Taganito Mining Corporation vs. Commissioner of Internal Revenue

AMENDED DECISION

CASTANEDA, JR., J.:

On September 30, 2015, petitioner filed its Motion for Partial Reconsideration and/or New Trial to seek partial reconsideration and reversal of this Court's Decision promulgated on September 14, 2015,¹ the dispositive portion of which reads: "WHEREFORE, premises considered, the instant Petition for Review is hereby PARTIALLY GRANTED. Respondent is hereby ORDERED TO REFUND OR ISSUE TAX CREDIT CERTIFICATE to petitioner in the reduced amount of P10,343,265.07 representing its unutilized amortized input taxes on importation and domestic purchases of capital goods with aggregate acquisition cost exceeding P1 Million incurred during the ,9t-

taxable years 2010, 2011 and 2012 and are attributable to zero-rated sales in the taxable years 2012 and 2013.

THE COURT'S RULING

A careful examination of the additional evidence submitted shows that zero-rated sales in the amounts of P159,444,703.78 and P462,266,844.51 for the taxable years 2012 and 2013, respectively, are properly substantiated:

P-458 to P-461, P-1920-2 42.955

& P-1920-3

433 .00 42.955 .75

P-1920-4

507 .00 41.180 .80

P-1920-7

503 41.735 .73

TOTAL

78 965,260.80 527 127,680.00 40.705 5,197,214.40

P-901 P-1920-10

552 080.00 43.200 656.00

P-1225 P-1920-11

685 300.00 44.150 945.00 P-1245, P-1247, P-1920- 545 393,583.93 41.070 16,164,492.01 12 P-1232 to P-1235, P- 522 635.00 40.690 1920-13 526 40.690 P-1297 to P-1300, P- 660 41.155 1920-14 535 41.155 P-1301 to P-1303-A, P- 550 42.270 1,1 563.84 1920-14 661 42.260 (8,283.38) P-1304 to P-1307, P- 662 43.200 170,708.26 1920-14 564 113,535.70 43.260 4,911,554.38 ?z-

P-1308 to P-1311, P- 1920-14 P-1312 to P-1315, P- 1920-14 P-1316 to P-1318-A, P- 1920-14 P-1319 to P-1322, P- 1920-14 P-1323 to P-1325, P- 1920-14

P-1326 P-1920-14

663 606 624 664 665 644 666 682 684 802 803

TOTAL

25,589.13 43.420 1,111,080.02 320,869.11 43.420 13,932,136.76 378,477.94 43.610 16,505,422.96 50,942.80 44.610 2,272,558.31 62,987.18 43.540 2, 742,461.82 728,137.18 43.540 31,703,092.82 768,504.47 43.540 33,460,684.62 85,389.39 43.540 3,717,854.04 1,000,995.01 43.760 43,803,541.64 111,221.67 43.760 4,867,060.28 1,676,350. 72 44.395 74,421,590.21 10,775,267.95 462,266,844.51 Petitioner did not submit additional supporting documents for the following disallowed zero-rated sales for the taxable year 2012 in the amount of P26,599,317.40, which are not supported by bank credit advices:

P-451

501

P-468

499

P-530

500

Subtotal

Regarding the unsupported difference between the zero-rated sales per VAT Returns9 and Schedule of Zero-Rated Sales for the taxable year 201310 amounting to P164,681,157.71, petitioner avers that the same represents zero-rated sales other than the sale of nickel ore.

Further, it submits that its zero-rated sales per VAT returns include all types of sales, including other zero-rated sales, i.e. not pertaining to its sales of ores from its mining activity, to which its capital goods purchases are not attributable.

Hence, the substantiated zero-rated sales pertain only to its sale of ores from mining activities. 11 In the assailed Decision, the Court computed the ratio of petitioner's substantiated zero-rated sales by dividing the same by the zero-rated sales declared per Quarterly VAT Returns. On the other hand, the Independent CPA reported the following: 12 fo--

Table I

Summary of Petitioner's Revenue under Zero Rated Activities For Taxable Years 2010, 2011, 2012 and 2013 It should be noted that for the year 2012, petitioner declared P3,093,865,540.54 zero-rated sales in its VAT returns, 13 which, based on the preceding table in the ICPA report, pertains only to petitioner's zero-rated sales from sale of ores.

For the year 2013, petitioner declared a total of P3,273,782,021.06/4 which includes its zero-rated sales from sale of ore, service (despatch) income, and rental income. It can be inferred that petitioner's zero-rated sales for the year 2012 is underdeclared.

Petitioner asserts that its input taxes were directly attributable to its sales from mining activities, thus: 15

Petition for Review

"The above input taxes were directly attributable to its zero-rated sales, were paid in the course of its trade and business, are duly supported by invoices and/or receipts, are not carried forward to the succeeding quarter or quarters subsequent to the filing of the claim, and have not been applied against any VAT output tax liability of the petitioner during the same period." (Emphasis supplied.) jh-

Memorandum for the Petitioner

"Said VAT input taxes were paid by petitioner in the course of its trade and business and are all directly attributable to petitioner's zero-rated export sales."

"Petitioner is engaged solely in zero-rated export sales, except for isolated transactions for which the corresponding output taxes were set-off against its excess input taxes. xxx" (Emphasis supplied.)

As it turned out, petitioner had other zero-rated sales for the years 2012 and 2013 other than from mining activities. The ICPA reported how he proceeded to substantiate petitioner's zero-rated sales: 16 "We examined the documents supporting the export sales of mineral ore such as invoices, bank debit advice, bills of lading and export declaration for selling of ore. We referred to the audited financial statement of the Petitioner to determine the amount of the service income from despatch and rental. These revenues are rendered to PEZA registered entities and their mining customers (see exhibits P-1921 to P-1930 for sample documentation)." (Emphasis supplied.)

However, Exhibits P-1921 to P-1930 are nowhere to be found in petitioner's formal offer of evidence. In fact, petitioner's submitted evidence were marked as Exhibits "P-1" to "P-1919-A" only. 17 Thus, petitioner failed to substantiate and prove the nature of its other zero-rated sales and that the capital goods purchased from where input taxes arose and are herein claimed for refund were not used in the generation of such sales. Consequently, the substantiated input taxes cannot be directly and entirely attributed to any of its jt-

zero-rated sales and shall be allocated proportionately on the basis of the volume of sales.

Petitioner's substantiated zero-rated sales for the taxable years 2012 and 2013 are P3,067,266,223.60 and P3,109,100,863.35, respectively, computed thus:

Less: Unsupported zero-rated sales from service and I income

P

.71 Unsupported zero-rated sales per find

of the Court

Total disallowances bstantiated zero-rated sales Accordingly, the rate to be used to attribute the substantiated input taxes to the substantiated zero-rated sales shall be adjusted as follows:

We proceed to determine the amount of unutilized input taxes attributable to petitioner's zero-rated export sales. By submitting additional documents, petitioner was able to prove that out of the total disallowed input taxes of P9,335,682.00, the following in the amount of P7,837,932.00 are already properly substantiated:

2011 2012 P-1327 toP- P-1337 to P-1343, P-1920-17, 114789647

P-1920-18

P-1350 toP-

P-1920-19

119387633 2/10/2012

TOTAL INPUT TAXES FROM IMPORTATIONS

P7,837,932.00 Petitioner disagrees with the Court's disallowance of input taxes from domestic purchases of capital goods in the aggregate amount of~

P1,497,750.00, averring that the same was not put at issue since these were reserved for utilization.18 However, the Court found that the claimed input taxes for refund amounting to P22,011,331.91 includes input taxes from domestic purchases of capital goods as reported by the Court-commissioned Independent CPA. 19 The subject disallowance, broken down as follows, should be maintained: 2010

P-1358

C1013008

p 678.57

P-1374

A111974

170,464.29

P-1375

A111975

170,464.29

P-1377

C1013008

146,678.57

P-1378-A

A112921

678.57

P-1378-B

A112922

2012

P-1370

96032

Subtotal

p invoice without the TIN of the purchaser

P-1366

4007 2011 p 11 321.43

P-1378

C1013126

10/26/2011 183,107.14 p 294,428.57 by invoice with a different TIN of the purchaser

P-1359

C1009837

7/9/2011 p 145,500.00 00 service and

Subtotal

TOTAL DISALLOWED INPUT TAX FROM DOMESTIC PURCHASES

In fine, out of the total P61,377,657.86 input taxes declared by petitioner in its Quarterly VAT Returns for the taxable years 2010, 2011 and 2012, only the amount of P59,579,639.90 is duly substantiated for VAT purposes, to wit: Input taxes from capital goods with acquisition cost exceeding P1M per VAT Returns: Taxable year 2010 p 4 628,363.58 Taxable year 2011 17 691 452.70 Taxable year 2012 39 057 841.58 p

Less: Disallowances

1. Unsupported input taxes Input taxesQ_er VAT Returns P61 377,657.86 Less: Total input taxes per submitted supporting documents (Schedule I of

Exhibit ''P-9")

61,077,389.90 p 300 267.96 18 Paragraph 19 of Motion for Partial Reconsideration and/or New Trial, Docket Vol. I, p. 360. 19 Schedules I and X of Exhibit "P-9", Docket Vol. I, pp. 224-225 and 236. 61,377 657.86

2. Not properly supported input taxes as found by the Court I 1,497 750.00 1 798 017.96 Substantiated input taxes PS9,579,639.90 Consequently, petitioner can only claim the amortized portion of its adjusted properly substantiated input taxes for the taxable years 2012 and 2013 in the total amount of P21,638,603.22, computed hereafter:

4/28/2011 5/11/2011 3/29/2011 2/10/2012 4/10/2012 12 577 718.00 4/16/2012 12 1 980, 5/21/2012 12 7/3/2012 50 12 228 767.00 8/14/2012 48 12 567 932.50 11/12/2012 48 11/22/2012 60 12/26/2012

Total- 2012

TOTAL

*rounding difference 152.14 777.92 150.50 .04 Applying the rate of substantiated zero-rated sales previously computed and petitioner's output taxes due for the taxable years 2012 and 2013, petitioner's adjusted valid input taxes on importation fc- and domestic purchases of capital goods with cost exceeding P1Million which are available for refund amounted to P14,263,324.04, as shown below:

Multiplied by the rate of substantiated zero-rated sales Valid input taxes attributable to zero- rated sales taxes

WHEREFORE, premises considered, petitioner's Motion for Partial Reconsideration is PARTIALLY GRANTED. Accordingly, the dispositive portion of the assailed Decision dated September 14, 2015 is amended to read as follows:

"WHEREFORE, premises considered, the instant Petition for Review is hereby PARTIALLY GRANTED. Respondent is hereby ORDERED TO REFUND OR ISSUE A TAX CREDIT CERTIFICATE to petitioner in the reduced amount of FOURTEEN MILLION TWO

HUNDRED

SIXTY

THREE

THOUSAND

THREE

HUNDRED TWENTY FOUR PESOS AND 4/100

(1114,263,324.04) representing its unutilized amortized input taxes on importation and domestic purchases of capital goods with aggregate acquisition cost exceeding P1 Million incurred during the taxable years 2010, 2011 and 2012 and are attributable to zero-rated sales in the taxable years 2012 and 2013."

Associate Justice

WE CONCUR:

~~-~~- ------AMELIA R. COTANGCO-MANALASTAS

Associate Justice

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. ~ C- Q.'f"-~~ Q., .

.fiJANITO C. CASTANEb~; JR.

Associate Justice

Chairperson

CERTIFICATION

Pursuant to Article VIII, Section 13 of the Constitution, and the Division Chairperson's Attestation, it is hereby certified that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court.

Presiding Justice