PHIL. GOLD PROCESSING & REFINING CORP. v. COMMISSIONER OF INTERNAL REVENUE

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY FIRST DIVISION PHIL. GOLD PROCESSING & CTA CASE NO. 8652 REFINING CORP., Members: Petitioner, -versus- DEL ROSARIO, Chairperson UY, and MINDARO-GRULLA, 11. COMMISSIONER OF Promulgated: _ INTERNAL REVENUE, .DEC () 1 2 -�~ ; 9:ova..,... Respondent. AMENDED DECISION MINDARO-GRULLA, J.: For resolution is petitioner's Motion for Reconsideration of the Decision dated 10 June 2015, filed on July 6, 2015, without respondent's comment despite notice as per Records Verification dated August 11, 2015. Petitioner moves for reconsideration of the Court's Decision dated June 10, 2015, the dispositive portion of which reads: "WHEREFORE, premises considered, petitioner's claim for refund or issuance of tax credit certificate is hereby DENIED for lack of merit. SO ORDERED.'(

AMENDED DECISION erA CASE NO. 8652 In the assailed Decision, the Court denied petitioner's claim for refund or issuance of tax credit certificate in the amount of P76,944,279.64 representing unutilized input VAT attributable to zero-rated sales for the third and fourth quarters of fiscal year (FY) ended June 30, 2011 on the ground that petitioner's proof of foreign currency inward remittances marked as Exhibits "P-24-A" to "P-24-I" were not formally offered in evidence; hence, inadmissible and were not considered by this Court. Petitioner alleges that it has sufficiently presented all documentary and evidentiary requirements in support of its claim for refund and/or issuance of tax credit certificate. As regards the documents not formally offered, petitioner cites the cases of Vda. De Onate vs. Court of Appeals and Dizon vs. Court of Tax AppeaiSZ, wherein the Supreme Court ruled that relaxation of the rules and allowance of evidence not formally offered can be admitted and considered by the Court provided the same must have been duly identified by testimony duly recorded, and the same have been incorporated in the records of the case. Thus, petitioner asks the Court to reconsider the assailed Decision and admit its Exhibits "P-24- A" to "P-24-I" in the resolution of its claim for refund and or issuance of tax credit certificate. We find petitioner's Motion for Reconsideration partly meritorious. After a careful evaluation of the arguments presented by petitioner and upon re-examination of the records of the case, the Court finds that petitioner's Exhibits "P-24-A" to "P-24-I" should be given evidentiary weight. Section 34, Rule 132 of the Rules on Evidence provides that the court shall not consider any evidence which has not been formally offered. Thus, without a formal offer of evidence, courts cannot give weight on this evidence even if previously marked and identified. This rule, however, admits of an exception. The Supreme Court, in appropriate cases, relaxed the formal-offer rule and allowed evidence not formally offered to be admitted. In the recent case of Herman Medina vs. People of the Philippine.~, the Supreme Court~ 1 G.R. No. 116149, November 23, 1995, 250 SCRA 283. 2 G.R. No. 140944, April 30, 2008, 553 SCRA 111. 3 G.R. No. 182648, June 17, 2015.

AMENDED DECISION CTA CASE NO. 8652 enumerated the two essential conditions in order that the evidence not formally offered may be admitted, to wit: "In Mato v. CA, which referred to People v. Napat-a, citing People v. Mate, We relaxed the application of Section 34, Rule 132 of the Rules of Court by allowing the admission of evidence not formally offered. To be admissible, however, two essential conditions must concur: first, the same must have been duly identified by testimony duly recorded and, second, the same must have been incorporated in the records of the case." (Emphasis ours) Based on the foregoing, documents not formally offered may be admitted and considered in evidence if (1) the documents have been duly identified by testimony duly recorded, and (2) the documents have been incorporated in the records of the case. In the present case, petitioner's proof of foreign currency inward remittances, specifically, the Certification from the Hongkong and Shanghai Banking Corporation Limited (HSBC) marked as Exhibit "P-24-A'14 and the BNP Paribas Corporate & Investment Banking Consolidated Cash Statements marked as Exhibits "P-24-B" to "P-24- !"5, although not formally offered, were duly identified by the Court- commissioned Independent Certified Public Accountant (ICPA), Atty. Clifford E. Chua, in his Judicial Affidavit6; thus, forms part of the case records as attachments (contained in black binder) to the ICPA report7� Hence, Exhibits "P-24-A" to "P-24-I" shall be admitted and considered in evidence. With the admission of Exhibits "P-24-A" to "P-24-I" as part of petitioner's documentary evidence, the Court shall now proceed to determine petitioner's valid zero-rated sales and the input VAT attributable thereto. In the assailed Decision, the Court ruled that pursuant to Section 106(A)(2)(a)(1) of the National Internal Revenue Code (NIRC) of 1997, as amended, in relation to Sections 113(A)(1), (B)(1), and (2)(c) of the same Code and Sections 4.113-1(A)(1),c 4 Attachments to ICPA Report. 5 Ibid. 6 Docket, pp. 1052-1053. 7 Exhibit "P-318".

AMENDED DECISION CTA CASE NO. 8652 (B)(1) and (2)(c) of Revenue Regulations (RR) No. 16-05, any VAT- registered person claiming VAT zero-rated direct export sales must present at least three (3) types of documents, namely: 1. Sales Invoice as proof of sale of goods; 2. Export Declaration and Bill of Lading or Airway Bill as proof of actual shipment of goods from the Philippines to a foreign country; and 3. Bank Credit Advice, Certificate of Bank Remittance or any other document proving payment for the goods in acceptable foreign currency or its equivalent in goods and services. To reiterate, only export sales supported by these documents shall qualify for VAT zero-rating under Section 106(A)(2)(a)(1) of the NIRC of 1997, as amended. Further, the sales invoices supporting the export sales must be registered with the BIR and must contain all the required information under the law and regulations, such as the imprinted word "zero-rated" and the taxpayer's TIN-VAT number. Records show that petitioner is registered with the BIR as a VAT taxpayer on March 15, 1996 with Tax Identification Number (TIN) 004-498-686-000, as evidenced by its BIR Certificate of Registration.8 Petitioner is also a Board of Investments (BOI)- registered enterprise with a Non-Pioneer Status with Pioneer Incentives, being located in Less Developed Area (LDA) as a new producer of gold and silver dore.9 For the third and fourth quarters of FY ended June 30, 2011, petitioner actually shipped its processed gold and silver dore to its foreign buyers, Metalor Technologies S.A. Refining Corp. in Switzerland, Standard Chartered PLC in Singapore, BNP Paribas in Great Britain and West LB, also in Great Britain and generated export sales in the respective amounts of US$43,483,221.28 and US$72,941,006.89 or in the sum of US$116,424,228.17 as shown in its zero-rated VAT sales invoices10 and export documents11 consisting of airway bills, export declarations, transport permits, packing lists and provisional invoices, summarized as follows12:c 8 Par. 4, Summary of Stipulated Facts, Joint Stipulation of Facts and Issues (JSFI), docket, p. 1022; Exhibit II P-411 � 9 Par. 3, Summary of Stipulated Facts, JSFI, docket, p. 1022; Exhibits II P- 511 and 11P-5-A11 � 10 Exhibits "P-35" to "P-55". 11 Exhibits "P-56" to "P-159". 12 Exhibit "P-318", Annex "A".

AMENDED DECISION CTA CASE NO. 8652 Invoice Export Sales (In US Dollars) Exhibit No. Date Customer 7,579,931.00 3rd Quarter ofFY2011 (January to March 2011) 55,695.05 "P-35" 0061 1/31/2011 Standard Chartered PLC 1,266,399.25 1,234,953.50 "P-36" 0062 1/31/2011 Metalor Technologies SA 12,091,102.89 1,271,080.25 "P-37" 0063 1/31/2011 West LB AG 1,239,634.50 16,217,672.39 "P-38" 0064 1/31/2011 BNP Paribas Bank 1,279,140.75 1,247,611.70 "P-39" 0065 2/28/2011 Standard Chartered PLC 43,483,221.28 "P-40" 0066 2/28/2011 West LB AG 13,194,639.92 1,295,705.80 "P-41" 0067 2/28/2011 BNP Paribas Bank 1,263,885.20 1,411,453.90 "P-42" 0068 3/31/2011 Standard Chartered PLC 16.29 1,300,442.60 "P-43" 0069 3/31/2011 West LB AG 22,307,183.28 "P-44" 0070 3/31/2011 BNP Paribas Bank 1,861,153.58 Subtotal 27,727,988.12 1,305,179.40 4th Quarter ofFY2011 (April to June 2011) 1,273,358.80 "P-45" 0071 4/30/2011 Standard Chartered PLC 72,941,006.89 "P-46" 0072 4/30/2011 West LB AG "P-47" 0073 4/30/2011 BNP Paribas Bank "P-48" 0074 5/31/2011 Standard Chartered PLC "P-49" 0075 5/31/2011 Metalor Technologies SA "P-50" 0076 5/31/2011 West LB AG "P-51" 0077 5/31/2011 BNP Paribas Bank "P-52" 0078 6/30/2011 Standard Chartered PLC "P-53" 0079 6/30/2011 Metalor Technologies SA "P-54" 0080 6/30/2011 West LB AG "P-55" 0081 6/30/2011 BNP Paribas Bank Subtotal TOTAL 116,424,228.17 Petitioner's Quarterly VAT Returns reflected the peso equivalent of the afore-stated export sales as follows: Exhibit Taxable Quarter Zero-Rated Sales "P-13" (FY ended June 30, 2011) p 1,893, 161,293.40 "P-161" Third Quarter 3,152,355,597.98 Fourth Quarter p 5,045,516,891.38 Total A careful perusal of the Consolidated Cash Statements13 from BNP Paribas Corporate & Investment Banking shows that out of the US$116,424,228.17 reported export sales; only the amount ofc 13 Exhibits "P-24-B" to "P-24-I".

AMENDED DECISION CTA CASE NO. 8652 US$101,024,507.75 has corresponding foreign currency remittances detailed as follows: Inward Remittance Export Sales Without Invoice Customer Export Sales Amount Exhibit No. (in US$) (in US$) Corresponding Inward Remittance 3rd Quarter ofFY 201.1. {January to March 201.1.) 0061 Standard Chartered PLC 7,579 931.00 7 579 910.00 "P-24-C" 21.00 55 695.05 0062 Metalor Technologies SA 55 695.05 - - 14.00 0063 West LB AG 1,266 399.25 1 266,385.25 "P-24-B" 1 234,953.50 "P-24-C" - 0064 BNP Paribas Bank 1,234 953.50 "P-24-C", 12 058,408.40 "P-24-D" 32 694.49 0065 Standard Chartered PLC 12,091 102.89 1 271,066.25 "P-24-C" 14.00 0066 West LB AG 1 271 080.25 1 239,627.50 7.00 0067 BNP Paribas Bank 1 239 634.50 "P-24-D" 16 180,651.10 "P-24-D", 37 021.29 0068 Standard Chartered PLC 16,217 672.39 1 279,126.75 "P-24-E" 14.00 1 247,604.70 "P-24-D" 7.00 0069 West LB AG 1 279 140.75 43,357,733.45 "P-24-E" 125,487.83 0070 BNP Paribas Bank 1,247 611.70 Subtotal 43,483,221.28 4th Quarter ofFY 201.1. (April to June 201.1.) 0071 Standard Chartered PLC 13,194 639.92 11 757,452.00 "P-24-E" 1 437 187.92 1 295 705.80 0072 West LB AG 1 295 705.80 - - 1 263 885.20 0073 BNP Paribas Bank 1 263 885.20 - - 14.00 16.29 0074 Standard Chartered PLC 1,411 453.90 1 411/439.90 "P-24-G" 14.00 0075 Metalor Technologies SA 16.29 - - 47 210.98 123 958.78 0076 West LB AG 1 300 442.60 1 300,428.60 "P-24-F" 11 106 218.62 "P-24-F", 0077 BNP Paribas Bank 22 307 183.28 22 259,972.30 "P-24-G" 14.00 0078 Standard Chartered PLC 1 861153.58 1 737 194.80 7.00 0079 Metalor Technologies SA "P-24-G" 0080 West LB AG 27,727 988.12 16 621,769.50 15,274,232.59 0081 BNP Paribas Bank 1 305 179.40 1 305,165.40 "P-24-G" Subtotal 1 273 358.80 1 273,351.80 "P-24-G" 72,941,006.89 57,666,774.30 "P-24-H" TOTAL 116,424,228.17 101,024,507.75 15,399,720.42 Thus, petitioner's total valid export sales subject to zero percent (0�/o) VAT under Section 106(A)(2)(a)(1) of the NIRC of 1997, as amended, for the third and fourth quarters of FY ended June 30, 2011 amounted to US$43,357,733.45 and US$57,666,774.30, respectively, totaling US$101,024,507.75 with the peso equivalent of P1,887,697,836.54 and P2,492,235,664.56, respectively, totaling P4,379,933,501.10 computed as follows: Total Export Sales in US$ 3rd Quarter 4th Quarter Total Less: Disallowed Export Sales 43,483,221.28 72,941,006.89 116,424,228.17 125,487.83 15,274,232.59 15,399,720.42

AMENDED DECISION 43,357,733.45 57,666,774.30 101,024,507.75 CTA CASE NO. 8652 in US$ Valid Zero-Rated Sales in US$ Declared Zero-Rated Sales per 1,893,161,293.40 3,152,355,597.98 5,045,516,891.38 return in Php 43,3571733.45 57,666,774.30 Multiplied by: 43,483,221.28 72,941,006.89 Valid Zero-rated Sales in US$ + Total Export Sales in US$ Total Valid Zero-rated Sales in Php 1,887,697,836.54 2,492,235,664.56 4,379,933,501.10 The Court shall now determine whether petitioner incurred input taxes in connection thereto and if said input taxes were not applied against any output VAT liability of petitioner. In the Quarterly VAT Returns for the third and fourth quarters of FY ended June 30, 2011, petitioner reported the amounts of P35,530,279.00 and P41,414,000.64, respectively, or in the sum of P76,944,279.64 representing input taxes on importations of goods other than capital goods for the same taxable quarters, to wit: Importations - Goods other than Capital Goods Purchases Input Tax Third Quarter (Exhibit ''P-13'') Fourth Quarter {Exhibit ''P-161 '') p 296,085 658.33 p 35,530,279.00 Total 345,116,672.00 41 414 000.64 P641,202,330.33 P76,944,279.64 Based on !CPA's examination of documents supporting petitioner's claimed input VAT such as Import Entry and Internal Revenue Declarations (IEIRDs), Assessment Notices and Statements of Settlement of Duties and Taxes14, input VAT in the amount of P32,320.0015 for the fourth quarter of FY ended June 30, 2011 should be disallowed for lack of proper supporting documents. Therefore, only the remaining input VAT for the third and fourth quarters of FY ended June 30, 2001 in the respective amounts of P35,530,279.00 and P41,381,680.64 totaling P76,911,959.64 shall represent petitioner's valid input VAT computed as follows: 3rd Quarter 4th Quarter Total Input VAT Claim p 35,530,279.00 p 41,414,000.64 p 76,944,279.64 Less: Disallowance - 32,320.00 32 320.00 14 Exhibits "P-162" to "P-317-A". 15 Exhibit "P-318", Annex "I".

AMENDED DECISION CfA CASE NO. 8652 I Total Valid Input VAT I P35,530,279.00 I P41,381,680.64l P76,911,959.64l Since petitioner's sales for the third and fourth quarters of FY ended June 30, 2011 were all direct export sales, the substantiated input VAT of P76,911,959.64 is entirely attributable thereto. However, as previously stated, petitioner had export sales with no corresponding foreign currency remittances, hence, only the input VAT in the amounts of P35,427,742.49 and P32,716,137.89 totaling P68,143,880.38 can be attributed to petitioner's valid zero-rated sales in the amounts of P1,887,697,836.54 and P2,492,235,664.56, respectively, totaling P4,379,933,501.10 for the third and fourth quarters of FY ended June 30, 2011, computed as follows: Third Quarter of FY 2011 p 35,530,279.00 Valid Input VAT P1,887 ,697,836.54 99.7114109% Multiplied by: 1,893,161,293.40 Valid Zero-Rated Sales in Php p 35,427,742.49 +Total Zero-Rated Sales Per Return Valid Input VAT Attributable To Valid Zero- p 41,381,680.64 Rated Sales P2,492,235,664.56 79.0594712% Fourth Quarter of FY 2011 3,152,355,597.98 Valid Input VAT p 32,716,137.89 Multiplied by: p 68,143,880.38 Valid Zero-Rated Sales in Php +Total Zero-Rated Sales Per Return Valid Input VAT Attributable To Valid Zero- Rated Sales Total Input VAT Attributable to Zero- Rated Sales As to whether or not the said input VAT was applied against any output VAT and/or carried over to the succeeding taxable quarter(s), petitioner's Quarterly VAT Returns16 for the subject period of claim show that petitioner had no output tax liability against which the claimed input VAT may be applied or credited. Additionally, petitioner's input tax claim for the third and fourth quarters of FY ended 2011 in the total amount of P76,944,279.64 was deducted as "VAT Refund/TCC claimed"17 in the Quarterly VAT Returns for the fourth quarter, thus, preventing the carry-over or application of such input taxes in the next taxable quarter/s.c 16 Exhibits "P-13" and "P-161", line 156. 17 Exhibit "P-161", line 230.

AMENDED DECISION CTA CASE NO. 8652 In view of the foregoing, the Court finds that petitioner is entitled to a refund or issuance of a tax credit certificate in the amount of P68,143,880.38 representing its unutilized input VAT attributable to its zero-rated sales for the third and fourth quarters of FY ended June 30, 2011. WHEREFORE, petitioner's Motion for Reconsideration is PARTIALLY GRANTED. Accordingly, respondent is hereby ORDERED TO REFUND OR ISSUE A TAX CREDIT CERTIFICATE in favor of petitioner in the amount of SIXTY EIGHT MILLION ONE HUNDRED FORTY THREE THOUSAND EIGHT HUNDRED EIGHTY PESOS AND 38/100 (P68,143,880.38) representing its unutilized input VAT for the period covering January 1, 2011 to June 30, 2011 or the third and fourth quarters of fiscal year ended June 30, 2011. SO ORDERED. ~ lJ_ U~�~.Jc;'~ CIELITO N. ~fiNDARO-GRULLA Associate Justice WE CONCUR: ROMAN G. DE ROSARIO ER~P' .UY Presiding Justice Associate Justice CERTIFICATION Pursuant to Article VIII, Section 13 of the Constitution, it is hereby certified that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of e Co 's Division. Presiding Justice Chairperson, 1st Division