SANKYU-ATS CONSORTIUM-B v. COMMISSIONER OF INTERNAL REVENUE

CTA Form No. 8 1111111111111111111111 11111 111111111111111 11111111111111111111111111111111111111 21-000445-0057 REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY FIRST DIVISION CTA CASE NO. 10676 SANKYU-ATS CONSORTlUM-B, NOTICE OF DECISION Petitioner, - versus - COMMISSIONER OF INTERNAL REVENUE, Respondent. To: OFFICE OF THE SOLIC ITOR GENERAL 134 Amorsolo Street, Legazp i Village Makati City ATTY. AYESHA HA NIA B. GU ILI NG-MATA 'OG L3ureau or Internal Revenue Room 703. Litigation Division, BIR National Oflice Building Sen. Miriam P. Defensor-Santiago Avenue Diliman. Quezon City L 1A LA'W OFFICES 12 th Floor Unit 12D, 6X05 Aya la Avenue Multinational Bancorporation Centre Bel-Air 1209, City or Makati Fourth District. National Capital Region (NCR) GREETINGS: You are hereby notified by these presents that on September 2, 2025,a Deci sion was rendered in the above-entitled case, copy of which is attached hereto. Quezon City, Philippines, September 8, 2025. Page I of 1�

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY FIRST DIVISION SANI<YU -ATS CTA Case No. 10676 CONSORTIUM-B, Petitioner, -versus- Members: DEL ROSARIO, EJ., Chairperson, BACORRO-VILLENA, and CUI-DAVID,]]. COMMISSIONER OF � , f~.Qlul~ate~ zoz5 INTERNAL REVENUE, Respondent. -{.)tl" 0' Lf; 3 0 .-, P X-- - - ---------------- ------- --- ------~--- -- - --------X DECISION BACORRO-VILLENA, L: Before the Court is a Petition for Review1 filed by petitioner Sankyu-Ats Consortium-S (petitioner) on 15 November 2021 pursuant , to Section 3(a)', Rule 8 in relation to Section 3(a)(r)', Rule 4 of thr Division Docket, Volume I, pp. 6-41. SEC. 3. Who may appeal; period tofile petition.- (a) A party adversely affected by a decision, ruling or the inaction of the Commissioner of Internal Revenue on disputed assessments or claim s for refund of internal revenue taxes , or by a decision or ruling of the Commissioner of Customs, the Secretary of Finance, the Secretary of Trade and Industry, the Secretary of Agriculture, or a Regional Trial Court in the exercise of its original jurisdiction may appeal to the Court by petition for review filed within th irty days after receipt of a copy of such decision or ruling, or expiration of the period fixed by law for the Commissioner of Internal Revenue to act on the disputed assessments. In case of inaction of the Commissioner of Internal Revenue on claims for refund of internal revenue taxes erroneously or illegally collected, the taxpayer must fi le a petition for review within the two-year period prescribed by law from payment or coll ection of the taxes. SEC. 3. Cases within the jurisdiction of the Court in Division. - The Court in Division shall exercise: (a) Exclusive original over or appellate jurisdiction to review by appeal the following: ( I) Decisions of the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties in relation thereto, or other matters arising under the National Internal Revenue Code or other laws administered by the Bureau of Internal Revenue[.]

CTA Case No. 10676 Sankyu-Ats Consortium-S v. Commissioner of Internal Revenue DECISION x-----------------------------------------------x Revised Rules of the Court of Tax Appeals (RRCTA), challenging respondent Commissioner of Internal Revenue's (respondent's/CIR's) partial denial of its administrative claim for refund or issuance of tax credit certificate (TCC) in the amount of I'1,269,224-57 out of I'4,821,286-42, which represents the excess and unutilized input Value-Added Tax (VAT) on purchases of goods and services attributable to zero-rated sales for the second (2nd) quarter of calendar year (CY) 2019- PARTIES OF THE CASE Petitioner is a consortium duly created by virtue of a "Consortium Agreement" between ATS Construction International, Inc. and Sankyu, Inc. on 04 October 2017.4 It is a VAT-registered taxpayer with Tax Identification Number (TIN) 710-338-514-ooo, engaged in supplying services and construction materials.s Respondent, on the other hand, is the duly appointed CIR of the Bureau of Internal Revenue (BIR) vested under the appropriate laws with the authority to carry out the functions, duties, and responsibilities of said office, including, inter alia, 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) of 1997, as amended, or other laws or portions thereof administered by the BIR.6 FACTS OF THE CASE For the 2nd quarter of CY 2019, petitioner filed its Amended7 Quarterly VAT Return (BIR Form No. 2550-Q) on 02 June 20208, through the BIR's Electronic BIR (eBIR) Forms facility. There, it declared a total zero-sales amount ofr>so,391,3o6.oo.9 ~- Exhibit "P-10'', Division Docket, Volume ll, pp. 593-596. Paragraph I, Facts Admitted, Joint Stipulation of Facts (JSF), id., Volume I, p. 362; Exhibit "P-1", id., Volume I, p. 490. 6 See Par. 2, Facts Admitted, JSF, id., pp. 362-363. Original Quarterly VAT Return for the 2"' quarter of CY 2019 was filed on 24 July 2019. Division Docket, Volume I, p. 499. 9 Exhibit "P-4", id., pp. 496-498.

CTA Case No. 10676 Sankyu-Ats Consortium-S v. Commissioner of Internal Revenue DECISION x-----------------------------------------------x For the same period, petitiOner claimed to have accumulated excess input tax in the total amount of P4,821,286-42 from its current domestic purchases of goods and services and amortized input VAT on purchases of capital goods from previous quarters, which is the subject of the present petition, as shown on the following tabulation10 : Input tax on domestic purchases of goods other than capital !'227,142.14 goods Input tax on domestic purchase of services 4.595,198.09 Total Input Taxes for the 2nd quarter of CY 2019 I'4,822,)40.23 Less: Amount excluded from the refund claim Amount of claim for refund 1,053�81" 1"4,821,286.42 On 29 June 2021, petitioner filed with the BIR Revenue District Office (RD0)-98 an administrative claim for refund of its excess and/or unutilized creditable input VAT attributable to its zero-rated sales for the 2nd quarter ofCY 2019 in the total amount ofP4,821,286.42.12 On 14 October 2021, petitioner received a check amounting to P3,552,o6L85, representing the partial grant of petitioner's application for VAT refund.'3 On 28 October 2021, petitioner wrote a formal letter addressed to respondent requesting a copy of the BIR's report containing the reasons for the disallowance or a letter specifying the same.'4 The BIR allegedly did not inform petitioner of the reasons or grounds for its partial denial on its application.'5 Due to the BIR's alleged inaction, petitioner filed the present s;� petition on 15 November 2021. The case was initially raffled to this Court' Second Division.'6 ]0 !d. II Difference between the amount per Petition for Review and Administrative Claim ofl'4,821 ,286.42 and per VAT Return of1'4,822,340.23. Par. 3, Facts Admitted, JSFI, Division Docket, Volume I, p. 363; Exhibit "P-7", Division Docket, Volume II, pp. 578-590. ]) Exhibit "P-12", id., pp. 599-600. 14 Exhibit "P-13", id., p. 60 I. !5 Par. 3.1.7, Petition for Review, supra at note I, p. 9. 16 Composed of Associate Justice Erlinda P. Uy (Ret.), as Chairperson, Associate Justice Jean Marie A. Bacorro-Villena and Associate Justice Lanee S. Cui-David as Members.

CTA Case No. 10676 Sankyu-Ats Consortium-S v. Commissioner of Internal Revenue DECISION x-----------------------------------------------x PROCEEDINGS BEFORE THE COURT In its petition before Us, petitioner asserted its entitlement to a refund of the full amount oft>4,821,286.42, representing its excess and/or unutilized creditable input VAT attributable to its zero-rated sales for the 2nd quarter of CY 2019, claiming that all the requisites for a successful claim for VAT refund have been duly satisfied, it alleged that: (1) it is a VAT-registered taxpayer; (2) its sales of Pso,J91,306.oo are valid zero- rated sales; (3) the excess and/or unutilized creditable input VAT are attributable to its valid zero-rated sales; (4) it has excess input VAT that were not applied against any output VAT liability; and (s) it timely filed its administrative and judicial claims for VAT refund. Petitioner further asseverated that respondent's failure to state in writing the legal and factual bases for partially denying its application for VAT refund for the 2nd quarter of CY 2019 violates its right to due process. On 22 November 2021, the Court issued Summons'7 on respondent. In compliance therewith, respondent filed his or her Answer'8 through registered mail on 31 January 2022. In his or her Answer, respondent invoked the well-settled rule that a claim for refund, partaking of the nature of a tax exemption, must be construed in strictissimi juris against the taxpayer-claimant, i.e., petitioner. Respondent insisted that the partial denial at the administrative level stemmed from petitioner's own failure to submit all requisite supporting documents within the audit period, per Revenue Memorandum Order (RMO) No. 47-2020.'9 Respondent, citing Pilipinas Total Gas, Inc. v. Commissioner of Internal Revenue20 (Total Gas), underscores that judicial review of such a denial is circumscribed: the Court of Tax Appeals (CTA) cannot cure evidentiary deficiencies by admitting documents not presented during the administrative stage. Respondent also averred that petitioner's right to due process was not violated, for it was duly apprised of the factual and legal bases of the denial through the evaluation report and reply letter. ~ 17 Division Docket, Volume I, p. 316. " !d., pp. 324-332. 19 Consolidated and Updated Guidelines and Procedures on the Processing of Claims for Value-Added Tax Credit/Refund Except Those under the Authority and Jurisdiction of the Legal Group. G.R. No. 207112, 08 December 2015.

CTA Case No. 10676 Sankyu-Ats Consortium-S v. Commissioner of Internal Revenue DECISION x-----------------------------------------------x The Court set and conducted the pre-trial conference on 02 May 2022.21 Prior thereto, petitioner filed its Pre-Trial Brie�22 on 26 April2022, while respondent filed his or her Pre-Trial Brie�23 on 27 April 2022. On 23 May 2022, the parties submitted their Joint Stipulation of Facts and Issues2 4 (JSFI), which the Court approved and adopted in the Pre-Trial Order dated 22 June 20222 s, thereby terminating the pre-trial proceedings. When trial ensued, petitioner presented its witnesses, namely: (1) Yvonne Karla M. Telan (Telan), its Accounting Clerk and (2) Josefino F. Garcia (Garcia), the Court-commissioned Independent Certified Public Accountant (ICPA), who all testified via their respective judicial affidavits. On the witness stand, Telan declared essentially that: (1) petitioner is a consortium created by virtue of a Consortium Agreement dated 04 October 2017 between ATS Construction International, Inc. and Sankyu, Inc. and is a VAT-registered taxpayer with BIR OCN No. 2RCooo1269536 and TIN of 710-338-514-ooo; (2) petitioner only sold goods and services to Philippine Sinter Corporation (PSC) for the claim period; (3) PSC is an enterprise registered with the Philippine Economic Zone Authority (PEZA) as an Export Enterprise at the Phividec Industrial Estate - Economic Zone; (4) petitioner reported the total amount of Pso,391.3o6.oo as its zero-rated sales for the period; (5) petitioner, in the course of generating the company's sales for the period, purchased goods and services in the aggregate amount of l"4o,186,168.56 for which it paid input tax in the amount of 1"4,821,286.42; (6) its excess input taxes are attributable to its zero-rated sales for the period; (7) petitioner's excess input taxes for the period were not utilized in subsequent succeeding periods; (8) petitioner timely filed its administrative and judicial claims for refund of its excess and/or unutilized creditable input VAT in the amount of 1"4,821,286-42 on 29 June 2021 with the RD0-98; (19) petitioner submitted all the documents required in RMO jl 21 See Notice of Pre-Trial Conference dated 03 March 2022, Division Docket, Volume I, pp. 335-336; See Minutes of the Hearing dated 02 May 2022, Division Docket, Volume I, p. 356. 22 Id., pp. 337-346. Id., pp. 350-353. 24 Id., pp. 362-368; Denominated merely as JSF but provided the issue/s for the Court's resolution. 25 Id., pp. 393-396.

CTA Case No. 10676 Sankyu-Ats Consortium-S v. Commissioner of Internal Revenue DECISION x-----------------------------------------------x No. 47-202026, as attached to the administrative claim for refund; (10) the invoices and receipts it submitted in support of its claim for refund are compliant with the substantiation requirements; (n) on 14 October 2021, petitioner, through Ms. Rosalie Biloro (Biloro), picked-up a check amounting to P3,552,o6I.8S, representing the partial grant of its application for VAT refund; (12) on the same day, Biloro asked RD0-98 to provide a formal letter or report stating the reasons of partially denying PI,269,224.57; (13) on 28 October 2021, petitioner wrote a formal letter addressed to RD0-98, requesting a copy of the BIR's report containing the reasons for the disallowance or in the alternative, a written letter specifying the same; and (14) as to date, petitioner has not received any letter explanation, or any letter reply from respondent concerning his or her ground for partially denying petitioner's claim for VAT refund for the 2nd quarter of CY 2019. 27 Telan, in the course of her cross-examination, testified that all of petitioner's purchases were properly supported with invoices and/or official receipts (ORs). On redirect examination, she clarified that the submitted documents comply with the existing rules and regulations. Upon re-cross examination, she further declared that she had personally prepared the documents submitted during the administrative stage and subsequently filed before this Court, and confirmed that the very same documents presented to the BIR are those now before Us.28 On 03 Aprilzo23, !CPA Garcia submitted "Exhibit 1- !CPA Report" (ICPA Report). 29 Thereafter, on 25 April2023, respondent transmitted the BIR's case records, consisting of eight (8) folders.3� During !CPA Garcia's testimony, he declared that: (1) petitioner has no other sales to other customers other than its zero-rated sales during the 2nd quarter of CY 2019; (2) the entire amount of input VAT is attributable to its zero-rated sales; (3) petitioner did not carry over and use the input VAT applied for refund in the succeeding periods; (4) the input VAT applied for refund was declared in the Amended VAT Returu I 26 Supra at note 19. 27 Judicial Affidavit (JA) of Yvonne Karla M. Telan, Exhibit "P-18", id., Volume I, pp. 174-197; Minutes of the Hearing held on, and Order both dated 27 October 2022, id., pp. 411 and 412, respectively. 28 TSN dated 27 October 2022, pp. 5-8. 29 Exhibit "P-24", Division Docket, Volume I, pp. 423-427. 30 See Compliance dated 25 April2023, id., pp. 441-443.

CTA Case No. 10676 Sankyu-Ats Consortium-S v. Commissioner of Internal Revenue DECISION X-----------------------------------------------X for the period; and (s) the remaining amount oLP1,269,224-57 is properly supported and thus petitioner is entitled to a refund of the said amount.3' In the interim, in a Resolution dated o6 July 2023, the present case was transferred to the Court's First Division pursuant to Administrative Circular No. 01-2023 (Reorganizing the Divisions of the Court) dated 23 May 2023Y Thereafter, during the hearing held on 22 August 2023, ICPA Garcia, on cross-examination, clarified that the documents he examined were mere photocopies of those submitted to the BIR (since the originals were still in respondent's possession). On redirect examination, he reiterated that he could not have examined petitioner's suppliers' original invoices and/or ORs as these, at the time of his review, were in respondent's possession_33 No re-cross examination was conducted.34 Petitioner filed its Formal Offer of Evidence35 (FOE) on 04 September 2023 and respondent filed his or her "Comment (on Petitioner's [FOE])"36 on 21 September 2023. In the Court's Resolution dated 28 February 202437, the Court admitted all of petitioner's exhibits and rested its case. In turn, respondent offered the testimony of Revenue Officer (RO) Yoko Hannah C. Alterado (Alterado) who testified via her judicial affidavit. On the witness stand, Alterado declared that: (1) she personally examined petitioner's administrative claim; (2) she recommended the partial grant of petitioner's administrative claim and her findings were exhaustively discussed in the Memorandum Report dated 17 August 2021 addressed to the Revenue District Officer (RDOr)38; and, Supplemental JA oflCPA Josefino F. Garcia, Exhibit "P-23", id., pp. 452-460. f ld., p. 471. )] TSN dated 22 August 2023, pp. 16-20. 34 !d., p. 20. 35 Division Docket, Volume I, pp. 479-489. 36 ld., Volume II, pp. 607-609. 37 !d., pp. 637-638. )8 Exhibit "R-2", BIR Records, Main Folder, pp. 33-34.

CTA Case No. 10676 Sankyu-Ats Consortium-S v. Commissioner of Internal Revenue DECISION x-----------------------------------------------x (3) subsequently, her Memorandum Report was adopted and approved by the RDOr Boy Omar G. Datudacula (Datudacula) and Regional Director (RD) Esmeralda M. Tabule (Tabule), through Memorandum dated 23 August 2021.39 During her cross-examination, Alterado clarified that: (1) petitioner was furnished with a copy of the Tax Verification Notice (TVN) on 17 August 2021; and (2) petitioner was not furnished with a copy of the memorandum reports since the same are internal d o c u m e n t s . 40 No redirect examination followed.4' On 30 April2024, respondent filed his or her FOE42 and petitioner filed its "Comment (on Respondent's [FOE] dated 30 April 2024)"43 on o6 May 2024. The Court, in its Resolution dated o8 July 202444, admitted all of respondent's exhibits. On 9 August 2024, petitioner filed its "Memorandum for Refund and/or Issuance of a [TCC] (for Petitioner)."45 Respondent, however, did not file his or her memorandum.46 On 04 September 2024, the Court submitted the case for decision.47 ISSUE As can be gleaned from the parties' JSFI48, the sole issue for this Court's resolution is- 39 Exhibit "R-3", id., pp. 8-9. 40 TSN dated 25 April 2024, pp. 7-16. 41 !d., p. 16. Division Docket, Volume 11, pp. 644-647. !d., pp. 650-655. 44 ld., pp. 661-662. 45 ld., pp. 663-699. 46 See Records Verification dated 16 August 2024, id., p. 701. 47 See Resolution dated 04 September 2024, id., p. 702. 48 See supra at note 24.

CTA Case No. 10676 Sankyu-Ats Consortium-S v. Commissioner of Internal Revenue DECISION x-----------------------------------------------x WHETHER PETITIONER SANKYU-ATS CONSORTIUM-S IS ENTITLED TO A REFUND OR THE ISSUANCE OF A TAX CREDIT CERTIFICATE (TCC) OF ITS ALLEGED UNUTILIZED INPUT VALUE- ADDED TAX (VAT) ALLEGEDLY ATTRIBUTABLE TO ZERO-RATED SALE OF SERVICES FOR THE SECOND (2N�) QUARTER OF CALENDAR YEAR (CY) 2019 IN THE AMOUNT OF f'1,269,224.57� ARGUMENTS In support of its petition, petitioner essentially argues that its excess and unutilized input VAT being claimed for refund, amounting to f'4,821,286.42, are all attributable to its zero-rated sales of goods and services to PSC. According to it, PSC is a PEZA-registered entity entitled to zero-rated VAT on its purchases of supply of goods and services needed for its export sales, pursuant to Sections w6(A)(2)(a)49 and w8(8) 50 of the NIRC of1997, as amended. 5' Petitioner insists that it fully complied with all statutory requisites for a VAT refund, namely: (1) it is a VAT-registered taxpayer; (2) it had zero-rated sales amounting to f'S0.391,306.oo for the 2nd quarter of CY 2019 to a PEZA-registered enterprise; (3) its input VAT off'4,821,286-42 was entirely attributable to said zero-rated sales; (4) the input VAT was not applied against any output VAT; (5) the administrative claim was filed within the two (2)-year prescriptive period; and (6) the judicial claim was timely filed within thirty (30) days from receipt of the SIR's partial denial of the same. Petitioner further contends that it also fully complied with SIR's documentary requirements under RMC No. 47-202052, submitting all necessary certifications, returns, financial statements, sworn bel declarations, and photocopies of sales invoices and ORs. It underscores that any noncompliance with invoicing requirements should 49 SEC. 106. Value-added Tax on Sale ofGoods or Properties.- (A) Rate and Base a/Tax.- ... ... (2) The following sales by VAT-registered persons shall be subject to zero percent (0%) rate: (a) Export Sales.- ... 50 SEC. !08. Value-added Tax on Sale ofServices and Use or Lease of Properties. (B) Transactions Subiect to Zero Percent (0%) Rate.- . 5I As amended by Republic Act (RA) No. I0963 or Tax Reform for Acceleration and Inclusion (TRAIN) but before RA 11534 or Corporate Recovery and Tax Incentives for Enterprises Act (CREATE). 52 Supra at note 19.

CTA Case No. 10676 Sankyu-Ats Consortium-S v. Commissioner of Internal Revenue DECISION x-----------------------------------------------x attributed to the seller-issuer, not the buyer-claimant, and that denial of refund on such basis unjustly penalizes the buyer despite fulfillment of other legal requisites. Finally, petitioner maintains that respondent's failure to provide a written statement of the legal and factual grounds for partial denial violates due process, depriving it of an opportunity to address the alleged deficiencies, and results in unjust enrichment by the government through double VAT collection from both buyer and seller. Respondent, on the other hand, argues that, being in the nature of a tax exemption, refund claims must be strictly construed against the taxpayer. Likewise, the BIR's partial denial was a result of petitioner's own failure to submit all required supporting documents within the audit period under RMO No. 47-2020.53 Citing Total Gas, respondent also maintains that this Court's review of the present case could not extend to evidence not presented at the administrative level. He or she further contends that, contrary to petitioner's insistence, the latter's right to due process was observed as the factual and legal grounds for the partial denial (of its refund claim) were conveyed to it. RULING OF THE COURT After a careful and thorough evaluation of the parties' respective evidence and the applicable laws, rules and regulations, the Court finds the instant petition bereft of merit. Petitioner anchors its claim on Sections uo(B)s4, 112(A) and (C) of the NIRC of 1997, as amended by RA 10963 or Tax Reform for Acceleration and Inclusion (TRAIN), which are quoted hereunder: SEC. no. Tax Credits. - (B) Excess Output or Input Tax. - If at the end of any taxable quarter the output tax exceeds the input tax, the excess shall be paid by the VAT-registered person. If the input tax exceeds the output tax, jl the excess shall be carried over to the succeeding quarter or quarters: Provided, however, That any input tax attributable to zero-rated sales 53 Supra at note 19. 54 As amended by Republic Act No. 9361, "AN ACT AMENDING SECTION II O(B) OF THE NATIONAL INTERNAL REVENUE CODE OF 1997, AS AMENDED, AND fOR OTHER PURPOSES''.

CTA Case No. 10676 Sankyu-Ats Consortium-S v. Commissioner of Internal Revenue DECISION x-----------------------------------------------x by a VAT-registered person may at his option be refunded or credited against other internal revenue taxes, subject to the provisions of Section 112. 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 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 w6(A)(2)(a)(r), (2) and (b) and Section w8(B)(r) 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 (BSP): 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 w8(B)(6), the input taxes shall be allocated ratably between his zero-rated and non-zero-rated sales. (C) Period within which Refund ofInput Taxes shall be Made.- In proper cases, the Commissioner shall grant a refund for creditable input taxes within ninety (9o) 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 (3o) 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, h agent, or employee of the BIR to act on the application within the ninety (9o)-day period shall be punishable under Section 269 of this Jl Code. 55 55 Emphasis supplied and italics in the original text.

CTA Case No. 10676 Sankyu-Ats Consortium-S v. Commissioner of Internal Revenue DECISION x-----------------------------------------------x In Commissioner of Internal Revenue v. Deutsche Knowledge Services Pte. Ltd.S6 (Deutsche Knowledge Services), the Supreme Court laid down the requisites for the entitlement to tax refund or credit of excess input VAT attributable to zero-rated sales, to wit: Under Section 4.112-I(a) of Revenue Regulations No. (RR) 16-os, otherwise known as the Consolidated VAT Regulations of 2005, in relation to Section 112 of the Tax Code, a claimant's entitlement to a tax refund or credit of excess input VAT attributable to zero-rated sales hinges upon the following requisites: "(1) the taxpayer must be VAT-registered; (2) the taxpayer must be engaged in sales which are zero-rated or effectively zero-rated; (3) the claim must be filed within two 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." Applying the foregoing principle, the Court will proceed to determine whether petitioner complied with the aforementioned requisites. For an orderly discussion, We shall start with the third (3'd) requisite, followed by the first (1'') and second (2nd) requisites, then the fourth (4'h) requisite. THIRD (3RD) REQUISITE: THE CLAIM MUST BE FILED WITHIN TWO (2) YEARS AFTER THE CLOSE OF THE TAXABLE QUARTER WHEN SUCH SALES ARE MADE. In accordance with Section 112(A) and (C)57 of the NIRC of 1997, as amended by TRAIN, the administrative claim for refund of unutilized input VAT must be filed with the BIR within two (2) years after the close of the taxable quarter when the zero-rated or effectively zero-rated sales are made. I Petitioner's present claim covers the 2nd quarter of CY 2019. Counting two (2) years from the close of the said quarter, the last day 56 G.R. No. 234445, 15 July 2020; Citations omitted. 57 Supra at p. II.

CTA Case No. 10676 Sankyu-Ats Consortium-S v. Commissioner of Internal Revenue DECISION x-----------------------------------------------x for the filing of the administrative claim is 30 June 2021. Thus, petitioner timely filed the administrative claim on 29 June 2021.s8 As to the timeliness of petitioner's judicial claim, respondent had ninety (90) days or until 27 September 2021, to decide on petitioner's administrative claim. However, considering that during the said period, enhanced community quarantine (ECQ) and modified enhanced community quarantine (MECQ) were imposed due to corona virus disease 2019 (COVID-19) pandemics9, thereby further extending the 9o-day period to act, and taking into account the additional3o days after the lifting thereofper Revenue Regulations (RR) No. 27-2060, the 9o-day to act now fell on 29 November 2021. Given that petitioner received a check amounting to .P3,552,o6L8S, representing the partial grant of petitioner's application for VAT refund on 14 October 20216\ petitioner had 30 days therefrom or until14 November 2021, within which to file a judicial claim before this Court. Thus, the instant Petition for Review was also seasonably filed on 15 November 2021 (since 14 November 2021 fell on a Sunday).62 Such being the case, the Court finds that petitioner satisfied the above-stated fd requisite. FIRST (t5T) REQUISITE: PETITIONER MUST BE VALUE-ADDED TAX (VAT)-REGISTERED. Undeniably, petitioner is a VAT-registered taxpayer with TIN 710-338-514-ooo, as shown in its BIR Certificate of Registration Number OCN 2RCooo1269536.63 Thus, petitioner complied with the 151 requisite./ 58 Supra at note 12. 59 Dates Imposed Number COVID-I9-related Issuances Quarantine of days 06 August 2021 to Restriction IATF-EID Resolution No. 130-A, 29 July 20 Auaust 202 I 15 2021 2 I August 2021 to ECQ II IATF-EID Resolution No. I34, I9 August 3 I Au~ust 202 I 7 2021 0 I September 202 I to MECQ 33 IATF-EID Resolution No. 135-A, 26 August 07 September 202 I 2021 Total MECQ 60 Regulations Suspending the Filing and Ninety (90)-Day Processing of Value-Added Tax (VAT) Refund Claims Anchored Under Section 112 of the Tax Code of !997, as Amended, in Relation to Section 4(tt) of Republic Act (R.A.) No. 11494. Otherwise Known as the "Bayanihan to Recover as One Act". 61 Exhibit "P-12", Division Docket, Volume II, pp. 599-600. Supra at note I. 63 Supra at note 5.

CTA Case No. 10676 Sankyu-Ats Consortium-S v. Commissioner of Internal Revenue DECISION X-----------------------------------------------X SECOND (2ND) REQUISITE: PETITIONER MUST BE ENGAGED IN SALES WHICH ARE ZERO-RATED OR EFFECTIVELY ZERO-RATED. The 2nd reqwszte requires that the taxpayer be engaged in zero-rated or effectively zero-rated sales. Petitioner alleges that its sales to PSC, a PEZA-registered entity, are zero-rated pursuant to Sections w6(A)(2)(a)(5) and w8(B)(3) of the NIRC of 1997, as amended by TRAIN, which state: SEC. 106. Value-added Tax on Sale ofGoods or Properties- (A) Rate and Base of Tax. -There shall be levied, assessed and collected on every sale, barter or exchange of goods ox properties, a value-added tax equivalent to twelve percent (12%) of the gross selling price or gross value in money of the goods or properties sold, bartered or exchanged, such tax to be paid by the seller or transferor. (2) The following sales by VAT-registered persons shall be subject to zero percent (o%) rate: (a) Export Sales. -The term 'export sales' means: (s) Those considered export sales under Executive Order No. 226, otherwise known as the Omnibus Investment Code of 1987, and other special laws[.] SEC. 108. Value-added Tax on Sale ofServices and Use or Lease of Properties. (B) Transactions Subject to Zero Percent (o%) Rate. -The following services performed in the Philippines by VAT-registered persons shall be subject to zero percent (o%) rate: (3) Services rendered to persons or entities whose exemption under special laws or international agreements to which the f Philippines is a signatory effectively subjects the supply of such services to zero percent (o%) rate[.] 6 64 Emphasis supplied and italics in the original text.

CTA Case No. 10676 Sankyu-Ats Consortium-S v. Commissioner of Internal Revenue DECISION x-----------------------------------------------x The special law applicable to this case is Republic Act (RA) No. 791665, as amended by RA 874866, otherwise known as "The Special Economic Zone Act of 1995". Sections 8 and 24 thereof read: SEC. 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. SEC. 24. Exemption from National and Local Taxes.- Except for real property taxes on land owned by developers, no taxes, local and national, shall be imposed on business establishments operating within the ECOZONE. In lieu thereof, five percent (s%) of the gross income earned by all business enterprises within the ECOZONE shall be paid and remitted as follows: (a) Three percent (3%) to the National Government; (b) Two percent (2%) which shall be directly remitted by the business establishments to the treasurer's office of the municipality or city where the enterprise is located 6 7 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 o% VAT. In the case of Commissioner of Internal Revenue v. Toshiba Information Equipment (Phils.), Inc. 68, the Supreme Court elucidated thusly- / 65 AN ACT PROVIDING FOR THE LEGAL FRAMEWORK AND MECHANISMS FOR THE CREATION, OPERATION, ADMINISTRATION, AND COORDINATION OF SPECIAL ECONOMIC ZONES IN THE PHILIPPINES. CREATING FOR THIS PURPOSE. THE PHILIPPINE ECONOMIC ZONE AUTHORITY (PEZA). AND FOR OTHER PURPOSES. AN ACT AMENDING REPUBLIC ACT NO. 7916. OTHERWISE KNOWN AS THE "SPECIAL ECONOMIC ZONE ACT OF I995". 67 Emphasis supplied and italics in the original text. 68 G.R. No. I 50154, 09 August 2005; Citations omitted and emphasis supplied.

CTA Case No. 10676 Sankyu-Ats Consortium-S v. Commissioner of Internal Revenue DECISION x-----------------------------------------------x 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 (s%) 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 . ... 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, 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 f export of goods and services from the Philippines to a foreign country must be free of VAT; while, those destined for use or

CTA Case No. 10676 Sankyu-Ats Consortium-S v. Commissioner of Internal Revenue DECISION X-----------------------------------------------X consumption within the Philippines shall be imposed with ten percent (w%) VAT. 69 The Cross-Border Doctrine mandates "that no VAT shall be imposed to form part of the cost of goods destined for consumption outside the territorial border of the taxing authority."7a On the other hand, the Destination Principle requires that "goods and services are taxed only in the country where these are consumed."7' Based on the foregoing, in order for a sale of goods and services to PEZA-registered entities to qualify for VAT zero-rating under Sections w6(A)(2)(a)(5) and w8(B)(3) of the NIRC of 1997, as amended, the following essential elements must be present - 1. The sale was made by a VAT-registered person; and, 2. The sale of goods must be to a PEZA-registered entity; and 3� It must be shown that the goods were consumed, or the services were rendered in the ECOZONE. As determined earlier, petitioner is a VAT-registered entity. Hence, the first essential element was already fulfilled. Relative to the second essential element, the case records show that petitioner only sold goods and services for the subject period to PSC. To prove that PSC is duly registered with PEZA, petitioner presented PSC's PEZA Certification dated 18 January 2019 with Certificate No. 2019-0963 covering the period 01 January to 30 June 2019, which includes the period subject of the present case - thereby satisfying the second essential element. Anent the third essential element, the Supreme Court, in Coral Bay Nickel Corporation v. Commissioner of Internal Revenue72 (2016/ 69 Now at 12% Value-Added Tax (VAT) rate. 70 Commissioner of Internal Revenue v. Filminera Resources Corporation, G.R. No. 236325, 16 September 2020; Citations omitted. 71 !d. 72 G.R. No. 190506. 13 June 2016; Citations omitted.

CTA Case No. 10676 Sankyu-Ats Consortium-S v. Commissioner of Internal Revenue DECISION x-----------------------------------------------x Coral Bay), denied Coral Bay's appeal upon finding that the locus of the subject purchases of goods and services was within the ECOZONE and that such purchases were destined for consumption therein. Consequently, the transactions should have been zero-rated, and Coral Bay was not entitled to claim a refund for purchases already falling within the ambit of o% VAT, to wit: The petitioner's principal office was located in Barangay Rio Tuba, Bataraza, Palawan. Its plant site was specifically located inside the Rio Tuba Export Processing Zone - a special economic zone (ECOZONE) created by Proclamation No. 304, Series of 2002, in relation to Republic Act No. 7916. As such, the purchases of goods and services by the petitioner that were destined for consumption within the ECOZONE should be free of VAT; hence, no input VAT should then be paid on such purchases, rendering the petitioner not entitled to claim a tax refund or credit. Verily, if the petitioner had paid the input VAT, the CTA was correct in holding that the petitioner's proper recourse was not against the Government but against the seller who had shifted to it the output VAT following RMC No. 42-03, which provides[.] Apropos is the recent case of Coral Bay Nickel Corporation v. Commissioner of Internal Revenue73 (:w25 Coral Bay), the Supreme Court sustained Coral Bay's appeal, holding this time that Coral Bay had sufficiently established that the goods in question were consumed, and the services rendered, outside the ECOZONE, viz: VAT is a tax on consumption. As such, the cross-border doctrine and the destination principle apply. Indeed, the situs of VAT is determined by where goods are consumed or where services are rendered. Applied to the present case, the CTA En Bane erred in treating Coral Bay as an absolutely VAT-exempt entity and declaring that its purchase of services outside of the ecozone should likewise be subject to zero-rating. Having been consumed outside of the ecozone, the cross- border doctrine finds no application. The same could not have been deemed "exported" to Coral Bay. Having been rendered withii " G.R. Nos. 251333-34,05 March 2025; Citations omitted and emphasis supplied.

CTA Case No. 10676 Sankyu-Ats Consortium-S v. Commissioner of Internal Revenue DECISION x-----------------------------------------------x the Philippines' customs territory, it is naturally subject to national internal revenue laws such as VAT. As the foregoing discourse makes manifest, sales to PEZA- registered entities are not ipso facto subject to o% VAT. It is still incumbent upon the taxpayer-claimant to establish that the locus of the transaction, i.e., the place of consumption of goods or the rendering of services, is within the ECOZONE, which is recognized as a separate customs territory. In the present case, petitioner never specifically alleged that its sale of goods and services were actually consumed or rendered within the ECOZONE, a crucial predicate to render them zero-rated pursuant to the Cross-Border Doctrine and Destination Principle. A perspicacious review of petitioner's pleadings yields no specific averment to this effect. Instead, to justify its claim of zero-rating, petitioner merely avers:74 30. The scope of the previously mentioned provisions was broadened through existing jurisprudence and BIR issuances, wherein the "Cross[-]Border Doctrine" or "Destination Principle" was used as the basis for certain transactions subjected to zero-rating under the mentioned provisions: 31. In this case, the Petitioner's sales of goods and services to PSC, a PEZA-registered entity, clearly falls under the scope of zero-rated sales under the NIRC, as amended. 32. Again, the witness testified in her direct examination that Petitioner's sales amounting to Phpso,391,J06.oo for Q2 TY2019 were VAT zero-rated, to wit: "11. Q: Is Philippine Sinter Corporation (PSC) a client of the company? A: Yes, in fact it is the only client ofSAC-B. 12. Q: Ms. Witness, what kind of transaction does SAC-B ' have with PSC? / 74 Division Docket, Volume II, pp. 671-673; Citation omitted and emphasis supplied.

CTA Case No. 10676 Sankyu-Ats Consortium-S v. Commissioner of Internal Revenue DECISION x-----------------------------------------------x A: It [is] a zero-rated sale of goods and services because SAC-B supplies it with goods and services in relation to its export business. 13. Q: How did the transactions with PSC become zero- rated? A: We have on file the PEZA Certification ofPSC. 14. Q: Ms. Witness, if! show you the PEZA Certificate ofPSC, would you be able to recognize it? A: Yes. 15. Q: I am showing you this PEZA Certificate of Philippine Sinter Corporation with Certificate No. 2019-0963, previously marked as Annex "["of the Petition for Review, is this the same document you were referring to in your previous answer? A: Yes. 16. Q: Ms. Witness, can you please read aloud the first two paragraphs ofthis PEZA Certificate? A: "This is to certify that Philippine Sinter Corporation at the Phividec Industrial Economic Zone, is a PEZA-registered Ecozone Export Enterprise with Registration Certificate No. 11-04 dated 31 january 2011. This is to further certify that PSC is a qualified enterprise for the purpose of VAT zero-rating of its transaction with its local suppliers of goods, properties and services in connection with its PEZA-registered activities, in accordance with Section 4.106-6 and 4-108-6 of Revenue Regulations No. 16-2005, the Consolidated Value-Added Tax Regulations 2005." 33� From the foregoing, both documentary and testimonial pieces of evidence established that Petitioner's sales are zero-rated considering that its only client is a PEZA-registered entity. Like any other requisites, the locus of the actual services rendered by petitioner during the claim period, i.e., 2nd quarter of CY 2019, must r be established by sufficient and competent evidence and the same is/

CTA Case No. 10676 Sankyu-Ats Consortium-S v. Commissioner of Internal Revenue DECISION x-----------------------------------------------x strictissimi scrutinizedJs Yet, what emerges in the present case is a glaring omission: petitioner never asserts, much less substantiates, that the locus of its sales for the claim period was within the ECOZONE. Moreover, petitioner's ORs merely provide the following as nature of its sale transactions and nowhere therein is the locus of said sales indicated: Exhibit No. OR No. Nature F.1-ICPA 0259 supply of labor, equipment and supervision for Sinter F.2-ICPA 0260 machine installation (24.84%) and removal25.52% F.3-ICPA 0262 28.96% progress billing for installation works of Sinter machine extension (PO# 45ooo26755) F-4-ICPA 0263 39.57% 54.oo% progress billing for sane removal and 33.10% payment for installation works of sane supply of labor, equipment and supervision for Sinter machine installation (36.91%) and removal (67.14%) Moreover, petitiOner failed to proffer as evidence the corresponding purchase orders (POs) or contract with PSC which would have enabled this Court to determine, with certainty, the locus of the foregoing transactions. This omission is a fatal defect that strikes at the very heart of petitioner's claim. The partial grant of petitioner's claim before the BIR is of no moment. Petitioner itself has squarely placed in issue the zero-rating of its sales, as is evident from its petition76, F0�77 and memorandum.78 Additionally, it bears stressing that cases filed in the CTA, being a court of record, are litigated de novo; thus, the party-litigants before it are required to substantiate every minute aspect of their claims.79 In conclusion, We reiterate that actions for tax refund or credit, as in the instant case, are in the nature of a claim for exemption and the pieces of evidence presented to entitle a taxpayer to an exemption is; 75 See Coca-Cola Bottlers Philippines. Inc. v. Commissioner of Internal Revenue, G.R. No. 222428, 19 February 2018, citing Atlas Consolidated Mining and Development CorporaNon v. Commissioner ofInternal Revenue, G.R. No. 159490, 18 February 2008. 76 Division Docket, Volume I, pp. 13 and 17-19. 77 Id., p. 480. " !d., Volume II, pp. 670-673. 79 See Commissioner ofInternal Revenue v. CE Casecnan Water and Energy Company, Inc., G.R. No. 212727, OJ February 2023.

CTA Case No. 10676 Sankyu-Ats Consortium-S v. Commissioner of Internal Revenue DECISION x-----------------------------------------------x strictissimi scrutinized and must be duly proven. The burden is on the taxpayer-claimant to show that it has strictly complied with the conditions for the grant of the tax refund or credit.80 For failure to substantiate the alleged zero-rated sales, petitioner cannot claim for refund the input taxes attributable thereto. Accordingly, We find it unnecessary to determine whether petitioner complied with the remaining requisite under Section 1128' of the NIRC ofr997, as amended, i.e., that 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). A further discussion or resolution thereof could no longer change the outcome of the herein case. WHEREFORE, premises considered, the instant Petition for Review filed on 15 November 2021 by petitioner Sankyu-Ats Consortium- B is hereby DENIED for lack of merit. SO ORDERED. ( . BACORRO-VILLENA ciate Justice WE CONCUR: Presiding Justice 80 Coca-Cola Bottlers PhiNppines, Inc. v. Commissioner ofInternal Revenue, supra at note 75. 81 Supra at p. II.

CTA Case No. 10676 Sankyu-Ats Consortium-S v. Commissioner of Internal Revenue DECISION x-----------------------------------------------x CERTIFICATION Pursuant to Article VIII, Section 13 of the Constitution, it is hereby certified that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court's Division. Presiding Justice