Court of Tax Appeals · First Division

Maxima Machineries, Inc. vs. Commissioner of Internal Revenue

CTA Case No. 9453 June 30, 2021

REPUBLIC OF THE PHILIPPINES

COURT OF TAX APPEALS

QUEZON CITY

FIRST DIVISION

MAXIMA MACHINERIES, INC.,

CTA Case No. 9453

Petitioner,

Members:

-versus-

DEL ROSARIO, P.J., Chairperson,

and

MANAHAN, JJ.

COMMISSIONER OF

INTERNAL REVENUE,

Promulgated:

Respondent.

X- - -

- -

DECISION

MANAHAN, J .:

The Petition for Review prays that the Court render judgment ordering respondent to issue the corresponding tax credit certificates (TCCs) to petitioner in the aggregate amount of !>89,994,022.70 covering the period January 1 to March 31, 2014. 1

FACTS

Petitioner Maxima Machineries, Inc. is a domestic corporation duly organized and existing under the laws of the Philippines with principal business address at 871 Quezon Avenue, Barangay Sta. Cruz, Quezon City.2 It is registered as a VAT taxpayer, with Tax Identification Number (TIN) 006-618- 023-000.3

Respondent

Commissioner of Internal

Revenue

is empowered to perform the duties of his office, including acting 1 Summary of the Case, Pre-Trial Order dated March 15, 2017, Docket- Vol. 2, p. 1002. 2 Exhibits "P-1 " and "P-2", Docket - Vol. 3, pp. 1205 to 1219. 3 Exhibit "P-3", Docket - Vol. 3, p. 1220. ~

Maxima Machineries, Inc. vs. Commissioner of Internal Revenue upon protest cases and approval of claims for refund or tax credit as provided by law and implementing regulations. 4 Petitioner made an administrative claim on March 30, 2016, for the issuance of TCCs totaling P89,994,022.70, representing the excess input value-added taxes (VAT) which are allocable and directly attributable to its VAT zero-rated transactions, as declared in its Amended Quarterly VAT Return for the period January 1, 2014 to March 31, 2014, that is, for the 4th quarter of fiscal year (FY) ending March 31, 2014.5 On April 18, 2016, petitioner, through Ms. Marlene Manuel, received the Letter of Authority No. eLA20 1200042249 dated April 8, 2016, issued against petitioner by Mr. Nestor S. Valeroso, Assistant Commissioner - Large Taxpayers Service, Bureau of Internal Revenue (BIR), authorizing Revenue Officer Jan Andre Abellera, and Group Supervisor Gilquin Tolentino, to examine its books of accounts and other accounting records for VAT, for the period from January 1, 2014 to March 31, 2014, pursuant to the Mandatory Audit-Claim for VAT Refund.6 On July 28, 2016, the 120-day period counted from the filing of the application for the issuance of TCCs on March 30, 2016, had lapsed without petitioner receiving the Decision of respondent. 7 The instant Petition for Review was filed on August 26, 2016. 8 The instant case was originally raffled to this Court's Third Division.

On November 2, 2016, respondent filed his Answer (to the Petition for Review dated 26 August 2016),9 interposing his special and affirmative defenses.

4 Par. A(2), Joint Stipulation of Facts and Issues (JSFI), Docket- Vol. 2, p. 977. 5 Par. B(l), JSFI, Docket- Vol. 2, p. 978. 6 Pars. A(3) and B(2), JSFI, Docket- Vol. 2, pp. 977 to 978. 7 Par. B(3), JSFI, Docket- Vol. 2, p. 979. 8 Docket- Vol. 1, pp. 10 to 49.

9 Docket- Vol. 1, pp. 317 to 327; cf: Motion for Extension of Time to File Answer, Docket - Vol. 1, pp. 309 to 312; Resolution dated October 14, 2016, Docket - Vol. 1,

p. 316. .alii. ....__ erA case No. 9453 Maxima Machineries, Inc. vs. Commissioner of Internal Revenue

On November 11, 2016, respondent submitted the BIR Records for the instant case.1o The Pre-Trial Conference was set and held on February 21, 2017.1! Respondent's Pre-Trial Briefwas filed on February 14, 20 17;12 while the Pre-Trial Brief for the Petitioner was submitted on February 16, 2017.13 On March 3, 2017, the parties submitted their Joint Stipulation of Facts and Issues (JSFI). 14 Subsequently, the Pre- Trial Order dated March 15, 2017 was issued by the Court,1s recognizing the said JSFI and deeming the termination of the Pre-Trial Conference.

The trial of this case then proceeded. During trial, petitioner presented its documentary and testimonial evidence. Petitioner offered the testimonies of the following individuals, namely: (1) Mr. Yusuke Yamada,16 petitioner's Chief Financial Officer; (2) Ms. Jenelyn Palayon- Tagao,H petitioner's Chief for Government Compliance of the Finance Department; and (3) Ms. Alina Corillo-Sison,1s the Court-commissioned Independent Certified Public Accountant (ICPA).19 10 Respondent's Compliance, Docket- Vol. I, pp. 331 to 334. 11 Notice of Pre-Trial Coriference dated November 3, 2016, Docket- Vol. I, pp. 329 to 330; Minutes of the hearing held on, and Order dated, February 21, 2017, Docket- Vol. 2, pp. 973, and 975 to 976, respectively. 12 Docket- Vol. I, pp. 338 to 341. 13 Docket- Vol. I, pp. 344 to 362. 14 Docket- Vol. 2, pp. 977 to 992. 15 Docket- Vol. 2, pp. 1002 to 1010. 16 Exhibit "P-43", Docket- Vol. I, pp. 368 to 386; Minutes of the hearing held on, and Order dated, May 16, 2017, Docket- Vol. 2, pp. I 034, and I 036 to I 037, respectively. 17 Exhibit "P-44", Docket- Vol. 2, pp. 644 to 653; Minutes of the hearing held on, and Order dated, June 20, 2017, Docket- Vol. 2, pp. I 067 to I 068. 18 Exhibit "P-47", Docket- Vol. 2, pp. II 05 to 1139; Minutes of the hearing held on, and Order dated, March 5, 2018, Docket- Vol. 3, pp. 1173 to 1174. 19 Oath of Commission dated May 16, 2017, Docket- Vol. 2, p. 1035; Minutes of the hearing held on, and Order dated, May 16, 2017, Docket - Vol. 2, pp. I 034, and I 036 to 1037, respectively.

.as-

Maxima Machineries, Inc. vs. Commissioner of Internal Revenue

On July 17, 2017, the Court received the Report of the ICPA.20 Petitioner filed its Formal Offer of Evidence on March 19, 2018.21 Respondent submitted his Comment [Re: Petitioner's Formal Offer of Evidence dated 15 March 2018] on March 26, 2018.22 In the Resolution dated May 18, 2018,23 the Court admitted petitioner's Exhibits, except for various exhibits for not being found in the records of the case or for failure to pre- mark (i.e., the exhibit number markings on the scanned copies were incomplete).

Consequently, petitioner filed its

Motion

for Reconsideration to the Resolution dated May 18, 2018 on June 8, 2018.24 Respondent failed to file his comment on petitioner's motion.2s At the hearing held on August 14, 2018, counsel for respondent manifested that there is no report of investigation from the BIR. Thus, as prayed for, the parties were granted thirty (30) days from receipt of the resolution of petitioner's Motion for Reconsideration to the Resolution dated May 18, 2018, within which to submit their respective memoranda.26 Pursuant to the Court's Order dated September 25, 2018,27 the instant case was transferred to this Court's First Division.

20 Exhibit "P-46", Docket- Vol. 2, pp. 1072 to 1096; cf: !CPA's Transmittal Letter dated October 9, 2017, Docket- 2, p. I 099. 21 Docket- Vol. 3, pp. 1175 to 1203. 22 Docket- Vol. 3, pp. 1671 to 1673. 23 Docket- Vol. 3, pp. 1677 to 1681. 24 Docket- Vol. 4, pp. 1686 to 1700. 25 Records Verification Report dated August 8, 2018 issued by the Judicial Records Division of this Court, Docket- Vol. 4, p. 1704. 26 Minutes ofthe hearing held on, and Order dated, August 14,2018, Docket- Vol. 4, pp. 1705 to 1706.

27 Docket- Vol. 4, p. 1707.

DEOSION

Maxima Machineries, Inc. vs. Commissioner of Internal Revenue

In the Resolution dated November 23, 2018,28 the Court partially granted the Motion for Reconsideration to the Resolution dated May 18, 2018 of petitioner, and admitted some of the exhibits under motion for reconsideration; but still denied Exhibits "P-45-L-2038" to "P-45-L-2410", "P-45-M-38" to "P-45-M -72" "P-45-S-64" "P-45-AI -1" and "P-45-AJ -2" for ' ' ' ' not being found in the record.

On January 15, 2019, petitioner filed a Motion to Admit Supplemental Formal Offer of Evidence. 29

Respondent's

Memorandum was filed on even date,30 while the Memorandum for the Petitioner was submitted on February 4, 2019.3 1 On February 27, 2019, respondent filed his Comment (Re: Petitioner's Supplemental Formal Offer of Evidence). 32 In the Resolution dated April 4, 2019,33 the Court admitted petitioner's Exhibits "P-45-AQ-377", "P-45-BA-7" to "P-45-BA-51", "P-45-BC-4" to"P-45-BC-18", "P-45-BD-130" to "P-45-BD-261", "P-45-BF-19" to "P-45-BF-32, "P-45-BG-19" to "P-45-BG-337", "P-45-BH -19" to "P-45-BH -290", "P-45-BI -19" to "P-45-BI-28" "P-45-BJ-19" to "P-45-BJ-44" "P-45-BK-19" ' ' to "P-45-BK -53", "P-45-BL-19" to "P-45-BL-68", "P-45-BM -19" to "P-BM-310", "P-45-BN-19" to "P-45-BN-92, and "P-45-B0- 19" to "P-45-B0-224".

In the same Resolution, the Court deemed the instant case submitted for decision. Thereafter, on April 8, 2019, petitioner filed a Motion to Allow the Continuance of the !CPA Audit and to Schedule the Presentation of the !CPA and Yusuke Yamada,34 praying that the Court allow the !CPA to continue her verification of the documents pertaining to the prior period excess input tax carry-over, and to schedule the presentation of Ms. Sison, who 18 Docket- Vol. 4, pp. 1710 to 1715. 29 Docket- Vol. 4, pp. 1740 to 1742, and 1735 to 1738. 30 Docket - Vol. 4, pp. 1724 to 1733; cf: Motion for Extension of Time to File Memorandum, Docket- Vol. 4, pp. 1716 to 1718; Resolution dated January 18,2019. Vol. 4, p. 1745.

31 Docket - Vol. 4, pp. 1748 to 1799; cf: Motion for Extension of Time to File Memorandum, Docket- Vol. 4, pp. 1720 to 1722; Resolution dated January 18,2019, Vol. 4, p. 1745.

32 Docket- Vol. 4, pp. 1801 to 1802. 33 Docket- Vol. 4, pp. 1807 to 1808. 34 Docket- Vol. 4, pp. 1809 to 1811. 0.

Maxima Machineries, Inc. vs. Commissioner of Internal Revenue will testify on the results of continuance of her audit, and of Mr. Yamada, who will testify on the results of the BIR assessments relative to the examination by the BIR of the prior period excess input VAT carry-over. In the Resolution dated July 18, 2019,35 the Court granted petitioner's Motion to Allow the Continuance of the ICPA Audit and to Schedule the Presentation of the ICPA and Yusuke Yamada; directed the ICPA to submit her supplemental ICPA report within fifteen (15) days from notice; and set the case for hearing on September 3, 2019 for the presentation of petitioner's recalled witnesses, Ms. Sison and Mr. Yamada. Correspondingly, the Resolution dated April 4, 2019, insofar as it submitted the case for decision, was recalled and set aside.

During the hearing on September 3, 2019, petitioner presented its witness, Mr. Yamada,36 but there was no appearance on the part of respondent. Considering that counsel for respondent was duly notified of the hearing and the same has been indicated in this Court's Resolutions dated July 18, 2019 and August 22, 2019, the Court granted the prayer of petitioner's counsel that respondent's right to cross- examine be deemed waived. 37 Meanwhile, the ICPA failed to submit the supplemental ICPA report. 38 Subsequently, on November 11, 2019, petitioner filed a Manifestation,39 stating that it will no longer recall the ICPA as witness on November 12, 2019, considering that she was not able to complete the audit and verification of the prior period excess credits because some of petitioner's documents can no longer be located or retrieved, notwithstanding the additional period provided by this Court. 35 Docket- Vol. 4, pp. 1892 to 1896. 36 Exhibit "P-57", Docket- Vol. 4, pp. 1910 to 1918. 37 Minutes of the hearing held on, and Order dated, September 3, 2019, Docket- Vol. 4, pp. 1970 to 1974.

38 Records Verification dated October 23, 2019 issued by the Judicial Records Division ofthis Court, Docket- Vol. 4, p. 1998. 39 Docket- Vol. 4, pp. 1999 to 2000. ~

Maxima Machineries, Inc. vs. Commissioner of Internal Revenue

In the Order dated November 12, 2019,40 the Court took note of petitioner's Manifestation. On November 19, 2019, petitioner filed its Second Supplemental Formal Offer of Evidence.41 Respondent failed to file his comment on petitioner's Second Supplemental Formal Offer of Evidence.42 In the Resolution dated May 27, 2020,43 the Court admitted petitioner's Exhibits, and gave the parties a period of thirty (30) days within which to file their respective supplemental memoranda.

Respondent's Manifestation that he is adopting the arguments he raised in his Memorandum, was posted on July 8, 2020;44 while the Supplemental Memorandum for the Petitioner was submitted on July 20, 2020.45 On August 26, 2020, the instant case was submitted for decision.46

ISSUE

As stipulated by the parties, the issue to be resolved by the Court is as follows:

WHETHER OR NOT THE PETITIONER IS ENTITLED

TO

THE

ISSUANCE

OF

TAX

CREDIT

CERTIFICATES FOR THE EXCESS UNUTILIZED

INPUT VALUE ADDED TAX (VAT) WHICH ARE

ALLOCABLE AND DIRECTLY ATTRIBUTABLE TO

ITS VAT ZERO[-]RATED SALES FOR THE PERIOD

40 Order dated November 12, 2019, Docket- Vol. 4, pp. 2003 to 2004. 41 Docket- Vol. 4, pp. 2009 to 2012. 42 Records Verification dated December 19. 2019 issued by the Judicial Records Division of this Court, Docket- Vol. 4, p. 2061. 43 Docket- Vol. 4, pp. 2066 to 2067. 44 Docket- Vol. 4, pp. 2068 to 2069. 45 Docket- Vol. 4, pp. 2072 to 2084. 46 Resolution dated August 26, 2020, Docket- Vol. 4, p. 2087. ~ ..

Maxima Machineries, Inc. vs. Commissioner of Internal Revenue

FROM JANUARY 1, 2014 TO MARCH 31, 2014 AMOUNTING TO P89,994,022.70. 4 7 Petitioner's arguments:

Petitioner argues that it is a VAT-registered taxpayer whose sales are entitled to VAT zero-rating; that the input taxes being claimed are due or paid; that petitioner had unutilized and unapplied input tax credits for the period January 1, 2014 to March 31, 2014 or the 4th quarter of FY 2014, which are allocable and directly attributable to its VAT zero-rated sales amounting to P89,994,022.70; that petitioner timely filed its administrative claim for the issuance of tax credit within the two-year prescriptive period; that it seasonably filed the Petition for Review to this Court against the "deemed denial decision" due to inaction of respondent after the lapse of the mandatory 120-day period under Section 112(C) of the Tax Code; and that it has sufficiently shown, through the presentation of its Quarterly VAT return for the 4th quarter of FY 2014, its input tax carried over from the period amounting to P369,111,554.05 and the deferred tax on capital goods in excess of P 1 million from previous quarters amounting to P2,731,710.09.

Respondent's counter-arguments:

Respondent contends that 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/ credit; that petitioner must show that it has complied with the provisions of Section 112 of the National Internal Revenue Code (NIRC) of 1997, as amended, on the prescriptive period for claiming tax refund/ credit; that petitioner must prove that it has submitted complete documents to substantiate its administrative claim for refund, otherwise, the administrative body will have sufficient reason to deny the claim; and that claims for refund are construed strictly against the claimant for the same partake the nature of tax exemption and as such, they are looked upon with disfavor.

47 Par. C, JSFI, Docket- Vol. 2, p. 979. ~

DEQSION

Maxima Machineries, Inc. vs. Commissioner of Internal Revenue

RULING OF THE COURT

The instant Petition for Review lacks merit. Requisites for the grant of the refund or issuance of a tax credit certificate under the law.

Section 112 (A) and (C) of the NIRC of 1997, as amended by Republic Act (RA) No. 9337,48 provides as follows:

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 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

(C) Period within which Refund or Tax Credit of Input Taxes shall be Made. - In proper cases, the Commissioner 48 AN ACT AMENDING SECTIONS 27, 28, 34, 106, 107, 108, 109, 110, Ill, 112, 113, 114, 116, 117, 119, 121, 148, 151, 236, 237 AND 288 OF THE NATIONAL INTERNAL REVENUE CODE OF 1997, AS AMENDED, AND FOR OTHER PURPOSES.

a.........

Maxima Machineries, Inc. vs. Commissioner of Internal Revenue 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 to the foregoing provisions, jurisprudence has laid down requisites which must be complied with by the taxpayer-applicant to successfully obtain a credit/refund of input VAT.

Said requisites are classified into categories, to wit:

Timeliness of the filing o[ the administrative and judicial claims:

1. the claim is filed with the BIR within two (2) years after the close of the taxable quarter when the sales were made;49

2. in case of full or partial denial of the refund claim, or the failure on the part of the Commissioner to act on the said claim within a period of 120 days from the date of submission of complete documents in support of the application, the judicial claim must be filed with this Court, within 30 days from receipt of the decision or after the expiration of the said 120- day period; 50 49 Intel Technology Philippines. Inc. vs. Commissioner ollnternal Revenue, G.R. No. 166732, April 27, 2007; San Roque Power Corporation vs. Commissioner ollnternal Revenue, G.R. No. 180345, November 25, 2009; and AT&T Communications Services Philippines, Inc. vs. Commissioner ollnternal Revenue, G.R. No. 182364, August 3, 2010.

50 Steag State Power, Inc. (Formerly Stale Power Development Corporation) vs. Commissioner ollnternal Revenue. G.R. No. 205282. January 14, 2019; Rohm Apollo Semiconductor Philippines vs. Commissioner ollnternal Revenue, G.R. No. 168950, January 14, 2015.

Maxima Machineries, Inc. vs. Commissioner of Internal Revenue

Taxpayer's registration with the BIR:

3. the taxpayer is a VAT-registered person;si Taxpayer's output VAT:

4. the taxpayer is engaged in zero-rated or effectively zero-rated sales;s2

5. for zero-rated sales under Sections 106(A)(2)(a)(l),

(2) and (b); and 108(B)(l) and (2), the acceptable foreign currency exchange proceeds have been duly accounted for in accordance with Bangko Sentral ng Pilipinas (BSP) rules and regulations;53 Taxpayer's input VAT being refunded:

6. the input taxes are not transitional input taxes;54

7. the input taxes are due or paid;ss

8. the input taxes claimed are attributable to zero- rated or effectively zero-rated sales. However, where there are both zero-rated or effectively zero-rated sales and taxable or exempt sales, and the input taxes cannot be directly and entirely attributable to any of these sales, the input taxes shall be proportionately allocated on the basis of sales volume·S6 '

9. the input taxes have not been applied against output taxes during and in the succeeding quarters. 57 51 Intel Technology Philippines. Inc. vs. Commissioner of Internal Revenue, supra; San Roque Power Corporation vs. Commissioner of Internal Revenue, supra; and AT&T Communications Services Philippines, Inc., supra.

52 Id

53 Id

54 Id

55 !d.

56 Intel Technology Philippines, Inc. vs. Commissioner of Internal Revenue, supra; and San Roque Power Corporation vs. Commissioner of Internal Revenue, supra. 57 Intel Technology Philippines, Inc. vs. Commissioner of Internal Revenue, supra; San Roque Power Corporation vs. Commissioner of Internal Revenue, supra; and AT&T Communications Services Philippines, Inc., supra. ~

Maxima Machineries, Inc. vs. Commissioner of Internal Revenue

Relative thereto, it must be emphasized that in cases filed before this Court, which are litigated de novo, party-litigants must prove every minute aspect of their case.ss Thus, it behooves petitioner to show compliance with each of the foregoing requisites.

Petitioner timely fl. led its administrative and judicial claims.

The first requisite pertains to the filing of the refund for tax credit or refund of input VAT before the BIR, within two (2) years from the close of the quarter when the sales were made. The instant claim covers the period from January 1, 2014 to March 31, 20 14 or the 4th quarter of petitioner's FY ending March 31, 2014 (FY 2014). Counting two (2) years from the close of the said quarter, petitioner had until March 31, 2016, within which to file its administrative claim. Considering that petitioner's administrative claim covering the subject quarter was filed with the BIR on March 30, 2016, 59 the same was timely made within the 2-year prescriptive period. The second requisite is to the effect that the judicial claim must have been filed within thirty (30) days from the receipt of respondent's decision or after the expiration of the 120-day period under Section 112(C) of the NIRC of 1997, as amended. On July 28, 2016, the 120-day period counted from the filing of the application for the issuance of TCC on March 30, 2016 had lapsed without petitioner receiving the Decision of 58 Edison (Bataan) Cogeneration Corporation vs. Commissioner of Internal Revenue, et a/., G.R. Nos. 201665 and 201668. August 30, 2017; Commissioner of Internal Revenue vs. Philippine National Bank, G.R. No. 180290, September 29, 2014; Commissioner of' Internal Revenue vs. United Salvage and Towage (Phils.), Inc., G.R. No. 197515, July 2, 20 14; Dizon v.1. Court of' Tax Appeals. et a/., G.R. No. 140944, April 30, 2008; Alias Conso/idaled Mining and Development Corporation vs. Commissioner of' fnlernal Revenue. G.R. No. 145526, March 16, 2007; and Commissioner of' Infernal Revenue vs. Manila Mining Corporation, G.R. No. 153204, August 31, 2005.

59 Par. 8(1), JSFL Docket - Vol. 2. p. 978; Exhibits "P-24" and "P-25, Docket- Vol. 3, pp. 1410 to 1435.

cu..

CfA Case No. 9453 Maxima Machineries, Inc. vs. Commissioner of Internal Revenue respondent.6° Such being the case, petitioner had 30 days from July 28, 2016 or until August 29, 2016,6 1 within which to file its judicial claim.

Thus, petitioner seasonably filed the instant Petition for Review on August 26, 2016.62 Correspondingly, petitioner complied with the said first and second requisites.

Petitioner's registration with the BIR.

As for its compliance with the third requisite, petitioner has fulfilled the same by presenting its BIR Certificate of Registration No. OCN8RCOOOOO 19980, with TIN 006-618-023- 000, indicating that it is liable to VAT, among other taxes.63 Petitioner had zero-rated or effectively zero-rated sales during the 4th quarter of FY 2014.

The fourth and fifth requisites respectively require that the taxpayer is engaged in zero-rated or effectively zero-rated sales, and that for zero-rated sales under

Sections

1 06(A)(2)(a)( 1), (2) and (b), and 1 08(B)( 1) and (2) of the NIRC of 1997, as amended, the acceptable foreign currency exchange proceeds must have been duly accounted for in accordance with the BSP rules and regulations. In its Amended 4th Quarterly VAT Return for FY 2014 or for the period from January to March 2014,64 petitioner reported total sales in the amount of P2,348,474,841.52, which include zero-rated sales in the amount of P952,009,079.19, as shown below:

60 Par. B(1 ), JSFI. Docket -Vol. 2. p. 97'!. 61 August 27.2016 falls on a Saturday. 62 Docket - Vol. I. pp. I 0 to 46. 63 Exhibit "P-3", Docket- Vol. 3, p. 1220. 64 Exhibit "P-21 ",Docket- Vol. 3. pp. 1255 to 1256. ~.

Maxima Machineries, Inc. vs. Commissioner of Internal Revenue

·------·------------ ---··

Particulars

Amount

---· -- VATable SalesL~e_ct:ip_ts p ----

Sale to Government

Zero-Rated Sales/_Recei]JlS

Total Sales/Receipts

p 1,387,310,556.79 9,155,205.54 952,009,079.19 2,348,474,841.52 In support of its zero-rated sales of P952,009,079.19, petitioner presented its Schedule of Zero-Rated Sales65 and various sales invoices, Official Receipts (ORs) and other related documents,66 which were all scrutinized by the Court- commissioned ICPA, Ms. Alina C. Sison. Based on her Report, 67 the said ICPA stated that petitioner's zero-rated sales arose from the following:

1. Petitioner sold goods and rendered services to entities registered with the

Philippine

Economic

Zone

Authority (PEZA), Subic Bay Metropolitan Authority (SBMA), Clark Development Authority (CDA), Cagayan Economic Zone Authority (CEZA), Clark Development Corporation (CDC) and Board of Investments (BOI).

2. Petitioner sold goods to entities which are not among the registered corporations in the Philippines, and the sales were paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the BSP as supported by invoices and inward remittances from banks.

For an orderly disposition of the instant case, this Court shall first determine whether the said second source of petitioner's zero-rated sales qualify as such. Sale of services to entities which are not among the registered corporations in the Philippines and were paid [or in 65 Exhibit "P-45-J-T.

66 Exhibits '·P-45-N-r· to ··P-4.'i-N-3'J"". ··1'-45-0-1"' to ··P-45-0-57". "P-45-P-1" to "P- 45-P-516". ··P-45-Q- r· to ··P-45-Q-4-l··. ··P-45-BQ-1 .. to "'P-45-BQ-8". "P-45-R-1" to "P-45-R-22"'. ··P-45-S-1"' to ··P-45-S-X4··. and ··P-45-T-1" to "'P-45-T-8". 67 Exhibit "P-46"', Docket- Vol. 2. pp. I 072 to I 096. at p. I 080. """"--

Maxima Machineries, Inc. vs. COmmtssmth_'l ol!nternnl Revenue accordance with the nJies und regulations o[" the BSP.

As for the alleged sales to enllltes not registered in the Philippines, the related schedules and exhibits68 submitted by the ICPA show that the same :nT actually sales of services (and not goods) to Marubcni Corpor:ttion. Pertinent to the VAT zero-rating of such sales to Marubeni Corporation, Section 108(8)(2) of the NIRC of 1997, as amended by RA No. C)JJ7. provides: SEC. I Cli"l. Vo/ue-orlrlecl Tux on Sole of Services and Use or Lease of Proper1ies. ·

XXX

(B) Trrmsuctions SiiiJ;c·c·t to /.cero l'crcenl (0%) Rate. - The following services pnformcd in I he l'hilippincs by VAT- registered persons sh:tll be subject to ~cro percent (0%) rate:

XXX

'\XX (2) Ser\"i('('s otlwr tll:111 1 hose rncnt ioned in the preceding pamgraph rL"IHkTt'd to " person engaged in business conduct cd ou 1 side I he Phi Iippi nes or to a non- resident person not engaged in business who is outside the

Philippines

when tlw snv!cr·s nn· performed, the consideration for whit·ll is P"id lor in <llTCptablc foreign currency and :tccoti!Jtt·d i<ll. i11 ;ttTor<I:IIH"C with the rules and regulations of the ll:lllgko St'lltt·:tl ng l'ilipinas (BSP); Based on the foregoing provt ston, certain essential elements must be present !"or :t s:tlc or supply of services to be subject to the V!\'f rate ol zcm percent (0'%) under Section 108(8)(2) of the Nli~C of I <)<)7, <ts amended, to wit: 1) The fCC! ptcn t or the services is a foreign corpora lion, and 1 he s<tid corporation is doing business oulsldc the Philippines; or is a non- resident person not engaged in business who

68 Exhibits "P-45-cr·. "1'-..J'>-( l--lx·· 'r"d ··t'-..J '-< J-..J'r· 0...

CfA Case No. 9453 Maxima Machineries, Inc. vs. Commissioner of Internal Revenue is outside the Philippines when the services were performed;69 2) The services fall under any of the categories under Section 108(B)(2),7D or simply, the services rendered should be other than "processing, manufacturing or repacking goods';71 3) The services must be performed in the Philippines72 by a VAT-registered person; and 4) The payment for such services should be in acceptable foreign currency accounted for in accordance with the BSP rules. 73 Petitioner, however, has not established the foregoing essential elements.

Relative to the first essential element, it has long been settled that to be considered as a non-resident foreign corporation doing business outside the Philippines, each entity must be supported, at the very least, by both SEC Certificate of Non-Registration of Corporation/Partnership and proof of incorporation/registration in a foreign country (e.g., Articles/Certificate of Incorporation/Registration and/or Tax Residence Certificate), and that there is no other indication which would disqualify said entity in being classified as a non- resident foreign corporation.

While petitioner presented proof of incorporation of Marubeni Corporation, 74 it failed to present the SEC Certificate 69 Site! Philippines Corporation (Formerly Clientlogic Phils .. Inc.) vs. Commissioner of Internal Revenue, G.R. No. 201326, February 8, 2017; Commissioner of Internal Revenue vs. Burmeister and Wain Scandinavian Contractor Mindanao, Inc., G.R. No. 153205, January 22, 2007; Accenture, Inc. vs. Commissioner of Internal Revenue, G.R. No.l90102,July 11,2012.

7° Commissioner of Internal Revenue vs. American Express international, inc. (Philippine Branch). supra.

71 Commissioner of Internal Revenue vs. Burmeister and Wain Scandinavian Contractor Mindanao, Inc., supra.

72 Commissioner of Internal Revenue vs. Burmeister and Wain Scandinavian Contractor Mindanao, Inc., supra; Commissioner of Internal Revenue vs. American Express International, Inc. (Philippine Branch), supra. 73 Commissioner of Internal Revenue vs. Burmeister and Wain Scandinavian Contractor Mindanao, Inc., supra; Commissioner of Internal Revenue vs. American Express International, Inc. (Philippine Branch), G.R. No. 152609, June 29,2005. 74 Exhibit "P-16", Docket- Vol. 3. pp. 1235 to 1250. ~

Maxima Machineries, Inc. vs. Commissioner of Internal Revenue of Non-Registration of Corporation/Partnership issued in favor of the latter. Thus, it cannot be said that petitioner fulfilled the first essential element.

With respect to the second essential element, petitioner likewise failed to present competent evidence to establish that the services it rendered to Marubeni Corporation are other than "processing, manufacturing or repacking goods." Thus, petitioner failed to comply with the second essential element. Petitioner further failed to comply with the third essential element as it was not able to establish that the services it provided to Marubeni Corporation were performed in the Philippines.

As regards the fourth essential element, petitioner also failed to present any certification (or proof) of inward remittances attesting to the fact of payment "in acceptable foreign currency and accounted for in accordance with the rules and regulations of the BSP".75 Thus, petitioner's non- presentation of the same constitutes failure to comply with the above-stated fourth essential element. Hence, petitioner's alleged export sales of services to Marubeni Corporation failed to qualify for zero percent (0%) VAT under Section 1 08(B)(2) of the NIRC of 1997, as amended, in the total amount ofP2,496,680.49, computed as follows: Exhibit No.

Name of Customer/Buyer

"P-45-0-48"

Marubeni Corporation

"P-45-0-49"

Marubeni Corporation

Sales to entities registered with PEZA. SBMA, CDC, and BOI.

Total

Amount

I'

2,010,621.25 486 059.24 ,.

2,496,680.49 Petitioner maintains that its sales of goods and services to entities registered with PEZA, SBMA, CDA, CEZA, CDC, and BOI during the period from January 1, 2014 to March 31, 75 Refer to Intel Technology Philippines, Inc. vs. Commissioner of Internal Revenue, G.R. No. 166732, Apri127, 2007.

a--- erA case No. 9453 Maxima Machineries, Inc. vs. Commissioner of Internal Revenue the 4th quarter of FY 2014 are subject to zero percent (0%) VAT, pursuant to Sections 106(A)(2)(a)(3), (5) and (c) and 1 08(B)(3) of the NIRC of 1997, as amended. The pertinent provisions of Sections 106(A)(2)(a)(3),(5) and (c) and 108(B)(3) of the NIRC of 1997, as amended by RA No. 9337, state:

SEC. 106. Value-Added Tax on Sale of Goods or Properties. - (A) Rate and Base of Tax. - xxx

XXX

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

manufacturer/producer whose products are 100% 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.

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, 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." (Emphases added) "SEC. 4.108-5. Zero-Rated Sale of Seruices.-

XXX

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

XXX

c::::A-- erA Case No. 9453 Maxima Machineries, Inc. vs. Commissioner of Internal Revenue

(2}

Services

other than processing, manufacturing or re-packing rendered to a person engaged in business conducted outside the Philippines or to a non-resident person not engaged in business who is outside the Philippines when the services are performed, the consideration for which is paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the BSP;

(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%) rate;(Emphases added) Relative to the foregoing provisions and to this case, the special laws are RA No. 7227, as amended by RA No. 9400, otherwise known as "Bases Conversion and Development Act of 1992", and RA No. 7916, as amended, otherwise known as "The Special Economic Zone Act of 1995." The relevant portions of said laws are quoted hereunder, to wit: Sections 12 and 15 of RA No. 7227, as amended by RA No. 9400:

SEC. 12. Subic Special Economic Zone.- xxx

XXX

(b) The Subic Special Economic Zone shall be operated and managed as a separate customs territory ensuring free flow or movement of goods and capital within, into and exported out of the Subic Special Economic Zone, as well as provide incentives such as tax and duty-free importations of raw materials, capital and equipment. However, exportation or removal of goods from the territory of the Subic Special Economic Zone to the other parts of the Philippine territory shall be subject to customs duties and taxes under the Tariff and Customs Code of the Philippines, as amended, the National Internal Revenue Code of 1997, as amended, and other relevant tax laws of the Philippines.

(c) The provision of existing laws, rules and regulations to the contrary notwithstanding, no national and local taxes shall be imposed within the Subic Special Economic Zone. xxx. (Emphases added) SEC. 15. Clark Special Economic Zone (CSEZ) and Clark Freeport Zone {CFZ).

- Subject to the concurrence by .:::4 erA Case No. 9453 Maxima Machineries, Inc. vs. Commissioner of Internal Revenue resolution of the local government units directly affected, the President is hereby authorized to create by executive proclamation a Special Economic Zone covering the lands occupied by the Clark military reservations and its contiguous extensions as embraced, covered and defined by the 194 7 Military Bases Agreement between the Philippines and the United States of America, as amended, xxx.7s The CFZ shall be operated and managed as a separate customs territory ensuring free flow or movement of goods and capital equipment within, into and exported out of the CFZ, as well as provide incentives such as tax and duty-free importation of raw materials and capital equipment. xxx.

The provisions of existing laws, rules and regulations to the contrary notwithstanding, no national and local taxes shall be imposed on registered business enterprises within the CFZ. xxx.

XXX

Duly registered business enterprises that will operate in the Special Economic Zones to be created shall be entitled to the same tax and duty incentives as provided for under Republic Act No. 7916, as amended: Provided, That for the purpose of administering these incentives, the PEZA shall register, regulate, and supervise all registered enterprises within the Special Economic Zones. (Emphases added) Sections 8 and 24 of RA No. 7916, as amended by RA No. 8748:

SECTION 8. ECOZONE to be Operated and Managed as Separate Customs Territory. - The ECOZONE 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." (Emphasis added) 78 Pursuant to Proclamation No. 1035 dated March 10, 2006 signed by then President Gloria Macapagal-Arroyo, the latter created and designated the area covered by the Clark Special Economic Zone, and transferred these lands to the BCDA pursuant to RA No. 7227.

c.r.-

Maxima Machineries, Inc. vs. Commissioner of Internal Revenue

"SECTION 24. Exemption form National and Local Taxes. - Except for real property taxes on land owned by developers, no taxes, local and national, shall be imposed on business establishments operating within the ECOZONE. xxx (Emphasis added) Considering that Economic Zones or ECOZONES are viewed as foreign territories by legal fiction, sales of goods and services made by a VAT-registered person in Philippine customs territory to an entity registered and operating within an ecozone are considered exports to a foreign country subject to zero percent (0%) VAT. The case of Commissioner of Internal Revenue us. Toshiba Information Equipment (Phils.), Inc. 79 which was later affirmed in the case of Coral Bay Nickel

Corporation

us.

Commissioner of Internal Revenue,80 is instructive, 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%) 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 - xxx [S]elected areas with highly developed or which have the potential to be developed into agro-industrial, industrial, tourist, recreational, commercial, banking, investment and financial centers whose metes and bounds are fixed or delimited by Presidential Proclamations. An ECOZONE may contain any or all of the following: industrial estates (IEs), export processing zones (EPZs), free trade zones and tourist/ recreational centers. The national territory of the Philippines outside of the proclaimed borders of the ECOZONE shall be referred to as the Customs Territory.

Section 8 of Rep. Act No. 7916, as amended, mandates that the PEZA shall manage and operate the ECOZONES as 79 G.R. No. 150154, August 9, 2005. 80 G.R. No. 190506, June 13, 2016. ~

DEOSION

Maxima Machineries, Inc. vs. Commissioner of Internal Revenue 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 (10%) VAT.Bl (Emphases added)

Based on the

foregoing statutory provisions and jurisprudential pronouncements, sales of goods and services by a VAT-registered taxpayer, such as herein petitioner, to entities located in ECOZONES, as well as to BOI-registered entities whose products are 100% exported, are considered "export sales" subject to the zero percent (0%) VAT rate. To prove that its clients are duly registered with the PEZA, SBMA, CDC, and BOI, petitioner submitted various Certifications issued by such agencies. Likewise, petitioner presented the letter of the PEZA Director General, BGen Charito B. Plaza, dated October 6, 201682 addressed to petitioner's Chief Financial Officer, Mr. Yusuke Yamada and Certification issued by the BOI-Director (Incentives Service), Ms. Erlinda F. Arcellana, on October 18, 2016,8 3 confirming the issuance of VAT zero-rating certifications to certain clients of petitioner.

Listed below are petitioner's clients for the subject period of claim with the alleged proof of VAT zero- rating:84 81 Now at 12% VAT rate.

82 Exhibit "P-4", Docket- Vol. 3, pp. 1221 to 1223. 83 Exhibit "P-5", Docket- Vol. 3, p. 1224. 84 Docket- Vol. 3, pp. 1225 to 1234 and USB. a--

Maxima Machineries, Inc. vs. Commissioner of Internal Revenue

Proof of

Exhibit

Name of Customer

VAT zero-ratin2 No.

ADNAMA MINING

Conf1rmation letter from 801 "P-5";

RESOURCES, INC.

dated October 18, 2016;

"P-45-K-1"

BOI Certification

ASIA INTERNATIONAL

SBMA Certificate of Tax

"P-6";

AUCTIONEERS, INC.

Exemption

"P-45-K- 30"

BERONG NICKEL

Confirmation letter from BOI "P-5";

CORPORATION

dated October 18, 2016;

"P-45-K-3"

BOI Certification

BIGLIFT PROPERTIES &

SBMA Certificate of Tax

"P-7"

"P-45-K-7"

Certification

FCF MINERALS CORP.

Confirmation letter from BOI "P-5";

dated October 18, 2016; BOI

"P-45-K-8"

Certification

HOUSE TECHNOLOGY

Confirmation letter from PEZA "P-4";

INDUSTRIES PTE., LTD.

dated October 6, 2016; PEZA

"P-45-K-9"

_ (HTIPL)

Certification

HYS-YACHT PHILS. LTD.,

SBMA Certificate of Tax

"P-8";

CO.INC.

Exemption

"P-45-K- 31"

JAMJLE PROPERTIES

SBMA Certificate of Tax

"P-9";

(SUBIC) AND

Exemption

"P-45-K-2"

DEVELOPMENT

CORPORATION (formerly:

JAMJLE EQU!PMENTS AND GEN. MERCHANDISE INC.)

K&AMETAL

Confirmation letter from PEZA "P-4";

INDUSTRIES, INC.

II"

MARCVENTURES MINING

Confirmation letter from BOI

"P-5"

AND DEVELOPMENT

dated October 18, 2016

CORPORATION

NORTHEAST GROUP OF

SBMA Certificate of Registration

"P-10";

COMPANIES, INC.

"P-45-K- (formerly: NORTHEAST 23" FREIGHT FORWARDERS, INC.\ PHILIPPINE BATTERIES, Confmnation letter from PEZA "P-4";

INCORPORATED (PBI)

dated October 6, 2016; PEZA "P-45-K-

Certification

12"

PLATINUM GROUP

Confirmation letter from BOI "P-5";

METALS CORPORATION

dated October 18, 2016; 801 "P-45-K-

Certification

I3"

RIO TUBA NICKEL MINING

Confirmation letter from BOI "P-5";

CORPORATION

dated October 18, 2016; BOI "P-45-K-

Certification

14" SCAD SERVICES (S) PTE., Confirmation letter from PEZA "P-4";

LTD. (PHIL. BRANCH\ __ d<>fed October6, 2016; PEZA "P-45-K-

Period Covered

2014 July 15, 2013 to July 14, 2014 November 27, 2013 to November 26, 2014 2014

January to

December 2013

January 1 to

December 31, 2013 2014

None

March 4, 2014 to March 3, 2015 2014

January 1 to

December 31, 2013

January 1 to

December 31,2013 2014 ~

Maxima Machineries, Inc. vs. Commissioner of Internal Revenue

CORPORATION (THPAL)

PEZA

dated October 6, 2016; PEZA

I "P-45-K-

Certification

24" and Cert. of Registration {as New I 32"~

REDeveloper)

"P-45-K- dated October 6, 2016; PEZA

Certification

"P-45-K- 17" to I, 2013 to April24, 2014 April I, 2013 to March 31, 2014 Thus, petitioner's sales to the aforementioned entities qualify for VAT zero-rating pursuant to Sections 106(A)(2)(a)(3),

(5) and (c) and 108(B)(3) of the NIRC of 1997, as amended, except for its sales to the following entities which are without BOI Certification to the effect that the said customers are HOI- registered manufacturers/producers whose products are 100% exported for the period covering the 4th quarter of FY 2014 or January 1, 2014 to March 31,2014, to wit: 1) ADNAMA MINING RESOURCES, INC.;

2) BERONG NICKEL CORPORATION;

3) CAGDIANAO MINING CORPORATION;

4) CARMEN COPPER CORPORATION;

5) CTP CONSTRUCTION AND MINING CORP.; 6) FCF MINERALS CORP.;

7) KROMINCO, INC.;

ac.,........--

Maxima Machineries, Inc. vs. Commissioner of Internal Revenue

8) LAPANDAY

AGRICULTURAL

AND

DEVELOPMENT

CORP.;

9) MARCVENTURES

MINING

AND

DEVELOPMENT

CORPORATION;

lO)PLATINUM GROUP METALS CORPORATION; ll)RIO TUBA NICKEL MINING CORPORATION; 12)SUNWEST WATER AND ELECTRIC CO. (SUWECO), INC.; and 13)TAGANITO MINING CORPORATION.

Correspondingly, in the absence of the said BOI Certification respectively issued to the foregoing entities, petitioner's claimed zero-rated sales in the amount of P831,827,398.02 are denied VAT zero-rating, as determined as follows:

Exhibit No.

Name of Customer/B~y~r

Amount

"P-45-P-6"

BERONG NICKEL CORPORATION

Maxima Machineries, Inc. vs. Commissioner of Internal Revenue rm ee ee ee a yo es

“P-45-N-15” CARMEN COPPER CORP

680,320.00 “P-45-N-16"

CARMEN COPPER CORP

“P_45-N-26” CARMEN COPPER CORP

CARMEN COPPER CORP

“p.45-N-28” CARMEN COPPER CORP 282,080.00 “P-45-N-29” CARMEN COPPER CORP 731,888.80 CARMEN COPPER CORP 913,420.32 “P-45-N-31” CARMEN COPPER CORP 37,614,50

“P-45-N-31”

-N- CARMEN COPPER CORP 896,056.00 “P-45-N-32” CARMEN COPPER CORP 24,129.50

“P_45-N-32”

911,704.00 900.00 40 (2.4 “P-45-P-48” CARMEN COPPER CORP 96,816.00 “P-45-P-49” CARMEN COPPER CORP 1,786,383.20

“P-45-P-49”

CARMEN COPPER CORP

Maxima Machineries, Inc. vs. Commissioner of Internal Revenue

39,488.00

CARMEN COPPER CORP

“P-45-P-120” CARMEN COPPER CORP

83,136.00

Maxima Machineries, Inc. vs. Commissioner of Internal Revenue

“P-45-P-120” CARMEN COPPER CORP 6,844.00 “p-45-P-122"

“P-45-P-142”

“P-45-P-153” CARMEN COPPER CORP 73,285.50

Maxima Machineries, Inc. vs, Commissioner of Internal Revenue

“P-45-P-153”

“P-45-P-154”

“P.45-P-185°

CARMEN COPPER CORP

“P-45-P- 189” CARMEN COPPER CORP

13,440.00

Maxima Machineries, Inc. vs. Commissioner of Internal Revenue eee eae eee Ho wee ee ee ee a ee se eee eee eee eee

“P-45-P-190” CARMEN COPPER CORP

CARMEN COPPER CORP

“p-45-P-191" __ | CARMEN COPPER CORP

“P-45-P-191” CARMEN COPPER CORP

18,678.00

CARMEN COPPER CORP

CARMEN COPPER CORP 190,176.00

CARMEN COPPER CORP

“P-45-P-235”

CARMEN COPPER CORP

“P-45-P-237” CARMEN COPPER CORP

“P_45-P-238” CARMEN COPPER CORP

*P-45-P-238” CARMEN COPPER CORP

CARMEN COPPER CORP

“p-45-P-244" CARMEN COPPER CORP 430,648.00

CARMEN COPPER CORP

66,155.00 “P-45-P-250” CARMEN COPPER CORP 727 832.00 “P-45-P-250” CARMEN COPPER CORP 95,589.50

Oo

41) By

J

Le]

Q

Oo

10,720.00 “P-45-P-271” CARMEN COPPER CORP 106,410.00 “P-45-P-272” CARMEN COPPER CORP 288,841.60 “P-45-P-273” CARMEN COPPER CORP 672,405.44 “P-45-P-274” CARMEN COPPER CORP 671,185.60 , “p-45-P-275”__ | CARMEN COPPER CORP 1,344.00 “p-45-P-275”__| CARMEN COPPER CORP 294,362.80 CARMEN COPPER CORP 1,076,536.80

“P-45-P-277” CARMEN COPPER CORP

1,489.65 “P-45-P-277” CARMEN COPPER CORP 23,834.00 “P-45-P-278” CARMEN COPPER CORP 653,365.20 CTP CONSTRUCTION & MINING CORP.

CTP CONSTRUCTION & MINING CORP. fg 000 | CTP CONSTRUCTION & MINING CORP.

CTP CONSTRUCTION & MINING CORP.

wo bt

BSS

j=] o 2° ©

Maxima Machineries, Inc. vs. Commissioner of Internal Revenue

“p-45-0-19° CTP CONSTRUCTION & MINING CORP. 2,136.00 “P.45-0-20" CTP CONSTRUCTION & MINING CORP. 20,583.50 “P-45-0-20" CTP CONSTRUCTION & MINING CORP. 442,728.00 CTP CONSTRUCTION & MINING CORP, 3,000.00 *P-45-O-21” CTP CONSTRUCTION & MINING CORP. 35,600.00 “P-45-0-22” CTP CONSTRUCTION & MINING CORP. 6,736.00 CTP CONSTRUCTION & MINING CORP.

CTP CONSTRUCTION & MINING CORP.

“P.45-0-30" CTP CONSTRUCTION & MINING CORP.

“P-45-0-31° CTP CONSTRUCTION & MINING CORP.

“p-45-0-32” CTP CONSTRUCTION & MINING CORP.

67,808.00 “P-45-0-34” CTP CONSTRUCTION & MINING CORP. 888.00 CTP CONSTRUCTION & MINING CORP, 3,216.00 CTP CONSTRUCTION & MINING CORP.

“P.45-0-38" CTP CONSTRUCTION & MINING CORP, 539.50 “P-45-0-40" 14,231.50 “P-45-0-40" 36,896.00 “P-45-0-41"

FCF MINERALS CORPORATION

“P-45-P-297”

“P-45-P-298”

FCF MINERALS CORPORATION

12,656.38 189,334.07 2 2 2 2 “p-45-p-298" _| FCF MINERALS CORPORATION

“P-45-P-299”

FCF MINERALS CORPORATION

FCF MINERALS CORPORATION _ 112,893.31 «p_45-P-303”__| FCF MINERALS CORPORATION 444.00

FCF MINERALS CORPORATION

“p-45-P-304” _| FCF MINERALS CORPORATION __ 12,422.70

“P-45-P-304” FCF MINERALS CORPORATION

MARCVENTURES MINING AND DEVELOPMENT

“P-45-P-352” CORP

137,540.00 3,230.00

DEOSION

Maxima Machineries, Inc. vs. Commissioner of Internal Revenue

MARCVENTURES MINING AND DEVELOPMENT

"P-45-P-352"

CORP

MARCVENTURES MINING AND DEVELOPMENT

"P-45-P-353"

CORP

MARCVENTURES MINING AND DEVELOPMENT

"P-45-P-353"

CORP

MARCVENTURES MINING AND DEVELOPMENT

"P-45-P-354"

CORP

MARCVENTURES MINING AND DEVELOPMENT

"P-45-P-354"

CORP

MARCVENTURES MINING AND DEVELOPMENT

"P-45-P-354"

CORP

MARCVENTURES MINING AND DEVELOPMENT

"P-45-P-355"

CORP

MARCVENTURES MINING AND DEVELOPMENT

"P-45-P-356"

CORP

MARCVENTURES MINING AND DEVELOPMENT

"P-45-P-357"

CORP

MARCVENTURES MINING AND DEVELOPMENT

"P-45-P-358"

CORP

MARCVENTURES MINING AND DEVELOPMENT

"P-45-P-358"

CORP

MARCVENTURES MINING AND DEVELOPMENT

"P-45-P-359"

CORP

MARCVENTURES MINING AND DEVELOPMENT

"P-45-P-359"

CORP

MARCVENTURES MINING AND DEVELOPMENT

"P-45-P-360"

CORP

I

MARCVENTURES MINING AND DEVELOPMENT

"P-45-P-36!"

CORP

MARCVENTURES MINING AND DEVELOPMENT

"P-45-P-362"

CORP

MARCVENTURES MINING AND DEVELOPMENT

"P-45-P-362"

CORP

MARCVENTURES MINING AND DEVELOPMENT

"P-45-P-363"

CORP

MARCVENTURES MINING AND DEVELOPMENT

"P-45-P-363"

CORP

MARCVENTURES MINING AND DEVELOPMENT

"P-45-P-364"

CORP

MARCVENTURES MINING AND DEVELOPMENT

"P-45-P-364"

CORP

MARCVENTURES MINING AND DEVELOPMENT

"P-45-P-365"

CORP

MARCVENTURES MINING AND DEVELOPMENT

"P-45-P-365"

CORP

MARCVENTURES MINING AND DEVELOPMENT

"P-45-P-366"

CORP

MARCVENTURES MINING AND DEVELOPMENT

"P-45-P-367"

CORP

MARCVENTURES MINING AND DEVELOPMENT

"P-45-P-367"

CORP

MARCVENTURES MINING AND DEVELOPMENT

"P-45-P-368"

CORP

MARCVENTURES MINING AND DEVELOPMENT

"P-45-P-368"

CORP

MARCVENTURES MINING AND DEVELOPMENT

"P-45-P-369"

CORP

MARCVENTURES MINING AND DEVELOPMENT

"P-45-P-370"

CORP

MARCVENTURES MINING AND DEVELOPMENT

"P-45-P-371"

CORP

MARCVENTURES MINING AND DEVELOPMENT

"P-45-P-37!"

CORP

12,960.00 PLATINUM GROUP METALS CORP.

PLATINUM GROUP METALS CORP.

“P-45-P-387"__| PLATINUM GROUP METALS CORP. “P.45-P-516"__| PLATINUM GROUP METALS CORP. “p.45-P-388" | RIO TUBA NICKEL MINING CORPORATION “p-45-P-389” _| RIO TUBA NICKEL MINING CORPORATION 473,755.36

RIO TUBA NICKEL MINING CORPORATION

SUNWEST WATER AND ELECTRIC CO INC

“p_45-P-430”__ | TAGANITO MINING CORP

TAGANITO MINING CORP

“P-45-P-432”__| TAGANITO MINING CORP

“p.45-P-436" __| TAGANITO MINING CORP

TAGANITO MINING CORP

“P-45-P-444” TAGANITO MINING CORP

3,816.00 2,872.00 TAGANITO MINING CORP 1,344.00

TAGANITO MINING CORP

194,560.00 “p_45-P-44g” _| TAGANITO MINING CORP_ 217,328.00 “p.45-P-449” _| TAGANITO MINING CORP 230,480.00 TAGANITO MINING CORP _ 789,472.00 “p.45-P-451” _| TAGANITO MINING CORP 53,160.00 “P-45-P-452" 52,920.00 116,477.60

TAGANITO MINING CORP

78,168.00 17,072.00 4,480.00 173,712.00

"P-45-P-4 76"

TAGAN!TO MINING CORP "P-45-P-477''

TAGANITO MINING CORP

"P-45-P-4 78"

TAGANITO MINING CORP

"P-45-P-479"

TAGANITO MINING CORP

"P-45-P-480"

TAGANITO MINING CORP

- Compliance with the invoicing requirements under the law.

I 15,808.00 6,400.00 108,528.00 85,760.00 33,400.00 76,704.00 129,584.00 12,120.00 1,145,780.80 448.00 8,736.00 3,576.00 3,576.00 16,120.00 2,616.80 !6,816.00 3 576.00 5,233.60 17,016.00 2,616.80 15,700.80 23,551.20 48,280.00 23,760.00

Total

,. 831,827,398.02 In any event, petitioner's export sales that qualify for VAT zero-rating under Sections 106(A)(2)(a)(3), (5) and (c) and 108(8)(3) of the NIRC of 1997, as amended, must further be supported by VAT zero-rated sales invoices [for sales of goods] and ORs [for sales of services] in accordance with Sections 113(A)(1) and (2), (B)(1), (2)(c) and (3) of the NIRC of 1997, as amended, as implemented by Sections 4.113-1 (A)( 1) and (2), (B)(1) and (2)(c) of RR No. 16-2005, which are all quoted hereunder:

Sec. 113. Invoicing and Accounting Requirements for VAT-registered Persons.-

{A)

Invoicing Requirements. -

A VAT-registered

person shall issue:

{ 1) A VAT invoice for every sale, barter or exchange of goods or properties; and ~

Maxima Machineries, Inc. vs. Commissioner of Internal Revenue

(2) A VAT official receipt for every lease of goods or properties, and for every sale, barter or exchange of services.

(B)

Information Contained in the VAT Invoice or VAT

Official Receipt. - The following information shall be indicated in the VAT invoice or VAT official receipt: (1) A statement that the seller is a VAT-registered person, followed by his Taxpayer's Identification Number (TIN);

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

XXX

(c) If the sale is subject to zero percent (0%) value- added tax, the term 'zero-rated sale' shall be written or printed prominently on the invoice or receipt;

XXX

(3) The date of transaction, quantity, unit cost and description of the goods or properties or nature of the service; and xxx.

Sec. 4.113-1. Invoicing Requirements.-

(A)

A VAT-registered person shall issue: -

(1) A VAT invoice for every sale, barter or exchange of goods or properties; and

(2) A VAT official receipt for every lease of goods or properties, and for every sale, barter or exchange of services. Only VAT-registered persons are required to print their TIN followed by the word 'VAT' in their invoice or official receipts. Said documents shall be considered as a 'VAT Invoice' or VAT official receipt.

All purchases covered by invoice/receipts other than VAT Invoice/VAT Official Receipt shall not give rise to any input tax. VAT invoice/official receipt shall be prepared at least in duplicate, the original to be given to the buyer and the duplicate to be retained by the seller as part of his accounting records.

a--

Maxima Machineries, Inc. vs. Commissioner of Internal Revenue

(B)

Information contained in VAT invoice or VAT official receipt. - The following information shall be indicated in VAT invoice or VAT official receipt: (1) A statement that the seller is a VAT-registered person, followed by his TIN;

(2) The total amount which the purchaser pays or is obligated to pay to the seller with the indication that such amount includes the VAT; Provided, That: xxx (c) If the sale is subject to zero percent (0%) VAT, the term 'zero-rated sale' shall be written or printed prominently on the invoice or receipt; xxx (Emphasis supplied) In addition to the above requirements, the invoices and ORs must be duly registered with the BIR as prescribed under Section 237 in relation to Section 238 of the NIRC of 1997, as amended, to wit:

SEC. 237. Issuance of Receipts or Sales or Commercial Invoices. - All persons subject to an internal revenue tax shall, for each sale or transfer of merchandise or for services rendered valued at Twenty-five pesos (P25.00) or more, issue duly registered receipts or sales or commercial invoices, prepared at least in duplicate, showing the date of transaction, quantity, unit cost and description of merchandise or nature of service: xxx SEC. 238. Printing of Receipts or Sales or Commercial Invoices. - All persons who are engaged in business shall secure from the Bureau of Internal Revenue an authority to print receipts or sales or commercial invoices before a printer can print the same.

No authority to print receipts or sales or commercial invoices shall be granted unless the receipts or invoices to be printed are serially numbered and shall show, among other things, the name, business style, Taxpayer Identification Number (TIN) and business address of the person or entity to use the same, and such other information that may be required by rules and regulations to be promulgated by the

Secretary

of Finance, upon recommendation of the Commissioner.

u. ./

Maxima Machineries, Inc. vs. Commissioner of Internal Revenue

In Eastern Telecommunications Philippines, Inc.

us.

Commissioner of Internal Revenue,ss the Supreme Court held: An applicant for a claim for tax refund or tax credit must not only prove entitlement to the claim but also compliance with all the documentary and evidentiary requirements. Consequently, the old CTA, as affirmed by the CTA en bane, correctly ruled that a claim for the refund of creditable input taxes must be evidenced by a VAT invoice or official receipt in accordance with Section 110(A)(1) of the NIRC. Sections 237 and 238 of the same Code as well as Section 4.108-1 of RR No. 7-95 provide for the invoicing requirements that all VAT-registered taxpayers should observe, such as: (a) the BIR Permit to Print; (b) the Tax Identification Number of the VAT-registered purchaser; and {c) the word 'zero-rated' imprinted thereon. Thus, the failure to indicate the words 'zero-rated' on the invoices and receipts issued by a taxpayer would result in the denial of the claim for refund or tax credit. xxx Based on the foregoing, it is vital for a taxpayer claiming tax refund/credit on its input taxes attributable to its zero- rated sales to prove that it had followed the invoicing requirements under the law.

Based on the !CPA's Report,86 the zero-rated sales in the amount of 1'22,197,171.85, as detailed below, did not qualify as such due to non-compliance with the invoicing requirements under the law, to wit:

Exhibit

·--------1

Reference

Description

Amount

"P-45-T"

Zero-rated sales properly supported by official receipt or sales invoice, p 3,978,362.67 but not properly classified as zero-rated sales (without stamp "Zero- rated sales")

"P-45-Q"

Zero-rated sales without certificates of zero-rating from Customers 550,793.72

"P-45-R"

Zero-rated sales properly supported by charge sales invoice, dated 12,237,958.28 outside the covered fiscal period.

I

I"P-45-S" ~rated sales not properly supported-by -charge sales invoice or OR 2,917,220.20 (Bills and Debit/ credit notes) ps::a_J:'"_ ~e':.":~rated sales with no ~upporting documents _ 2,512,836.98" -

Total Invalid Zero-rated Sales

P22,197,171.85 85 G.R. No. 183531, March 25,2015. 86 Exhibit "P-46", Docket- Vol. 2, p. I 081 and USB. 87 1"2,512,837.00 per !CPA Report (Item. c 2., Exhibit "P-46", Docket, p. 1081) but 1"2,512,836.98 per actual Schedule (Exhibit "P-45-BP"). ""

Maxima Machineries, Inc. vs. Commissioner of Internal Revenue

Finding merit on the foregoing determinations of the ICPA, the same are sustained.

In addition, petitioner's claimed zero-rated sales in the amount of Pl2,542,182.58 shall also be denied VAT zero-· rating for being supported by charge sales invoices with unreadable details, to wit:

Exhibit No.

Name of Customer /Buyer

Amount

""P-45-0-45" KandA Metal Industries Inc.

~ 17,359.57 I

"P-45-0-46"

KandA Metal Industries Inc.

24,823.0 I

"P-45-0-51"

Northeast Grouo of Companies Inc

12,500 000.00

Total

I' 12,542,182.58 Thus, out of the total reported zero-rated sales of P952,009,079.19 only the amount of P75,534,773.13, as computed below, qualify for VAT zero-rating for the 4th quarter ofFY2014:

FY 2014

4" Quarter d

Total Reported Zero- Rated Sales

p 952,009,079.19

Less: Sales to CM Pancho Construction Incorporation88

7,4!0,873.1:2_J -- Zero-Rated sales per Petition p 944,598,206.07 -· -- Less: Sales denied of VAT zero-rating

Per ICPA Report

22,197,171.85 Per this Court's further verification (P2 ,496 ,680.49+P831 ,827,398.02+P12,542, 182.581 846,866,261.09

Valid Zero-Rated Sales

P7S,S34,773.ta - Such being the case, for purposes of the fourth requisite, the Court finds that petitioner had VAT zero-rated sales, but only in the said amount of P75,534,773.13 for the 4th quarter ofFY 2014.

As for the fifth requisite, petitioner must prove that the acceptable foreign currency exchange proceeds have been duly accounted for in accordance with BSP rules and regulations, pursuant to Sections 106(A)(2)(a)(l), (2) and (b), and 108(B)(l) and (2), of the NIRC of 1997, as amended. However, since the legal basis for petitioner's zero-rated sales of P75,534,773. 13 is Section 1 06(A)(2)(a)(3), (5) and (c) of the NIRC of 1997, as amended, the instant case need not comply with the said fifth 88 Exhibit "P-46". Docket- Vol. 2, pp. l 072 to 1 096. at p. l 080. ~

Maxima Machineries, Inc. vs. Commissioner of Internal Revenue requisite. Moreover, while petitioner alleges that it has sales of services to a non-resident foreign corporation, the Court need not determine whether there was compliance with the same fifth requisite, since it was not duly proven, as above shown., that the said sales of services qualify for VAT zero-rating under Section 108(B)(2) of the NIRC of 1997, as amended. Having found that petitioner had valid zero-rated sales in the total amount of P75,534,773.13 for the subject period of claim, the Court shall now proceed to determine whether petitioner complied with the following remaining requisites pertaining to the input VAT being claimed for refund or issuance of a tax credit certificate, to wit: a) sixth requisite: the input taxes are not transitional input taxes;

b) seventh requisite: the input taxes are due or paid; c) eighth requisite:

the input taxes claimed are attributable to zero-rated or effectively zero-rated sales. However, where there are both zero-rated or effectively zero-rated sales and taxable or exempt sales, and the input taxes cannot be directly and entirely attributed to any of these sales, the input taxes shall be proportionately allocated on the basis of sales volume; and d) ninth requisite: the input taxes have not been applied against output taxes during and in the succeeding quarters.

The input VAT being claimed does not appear to be transitional input taxes.

The claimed input taxes do not appear to be transitional input taxes, as understood under Section 111 (A) of the NIRC of 1997, as amended by RA No. 9337, to wit: SEC. 111. Transitional/ Presumptive Input Tax Credits. (A) Transitional Input Tax Credits. - A person who becomes liable to value-added tax or any person who elects to be a VAT-registered person shall, subject to the filing of an c::;

CfA Case No. 9453 Maxima Machineries, Inc. vs. Commissioner of Internal Revenue inventory according to the rules and regulations prescribed by the Secretary of Finance, upon recommendation of the Commissioner, be allowed input tax on his beginning inventory of goods, materials and supplies equivalent to two percent (2%) of the value of such inventory or the actual value-added tax paid on such goods, materials and supplies, whichever is higher, which shall be creditable against the output tax.

Transitional input tax credit operates to benefit newly VAT-registered persons, whether or not they previously paid taxes in the acquisitions of their beginning inventory of goods, materials and supplies. During the period of transition from non-VAT to VAT status, the transitional input tax credit serves to alleviate the impact of the VAT on the taxpayer.s9 Considering that there is no showing that the claimed input VAT is transitional input VAT, petitioner has complied with the sixth requisite for the grant of an input VAT refund. Not all of the input VAT being claimed are due or paid.

Anent the seventh requisite in claiming VAT refund, it is necessary for petitioner to provide supporting documents to prove that the input taxes claimed during the 41h quarter of FY 20 14 were actually due or paid in accordance with Section 11 O(A) of the NIRC of 1997, as amended, which provides that: SEC. 110. Tax Credits.- (A) Creditable input Tax. -

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

(a) Purchase or importation of goods:

(i) For sale; or 89 Fort Bonifacio Development Corporation vs. Commissioner of Internal Revenue, G.R. Nos. 158885 and 170680, April 2, 2008. c-.--

Maxima Machineries, Inc. vs. Commissioner of Internal Revenue

(ii) For conversion into or intended to form part of a finished product for sale including packaging materials; or (iii) For use as supplies in the course of business; or (iv) For use as materials supplied in the sale of service; or

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

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

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

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

(b) To the importer upon payment of the value-added tax prior to the release of the goods from the custody of the Bureau of Customs.

Provided, That the input tax on goods purchased or imported in a calendar month for use in trade or business for which deduction for depreciation is allowed under this Code, shall be spread evenly over the month of acquisition and the fifty-nine (59) succeeding months if the aggregate acquisition cost for such goods, excluding the VAT component thereof, exceeds One million pesos (f'1,000,000): Provided, however, That if the estimated useful life of the capital good is less than five (5) years, as used for depreciation purposes, then the input VAT shall be spread over such a shorter period: Provided, finally, That in the case of purchase of services, lease or use of properties, the input tax shall be creditable to the purchaser, lessee or licensee upon payment of the compensation, rental, royalty or fee. The above provisions are implemented by Sections 4.110- 1 to 4.110-3 of RR No. 16-2005, which provide as follows: SECTION 4.110-1. Credits For Input Tax.- 'Input tax' means the VAT due on or paid by a VAT-registered person on importation of goods or local purchases of goods, properties, or services, including lease or use of properties, in the course of his trade or business. It shall also include the transitional input tax and the presumptive input tax determined in accordance with Sec. 111 of the Tax Code. a ....

CfA Case No. 9453 Maxima Machineries, Inc. vs. Commissioner of Internal Revenue

It includes input taxes which can be directly attributed to transactions subject to the VAT plus a ratable portion of any input tax which cannot be directly attributed to either the taxable or exempt activity.

Any input tax on the following transactions evidenced by a VAT invoice or official receipt issued by a VAT-registered person in accordance with Sees. 113 and 237 of the Tax Code shall be creditable against the output tax:

(a) Purchase or importation of goods ( 1) For sale; or

(2) For conversion into or intended to form part of a finished product for sale, including packaging materials; or

(3) For use as supplies in the course of business; or

(4) For use as raw materials supplied in the sale of services; or

(5) For use in trade or business for which deduction for depreciation or amortization is allowed under the Tax Code,

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

XXX

SECTION 4.110-2. Persons Who Can Avail of the Input Tax Credit. -The input tax credit on importation of goods or local purchases of goods, properties or services by a VAT- registered person shall be creditable:

(a) To the importer upon payment of VAT prior to the release of goods from customs custody;

(b) To the purchaser of the domestic goods or properties upon consummation of the sale; or

C2c.

Maxima Machineries, Inc. vs. Commissioner of Internal Revenue

SECTION 4.110-3. Claim for Input Tax on Depreciable Goods. - Where a VAT-registered person purchases or imports capital goods, which are depreciable assets for income tax purposes, the aggregate acquisition cost of which (exclusive of VAT) in a calendar month exceeds One Million pesos (P1,000,000.00), regardless of the acquisition cost of each capital good, shall be claimed as credit against output tax in the following manner:

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

(5) years or more -The input tax shall be spread evenly over a period of sixty (60) months and the claim for input tax credit will commence in the calendar month when the capital good is acquired. The total input taxes on purchases or importations of this type of capital goods shall be divided by 60 and the quotient will be the amount to be claimed monthly.

(b) If the estimated useful life of a capital good is less than five (5) years -The input tax shall be spread evenly on a monthly basis by dividing the input tax by the actual number of months comprising the estimated useful life of the capital good. The claim for input tax credit shall commence in the calendar month that the capital goods were acquired. Where the aggregate acquisition cost (exclusive of VAT) of the existing or finished depreciable capital goods purchased or imported during any calendar month does not exceed One million pesos (Pl,OOO,OOO.OO), the total input taxes will be allowable as credit against output tax in the month of acquisition; Provided, however, that the total amount of input taxes (input tax on depreciable capital goods plus other allowable input taxes) allowed to be claimed against the output tax in the quarterly VAT Returns shall be subject to the limitation prescribed under Sec. 4.110-7 of these Regulations.

The aggregate acquisition cost of a depreciable asset in any calendar month refers to the total price agreed upon for one or more assets acquired and not on the payments actually made during the calendar month. Thus, an asset acquired in installment for an acquisition cost of more than Pl,OOO,OOO.OO will be subject to the amortization of input tax despite the fact that the monthly payments/installments may not exceed Pl,OOO,OOO.OO.

XXX

If the depreciable capital good is sold/ transferred within a period of five (5) years or prior to the exhaustion of the amortizable input tax thereon, the entire unamortized input tax on the capital goods sold/transferred can be ac

CfA Case No. 9453 Maxima Machineries, Inc. vs. Commissioner of Internal Revenue claimed as input tax credit during the month/quarter when the sale or transfer was made but subject to the limitation prescribed under Sec. 4.110-7 of these Regulations. Furthermore, Section 4.110-8 of RR No.

16-2005 provides for the substantiation requirements of input tax credits on domestic purchases of goods, properties and services, as follows:

SECTION 4.110-8. Substantiation of Input Tax Credits.

(a) Input taxes for the importation of goods or the domestic purchase of goods, properties or services is made in the course of trade or business, whether such input taxes shall be credited against zero-rated sale, non-zero-rated sales, or subjected to the 5% Final Withholding VAT, must be substantiated and supported by the following documents, and must be reported in the information returns required to be submitted to the Bureau:

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

(2) For the domestic purchase of goods and properties - invoice showing the information required under Sees. 113 and 237 of the Tax Code.

(3) For the purchase of real property - public instrument i.e., deed of absolute sale, deed of conditional sale, contract/agreement to sell, etc., together with VAT invoice issued by the seller.

(4) For the purchase of services - official receipt showing the information required under Sees. 113 and 237 of the Tax Code.

A cash register machine tape issued to a registered buyer shall constitute valid proof of substantiation of tax credit only if it shows the information required under Sees. 113 and 237 of the Tax Code.

It is categorically mentioned in the above provisions that in order to be entitled to input tax credits, the same must be evidenced by VAT invoices (for domestic purchases of goods or properties) or ORs (for domestic purchases of services) issued ee----

Maxima Machineries, Inc. vs. Commissioner of Internal Revenue in accordance with the above-quoted Section 113 of the NIRC of 1997, as amended.

Thus, in order to prove entitlement to credits for input taxes due or paid, petitioner must not only present the supporting documents prescribed under Section 4.110-8 of RR No. 16-2005, but more importantly, these documents must comply with the invoicing requirements under the earlier quoted Sections 113(A) and (B), 237 and 238 of the NIRC of 1997, as amended, and as implemented by Section 4.113-1(A) and (B) of RR No. 16-2005.

For the 4th quarter of FY 2014, petitioner declared input taxes in the total amount ofP187,840,058.19, out of which the amount of !'89,994,022.70 is the subject of petitioner's claim for refund, to wit:

Input taxes as declared per Amended Quarterly VAT Return [or the 4th quarter o[FY 2014: 90

Nature of Transaction

Input Tax Deferred on Capital Goods exceeding PI Million from Previous

Quarter (Line 2081

Less: Input Tax on Purchases of Capital Goods Exceeding Pl Million deferred for succeeding period (Line 23A) -- Input tax Amortized for the period

Add: Current Input Taxes

Domestic Purchases of Goods other than CG (Line 21F) Importation of Goods Other than CG (Line 21 H)

Domestic Purchase of Services (Line 21J)

Total Input Taxes for the period - --- - --- -- --- ---- -- Input taxes as per subject claim: 91

Nature of Transaction

Total current input tax for the 4th quarter of fiscal year 2014

Less·

Input tax directly attributable to VATable sale of machineries from current purchases f--- Input tax directly attributable to Zero-rated sale of machineries from current purchases Input tax directly attributable to government sales from current purchases 90 Exhibit "P-21 ", Docket- Vol. 3, pp. 1255 to 1256. 91 Exhibit "P-46", Docket- Vol. 2, p. 1079. ln~ut Tax p 2,731,710.09 2,536,494.62 p 195,215.4:1 3,371,511.40 176,437,656.00 7,835,675.32 p 187,840,058.19 ---- --

Input Tax

p 187,840,058.1') 13,394,928.9'2 48,555,626.80 824,161.61 a...

Maxima Machineries, Inc. vs. Commissioner of Internal Revenue

Input tax directly attributable on current purchases not sold within the quarter Current input tax available for allocation Multiply by percentage of zero-rated sales in relation to total sales, computed as follows:

VAT zero-rated sales receipt for the 4th quarter of fiscal year 2014 p 944,598,206.07 Divide: Total salesjreceipts for the 4th quarter of fiscal year 2014 2,341,063,968.40 Input taxes from current purchases allocable to zero-rated sales during the quarter

Add:

Input tax directly attributable to zero-rated sales of machineries from current purchases Input tax directly attributable to zero-rated sales of machineries and spare parts which were imported in prior years but sold during the quarter

Total

81,867,736.28 P 43,197,604.58 I

I

40.35% p 17,429,844.01 48,555,626.80 24,008,551.89 P89,994,022.70 In support of its input taxes due or paid, petitioner submitted various sales invoices, ORs, Import Entry and Internal Revenue Declarations (IEIRDs), Bureau of Customs (BOC) Single Administrative Document (SAD), Statements of Settlement of Duties and Taxes (SSDTs), BOC ORs, and other related documents,92 which were examined by the ICPA. Summarized below are the input taxes for the 4th quarter of FY 2014 in the total amount of P187,840,058.19, as accounted for by the ICPA:93 Exhibit No.

Amount

A. Input tax directly attributable to VA Table sale of machineries from

"P-45-BR"

p 13,394,928.92 current purchases 92 Exhibits "P-45-U-1" to "P-45-U-84" "P-45-V-1" "P-45-W-1" to "P-45-W-8" "P-45- , , , X-1" to "P-45-X-109". "P-45-Y-1" to "P-45-Y-5", "P-45-AZ-1" to "P-45-AZ-18", "P- 45-AA-1" to "P-45-AA-32", "P-45-AB-1" to "P-45-AB-118", "P-45-AC-1" to "P-45- AC-4", "P-45-AD-1" to "P-45-AD-11 ", "P-45-AE-1" to "P-45-AE-6", "P-45-AF-1" to "P-45-AF-25", "P-45-BA-1" to "P-45-BA-51 ", "P-45-BB-1" to "P-45-BB-61 ", "P-45- BC-1" to "P-45-BC-18", "P-45-BD-1" to "P-45-BD-262", "P-45-BF-1" to "P-45-BF- 39", "P-45-BG-1" to "P-45-BG-337'', "P-45-BH-1" to "P-45-BH-291 ", "P-45-BI-1" to "P-45-BI -28", "P-45-BJ-1" to "P-45-BJ-44". "P-45-BK -1" to "P-45-BK-53", "P-45- BL-1" to "P-45-BL-68", "P-45-BM-1" to "P-45-BM-310", "P-45-BN-1" to "P-45-BN- 92" "P-45-B0-1" to "P-45-B0-18" "P-45-BQ-1" to "P-45-BQ-3" "P-45-BR-1" to , , , "P-45-BR-13", and "P-45-BS-1" to "P-45-BS-35". 93 Exhibit "P-46", Findings and Observations Nos. 7 and 8, Docket- Vol. 2, pp. 1082 to 1087.

a--

Maxima Machineries, Inc. vs. Commissioner of Internal Revenue

I B. Input tax directly attributable on current purchases not sold within

"P-45-BS"

the quarter C. Input tax directly attributable to zero-rated sale of machineries from

"P-45-BQ"

current purchases D. Input tax directly attributable to government sales from current

"P-46"94

purchases "P-45-U" to "P-45-Y"; "P-45-AZ";

E. Input tax available for allocation "P-45-BA" to "P-45-BO";

"P-45-Z"; "P-45-AA" to "P-45-AF"

Total

81,867,736.28 48,555,626.80 824,161.61 43,197,604.58 P187,840,058.19 As per Report of the ICPA, out of the P43, 197,604.58 current input tax available for allocation, the input VAT in the amount of P11,776,427.6995 shall be disallowed for failure to meet the invoicing requirements under Sections 110(A), 113(A) and (B), and 237 of the NIRC of 1997, as amended, in relation to Sections 4.110-1, 4.110-2, 4.110-8 and 4.113-1 of RR No. 16-2005, as amended, to wit:

I

Exhibit No.

Description

l. Input tax on domestic purchase of goods and services 96

"P-45-BE"

Domestic purchase of goods and senrices with no supporting documents

"PAS-BF"

Domestic purchase of goods supported by documents other than VAT invoices

"P-45-BG"

Domestic purchase of services supported by documents other than VAT ORs

"P-45-BH"

Domestic purchase of goods and services supported by unreadable documents Domestic purchase of goods supported by VAT

"P-45-Bl"

InvoicejORs claimed outside the taxable quarter but within taxable year Domestic purchase of services supported by VAT

"P-45-BJ"

InvoicejORs claimed outside the taxable quarter but within taxable year

"P-45-BK"

Domestic purchase of services supported by tape receipts but without permit number

"P-45·BL"

Domestic purchase of goods or services with missin~/outdated ATP Domestic purchase of goods or services supported by VAT

"P-45-BM"

official receipts issued in. the nmne of the petitioner wherein VAT wnount was not separately disclosed I o-m· ~·M• "' -· m""'"'"' ""'

"P-45-BN"

invoices/VAT ORs but without/incorrect name, TIN andjor address of the petitioner '----·---··- 94 Findings and Observations Nos. 7.j. and 7.k., Docket- Vol. 2, p. 1086. 95 With P0.01 difference per footing.

Amount

p 7,789,196.67 107,053.88 433,148.05 58 594.12 76,602.19 95,412.22 4,643.25 448 602.72 1,267,208.18 202,243.28 96 Exhibit "P-46", Findings and Observations No. 7.e., Docket- Vol. 2, pp. 1083 to 1084. a-

Maxima Machineries, Inc. vs. Commissioner of Internal Revenue

Domestic purchase of service supported by VAT

"P-45-BO"

Invoices/VAT ORs but without/incorrect name, TIN and/or address of the petitioner Total input tax disallowed on local purchases 2.

Input tax on importation of goods 97

Importation

of goods supported by

Import

"P-45-Y"

Declarations only

"P-45-AZ"

Importation of goods without supporting document Total disallowed input tax on importations 3.

Deferred Input tax "

Entry

Input tax deferred on purchase of capital goods exceeding

"P-45-AA"

1M supported by sales invoices but did not comply with the invoicing requirements Deferred input tax from purchase of capital goods

"P-45-AB"

exceeding

I

Million

supported by unreadable tape receipt/invoice Input tax on purchases of goods other than capital goods

"P-45-AC"

classified as Input tax on purchase of capital goods exceeding 1 Million

"P-45-AD"

Input tax on purchases of service classified as input tax on Purchase of capital goods exceeding 1 Million Deferred input tax from purchase of capital goods

"P-45-AE"

exceeding 1 Million supported by documents other than sales invoice

"P-45-AF"

Deferred input tax from purchase of capital goods exceeding 1 Million without supporting document Total disallowed Deferred Input Tax

TOTAL

287,011.66 1'10,769,716.22 i p 760,976.00 120,706.99 I' 881,682.99 p 77,355.62 110.73 959.40 1,682.59 12,631.38 32,288.77 I' 125,028.49 Pl1,776,427,70 In addition to the above disallowances, the input VAT in the amount of P31, 105,008.02 shall also be disallowed for failure to meet the substantiation and invoicing requirements under the aforementioned VAT law and regulations, to wit: r--· Exhibit No.

I

Customer Name

I

VAT Amount

a. Input VAT on domestic purchase of goods and services wherein the TIN of ~tl.tl.oner is not indicated in the invoice/receiot

"P-45-BA-46"

WORLD BEST INDUSTRIAL SALES INC

"P-45-BB-1"

ORIENTAL ASSURANCE CORPORATION

"P-45-BD-20"

JONEL PATIGAYON

"P-45-BB-31"

MANUEL RANDY P ESTABLECIDA

"P-45-BB-50"

TUDLASAN SUSANO

97 Exhibit "P-46", Findings and Observations No. 7.g., Docket- Vol. 2, p. 1084. 98 Exhibit "P-46", Findings and Observations No. 7.i., Docket- Vol. 2, p. 1085. 739.96 486.55 15.00 289.29 300.00 a--

Maxima Machineries, Inc. vs. Commissioner of Internal Revenue

"P-45-BB-57"

CHARTER PING AN INSURANCE CORP

"P-45-BB-61"

WHITEKNIGHT SECURITY AGENCY CORPORATION

"P-45-BD-11"

YALE HARDWARE CORP.

"P-45-BD-17"

CHARTER PING AN INSURANCE CORPORATION

"P-45-BD-19"

IRIS TUBIO ABAD!LLA

"P-45-BD-21"

JONEL PATIGAYON

"P-45-BD-22"

JORAM GOWOVE HERRERA

"P-45-BD-23"

ASIAN BRIDGE EXPRESS INC

"P-45-BD-24"

ASIAN BRIDGE EXPRESS INC

"P-45-BD-25"

ASIAN BRIDGE EXPRESS INC

"P-45-BD-29"

MERALCO

"P-45-BD-30"

PEDR!TO JR QUINONES RESUERA

"P-45-BD-31"

PEDR!TO JR QUINONES RESUERA

"P-45-BD-32"

DAVAO LIGHT & POWER CO

"P-45-BD-87"

MAREONNE JOY B. ACHACOSO

"P-45-BD-88"

GEORGE PO

"P-45-BD-229"

MARTIN ARTHUR

Subtotal

b. Input VAT on domestic purchase of goods and services wherein the TIN and address of the petitioner is not indicated in the invoice/receipt

"P-45-BA-25"

TRUST MARKETING & AUTO SUPPLY

"P-45-BA-26"

TRUST MARKETING & AUTO SUPPLY

"P-45-BA-27"

GEORGE PO

"P-45-BD-12"

BENJAMIN SORIANO ADRIANO

"P-45-BD-13"

BENJAMIN SORIANO ADRIANO

"P-45-BD-14"

JABBAR SANDY JESUS SEPTIMO PIMENTEL

"P-45-BD-131"

VIRGILIO EGUILOS SALES

"P·45-BD-137"

DIG !TEL MOBILE PHILIPPINES INC

"P-45-BD-138"

DIGITEL MOBILE PHILIPPINES INC

"P-45-BD-139"

DIG !TEL MOBILE PHILIPPINES INC

"P-45-BD-140"

DIGITEL MOBILE PHILIPPINES INC

"P-45-BD-149"

JAN JEFFREY SANCHEZ

"P-45-BD-219"

LOVELY LYN SANTIAGO

Subtotal

I"

c. Input VAT on domestic purchase of goods and services wherein the address of the petitioner is not indicated in the tnvotcejreceipt

"P-45-BA-37"

DAVAO MOLAVE TIRE SUPPLY

"P-45-BD-26"

BIENVENIDO JR CANLAS B1TENO

"P-45-BD-27"

KR!STOFFER GONGON FAVOR

"P-45-BD-47"

SANGIL RODELIO

"P-45-BD-238"

HAROLD GENETIA

Subtotal

I"

d. Input VAT on domestic purchase of goods and services wherein the name, TIN and address of the petitioner is not indicated in the invoice/receipt

"P-45-BB-33"

JONATHAN GESULGA VUELBAN

"P-45-BD-1 5"

PNB CREDIT CARDS

"P-45-BD-43"

JONATHAN GESULGA VUELBAN

"P-45-BD-48"

HERRERA JORAM G

"P-45-BD-49"

DUHAYLUNGSOD WIDMARK !RISK

"P-45-BD-96"

ALBERT ENRIQUEZ CASTRO

"P-45-BD-97"

JEROME GRAVE ORTEGA

"P-45-BD-132"

VIRGILIO EGUILOS SALES

Subtotal

I"

e. Input VAT on domestic purchase of service supported by official receipt not in petitioner's name

"P-45-BD-159"

FINNEY ROBERT M

Subtotal

I

I"

1,680.00 1,463.61 32.14 75.11 58.93 15.00 21.43 37.09 60.00 60.00 234.02 115.71 75.00 53.47 10.71 53.57 61.07 5,937.66 385.71 167.14 10.71 107.14 85.71 53.57 21.43 37.50 37.50 37.50 38.89 16.93 10.07 1,009.80 2,742.86 8.57 68.79 22.29 20.68 2,863.19 44.57 115.71 22.29 10.71 9.43 2.68 35.79 11.36 252.5~ 176.2!:

176.21 a.-

Maxima Machineries, Inc. vs. Commissioner of Internal Revenue f. Input VAT on domestic purchase of service supported by cash receipt printed with "THIS DOCUMENT IS NOT VALID FOR CL.4lM OF INPUT TAX"

"P-45-BA-12"

MORSE HYDRAULICS SYSTEM CORPORATION

I

Subtotal

J

g. Input VAT on dome~;~ purchase of serofce and importation of goods dated outside the period o claim

"P-45-BA-38"

REFE LEONIDES

"P-45-W-3"

KOMATSU MINING GERMANY

"P-45-W-7"

KOMATSU UNDERCARRIAGE INDONESIA

"P-45-W-8"

BOMAG FAYAT GROUP

Subtotal

h. Input VAT on domestic purchase of goods and services which are not properly supported with l.nvoi.cejreceipt (supported only by tape receipt, debit note, etc.)

"P-45-BB-30"

JUNEL MORGADO ANSAY

"P-45-BD-2"

JONAS VILLAPA CANLAS

"P-45-BD-37"

JEROME GRAVE ORTEGA

"P-45-BD-38"

WIDMARK IRISH DESCALLAR DUHAYLUNGSOD

"P-45-BD-40"

MANUEL MARLENE

"P-45-BD-41"

JONATHAN GESULGA VUELBAN

"P-45-BD-42"

JONATHAN GESULGA VUELBAN

"P-45-BD-45"

ERICK VELASCO

"P-45-BD-50"

CHINEDO ROGELIO

"P-45-BD-51"

DELOS REYES JOEY

"P-45-BD-53"

SANGIL RODELIO

"P-45-BD-54"

BORROMEO ALEX

"P-45-BD-65"

JOSEPH ZALDY LEDON

"P-45-BD-86"

WIDMARK IRISH DESCALLAR DUHAYLUNGSOD

"P-45-BD-91"

WIDMARK IRISH DESCALLAR DUHAYLUNGSOD

"P-45-BD-92"

ROGELIO CABIAD CHINEDO

"P-45-BD-101"

LEONIDES RIVERA REFE

"P-45-BD-104"

VIRGILIO EGUILOS SALES

"P-45-BD-105"

VIRGILIO EGUILOS SALES

"P-45-BD-106"

JULITO B. GARCIA

"P-45-BD-107"

JEFFREY JR PERALTA MUNOZ

"P-45-BD-109"

M!CO GUILE SAGUINSIN BUSANGILAN

"P-45-BD-112"

JONATHAN GESULGA VUELBAN

"P-45-BD-113"

VIRGILIO EGUILOS SALES

"P-45-BD-114"

ROBERTO COMAPON ADEVOSO

"P-45-BD-115"

ROBERTO COMAPON ADEVOSO

"P-45-BD-117"

LOPENAROY E

"P-45-BD-12 I"

DIGITEL MOBILE PHILIPPINES INC

"P-45-BD-122"

VIRGILIO EGUILOS SALES

"P-45-BD-123"

JONAS VILLAPA CANLAS

"P-45-BD-125"

REYNAN ANGARA ROMUALDO

"P-45-BD-134"

JONATHAN GESULGA VUELBAN

"P-45-BD-135"

VICTOR TABERNILLA EDORA

"P-45-BD-142"

REYNAN ANGARA ROMUALDO

"P-45-BD-143"

MARK JOHN SUPRANES CORBEDA

"P-45-BD- I 48"

JAN JEFFREY SANCHEZ

"P-45-BD- !50"

JAMES MAHINAY JARDENIL

"P-45-BD-152"

BON LAURO R CAPIRAL

"P-45-BD-153"

TSUY OS HI ISOGAMI

"P-45-BD-161"

TAN MICHELIN P

"P-45-BD-162"

COLOMA VICTORIO JIMENEZ

"P-45-BD-163"

JORAM GOLDOVE HERRERA

"P-45-BD- 164"

ALBERT ENRIQUEZ CASTRO

- p 388.93 , 388.93 p 33.43 96,557.00 1,443,426.00 2,453.00 , 1,542,469.43 p 9.00 25.71 69.43 28.50 18.75 21.11 71.79 2.14 49.71 16.61 45.64 79.29 44.57 9.43 12.96 52.71 146.79 77.36 21.43 22.93 17.68 16.61 116.57 28.71 68.25 9.43 37.50 37.50 15.64 107.57 15.64 35.79 2.68 15.64 2.14 36.43 12.43 8.46 41.04 11.2!:

57.8c 21.4c 37.9c ~ erA Case No. 9453 Maxima Machineries, Inc. vs. Commissioner of Internal Revenue

"P-45-BD-171"

ROGELIO CABIAD CHINEDO

"P-45-BD-172"

ROBERTO COMAPON ADEVOSO

"P-45-BD-173"

ROBERTO COMAPON ADEVOSO

"P-45-BD-174"

ROBERTO COMAPON ADEVOSO

"P-45-BD-175"

ROBERTO COMAPON ADEVOSO

"P-45-BD-176"

GEORGE PO

"P-45-BD-181"

DARRYL BALINGIT JOSEPH

"P-45-BD-184"

BIENVENIDO JR CANLAS BITENO

"P-45-BD-185"

BIENVENIDO JR CANLAS BITENO

"P-45-BD-186"

MAREONNE JOY B. ACHACOSO

"P-45-BD-187"

VICTOR TABERNILLA EDORA

"P-45-BD-188"

VICTOR TABERNILLA EDORA

"P-45-BD-191"

LEONARD CUTIB ATAP

"P-45-BD-195"

BIENVENIDO JR CANLAS BITENO

"P-45-BD-199"

JULITO B. GARCIA

"P-45-BD-203"

WIDMARK IRISH DESCALLAR DUHAYLUNGSOD

"P-45-BD-205"

JAN ANDREW MARINAS ANTIMANO

"P-45-BD-206"

ROGELIO CABIAD CHINEDO

"P-45-BD-207"

ROGELIO CABIAD CHINEDO

"P-45-BD-208"

VIRGILIO EGUILOS SALES

"P-45-BD-209"

VIRGILIO EGUILOS SALES

"P-45-BD-210"

VIRGILIO EGUILOS SALES

"P-45-BD-213"

RHOMN CHRISTIAN CAO YU

"P-45-BD-214"

ANTHONY CARON

"P-45-BD-222"

SANCHEZ JAN JEFFREY

"P-45-BD-223"

JOSEPH ZALDY LEDON

"P-45-BD-224"

JOSEPH ZALDY LEDON

"P-45-BD-225"

REFE LEONIDES

"P-45-BD-228"

ANTIMANO JAN ANDREW

"P-45-BD-239"

BON LAURO R CAPIRAL

"P-45-BD-241"

LEANDRO MAGBANUA

"P-45-BD-242"

ALLIED BANK CREDIT CARDS

"P-45-BD-243"

ABRAHAM J DELA CRUZ

"P-45-BD-244"

AMOS BURKE CRUZ DE LEON

"P-45-BD-245"

AMOS BURKE CRUZ DE LEON

"P-45-BD-246"

BENJAMIN ADRIANO

"P-45-BD-247"

BITENO JR BIENVENIDO

"P-45-BD-248"

JONEL PATIGAYON

"P-45-BD-249"

DUHAYLUNGSOD WIDMARK !RISK

"P-45-BD-250"

DELOS REYES JOEY

"P-45-BD-251"

DELOS REYES JOEY

"P-45-BD-252"

AMOS BURKE DE LEON

"P-45-BD-256"

NAMOCATCAT ARNULFO

"P-45-BD-257"

JOSEPH ZALDY LEDON

"P-45-BD-258"

REYNAN ROMUALDO

"P-45-BD-259"

LAPAT GILBERT

Subtotal

I"

i. Input VAT on domestic purchase of goods and services wherein the details in the involces/receiots are unreadable.

"P-45-BA-45"

RNS ELECTRONICS ENTERPRISES

"P-45-BB-25"

MATATAG CARGO LOGISTICS CORP

"P-45-BD-1"

BERNADETTE COSM!ANO MAARAT

"P-45-BD-3"

JESUS ANTONIO ESPINOSA PARAS

-·

"P-45-BD-5"

YU RHOMN CHRISTIAN

"P-45-BD-6"

MICHELLE MENDOZA TUAZON

"P-45-BD-7"

TRI STAR PAINTS CENTER & CONSTRUCTION SUPPLY

16.93 24.54 14.14 8.46 45.43 98.04 16.93 22.29 51.86 31.61 46.71 22.29 6.21 25.50 14.46 14.36 28.29 8.46 22.29 58.29 154.71 32.79 7.18 5.89 2.41 7.50 4.29 7.71 9.43 46.71 58.93 89.46 16.61 6.21 11.14 5.14 10.29 3.75 12.64 18.86 18.86 8.00 6.43 44.57 21.43 10.71 2,778.78 3,514.29 5,197.86 8.04 57.14 21.43 73.29 117.8E c:z..____

Maxima Machineries, Inc. vs. Commissioner of Internal Revenue

"P-45-BD-8"

W!DMARK IRISH DESCALLAR DUHAYLUNGSOD

"P-45-BD-9"

MICHELLE TUAZON

"P-45-BD-10"

DINA PUERTO

"P-45-BD-18"

ALEX JR ADONA BORROMEO

"P-45-BD-28"

HERRERA JORAM G

"P-45-BD-33"

LEOFRED ANGELO ERADOR

"P-45-BD-35"

B1ENVENIDO JR CANLAS BITENO

"P-45-BD-36"

BIENVENIDO JR CANLAS BITENO

"P-45-BD-39"

MANUEL MARLENE

"P-45-BD-44"

JUL1TO B. GARCIA

"P-45-BD-52"

DELOS REYES JOEY

"P-45-BD-55"

JAN JEFFREY SANCHEZ

"P-45-BD-56"

ROGELIO CABIAD CHINEDO

"P-45-BD-57"

JONEL PATIGAYON

"P-45-BD-58"

IVAN GAMIAO

"P-45-BD-59"

WIDMARK IRISH DESCALLAR DUHAYLUNGSOD

"P-45-BD-60"

ABIGAEL M CABUNGAN

"P-45-BD-61"

VIRGILIO EGUILOS SALES

"P-45-BD-62"

VIRGILIO EGU!LOS SALES

"P-45-BD-63"

REYNAN ANGARA ROMUALDO

"P-45-BD-64"

VICENTE JR MAGLAQUE OMAC

"P-45-BD-66"

JOSEPH ZALDY LEDON

"P-45-BD-67"

JOSEPH ZALDY LEDON

"P-45-BD-68"

JOSEPH ZALDY LEDON

"P-45-BD-69"

JABBAR SANDY JESUS SEPTIMO PIMENTEL

"P-45-BD-70"

JABBAR SANDY JESUS SEPTIMO PIMENTEL

"P-45-BD-71"

JABBAR SANDY JESUS SEPTIMO PIMENTEL

"P-45-BD-72"

JABBAR SANDY JESUS SEPTIMO PIMENTEL

"P-45-BD-73"

VIRGILIO EGUILOS SALES

"P-45-BD-74"

VIRGILIO EGU1LOS SALES

"P-45-BD-75"

AMOS BURKE CRUZ DE LEON

"P-45-BD-76"

AMOS BURKE CRUZ DE LEON

"P-45-BD-77"

AMOS BURKE CRUZ DE LEON

"P-45-BD-78"

WIDMARK IRISH DESCALLAR DUHAYLUNGSOD

"P-45-BD-79"

WIDMARK IRISH DESCALLAR DUHAYLUNGSOD

"P-45-BD-80"

JAN ANDREW MARINAS ANTIMANO

"P-45-BD-81"

MICO GUILE SAGUINSIN BUSANGILAN

"P-45-BD-82"

ALDRIN COSTES CRUZ

"P-45-BD-83"

EDISON RYLLE VILLEGAS

"P-45-BD-84"

JAN JEFFREY SANCHEZ

"P-45-BD-85"

WIDMARK IRISH DESCALLAR DUHAYLUNGSOD

"P-45-BD-89"

FERDINAND CALBO

"P-45-BD-90"

WIDMARK IRISH DESCALLAR DUHAYLUNGSOD

"P-45-BD-93"

JORAM GOLDOVE HERRERA

"P-45-BD-94'

REYNAN ANGARA ROMUALDO

"P-45-BD-95"

ALBERT ENRIQUEZ CASTRO

"P-45-BD-98"

VICTOR TABERN!LLA EDORA

"P-45-BD-99"

VICTOR TABERNILLA EDORA

"P-45-BD-100"

LEONIDES RIVERA REFE

"P-45-BD-102"

JAN ANDREW MARINAS ANTIMANO

"P-45-BD-103"

ROGELIO CABIAD CHINEDO

"P-45-BD-108"

JEFFREY JR PERALTA MUNOZ

"P-45-BD-110"

ERICK ORFANO VELASCO

"P-45-BD-111"

cTONATHAN GESULGA VUELBAN

"P-45-BD-116"

LOPENAROY E

---·- -- --- ---·- --- 9.43 1 40.18 13.39 80.36 10.71 107.14 46.71 12.64 20.25 37.93 18.86 107.14 29.97 18.16 6.16 49.93 54.19 53.79 .

15.64 39.21 11.25 4.82 56.79 128.79 22.87 37.72 8.04 22.88 15.64 53.79 46.29 26.14 5.14 22.93 9.43 33.64 16.61 46.07 10.71 5.14 9.54 10.71 9.43 34.29 69.43 19.50 45.86 18.86 21.43 22.29 28.29 2.68 4.82 22.29 23.57 -- --- ------ ~

Maxima Machineries, Inc. vs. Commissioner of Internal Revenue

“p-45-BD-118” | GERRICK B GONZALES 19.82

*P-45-BD-119" | GERRICK B GONZALES

“P-45-BD-120” | ROBERTO COMAPON ADEVOSO

“P-45-BD-130" | VIRGILIO EGUILOS SALES BRYAN LORENZO INDIONGCO f 4.29 | LEONARD CUTIB ATAP 15.00 JONAS VILLAPA CANLAS 161.36

“P-45-BD-144” | REYNAN ANGARA ROMUALDO

ALVIN CRIS MENDEZ BERNARDINO

“P-45-BD-157"_| MAARAT BERNADETTE

“P-45-BD- 169”

“P-45-BD-170”

“P-45-BD-177” JAKE SAMSON

“P-45-BD-167” WILSON ABALOS

“P-45-BD-168” ALDRIN MARTINEZ

je ajele = /N}do myn

SHERILL CORTEZ MERDEGIA

NO

_ ~ oa “P-45-BD- 178” BON LAURO R CAPIRAL 11.25

“P-45-BD-179” | JUNEL MORGADO ANSAY

p = wo - for) ry} bo ou

“P-45-BD-180” | VICENTE JR MAGLAQUE OMAC

DARRYL BALINGIT JOSEPH

“P-45-BD- 197”

“P-45-BD- 198”

JULITO B. GARCIA 18.75 JULITO B. GARCIA 18.75 “P-45-BD-200” | SAMUEL RAIZ 10.71 LEONARD CUTIB ATAP 14.68 41.79

WIDMARK IRISH DESCALLAR DUHAYLUNGSOD

MAREONNE JOY B. ACHACOSO 20.89 ERICK VELASCO 14.46

DELA CRUZ DARYLB

“P-45-BD-220”

“P-45-BD-221”

CHINEDO ROGELIO

DELOS REYES JOEY

14.14 2.57

CfA case No. 9453 Maxima Machineries, Inc. vs. Commissioner of Internal Revenue

"P-45-BD-226"

FERDINAND CALBO

"P-45-BD-227"

LAPAT GILBERT

"P-45-BD-230"

BENITEZ RAYMOND

"P-45-BD-231"

CATAPANO PABUTO

"P-45-BD-232"

MARK JOSPEH PASCUA

"P-45-BD-233"

SALES VIRGILIO

"P-45-BD-234"

REYNAN ROMUALDO

"P-45-BD-235"

REYNAN ROMUALDO

"P-45-BD-236"

JONATHAN VUELBAN

"P-45-BD-237"

JONATHAN VUELBAN

"P-45-BD-240"

BON LAURO R CAPIRAL

"P-45-BD-253"

DIGITEL MOBILE PHILIPPINES INC

"P-45-BD-254"

DIGITEL MOBILE PHILIPPINES INC

"P-45-BD-255"

DIG!TEL MOBILE PHILIPPINES INC

"P-45-BD-260"

WILSON ABALOS

"P-45-BD-261"

EDDIE DELA CRUZ

"P-45-BD-262"

VILLANUEVA REYNALDO

Subtotal

1" J. Input VAT on domestic purchase of goods and services wherein the transactions/ amounts per the Schedule provided by the ICPA cannot be cucertatned with the supporttna document

"P-45-BC"

L VARIOUS ACCOUNTS

I'

Subtotal

L

k. Input VAT on importation of goods wherein the transactions/amounts per Imports Transaction Reconciliation of Listing for Enforcement cannot be 4$Certained with the supporting documents

"P-45-U"

VARIOUS ACCOUNTS

I'

Subtotal

I

1" L Input VAT on importation of goods supported by BOC lEIRD/Assessment Notice without machine validation/SSDTs or other documents to prove that the VAT were actual!:rJ patd

"P-45-X"

VARIOUS ACCOUNTS

Subtotal

m. Deferred input VAT without supporting documents/Denied Admisslon1oo by the

Court

"P-45-Z"

Deferred input tax from purchase of capital goods exceeding 1 f' million

Subtotal

TOTAL

L_

p '-------- -~~ - - -- - - - 10.71 10.71 10.18 18.86 81.96 116.57 145.71 !:

8.36 44.57 141.00 17.89 37.50 37.50 37.50 11.25 10.71 11.25 13,337.29 2,524.18 2,524.18 16,595,632.99" 16,595,632.99 12,867,450.00 • 12,867,450.00 .

I

i 70,186.98101 70,186.98 31,105,008.02 In sum, out of the current input VAT available for allocation of P43, 197,604.58 for the 4th Quarter of FY 2014, petitioner was able to substantiate only the amount of 1'316,168.86, computed as follows: Input VAT available for allocation p 43,197,604.S8

Less: Disallowances

Per ICPA fmdimzs p 11,776,427.70 Per this Court's further verification 31 105,008.02 Substantiated input VAT due or paid p 99 Exhibit "P-46", Findings and Observations No. 7.f., Docket- Vol. 2, p. 1084. 100 Docket- Vol. 3, p. 1679.

42 881 435.72 316,168.116 101 Exhibit "P-46", Findings and Observations No. 7.h., Docket- Vol. 2, p. 1085. a-..

Maxima Machineries, Inc. vs. Commissioner of Internal Revenue

A

portion of petitioner's valid input taxes due or paid is attributable to its zero-rated or effectively zero- rated sales To reiterate, the eighth requisite is to the effect that the input taxes claimed are attributable to zero-rated or effectively zero-rated sales. However, where there are both zero-rated or effectively zero-rated sales and taxable or exempt sales, and the input taxes cannot be directly and entirely attributable to any of these sales, the input taxes shall be proportionately allocated on the basis of sales volume. Considering that petitioner is engaged in taxable sales subject to zero percent (0%) and twelve percent (12%) rates, and its common input VAT of 1"316,168.86 for the 41h quarter of FY 2014 cannot be directly or entirely attributed to any of the transactions, the same shall be allocated proportionately on the basis of the volume of its sales for the respective quarters in this wise:

~- --,---..

Period

VAT Sales

Sales to Gov't

Zero·Rated Sales

Total Sales

(FY 2014)

(a) (b) (c) (d = a+b+c) 4th Quarter Pl,387,310,556 .. 79 P9,!55,205 .. 54 P952,009,079 .. !9 r2,348,474,841 .. 52 4th Quarter of FY 2014 substantiated input VAT attributable to: VAT Sales (P1,387,310,556 . 79/ P2,348,474,841..52 x P316,!68 . 86) p 186,769 . 89- Sales to Gov't W9, 155,205.54/ f'2,348,474,841.52 x P316,168.86) c- 1,232 .. 54 Zero-Rated Sales (P952,009,079 . 19/ P2,348,474,841..52 x ~316,168 . 86) 128,166..43 4 Total- 4th Quarter of FY 2014 p 316,168.86 Petitioner also included in its claim, the input VAT amounting to 1"48,555,626.80 and '1"24,008,551.89 which, accordingly, pertain to "input tax directly attributable to zero- rated sales of machineries from current purchases" and "input tax directly attributable to zero-rated sales of machineries and spare parts which were imported in prior years but sold during the quarter", respectively.

However, the input VAT in the amounts of 1"562,020.80 and 1"12,830,657.81 shall be disallowed for the following reasons, to wit: a-..

Maxima Machineries, Inc. vs. Commissioner of Internal Revenue

"Input tax directly attributable to zero·rated sales of machineries from current purcha&es" Input VAT on importations supported by BOC SAD/Assessment Notice without machine validation/SSDTs Exhibit No.

Customer Name

VAT Amount

"BQ 3"

BANGKOK KOMATSU CO., LTD p 562,020.80

TOTAL

p 562,020.80 "Input tax directly attributable to zero-rated sales of machineries and spare parts which were imported in prior years but sold during the quarter" Input VAT on importations supported by IEIRDS without machine validation/SSDTs Exhibit No.

IEIRD I SN No.

VAT Amount per IEIRD

VAT Amount

"P-45-BT-6"

C129292

p 1,503,061.00 p 601,224.40

"P-45-BT -7"

Cl39396

346,933.77 173,468.69

"P-45-BT -8"

C0090310

8,086,342.08 2,021 ,585.52

"P-45-BT -9"

C0094401

12,041,255.04 10,034,379.20

TOTAL

P12 830,657.81 Hence, out of the input VAT directly related to zero-rated sale of machineries imported during the current and prior period of !'48,555,626.80 and P24,008,551.89, only the amounts of P4 7,993,606.00102 and Pll, 177,894.08103, respectively, which were duly supported by IEIRDs/SADs and SSDTs/bank confirmations, may be refunded. In sum, petitioner's input VAT attributable to its zero-rated P59,299,666.51, as computed below: 4th Quarter ofFY 2014 Common input VAT due or paid allocable to zero rated sales Add: Input VAT directly attributable to zero-rated sales of machineries from current purchases Input VAT directly attributable to zero-rated sales of machineries and spare parts which were imported in prior years but sold during the quarter Totallnl)ut VAT attributable to zero-rated sales Petitioner has no excess input VAT available for refund.

directly and indirectly sales amounted to

Amount

p 128,166.43 47,993,606.00 11,177,894.08 P59,299 666.51 Having determined that petitioner had valid input VAT attributable to its zero-rated sales, the Court shall now determine whether the same was not applied against its output VAT liability.

102 1-'48,555,626.80 less !'562,020.80. 103 P24,008,551.89less Pl2,830,657.81. a-.

DEOSION

Maxima Machineries, Inc. vs. Commissioner of Internal Revenue

After deducting the input VAT attributable to VATable sales to private entities amounting to 1"3,539,167.39104 from its output VAT liability of 1"166,477,266.811°5 on the said sales, petitioner still has a net output VAT payable of 1"162,938,099.42 as computed below:

Particulars

Amount

Output VAT per Return

P166,477,266.81 Less: Input VAT attributable to VA Table sales to orivate entities 3 539 167.39 Net output VAT Payable P162,938,099.42 Considering that the input VAT attributable to VATable sales to private entities is not enough to cover its output VAT liability, the input VAT attributable to zero-rated sales shall be utilized against the remaining output VAT liability. However, the input

VAT

attributable to zero-rated sales of 1"59,299,666.51 is way lower than the net output VAT payable of 1"162,938,099.42.

Consequently, petitioner still has net output VAT due off'103,638,432.91, computed as follows:

Particulars

Amount

Net output VAT Payable I' 162,938,099.42 Less: Input VAT attributable to zero-rated sales 59,299,666.51

Net Output VAT Still Due

P103,638,432.91 Although petitioner's Amended Quarterly VAT Return for the 4th quarter of FY 2014 reflected the amount of P369, 111,554.05106 as "Input Tax Carried Over from Previous Period", petitioner, however, failed to fully substantiate the same.

104 Common input VAT allocable to VA Table sales to private entities Add: Input tax directly attributable to VA Table sale of machineries from current purchase (Exhibit "P-45-BR") Less· Input VAT on importations supported by BOC IEIRD/SAD/ Assessment Notice without machine validationiSSDTs Actual Exhibit No.

Exhibit Reference per Schedule

"P-45-BR-1"

"P-45-BR-12"

"P-45-BR-2"

"P-45-BR-13"

"P-45-BR-8"

"P-45-BR-10"

"P-45-BR-9"

"P-45-BR-4"

"P-45-BR-10"

"P-45-BR-11"

TOTAL

Input VAT attributable to VA Table sales to privatr entities 105 Exhibit "P-21" (Line !58), Docket- Vol. 3, p. 1255. 106 Exhibit "P-21" (Line 20A), Docket- Vol. 3, p. 1255. p 186,769.89 I P13 394,928.92 I

Amount

p 3,934,145.60 568,997.07 397,931.75 214,037.00 4,927,420.00 Pl0,042,53/.42 p 3 539,167.39 q_,_

Maxima Machineries, Inc. vs. Commissioner of Internal Revenue

As ascertained by the ICPA, out of the reported input VAT from the 2nd quarter of FY 2013 up to the 3rd quarter of FY 2014 in the aggregate amount of P915,618,038.88J07, only the input

VAT

on importations in the amount of P758,489,926.43I08 were verified.

Even assuming that the amount of 1'758,489,926.43 were valid input VAT attributable to VATable sales to private entities and zero-rated sales, the same is still not enough to cover its reported output VAT on VATable sales to private entities for the same period in the aggregate amount of P776,092,538.961D9, thereby resulting in net output VAT payable ofP17,602,612.53llO. Needless to say, petitioner failed to prove that it has excess input VAT carried over from the previous period.

Accordingly, the input tax carry-over of P369, 111,554.05, cannot be validly applied against petitioner's output tax pursuant to Section 110(A) in relation to Section 110(B) of the NIRC of 1997, as amended, which states: SEC. 110. Tax Credits.- (A) Creditable Input Tax. -

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

XXX

(B) Excess Output or Input Tax. - If at the end of any taxable quarter the output tax exceeds the input tax, the excess shall be paid by the Vat-registered person.

If the

input tax exceeds the output tax, the excess shall be carried over to the succeeding quarter or quarters: XXX. It is worthy to stress that in claiming excess or unutilized input VAT from zero-rated transactions, it is the excess input tax over the output tax which should be refunded to the taxpayer or credited against other internal revenue taxes. Hence, it is important for the taxpayer to prove that it has 107 Exhibit "P-46", No. 9.b, Docket- Vol. 2, pp. 1087 to 1088. 108 Exhibit "P-46", No. 9.d, Docket- Vol. 2, pp. 1088 to 1089. 109 Exhibit "P-46", No. 9.b, Docket- Vol. 2, pp. 1087 to 1088. 110 1'776,092,538.96 less 1'758,489,926.43. a--

Maxima Machineries, Inc. vs. Commissioner of Internal Revenue enough excess input tax credits from prior years to cover its output tax liability for the current taxable year. To reiterate, in cases filed before this Court, which are litigated de novo, party-litigants must prove every minute aspect of their case.11 1 There being no excess input VAT which may be the subject of a claim for refund or tax credit certificate, the instant claim must perforce be denied. Consequently, petitioner failed to fulfill the ninth requisite, i.e., that the input taxes have not been applied against output taxes during and in the succeeding quarters. Accordingly, the instant claim for issuance of TCCs on petitioner's alleged unutilized input VAT must necessarily fail. The Court reiterates that it is the taxpayer-claimant that has the burden of proof to establish the factual basis of his or her claim for tax credit or refund.ll 2 Tax refunds are in the nature of tax exemptions. As such, they are regarded as in derogation of sovereign authority and to be construed strictissimi juris against the person or entity claiming the refund.ll3 Thus, an applicant for a claim for tax refund or tax credit must not only prove entitlement to the claim but also compliance with all the documentary and evidentiary requirements. 114 Strict adherence to the conditions prescribed by law is required of the taxpayer. liS In sum, petitioner failed to sufficiently prove its entitlement to the issuance of TCCs in its favor for its unutilized input VAT for the period covering January 1, 2014 to March 31, 2014 or the 41h quarter of FY 2014. Considering petitioner's failure to substantiate that it has sufficient input 111 Supra.

112 Citibank N.A. vs. Court of Appeals and Commissioner of Internal Revenue, G.R. No. 107434, October 10, 1997.

113 Commissioner of Internal Revenue v. S.C. Johnson and Son. Inc .. et al., G.R. No. 127105, June 25, 1999.

114 Eastern Telecommunications Philippines, Inc. vs. Commissioner of Internal Revenue, G.R. No. 183531, March 25, 2015, citing JR.A. Philippines, Inc. vs. CIR, G.R. No. 171307, August 28,2013.

115 Steag State Power, Inc. (Formerly State Power Development Corporation) vs. Commissioner of Internal Revenue, G.R. No. 205282, January 14, 2019. a.

Maxima Machineries, Inc. vs. Commissioner of Internal Revenue taxes to offset its output taxes due for the period covered, this Court is constrained to deny the present Petition for Review.

WHEREFORE, in light of the foregoing considerations, the instant Petitionfor Review is DENIED for lack of merit.

SO ORDERED.

t~T-~ CATHERINE T. MANAHAN

Associate Justice

I CONCUR:

Presiding 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's Division.