TOLEDO POWER COMPANY v. COMMISSIONER OF INTERNAL REVENUE

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY SECOND DIVISION TOLEDO POWER COMPANY, CTA CASE NO. 879 2 Petitioner, Members: -versus- CASTANEDA, JR., Chairperson/ CASANOVA, and MANAHAN, JJ. COMMISSIONER OF INTERNAL Promulgated: REVENUE, JUN 0 6 2017 / Respondent. "'" . x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x DECISION CASTANEDA, JR., J.: STATEMENT OF THE CASE This case involves a claim for refund in the amount of P60,067,141.05 filed by Toledo Power Company, allegedly representing its unutilized input value-added tax (VAT) related to its zero-rated sales for the four quarters of taxable year 2012. STATEMENT OF FACTS Petitioner Toledo Power Company is a partnership duly registered with the Securities and Exchange Commission (SEC), with ~

DECISION CTA Case No. 8792 Company Registration No. AP094-900. 1 Under its Restated and Amended Agreement of General Partnership, petitioner is engaged in the business of acquiring, owning, rehabilitating, maintaining and operating the Sangi coal-fired and oil-fired electrical generation facility located in Sangi, Toledo City, Cebu and the Carmen diesel- fueled electric generation facility located in Barangay Don Andres Soriano, Toledo City, Cebu. 2 As a generation company, petitioner was granted by the Energy Regulatory Commission (ERC) with the authority to operate its generation facilities. 3 It is likewise registered with the Bureau of Internal Revenue (BIR) as a VAT taxpayer with Taxpayer Identification Number (TIN) 003-883-626-000 per BIR Certificate of Registration No. 2RC0000074406.4 On the other hand, respondent is the duly appointed Commissioner of the BIR who has the power to decide disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties imposed in relation thereto or other matters arising under the National Internal Revenue Code (NIRC) or other laws or portions thereof administered by the BIR. He holds office at 5th Floor, BIR National Office Building, Agham Road, Diliman, Quezon City. On November 29, 2013, petitioner filed with the BIR Revenue District Office No. 123 an administrative claim for refund in the total amount of P60,067,141.05, allegedly representing its unutilized input VAT related to its zero-rated sales/receipts for the 1st to 4th quarters of taxable year 2012.5 In view of respondent's inaction on its protest, petitioner filed the instant Petition for Review before this Court on March 31, 2014. Respondent filed his Answer6 on May 28, 2014 and interposed special and affirmative defenses, alleging, among others, that petitioner must prove its compliance with the prescribed checklist of f.-- 1 Exhibit "P-1", docket, val. II, p. 850. 2 Exhibit "P-2", docket, val. II, pp. 855-890. 3 Exhibits "P-3" and "P-3-A", docket, val. II, pp. 891-894. 4 Exhibit "P-4", docket, val. II, p. 895. 5 Exhibits "P-9" and "P-10", docket, val. II, pp. 905-917. 6 Docket, val. I, pp. 122-136.

DECISION CTA Case No. 8792 requirements provided under Revenue Memorandum Order No. 53- 98; that petitioner failed to prove that it has submitted the complete documents to substantiate its administrative claim for refund, hence, the instant petition was prematurely filed with the Court; that petitioner's alleged claim for refund is subject to administrative routinary investigation/examination by the BIR; that the instant petition should not be given due course for lack of jurisdiction since petitioner failed to exhaust all administrative remedies before elevating this case to this Court; and that 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. A Notice of Pre-Trial Conference was issued by the Court on May 29, 2014, setting the case for pre-trial conference on July 3, 20147, but was reset to July 31, 20148, upon respondent's motion9, and later reset to August 28, 201410� Accordingly, petitioner's Pre- Trial Brief11 was filed on June 25, 2014; while respondent's Pre-Trial Brief12 was filed on July 21, 2014. Pre-trial conference ensued. Meanwhile, upon petitioner's motion 13 this Court commissioned Mr. Joseph Cedric V. Calica of , AMC & Associates, as Independent Certified Public Accountant (ICPA) for the case. 14 The parties submitted their Joint Stipulation of Facts and Issues15 on September 17, 2014. Subsequently, the Court issued a Pre-Trial Order16 on September 24, 2014, approving and adopting the parties' joint stipulations and the pre-trial was deemed terminated. }i- 7 Docket, vol. I, p. 138. 8 Order dated June 27, 2014, docket, vol. I. p. 355. 9 Motion to Reset Pre-Trial Conference (Set on July 3, 2014), filed on June 24, 2014, docket, vol. I, pp. 139-142. 10 Notice of Resetting, docket, vol. I, p. 357. 11 Docket, vol. I, pp. 276-287. 12 Docket, vol. I, pp. 358-361. 13 Motion to Avail the Provisions of Rule 13 of the Revised Rules of the Court of Tax Appeals, filed on June 25, 2014, docket, vol. I, pp. 288-291. 14 Minutes of the Hearing dated August 28, 2014, docket, vol. I, p. 364. 15 Docket, vol. I, pp. 371-376. 16 Docket, vol. I, pp. 378-383.

DECISION CTA Case No. 8792 During trial, petitioner presented (1) Ms. Edita C. Encarnacion 17 , petitioner's Assistant Vice President - Accounting; (2) Mr. Rolando L. Vicente18, Finance Manager of Cebu Electric Cooperative Inc. III, purchaser of electric power sourced from petitioner; (3) Mr. Joseph Cedric V. Calica 19 the ICPA; (4) Isidito Camota Decina 20 Head of the , , Dispatch Group of petitioner; and (5) Bernadette Ann V. Policarpio2\ legal counsel of Global Business Power Corporation, petitioner's ultimate parent company, as its witnesses. Petitioner filed its Formal Offer of Evidence22 on September 3, 2015 and Supplemental Formal Offer of Evidence23 on February 9, 2016. In the Resolution24 dated March 29, 2016, the Court admitted all of petitioner's evidence. On the other hand, respondent manifested that he has no witness to present.25 The case was submitted for decision on June 29, 201626 considering petitioner's Memorandum27 filed on June 24, 2016 and respondent's Manifestation28 filed on June 23, 2016, stating that he is adopting his Answer as his memorandum. STATEMENT OF ISSUES ~ 17 Minutes of the Hearing dated October 1, 2014, docket, val. I, p. 384; Exhibit "P-60", docket, val. I, pp. 150-165; Minutes of the Hearing dated February 16, 2015, docket, val. I, p. 462; Exhibit "P-150", docket, val. II, pp. 1009-1014. 18 Minutes of the Hearing dated November 17, 2014, docket, val. I, p. 388; Exhibit "P-61", docket, val. I, pp. 318-324. 19 Minutes of the Hearing dated December 1, 2014, docket, val. I, p. 420; Exhibit"P-142", docket, val. I, pp. 406-419; and Minutes of the Hearing dated January 27, 2016, docket, val. III, p. 1445; Exhibit "P-209", docket, val. III, pp. 1110-1115. 20 Minutes of the Hearing dated March 18, 2015, docket, val. II, p. 717; Exhibit "P-152", docket, val. II, pp. 1033-1037. 21 Minutes of the Hearing dated May 20, 2015, docket, val. II, p. 776; Exhibit "P-155", docket, val. II, pp. 728-733. However, Exhibit "P-155" was not included in petitioner's Formal Offer of Evidence or Supplemental Offer of Evidence. 22 Docket, val. II, pp. 814-833. 23 Docket, val. IV, pp. 1450-1455. 24 Docket, val. IV, pp. 1796-1797. 25 Minutes of the Hearing dated April 25, 2016, docket, val. IV, p. 1799. 26 Resolution dated June 29, 2016, docket, val. IV, p. 1841. 27 Docket, val. IV, pp. 1814-1839. 28 Docket, val. IV, pp. 1811-1812.

DECISION CTA Case No. 8792 The parties agreed on the following issues for the Court's resolution: 29 Joint Issue: Whether petitioner is entitled to a claim for refund in the total amount of P60,067,141.05, representing unutilized VAT input taxes for the 1st to 4th quarters of the taxable year 2012. Additional Issues for Petitioner: A. Whether petitioner is a VAT-registered taxpayer. B. Whether petitioner is engaged in zero-rated sales. C. Whether the input taxes are due or paid and have not been applied against output taxes during the quarter and in the succeeding quarters. D. Whether the input tax being claimed is attributable to zero- rated sales. E. Whether the instant claim complies with the period for claiming a refund under Section 112 of the National Internal Revenue Code (NIRC) of 1997, as amended. DISCUSSION/RULING Petitioner anchors its claim for refund/tax credit of its unutilized input VAT attributable to its zero-rated sales/receipts on Section 112, in relation to Section 108(8)(3), of the NIRC of 1997, as amended. Section 112 of the NIRC of 1997, as amended, allows the refund or tax credit of unutilized excess input VAT attributable to zero-rated or effectively zero-rated sales. Subsections (A) and (C) thereof provide that: SEC. 112. Refunds or Tax Credits ofInput Tax. - (A) Zero-Rated or Effectively Zero-Rated Sales. - Any VAT-registered person, whose sales are zero-rated or J't- 29 Statement of the Issues, JSFI, docket, val. I, p. 372.

DECISION CTA Case No. 8792 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 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 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. fl-

DECISION CTA Case No. 8792 Pursuant to the above-quoted provisions, in order to be entitled to a refund/tax credit of excess input VAT attributable to zero-rated or effectively zero-rated sales, the following requisites must be complied with: 1. the taxpayer-claimant must be VAT-registered; 2. there must be zero-rated or effectively zero-rated sales; 3. input taxes were incurred or paid; 4. such input taxes are attributable to zero-rated or effectively zero-rated sales; 5. said input taxes were not applied against any output VAT liability; and 6. the claim was filed within the prescriptive period. The Court shall first determine whether petitioner complied with the sixth requisite. Petitioner's administrative and judicial claims were timely filed Pursuant to the above-quoted Section 112(A), the application for tax credit certificate/refund of input VAT must be filed within two years after the close of the taxable quarter when the zero-rated or effectively zero-rated sales were made. Thus, petitioner's last day for filing of its administrative claim for the four taxable quarters of calendar year (CY) 2012 fell on the following dates: Period Covered Last Day for Filing January 1 to March 31, 2012 (1st Quarter) Administrative Claim April 1 to June 30, 2012 (2nd Quarter) March 31, 2014 July 1 to Sept. 30, 2012 (3rd Quarter) June 30 2014 October 1 to Dec. 31, 2012 (4tnQuarter) September 30 2014 December 31, 2014 Evidently, petitioner timely filed with the BIR Large Taxpayers Division - Cebu, Revenue District Office No. 123 its administrative claim, together with the supporting documents, on November 29, 2013.30 l'- 30 Exhibits "P-9" and "P-10", docket, vol. II, pp. 905-917.

DECISION erA case No. 8792 As to the timeliness of petitioner's judicial appeal, Section 112(C) of the NIRC of 1997, as amended, states the time requirements for filing a judicial claim for the refund or tax credit of input VAT. The legal provision speaks of two periods: the period of 120 days, which serves as a waiting period to give time for the CIR to act on the administrative claim for a refund or credit; and the period of 30 days, which refers to the period for filing a judicial claim with the CTA. 31 Applying Section 112(C), respondent should have acted on petitioner's claim for tax credit certificate/refund until March 29, 2014, the end of the 120-day period reckoned from November 29, 2013, the date when petitioner is deemed to have made its submission of complete documents to support its application for refund of excess unutilized input VAT. From March 29, 2014, petitioner had 30 days, or until April 28, 2014, within which to file its judicial claim before the Court. Therefore, the instant Petition for Review was timely filed on March 31, 2014. Petitioner is VAT-registered and had zero-rated sales/receipts for the four taxable quarters ofCY2012 Petitioner complied with the first requisite considering that it is a VAT-registered entity with Certificate of Registration No. 2RC0000074406 duly issued by respondent and was assigned with TIN 003-883-626-000.32 On the second requisite, records show that petitioner is a partnership duly registered with the SEC and is engaged in the business of acquiring, owning, rehabilitating and operating coal-fired and oil-fired electrical generation facilities. 33 As a generation company, petitioner was granted by the ERC with the authority to operate generation facilities located in Sangi and Sigpit, Toledo City, )'c- 31 Rohm Apollo Semiconductor Philippines vs. Commissioner of Internal Revenue, G.R. No. 168950, January 14, 2015. 32 Exhibit "P-4", docket, val. II, p. 895. 33 Exhibits "P-1" and "P-2", docket, val. II, pp. 850-890.

DECISION CTA Case No. 8792 Cebu under Certificate of Compliance No. 09-11-GXT 61-0066 issued on November 16, 2009. 34 Petitioner avers that it is engaged in zero-rated sales as it sells and supplies electric power to entities located in economic zones, such as Philippine Economic Zone Authority (PEZA) or to Board of Investments (BOI)-registered enterprises and to other entities whose purchases from local suppliers are entitled to VAT zero-rating. Indeed, sales of services by a VAT-registered taxpayer, such as herein petitioner, to PEZA-registered entities or SOl-registered 100�/o exporters are subject to zero percent (0�/o) VAT. Pertinent provisions of Section 108(8) of the NIRC of 1997, as amended, state that: SEC. 108. Value-added Tax on Sale of Services and Use or Lease of Properties. - XXX XXX XXX (B) Transactions Subject to Zero Percent (0%) Rate. - The following services performed in the Philippines by VAT-registered persons shall be subject to zero percent (0�/o) rate: XXX XXX XXX (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�/o) rate; (Emphasis supplied) The special law specific to this case is Republic Act (RA) No. 7916, as amended, otherwise known as "The Special Economic Zone Act of 1995". Section 8 of RA No. 7916, as amended, mandates that Jt- 34 Exhibits "P-3" and "P-3-A", docket, val. II, pp. 891-894.

DECISION CTA Case No. 8792 the PEZA shall manage and operate the ecozones as a separate customs territory, thus: SECTION 8. ECOZONE to be Operated and Managed as Separate Customs Territory.- The ECOZONES 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. Since the Ecozone is viewed as a foreign territory by legal fiction, sales of goods and services made by a VAT-registered person in the Philippine customs territory to an entity registered and operating within the Ecozone are considered exports to a foreign country subject to zero percent (0�/o) VAT. This was elucidated by the Supreme Court in the case of Commissioner of Internal Revenue vs. Toshiba Information Equipment (Phi/s.), Inc.35, 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�/o) 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 - [S]elected areas with highly developed or which have the potential to be developed into agro-industrial, industrial, ~ 35 G.R. No. 150154, August 9, 2005.

DECISION CfA Case No. 8792 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 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 {l0�/o)36 VAT. (Emphasis supplied) ?r- 36 Now 12%.

DECISION CTA Case No. 8792 With respect to sales by a VAT-registered supplier to a SOl- registered manufacturer/producer, Section 4.106-5 of Revenue Regulations (RR) No. 16-05, as amended by RR No. 04-07, provides: SECTION 4.106-5. Zero-Rated Sales of Goods or Properties. - xxx The following sales by VAT-registered persons shall be subject to zero percent (0�/o) rate: (a) Export Sales.- "Export Sales"shall mean: XXX XXX XXX (5) Transactions considered export sales under Executive Order No. 226, otherwise known as the Omnibus Investments Code of 1987, and other special laws. "Considered export sales under Executive Order No. 226" shall mean the Philippine port F.O.B. value determined from invoices, bills of lading, inward letters of credit, landing certificates, and other commercial documents, of export products exported directly by a registered export producer, or the net selling price of export products sold by a registered export producer to another export producer, or to an export trader that subsequently exports the same; Provided, That sales of export products to another producer or to an export trader shall only be deemed export sales when actually exported by the latter, as evidenced by landing certificates or similar commercial documents; Provided, further, That pursuant to EO 226 and other special laws, even without actual exportation, the following shall be considered constructively exported: (1) sales to bonded manufacturing warehouses of export-oriented manufacturers; (2) sales to export processing zones pursuant to Republic Act (RA) Nos. 7916, as amended, 7903, 7922 and other similar export processing zones; (3) sale to enterprises duly registered and accredited with the Subic Bay Metropolitan Authority pursuant to RA ,9t-

DECISION CTA Case No. 8792 7227; (4) sales to registered export traders operating bonded trading warehouses supplying raw materials in the manufacture of export products under guidelines to be set by the Board in consultation with the Bureau of Internal Revenue (BIR) and the Bureau of Customs (BOC); (5) sales to diplomatic missions and other agencies and/or instrumentalities granted tax immunities, of locally manufactured, assembled or repacked products whether paid for in foreign currency or not. For purposes of zero-rating, the export sales of registered export traders shall include commission income. The exportation of goods on consignment shall not be deemed export sales until the export products consigned are in fact sold by the consignee; and Provided, finally, that sales of goods, properties or services made by a VAT-registered supplier to a HOI-registered manufacturerI producer whose products are 100�/o 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. (Emphasis supplied) Clearly, sales of services by a VAT-registered taxpayer, such as herein petitioner, to entities located in Ecozones and to SOl- registered manufacturers/producers whose products are 100�/o exported are considered "export sales" subject to zero percent {0�/o) VAT rate pursuant to Section 108(8)(3) of the NIRC of 1997, as amended, and Section 4.106-5 of RR No. 16-05. In its Quarterly VAT Returns for the four taxable quarters of CY 2012, petitioner reflected an amount of P1,781,612,046.76 zero-rated sales/receipts, broken down as follows: Exhibit CY 2012 Zero-Rated "P-17'' 1st Quarter Sales/Receipts "P-18" 2nd Quarter p 542,930,177.94 "P-21" 3rd Quarter "P-24" 4th Quarter 501,923,964.17 430,079,791.55 306,678,113.10

DECISION CTA Case No. 8792 Total I P1,781,612,046.76l A perusal of petitioner's Schedule of Gross Sales (VATable, Zero-Rated, VAT-exempt and Sales to Government)37 with the related sales invoices, official receipts and credit/debit memos38 shows that the amount of P1,781,612,046.76 treated by petitioner as zero-rated sales/receipts pertains to its sales of electricity to Balamban Enerzone Corporation (BEC), Carmen Copper Corporation (CCC)39, and Cebu Electric Cooperative III (CEBECO III). It was established that BEC is a PEZA-registered entity and CCC is a registered BOI 100�/o exporter as evidenced by the Certifications issued by the PEZA40 and BOI4\ respectively. Thus, petitioner's sales of electricity to BEC and CCC for the four taxable quarters of CY 2012 qualify for VAT zero-rating except for the following sales for the first and fourth quarters in the respective amounts of P167,364,545.29 and P115,377,193.94 which are not covered by VAT zero-rated official receipts (ORs) in accordance with Section 113(A)(2) of the NIRC of 1997, as amended: Exhibit OR Customer 1st Quarter 4th Quarter No. BALAMBAN ENERZONE p 8 647 861.37 - CORPORATION p 7 893 254.29 - - CARMEN COPPER CORPORATION 8 094 882.48 8 959 772.99 - CARMEN COPPER CORPORATION 150 621.801.44 10 813 211.00 2323 BALAMBAN ENERZONE 992 722.36 - 2323 CORPORATION P167.364 545.29 75 905 022.30 BALAMBAN ENERZONE 10 813 211.00 - 2349 CORPORATION BALAMBAN ENERZONE P115.377,193.94 - - CORPORATION - CARMEN COPPER CORPORATION 2356 CARMEN COPPER CORPORATION - 2357 BALAMBAN ENERZONE 2358 CORPORATION - 2356 Total With regard to petitioner's sales to CEBECO III, petitioner asserts that since the electricity it sold to CEBECO III was ultimately distributed to BEC and CCC, petitioner's energy fee billings to CEBECO III were pass through charges and directly attributable to /c.. 37 Exhibit "P-105". 38 Exhibits "P-105-1" to "P-105-358". 39 Exhibit "P-11", docket, val. II, pp. 918-920. 40 Exhibit "P-7", docket, val. II, p. 903. 41 Exhibit "P-11", docket, val. II, pp. 918-920.

DECISION CTA Case No. 8792 BEC and CCC. Petitioner posits that its sales to CEBECO III are likewise considered as zero-rated sales, citing as basis therefor Revenue Memorandum Circular (RMC) No. 61-05 dated October 27, 2005. The Court disagrees with petitioner. The VAT zero-rating contemplated under Section 108(8)(3) of the NIRC of 1997, as amended (in relation to Section 8 of RA No. 7916, as amended) and Section 4.106-5 of RR No. 16-05, as amended pertains only to sales made directly to PEZA-registered entities and BOI-registered 100�/o exporters. Since CEBECO III is neither a PEZA-registered entity nor a BOI-registered 100�/o exporter, the following sales to CEBECO III do not qualify for VAT zero-rating: Exhibit OR 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter P-105-138 No. p 8 366 451.93 P-105-139 2717 p 6 752,768.35 p 454 092.05 p 7 490 193.92 P-105-152 2718 6 924 583.91 5 545 934.36 5 856 012.52 3 228 804.45 P-105-153 2732 6 576 566.19 7 829.375.98 3 438 606.48 9,525 723.51 P-105-173 2733 8 818 614.94 5 982.481.37 6 018 956.23 8,547 142.00 P-105-173 2744 7 470 878.44 9 506,165.89 4 102 823.97 P-105-191 2744 6 106 423.96 2 171417.99 P28.791,863.88 P-105-192 2753 P35,616,725.95 56 268.11 P-105-213 2754 P44,263,519.37 7 392 333.52 P-105-213 2771 P-105-356 2771 P29,490,510.87 P-105-255 2786 P-105-256 2797 P-105-256 2798 P-105-272 2798 P-105-273 2868 P-105-306 2869 P-105-306 2879 P-105-306 2879 P-105-325 2879 P-105-325 2896 P-105-344 2896 2900 - 2924 Total Therefore, only sales/receipts amounting to P1,360,707,687.46, as computed below, qualify for VAT zero-rating: 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Total p 542 930 177.94 p 501 923 964.17 p 430 079 791.55 Total Declared p 306 678 113.10 p 1 781 612 046.76 Zero-Rated Sales/Receipts Per Return Less: Disallowances

DECISION CTA Case No. 8792 Sales not 167 364 545.29 - - 115 377 193.94 282,741 739.23 44 263 519.37 138,162 620.07 supported by 35 616 725.95 29 490 510.87 28 791 863.88 P331,302,113.28 P1,360,707,687.46 official receipts P466,307,238.22 P400,589,280.68 P162,509,055.28 Sales to CEBECO III Total Allowed Zero-Rated Sales Petitioner incurred/paid excess input taxes attributable to its valid zero-rated sales/receipts for the subject periods and said input taxes were not applied against any output VAT liability After resolving that petitioner had VAT zero-rated sales/receipts for the four taxable quarters of CY 2012, the Court shall now determine the amount of unutilized excess input VAT attributable thereto. In its 2012 Quarterly VAT Returns, petitioner reported the following input taxes totaling P148,611,453.13 arising from its amortization of input VAT on purchases of capital goods exceeding P1Million, purchases of capital goods not exceeding PlMillion, domestic purchases and importation of goods other than capital goods and domestic purchases of services, broken down as follows: 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter CY 2012 (Exhibit "P-17") (Exhibit ''P-18'} (Exhibit ''P-24'/ p 1 970 077.71 p 1970 077.71 p 2 000 868.29 (Exhibit ''P-21 '? 1 459 441.24 Input Tax Deferred 219 516.85 p 2 000,868.29 p 1,805 870.12 p 1 918 040.17 p 3 429 518.95 on capital Goods p 2 189 594.56 1 805 870.12 exceeding P1Million 296 407.56 943 516.83 2 649 506.67 from previous quarter 2 000 868.29 p 2 102,277.68 p 2 861 557.00 Add: 1 918 040.17 2 649 506.67 Input Tax on Capital Goods exceeding P1Million purchased this quarter Total Unamortized Input Tax on Capital Goods exceeding P1Million Less: Input Tax on Purchases of Capital Goods exceeding P1Million deferred for the succeeding

DECISION CTA Case No. 8792 period Amortization ofInput p 188726.27 p 194 998.17 p 184237.51 p 212 050.33 p 780 012.28 Tax on Purchases of Capital Goods 94 088.66 70081.71 - 164170.37 exceeding P1Million Add: Input Tax on 2 339408.36 4 757.874.47 7.658181.33 17.191 706.76 31 947.170.92 Current Purchases Purchases ofcapital 25882 597.00 2409980.00 2,782 002.00 26,786 411.00 57.860 990.00 goods not exceeding P1Million 6543893.02 15 030 906.91 15 657. 404.00 20,626 905.63 57.859109.56 Domestic purchases ofgoods other than P34,954,624.65 P22,487,848.21 P26,351,906.55 P64 817 073.72 P148,611,453.13 capital gpods Importation ofgoods other than capital qoods Domestic purchases ofservices Total In support of the said input VAT, petitioner presented among others, its Schedule of Domestic Purchases of Goods and Services and Corresponding Input Tax42, Schedule of Importation of Goods and Corresponding Input Tax43 and the related suppliers' official receipts and sales invoices, Bureau of Customs (BOC) Import Entry and Internal Revenue Declarations (IEIRDs), Statements of Settlement of Duties and Taxes (SSDTs) and Temporary Assessment Notices44 which were all examined by the Court-commissioned ICPA, Mr. Joseph Cedric V. Calica. Based on the ICPA's findings, petitioner's reported input VAT in the aggregate amount of P17,361,231.47 shall be disallowed for not being properly substantiated by VAT invoices or receipts as prescribed under Sections 110(A), 113(A) and (B), 237, and 238 of the NIRC of 1997, as amended, and as implemented by Sections 4.110-1, 4.110-2, 4.110-8, and 4.113-1 of RR No. 16-05, as amended: Exhibit Exceptions 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter CY 2012 P-106-1 No sales p 504 527.89 p 42 618.20 p 1 439 832.31 p 4 458 124.37 p 6 445 102.77 P-106-2 invoices/official receipts submitted 2 319 037.59 62 574.97 705 319.74 219 373.66 3,306 305.96 by the petitioner Supporting documents are not in the period covered by the claim 42 Exhibit "P-102". 43 Exhibit "P-103". 44 Exhibits "P-102-1" to "P-102-3465" and "P-103-1" to "P-103-66".

DECISION CTA Case No. 8792 P-106-3 No valid supporting - 10 827.86 852 707.50 6 318 626.46 7 182 161.82 documents P-106-4 Vat amount per 11,965.38 - - - 11 965.38 P-106-5 schedule does not - P-106-6 tally with the 2,823.60 181956.85 139.29 184 919.74 P-106-7 amount indicated in 12 429.60 12 429.60 P-106-8 the supporting - 51448.02 - - 60 028.31 P-106-9 document - Incorrect/incomplete 19 294.80 4 687.79 3 892.50 19 294.80 name of the - petitioner - - No TIN of the SUPPlier 2 057.14 4 578.46 6 319.15 126 068.34 139 023.09 No TIN of the petitioner P2,840 411.60 P203,771.91 P3,190,823.34 P11,126,224.62 P17 361,231.47 Incorrect or no address of the Company VAT not separately shown in the documents Total In addition, the Court finds that the following input VAT should likewise be disallowed for failure to meet the substantiation requirements prescribed under the aforementioned VAT law and regulations, detailed as follows: Invoice/ Input VAT Claim (In Php) Exhibit OR No. Supplier 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter 1. Domestic purchases of goods and services Input VAT supported by DRs pre-printed/stamped with "NOTA VALID SOURCE OF INPUT TAX" MAJESTIC SHIPPING P-102-75 130 CORPORATION 246 016.60 AMERICAN P-102-1720 16723-A TECHNOLOGIES INC. 331.71 MAJESTIC SHIPPING P-102-123 0128A CORPORATION 248 401.96 ELASCO INTERNATIONAL P-102-1728 16848 CORPORATION 5 400.00 MAJESTIC SHIPPING P-102-178 108 CORPORATION 178 539.69 MAJESTIC SHIPPING P-102-179 113 CORPORATION 252 187.44 MAJESTIC SHIPPING P-102-180 116A CORPORATION 257 260.20 MICROGENESIS P-102-2153 50624 BUSINESS SYSTEMS 1157.14 MAJESTIC SHIPPING P-102-2171 138-A CORPORATION 249 863.49 MAJESTIC SHIPPING P-102-353 152 CORPORATION 249 292.50 ULTRACOTE PAINTS & COATINGS P-102-2222 3764 CORPORATION 9 647.18 MAJESTIC SHIPPING P-102-2298 148 CORPORATION 257 467.05 P-102-451 144 MAJESTIC SHIPPING 251161.27

DECISION erA Case No. 8792 Exhibit Invoice/ Supplier 1st Quarter Input VAT Claim (In Php) 4th Quarter OR No. 2nd Quarter 3rd Quarter CORPORATION THE FLOWER PLANT BY P-102-727 694 WTU 267.86 ULTRACOTE PAINTS & COATINGS P-102-836 4075 CORPORATION 24 102.82 ULTRACOTE PAINTS & COATINGS P-102-2083 4509 CORPORATION 33 756.05 MAJESTIC SHIPPING 248 788.04 282,544.09 P-102-1545 162-A CORPORATION Subtotal 1,188137.60 1,018,588.63 24,370.68 Input VAT SUJ, 'POrted by TIN-V invoices/DRs ALAS CUSTOMS P-102-85 01659 BROKERAGE 2 395.78 1 025.47 ALAS CUSTOMS 788.78 P-102-85 01659 BROKERAGE 2 113.87 ALAS CUSTOMS 350.42 382.73 P-102-86 01663 BROKERAGE 756.00 ALAS CUSTOMS 93.98 382.72 P-102-86 01663 BROKERAGE 4 823.12 6 545.09 ALAS CUSTOMS 13 658.96 382.72 P-102-86 01663 BROKERAGE 23.21 ALAS CUSTOMS 180.00 334.88 P-102-87 01661 BROKERAGE 146.88 671.43 ALAS CUSTOMS 1 665.26 88.04 P-102-87 01661 BROKERAGE 348.00 1 048.60 ALAS CUSTOMS 108.05 2 623.78 P-102-87 01661 BROKERAGE 819.29 2 235.12 ALAS CUSTOMS P-102-87 01661 BROKERAGE ALAS CUSTOMS P-102-88 01668 BROKERAGE ALAS CUSTOMS P-102-89 01669 BROKERAGE ALAS CUSTOMS P-102-90 01670 BROKERAGE ALAS CUSTOMS P-102-91 01662 BROKERAGE ALAS CUSTOMS P-102-91 01662 BROKERAGE ALAS CUSTOMS P-102-92 01667 BROKERAGE ALAS CUSTOMS P-102-149 01657 BROKERAGE ALAS CUSTOMS P-102-149 01657 BROKERAGE ALAS CUSTOMS P-102-149 01657 BROKERAGE ALAS CUSTOMS P-102-149 01657 BROKERAGE ALAS CUSTOMS P-102-149 01657 BROKERAGE ALAS CUSTOMS P-102-149 01657 BROKERAGE ALAS CUSTOMS P-102-150 01656 BROKERAGE ALAS CUSTOMS P-102-150 01656 BROKERAGE P-102-150 01656 ALAS CUSTOMS BROKERAGE ALAS CUSTOMS P-102-151 01655 BROKERAGE P-102-151 01655 ALAS CUSTOMS

DECISION CTA Case No. 8792 Exhibit Invoice/ Supplier 1st Quarter Input VAT Claim (In Php) 4th Quarter OR No. 2nd Quarter 3rd Quarter 2 008.93 BROKERAGE 16 714.29 ALAS CUSTOMS 2 149.66 120.64 P-102-151 01655 BROKERAGE 673.60 929.40 495.99 ALAS CUSTOMS 1 680.00 P-102-1732 1644 BROKERAGE 876.73 24,098.91 ALAS CUSTOMS P-102-210 01650 BROKERAGE 498.47 ALAS CUSTOMS P-102-210 01650 BROKERAGE 71.34 ALAS CUSTOMS P-102-210 01650 BROKERAGE 120.00 LIANG CHI INDUSTRY P-102-2151 4600 PHILS 11,606.40 P-102-528 P-102-529 0333 MARNO TRADING 21 379.29 P-102-549 0311 MARNO TRADING 565.44 P-102-552 0315 MARNO TRADING 3 553.20 P-102-1932 0318 MARNO TRADING 278.79 P-102-553 0317 MARNO TRADING 239.14 P-102-1933 0316 MARNO TRADING 535.71 P-102-1934 321 MARNO TRADING 218.57 P-102-1935 0319 MARNO TRADING 535.71 P-102-554 0312 MARNO TRADING 4 140.00 P-102-583 0325 MARNO TRADING 1 020.00 P-102-584 0326 MARNO TRADING 1 205.28 P-102-588 0327 MARNO TRADING 2 860.71 P-102-589 0324 MARNO TRADING 5 245.71 ALAS CUSTOMS P-102-737 01693 BROKERAGE 448.71 ALAS CUSTOMS P-102-737 01693 BROKERAGE 459.78 ALAS CUSTOMS P-102-737 01693 BROKERAGE 374.24 ALAS CUSTOMS P-102-737 01693 BROKERAGE 596.90 P-102-2020 0309 MARNO TRADING 257.14 P-102-2020 0309 MARNO TRADING 257.14 ALAS CUSTOMS P-102-907 01687 BROKERAGE 384.07 ALAS CUSTOMS P-102-908 01686 BROKERAGE 528.62 ALAS CUSTOMS P-102-908 01686 BROKERAGE 516.00 ALAS CUSTOMS P-102-908 01686 BROKERAGE 88.04 ALAS CUSTOMS P-102 -910 1685 BROKERAGE 390.25 ALAS CUSTOMS P-102-910 1685 BROKERAGE 364.28 ALAS CUSTOMS P-102-910 1685 BROKERAGE 61.67 P-102-1143 371 MARNO TRADING P-102-2119 338 MARNO TRADING P-102-1253 347 MARNO TRADING P-102-1254 355 MARNO TRADING P-102-1302 0335 MARNO TRADING ALAS CUSTOMS P-102-1605 1701 BROKERAGE P-102-1347 389 MARNO TRADING Subtotal 46,232.32 11606.40 46,504.39 Input VAT suJ.�ported by invoices/DRs dated outside the period of claim P-102-1718 9107 SEVERO SY LING INC 11 283.08 P-102-1719 9342 SEVERO SY LING INC 7,839.53

DECISION CTA case No. 8792 Exhibit Invoice/ Supplier 1st Quarter Input VAT Claim (In Php) 4th Quarter OR No. 2nd Quarter 3rd Quarter - AMERICAN PACKING - P-102-65 03-01805 INDUSTRIES (PHILS.) 10 980.00 257.14 P-102-1722 2901 KINGMARK ENT. PHIL. 28 392.86 497.61 366.14 P-102-1723 2907 KINGMARK ENT. PHIL. 70 982.14 23.11 RBER INDUSTRIAL & 3 395.84 4,539.84 P-102-1724 1822 TRADING 22 701.85 CORPORATION - Subtotal 152,179.46 - - - - Input VAT SUJ. 'Ported only by a Provisional Receipt 11 396.88 75.00 P-102-93 3670 AMC & ASSOCIATES CPA 20 160.00 Subtotal 20160.00 Input VAT supported by TIN-Non VAT invoices/DRs PHILIPPINE INDEPENDENT POWER PRODUCERS P-102-1817 500 ASSOCIATION INC KJL COMPUTER P-102-508 1732 ENTERPRISE P-102-1190 45905 ISA-CON ENTERPRISES NATIONAL GRID N32- CORPORATION OF THE P-102-1645 0000542 PHILIPPINES NATIONAL GRID CORPORATION OF THE P-102-1715 444 PHILIPPINES NATIONAL GRID N32- CORPORATION OF THE P-102-1650 0000404 PHILIPPINES NATIONAL GRID N32- CORPORATION OF THE P-102-1651 0000343 PHILIPPINES Subtotal - 11,396.88 75.00 Input VAT amount not se arately indicated in the invoices/DRs P-102-723 9401 PRODUCT EQUIPMENT (42.22) RESOURCES & TRADING INC. 8 023.90 PRODUCT EQUIPMENT (42.21) P-102-723 9401 RESOURCES & 8 304.63 TRADING INC. 16,244.10 PRODUCT EQUIPMENT P-102-789 9312 RESOURCES & TRADING INC. PRODUCT EQUIPMENT RESOURCES & P-102-789 9312 TRADING INC. Subtotal - - Input VAT not covered by the supporting OR 3 829 981.06 (1,840 974.54) P-102-2302 6023 SCB FAO PEMC (1 462 351.40) P-102-2302 6023 SCB FAO PEMC P-102-2302 6023 SCB FAO PEMC P-102-2302 6023 SCB FAO PEMC 307.49 P-102-2302 6023 SCB FAO PEMC 1 852.88 P-102-2318 5805 SCB FAO PEMC P-102-2318 5805 SCB FAO PEMC 980 731.57 P-102-2318 5805 SCB FAO PEMC P-102-2318 5805 SCB FAO PEMC (161 309.85) P-102-628 6954 SCB FAO PEMC P-102-628 6954 SCB FAO PEMC 307.49 P-102-628 6954 SCB FAO PEMC P-102-628 6954 SCB FAO PEMC 1 852.88 P-102-628 6954 SCB FAO PEMC 28,144.07 7 837.05 713.52 231.79 , 959.14 7�-"

DECISION CTA Case No. 8792 Invoice/ Input VAT Claim (In Php) 2nd Quarter 3rd Quarter Exhibit OR No. Supplier 1st Quarter 4th Quarter 107.14 P-102-703 2238873 GLOBE TELECOM INC. 1_L_481.76 664.17 6 156.55 P-102-725 6723 SCB FAO PEMC 307.49 6,820.72 P-102-1922 6723 SCB FAO PEMC 2 510.84 664.17 58 251.84 JMPM FREIGHT 166.80 89 472.00 148388.01 FORWARDER 166.80 58 448.26 58 448.26 P-102-775 879 INTERNATIONAL INC. 186.97 116896.52 JMPM FREIGHT 3 378.96 1 016.52 FORWARDER 836.14 P-102-775 879 INTERNATIONAL INC. 1 082.41 JMPM FREIGHT 572.13 904.30 FORWARDER 7,790.46 P-102-775 879 INTERNATIONAL INC. JMPM FREIGHT FORWARDER P-102-775 879 INTERNATIONAL INC. PHILIPPINE ELECTRICITY MARKET P-102-2074 08248 CORPORATION PHILIPPINE ELECTRICITY MARKET P-102-2074 08248 CORPORATION - Subtotal 1,3SO 397.58 42,813.37 Exhibit reference does not pertain to the input VAT claim 494 140.86 (169 942.99) P-102-632 6954 SCB FAO PEMC 79.49 P-102-632 6954 SCB FAO PEMC P-102-632 6954 SCB FAO PEMC PHILIPPINE ELECTRICITY MARKET P-102-2101 7426 CORPORATION PILIPINAS SHELL PETROLEUM P-102-1215 650212 CORPORATION SAN-VIC AGRO- P-102-2143 504 BUILDERS - Subtotal - 324,277.36 Input VAT claimed twice P-102-2021 6633 MARNIEL MARKETING 1 350.00 PILIPINAS SHELL 669350 PETROLEUM CORP PILIPINAS SHELL 669349 PETROLEUM CORP Subtotal - - 1,350.00 Marked exhibit cannot be found from the records MANDAUE INTEGRATED P-102-1631 22580 MANPOWER SERVICES MANDAUE INTEGRATED P-102-1631 22580 MANPOWER SERVICES MANDAUE INTEGRATED P-102-1631 22580 MANPOWER SERVICES MANDAUE INTEGRATED P-102-1631 22580 MANPOWER SERVICES MANDAUE INTEGRATED P-102-1631 22580 MANPOWER SERVICES MANDAUE INTEGRATED P-102-1631 22580 MANPOWER SERVICES - Subtotal - - Input VAT not supported by Invoices/DRs

DECISION CTA Case No. 8792 Invoice/ Input VAT Claim {In Php) OR No. Exhibit Supplier 1st Quarter 2nd Quarter 3rd_Quarter 4th Quarter ADVANCE SURFACE PROTECTION - 3082 SPECIALIST 2,206.56 IN NOVE BN-24 COMMUNICATIONS 4 560.00 - Subtotal - - - 6,766.56 2. Importation of goods Input VAT supported by IEIRD but without a validation of the payment, or Statement ofSettlement ofDuties and Taxes {SSDT) or Bureau ofCustoms {IJOC) official receipt PT KIDECO JAYA P-103-1 to 2 114960325 AGUNG 4,080 063.00 P-103-12 118730841 KSB SINGAPORE PTE LTC 696 349.00 SUN MACHINERY and P-103-13 to 15 116409413 TRADING INC 16 718.00 P-103-16 to 18 116409465 KSB SINGAPORE PTE LTC 32 066.00 P-103-19 120767963 KSB SINGAPORE PTE LTC 10 760.00 P-103-20 118553757 YASHIMA and CO LTD 156,378.00 P-103-21 to 22 118553741 FUJI TRADING COL LTD 84 431.00 P-103-23 to 25 118553705 IANDN INTL 94 632.00 P-103-26 to 28 120751303 NOMAX LTD 1 552 713.00 P-103-29 to 31 120751303 NOMAX LTD 456 619.00 P-103-32 to 34 118553522 FUJI TRADING CO LTD 221 585.00 121773251 I AND N P-103-35 to 37 INTERNATIONAL 127,011.00 P-103-38 121773084 PT SION MANDl 2 654,991.00 HWAN TAl CEMENT P-103-39 to 40 123885002 PRODUCTS CO LTD 2 963 129.00 HWAN TAl CEMENT P-103-41 to 43 123884993 PRODUCTS LTD 798.00 PT SION ANUGRAH P-103-44 to 45 121773102 MANDIRI 2 616 500.00 PT SION ANUGRAH P-103-48 121773181 MANDIRI 3 530 132.00 FORMOSA HEAVY INDUSTRIES P-103-55 to 57 018180153 CORPORATION 3 388 641.00 PT SION ANUGRAH P-103-58 to 60 121853286 MANDIRI 3 521 760.00 PT SION ANUGRAH P-103-61 121853313 MANDIRI 3 492 053.00 FORMOSA HEAVY INDUSTRIES P-103-62 to 63 116603094 CORPORATION 1 371 231.00 FORMOSA HEAVY INDUSTRIES 1,852 731.00 P-103-64 to 65 116603103 CORPORATION P-103-66 LONJING HONGKONG so 577.00 116603146 COMPANY LIMITED PT SION ANUGRAH - 121853286 MANDIRI (520.00) Subtotal 4,992,334.00 2,409,980.00 2,782,002.00 22 787. 032.00 Total 6,399,043.38 4 801969.49 3,237,636.90 23,384,877.11 With regard to the claimed P780,012.28 amortization of input VAT on purchases of capital goods exceeding PlMillion, the same shall also be disallowed because petitioner failed to submit before this Court VAT invoices/official receipts in support of its previous year/s' purchases of capital goods exceeding PlMillion. Also, J)i.-

DECISION CTA Case No. 8792 petitioner failed to identify which among its domestic purchases of goods and services45 for the year 2012 pertain to its capital goods purchases exceeding P1Million. Therefore, out of petitioner's reported input VAT for the four quarters of CY 2012 in the total amount of P148,611,453.13, only the amount of P92,646,682.50 represents valid input VAT, computed below: Input VAT per VAT 1st_Quarter 2nd Quarter 3rd Quarter 4th Quarter Total Return p 34,954,624.65 p 22,487,848.21 p 26,351,906.55 p 64,817,073.72 p 148,611,453.13 Less: Disallowances p 2 840 411.60 p 203,771.91 p 3 190 823.34 p 11 126 224.62 p 17 361 231.47 Per ICPA report ~399 043.38 Per Court's 4 801,969.49 3 237,636.90 23,384 877.11 37 823 526.88 further 188 726.27 verification p 9 428 181.25 194 998.17 184 237.51 212,050.33 780 012.28 P25_L_526,443.40 Input VAT on p 5 200 739.57 p 6 612 697.75 p 34,723 152.06 p 55,964 770.63 domestic purchases of P17,287,108.64 P19,739,208.80 P30,093,921.66 P92,646,682.50 goods and services and importation of goods Amortization of input VAT on capital goods purchases exceeding P1Million Total Disallowances Substantiated Input VAT However, considering that petitioner had other kinds of sales, i.e., sales to private entities, sales to government and exempt sales, and its input VAT cannot be directly attributed to specific sales, the Court shall allocate the valid input VAT proportionately on the basis of the volume of petitioner's sales pursuant to Section 112(A) of the NIRC of 1997, as amended, computed as follows: 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Total Sales per VAT return p 142 290 065.92 P213 266 370.23 P179 525 702.25 P172 096 239.00 p 707 178 377.40 Vatable Sales/ Receipts - 15 498 374.80 15 220 068.60 14 385 534.60 Private 13 574 278.83 58 678 256.83 Sales to Government 542 930 177.94 501 923 964.17 430 079 791.55 1 082 505.00 1138 810.24 1133 588.81 306 678 113.10 1 781 612 046.76 Zero-Rated Sales/Receipts 1 211 682.00 4 566 586.05 Exempt Sales/ Receipts 45 Exhibit "P-102".

DECISION CTA Case No. 8792 Total p 701,801 123.66 P731,549 213.24 P625 124 617.21 P493 560 312.93 P2 552 035 267.04 Allocation Factor (Percentage of each type ofsales to total sales): Vatable Sales/ Receipts - 20.2749841% 29.1527031% 28.7183863% 34.8683301% 27.7103685% Private 2.3012267% 2.7502776% 2.2992730% 68.7990490% 69.8114195% Sales to Government 2.2083713% 2.0805256% 0.1813381% 62.1358940% 0.1789390% 100.0000000% 0.2454983% 100.0000000% Zero-Rated Sales/Receipts 77.3623979% 68.6111003% 100.0000000% Exempt Sales/ Receipts 0.1542467% 0.1556710% Total 100.0000000% 100.0000000% Valid Input VAT p 25 526 443.40 p 17 287 108.64 p 19 739 208.80 P30 093 921.66 p 92 646 682.50 Input VATAllocation Per Each Type ofSales (Allocation Factor multiplied by Valid Input VAT): Vatable Sales/ Receipts -Private p 5,175,482.33 p 5,039,659.46 p 5,668,782.23 P10,493 247.93 p 26 377 171.95 Sales to Government 563 718.66 359 662.72 454 243.94 827 666.39 2 205,291.71 Zero-Rated 19 747 868.72 11 860,875.44 13,580,387.93 18 699,127.28 63 888,259.37 Sales/ Receipts Exempt Sales/ Receipts 39 373.69 26 911.02 35 794.70 73 880.06 175 959.47 Total p 25 526 443.40 p 17 287 108.64 p 19 739 208.80 p 30 093 921.66 p 92 646 682.50 Since the input VAT allocated to VATable sales/receipts-private entities is not enough to cover petitioner's output tax due for each quarter, the input VAT allocated to zero-rated sales/receipts shall be utilized to pay for the remaining output tax, as shown below: l 5t Quarter 2"d Quarter 3n1 Quarter 4th Quarter Total p 17 074 807.91 p 25 591 964.43 Output VAT Due p 21,543 084.27 p 20 651 548.68 p 84 861 405.29 5 175 482.33 5 039 659.46 Less: Input VAT allocated to p 11 899 325.58 p 20 552 304.97 5,668 782.23 10 493 247.93 26 377 171.95 VATable sales/receipts 19 747,868.72 11 860 875.44 p 15 874 302.04 p 10 158 300.75 p 58 484 233.34 Balance of Output VAT Due P(7,848,543.14) P8,691,429.53 Less: Input VAT allocated to 13 580 387.93 18 699 127.28 63 888 259.37 Zero-Rated P2,293,914.11 P(8,540 826.53) P(5,404,026.03) Sales/Receipts Output VAT Still Due/(Excess Input VAT) Based from the foregoing, petitioner had excess input VAT for the CY 2012 in the amount of P5,404,026.03, which can be attributed to its entire declared zero-rated sales/receipts in the amount of P1,781,612,046.76. However, as stated earlier, petitioner was able to properly substantiate only the amount of P1,360,707,687.46 out of its total J-t-

DECISION CfA case No. 8792 declared zero-rated sales/receipts of P1,781,612,046.76. Thus, the input VAT attributable to petitioner's valid zero-rated sales/receipts of P1,360,707,687.46 amounts only to P4,127,329.38, as computed below: Excess Input VAT Attributable to Declared Zero-Rated p 5,404,026.03 Sales/Receipts 7 1,781,612,046.76 X 1 360 707,687.46 Divided by Declared Zero-Rated Sales/Receipts p 4,127,329.39 Multiplied by Valid Zero-Rated Sales/Receipts Excess Input VAT Attributable to Valid Zero-Rated Sales/Receipts Even though the claimed input VAT was carried over by petitioner in its succeeding Quarterly VAT Returns46, the same remained unutilized until it was deducted in its Quarterly VAT Return for the fourth quarter of 2013 as "VAT Refund/TCC claimed'147 from the total available input tax of P382,255,748.7248� Thus, the claimed input taxes for the four quarters of CY 2012 could not have been carried over/utilized in the succeeding first quarter of 201449 � In fine, petitioner has sufficiently proven its entitlement to a refund in the amount of P4,127,329.39 representing its unutilized excess input VAT for the four taxable quarters of CY 2012, which is attributable to its zero-rated sales/receipts for the same period. WHEREFORE, the instant Petition for Review is PARTIALLY GRANTED. Accordingly, respondent is ORDERED TO REFUND to petitioner the amount of P4,127,329.39 representing its unutilized excess input VAT for the four quarters of taxable year 2012 attributable to its zero-rated sales/receipts. SO ORDERED. ~~z:- c..a.st-a..-c.o~ / ~� fUANITO C. CASTANEDA, JR. Associate Justice 46 Exhibits "P-25" to "P-26", "P-28", and "P-29", docket, vol. II, pp. 940-943 and 946-949. 47 Exhibit "P-29", line 23D, docket, vol. II, p. 949. 48 Exhibit "P-29", line 22, docket, vol. II, p. 948. 49 Exhibit "P-30", docket, vol. II, p. 950.

DECISION . ee~-7 ~~ CTA Case No. 8792 (With Concurring and Dissenting Opinion) CATHERINET.MANAHAN WE CONCUR: Associate Justice CAESAR-#c;SANOVA Associate Justice ATTESTATION I attest that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court's Division. a~-~ c. ~~~~Q. cftfANITO C. CASTANEtfA, JR. Associate Justice Chairperson CERTIFICATION Pursuant to Article VIII, Section 13 of the Constitution, and the Division Chairperson's Attestation, it is hereby certified that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court. Presiding Justice

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY SECOND DIVISION TOLEDO POWER COMPANY, CTA Case No. 8792 Petitioner, -versus- Members: CASTANEDA, JR., Chairperson CASANOVA, and MANAHAN, JJ. COMMISSIONER OF INTERNAL Promulgated: REVENUE, r'?': - R espondent. JUN 0 6 2017 / f.!V_~ "'-�x X- - - - - - - - - - - - - - - - - - - - - - - - - - -- - - - - CONCURRING AND DISSENTING OPINION MANAHAN,J.: I concur with the ponencia's conclusion that administrative and judicial claims for refund were timely filed. However, I respectfully d issent to the evidentiary value given to the Board of Inves tments (BOI) Certification submitted by Toled o Power Corporation (Toledo) to prove that its sales to Carmen Copper Corporation are zero-rated. The said BOI Certification1 provides as follows: This is to . certify that CARMEN COPPER CORPORATION is registered with the Board of Investments (BOI) pursuant to Executive Order No. 226, otherwise known as the Omnibus Investments Code of 1987, with the following data: XXX XXX XXX Information is hereby given that the firm exported 100% of its total sales volume/value for the calendar year covering January 0 1 to December 31, 2011 based on the 1 Docket, CTA Case No. 8792 , Vol. 2, Exhibit "P-11" Letter from 801 with attached Certification, pp. 918-920.

CONCURRING AND DISSENTING OPINION CTA Case No. 8792 Page 2 of2 attached documents ... submitted to BOI, summarized as follows: XXX XXX XXX This Certification is valid from J anuarv 0 1 to December 31, 2012 unless sooner revoked by the BOI Governing Board for any or all of the following grounds: (a) Failure of the herein registered enterprise to comply with any of its BOI registration terms, commitments, and conditions; (b) Failure to export 100% in any of the instances set forth in Section 2 of RMO No. 9-2000; (c) Submission of fraudulent documents; and (d) Failure to submit Audited Financial Statements, Annual Income Tax Return and Annual Report on Actual Operations for the year 2011. (Underscoring supplied) It is my view that in the instant case, the BOI Certification issued on January 30, 2012 does not attest to the 100�/o export sale of Carmen Copper Corporation (Carmen Copper) for calendar year 20 12. At most, the BOI Certification attests that for the period of January 1 to December 31, 2011, Carmen Copper exported 100�/o of its total sales volume. The validity period of January 1 to December 31, 2012 indicated in the BOI Certification of Carmen Copper made the majority conclude that the claim for refund pertaining to the four taxable quarters of taxable year 20 12 falls within the coverage of the Certification's validity period. This may well be true if the purpose is to accord zero-rating status to sales made during the covered period, but it does not prove that Carmen Copper, as a BOI-registered exporter, exported 100�/o of its products for the period January 1 to December 31, 2012. Thus, Toledo submitted a BOI Certification from Carmen Copper, its BOI-registered buyer, which failed to prove that Carmen Copper exported 100�/o of its sales from January 1 to December 31, 2012. Hence, Toledo failed to prove an essential aspect of its claim for refund/issuance of tax credit certificate. Considering the foregoing, Toledo's entitlement to refund should be adjusted accordingly. C~ A~~ ER- INE7T./ MA1 NA1 HA~ N Associate Justice