CTA Case No. 5305 (Decision)

/\ REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY TAGANITO MINING CORPORATION, -!Iii C.T.A. CASE NO. 5305 Petitioner, " Promu I gated: - versus - JUL 29 1997 - --- _ COMMISSIONER OF INTERNAL - - - - - - - REVENUE, - Respondent. X - --- DECISION This case involves a claim for tax credit in the amount of P1,001,439.41 equivalent to the value-added tax <input tax> paid by petitioner herein on its domestic purchases of goods and services for the period covering January 1, 1994 to December 31, 1994. Petitioner is a domestic corporation pr�imari ly engaged in the business of exploring, producing and exporting beneficiated ni ekeI siIi cate ores and chromite ores found in Parcel One of the Surigao M in e ral Reservation area in the Mun i ci p a l ity of Claver, Suri g ao del Norte and was granted by respondent permit to engage in such business under BIR Permit No. 0057-MP-90 (Exh. "G", p. 95, CTA records) on June 22, 1990. Effective January 1, 1988, it register ed itself with the Bureau of Inter n al Revenue <BIR) as a Value-Added Tax (VAT) entity and was issued VAT Regi s t rat io n Ce rti f ica te No. 32A-0-003939 (Exh. "H" , p. 98, C.T.A. records). It

DECIS ION C. T . A . CAS E NO. 5 3 0 5 -2 - also registered with the Board of Investments as a non- pioneer enterprise and is in possession. of BOt Certificate No. EP 8 8-306 (Exhibit "1"). For the period from January 1, 1994 to December 31, 1994, petitioner alleges ' it rea I i zed zero-rated that export sales amounting to ONE HUNDRED THRE E MILLION FOUR HUNDR E D NINE T Y T WO T HOUS AND T HREE HUNDRED NINET Y T HRE E P ESOS AND 4 5 / 1 0 0 (P103,492 ,393. 45 ) which was paid for in acceptable foreign currency inwardly remitted to the Philippines and accounted for in accordance with existing regu I ations of the Centra I Bank of the Phi Iipp ines (now Bangko Sentral ng Pilipinas). For the same period, petitioner paid VAT input taxes on its domestic purchases of taxable goods and services amounting to ONE MILL ION ONE T HO U S A N D FOUR HUNDRED THIRTY NINE - P ESOS AND 41/100 (P1,001,439.41) which allegedly were directly attributable to its zero-rated export sales amounting to P103,492,393. 45 . The abovementioned zero-rated export sales and VAT input taxes paid on its domestic purchases of taxable goods and services are broken down as �fo I Iows: PERIOD COVERED ZERO-RATED DOMESTIC PURCHASE VAT INPUT EXPORT SALES OF TAXABLE GOODS/ TAXES 1/1/94-3/31/94 4/1/94-6/30/94 SERV I CES p 20,500,105.97 p 1 ' 907' 151 . 30 p 190,715.13 26,413,983.18 3,207,030.98 320,703.05

DECISION C.T.A. CASE NO. 5 3 0 5 -3 - 7/1/94-9/.30/94 20,442,370.09 2, 62 3,4 70. 57 262,347.15 10/1/94-12/31/94 36,135,934.21 2,276 , 740.80 227,674.08 TOTAL P103,492,393.45 P10,014,393.65 P1,001,439.41 The corresponding VAT returns ccmprising the aforestated periods were filed with and received by the respondent (Exhibits "J", "K", "L", "M", and "N" and submarkings). Petitioner asserted that the VAT input taxes wl1ich it paid have not been applied to any of its VAT output tax Iiabi I ity during the same period or to any succeeding quarter or quarters and that the VAT input taxes of P1,001,439.41 are duly supported by sales invoices and/or official receipts issued by its suppliers (Exhs. "C" to "C- 339" and "D" to "D-998"). Hence, on February 21, 1995, petitioner filed with respondent a written claim for refund of VAT input taxes in tile amount of P878,981.64 (Exh. "W") which it amended later on July 20, 1995 by fiIing an amended written claim for refund/issuance of a tax credit certificate in the amount of P1,001,439.41 (Exh. Y ) " . " Since the two-year prescriptive period for the fi I ing of a claim for refund was about to lapse sans any action on the part of the respondet, petitioner instituted the instant case on December 18, 1995. In her Answer filed on January 18, 1996, respondent sets forth the following special and affirmative defenses: 1. The petition states no cause of action as it does not allege the dates when the taxes sought to be refunded were actually paid;

DECISION C.T.A. CASE NO. 5 3 05 -4 - 2. Petitioner's claim for refund of alleged excess VAT input ta�xes is stiII under investigation by respondent's bureau; 3. PetItIoner faI I ed to show camp I Iance wIth the provision of Section 16(c)(3) of Revenue Regulations No. 5-87 as amended by Revenue Regulations No. 3-88; 4. The input taxes al fegedly paid on its local purchases are not supported by invoices pursuant to Section 108 of the Tax Code, as amended; 5. Claims for refund are construed strictly against the claimant, the same being in the nature of exemption from taxes; 6. One who claims to be exempt from the payment of a particular tax must do so under clear and unmistakable terms found in the statute. The lone issue to be resolved in this case is whether or not petitioner is entitled to the issuance of a tax credit certificate amounting to P1,001,439.41 representing VAT input taxes paid on its domestic purchases of taxable goods and services for the period from January 1, 1994 to December 31, 1994. The provisions of law applicable in the case at bar are Sections 100 (a)(1), 102 (a)(2), 104 (b), and 106 (a) of the Tax Code, pertinent portions of which are quoted hereunder: "Sec. 100. Value-added tax on sale of goods. (a) Rate and base of tax. -There shai I be levied, assessed and collected on every sale, barter or exchange of goods, a value-added tax equivalent to 10% of the gross sel I ing price or gross value in money of the goods sold, bartered or exchanged, such tax to be paid by the seller or transferor: Provided, That the following sales by VAT-registered persons shal I be subject to 0%: (1) Exports sales; x x x."

DECISION C . T .A. CASE NO. 5305 -5 - "Sec. 102. Value-added tax on sale of services. (a) Rate and base of tax. There shal I be levied, assessed and collected, a value-added tax equivalent to 10% of gross receipts derived by any person engaged in the sale of services. x x x� Provided Tl1at the following services performed in the Philippines by VAT registered persons shal I be subject to 0%: X XX X X X- XXX (2) Services other than those mentioned in the preceding sub-paragraph, the consideration for which is paid for in acceptable foreign currency which is remitted Inwardly to the Phi I ippines and accounted for in accordance with the rules and regulations of the Central Bank of the Phi Iippines: XXX XXX X X X. " "Sec. 104. Tax Credits. - X X X X X X X X X. (b) Ex c e s s o u t p u t o r in put tax. - If at the end of any taxable quarter the output tax exceeds the input tax, the excess shal I be paid by the VAT-registered person. If the input tax exceeds the output tax, the excess shal I be carried over to the succeeding quarter or quarters. Any input tax attributable to the purchase of capital goods or to zero-rated sales by a VAT-registered person may at his option be refunded or credited against , other internal revenue taxes, subject to the provisions of Section 106." (Under! ining ours} "Sec. 106. Refunds or tax credits of input tax. (a) Export Sales. An exporter who is a VAT- registered person may within two years from the date of exportation, apply for the issuance of a tax credit certificate or refund of the input tax attributable to the goods exported, to the extent that such input tax has not been applied to output tax and upon presentation of proof that the foreign exchange proceeds has been accounted for in accordance with the regulation of the Central Bank of the Phi Iippines." (Emphasis supplied) In this case, petitioner submitted documentary evidence necessary to substantiate its claim for refund and/ol tax credit pursuant to Section 16 of Revenue Regulations No. 5-87, as amended by

D E CISION C .T .A . C ASE NO. 5 305 -6 - Revenue Regulations No. 3-88 such as App Iication for Tax Credit/Refund of Value-Added Tax Paid CBIR Form No. 2552, Exhs. "X" and "Z"), photocopy of supplier's invoices and/or official receipts (Exhs. "C " to "C-339 " and "D " to "D-988"); and bank credit advises (Exhs. E & F to F-42). Based on the above-enumerated provisions of the Tax Code and the facts presented, petitioner is rightfully entitled to a refund or to the issuance of a tax credit certificate for the VAT input taxes on its domestic purchases of goods and services. And this conclusion finds support in Section 8(a) of Revenue Regulations No. 5-87 which provides as follows: "Section 8. Zero-rating. (a) In general - A zero-rated sale is a taxable transaction for value-added tax purposes. A sale by a VAT-registered person of goods and/or services taxed at zero-rate shal I not result in any output tax. The input tax on his purchases of goods or services related to such zero-rated sale shalI be available as tax credit or refundable in accordance with Section 16 of these Regulations." (Underscoring ours) In view of the voluminous sales invoices and official receipts which the petitioner had to present during the trial to buttress its claim and in campi iance with the requirement of CTA Circular No. 1- 95, it engaged the services of Punongbayan and Araullo, an independent Certified Public Accountant (CPA). Their findings as embodied in their Certification marked as Exhibit "A" (p. 45, CTA records) may be summed up thus:

DECISION C . T .A . CASE NO . 53 0 5 -7- 1. The VAT paid per summaries prepared by petitioner for the period January 1, 1994 to December 31, 1994-Head Office <Exhibit "B") and Minesite (Exhibit "B-1") in the amount of P1, oo�1,493. 81 are pro;?er I y recorded in the books; 2. The date of the invoices and/or official receipts is within the period covered in the application; - 3. The suppliers' VAT numbers are indicated on the Invoices and/or official receipts; 4. The suppIiers' invoices and/or official receipts on file represent original copies; 5. The VAT paid are correctly and properly computed; 6. The export sales indicated in the summe.ry are recorded in the books. 7. However, input tax credits total I ing P79,009.28 were found to have either no supporting invoices or official receipts, or if otherwise supported by such documents, there were erroneous entries therein or an erroneous tax base was used, or in a few other transactions, the petitioner returned suppl ics thus resulting in the adjustment of amounts reflected in some invoices or receipts as specified in the "Summary of Findings". After a thorough study of al I the exhibits offered by the petitioner, the Court concurs with the aforementioned findings of Punongbayan and Araul lo. The evidence offered by respondent consisting only of Letter of Authority No. 62176 dated July 25, 1995 and the signature of Mr. Hernani S. Arboleda thereon <Exhibits "1" I and "1-A", respectively; p. 129, CTA records) did not, after all, controvert the evidence of the petitioner. Said exhibits merely authorized RO Leticia Lorna Dosado/GS Julita Batoon of Revenue District 47, East Makati to examine petitioner's books of accounts

DECISION C.T.A. CASE NO. 5305 -8- and other accounting records in connection with its claim for refund of VAT for the subject period. In conclusion, this Court finds that petitioner is entitled to a lesser amount of P922,419.19 after taking into consideration the exhibits offered by the petitioner including the findings of the independent CPA. The detai Is of the computation are specified below, thus: Input Taxes Paid Summation Amou nt Amount Per Quarter (EX h. 'Y') Verified (E X h i b i t 'B' l Claimed wl BIR Head Office Mine Site January 1994 p 10,199.81 p 62,559.00 p 190,715.28 190,715.13 p 190,715.13 February 1994 15,773.38 33,925.73 March 1994 9 1 723, 77 58,533.59 April 1994 p 53,871.85 p 39,319.93 320,692.11 320,703.05 320,692.11 May 1994 42,812.89 56,018.95 June 1994 82,151.75 46,516.74 July 1994 P118,269.86 p 33,304.71 262,412.34 262,347.15 262,347.15 August 1994 20,425.92 30,878.04 227,674.08 227,674.08 227,674.08 Septeber 1994 13,689.92 45,843.89 October 1994 P122,909.11 p 32,041.43 Nomtber 1994 2,322.68 23,298.89 December 1994 27,215.84 19,886.13 Total P1,001,493.81 P_hQ_0141 P1,001,428.47 Less findings arrived at by the independent CPA: p 72,005.71 79,009.28 4,741.82 (p. 48, Ex h. D of Ex h. A, p. 94, CTA rec. l 836.36 827.58 a. Erroneous entry 272.73 b. No invoice 259.09 c. Returned supplies 65.99 d. No official receipt e. Not a VAT supplier f. No original sales invoice g. Erroneous tax base AMOUNT REFUNDABLE p 922,419.19

DECISIO N C.T.A. CASE NO. 5305 -9 - WHEREFORE, in view of the foregoing, respondent is hereby ORDERED to ISSUE a tax credit certificate in favor of petitioner in the amount of P922,419.19, representing VAT input taxes for the period January 1 , 1994 to December 31 ,_ 1994. SO ORDERED. L lQ .. ERNESTO D. ACOSTA Presiding Judge WE I I I I CERTIFICATION hereby certify that this decision was reached after due consultation with the members of the Court of Tax Appeals in accordance wllh Section 13, Article VI I I of the Constitution. ERNESTO D. ACOSTA Presiding Judge Court of Tax Appeals