROKERAGE

1526

ALAS CUSTOMS BROKERAGE

01536

ALAS CUSTOMS BROKERAGE

01533

ALAS CUSTOMS BROKERAGE

01535

ALAS CUSTOMS BROKERAGE

01534

ALAS CUSTOMS BROKERAGE

01538

ALAS CUSTOMS BROKERAGE

01539

ALAS CUSTOMS BROKERAGE

01518

ALAS CUSTOMS BROKERAGE

01530

ALAS CUSTOMS BROKERAGE

01531

ALAS CUSTOMS BROKERAGE

01537

ALAS CUSTOMS BROKERAGE

01542

ALAS CUSTOMS BROKERAGE

01540

ALAS CUSTOMS BROKERAGE

01541

ALAS CUSTOMS BROKERAGE

01554

ALAS CUSTOMS BROKERAGE

00313

ALAS CUSTOMS BROKERAGE

01565

ALAS CUSTOMS BROKERAGE

00314

ALAS CUSTOMS BROKERAGE

01566

ALAS CUSTOMS BROKERAGE

subtotal

I'

980.01 3 125.91 231 S18.13 1 511 234.77 22 045.21 474.07 1 235.14 569 582.68 64691.52 I' 2 357.293.36

3. Domestic purchases of _goods and seiVices supported by unreadable invoicesjORs

BBB-272

28082

PHILCOPY CORPORATION

p 1 281.00

BBB-2640

915005 U-FREIGHT PHILS. INC.

2 336.39 subtotal

I'

3.617.39 - p 458 680.78 1109.76 1 031.16 2 921.72 3 002.23 3 116.32 460.91 3 164.59 5 384.22 3 123.57 3 245.38 3 179.43 382.72 p 1 009.95 432.04 444.82 1 369.08 543.94 918.32 569.73 1 542.14 3 838.22 566.34 571.10 524.18

I'

468.602.79 I' 12329.66 - -

4. Domestic purchases of goods and seiVices supported by invoices/DRs dated outside the period of claim or with no year indicated

BBB-3436

67940 SYCIP GORRES VELA YO & CO.

p 13 134.12 MAPECON PHILS., INC. dated

BBB-264

Cl1577

2009 1166.79

W & L TRADING

BBB-274

14-000005074 CORPORATION dated 2009 783.58

W & L TRADING

BBB-275

14-000005163 CORPORATION dated 2009 2 237.45

MABUHAY VINYL

BBB-354

20291

CORPORATION

17 005.71

BBB-386

025987

SELLCHEM CORPORATION

21 085.71

BBB-526

SNG/0790863

AFC Fertilizer & Chemicals Inc. 5 379.84

BBB-555

3503 YUMPIL INDUSTRIES INC.

691.20

BBB-556

3505 YUMPIL INDUSTRIES INC.

199.20

BBB-557

25104 UNITED REBUILDERS INC.

2 220.00

BBB-558

3502 YUMPIL INDUSTRIES INC.

2 084.16

BBB-614

13803

RM INDUSTRIAL SALES

326.40

BBB-615

14125

RM INDUSTRIAL SALES

1428.00

BBB-616

14126

RM INDUSTRIAL SALES

545.25

BBB-622

11611

V AND U ENTERPRISES

3 193.93

BBB-646

62499

FSP GROUP INC

1 441.07 ...

BBB-647

BBB-648

BBB-649

BBB-650

BBB-651

BBB-2548

BBB-2566

BBB-749

BBB-750

BBB-751

BBB-752

BBB-753

BBB-754

BBB-755

BBB-756

BBB-757

BBB-758

BBB-759

BBB-760

BBB-761

BBB-762

BBB-763

BBB-764

BBB-797

BBB-798

BBB-799

BBB-800

BBB-801

BBB-802

BBB-806

BBB-856

BBB-879

BBB-880

BBB-890

BBB-891

BBB-892

BBB-893

BBB-894

BBB-916

BBB-930

BBB-1096

BBB-1117

BBB-2958

BBB-4493

BBB-4572

THINKINGTOOLS

373076

INCORPORATED

THINKINGTOOLS

372743

INCORPORATED

UNIWELL TECHNOLOGIES

18779 A

CORPORATION

WILLIAMS COMMERCIAL

138597

COMPANY INCORPORATED

WILLIAMS COMMERCIAL

138779

COMPANY INCORPORATED

141554

GROUND-AIR LOGISTIC CORP

TOS1015835

TOYOTA CEBU CITY INC.

0056

MARNO TRADING

0050

MARNO TRADING

0052

MARNO TRADING

0051

MARNO TRADING

6435

MZJT MARKETING

6476

MZJT MARKETING

23326

DEGALEN CORPORATION

23378

DEGALEN CORPORATION

23392

DEGALEN CORPORATION

23411

DEGALEN CORPORATION

0073

MARNO TRADING

0081

MARNO TRADING

6535

MZJT MARKETING

6482

MZJT MARKETING

RBER INDUSTRIAL AND

1022

TRADING CORPORATION

RBER INDUSTRIAL AND

1037

TRADING CORPORATION

97604

UNITED AUTOMART

98544

UNITED AUTOMART

98577

UNITED AUTOMART

98565

UNITED AUTOMART

99189

UNITED AUTOMART

99190

UNITED AUTOMART

99187

UNITED AUTOMART

0300 AIRSERVE INDUSTRIAL INC.

ASSISTCO ENERGY AND

30340

INDUSTRIAL CORPORATION

ASSISTCO ENERGY AND

30341

INDUSTRIAL CORPORATION

BES PACIFIC HARDWARE AND

104403

INDUSTRIAL SUPPLY INC

110014

RS COMPONENTS LIMITED

SPECIALIZED BOLT CENTER

67044

MERCANTILE & ENGINEERING

SPECIALIZED BOLT CENTER

67046

MERCANTILE & ENGINEERING

SPECIALIZED BOLT CENTER

67045

MERCANTILE & ENGINEERING

161507 FOTOLINE EXPRESS INC.

218443 YANA CHEMODITIES INC.

475444 CORD CHEMICALS INC.

PILIPINAS SHELL PETROLEUM

1775192288

CORPORATION

PHILIPPINE CHARTER

418061

INSURANCE CORPORATION

CEBU ENERGY DEVELOPMENT

0092

CORPORATION

TOLEDO HOLDINGS

0007

CORPORATION

subtotal " 1 392.32 619.29 4 920.00 816.00 989.08 12.43 2 642.66 p 475.71 2 041.07 804.00 1 281.43 1469.52 2 065.54 399.12 364.32 612.00 499.20 501.43 557.14 1 789.92 164.61 2 121.43 2 110.20 276.00 978.60 804.00 384.00 979.20 2 694.60 613.20 37 109.57 23 973.21 21428.57 315.00 1 801.20 324.64 537.59 721.61 8 222.94 388.80 2 081.32 21 549.89 139 302.41 p 9 759 790.40 286 510.68 8~14.19 , 281,742.99 - " 10. 04ti301.08

5. Domestic purchases o' goods supported by invoices without supplier's VAT Reg. TIN or with supplier's TIN but without the word

"VAT"

...

NFF INDUSTRIAL

BBB-603 13844 CORPORATION P 38,571.43 BBB-874 53493 HL TRACTOR PARTS Fos 289.29 BBB-993 0102 MARNO TRADING fs 1,671.43 BBB-1514 13898 CORPORATION P 120,000.00 BBB-1763 16874 TRI-J] MARKETING INC. 1,404.00 BBB-1912 0135 MARNO TRADING 1,928.57 BBB-2413 229443 CEBU TRISTAR CORPORATION 3,972.60 BBB-2414 229346 CEBU TRISTAR CORPORATION fF 313.20

Lag | ELASCO INTERNATIONAL

BBB-4033 048 CORPORATION

P 5,703.00 BBB-4061 0026209 DEGALEN CORPORATION ee ee 10,758.00 BBB-4077 33231 PHILCOPY CORPORATION es 5,089.29 BBB-4079 15741 RM INDUSTRIAL SALES ee ee 1,425.60 | subtotal P 38,571.43 |P 1,960.72|P 127,618.37 |P 22,975.89

6. Domestic purchase of goods supported by invoice but the amounts were not indicated therein

YOKOGAWA PHILIPPINES |

BBB-3995 | _vyPIOx0053__| INCORPORATED P 15,794.16 PT sesbtotal es ee ea 15,794.16

7. Domestic purchases of services supported by VAT ORs but with notation "Not valid as source of input VAT' foe) oe eee ml BBB-2940 15485 CORPORATION P 7,200.00 a BBB-3302 0857 CORPORATION P 5,100.00 | subtotal | tid 7,200.00 | # 5,100.00 -

8. Domestic purchases of services supported by documents other than VAT ORs BBB-2455 0415 ASEA BROWN BOVERI, INC. P 23,914.29

NATIONAL GRID

0401 00068 CORPORATION OF THE

BDO 00683 PHILIPPINES

[subtotal =i 23.94.20 |

9. Domestic purchases of services not supported by ORs ee baal TRADING CO INC P 1,478.57 roores INC. 107.04

BBB-3222

TURBO ENGINE RECOVERY, | sae | INC. 14,785.71 ALAS CUSTOMS BROKERAGE 410.39 HI-SPEED INDUSTRIALCORP. | ——————s&Y subtotal P 16,781.71

10. Exhibit reference does not refer to the arount claimed BBB-815 218190 YANA CHEMODITIES, INC. Pp 429.00)| TC a ne P 1,296.00 - : :

11. Overclaimed input VAT on domestic purchase of service

CEBU PORT AUTHORITY

(103,913.87 per sched. less BBB-4284 2964714 60,030.42 per OR P 43,883.42 | subtotal es es 43,883.42

12. Exhibit was denied admission by the Court per Resolution dated October 8, 2014 —[kewanatm | BBB-3226 SALES & SERVICES, INC. P 4,858.44 | td utotat tt Cd| ti‘ eri]COOOOCCCO-iP 4,858.44 - 413. Importation of goods supported by IEIRD but without machine validation CCC-12 10370392 CORP P 22,445.00 CCC-13 102814004 PM CONTROL SYSTEM PTE LTD 107,152.00 | CCC-14 102813961 MAN DISEL SAS 802,273.00 ee CCC-15 103813821 CORP 49,833.00 CCC-16 104522092 TECHNOMARINE CO LTD 961,944.00 — CCC-19 104984582 _| MITSUBISHICORPORATION. | —si[ 461,599.00 CCC-20 104522241 | FUJI TRADING CO LTD 101,015.00 CCC-21 104984512 _| FUJI TRADING CO LTD 703,729.00

CCC-22 104984546 FZE

L 2,486,778.00 CCC-23 104984616 | 2,323,132.00 857.14 857.14 -

EASTERN ENERGY RESOURCES

FZE

CCC-24

CCC-25

CCC-26

CCC-27

CCC-28

CCC-29

CCC-30

CCC-31

CCC-32

CCC-33

CCC-34

CCC-35

CCC-36

CCC-37

CCC-38

CCC-39

CCC-40

CCC-41

CCC-42

CCC-43

CCC-44

CCC-45

CCC-46

CCC-47

CCC-48

CCC-49

CCC-50

CCC-51

Grand Total

EASTERN ENERGY RESOURCES

104984756

FZE

EASTERN ENERGY RESOURCES

104984747

FZE

EASTERN ENERGY RESOURCES

17175445

FZE

EASTERN ENERGY RESOURCES

107336083

FZE

108861103

I & N INTERNATIONAL CORP

107336092

HOLCIM TRADING PTE L TO

SN 107336047

Chris Marine AB

SN 108999913

Eastern Energy Resources Fze

SN 108999947

Eastern Energy Resources Fze

SN 108861207

Eastern Energy Resources Fze

SN 108861137

Eastern Energy Resources Fze

SN 107336257

Eastern Energy Resources Fze

SN-108999825

Eon Far East Limited

SN-108999807

Fuji Tradina Co Ltd

SN-108861024

I and N International Corp

SN-108861173

I and N International Corp

SN-108999782

I and N International Corp

SN-108999764

I and N International Corp

SN 108999877

PT Insani Baraperkasa

SN 108999886

Sun Machinery & Trading Inc

SN 107336144

Sun Machinery & Trading Inc

SN 108861234

Technomarine Co Ltd

SN 111872241

Eastern Energy Resources Fze

SN 111872223

Yashima and Co Ltd

SN 101683294

I and N International Corp_

SN-108999931

I and N International Corp

SN 108861191

Sun Machinery & Trading Inc

SN 108999895

Eastern Energy Resources Fze

2 496 606.00 2 393 959.00 p 2 539 536.00 2 503 151.00 34 221.00 4 521 111.00 p 48 183.00 2 343 144.00 2 426 488.00 2 540 278.00 2 553 446.00 2 611 779.00 5 588 062.00 238 927.00 9 033.00 29 612.00 48 638.00 59 378.00 3 138 963.00 81 092.00 393 027.00 175 625.00 2 240 191.00 6 763 191.00 6 523.00 31 038.00 178 775.00 2 370 830.00 subtotal ~1 543,647.00 ~ 1096ti818.00 ~ 9. 598. 019.00 33.876,223.00 Total per quarter 1,810 976.39 13 619 702.59 10 350 659.13 p 44,056 787.98 p 69,838 126.09 Meanwhile, Section 110(A) of the NIRC of 1997, as amended, and implemented by Section 4.110-3 of RR No. 16-2005, provides that the input VAT claim on capital goods purchases attributable to zero- rated sales may be claimed either in full during the month of acquisition, or spread over a period of time, depending on the aggregate acquisition cost of the capital goods in the calendar month. If the aggregate acquisition cost exceeds P1,000,000.00, the claim for input tax should be spread over sixty (60) months or the estimated useful life of the capital goods, whichever is shorter. On the other hand, if aggregate acquisition cost does not exceed P1,000,000.00, the total input taxes shall be allowed as credit/refund in the month of acquisition.

However, petitioner failed to provide documents in support of its purchases of capital goods exceeding P1,000,000.00 from previous period, nor did the latter identify which among the substantiated domestic purchases of goods and services pertained to the current purchases of capital goods exceeding P1,000,000.00. Hence, the__ amortized input VAT relating thereto in the amount of P1,345,174.71 shall also be disallowed.

Therefore, out of petitioner's reported input

VAT

of P207,584,778.89 for CY 2010, only the amount of P123,584,633.81 represents petitioner's valid input VAT, computed as follows: 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr

Total

Input tax per Returns p 45,772,154.50 p 47,220,171.04 p 44,065,265.53 p 70,527,187.82 p 207,584,778.89

Less:

Disallowances

Per !CPA's findings 4,951,630.97 4,442,542.74 1,647,381.44 1,775,289.13 12,816,844.28 Per Court's further verification 1,810,976.39 13,619,702.59 10,350,659.13 44,056,787.98 69,838,126.09

Unsupported Amortized Input

VAT on purchase of capital goods 327,455.43 327,455.41 348,468.60 341,795.27 1,345,174.71 exceeding P1M

Total Disallowances

p 7, 090,062.79 p 18,389_700.74 p 12,346,509.17 p 46,173,872.38 p 84,000,145.08

Valid Input VAT

p 38,682,091.71 p 28,830,470.30 p 31,718,756.36 p 24,353,315.44 p 123,584,633.81 However, considering that petitioner is engaged both in taxable sales subject to zero percent (0°/o) and twelve percent (12°/o) rates, as well as exempt sales, and its input VAT cannot be directly or entirely attributed to any of the transactions, the Court shall allocate the valid input VAT proportionately on the basis of the volume of its sales. Thus: lstQtr 2010 2nd Qtr 2010 3rd Otr 2010 4th_Q_tr 2010

Total

Zero-Rated Sale _{A)

p 403 664 957.64 p 378 881 751.80 p 489 216 287.95 p 523 898 827.74 p 1 795 661 825.13

VAT Sales (B)

323 285 336.68 254 653 568.27 269 413 258.33 164 996 139.32 1 012 348 302.60

Sale to Government (C)

12 567 124.40 15 843 946.40 19 426 859.00 15 062 327.60 62 900 257.40

Exempt Sales (OJ

1 217 768.43 678 481.14 1 715 904.62 1 576 163.82 5 188 318.01

Total Sales (E)

p 740 735 187.15 p 650 057,747.61 p 779 772 309.90 p 705 533,458.48 P2 876,098 703.14 lstQtr 2010 2nd Otr 2010 3rd Otr 2010 4thQtr 2010

Total

Substantiated Input VAT (F)

p 38 682 091.71 p 28 830 470.30 p 31 718 756.36 p 24 353 315.44 p 123 584 633.81

Allocation:

Zero-Rated Sale 1G=(A/E x F)] p 21 079 874.67 p 16 803 644.19 p 19 899 824.66 p 18 083 725.52 p 75 867 069.05 VAT Sales [H=(B/E x F)] 16 882 353.18 11 294 046.05 10 958 908.64 5 695 269.27 44 830 577.14 Sale to Government (C/E x F) 656 270.51 702 689.00 790 225.30 519 915.27 2 669 100.07 Exempt Sales (!JD x F) 63 593.35 30 091.07 69 797.76 54 405.38 217 887.55

Total

p 38,682 091.71 p 28 830,470.30 p 31,718 756.36 p 2~353 315.44 p 123/584 633.81 Since petitioner's input VAT allocated to VATable sales in the respective amounts of P16,882,353.18, P11,294,046.05, P10,958,908.64 and P⁵,695,269.27 for the first, second, third and fourth quarters of CY 2010 is not enough to cover its output VAT liability in the amounts of P38,794,240.40, P30,558,428.19, P32,329,591.00 and P19,799,536.72 for the first, second, third ancb_ fourth quarters of CY 2010, respectively, the substantiated input VAT attributable to zero-rated sales shall be utilized against the remaining output VAT of P21,911,887.22, P19,264,382.14, P21,370,682.36 and P14,104,267.45 for the first, second, third and fourth quarters of CY 2010, respectively.

Apparently, petitioner has no excess input VAT for the first, second and third quarters of CY 2010. While, for the fourth quarter of CY 2010, petitioner has excess input VAT of P3,979,458.07 which can be attributed to the entire amount of P523,898,827. 74 zero-rated sales declared by petitioner in its Quarterly VAT Return for the fourth quarter of the same year, to wit:

1st Qtr 2010 2nd Qtr 2010 Output tax on VAT Sales p 38 794,240.40 p 30 558,428.19 Less: Input VAT allocated to

VAT Sales [H)

16 882L353.18 11 294,046.05 Remaining output tax p 21 911,887.22 p 19 264 382.14 Less: Input VAT allocated to zero-rated sales {Gj_ 21 079 874.67 16 803 644.19 Output tax still due/(Excess Input VAT) p 832,012.55 p 2,460,737.95 Petitioner had zero-rated or effectively zero-rated sales for the fourth quarter of taxable year2010 3rd _Qtr 2010 4th Qtr 2010 p 32,329 591.00 p 19 799 536.72 10 958 908.64 5 695,269.27 p 21 370 682.36 p 14 104 267.45 19 899 824.66 18 083 725.52 p 1,470,857.70 p (3,979,458.07) Petitioner is duly registered with the Securities and Exchange Commission (SEC) and is engaged in the business of acquiring, owning, rehabilitating, maintaining and operating coal-fired and oil-fired electrical generation facilities. 57 As a generation company, petitioner has been granted by the Energy Regulatory Commission (ERC) with the authority to operate its generation facilities, under Certificate of Compliance No. 09-11-GXT 61-0066.58 Petitioner asserts that it is engaged in zero-rated sales as it sells and supplies electric power to Philippine Economic Zone Authority (PEZA) registered enterprise, Board of Investments (BOI) registered enterprise, and other entities whose purchases from local suppliers are entitled to VAT zero-rating. a- 57 Exhibits "A" and "B".

5a Exhibits "C" to "C-1".

For the fourth quarter of CY 2010, petitioner has allegedly sold and supplied electric power to Balamban Enerzone Corporation (BEC), a VAT-registered entity duly registered with the PEZA59, and Carmen Copper Corporation (CCC), a VAT-registered entity duly registered with

the BOI60•

Accordingly, the transactions of PEZA and BOI-registered entities with local suppliers of goods and services, such as herein petitioner, qualifiled for VAT zero-rating pursuant to Sections 106(A)(2)(a)(S) and 108(8)(3) of the NIRC of 1997, as amended, which explicitly provide: "SEC. 106. Value-added Tax on Sale of Goods or Properties. -

(A)

Rate and Base of Tax.- x x x

XXX

XXX

XXX

(2) The following sales by VAT-registered persons shall be subject to zero percent (0°/o) rate: (a) Export Sales. -The term 'export sales' means:

XXX

XXX

XXX

(5) Those considered export sales under Executive Order No. 226, otherwise known as the Omnibus Investment Code of 1987, and other special laws; and" "SEC. 108. Value-added Tax on Sale of Services and Use or Lease of Properties. -

XXX

XXX

XXX

(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°/o) rate:~ 59 Exhibits "H" to "H-6" and "1". &a Exhibits "G-1" to "G-3".

XXX

XXX

XXX

(3) Services rendered to persons or entities whose exemption under special laws or international agreements to which the Philippines is a signatory effectively subjects the supply of such services to zero percent (0°/o) rate;" Furthermore, pertinent provisions of Revenue Regulations (RR) No. 16-2005, as amended, state: "SEC. 4.106-5. Zero-Rated Sales oF Goods or Prooerties. - x x x The following sales by VAT-registered persons shall be subject to zero percent (0°/o) rate:

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

XXX

XXX

XXX

(5) Transactions considered export sales under Executive Order No. 226, otherwise known as the Omnibus Investments Code of 1987, and other special laws.

XXX

XXX

XXX

For purposes of zero-rating, the export sales of registered export traders shall include commission income. The exportation of goods on consignment shall not be deemed export sales until the export products consigned are in fact sold by the consignee; and Provided, finally, that sales of goods, properties or services made by a VAT- registered supplier to a BOI -registered manufacturer/producer whose products are 100°/o exported are considered export sales. A certification to this effect must be issued by the Board of Investment (BOI) which shall be good for one year unless subsequently re- issued by the BOI.,A-

XXX

XXX

XXX

(c) 'Sales to Persons or Entities Deemed Tax- exempt under Special

Law

or

International

Agreement'. -Sales of goods or property to persons or entities who are tax-exempt under special laws, e.g. sales to enterprises duly registered and accredited with the Subic Bay Metropolitan Authority (SBMA) pursuant to R.A. No. 7227, sales to enterprises duly registered and accredited

with the Philippine Economic Zone Authority (PEZA) or

international agreements to which the Philippines is signatory, such as, Asian Development Bank (ADB), International Rice Research Institute (IRRI), etc., shall be effectively subject to VAT at zero-rate." "SEC. 4.108-5. Zero-Rated Sale of Services. -

(a) In general. -A zero-rated sale of service (by a VAT-registered person) is a taxable transaction for VAT purposes, but shall not result in any output tax. However, the input tax on purchases of goods, properties or services related to such zero-rated sale shall be available as tax credit or refund in accordance with these Regulations.

(b) Transactions Subject to Zero Percent (0°/o) VAT Rate. - The following services performed in the Philippines by a VAT-registered person shall be subject to zero percent (0°/o) VAT rate:

XXX

XXX

XXX

(3) Services rendered to persons or entities whose exemption under special laws or international agreements to which the Philippines is a signatory effectively subjects the supply of such services to zero percent (0°/o) rate;" Based on the foregoing, petitioner's sales of services to BEC and CCC, which are entities duly registered with PEZA and BOI, respectively, are subject to zero percent (0°/o) VAT rate pursuant to Section 108(B)(3) of the NIRC of 1997, as amended.~ To prove that petitioner had zero-rated sales for the said fourth quarter of CY 2010, petitioner presented various sales invoices and official receipts (OR)61 issued to BEC and CCC. Upon examination of the supporting invoices and ORs, the Court finds that the amount of P13,589,501.31 representing petitioner's sales to BEC and CCC, are not covered by VAT zero-rated ORs, thus, shall be denied VAT zero-rating, to wit:

Amount per

Amount

Exhibit

OR No.

schedule62

Amount per OR

Disallowed

EEE-208

2273 p 18 302 479.34 p 12 726 717.57 p 5 575 761.77

EEE-232

2285 137 912 255.16 129 898 515.62 8,013,739.54

Total

p 13,589,501.31 Likewise, petitioner asserts that during the same period, it sold and supplied electric power to a VAT-registered entity, Cebu Electric Cooperative III (CEBECO III), whose electric power was ultimately distributed to BEC and CCC. Allegedly, portions of petitioner's energy fee billing to CEBECO III were pass through charges and directly attributable to BEC and CCC. Thus, petioner is also of the considered view that its sales to CEBECO III are, likewise, considered as zero- rated sales following Revenue Memorandum Circular (RMC) No. 61-05 dated October 27, 2005.

However, the Court does not subscribe to petitioner's postulation that its sales to CEBECO III are subject to zero-rating since the latter is a non-PEZA-registered nor a SOl-registered entity. Consequently, petitioner's sales to CEBECO III for the fourth quarter of CY 2010 in the total amount of P34,689,126.77 shall likewise be disallowed, to wit:

Exhibit

No.

OR No.

OR Date

Amount

EEE-210

2494 27-0ct-10 p 12 168,778.25

EEE-217

2498

19-Nov-10

1~593 201.97

EEE-229

2511

22-Dec-10

10,927 146.55

Total

p 34,689,126.77 Thus, out of the total declared zero-rated sales of P523,898,827.74 for the fourth quarter of CY 2010, only the amountca

of P475,620,199.66 represents petitioner's valid zero-rated sales, as computed below:

Zero-Rated Sales per Returns

Less: Disallowances on:

Sales to BEC & CCC

Sales to CEBECO III

Valid Zero-Rated Sales

Petitioner is entitled to a partial refund of its excess input VAT attributable to valid zero-rated sales p 523 898 827.74 13 589 501.31 34 689 126.77 48 278,628.08 p 475,620,199.66 As earlier discussed, petitioner has no excess input VAT for the first, second and third quarters of CY 2010. While, for the fourth quarter of CY 2010, petitioner has excess input VAT of P3,979,458.07 which can be attributed to the entire amount of P523,898,827. 74 zero- rated sales declared by petitioner in its Quarterly VAT Return for the fourth quarter of the same year. However, only the input VAT of P3,612, 740.75 is attributable to the valid zero-rated sales of P475,620,199.66, as computed below: Excess Input Tax attributable to zero-rated sales p 3 979 458.07

Divided by Declared Zero-Rated Sales

p 523 898 827.74

Multiply by Valid Zero-Rated Sales

p 475 620 199.66 Refundable Input VAT attributable to Zero-Rated Sales p 3,612,740.75 Although the claimed input VAT was carried-over by petitioner in its Quarterly VAT Return for the first quarter of 2011 until the third quarter of 201263, the same remained unutilized since it was deducted in the third Quarterly VAT Return of 2012, as "VAT Refund/TCC claimed'164 from the total available input tax of P174,303,476.4865• Thus, the claimed input taxes for the fourth quarter of CY 2010 could not have been carried-over/utilized in the succeeding fourth quarter of 2012.

WHEREFORE, premises considered, the Petitions for Review docketed as CTA Case Nos. 8450, 8512, and 8547 covering petitioner's~

claims for refund for the first, second and third quarters, respectively, are denied for lack of merit.

On the other hand, the Petition for Review docketed as CTA Case No. 8596 is PARTIALLY GRANTED. Accordingly, respondent is ordered to refund the amount of P3,612,740.75 in favor of petitioner representing the latter's excess input VAT attributable to zero-rated sales/receipts for the fourth quarter of CY 2010.

WE CONCUR:

~~C-~~~/~4

tf'UANITO C. CASTANED,(,JR.

Associate Justice

~ CAESAR A. CASANOVA

Associate Justice

c~·:;:~ CATHERINET.MANAHAN

Associate Justice

CERTIFICATION

Pursuant to Article VIII, Section 13 of the Constitution, 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.

~~c-~~~ Q JtfANITO c. CASTANEDAfJR:

Acting Presiding Justice