SCHAEFFLER PHILIPPINES INC. v. COMMISSIONER OF INTERNAL REVENUE

CTA Form No. 8 1111111111111111111111 11111111111111111111111111111 11111111111 111111111111111111 20-000299-0061 REPUBLIC OF THE PIDLIPPINES COURT OF TAX APPEALS QUEZON CITY SPECIAL FIRST DIVISION CTA CASE NO. 10358 SCHAEFFLER PHILIPPINES NOTICE OF DECISION INC., Petitioner, - versus- COMMISSIONER OF INTERNAL REVENUE, Respondent. To: OFFICE OF THE SOLICITOR GENERAL 134 Amorsolo Street, Legazpi Village Makati City ATTY. PHILIP A. MAYO ATTY. JONELLE ELLAINE A. MAGALONG Bureau oflntemal Revenue -Revenue Region No. 8A 36th Floor, Export Bank Plaza Building Sen. Gil Puyat Avenue comer Chino Roces Avenue Makati City FOLLOSCO MORALLOS & HERCE 25th Floor, 88 Corporate Center 141 Valero corner Sedeiio Streets Salcedo Village, Makati City GREETINGS: You are hereby notified by these presents that on February 15, 2024, a Decision was rendered in the above-entitled case, copy of which is attached hereto. Quezon City, Philippines, February 19, 2024. AttyE. xMeacruitia~ -~Co. uCrht an-Te II

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY SPECIAL FIRST DIVISION SCHAEFFLER PHILIPPINES INC., CTA CASE NO. 10358 Petitioner, Members: -versus - DEL ROSARIO, P.J. , Chairperson , MANAHAN, and REYES-FAJARDO, JJ. COMMISSIONER OF INTERNAL Promulgated: REVENUE , Respondent. X - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - _//~~~~/. DECISION DEL ROSARIO, P.J.: This resolves the Petition for Review which prays for the refund of the amount of P3,332,237.00 representing petitioner's unutilized input value-added tax (VAT) attributable to its zero-rated sales for the first (1 51) quarter of calendar year (CY) 2018. THE PARTIES Petitioner SCHAEFFLER PHILIPPINES INC. is a domestic corporation duly organized and existing under Philippine laws, with principal office at SF Optima Building, 221 Salcedo Street, Legaspi Village, Makati City, Philippines. 1 It is a domestic market enterprise primarily engaged in the business of wholesale, export and import, and commission agency of rolling bearings, journal bearings, auxiliary devices and other components and parts, as well as spare parts, for automotive and other vehicles, railway, aircraft, general machineries, high precision devices and other equipment, as well as the provision of after-sales s;ervices, consulting and other relevant services. 2 1 Pre-Trial Order, Docket, Vol. I, p. 783. 2 Memorandum (of Petitioner), Docket, Vol. II , p. 895; Exhibit "P-2", Docket, Vol. I, p. 50.~

DECISION Schaeffler Philippines Inc. vs. Commissioner of Internal Revenue CTA Case No. 10358 Respondent COMMISSIONER OF INTERNAL REVENUE (CIR) is being sued in his official capacity, having been duly appointed and empowered to perform the duties of his office including, among others, the duty to act on and approve claims for refund and/or tax credits as provided by law. 3 THE FACTS On June 23, 2020, petitioner filed an Application for Tax Credits/Refunds, together with the supporting documents, before the Bureau of Internal Revenue (BIR), which sought the refund of its unutilized input tax in the amount of P1 0,775,485.00 attributable to its zero-rated sales for the 1st quarter of CY 2018 or from January 1, 2018 to March 31 , 2018.4 In the VAT Refund Notice dated August 25, 2020, which petitioner received on the same date, the BIR approved petitioner's refund claim but only in the reduced amount of P5,625,739.78, computed as follows:5 Amount of Claim p 10,775,485.00 Less: Deductions/disallowance Over Claimed Excess Input Tax from p 701 ,747.00 Previous Period Unsupported "Other" Purchases 157,67 1.66 Violation of Invoicing Requirements 71 9,985.19 pursuant to Section 11 3 in relation to Section 110 of the Nl RC, as amended 3,332,237.00 Discrepancy between Importation Claimed against Importation per 238, 104.37 5 ,149 ,745 .22 AITEID No Commercial Invoice as required by p 5,625,739.78 RMC No. 4 7-2019 RECOMMENDED VAT REFUND Petitioner filed the present Petition for Review on September 24, 2020, claiming a refund amounting to P3,332,237.00 only.6 Summonses were served upon respondent on October 20, 2020, and the Office of the Solicitor General on October 21 , 2020.7 3 Pre-Trial Order, Docket, Vol. I, p. 783. 4 Exhibits "P-28" and "P-29", Docket, Vol. II, p p . 705-706. 5 Exhibit "P-35", Docket, Vol. II , pp. 740-750. 4'f 6 Docket, Vol. I, pp. 7-46. 7 Docket, Vol. I, p. 242.

DECISION Schaeffler Philippines Inc. vs. Commissioner of Internal Revenue CTA Case No. 10358 On November 19, 2020, respondent filed via registered mail a Motion for Extension of Time to File Answer,8which the Court granted in the Resolution dated December 16, 2020, giving respondent until December 19, 2020 within which to file his Answer.9 Within the approved extended period , respondent posted on December 18, 2020 his Answer (With Special and Affirmative Defenses). 10 On January 6, 2021 , respondent filed a Compliance, elevating the BIR Records of this case. 11 In the Resolution dated January 19, 2021 , the Court noted respondent's: (i) Manifestation (Change of Address); (ii) Answer (With Special and Affirmative Defenses); and (iii) Compliance, and set the Pre-Trial Conference on March 18, 2021 .12 Both petitioner and respondent filed their respective Pre-Trial Briefs on March 11 , 2021 .13 The Pre-Trial Conference was reset to May 27, 2021 via videoconference ,14 and was conducted on said date.15 On June 25, 2021 , petitioner filed a Motion to Commission an Independent Certified Public Accountant (ICPA). 16 The parties filed their Joint Stipulation of Facts and Issues on June 28, 2021 .17 In the Resolution dated July 14, 2021 , the Court approved the parties' Joint Stipulation of Facts and Issues, and terminated the Pre- Trial.1 8 8 Docket, Vol. I, pp. 245-247. 9 Docket, Vol. I, p. 251 . 1o Docket, Vol. I, pp. 254-298. 11 Docket, Vol. I, p. 299. 12 Docket, Vol. I, pp. 301 -302. 13 Docket, Vol. I, pp. 304-311; pp. 354-384. 14 Docket, Vol. I, p. 386. 1s Docket, Vol. I, pp. 395 to 395-B. 1s Docket, Vol. I, pp. 405-408 . ay 11 Docket, Vol. I, pp. 447-461 . 18 Docket, Vol. I, pp. 454-455.

DECISION Schaeffler Philippines Inc. vs. Commissioner of Internal Revenue CTA Case No. 10358 The Court granted petitioner's Motion to Commission an ICPA in its Order dated October 7, 2021. Thereafter, Ms. Ma. Fedna B. Parallag was allowed to take her oath as ICPA, and was given a non- extendible period of forty-five (45) days, or until November 22, 2021 , within which to submit her report.19 On November 22, 2021, the ICPA submitted her Report.20 The Pre-Trial Order was issued on February 7, 2022.21 Thereafter, trial of the case ensued. Petitioner presented both testimonial and documentary evidence. It offered the testimonies by way of Judicial Affidavits of the following witnesses, namely: (1) Ms. Melany A. Belen, petitioner's Treasurer and Finance Manager;22 and, (2) Ms. Parallag, the Court- commissioned ICPA.23 On January 10, 2022, petitioner filed via email, private courier and registered mail a Motion for Extension of Time to File Petitioner's Formal Offer of Evidence.24 Petitioner filed its Formal Offer of Evidence on February 2, 2022 .25 In the Resolution dated March 4, 2022, the Court: (i) noted petitioner's Formal Offer of Evidence; (ii) rendered moot the Motion for Extension of Time to File Petitioner's Formal Offer of Evidence; and (iii) granted respondent fifteen (15) days, or until February 17, 2022, within which to file comment.26 On February 16, 2022, respondent posted his Comment/ Opposition (To Petitioner's Formal Offer of Evidence dated February 02, 2022).27 19 Docket, Vol. I, pp. 472-473. 2o Exhibit "P-49", Docket, Vol. I, pp. 498-586. 21 Docket, Vol. I, pp. 770-797. 22 Exhibit "P-36", Docket, Vol. I, pp. 102-125; Exhibit "P-37", Docket, Vol. I, pp . 421-430. 23 Exhibit "P-616", Docket, Vol. I, pp. 589-606. 24 Docket, Vol. II , pp. 761-820. 2s Docket, Vol. II, pp. 629-652. 2s Docket, Vol. II, pp. 824-825. 27 Docket, Vol. II , pp. 826-829. ~

DECISION Schaeffler Philippines Inc. vs. Commissioner of Internal Revenue CTA Case No. 10358 On March 4, 2022, petitioner filed via registered mail a Manifestation & Motion for Correction of Pre-Trial Order dated 07 February 2022.28 Acting on petitioner's Formal Offer of Evidence and Manifestation & Motion for Correction of Pre-Trial Order dated 07 February 2022, the Court, in the Resolution dated May 24, 2022, admitted all of petitioner's documentary evidence except Exhibits "P- 8" "P-22" "P-23" "P-24" "P-25" "P-26" "P-38" "P-51" "P-52" "P-53" ' , 1 , ' 1 ' , stoou"gPh-5t 6"c'or"rPe-c5t8io"ntso "toP-6th5e"' and "P-3 4O4"rdtoer".2P9-5T6h7e"r'eaanftderg, rapnetteitdiotnheer Pre-Trial rested its case. Respondent likewise presented both documentary and testimonial evidence. He offered the testimony of Revenue Officer Mica Norielle G. Cui by way of Judicial Affidavit.30 Respondent filed his Formal Offer of Evidence on August 4, 2022;31 meanwhile petitioner filed via email on August 19, 2022, and via personal filing on August 22, 2022, its Comment/Opposition (Re: Respondent's Formal Offer of Evidence dated 03 August 2022).32 In the Resolution dated September 13, 2022, the Court admitted all of respondent's exhibits, and granted the parties a non-extendible period of thirty (30) days to file their respective memoranda.33 Petitioner and respondent filed their Memoranda on October 17, 2022,34 and October 14, 2022,35 respectively. On November 17, 2022, the case was submitted for decision.36 THE ISSUE The sole issue for resolution is: whether petitioner is entitled to its claim for refund in the amount of P3,332,237.00, representing petitioner's excess and unutilized input VAT on its importations 2s Docket, Vol. II, pp. 842-848. 29 Docket, Vol. II , pp. 854-860 . 30 Exhibit "R-6", Docket, Vol. I, pp. 317-326. 31 Docket, Vol. II , pp. 866-871 . 32 Docket, Vol. II, pp. 873-885. 33 Docket, Vol. II, pp. 889-890. 34 Docket, Vol. II, pp. 891-913. C1tf 35 Docket, Vol. II, pp. 915-925. 36 Docket, Vol. II, p. 928.

DECISION Schaeffler Philippines Inc. vs. Commissioner of Internal Revenue CTA Case No. 10358 attributable to its effectively zero-rated sales for the 1st quarter of CY ended in 31 December 2018.37 THE ARGUMENTS OF THE PARTIES Petitioner's Arguments Petitioner contends that during the 1st quarter of CY 2018, it sold goods to certain manufacturers and exporters located in economic zones (ecozones) and reg istered with the Philippine Economic Zone Authority (PEZA). It argues that while the Court denied admission in evidence of the exhibits representing the PEZA Certifications of these ecozone entities, the exhibits pertaining to the quick response (QR) codes, as well as the corresponding registration details that appear when such QR codes are scanned, sufficiently establish the status of these entities as enterprises duly registered with the PEZA. As such , in accordance with Section 106(A)(2)(a)(5) of the National Internal Revenue Code (NIRC ) of 1997, as amended, and prevailing jurisprudence, sales made to ecozone entities are treated as export sales subject to zero percent (0%) VAT. Specific to the amount of P3,332 ,237.00, petitioner asserts that respondent's disallowance of the same from petitioner's administrative claim is devoid of any factual or legal basis. Petitioner contends that: first, the matching procedure performed by the BIR using the data reported by petitioner in its Summary List of Purchases (SLP) and the data provided by the Audit Information, Tax Exemption and Incentives Division (AITEID) of the BIR would not have the same outcome as petitioner and its various suppliers may not adopt the same accounting method in keeping their books of accounts; and, second, respondent never presented petitioner w ith any third party certification or other supporting documentation for the BIR-AITEID data which was used to come up with the supposed discrepancy. As found by the ICPA, the said amount of P3,332,237.00 was duly substantiated and not applied against any output VAT, thus petitioner prays that the Court order respondent to refund the said amount.38 Respondent's Counter-arguments On the other hand, respondent maintains that petitioner is not entitled to the refund being sought. Respondent interposes that the BIR, in verifying the supporting documents and pertinent records ay 37 Pre-Trial Order, Docket, Vol. I, p. 784. 38 Memorandum (of Petitioner), Docket, Vol. II , pp. 895-911 .

DECISION Schaeffler Philippines Inc. vs. Commissioner of Internal Revenue CTA Case No. 10358 relative to petitioner's claim for VAT refund , which resulted in findings of discrepancies, was conducted in accordance with the procedure laid out in Revenue Memorandum Order (RMO) No. 16-2007. Additionally, respondent claims that petitioner failed to substantiate that it sold goods to PEZA-registered entities considering that the Court had denied admission in evidence of Exhibits "P-22" to "P-26" representing the PEZA-issued certifications since they are mere photocopies. Respondent avers that petitioner likewise failed to comply with the requisites before secondary evidence may be allowed in lieu of the originals. Considering that tax refunds are construed strictly against the claimant, and petitioner fa iled to discharge the burden entitling it to the claim, respondent prays that the present Petition be dismissed.39 THE COURT'S RULING After a thorough review of the facts as established by the records, and applying the governing law on the matter, the Court finds no merit in the Petition for Review. The Court has jurisdiction over this case Section 112(A) and (C) of the NIRC of 1997, as amended, reads: "SEC . 112. Refunds or Tax Credits of Input Tax. - (A) Zero-rated or Effectively Zero-rated Sales. - Any VAT- registered person , whose sales are zero-rated or effectively zero- rated may, within two (2) years after the close of the taxable quarter when the sales were made, apply for the issuance of a tax credit certificate or refund of creditable input tax due or paid attributable to such sales, except transitional input tax, to the extent that such input tax has not been applied against output tax: Provided, however, That in the case of zero-rated sales under Section 106(A)(2)(a)(1), (2) and (b) and Section 108 (8)(1) and (2), the acceptable foreign currency exchange proceeds thereof had been duly accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (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 of 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. a., 39 Respondent's Memorandum, Docket, Vol. II, pp. 91 6-924.

DECISION Schaeffler Philippines Inc. vs. Commissioner of Internal Revenue CTA Case No. 10358 XXX XXX XXX (C) Period within which Refund or Tax Credit of Input Taxes shall be Made. - In proper cases, the Commissioner shall grant a refund for creditable input taxes within ninety (90) days from the date of submission of the official receipts or invoices and other documents in support of the application filed in accordance with Subsections (A) and (B) hereof: Provided, That should the Commissioner find that the grant of refund is not proper, the Commissioner must state in writing the legal and factual basis for the denial. In case of full or partial denial of the claim for tax refund , the taxpayer affected may, within thirty (30) days from the receipt of the decision denying the claim, appeal the decision with the Court of Tax Appeals: Provided, however, That failure on the part of any official, agent, or employee of the BIR to act on the application within ninety (90) days period shall be punishable under Section 269 of this Code." Verily, three (3) relevant periods governing claims for refund of input tax attributable to zero-rated or effectively zero-rated sales must be observed , viz.: (1) The VAT-registered taxpayer must file its application for refund or issuance of tax credit certificate within two (2) years from the close of the taxable quarter when the sales were made; (2) The CIR has ninety (90) days to grant or deny such claim for refund from the date of submission of official receipts or invoices and other documents in support of the application; and, (3) The taxpayer must file an appeal with the CTA within thirty (30) days from receipt of the decision denying the claim. In this case, a careful perusal of the records reveals that petitioner has complied with the above-listed periods. From the close of the 1st quarter of 2018, petitioner had two (2) years therefrom, or until March 31, 2020, within which to file the administrative claim. On March 17, 2020, Revenue Memorandum Circular (RMC) No. 27-2020 was issued, which extended until April 30, 2020 the filing of VAT refund claims covering the quarter ending March 31 , 2018. Thereafter, Revenue Regulations (RR) No. 10-2020 was issued, which further extended the deadline for filing of VAT refund claims covering the 1st quarter of 2018 until May 15, 2020 or th irty (30) days from the date of the lifting of the enhanced community quarantine, whichever comes later. Then, RR No. 11-2020 amended the deadlineaa,

DECISION Schaeffler Philippines Inc. vs. Commissioner of Internal Revenue CTA Case No. 10358 to May 30, 2020. Finally, under RR No. 16-2020, the deadline for filing was extended until July 15, 2020. Thus, petitioner's filing of the administrative claim , together with the submission of official receipts, invoices and supporting documents, on June 23, 2020, was timely. From June 23, 2020, respondent had ninety (90) days, or until September 21, 2020, within which to act on the refund claim . On August 25, 2020, or within the ninety (90)-day period, petitioner received the VAT Refund Notice, which partially granted the administrative claim . Thus, petitioner had thirty (30) days from receipt of said Notice, or until September 24, 2020, within which to file the judicial claim. Considering that the present Petition for Review was filed on September 24, 2020, the same was filed within the prescribed period and the Court has jurisdiction to decide this case. Requisites for a valid claim of refund of unutilized input tax Jurisprudence has provided for the requisites of a valid claim for refund of unutilized input tax, to wit: "1. The taxpayer is VAT-registered ; 2. The administrative and judicial claims for refund were filed within their respective prescriptive periods; 3. The taxpayer is engaged in zero-rated or effectively zero- rated sales; 4. The input taxes were incurred or paid ; 5. The input taxes are attributable to zero-rated or effectively zero-rated sales; and 6 . The input taxes were not applied against any output VAT liab ility. "40 The Court shall determine petitioner's compliance with the abovementioned requisites in seriatim. �4 CBK Power Company Limited vs. Commissioner of Internal Revenue, G.R. No. 24791 8, February 1, 2023 .CPJ

DECISION Schaeffler Philippines Inc. vs. Commissioner of Internal Revenue CTA Case No. 10358 First Requisite: The taxpayer is VAT-registered The parties have jointly stipulated as a fact that petitioner is duly registered with the BIR as a VAT taxpayer under Tax Identification Number 006-868-990-000.41 Second Requisite: The administrative and judicial claims were filed within their respective prescriptive periods As discussed above, petitioner filed its administrative claim for refund within the two (2)-year prescriptive period under Section 112(A) of the NIRC of 1997, as amended, and its judicial claim within thirty (30) days from receipt of the CIR's decision partially denying the administrative claim as provided for in Section 112(C). Third Requisite: The taxpayer is engaged in zero-rated or effectively zero-rated sales Petitioner claims that during the first (1st) quarter of CY 2018, it engaged in sales of goods to manufacturers/exporters registered with PEZA and the Board of Investments (801). Such sales amounted to a total of P121 ,890,543.63,42 broken down as follows: Customer Name Amount43 Asian Transmission Corporation (ATC) p 29,163,101.44 Honda Parts Manufacturing Corp (HPMC) 2 0 8 ,5 5 3.26 lsuzu Autoparts Manufacturing (lAM) 24,540,51 2.00 Mitsuba Philippines Corporation (MPC) 658,299.95 Philippine Gold Processing and Refining Corp (PGPRC) 193,851.00 Toyota Aisin Philippines Corporation (TAPI) 67 ,126 ,225 .98 Total p 121 ,890,543.63 All of the abovementioned customers, except for PGPRC which is a SOl-registered entity, are PEZA-registered entities. 41 Pre-Trial Ord er, Docket, Vol. I, p. 783 . 42 Exhi bit No. "P-57" , USB. 43 Amount per customer was computed by the Court. ~

DECISION Schaeffler Philippines Inc. vs. Commissioner of Internal Revenue CTA Case No. 10358 For purposes of VAT zero-rating of sales made to a SOl - registered buyer, the Supreme Court clarified , in the case of Commissioner of Internal Revenue vs. Filminera Resources Corporation,44 that the following conditions must be complied with: "Accordingly, sales made to a SOl-registered buyer are export sales subject to zero percent rate if the following conditions are met: (1) the buyer is a SOl-registered manufacturer/producer; (2) the buyer's products are 100% exported ; and (3) the SOl certified that the buyer exported 100% of its products. For this purpose, the 801 Certification is vital for the seller-taxpayer to avail of the benefits of zero-rating. The certification is evidence that the buyer exported its entire products and shall serve as authority for the seller to claim for refund or tax credit." (Boldfacing supplied) Accordingly, it is incumbent for petitioner to present both: (a) PGPRC's Certificate of Registration with the 801 ; and (b) the 801 Certification that PGPRC exported 100% of its products. Petitioner failed to submit the 801 Certificate of Registration of PGPRC. Moreover, in a Resolution dated May 24, 2022,45 Exhibit "P- 65", representing PGPRC's 801 Certification valid from January 1 to December 31 , 2018, was denied admission for failure to submit the original for comparison. Thus, for petitioner's failure to present in evidence these vital documents, the alleged zero-rated sales made to PGPRC in the amount of P193,851 .00 shall be disallowed. Anent the sales made to PEZA-registered entities, a PEZA Certificate of Registration is sufficient to entitle a supplier to VAT zero- rating on its sales to a PEZA-registered enterprise consistent with the Court En Bane's ruling in Commissioner of Internal Revenue vs. Kurimoto (Philippines) Corporation,46 viz .: "To underscore, all sales of goods, property or services by a VAT-registered supplier to a PEZA-registered enterprise, regardless of the type of tax exemption availed of by the latter, shall be subject to VAT at zero percent, not at the regular rate of 12%. To enjoy the benefit of VAT zero-rating of its sales, the supplier is not even required to secure a separate certification therefor. RMC No. 74- 99's provisions shall be sufficient basis for its entitlement to VAT zero-rating under Section 108(8)(3) of the Tax Code. 44 G.R. No. 236325, September 16, 2020. qy 45 Docket, Vol. II, pp. 854 to 860. 46 CTA EB No. 2666, October 11 , 2023.

DECISION Schaeffler Philippines Inc. vs. Commissioner of Internal Revenue CTA Case No. 10358 Page 12of1 7 In the present case, that THPAL is a PEZA-registered enterprise is established by its PEZA Certificate of Registration. This certification, by itself, entitles KPC a VAT zero-rating with respect to its sales of services to THPAL." (Boldfacing supplied) Perusal of the records reveals that petitioner offered in evidence five (5) PEZA Certificates of Registration of its rema ining clients, detailed below: Exhibit No. Customer Name Certificate of Registration No. P-4447 ATC P-4548 HPMC 14-047 P-4649 93-05 P-4750 lAM 97-015 P-4851 MPC 96-107 TAP I 95-60 The Court shall now proceed to determine whether petitioner has complied with the invoicing requirements under Section 113(A) and (B) of the NIRC of 1997, as amended, which provides that a VAT taxpayer shall, for every sale, barter or exchange of goods or properties, issue a VAT invoice which must contain specific information as prescribed therein . Particularly, Section 113(A), in relation to Section 113(8)(2)(c) and (d) of the NIRC of 1997, as amended, reads : "SEC . 11 3. Invoicing and A ccounting Req uirements for VAT- Registered Persons. - (A) In voicing Requirements. -A VAT-reg istered 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. 47 Docket, Vol. II , p. 756. 48 Docket, Vol. II , p. 757. 49 Docket, Vol. II , p. 758. 5o Docket, Vol. II , p. 759. 51 Docket, Vol. II , p. 760 .~

DECISION Schaeffler Philippines Inc. vs. Commissioner of Internal Revenue CTA Case No. 10358 (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: XXX (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; (d) If the sale involved goods, properties or services some of which are subject to and some of which are VAT zero-rated or VAT exempt, the invoice or receipt shall clearly indicate the break- down of the sale price between its taxable, exempt and zero-rated components, and the calculation of the value-added tax on each portion of the sale shall be known on the invoice or receipt: Provided, That the seller may issue separate invoices or receipts for the taxable, exempt, and zero-rated components of the sale. x x x" (Boldfacing and underscoring supplied) The above provision is implemented by Section 4.113-1 of Revenue Regulations (RR) No. 16-2005, as amended, which reads: "SEC. 4.113-1 . Invoicing Requirements. - XXX (B) Information contained in VAT invoice or VAT official receipt. - The following information shall be indicated in VAT invoice or VAT official receipt: XXX (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; cPf (d) If the sale involves goods, properties or services some of which are subject to and some of which are VAT zero-rated

DECISION Schaeff/er Philippines Inc. vs. Commissioner of Internal Revenue CTA Case No. 10358 or VAT-exempt, the invoice or receipt shall clearly indicate the break-down of the sale price between its taxable, exempt and zero- rated components, and the calculation of the VAT on each portion of the sale shall be shown on the invoice or receipt. The seller has the option to issue separate invoices or receipts for the taxable, exempt, and zero-rated components of the sale." (Boldfacing and underscoring supplied) Verily, it is a requirement that for any VAT invoice or official receipt evidencing a zero-rated transaction, the term "zero-rated sale" should be written or printed prominently thereon . Failure to comply with the invoicing requirements is sufficient ground to deny the claim for refund or tax credit.52 The Supreme Court has settled , in a number of cases,53 that the writing or imprinting of the term "zero-rated sale" on the VAT invoice or official receipt is indispensable for a valid claim for refund of unutilized input tax. Such requirement was traced by the Supreme Court from Section 4.108-1 of RR No. 7-95, which has been incorporated in Section 113(B)(2)(c) of the NIRC of 1997, as amended , by virtue of the amendments introduced by Republic Act No. 9337, which confirms the validity of the imprinting requirement on VAT invoices or official receipts, viz.:54 "RR 7-95, which took effect on 1 January 1996, proceeds from the rule-making authority granted to the Secretary of Finance by the NIRC for the efficient enforcement of the same Tax Code and its amendments. In Panasonic Communications Imaging Corporation of the Philippines v. Commissioner of Internal Revenue, we ruled that this provision is 'reasonable and is in accord with the efficient collection of VAT from the covered sales of goods and services.' Moreover, we have held in Kepco Philippines Corporation v. Commissioner of Internal Revenue that the subsequent incorporation of Section 4.108-1 of RR 7-95 in Section 113 (B)(2)(c) of R.A. 9337 actually confirmed the validity of the imprinting requirement on VAT invoices or official receipts- a case falling under the principle of legislative approval of administrative interpretation by reenactment." (Boldfacing supplied) 52 Commissioner of Internal Revenue vs. Ph i/ex Mining Corporation, G.R. No. 23001 6, November 23 , 2020. 53 Panasonic Communications Imaging Corporation of the Philippines vs. Commissioner of Internal Revenue, G.R. No. 178090, February 8, 2010; J.R. A. Philippines, Inc. vs. Commissioneroflnternal Revenue, G .R. No. 177127, October 11, 2010; Hitachi Global Storage Technologies Philippines Corp. vs. Commissioner of Internal Revenue, G.R. No. 174212, October 20, 20 10; Kepco Philippines Corporation vs. Commissioner of Internal Revenue, G.R. No. 181 858, November 24, 2010; Silicon Philippines, Inc. vs. Commissioner of Internal Revenue, G.R. No. 172378, January 17, 20 11; Western Mindanao Power Corporation vs. Commissioner of Internal Revenue , G.R. No. 1811 36, June 13, 2012; Eastern Telecommunications Philippin es, Inc. vs. Commissioner oflnternal CJy Revenue, G.R. No. 183531, March 25, 2015. 54 Western Mindanao Power Corporation vs. Commissioner of Internal Revenue, id.

DECISION Schaeffler Philippin es Inc. vs. Commissioner of Intern al Revenue CTA Case No. 10358 Revenue Memorandum Circular No. 42-2003 is explicit that if the refund claim is based on the existence of zero-rated sales but the taxpayer fails to comply with the invoicing requirements, such claim should be denied, viz .: "Q-13: Should penalty be imposed on TCC application for fa ilure of claimant to comply with certain invoicing requirements, (e.g., sales invoices must bear the TIN of the seller)? A-13: Failure by the supplier to comply with the invoicing requirements on the documents supporting the sale of goods and services will result to the disallowance of the claim for input tax by the purchaser-claimant. If the claim for refund/TCC is based on the existence of zero-rated sales by the taxpayer but it fails to comply with the invoicing requirements in the issuance of sales invoices (e.g. failure to indicate the TIN), its claim for tax credit/refund of VAT on its purchases shall be denied considering that the invoice it is issuing to its customers does not depict its being a VAT- registered taxpayer whose sales are classified as zero-rated sales. Nonetheless, this treatment is without prejudice to the right of the taxpayer to charge the input taxes to the appropriate expense account or asset account subject to depreciation, whichever is applicable. Moreover, the case shall be referred by the processing office to the concerned BIR office for verification of other tax liabilities of the taxpayer." (Boldfacing and underscoring supplied) In this case, all of petitioner's alleged zero-rated sales, evidenced by VAT invoices,55 do not bear the term "zero-rated sale" written or printed prominently on such invoices . Thus, for failure of petitioner to comply with the invoicing requirements for all its alleged zero-rated sales, the refund claim should be denied . Notwithstanding that petitioner indicated in the breakdown of the VAT invoices the amount pertaining to "zero-rated sale", such however did not in any way cure its failure to comply with the imprinting requirement. The information necessary to be indicated in the "breakdown" and the writing or imprinting of "zero rated sales" on the VAT official receipts are requirements governed by separate provisions of the NIRC of 1997, as amended -- that is, Section 113(B)(2)(d), which requires the breakdown of sales as VATable, VAT- exempt or VAT zero-rated in case of mixed transactions; and Section 113(B)(2)(c), which provides for the imprinting requirement. O'J 55 Exhi bits "P-66" to "P-130".

DECISION Schaeffler Philippines Inc. vs. Commissioner of Internal Revenue CTA Case No. 10358 Otherwise stated , when the transaction involves a purely VAT zero-rated sale, the VAT official receipt should prominently bear the term "zero-rated sale" in accordance with Section 113(8)(2)(c) of the NIRC of 1997, as amended . However, when the transaction is mixed, i.e., it involves a combination of VATable, VAT-exempt or VAT zero-rated sales, the breakdown requirement under Section 113(8)(2)(d) may apply. Here, all of petitioner's VAT invoices pertain to purely VAT zero-rated sales, yet the imprinting of the required phrase "zero-rated sale" remained lacking. As petitioner was unable to prove compliance with the third requisite, the Court need not belabor on the other issues in this case. Again , tax refunds are in the nature of a claim for tax exemption and the law is not only construed in strictissimi juris against the taxpayer, but also the pieces of evidence presented entitling a taxpayer to an exemption is strictissimi scrutinized and must be duly proven .56 As afore-discussed , petitioner's VAT invoices fai led to comply with the invoicing requirements as prescribed by law, thereby precluding its entitlement to refund . WHEREFORE, premises considered , the Petition for Review is DENIED for lack merit. SO ORDERED. Presiding Justice WE CONCUR: ~~ J'./A~4-- (With utmost respect, please see my Concurring and Dissenting Opinion.) CATHERINE T. MANAHAN Associate Justice . ~F.~-F~ (With b pec(jlease see Dissenting Opinion.) MARIAN IVY F. REYES-FAJARDO Associate Justice 56 Pilipinas Shell Petroleum Corporation vs. Commissioner of Internal Revenue, G .R. No. 2 11779, November 3, 2020.

DECISION Schaeffler Philippines Inc. vs. Commissioner of Internal Revenue CTA Case No. 10358 CERTIFICATION F�Jrsuant 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. 10 Presiding Justice

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY SPECIAL FIRST DIVISION SCHAEFFLER PHILIPPINES, CTA Case No. 10358 INC., Petitioner, Members: -versus- DEL ROSARIO, P. J., Chairperson, MANAHAN, and REYES-FAJARDO, JJ. COMMISSIONER OF Promulgated: INTERNAL REVENUE, ~.'{l)Pf/ Respondent. CONCURRING AND DISSEN MANAHAN, J.: I concur with the result of the ponencia of my esteemed colleague, the Honorable Presiding Justice Roman G. Del Rosario. However, with utmost respect, I submit that the Petition for Review should be denied on the ground that petitioner failed to present its clients' Philippine Economic Zone Authority (PEZA) Value-Added Tax (VAT) Zero-Rating Certifications in order to prove that its sales of goods are effectively zero-rated. Pursuant to S ection 106(A)(2)(a)(S) of the 1997 Na tional Internal Revenue Code (NIRC), as amended, sales considered as "export sales" under Executive Order No. 226 , otherwise known as the "Omnibus Investment Code of 1987," and other special laws, are subject to zero percent (0�/o) rate. One such special law referred to in this Section, and which specifically applies in this case , is Republic Act (RA) No. 7916 , as amended by RA No. 8748, otherwise known as "The Special Economic Zone Act of 1995." S ection 8 of RA No. 7916 mandates the PEZA to manage and operate the ECOZONES as separate customs territory , thereby creating the legal fiction that the ECOZONE is foreign~

CONCURRING AND DISSENTING OPINION CTA Case No . 10385 Schaefjler Philippines, Inc. v. Commissioner of Internal Revenue territory. 1 As consequence, sales made by a VAT-registered person such as petitioner to an entity registered and operating within an ECOZONE are considered exports to a foreign country subject to VAT zero-rating. The factual question therefore in this case is whether petitioner proved that the subject sales were made to qualified PEZA-registered enterprises. The majority is of the opinion that a PEZA Certificate of Registration is sufficient to entitle a supplier to VAT zero-rating on its sales to a PEZA-registered enterprise. Accordingly, since petitioner offered in evidence the PEZA Certificates of Registration of its clients, it was able to establish that it is engaged in zero-rated or effectively zero-rated sales. The PEZA Certificate of Registration is a certificate issued by the PEZA to an ECOZONE enterprise upon its registration.2 Concededly, such registration ipso facto results in the zero- rating of the enterprise's transactions with its suppliers. This is in line with the cross-border doctrine adhered to by the Philippine VAT system, which provides that 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. In Commissioner of Internal Revenue v. Seagate Technology (Philippines), 3 the Supreme Court pronounced that administrative regulations requiring prior application for effective zero-rating cannot prevail over the VAT nature of a registered enterprise's transactions. Other than the general registration of a taxpayer from which the VAT status can be determined, no provision under our VAT law imposes additional requirements for such transactions to qualify as effectively zero-rated.4 However, such registration-and by implication all the benefits and incentives arising therefrom, which includes VAT- zero rate-is not without conditions. Failure to maintain the qualifications of the registration is among the grounds for its 1 Commissioner of Interna l Revenue v. Toshiba Information Equipment (Phils.), Inc., G.R. No. 150154, Aug. 9, 2005. 2 Section 2(s), Rules and Regula tions to lmplement Republic Act No. 7916, May 17 , 1995. Hereinafter 'IRR of RA 7916. ' 3 G.R. No. 15~Feb . 11 , 200 5. 4 Id. ~

CONCURRING AND DISSENTING OPINION CTA Case No. 10385 Schaefjler Philippines, Inc. v. Commissioner of Internal Revenue revocation. Section 8(C) of the IRR of RA No. 7916, in relation to Section 14(h) of RA No. 7916,5 provides as follows: SECTION 8. Penalties XXX (C) Cancellation/Revocation - Registration, permit a nd/or franchise of a n ECOZONE enterprise may be cancelled for any of the following grounds: a) Failure to m a inta in the qua lifications of registration / permit/ franchise as required. b) Violation of a ny pertin ent provision of the Act Code (sic) and/ or Decree; and c) Violation of any of these Rules a nd Regulations, the corresponding implementing memoranda or circulars or any of the general and specific terms and conditions of the Registration Agreement between the PEZA and the ECOZONE enterprise or violation of the terms and conditions of the permit/franchise issued by PEZA. However, delay by the ECOZONE enterprise in the implementation of the timetable of its project as set by the PEZA shall result in the automatic cancellation of the certificate of registration/permit/ franchise unless extended or a different period is set by the PEZA or these Rules. XXX Thus, while the Certificate of Registration proves that the enterprise is duly registered with the PEZA, it is the PEZA VAT Zero-Rating Certificate (PEZA-ERD Form No. 97-01) which confirms that the enterprise is compliant with the conditions stipulated in its PEZA Certificate of Registration and has no s SECTION 14. Powers and Functions of the Director General. - The director general shall be the overall coordinator of the policies, plans and programs of the ECOZONES. As such, h e shall provide overall supervision over and general direction to the development and operations of these ECOZONES. x x x In addition, h e shall have the following specific powers and responsibilities: XXX (h) To recommend to the Board the grant, approval, refusal, amendment or termination of the ECOZONE franchises, licenses, permits, contracts, and agreements in accordance with the policies set by the Board; XXX ~

CONCURRING AND DISSENTING OPINION CTA Case No. 10385 Schaefjler Philippines, Inc. v. Commissioner of Internal Revenue outstanding penalties.6 It is the PEZA VAT Zero-Rating Certificate which serves as competent proof that the enterprise seeking VAT refund remains a qualified PEZA-registered enterprise and therefore entitled to the VAT zero-rating incentive. It bears to stress that under RA No . 7916, the PEZA is entrusted by law with the establishment, operation, administration, regulation, and development of ECOZONES. So in the instant case, petitioner submitted photocopies of the PEZA VAT Zero-Rating Certificates of its clients , but the same were denied by the Court in its Resolution dated May 24, 20227 for failure to submit the originals for comparison. The Court cannot give probative value to the same as it is a basic rule that eviden ce which has not been admitted cannot be validly considere d by the courts in arriving a t their judgments.s Cases b efore the Court a re litigated de novo where party- litigants should prove every minute aspect of their cases.9 This is especially true in t ax r efund cases , wher e taxpayers have the burden of proving the factual b a ses of their claims.10 Tax refunds, being in the nature of tax exemptions, are regarded as derogation of sovereign authority and are to be construed strictissimi juris against the claimant.l l The taxpayer-claimant therefore must not only prove entitlement to the grant of the claim under substantive law but also compliance with all the documentary a nd evidentiary requirem ents. 12 Failure to discharge this burden , as in this case, is fatal to the taxpayer's claim. In view of the foregoing, I VOTE to den y the Petition for R evie w. ~~/':~ CATHERINE T. MANAHAN Associa te Justice 6 See Annex "A," PEZA Memorandu m Order No. 2023-0 14, Nov. 3 , 2 023. 7 Docket- Vol. II, pp. 854-860 . s Dela Lla no v. Bion g, G.R. No. 182 3 56, Dec. 4 , 2 01 3. 9 Commissione r of Interna l Revenu e v. Philippin e Bank of Communications, G.R. No. 2 1 134 8, Feb. 23,20 22. 10 Sitel Philippin es Corp . v. Commission er of Internal Revenue, G.R. No. 2 0 1326, Feb. 8, 2 0 17. I I Ma iba ra ra Geoth erma l, Inc. v. Commissioner of Interna l Revenue, G.R. No. 250479 , Jul. 18 , 2 022 , citing Commissioner of Interna tional Revenue v. Filminera Resources Cor por ation , G .R. No. 2 36325, Sep . 16 , 20 20 . 12 Ta nduay Distiller s , In c. v. Commission e r of In terna l Revenue, G.R. No. 2 56740 (Notice), Feb . 13, 2 023; Eastern Telecommunications Philippines, In c. v. Commissioner of Interna l Revenue, G.R. No . 18353 1, Ma r . 25,20 15.

REPUBLIC OF THE PHILIPPINES COURT OFTAX APPEALS QUEZON CITY SPECIAL FIRST DIVISION SCHAEFFLER PHILIPPINES, CTA Case No. 10358 INC. Petitioner, Members: DEL ROSARIO, P.J., Chairperson, - versus - MANAHAN, and REYES-FAJARDO, JL COMMISSIONER OF INTERNAL REVENUE, Respondent. )(- - --- - -- - ---- - - - - - - -- - -- ----- -- - -- REYES-FAJARDO, L;. The recent case of Chevron Holdings, Inc. v. Commissioner of Internal Revenue1 set out the requisites for a grant of refund or credit of unutilized input value-added ta)( (VAT) attributable to zero-rated sales, viz.: Under Section 112(A) of the Tax Code, the taxpayer may claim for refund or issuance of tax credit certificate of unutilized input VAT attributable to zero-rated sales subject to the following conditions: (1) the taxpayer is VAT-registered; (2) the taxpayer is engaged in zero-rated or effectively zero-rated sales; (3) the claim must be filed within two (2) years after the close of the taxable quarter when such sales were made; and (4) the creditable input tax due or paid must be attributable to such sales, except the transitional input tax, to the extent that such input tax has not been applied against the output tax. (Emphasis supplied) With regard the second requirement above, I concur with the ponencia in finding that the Philippine Economic Zone Authority (PEZA) Certifications offered in the present case are sufficient to establish that Schaeffler Philippines, Inc. (Schaeffler) engaged in sales to PEZA-registered enterprises. Pursu ant to the provisions in Revenue 1 G.R. No. 215159, July 5, 2022.

DISSENTING OPINION CTA Case No. 10358 Page 2 of5 Memorandum Circular (RMC) No. 74-99,2 sales to enterprises, the PEZA registration of which have been established, shall be regarded as zero-rated sales for purposes of Section 108(B)(3) of the National Internal Revenue Code of 1997, as amended (Tax Code), i.e., services to person enjoying a tax exemption. Nonetheless, the ponencia denied Schaeffler's claim for refund or credit on account of non-compliance with VAT invOicing requirements. In particular, the ponencia points out that VAT invoices and/ or receipts containing a breakdown to differentiate among VAT- able sales, zero-rated sales, and exempt sales, but do not bear the term "zero-rated sales" prominently on the face of the document, fail to meet the substantiation requirements set out in the law and applicable regulations. With all due respect, I disagree with this position. Section 113 of the Tax Code enumerates the invoicing requirements and information that must be contained in the VAT invoice or official receipt. Relative thereto, Revenue Regulations (RR) No. 16-05 (VAT Regulations)3 set out as follows: SEC. 4.113-1. Invoicing Requirements. - (A) X X X (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: 2 Tax Treatment of Sales of Goods, Property and Services Made by a Supplier from the Customs Territory to a PEZA Registered Enterprise; and Sale Transactions Made by PEZA Registered Enterprises Within and Without the ECOZONE, October 15, 1999.1 I I (Commissioner of Internal Revenue v . Kurimoto (Philippines) Corp., C.T.A. EB Case No. 2666 (C.T.A. Case No. 9740), [October 11, 2023]) 3 Consolidated Value-Added Tax Regulations of 2005, Revenue Regulations No. 16-05, ~./ September 1, 2005. 'f' r

DISSENTING OPINION CTA Case No. 10358 Page 3 of5 (a) The amount of tax shall be shown as a separate item in the invoice or receipt; (b) If the sale is exempt from VAT, the term "VAT-exempt sale" shall be written or printed prominently on the invoice or receipt; (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; (d) If the sale involves goods, properties or services some of which are subject to and some of which are VAT zero- rated or VAT-exempt, the invoice or receipt shall clearly indicate the break-down of the sale price between its taxable, exempt and zero-rated components, and the calculation of the VAT on each portion of the sale shall be shown on the invoice or receipt. The seller has the option to issue separate invoices or receipts for the taxable, exempt, and zero-rated components of the sale. (Emphasis supplied) While the " prominence" and " break-down" requirements are set out separately in sub-paragraphs (b) and (c), and (d), respectively, there is nothing in the law and regulations that prohibits a VAT taxpayer from adopting a more concise method of presentation/ disclosure of invoice information yet simultaneously meeting both these standards under the law. Verily, the rule is that a claimant's VAT zero-rating, by itself, does not ipso facto justify the grant of its application for refund or credit of unutilized input taxes attributable to zero-rated sales. As tax refunds are construed strictissimi juris against the claimant, it must also establish compliance with the applicable invoicing and accounting requirements.4 However, our construction of these statutory and regulatory requirements must not be so rigid.s We must still arrive at a reasonable, practical, and logical interpretation that does not depart from their purposes and intent.6 ~ Westem Mi11dnnno Power Corp. v. Commissioner ofIntemnl Revenue, G.R. No. 181136, June 13, 2012, 687 PHIL 328-342. 5 In Commissioner ofi11temnl Reve11ue v. Philex Mi11i11g Corp. (G.R. No. 230016, November 23, 2020), the Supreme Court held, "While tax refunds are in the nature of tax exemptions and are construed strictissimi juris against the taxpayer, tax statutes shall be construed strictly against the taxing authority and liberally in favor of the taxpayer, for taxes, being burdens, are not to be presumed beyond what the statute expressly and clearly declares." 6 See Commissioner of 111ternnl Revenue v. Court of Appeals, G.R. Nos. 104151 & 105563, March 10, hflt)_... 1995,312 PHIL 337-373. In Muiioz & Co. v. Hard (G.R. No. 4832, January 28, 1909,12 PHIL 624- 'ff r

DISSENTING OPINION CTA Case No. 10358 Page 4 of5 The primary objective of requ1nng strict compliance with invoicing requirements is only a "VAT invoice/ official receipt" can give rise to any input tax from domestic purchase of goods or service.? "The appearance of the word 'zero-rated' on the face of invoices covering zero-rated sales prevents buyers from falsely claiming input VAT from their purchases when no VAT was actually paid. If, absent such word, a successful claim for input VAT is made, the government would be refunding money it did not collect."B In other words, invoicing requirements are directed at the substantiation of the claimant's input tax credits, i.e., whether the documentation issued by its suppliers as evidence of the purchases contain the required information. The Supreme Court's discussion in Commissioner of Internal Revenue v. Euro-Philippines Airline Services, Inc.9 is instructive: Here, there is no dispute that Euro-Phil is VAT registered. Next, it is also not disputed that the services rendered by Euro-Phil was to a person engaged in international air-transport operations. Thus, by application, Section 108 of the NIRC of 1997 subjects the services of Euro-Phil to British Airways PLC, to the rate of zero percent VAT. While CIR contends that the dissenting opinion of Justice del Rosario that Euro-Phil's failure to present and offer any proof to show that it has complied with the invoicing requirements, deems its sale of services to British Airways PLC subject to 12% VAT, it does not negate the established fact that British Airways PLC is engaged in international air-transport operations. Verily, in refund cases, it is still essential that the claimant's own sales invoices or official receipts satisfy the relevant invoicing and accounting requirements.JOHowever, even the failure to present and offer proof showing compliance with invoicing requirements does 639), the Supreme Court d ecreed, "Applying the rules of interpretation above cited, it is clear that a construction should be rejected which gives to the language used in the exception a meaning not required to accomplish the purpose for which the exception was inserted by the legislator, and which tends to defeat the ends which are sought to be attained by the enactment of the provision wherein the exception is found, unless it appears that the language of the exception is not susceptible of some other fair and reasonable construction, to which such objections cannot be raised." 7 Commissioner of Internal Revwue v. Philex Mini11g Corp., G.R. No. 230016, November 23, 2020. s Panaso11ic Communications fluaging Corp. v. Commissioner of Internal Revenue, G.R. No. 178090, February 8, 2010,625 PHIL 631-644. 9 G.R. No. 222436, July 23, 2018. 10 Western Mindanao Power Corp. v. Commissioner of Internal Revenue, G.R. No. 181136, June 13, 2012, hiQ_/ 687 PHIL 328-342. 'f' .,....

DISSENTING OPINION CTA Case No. 10358 Page 5 of5 merit an outright and complete denial of the claim11 and cannot serve to negate the zero-rated character of the sales, especially when already demonstrated sufficiently, as in the present case. At the very least, the Court remains duty-bound to verify the claim and determine whether the remaining conditions under Section 112(A) of the Tax Code have been satisfied.12 I reiterate two points: First, Schaeffler's invoices bear a detailed break-down, through which it has expressly disclosed the zero-rated nature of the sale, as well as the money value of the transaction. Second, its clients' Certificates of Registration show that Schaeffler's sales were made to PEZA-registered enterprises. It is clear from these considerations that Schaeffler's sales to PEZA-registered clients effectively subjects the same to VAT at zero percent13 and that its invoices contain the information required by the law and regulations. To be sure, the term IIzero-rated sale" is prominently printed in the break-down portion of Schaeffler's invoices. That the break-down portion clearly identifies the nature of and the money value assigned to the transaction obviates the IIevil" that buyers may falsely claim input VAT therefrom. While the appearance of the term IIzero-rated sale" more than once or the use of a more emphatic typeface may increase prominence, in my opinion, it is not necessary in this case. In these lights, I VOTE to GRANT the petition to the extent that Schaeffler also establishes the validity of its input VAT, after a determination of whether or not it has complied with the remaining requisites under Section 112(A) of the Tax Code.14 ~~F.~-F~ MARIAN l~Y F. REYES-FAJARDO Associate Justice 11 Southern Power Corp. v. Commissioner of Internal Revenue, G.R. No. 179632, October 19, 2011, 675 PHIL 732-741 . 12 Id. 13 Section 108(B)(3), Tax Code, in relation to RMC No. 74-99. 14 In Southern Power Corp. v. Commissioner of Internal Revenue (G.R. No. 179632, October 19, 2011, 675 PHIL 732-741), the judicial refund was denied at the outset by the CTA for failure to substantiate zero-rated sales (second requisite). However, on review, the Supreme Court remanded the case to the CTA for determination of whether or not the taxpayer complied with the remaining requisites under Section 112(A) of the Tax Code.