Toledo Power Company vs. Commissioner of Internal Revenue

DECISION

CASTANEDA, JR., J.:

STATEMENT OF THE CASE

This case involves a claim for refund in the amount of P60,067,141.05 filed by Toledo Power Company, allegedly representing its unutilized input value-added tax (VAT) related to its zero-rated sales for the four quarters of taxable year 2012.

STATEMENT OF FACTS

Petitioner Toledo Power Company is a partnership duly registered with the Securities and Exchange Commission (SEC), with ~

Company Registration No. AP094-900. 1 Under its Restated and Amended Agreement of General Partnership, petitioner is engaged in the business of acquiring, owning, rehabilitating, maintaining and operating the Sangi coal-fired and oil-fired electrical generation facility located in Sangi, Toledo City, Cebu and the Carmen diesel- fueled electric generation facility located in Barangay Don Andres Soriano, Toledo City, Cebu. 2 As a generation company, petitioner was granted by the Energy Regulatory Commission (ERC) with the authority to operate its generation facilities. 3 It is likewise registered with the Bureau of Internal Revenue (BIR) as a VAT taxpayer with Taxpayer Identification Number (TIN) 003-883-626-000 per BIR Certificate of Registration No. 2RC0000074406.4 On the other hand, respondent is the duly appointed Commissioner of the BIR who has the power to decide disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties imposed in relation thereto or other matters arising under the National Internal Revenue Code (NIRC) or other laws or portions thereof administered by the BIR. He holds office at 5th Floor, BIR National Office Building, Agham Road, Diliman, Quezon City.

On November 29, 2013, petitioner filed with the BIR Revenue District Office No. 123 an administrative claim for refund in the total amount of P60,067,141.05, allegedly representing its unutilized input VAT related to its zero-rated sales/receipts for the 1st to 4th quarters of taxable year 2012.5 In view of respondent's inaction on its protest, petitioner filed the instant Petition for Review before this Court on March 31, 2014. Respondent filed his Answer6 on May 28, 2014 and interposed special and affirmative defenses, alleging, among others, that petitioner must prove its compliance with the prescribed checklist of f.--

requirements provided under Revenue Memorandum Order No. 53- 98; that petitioner failed to prove that it has submitted the complete documents to substantiate its administrative claim for refund, hence, the instant petition was prematurely filed with the Court; that petitioner's alleged claim for refund is subject to administrative routinary investigation/examination by the BIR; that the instant petition should not be given due course for lack of jurisdiction since petitioner failed to exhaust all administrative remedies before elevating this case to this Court; and that 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. A Notice of Pre-Trial Conference was issued by the Court on May 29, 2014, setting the case for pre-trial conference on July 3, 20147, but was reset to July 31, 20148, upon respondent's motion9, and later reset to August 28, 201410• Accordingly, petitioner's Pre- Trial Brief11 was filed on June 25, 2014; while respondent's Pre-Trial Brief12 was filed on July 21, 2014. Pre-trial conference ensued. Meanwhile, upon petitioner's motion13, this Court commissioned Mr. Joseph Cedric V. Calica of AMC & Associates, as Independent Certified Public Accountant (ICPA) for the case. 14 The parties submitted their Joint Stipulation of Facts and Issues15 on September 17, 2014. Subsequently, the Court issued a Pre-Trial Order16 on September 24, 2014, approving and adopting the parties' joint stipulations and the pre-trial was deemed terminated. }i-

During trial, petitioner presented (¹) Ms. Edita C. Encarnacion17, petitioner's Assistant Vice President - Accounting; (²) Mr. Rolando L. Vicente18, Finance Manager of Cebu Electric Cooperative Inc. III, purchaser of electric power sourced from petitioner; (³) Mr. Joseph Cedric V. Calica19, the ICPA; (⁴) Isidito Camota Decina20, Head of the Dispatch Group of petitioner; and (⁵) Bernadette Ann V. Policarpio2\ legal counsel of Global Business Power Corporation, petitioner's ultimate parent company, as its witnesses. Petitioner filed its Formal Offer of Evidence22 on September 3, 2015 and Supplemental Formal Offer of Evidence23 on February 9, 2016. In the Resolution24 dated March 29, 2016, the Court admitted all of petitioner's evidence. On the other hand, respondent manifested that he has no witness to present. 25 The case was submitted for decision on June 29, 201626 considering petitioner's Memorandum27 filed on June 24, 2016 and respondent's Manifestation28 filed on June 23, 2016, stating that he is adopting his Answer as his memorandum.

STATEMENT OF ISSUES ~

The parties agreed on the following issues for the Court's resolution: 29 Joint Issue:

Whether petitioner is entitled to a claim for refund in the total amount of P60,067,141.05, representing unutilized VAT input taxes for the 1st to 4th quarters of the taxable year 2012. Additional Issues for Petitioner: A. Whether petitioner is a VAT-registered taxpayer. B. Whether petitioner is engaged in zero-rated sales. C. Whether the input taxes are due or paid and have not been applied against output taxes during the quarter and in the succeeding quarters.

D. Whether the input tax being claimed is attributable to zero- rated sales.

E. Whether the instant claim complies with the period for claiming a refund under Section 112 of the National Internal Revenue Code (NIRC) of 1997, as amended. DISCUSSION/RULING Petitioner anchors its claim for refund/tax credit of its unutilized input VAT attributable to its zero-rated sales/receipts on Section 112, in relation to Section 108(8)(3), of the NIRC of 1997, as amended. Section 112 of the NIRC of 1997, as amended, allows the refund or tax credit of unutilized excess input VAT attributable to zero-rated or effectively zero-rated sales. Subsections (A) and (C) thereof provide that: 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 J't-

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 8angko Sentral ng Pilipinas (8SP): Provided, further, That where the taxpayer is engaged in zero-rated or effectively zero-rated sale and also in taxable or exempt sale of goods or properties or services, and the amount of creditable input tax due or paid cannot be directly and entirely attributed to any one of the transactions, it shall be allocated proportionately on the basis of the volume of sales: Provided, finally, That for a person making sales that are zero-rated under Section 108(8)(⁶), the input taxes shall be allocated ratably between his zero-rated and non-zero-rated sales. 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. fl-

Pursuant to the above-quoted provisions, in order to be entitled to a refund/tax credit of excess input VAT attributable to zero-rated or effectively zero-rated sales, the following requisites must be complied with:

1. the taxpayer-claimant must be VAT-registered;

2. there must be zero-rated or effectively zero-rated sales;

3. input taxes were incurred or paid;

4. such input taxes are attributable to zero-rated or effectively zero-rated sales;

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

6. the claim was filed within the prescriptive period. The Court shall first determine whether petitioner complied with the sixth requisite.

Petitioner's and judicial timely filed administrative claims were Pursuant to the above-quoted Section 112(A), the application for tax credit certificate/refund of input VAT must be filed within two years after the close of the taxable quarter when the zero-rated or effectively zero-rated sales were made. Thus, petitioner's last day for filing of its administrative claim for the four taxable quarters of calendar year (CY) 2012 fell on the following dates: Last Day for Filing Period Covered Administrative Claim January 1 to March 31, 2012 (1st Quarter) March 31, 2014 April 1 to June 30, 2012 (2nd Quarter) June 30 2014 July 1 to Sept. 30, 2012 (3rd Quarter) September 30 2014 October 1 to Dec. 31, 2012 (4tnQuarter) December 31, 2014 Evidently, petitioner timely filed with the BIR Large Taxpayers Division - Cebu, Revenue District Office No. 123 its administrative claim, together with the supporting documents, on November 29, 2013.

30 l'-

erA case No. 8792

As to the timeliness of petitioner's judicial appeal, Section 112(C) of the NIRC of 1997, as amended, states the time requirements for filing a judicial claim for the refund or tax credit of input VAT. The legal provision speaks of two periods: the period of 120 days, which serves as a waiting period to give time for the CIR to act on the administrative claim for a refund or credit; and the period of 30 days, which refers to the period for filing a judicial claim with the CTA.31 Applying Section 112(C), respondent should have acted on petitioner's claim for tax credit certificate/refund until March 29, 2014, the end of the 120-day period reckoned from November 29, 2013, the date when petitioner is deemed to have made its submission of complete documents to support its application for refund of excess unutilized input VAT. From March 29, 2014, petitioner had 30 days, or until April 28, 2014, within which to file its judicial claim before the Court. Therefore, the instant Petition for Review was timely filed on March 31, 2014. Petitioner is VAT-registered and had zero-rated sales/receipts for the four taxable quarters of CY 2012 Petitioner complied with the first requisite considering that it is a VAT-registered entity with Certificate of Registration No.

2RC0000074406 duly issued by respondent and was assigned with TIN 003-883-626-000. 32 On the second requisite, records show that petitioner is a partnership duly registered with the SEC and is engaged in the business of acquiring, owning, rehabilitating and operating coal-fired and oil-fired electrical generation facilities.33 As a generation company, petitioner was granted by the ERC with the authority to operate generation facilities located in Sangi and Sigpit, Toledo City, )'c-

Cebu under Certificate of Compliance No. 09-11-GXT 61-0066 issued on November 16, 2009.34 Petitioner avers that it is engaged in zero-rated sales as it sells and supplies electric power to entities located in economic zones, such as Philippine Economic Zone Authority (PEZA) or to Board of Investments (BOI)-registered enterprises and to other entities whose purchases from local suppliers are entitled to VAT zero-rating. Indeed, sales of services by a VAT-registered taxpayer, such as herein petitioner, to PEZA-registered entities or SOl-registered 100°/o exporters are subject to zero percent (0°/o) VAT. Pertinent provisions of Section 108(8) of the NIRC of 1997, as amended, state that:

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: 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; (Emphasis supplied) The special law specific to this case is Republic Act (RA) No. 7916, as amended, otherwise known as "The Special Economic Zone Act of 1995". Section 8 of RA No. 7916, as amended, mandates that Jt-

the PEZA shall manage and operate the ecozones as a separate customs territory, thus: SECTION 8. ECOZONE to be Operated and Managed as Separate Customs Territory.- The ECOZONES shall be managed and operated by the PEZA as separate customs territory.

The PEZA is hereby vested with the authority to issue certificates of origin for products manufactured or processed in each ECOZONE in accordance with the prevailing rules of origin, and the pertinent regulations of the Department of Trade and Industry and/or the Department of Finance. Since the Ecozone is viewed as a foreign territory by legal fiction, sales of goods and services made by a VAT-registered person in the Philippine customs territory to an entity registered and operating within the Ecozone are considered exports to a foreign country subject to zero percent (0°/o) VAT. This was elucidated by the Supreme Court in the case of Commissioner of Internal Revenue vs. Toshiba Information Equipment (Phi/s.), Inc.35, to wit: This Court agrees, however, that PEZA- registered enterprises, which would necessarily be located within ECOZONES, are VAT-exempt entities, not because of Section 24 of Rep. Act No. 7916, as amended, which imposes the five percent (5°/o) preferential tax rate on gross income of PEZA-registered enterprises, in lieu of all taxes; but, rather, because of Section 8 of the same statute which establishes the fiction that ECOZONES are foreign territory. xxx An ECOZONE or a Special Economic Zone has been described as - [S]elected areas with highly developed or which have the potential to be developed into agro-industrial, industrial, ~

CfA Case No. 8792 tourist, recreational, commercial, banking, investment and financial centers whose metes and bounds are fixed or delimited by Presidential Proclamations. An ECOZONE may contain any or all of the following: industrial estates (IEs), export processing zones (EPZs), free trade zones and tourist/recreational centers.

The national territory of the Philippines outside of the proclaimed borders of the ECOZONE shall be referred to as the Customs Territory. Section 8 of Rep. Act No. 7916, as amended, mandates that the PEZA shall manage and operate the ECOZONES as a separate customs territory; thus, creating the fiction that the ECOZONE is a foreign territory. As a result, sales made by a supplier in the Customs Territory to a purchaser in the ECOZONE shall be treated as an exportation from the Customs Territory. Conversely, sales made by a supplier from the ECOZONE to a purchaser in the Customs Territory shall be considered as an importation into the Customs Territory. Given the preceding discussion, what would be the VAT implication of sales made by a supplier from the Customs Territory to an ECOZONE enterprise? The Philippine VAT system adheres to the Cross Border Doctrine, according to which, no VAT shall be imposed to form part of the cost of goods destined for consumption outside of the territorial border of the taxing authority. Hence, actual export of goods and services from the Philippines to a foreign country must be free of VAT; while, those destined for use or consumption within the Philippines shall be imposed with ten percent {l0°/o)36 VAT.

(Emphasis supplied) ?r-

With respect to sales by a VAT-registered supplier to a SOl- registered manufacturer/producer, Section 4.106-5 of Revenue Regulations (RR) No. 16-05, as amended by RR No. 04-07, provides: SECTION 4.106-5.

Zero-Rated Sales of Goods or Properties. - xxx 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.

"Considered export sales under Executive Order No. 226" shall mean the Philippine port F.O.B. value determined from invoices, bills of lading, inward letters of credit, landing certificates, and other commercial documents, of export products exported directly by a registered export producer, or the net selling price of export products sold by a registered export producer to another export producer, or to an export trader that subsequently exports the same; Provided, That sales of export products to another producer or to an export trader shall only be deemed export sales when actually exported by the latter, as evidenced by landing certificates or similar commercial documents; Provided, further, That pursuant to EO 226 and other special laws, even without actual exportation, the following shall be considered constructively exported: (1) sales to bonded manufacturing warehouses of export-oriented manufacturers; (2) sales to export processing zones pursuant to Republic Act (RA) Nos. 7916, as amended, 7903, 7922 and other similar export processing zones;

(3) sale to enterprises duly registered and accredited with the Subic Bay Metropolitan Authority pursuant to RA ,9t-

7227; (4) sales to registered export traders operating bonded trading warehouses supplying raw materials in the manufacture of export products under guidelines to be set by the Board in consultation with the Bureau of Internal Revenue (BIR) and the Bureau of Customs (BOC); (5) sales to diplomatic missions and other agencies and/or instrumentalities granted tax immunities, of locally manufactured, assembled or repacked products whether paid for in foreign currency or not. 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 HOI-registered manufacturer I 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. (Emphasis supplied) Clearly, sales of services by a VAT-registered taxpayer, such as herein petitioner, to entities located in Ecozones and to SOl- registered manufacturers/producers whose products are 100°/o exported are considered "export sales" subject to zero percent {0°/o) VAT rate pursuant to Section 108(8)(3) of the NIRC of 1997, as amended, and Section 4.106-5 of RR No. 16-05. In its Quarterly VAT Returns for the four taxable quarters of CY 2012, petitioner reflected an amount of P1,781,612,046.76 zero-rated sales/receipts, broken down as follows: Zero-Rated Exhibit

CY 2012

Sales/Receipts "P-17'' 1st Quarter p 542,930,177.94 "P-18" 2nd Quarter 501,923,964.17 "P-21" 3rd Quarter 430,079,791.55 "P-24" 4th Quarter 306,678,113.10 Total I P1,781,612,046.76l A perusal of petitioner's Schedule of Gross Sales (VATable, Zero-Rated, VAT-exempt and Sales to Government)37 with the related sales invoices, official receipts and credit/debit memos38 shows that the amount of P1,781,612,046.76 treated by petitioner as zero-rated sales/receipts pertains to its sales of electricity to Balamban Enerzone Corporation (BEC), Carmen Copper Corporation (CCC)39, and Cebu Electric Cooperative III (CEBECO III). It was established that BEC is a PEZA-registered entity and CCC is a registered BOI 100°/o exporter as evidenced by the Certifications issued by the PEZA40 and BOI4\ respectively. Thus, petitioner's sales of electricity to BEC and CCC for the four taxable quarters of CY 2012 qualify for VAT zero-rating except for the following sales for the first and fourth quarters in the respective amounts of P167,364,545.29 and P115,377,193.94 which are not covered by VAT zero-rated official receipts (ORs) in accordance with Section 113(A)(2) of the NIRC of 1997, as amended: OR Exhibit No.

Customer 1st Quarter 4th Quarter

BALAMBAN ENERZONE

- - CORPORATION p 8 647 861.37 - 2323

CARMEN COPPER CORPORATION

8 094 882.48 - 2323

CARMEN COPPER CORPORATION

150 621.801.44

BALAMBAN ENERZONE

- 2349 CORPORATION p 7 893 254.29

BALAMBAN ENERZONE

- - CORPORATION 8 959 772.99

BALAMBAN ENERZONE

- 2356 CORPORATION 10 813 211.00 - 2357

CARMEN COPPER CORPORATION

992 722.36 - 2358

CARMEN COPPER CORPORATION

75 905 022.30

BALAMBAN ENERZONE

- 2356 CORPORATION 10 813 211.00 Total P167.364 545.29 P115.377,193.94 With regard to petitioner's sales to CEBECO III, petitioner asserts that since the electricity it sold to CEBECO III was ultimately distributed to BEC and CCC, petitioner's energy fee billings to CEBECO III were pass through charges and directly attributable to /c..

BEC and CCC. Petitioner posits that its sales to CEBECO III are likewise considered as zero-rated sales, citing as basis therefor Revenue Memorandum Circular (RMC) No. 61-05 dated October 27, 2005.

The Court disagrees with petitioner.

The VAT zero-rating contemplated under Section 108(B)(3) of the NIRC of 1997, as amended (in relation to Section 8 of RA No. 7916, as amended) and Section 4.106-5 of RR No. 16-05, as amended pertains only to sales made directly to PEZA-registered entities and BOI-registered 100% exporters. Since CEBECO III is neither a PEZA-registered entity nor a BOI-registered 100% exporter, the following sales to CEBECO III do not qualify for VAT zero-rating:

| Re | astouarter _ 2nd Quarter 3rd Quarter 4th Quarter | 2717 _| 2717 P-105-139 P-105-152 | 2732 | 6,576,566.19| = Cd P-105-153 | 2733 | —8,818,61494[ P-105-173 | 2744 | —s⁷,470,878.44[ Ts P-105-138 P-105-173 P-105-191 | 2753 | ———sY 6,752,768.35 P-105-192 | 2754 | = ss sd SS —5,545,934.36 | P-105-213 | 2771 | ss isd 7, 829,375.98 | P-105-213 | 2771 | CTS «5982,481.37 | P-105-356 | 2786 | —=—————«|——9, 506,165.89 | P-105-255 | 2797 | CT t—(“‘ti‘“‘C‘*r «454,092.05 P-105-256 | 2798 | | 5,856,012.52 pP-105-256 | 2798 | | 3,438,606.48 p-105-272 | 2868 | CT s—(Csi‘C‘isr 6,018,956.23 P-105-273 P-105-306 2879 P-105-306 a 56,268.11 P-105-306 | 2879 7,392,333.52 — —— Pe P__7,490,193.92 3,228,804.45

P-105-325 | 2896

P-105-325 P-105-344 | 2900 9,525,723.51

2924 8,547,142.00

Total | P44,263,519.37 | P35,616,725.95 | P29,490,510.87 | P28,791,863.88 Therefore, only sales/receipts amounting to P1,360,707,687.46, as computed below, qualify for VAT zero-rating:

3rd Quarter 4th Quarter Total Total Declared Zero-Rated Sales/Receipts Per Return P_ 542,930,177.94 | P 501,923,964.17 |_ P 430,079,791.55 | P 306,678,113.10 | P 1,781,612,046.76 Less: Disallowances He

Sales not supported by official receipts 167 364 545.29 Sales to

CEBECO III

44 263 519.37 Total Allowed - - 35 616 725.95 29 490 510.87 Zero-Rated Sales P331,302,113.28 P466,307,238.22 P400,589,280.68 Petitioner incurred/paid excess input taxes attributable to its valid zero-rated sales/receipts for the subject periods and said input taxes were not applied against any output VAT liability 115 377 193.94 282,741 739.23 28 791 863.88 138,162 620.07 P162,509,055.28 P1,360,707 ,687.46 After resolving that petitioner had VAT zero-rated sales/receipts for the four taxable quarters of CY 2012, the Court shall now determine the amount of unutilized excess input VAT attributable thereto.

In its 2012 Quarterly VAT Returns, petitioner reported the following input taxes totaling P148,611,453.13 arising from its amortization of input VAT on purchases of capital goods exceeding P1Million, purchases of capital goods not exceeding PlMillion, domestic purchases and importation of goods other than capital goods and domestic purchases of services, broken down as follows: 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter

CY 2012

(Exhibit "P-17") (Exhibit ''P-18'} (Exhibit ''P-21 '?

(Exhibit ''P-24'/ Input Tax Deferred on capital Goods exceeding P1Million from previous quarter p

1970 077.71

p 2 000 868.29 p 1,805 870.12 p 1 918 040.17 p 1 970 077.71 Add:

Input Tax on Capital Goods exceeding P1Million purchased this quarter 219 516.85 296 407.56 943 516.83 1 459 441.24 Total Unamortized Input Tax on Capital Goods exceeding P1Million p 2 189 594.56 p 2 000,868.29 p 2 102,277.68 p 2 861 557.00 p 3 429 518.95 Less:

Input Tax on Purchases of Capital Goods exceeding P1Million deferred for the succeeding 2 000 868.29 1 805 870.12 1 918 040.17 2 649 506.67 2 649 506.67 period

Amortization of Input Tax on Purchases of Capital Goods exceeding P1Million p 188726.27 p 194 998.17 p 184237.51 p 212 050.33 p 780 012.28 Add: Input Tax on Current Purchases Purchases of capital goods not exceeding P1Million 94 088.66 70081.71 - 164170.37 Domestic purchases of goods other than capital gpods 2 339408.36 4 757.874.47 7.658181.33 17.191 706.76 31 947.170.92 Importation of goods other than capital qoods 25882 597.00 2409980.00 2,782 002.00 26,786 411.00 57.860 990.00 Domestic purchases of services 6543893.02 15 030 906.91 15 657. 404.00 20,626 905.63 57.859109.56 Total Exhibit P-106-1 P-106-2 P34,954,624.65 P22,487,848.21 P26,351,906.55 P64 817 073.72 P148,611,453.13 In support of the said input VAT, petitioner presented among others, its Schedule of Domestic Purchases of Goods and Services and Corresponding Input Tax42, Schedule of Importation of Goods and Corresponding Input Tax43 and the related suppliers' official receipts and sales invoices, Bureau of Customs (BOC) Import Entry and Internal Revenue Declarations (IEIRDs), Statements of Settlement of Duties and Taxes (SSDTs) and Temporary Assessment Notices44 which were all examined by the Court-commissioned ICPA, Mr. Joseph Cedric V. Calica. Based on the ICPA's findings, petitioner's reported input VAT in the aggregate amount of P17,361,231.47 shall be disallowed for not being properly substantiated by VAT invoices or receipts as prescribed under Sections 110(A), 113(A) and (B), 237, and 238 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 RR No. 16-05, as amended:

Exceptions No sales invoices/official receipts submitted by the petitioner Supporting documents are not in the period covered by the claim 42 Exhibit "P-102".

43 Exhibit "P-103".

p 1st Quarter 2nd Quarter 3rd Quarter 504 527.89 p 42 618.20 p 1 439 832.31 2 319 037.59 62 574.97 705 319.74 44 Exhibits "P-102-1" to "P-102-3465" and "P-103-1" to "P-103-66". 4th Quarter

CY 2012

p 4 458 124.37 p 6 445 102.77 219 373.66 3,306 305.96

No valid supporting P-106-3 documents - 10 827.86 852 707.50 6 318 626.46 7 182 161.82 Vat amount per schedule does not tally with the amount indicated in the supporting P-106-4 document 11,965.38 - - - 11 965.38 Incorrect/incomplete name of the P-106-5 petitioner 2,823.60 - 181956.85 139.29 184 919.74 No TIN of the P-106-6 SUPPlier - 12 429.60 - - 12 429.60 No TIN of the P-106-7 petitioner - 51448.02 4 687.79 3 892.50 60 028.31 Incorrect or no address of the P-106-8 Company - 19 294.80 - - 19 294.80 VAT not separately shown in the P-106-9 documents 2 057.14 4 578.46 6 319.15 126 068.34 139 023.09 Total P2,840 411.60 P203,771.91 P3,190,823.34 P11,126,224.62 P17 361,231.47 Exhibit In addition, the Court finds that the following input VAT should likewise be disallowed for failure to meet the substantiation requirements prescribed under the aforementioned VAT law and regulations, detailed as follows: Invoice/ Input VAT Claim (In Php) OR No.

Supplier 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter

1. Domestic purchases of goods and services Input VAT supported by DRs pre-printed/stamped with "NOT A VALID SOURCE OF INPUT TAX"

MAJESTIC SHIPPING

P-102-75 130 CORPORATION 246 016.60 AMERICAN P-102-1720 16723-A TECHNOLOGIES INC.

331.71

MAJESTIC SHIPPING

P-102-123 0128A CORPORATION 248 401.96 ELASCO INTERNATIONAL P-102-1728 16848 CORPORATION 5 400.00

MAJESTIC SHIPPING

P-102-178 108 CORPORATION 178 539.69

MAJESTIC SHIPPING

P-102-179 113 CORPORATION 252 187.44

MAJESTIC SHIPPING

P-102-180 116A CORPORATION 257 260.20 MICROGENESIS P-102-2153 50624

BUSINESS SYSTEMS

1157.14

MAJESTIC SHIPPING

P-102-2171 138-A CORPORATION 249 863.49

MAJESTIC SHIPPING

P-102-353 152 CORPORATION 249 292.50

UL TRACOTE PAINTS &

COATINGS P-102-2222 3764 CORPORATION 9 647.18

MAJESTIC SHIPPING

P-102-2298 148 CORPORATION 257 467.05 P-102-451 144

MAJESTIC SHIPPING

251161.27 Exhibit P-102-727 P-102-836 P-102-2083 P-102-1545 erA Case No. 8792

Invoice/ OR No.

Supplier CORPORATION

THE FLOWER PLANT BY

694 WTU

UL TRACOTE PAINTS &

COATINGS 4075 CORPORATION

UL TRACOTE PAINTS &

COATINGS 4509 CORPORATION

MAJESTIC SHIPPING

162-A CORPORATION Subtotal Input VAT SUJ, 'POrted by TIN-V invoices/DRs

ALAS CUSTOMS

P-102-85 01659 BROKERAGE

ALAS CUSTOMS

P-102-85 01659 BROKERAGE

ALAS CUSTOMS

P-102-86 01663 BROKERAGE

ALAS CUSTOMS

P-102-86 01663 BROKERAGE

ALAS CUSTOMS

P-102-86 01663 BROKERAGE

ALAS CUSTOMS

P-102-87 01661 BROKERAGE

ALAS CUSTOMS

P-102-87 01661 BROKERAGE

ALAS CUSTOMS

P-102-87 01661 BROKERAGE

ALAS CUSTOMS

P-102-87 01661 BROKERAGE

ALAS CUSTOMS

P-102-88 01668 BROKERAGE

ALAS CUSTOMS

P-102-89 01669 BROKERAGE

ALAS CUSTOMS

P-102-90 01670 BROKERAGE

ALAS CUSTOMS

P-102-91 01662 BROKERAGE

ALAS CUSTOMS

P-102-91 01662 BROKERAGE

ALAS CUSTOMS

P-102-92 01667 BROKERAGE

ALAS CUSTOMS

P-102-149 01657 BROKERAGE

ALAS CUSTOMS

P-102-149 01657 BROKERAGE

ALAS CUSTOMS

P-102-149 01657 BROKERAGE

ALAS CUSTOMS

P-102-149 01657 BROKERAGE

ALAS CUSTOMS

P-102-149 01657 BROKERAGE

ALAS CUSTOMS

P-102-149 01657 BROKERAGE

ALAS CUSTOMS

P-102-150 01656 BROKERAGE

ALAS CUSTOMS

P-102-150 01656 BROKERAGE

ALAS CUSTOMS

P-102-150 01656 BROKERAGE

ALAS CUSTOMS

P-102-151 01655 BROKERAGE P-102-151 01655

ALAS CUSTOMS

Input VAT Claim (In Php) 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter 267.86 24 102.82 33 756.05 248 788.04 1,188137.60 1,018,588.63 24,370.68 282,544.09 2 395.78 1 025.47 788.78 2 113.87 350.42 382.73 756.00 93.98 382.72 4 823.12 6 545.09 13 658.96 382.72 23.21 180.00 334.88 146.88 671.43 1 665.26 88.04 348.00 1 048.60 108.05 2 623.78 819.29 2 235.12 Exhibit P-102-151 P-102-1732 P-102-210 P-102-210 P-102-210 P-102-2151 P-102-528 P-102-529 P-102-549 P-102-552 P-102-1932 P-102-553 P-102-1933 P-102-1934 P-102-1935 P-102-554 P-102-583 P-102-584 P-102-588 P-102-589 P-102-737 P-102-737 P-102-737 P-102-737 P-102-2020 P-102-2020 P-102-907 P-102-908 P-102-908 P-102-908

P-102 -910

P-102-910 P-102-910 P-102-1143 P-102-2119 P-102-1253 P-102-1254 P-102-1302 P-102-1605 P-102-1347

Invoice/ OR No.

Supplier BROKERAGE

ALAS CUSTOMS

01655 BROKERAGE

ALAS CUSTOMS

1644 BROKERAGE

ALAS CUSTOMS

01650 BROKERAGE

ALAS CUSTOMS

01650 BROKERAGE

ALAS CUSTOMS

01650 BROKERAGE

LIANG CHI INDUSTRY

4600 PHILS 0333

MARNO TRADING

0311

MARNO TRADING

0315

MARNO TRADING

0318

MARNO TRADING

0317

MARNO TRADING

0316

MARNO TRADING

321

MARNO TRADING

0319

MARNO TRADING

0312

MARNO TRADING

0325

MARNO TRADING

0326

MARNO TRADING

0327

MARNO TRADING

0324

MARNO TRADING

ALAS CUSTOMS

01693 BROKERAGE

ALAS CUSTOMS

01693 BROKERAGE

ALAS CUSTOMS

01693 BROKERAGE

ALAS CUSTOMS

01693 BROKERAGE 0309

MARNO TRADING

0309

MARNO TRADING

ALAS CUSTOMS

01687 BROKERAGE

ALAS CUSTOMS

01686 BROKERAGE

ALAS CUSTOMS

01686 BROKERAGE

ALAS CUSTOMS

01686 BROKERAGE

ALAS CUSTOMS

1685 BROKERAGE

ALAS CUSTOMS

1685 BROKERAGE

ALAS CUSTOMS

1685 BROKERAGE 371

MARNO TRADING

338

MARNO TRADING

347

MARNO TRADING

355

MARNO TRADING

0335

MARNO TRADING

ALAS CUSTOMS

1701 BROKERAGE 389

MARNO TRADING

Subtotal Input VAT Claim (In Php) 1st Quarter 2nd Quarter 3rd Quarter 673.60 876.73 498.47 71.34 120.00 11,606.40 21 379.29 565.44 3 553.20 278.79 239.14 535.71 218.57 535.71 4 140.00 1 020.00 1 205.28 2 860.71 5 245.71 448.71 459.78 374.24 596.90 257.14 257.14 384.07 528.62 516.00 88.04 390.25 364.28 61.67 46,232.32 11606.40 46,504.39 Input VAT suJ.•ported by invoices/DRs dated outside the period of claim P-102-1718 9107

SEVERO SY LING INC

11 283.08 P-102-1719 9342

SEVERO SY LING INC

7,839.53 4th Quarter 2 008.93 16 714.29 2 149.66 120.64 929.40 495.99 1 680.00 24,098.91

OR No. op | 1st Quarter | 2nd Quarter | 3rd Quarter 4th Quarter P-102-65 03-01805 | INDUSTRIES (PHILS. 10,980.00 P10 2301 AINGMARKENT BL, | _ 28,80}

RBER INDUSTRIAL & |

TRADING P-102-1724 1822 CORPORATION 22,701.85 fi Sutotat ——T52,17946) ee : Input VAT supported only by a Provisional Receipt | P-102-93. | ~— 3670 = AMC& ASSOCIATES, CPA __—=—s20,160.00[ Sr CUd|—“‘CSSC‘isrY Sti Subtotal = dL 20 t60.00| te | - Input VAT supported by TIN-NonVAT invoices/ORs PHILIPPINE

INDEPENDENT POWER

PRODUCERS P-102-1817 500 ASSOCIATION INC 11,396.88 ‘eigen | oe [eee — P-102-508 1732 ENTERPRISE 75.00 | P-102-1190 | 45905 | ISA-CONENTERPRISES | sd 257.14

NATIONAL GRID

N32- CORPORATION OF THE

P-102-1645 0000542_| PHILIPPINES 497.61

NATIONAL GRID

P-102-1715 444 PHILIPPINES 366.14

NATIONAL GRID

N32- CORPORATION OF THE

P-102-1650 0000404 | PHILIPPINES 23.11

N32- CORPORATION OF THE

P-102-1651 0000343 | PHILIPPINES 3,395.84 | tid Stott Te 11,396.88 75.00 4,539.84 Input VAT amount not separately indicated in the invoices/ORs

PRODUCT EQUIPMENT

RESOURCES &

P-102-723 9401 TRADING, INC. 42.22

PRODUCT EQUIPMENT

RESOURCES &

P-102-723 9401 TRADING, INC. 8,023.90

PRODUCT EQUIPMENT

RESOURCES &

P-102-789 9312 TRADING, INC. 42.21

PRODUCT EQUIPMENT

RESOURCES &

P-102-789 9312 TRADING, INC. 8,304.63 Subtotal «|_| Input VAT not covered by the supporting OR P-102-2302 6023 SCB FAO PEMC | tst—t—s—siYE:C 3, 829,981.06 P-102-2302 6023 SCB FAO PEMC fs, 840,974.54 P-102-2302 6023 SCB FAO PEMC 1,462,351.40

P-102-2302 6023 SCB FAO PEMC

307.49 1,852.88 980,731.57

P-102-2318 9805 SCB FAO PEMC

| t—“Ctis*zr

P-102-2302 6023 SCB FAO PEMC P|

| Cid SCB FAO PEMC eee 161,309.85 | | —i‘i‘észr | | sd | | | | P-102-2318 _| Pp

| P-102-2318 | 5805__|

307.49 1,852.88

| P-102-628 | 6954 | SCBFAOPEMC

Exhibit P-102-703 P-102-725 P-102-1922 P-102-775 P-102-775 P-102-775 P-102-775 P-102-2074 P-102-2074

Invoice/ OR No.

Supplier 2238873 GLOBE TELECOM INC.

6723

SCB FAO PEMC

6723

SCB FAO PEMC

JMPM FREIGHT

FORWARDER 879 INTERNATIONAL INC.

JMPM FREIGHT

FORWARDER 879 INTERNATIONAL INC.

JMPM FREIGHT

FORWARDER 879 INTERNATIONAL INC.

JMPM FREIGHT

FORWARDER 879 INTERNATIONAL INC.

PHILIPPINE

ELECTRICITY MARKET

08248 CORPORATION PHILIPPINE

ELECTRICITY MARKET

08248 CORPORATION Subtotal 1st Quarter Exhibit reference does not pertain to the input VAT claim P-102-632 6954

SCB FAO PEMC

P-102-632 6954

SCB FAO PEMC

P-102-632 6954

SCB FAO PEMC

PHILIPPINE

ELECTRICITY MARKET

P-102-2101 7426 CORPORATION

PILIPINAS SHELL

PETROLEUM P-102-1215 650212 CORPORATION

SAN-VIC AGRO-

P-102-2143 504 BUILDERS Subtotal Input VAT claimed twice P-102-2021 6633

MARNIEL MARKETING

PILIPINAS SHELL

669350

PETROLEUM CORP

PILIPINAS SHELL

669349

PETROLEUM CORP

Subtotal Marked exhibit cannot be found from the records MANDAUE INTEGRATED P-102-1631 22580

MANPOWER SERVICES

MANDAUE INTEGRATED P-102-1631 22580

MANPOWER SERVICES

MANDAUE INTEGRATED P-102-1631 22580

MANPOWER SERVICES

MANDAUE INTEGRATED P-102-1631 22580

MANPOWER SERVICES

MANDAUE INTEGRATED P-102-1631 22580

MANPOWER SERVICES

MANDAUE INTEGRATED P-102-1631 22580

MANPOWER SERVICES

Subtotal Input VAT not supported by Invoices/DRs Input VAT Claim (In Php) 2nd Quarter 3rd Quarter 4th Quarter 107.14 1_L_481.76 307.49 2 510.84 166.80 166.80 186.97 664.17 6 156.55 - 1,3SO 397.58 42,813.37 6,820.72 494 140.86 (169 942.99) 79.49 664.17 58 251.84 89 472.00 - - 324,277.36 148388.01 1 350.00 58 448.26 58 448.26 - - 1,350.00 116896.52 3 378.96 1 016.52 836.14 1 082.41 572.13 904.30 - - - 7,790.46

Invoice/ Input VAT Claim {In Php) Exhibit OR No.

Supplier 1st Quarter 2nd Quarter 3rd_Quarter 4th Quarter

ADVANCE SURFACE

PROTECTION - 3082 SPECIALIST 2,206.56

IN NOVE

BN-24 COMMUNICATIONS 4 560.00 - Subtotal - - - 6,766.56

2. Importation of goods Input VAT supported by IEIRD but without a validation of the payment, or Statement of Settlement of Duties and Taxes {SSDT) or Bureau of Customs {IJOC) official receipt

PT KIDECO JA YA

P-103-1 to 2 114960325 AGUNG 4,080 063.00 P-103-12 118730841

KSB SINGAPORE PTE LTC

696 349.00 SUN MACHINERY and P-103-13 to 15 116409413

TRADING INC

16 718.00 P-103-16 to 18 116409465

KSB SINGAPORE PTE LTC

32 066.00 P-103-19 120767963

KSB SINGAPORE PTE LTC

10 760.00 P-103-20 118553757 YASHIMA and CO LTD 156,378.00 P-103-21 to 22 118553741

FUJI TRADING COL LTD

84 431.00 P-103-23 to 25 118553705

IANDN INTL

94 632.00 P-103-26 to 28 120751303

NOMAX LTD

1 552 713.00 P-103-29 to 31 120751303

NOMAX LTD

456 619.00 P-103-32 to 34 118553522

FUJI TRADING CO LTD

221 585.00 121773251

I AND N

P-103-35 to 37 INTERNATIONAL 127,011.00 P-103-38 121773084 PT SION MANDl 2 654,991.00 HWAN TAl CEMENT P-103-39 to 40 123885002

PRODUCTS CO LTD

2 963 129.00 HWAN TAl CEMENT P-103-41 to 43 123884993

PRODUCTS LTD

798.00

PT SION ANUGRAH

P-103-44 to 45 121773102 MANDIRI 2 616 500.00

PT SION ANUGRAH

P-103-48 121773181 MANDIRI 3 530 132.00

FORMOSA HEAVY

INDUSTRIES P-103-55 to 57 018180153 CORPORATION 3 388 641.00

PT SION ANUGRAH

P-103-58 to 60 121853286 MANDIRI 3 521 760.00

PT SION ANUGRAH

P-103-61 121853313 MANDIRI 3 492 053.00

FORMOSA HEAVY

INDUSTRIES P-103-62 to 63 116603094 CORPORATION 1 371 231.00

FORMOSA HEAVY

INDUSTRIES P-103-64 to 65 116603103 CORPORATION 1,852 731.00

LONJING HONGKONG

P-103-66 116603146

COMPANY LIMITED

so 577.00

PT SION ANUGRAH

- 121853286 MANDIRI (520.00) Subtotal 4,992,334.00 2,409,980.00 2,782,002.00 22 787. 032.00 Total 6,399,043.38 4 801969.49 3,237,636.90 23,384,877.11 With regard to the claimed P780,012.28 amortization of input VAT on purchases of capital goods exceeding PlMillion, the same shall also be disallowed because petitioner failed to submit before this Court VAT invoices/official receipts in support of its previous year/s' purchases of capital goods exceeding PlMillion. Also, J)i.- petitioner failed to identify which among its domestic purchases of goods and services45 for the year 2012 pertain to its capital goods purchases exceeding P1Million. Therefore, out of petitioner's reported input VAT for the four quarters of CY 2012 in the total amount of P148,611,453.13, only the amount of P92,646,682.50 represents valid input VAT, computed below:

1st _Quarter 2nd Quarter 3rd Quarter 4th Quarter Total Input VAT per VAT p 34,954,624.65 p 22,487,848.21 p 26,351,906.55 p 64,817,073.72 p 148,611,453.13 Return Less: Disallowances Per ICPA report p 2 840 411.60 p 203,771.91 p 3 190 823.34 p 11 126 224.62 p 17 361 231.47 Per Court's further verification Input VAT on domestic purchases of goods and services and importation of goods ~399 043.38 4 801,969.49 3 237,636.90 23,384 877.11 37 823 526.88 Amortization of input VAT on capital goods purchases exceeding P1Million 188 726.27 194 998.17 184 237.51 212,050.33 780 012.28 Total Disallowances p 9 428 181.25 p 5 200 739.57 p 6 612 697.75 p 34,723 152.06 p 55,964 770.63 Substantiated Input VAT P25_L_526,443.40 P17,287,108.64 P19,739,208.80 P30,093,921.66 P92,646,682.50 However, considering that petitioner had other kinds of sales, i.e., sales to private entities, sales to government and exempt sales, and its input VAT cannot be directly attributed to specific sales, the Court shall allocate the valid input VAT proportionately on the basis of the volume of petitioner's sales pursuant to Section 112(A) of the NIRC of 1997, as amended, computed as follows: 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Total Sales per VAT return Vatable Sales/ Receipts - Private p 142 290 065.92 P213 266 370.23 P179 525 702.25 P172 096 239.00 p 707 178 377.40 Sales to Government 15 498 374.80 15 220 068.60 14 385 534.60 13 574 278.83 58 678 256.83 Zero-Rated Sales/Receipts 542 930 177.94 501 923 964.17 430 079 791.55 306 678 113.10 1 781 612 046.76 Exempt Sales/ Receipts 1 082 505.00

1138 810.24

1133 588.81

1 211 682.00 4 566 586.05 45 Exhibit "P-102".

Total p 701,801 123.66 P731,549 213.24 Allocation Factor (Percentage of each type of sales to total sales): Vatable Sales/ Receipts - Private 20.2749841% 29.1527031% Sales to Government 2.2083713% 2.0805256% Zero-Rated Sales/Receipts 77.3623979% 68.6111003% Exempt Sales/ Receipts 0.1542467% 0.1556710% Total 100.0000000% 100.0000000% Valid Input VAT p 25 526 443.40 p 17 287 108.64 P625 124 617.21 P493 560 312.93 28.7183863% 34.8683301% 2.3012267% 2.7502776% 68.7990490% 62.1358940% 0.1813381% 0.2454983% 100.0000000% 100.0000000% p 19 739 208.80 P30 093 921.66 Input VAT Allocation Per Each Type of Sales (Allocation Factor multiplied by Valid Input VAT): Vatable Sales/ Receipts -Private p 5,175,482.33 p 5,039,659.46 p 5,668,782.23 P10,493 247.93 Sales to Government 563 718.66 359 662.72 454 243.94 827 666.39 Zero-Rated Sales/ Receipts 19 747 868.72 11 860,875.44 13,580,387.93 18 699,127.28 Exempt Sales/ Receipts 39 373.69 26 911.02 35 794.70 73 880.06 Total p 25 526 443.40 p 17 287 108.64 p 19 739 208.80 p 30 093 921.66 P2 552 035 267.04 27.7103685% 2.2992730% 69.8114195% 0.1789390% 100.0000000% p 92 646 682.50 p 26 377 171.95 2 205,291.71 63 888,259.37 175 959.47 p 92 646 682.50 Since the input VAT allocated to VATable sales/receipts-private entities is not enough to cover petitioner's output tax due for each quarter, the input VAT allocated to zero-rated sales/receipts shall be utilized to pay for the remaining output tax, as shown below: l 5t Quarter 2"d Quarter 3n1 Quarter 4th Quarter Total Output VAT Due p 17 074 807.91 p 25 591 964.43 p 21,543 084.27 p 20 651 548.68 p 84 861 405.29 Less: Input VAT allocated to VATable sales/receipts 5 175 482.33 5 039 659.46 5,668 782.23 10 493 247.93 26 377 171.95 Balance of Output VAT Due p 11 899 325.58 p 20 552 304.97 p 15 874 302.04 p 10 158 300.75 p 58 484 233.34 Less: Input VAT allocated to Zero-Rated Sales/Receipts 19 747,868.72 11 860 875.44 13 580 387.93 18 699 127.28 63 888 259.37 Output VAT Still Due/(Excess Input VAT) P(7 ,848,543.14) P⁸,691,429.53 P2,293,914.11 P(8,540 826.53) P(5,404,026.03) Based from the foregoing, petitioner had excess input VAT for the CY 2012 in the amount of P5,404,026.03, which can be attributed to its entire declared zero-rated sales/receipts in the amount of P1,781,612,046.76.

However, as stated earlier, petitioner was able to properly substantiate only the amount of P1,360,707,687.46 out of its total J-t-

CfA case No. 8792 declared zero-rated sales/receipts of P1,781,612,046.76. Thus, the input VAT attributable to petitioner's valid zero-rated sales/receipts of P1,360,707,687.46 amounts only to P4,127,329.38, as computed below:

Excess Input VAT Attributable to Declared Zero-Rated Sales/Receipts p 5,404,026.03 Divided by Declared Zero-Rated Sales/Receipts 7 1,781,612,046.76 Multiplied by Valid Zero-Rated Sales/Receipts X 1 360 707,687.46 Excess Input VAT Attributable to Valid Zero-Rated Sales/Receipts p 4,127,329.39 Even though the claimed input VAT was carried over by petitioner in its succeeding Quarterly VAT Returns 46 , the same remained unutilized until it was deducted in its Quarterly VAT Return for the fourth quarter of 2013 as "VAT Refund/TCC claimed'147 from the total available input tax of P382,255,748.7248• Thus, the claimed input taxes for the four quarters of CY 2012 could not have been carried over/utilized in the succeeding first quarter of 2014 49 • In fine, petitioner has sufficiently proven its entitlement to a refund in the amount of P4,127,329.39 representing its unutilized excess input VAT for the four taxable quarters of CY 2012, which is attributable to its zero-rated sales/receipts for the same period.

WHEREFORE, the instant Petition for Review is PARTIALLY GRANTED. Accordingly, respondent is ORDERED TO REFUND to petitioner the amount of P4,127,329.39 representing its unutilized excess input VAT for the four quarters of taxable year 2012 attributable to its zero-rated sales/receipts.

WE CONCUR:

CAESAR-#c;SANOVA Associate Justice ee~-7 .. ~~ (With Concurring and Dissenting Opinion) CATHERINET.MANAHAN Associate Justice ATTESTATION I attest that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court's Division. a~-~ c. ~~~~Q.

cftfANITO C. CASTANEtfA, JR. CERTIFICATION Associate Justice Chairperson 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 of the opinion of the Court.

Presiding Justice

REPUBLIC OF THE PHILIPPINES

COURT OF TAX APPEALS

QUEZON CITY

SECOND DIVISION

TOLEDO POWER COMPANY, Petitioner, CTA Case No. 8792 -versus- Members:

CASTANEDA, JR., Chairperson CASANOVA, and MANAHAN, JJ.

COMMISSIONER OF INTERNAL Promulgated: REVENUE, Respondent.

JUN 0 6 2017 /

X- -

- - - - - - - - - - - - - - - - - - - - - - - - -- - - - - r'?':-f.!V_ ~ "'-·x

CONCURRING AND DISSENTING OPINION

MANAHAN,J.:

I concur with the ponencia's conclusion that administrative and judicial claims for refund were timely filed. However, I respectfully dissent to the evidentiary value given to the Board of Investments (BOI) Certification submitted by Toledo Power Corporation (Toledo) to prove that its sales to Carmen Copper Corporation are zero-rated. The said BOI Certification1 provides as follows: This is to . certify that CARMEN COPPER CORPORATION is registered with the Board of Investments (BOI) pursuant to Executive Order No. 226, otherwise known as the Omnibus Investments Code of 1987, with the following data: XXX XXX XXX Information is hereby given that the firm exported 100% of its total sales volume/value for the calendar year covering January 0 1 to December 31, 2011 based on the 1 Docket, CTA Case No. 8792, Vol. 2, Exhibit "P-11" Letter from 801 with attached Certification, pp. 918-920.

CONCURRING AND DISSENTING OPINION

attached documents ... submitted to BOI, summarized as follows:

XXX XXX XXX This Certification is valid from J anuarv 0 1 to December 31, 2012 unless sooner revoked by the BOI Governing Board for any or all of the following grounds:

(a) Failure of the herein registered enterprise to comply with any of its BOI registration terms, commitments, and conditions; (b) Failure to export 100% in any of the instances set forth in Section 2 of RMO No. 9-2000; (c) Submission of fraudulent documents; and (d) Failure to submit Audited Financial Statements, Annual Income Tax Return and Annual Report on Actual Operations for the year 2011. (Underscoring supplied) It is my view that in the instant case, the BOI Certification issued on January 30, 2012 does not attest to the 100°/o export sale of Carmen Copper Corporation (Carmen Copper) for calendar year 20 12. At most, the BOI Certification attests that for the period of January 1 to December 31, 2011, Carmen Copper exported 100°/o of its total sales volume. The validity period of January 1 to December 31, 2012 indicated in the BOI Certification of Carmen Copper made the majority conclude that the claim for refund pertaining to the four taxable quarters of taxable year 20 12 falls within the coverage of the Certification's validity period. This may well be true if the purpose is to accord zero-rating status to sales made during the covered period, but it does not prove that Carmen Copper, as a BOI-registered exporter, exported 100°/o of its products for the period January 1 to December 31, 2012. Thus, Toledo submitted a BOI Certification from Carmen Copper, its BOI-registered buyer, which failed to prove that Carmen Copper exported 100°/o of its sales from January 1 to December 31, 2012. Hence, Toledo failed to prove an essential aspect of its claim for refund/issuance of tax credit certificate. Considering the foregoing, Toledo's entitlement to refund should be adjusted accordingly. ~~- 7/11~ CA~ERINE T. MANAHAN Associate Justice