LEPANTO CONSOLIDATED MINING COMPANY v. COMMISSIONER OF INTERNAL REVENUE

REPUBLIC OF THE PHILI PPI NES COURT OF TAX APPEALS QUEZON CITY SECOND DIVISION LE PANTO CONSOLIDATED CTA CASE NO. 8855 Members: MINING COMPANY, Petitioner, -versus- CASTAN EDA, JR., Chairperson, CASANOVA, and COTANGCO- MANALASTAS, JJ. Promulgated: COMMISSIONER OF INTERNAL REVENUE , SEP 0 7 2016 ~ Respondent. I: 7 Cj: I~/- a �A . x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x DECISION CASTANEDA, JR., J,: THE CASE This Petition for Review filed by petitioner Lepanto Consolidated Mining Company, seeks for the issuance of a tax credit certificate in the amount of Sixteen Million Seven Hundred Eighty-Two Thousand Five Hundred Eighty-Six Pesos and 10/100 (P16,782,586.10), representing its unutilized input value-added tax (VAT) for the first and second quarters of taxable year 2012. THE FACTS Petitioner Lepanto Consolidated Mining Company is a duly organized and existing domestic corporation engaged in mining of ~

DECISION CTA CASE NO. 8855 gold and other precious metals, with principal place of business at 21/F Lepanto Bldg., 8747 Paseo de Roxas St., Makati City. 1 Respondent is the duly appointed Commissioner of the Bureau of Internal Revenue (BIR), who has the authority to grant claims for refund or tax credit under the law. He holds office at the 5th Floor, BIR National Office Building, Agham Road, Diliman, Quezon City. Petitioner filed its Quarterly VAT Returns (BIR Form No. 2550- Q) for the first and second quarters of taxable year 2012 on the following dates: Period Covered VAT Return Date Filed (2012) Original April 25, 20122 First Quarter Amended May 24, 2012j September 12, 20124 Second Quarter Original July 23, 20125 Amended September 12, 20126 October 3, 20127 April 10, 2013tl On February 27, 2014,9 petitioner filed before the BIR its administrative claim for tax credit covering the first and second quarters of taxable year 2012. On March 3, 2014,10 petitioner likewise submitted additional supporting documents. Consequently, on July 31, 2014, petitioner filed the instant Petition for Review.11 In his Answer,12 respondent raised the following special and affirmative defenses: Jt-- 1 Par. 1, Stipulation of Facts, Joint Stipulation of Facts and Issues (JSFI), docket, p. 118. 2 Exhibits "P-8-A'' and "P-8-B". 3 Exhibits "P-8-C" and "P-8-D". 4 Exhibits "P-8-E" and "P-8-F". 5 Exhibits "P-8-G" and "P-8-H". 6 Exhibits "P-8-I" and "P-8-J." 7 Exhibits "P-8-K" and "P-8-L". 8 Exhibits "P-8-M" and "P-8-N". 9 Exhibits "P-27" and "P-28". 10 Exhibit "P-29". 11 Docket, pp. 6-15. 12 Docket, pp. 57-62.

DECISION CTA CASE NO. 8855 "SPECIAL AND AFFIRMATIVE DEFENSES XXX XXX XXX 11. In the case at hand, petitioner's alleged claim for tax credit is subject to administrative routinary investigation/examination by the Bureau of Internal Revenue. A claim for tax credit is not ipso facto granted because respondent still has to investigate and ascertain the validity of the claim. XXX XXX XXX 13. Likewise, not only should petitioner establish that it is entitled to the tax credit; it is also imperative for petitioner to prove its compliance with the following: a. The registration requirements of a VAT taxpayer in compliance with Revenue Regulations 7-2012 in relation to Section 236 (A), (B), (C) and (D) of the National Internal Revenue Code (NIRC); b. The invoicing and accounting requirements for VAT-registered persons, as well as the filing and payment of VAT in compliance with the provisions of Section 113 and 114 of the NIRC; c. Proof of compliance with the prescribed checklist of requirements to be submitted involving claim for VAT credit pursuant to Revenue Memorandum Order No. 53-1998 and Revenue Memorandum Circular No. 54-2014, otherwise there would be no sufficient compliance with the filing of an administrative application for tax credit which is a condition sine qua non prior to the filing of a judicial claim in accordance with Section 112 of the NIRC. This requires the submission of complete documents in support of the application filed with the Bureau of Internal Revenue before the 120-day audit period shall apply, and before the taxpayer could avail of the~

DECISION CTA CASE NO. 8855 judicial remedies as provided for in the law. Hence, petitioner's failure to submit proof of compliance with the above-stated requirements warrants immediate dismissal of the petitioner for review; d. That the input taxes in the amount of Sixteen Million Seven Hundred Eighty Two Thousand Five Hundred Eighty Six Pesos and 10/100 (P16,782,586.10) allegedly incurred by petitioner for the taxable year 2012 were attributable to its zero-rated sales and such have not been applied against any output tax and were not carried over to the succeeding taxable quarter or quarters; e. That petitioner's administrative and judicial claims for tax credit of the unutilized input VAT was filed within the periods provided in Sections 112 (A) and (C) of the NIRC; f. That petitioner's domestic purchases of goods and services were made in the course of its trade or business, properly supported by VAT invoices and /or official receipts and other documents, such as subsidiary purchase Journal showing that it actually paid VAT in accordance with Sections 110 (A) (2) and 113 of the NIRC and pursuant to Section 4.110-7 of Revenue Regulations No. 14-2005; and g. The requirements as enumerated under Section 4.110-7 of Revenue Regulations No. 14-2005. 14. The amount of Sixteen Million Seven Hundred Eighty Two Thousand Five Hundred Eighty Six Pesos and 10/100 (P16,782,586.10) being claimed by petitioner arising from excess and unutilized input VAT paid and incurred for the taxable year 2012 is not properly documented. XXX XXX XXX Jt--

DECISION CTA CASE NO. 8855 On November 6, 2014,13 the case was set for pre-trial conference. On November 26, 2014, the parties submitted their Joint Stipulation of Facts and Issues,14 which was approved by the Court in the Pre-Trial Order15 promulgated on December 3, 2014. During trial, petitioner presented Glenn Ian D. Villanueva, Teofilo Sacpa, and Cherry H. Tan as witnesses. Likewise, petitioner filed its Formal Offer of Evidence.16 On the other hand, during the hearing held on August 26, 2015, counsel for respondent manifested that she has no witness to present. 17 On October 15, 2015, petitioner filed its Memorandum. 18 On the other hand, on September 28, 2015, respondent filed a Manifestation19 that he is adopting his Answer filed on September 22, 2014 as his Memorandum. On October 28, 2015/0 the case was submitted for decision. Hence, this Decision. THE ISSUE The parties submitted to this Court the lone issue21 of whether petitioner is entitled to a tax credit amounting to Sixteen Million Seven Hundred Eighty Two Thousand Five Hundred Eighty Six and 10/100 pesos (P16,782,586.10), representing input VAT attributable to petitioner's zero-rated export sales in the first half of 2012. THE RULING For the period covering January 1, 2012 to June 30, 2012, petitioner filed with the BIR its amended Quarterly VAT Returns, declaring the following: pt.- 13 Docket, p. 64. 14 Docket, pp. 118-122. 15 Docket, pp. 124-128. 16 Docket, pp. 317-327. 17 Minutes of Hearing dated August 26, 2015, docket, p. 398. 18 Docket, pp. 407-434. 19 Docket, pp. 402-404. 20 Docket, p. 436. 21 JSFI, docket, p. 119

DECISION CTA CASE NO. 8855 Vatable Sales/Receipts 1st Quarter 2nd Quarter Zero-Rated Sales/Receipts Exhibit ''P-8-E" to ''P- Exhibit ''P-8-M" to ''P- Total Sales/Receipts 8-F" 8-N" p 25 123,833.25 p 5,502,287.00 543 798,086.20 502,436,233.15 568,921,919.45 507,938,520.15 Outp_ut tax due 3,014,859.99 660,274.44 Less: Allowable Input Tax 39,632,318.44 30,875,604.13 Input Tax Carried Over from Previous Period Deferred on Capital Goods Exceeding P1 101,042.20 397,483.80 Million from Previous Quarter 31/273 087.93 Total 3~733,360.64 Current transactions 1,014,991.00 Purchase of Capital Goods exceeding P1M 913,090.00 Importation of Goods other than Capital 11,050,298.33 Goods 8,523,280.00 12/065,289.33 Total Current 43{338 377.26 ~43~370.00 Total Available Input Tax Less: Deductions from inR_ut tax 49_ll69L730,64 Input tax on capital goods deferred for the 730 472.00 811 992.80 succeeding period 14,548,794.52 811/992.80 VAT Refund/TCC claimed 15.27~266.52 42,526,384.46 Total 33,890,464.12 Total Allowable Input Tax Net VAT Pa_yable (30,875,604.13) (41,866,110.02) Less: Tax Credits/Pay_ments - - Total Over~ayment P(30,875,604.13) P(41,866_,110.021 Petitioner anchors its claim on Section 112(A) of the National Internal Revenue Code (NIRC) of 1997, as amended, which reads: "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 106(A)(2)(a)(1), (2) and (b) and Section ;;v- 108(8)(1) and (2), the acceptable foreign currency

DECISION CTA CASE NO. 8855 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 108(8)(6), the input taxes shall be allocated ratably between his zero-rated and non-zero-rated sales." Pursuant to the afore-quoted provision and as laid down by the Supreme Court in a number of cases,22 a taxpayer may claim a refund or a tax credit certificate for input taxes paid on purchases of goods and services attributable to zero-rated sales upon compliance with the following requisites: 1. that the taxpayer must be VAT-registered; 2. that the claim for refund must be filed within the two- year prescriptive period; 3. that there must be zero-rated or effectively zero-rated sales; 4. that input taxes were incurred or paid; 5. that such input taxes are attributable to zero-rated or effectively zero-rated sales; and 6. that the input taxes were not applied against any output VAT liability. With respect to the first requisite, petitioner is a duly registered VAT taxpayer with the Bureau of Internal Revenue, with Tax Identification No. 000-160-247-00023 from 1994 up to present.24)<- 22 Commissioner of Internal Revenue v. Toledo Power Company, G.R. Nos. 195175 & 199645, August 10, 2015; Luzon Hydro Corporation v. Commissioner of Internal Revenue, G.R. No. 188260, November 13, 2013; Southern Philippines Power Corporation v. Commissioner of Internal Revenue, G.R. No. 179632, October 19, 2011; Silicon Philippines, Inc. (Formerly Intel Philippines Manufacturing, Inc.) v. Commissioner of Internal Revenue, G.R. No. 172378, January 17, 2011; AT&T Communications Services Philippines, Inc. v. Commissioner of Internal Revenue, G.R. No. 182364, August 3, 2010; San Roque Power Corporation v. Commissioner of Internal Revenue, G.R. No. 180345, November 25, 2009; Intel Technology Philippines, Inc. v. Commissioner ofInternal Revenue, G.R. No. 166732, April 27, 2007. 23 Exhibit "P-2-A". 24 Par. 3, Stipulation of Facts, JSFI, docket, pp. 118-119.

DECISION CfA CASE NO. 8855 With respect to the second requisite, the ruling of the Supreme Court in Commissioner of Internal Revenue v. Mirant Pagbilao Corporation (Formerly Southern Energy Quezon, Inc.j5 provides: "The above proviso clearly provides in no uncertain terms that unutilized input VAT payments not otherwise used for any internal revenue tax due the taxpayer must be claimed within two years reckoned from the close of the taxable quarter when the relevant sales were made pertaining to the input VAT regardless of whether said tax was paid or not." (Emphasis supplied) Here, the claim covers the first and second quarters of taxable year 2012, which closed on March 31, 2012 and June 30, 2012, respectively. Counting two years therefrom, petitioner had until March 31, 2014 and June 30, 2014, respectively, within which to file its administrative claim for refund or tax credit. Records reveal that petitioner filed its claim with the BIR on February 27, 2014/6 or within the two-year prescriptive period provided for under Section 112(A) of the NIRC of 1997, as amended. The Court shall now proceed to determine whether petitioner's judicial claim was timely filed. In this regard, Section 112(C) of the NIRC of 1997, as amended, reads: "SEC. 112. Refunds or Tax Credits ofInput Tax.- 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. ft- 25 G.R. No. 172129, September 12, 2008. 26 Exhibits "P-27" and "P-28".

DECISION CTA CASE NO. 8855 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." In Rohm Apollo Semiconductor Philippines v. Commissioner of Internal Revenue,27 the Supreme Court held that: "Section 112(0) of the 1997 Tax Code 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. xxx The landmark case of Commissioner of Internal Revenue v. San Roque Power Corporation has interpreted Section 112 (D). The Court held that the taxpayer can file an appeal in one of two ways: (1) file the judicial claim within 30 days after the Commissioner denies the claim within the 120-day waiting period, or (2) file the judicial claim within 30 days from the expiration of the 120-day period if the Commissioner does not act within that period." Respondent contends that it is incumbent upon petitioner to establish compliance with the checklist of requirements under Revenue Memorandum Order (RMO) No. 53-1998 and Revenue Memorandum Circular (RMC) No. 54-2014. Failure to do so would render the administrative application for refund or tax credit insufficient and would warrant its dismissal. However, it must be emphasized that it is not within the province of the BIR to determine what documents must be submitted~ 27 G.R. No. 168950, January 14, 2015.

DECISION CTA CASE NO. 8855 by the taxpayer to support its claim. In Pilipinas Total Gas, Inc. v. Commissioner ofInternal Revenud-8, the Supreme Court held that: "xxx for purposes of determining when the supporting documents have been completed - it is the taxpayer who ultimately determines when complete documents have been submitted for purposes of commencing and continuing the running of the 120-day period After all, he may have already completed the necessary documents the moment he filed his administrative claim, in which case, the 120-day period is reckoned from the date of filing. xxx Then, except in those instances where the BIR would require additional documents to fully appreciate a claim for tax credit or refund, in terms what additional document must be presented in support of a claim for tax credit or refund- it is the taxpayer who has the right and the burden of providing any and all documents that would support his claim for tax credit or refund. After all, in a claim for tax credit or refund, it is the taxpayer who has the burden to prove his cause of action. As such, he enjoys relative freedom to submit such evidence to prove his claim. The foregoing conclusion is but a logical consequence of the due process guarantee under the Constitution. Corollary to the guarantee that one be afforded the opportunity to be heard, it goes without saying that the applicant should be allowed reasonable freedom as to when and how to present his claim within the allowable period. Thereafter, whether these documents are actually complete as required by law - is for the CIR and the courts to determine. Besides, as between a taxpayer-applicant, who seeks the refund of his creditable input tax and the CIR, it cannot be denied that the former has greater interest in ensuring that the complete set of documentary evidence is provided for ? proper evaluation of the State. 28 G.R. No. 207112, December 8, 2015.

DECISION XXX XXX CTA CASE NO. 8855 XXX In all cases, whatever documents a taxpayer intends to file to support his claim must be completed within the two-year period under Section 112(A) of the NIRC. The 30-day period from denial of the claim or from the expiration of the 120-day period within which to appeal the denial or inaction of the CIR to the CTA must also be respected. XXX XXX XXX As explained earlier xxx, taxpayers cannot simply be faulted for failing to submit the complete documents enumerated in RMO No. 53-98, absent notice from a revenue officer or employee that other documents are required. Granting that the BIR found that the documents submitted by Total Gas were inadequate, it should have notified the latter of the inadequacy by sending it a request to produce the necessary documents in order to make a just and expeditious resolution of the claim. Indeed, a taxpayer's failure with the requirements listed under RMO No. 53-98 is not fatal to its claim for tax credit or refund of excess unutilized excess VAT. This holds especially true when the application for tax credit or refund of excess unutilized excess VAT has arrived at the judicial level. After all, in the judicial level or when the case is elevated to the Court, the Rules of Court governs. Simply put, the question of whether the evidence submitted by a party is sufficient to warrant the granting of its prayer lies within the sound discretion and judgment of the Court." (Emphasis supplied) In the instant case, petitioner promised to submit the following additional documents in support of its claim: 29 1. Letter Request for Certification received by the Board of Investments-Department of Finance (BOI-DOF); )!_ 29 Exhibit "P-29".

DECISION CTA CASE NO. 8855 2. VAT Return showing the amount of tax credit certificate applied; 3. Schedule of Acquisition and Disposal of PPE for the subject period and Schedule of Amortization of Deferred Input Tax; and 4. BIR Form No. 1914 (3 copies). Records show that said documents were received by the BIRon March 3, 2014.30 Moreover, witness Mr. Teofilo Sacpa testified that: 31 "22Q: How did the BIR act on the 2 applications for tax credits filed by LCMC? 22A: On 27 February 2014, the same day that the applications were filed, the BIR required the submission of certain documents and made the person who filed the applications execute a letter of undertaking to that effect. 23Q: What were the documents required to be submitted by the BIR? 23A: 1. Letter-request for Certification of no filed similar claims received and issued by the Board of Investments of the Department of Finance; 2. Vat return showing the amount of the tax credit applied for; 3. Schedule of acquisition and disposal of PPE for the period claimed and schedule of amortization of deferred input tax; and 4. Form 1914. 24Q: How did LCMC respond to such requirement by the BIR? 24A: On 3 March 2014, LCMC submitted all the required documents for the 2 applications. 25Q: What is your proof that the BIR required the submission of the said documents and that LCMC complied with the same?~ 3o Id. 31 Exhibit "P-49".

DECISION CTA CASE NO. 8855 25A: A letter of undertaking dated 27 February 2014 with stamped date of receipt by the BIR listing the documents required to be submitted and a notation showing that the requested documents were submitted on 3 March 2014. XXX XXX XXX 28Q: There's a signature appearing on the middle left side of the letter below the notation 'received 3/3/14', whose signature is that? 28A: That's the signature of the BIR personnel who received the letter and the additional documents submitted by LCMC." Based therefrom, the Court finds that March 3, 2014 is the reckoning date of the 120-day period stated above. Consequently, the vital dates relative to petitioner's claim for the issuance of tax credit certificate are as follows: Date of End of the 120- End of the 30- Date of Filing of Submission of day period for the day period from the Judicial BIR Commissioner the expiration of Claim Documents to decide on the the 120-day July 31, 2014jj March 3, 2014j� claim period July 1, 2014 July 31, 2014 Pursuant to Section 112(C) of the NIRC of 1997, as amended, and the above-quoted cases, petitioner last submitted supporting documents on March 3, 2014. Consequently, respondent is required to act on petitioner's administrative claim for tax credit within 120 days from March 3, 2014, or until July 1, 2014. Considering that the administrative claim remains unacted upon by respondent, petitioner had 30 days from July 1, 2014, or until July 31, 2014 within which to file its judicial claim before this Court. Here, petitioner filed the instant Petition for Review on July 31, 2014, which is well-within the prescriptive period under Section 112(C) of the NIRC of 1997, as amended. With respect to the third requisite, petitioner posits that its entire gold bullion and copper concentrate product is exported and sold directly to foreign commodities trader abroad. For this purpose, ?-z- 32 Exhibit "P-29". 33 Petition for Review, docket, pp. 6-15.

DECISION CfA CASE NO. 8855 petitioner was certified by the Board of Investments as an entity engaged in export sales. 34 By virtue thereof, petitioner maintains that its export sales are subject to VAT at zero percent (0�/o), pursuant to Section 106(A)(2)(a)(1) of the NIRC of 1997, as amended, which reads: "SEC. 106. Value-added Tax on Sale of Goods or Properties. - (A) Rate and Base of Tax. - XXX XXX XXX (2) The following sales by VAT-registered persons shall be subject to zero percent (0�/o) rate: (a) Export Sales. - The term 'export sales' means: (1) The sale and actual shipment of goods from the Philippines to a foreign country, irrespective of any shipping arrangement that may be agreed upon which may influence or determine the transfer of ownership of the goods so exported and paid for in acceptable foreign currency or its equivalent in goods or services, and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP);" Relative thereto, Sections 113(A)(1), (B)(1) and (2)(c) of the NIRC of 1997, as amended, as implemented by Sections 4.113- 1(A)(1), B(l) and (2)(c) of Revenue Regulations (RR) No. 16-2005, as amended, require that a VAT taxpayer shall, for every sale, issue a VAT invoice which must contain the following information: "SEC. 113. Invoicing and Accounting Requirements for VAT-Registered Persons. - (A) Invoicing Requirements. - A VAT-registered Jz- person shall issue: 34 Exhibit "P-35".

DECISION CTA CASE NO. 8855 (1) A VAT invoice for every sale, barter or exchange of goods or properties; and XXX XXX XXX (B) Information Contained in the VAT Invoice or VAT Official Receipt. - The following information shall be indicated in the VAT invoice or VAT official receipt: (1) A statement that the seller is a VAT-registered person, followed by his Taxpayer's Identification Number (TIN); (2) The total amount which the purchaser pays or is obligated to pay to the seller with the indication that such amount includes the value-added tax: Provided, That: XXX XXX XXX (c) If the sale is subject to zero percent (0�/o) value- added tax, the term 'zero-rated sale' shall be written or printed prominently on the invoice or receipt;" (Emphasis supplied) "SEC. 4.113-1. Invoicing Requirements. - (A) A VAT-registered person shall issue: - (1) A VAT invoice for every sale, barter or exchange of goods or properties; and XXX XXX XXX Only VAT-registered persons are required to print their TIN followed by the word 'VAT' in their invoice or official receipts. Said documents shall be considered as a 'VAT Invoice' or VAT official receipt. All purchases )e..

DEOSION CTA CASE NO. 8855 covered by invoices/receipts other than VAT Invoice/VAT Official Receipt shall not give rise to any input tax. VAT invoice/official receipt shall be prepared at least in duplicate, the original to be given to the buyer and the duplicate to be retained by the seller as part of his accounting records. (B) Information contained in VAT invoice or VAT official receipt. - The following information shall be indicated in VAT invoice or VAT official receipt: (1) A statement that the seller is a VAT-registered person, followed by his TIN; (2) The total amount which the purchaser pays or is obligated to pay to the seller with the indication that such amount includes the VAT; Provided, That: XXX XXX XXX (c) If the sale is subject to zero percent (0�/o) VAT, the term 'zero-rated sale' shall be written or printed prominently on the invoice or receipt;" (Emphasis supplied) In addition, the invoice or receipt must be duly registered with the BIR as prescribed under Sections 237 and 238 of the NIRC of 1997, as amended, to wit: "SEC. 237. Issuance of Receipts or Sales or Commercial Invoices. - All persons subject to an internal revenue tax shall, for each sale and transfer of merchandise or for services rendered valued at Twenty- five pesos (P25.00) or more, issue duly registered receipts or sales or commercial invoices, prepared at least in duplicate, showing the date of transaction, quantity, unit cost and description of merchandise or nature of service. xxx" (Emphasis supplied) j:t-

DECISION CTA CASE NO. 8855 "SEC. 238. Printing of Receipts or Sales or Commercial Invoices. - All persons who are engaged in business shall secure from the Bureau of Internal Revenue an authority to print receipts or sales or commercial invoices before a printer can print the same. No authority to print receipts or sales or commercial invoices shall be granted unless the receipts or invoices to be printed are serially numbered and shall show, among other things, the name, business style, Taxpayer Identification Number (TIN) and business address of the person or entity to use the same, and such other information that may be required by rules and regulations to be promulgated by the Secretary of Finance, upon recommendation of the Commissioner." In Intel Technology Philippines, Inc. v. Commissioner of Internal Revenue/5 the Supreme Court took into consideration various documents that may support a taxpayer's claim for refund or tax credit under Section 106(A)(2)(a)(1) of the NIRC of 1997, as amended. Thus: "To the mind of the Court, these documentary evidence submitted by petitioner, e.g., summary of export sales, sales invoices, official receipts, airway bills and export declarations, prove that it is engaged in the 'sale and actual shipment of goods from the Philippines to a foreign country.' In short, petitioner is considered engaged in export sales (a zero-rated transaction) if made by a VAT-registered entity. Moreover, the certification of inward remittances attests to the fact of payment 'in acceptable foreign currency or its equivalent in goods or services, and accounted for in accordance with the rules and regulations of the BSP.' Thus, petitioner's evidence, juxtaposed with the requirements of Sections 106 (A)(2)(a)(1) and 112(A) of the Tax Code, as enumerated earlier, sufficiently establish that it is entitled to a claim for refund or issuance of a tax credit certificate for creditable input taxes." Pursuant to Section 106(A)(2)(a)(1) of the NIRC of 1997, as amended, in relation to Sections 113(A)(1), (8)(1), and (2)(c) of the~ 35 G.R. No. 166732, April 27, 2007.

DECISION CTA CASE NO. 8855 same Code, Sections 4.113-1(A)(1), (B)(1) and (2)(c) of Revenue Regulations No. 16-05, and the ruling in Intel, any VAT-registered person claiming VAT zero-rated direct export sales may present the following documents to prove its claim, to wit: 1. Sales Invoice as proof of sale of goods; 2. Export Declaration and Bill of Lading or Airway Bill as proof of actual shipment of goods from the Philippines to a foreign country; and 3. Bank Credit Advice, Certificate of Bank Remittance or any other document proving payment for the goods in acceptable foreign currency or its equivalent in goods and services. In its Quarterly VAT Returns for the first and second quarters of 2012, petitioner declared total zero-rated sales of P1,046,234,319.35, broken down as follows: TAXABLE YEAR ZERO-RATED SALES/RECEIPTS 2012 First Quarter p 543,798,086.20 Second Quarter 502,436,233.15 TOTAL P1,046,234,319.35 To substantiate the foregoing, petitioner presented the Summary List of Sales for the first half of 201236, Schedule of Exportations37, Zero-Rated Provisional Invoices38, Zero-Rated Final Invoices39, Export Declarations40, Airway Bills4\ Bank Credit Memos42, and Bank Certificate of Inward Remittances.43 As ascertained by the Court-commissioned Independent Certified Public Accountant (CPA), Mr. Glenn Ian Villanueva, the reported zero-rated sales of P1,046,234,319.35 consisted of the following: 1st Quarter 2nd Quarter TOTAL I I In USD In Peso I In USD In Peso I In USD In Peso I 36 Exhibits "P-4A-1" to "P-4A-2". 37 Exhibits "P-48-1" to "P-48-4". 38 Exhibits "P-5A-1" to "P-5A-32". 39 Exhibits "P-58-1" to "P-58-32". 40 Exhibits "P-5C-1" to "P-5C-32". 41 Exhibits "P-5D-1" to "P-50-32". 42 Exhibits "P-5E-1" to "P-5E-32". 43 Exhibits "P-14-A" to "P-14-8".

DECISION CTA CASE NO. 8855 Sales per related 12 850 351.58 553 797 335.03 11 440 567.88 489 276 596.25 24 290 919.46 1 043 073 931.28 sales invoices (Exhibits P-SB-1 to 28 978.24 1195 543.51 5 259.42 225 455.33 34 237.66 1420 998.84 P-SB-32) (5 259.42) (225 455.33) 10 754.33 459 313.51 5 494.91 233 858.18 Add/(Less): 26 925.71 1159 897.64 19 988.84 854 718.60 46 914.55 2 014 616.24 Adjustments 272 427.35 (11 678,141.04) 11,621 916.99 272 427.35 (56 224.05) Prior Quarter Adjustments (451 093.61) - (451 093.61) Adjustments (1 767.53) Booked in (1 767.53) - the Succeeding Period Treatment Charges- Bullion Shipment Partially Recognized Next Quarter Adjustment in ForEx Rates due to Split Sales Unaccounted Difference Total 323 071.88 (9 999 248.83) 36 002.59 13 159 636.90 359 074.47 3 160 388.07 Total 13,173,423.46 543 798,086.20 11,476 570.47 502 436,233.15 24,649,993.93 1,046 234,319.35 Based on the foregoing, the total adjustments in the amount of P3,160,388.07 shall be denied VAT zero-rating for being unsupported and for not being reflected in the issued zero-rated final invoices. Likewise, the exportations/shipments in the amount of P90,909,330.71 shall also be disallowed for lack of corresponding airway bill, and for being made outside the period of claim, to wit: Shipment Final Reference Shipment Exhibit Invoice Exhibit No. Date No. No. No. Sales in USD Sales in PHP 1. Without supporting Airway Bill 5071 P-58-1 647 782.32 28 225 171.25 647.782.32 28,225.171.25 Sub-total 2. Shipments made outside the period ofclaim 31-12 02-Jul-2012 P-50-31 5128 P-58-31 787 070.90 33 615 011.07 680 632.85 29,069 148.39 32-12 06-Jul-2012 P-50-32 5129 P-58-32 1,467. 703.75 62,684,159.46 Sub-total 2,115,486.07 90,909,330.71 TOTAL Therefore, out of the P1,046,234,319.35 zero-rated sales reported by petitioner for the first and second quarters of 2012, only the amount of P952,164,600.57 is duly supported by zero-rated sales invoices as proof of sale of goods; airway bills as proof of actual shipment/exportation of goods; and Bank Credit Memos as certified by UCPB through the Bank Certification of Inward Remittance, as proof of collection in acceptable foreign currency, and qualifies forfo--

DECISION CTA CASE NO. 8855 VAT zero-rating under Section 106(A)(2)(a)(1) of the NIRC of 1997, as amended, computed below: Zero-Rated Sales per Returns , 3,160,388.07 , 1,046 234 319.35 Less: Disallowances 90 909,330.71 94 069 718.78 Petitioner's Adjustment without supporting P952,164,600.57 documents Without supporting airway bill and shipments made outside the period of claim Substantiated Zero-Rated Sales With respect to the fourth and fifth requisites, petitioner asserts that the claimed input taxes came from importations of capital and consumable goods, all of which are indispensable and used directly in its mining operations. Based on the Quarterly VAT Returns for the first and second quarters of 2012, the unutilized input VAT on purchases of goods claimed for tax credit is computed as follows: 1st Quarter 2nd Quarter Total Input Tax Deferred on capital Goods p 101042.20 p 397 483.80 p 498 526.00 exceeding P1 Million from Previous Quarter Add: Input Tax on Capital Goods exceeding 913 090.00 1 014,991.00 1,928,081.00 1 412,474.80 p 2,426,607.00 P1 Million Purchased this Quarter p 1 014 132.20 p Total Unamortized Input Tax on capital 730 472.00 811,992.80 1,542,464.80 Goods exceeding P1 Million Less: Input Tax on Purchases of capital p 283,660.20 p 600,482.00 p 884,142.20 Goods exceeding P1 Million deferred 8 523 280.00 11 050 298.33 19,573,578.33 for the succeeding period P8,806,940.20 P11,650,780.33 P20,457, 720.53 Amortization of Input Tax on Capital Goods exceeding Pl Million 3,014 859.99 660 274.44 3 675 134.43 Add: Input Tax on Importation of Goods P5,792,080.21 P10,990,505.89 P16,782,586.10 other than capital Goods Total Allowable Input Tax Less: Output Tax Excess Unutilized Input VAT To support its claim, petitioner presented as evidence the Import Entry and Internal Revenue Declarations (IEIRDs),44 Statement of Settlement of Duties and Taxes (SSDTs),45 Single Administrative Documents (SADs),46 Bank Certification on payments by petitioner to the Bureau of Customs (BOC) of taxes and duties47, and VAT sales invoices and official receipts48 issued by its suppliers, 'f-- 44 Exhibits "P-7-A" to "P-7-EA". 45 Exhibits "P-12-A" to "P-12-CK". 46 Exhibits "P-13-A" to "P-13-EK". 47 Exhibits "P-14-A" to "P-14-B". 48 Exhibits "P-20-A" to "P-20-AR".

DECISION CTA CASE NO. 8855 which were examined by the Independent CPA. The Independent CPA findings may be summarized as follows: Findings Annex 1st Quarter 2nd Quarter Total Input Tax on Importation ofGoods other than Capital Goods 1. Under e2M Customs49 supported by SADs, certified true copy of the Custom's copy of IEIRDs or original 12-A p 4,867,303.00 p 9,229,097.00 p 14,096,400.00 copy of the Declarant's copy of IEIRDs, and SSDTs dated within January to June 2012 and payment verified with Bank Certifications 2. Under e2M Customs supported by SADs and SDDTs dated within January 12-B 2,768,969.00 544,757.00 3,313,726.00 to June 2012 and payment verified with Bank Certification 3. Under e2M Customs supported by SADs, certified true copy of the Custom's copy of IEIRDs or original 12-C 159,497.00 490,637.00 650,134.00 copy of the Declarant's copy of IEIRDs, and SSDTs but not dated within January to June 2012 4. Under e2M Customs supported by SADs and 12-D 733,806.00 742,101.00 1,475,907.00 SDDTs but not dated within January to June 2012 5. Supported by certified true copy of Custom's copy of IEIRDs with no date 12-E 7,972.00 7,972.00 indicated and BOC official receipts not dated within January to June 2012 6. Supported by photocopy Custom's copy of IEIRDs and BOC official receipts, 12-F 1,451.33 1,451.33 both not dated within January to June 2012 7. Supported by SADs but not supported by any proof 12-G 18,631.00 18,631.00 of payment 8. Supported by photocopy of Informal Import Declaration and Entry and 12-H 3,194.00 3,194.00 BOC official receipt dated within January to June 2012 9. Supported only by BOC official receipt not dated 12-I 6,163.00 6,163.00 within January to June 2012 49 Electronic to Customs Mobile System.

DECISION P8,529,575.00 P11,044,003.33 P19,573,578.33 CfA CASE NO. 8855 Total Input VAT on Importations of Goods other than Ca itaI Goods Amortization ofInput Tax on Capital Goods exceeding 1'1 Million 1. Charged to expense (not traceable to asset account) 15 p 43,419.60 342,196.60 2. Under e2M Customs supported by SADs and SSDTs dated within 16 January to June 2012 and payment verified with Bank Certifications 498,526.00 P884,142.20 3. Input VAT on importations of capital goods with an aggregate amount exceeding P1 Million not supported by any documents 17 Total amortization Based on the foregoing, the input VAT of P2,924,906.56 shall be disallowed due to the following reasons: Findings Annex Total Input VAT on Importation ofGoods other than Capital Goods p 650,134.00 1. Input VAT on importations under e2M Customs 1,475,907.00 supported by SADs, certified true copy of the Custom's copy 7,972.00 of IEIRDs or original copy of the Declarant's copy of 12-C 1,451.33 IEIRDs, and SSDTs but not dated within January to 18,631.00 June 2012 3,194.00 6,163.00 2. Input VAT on importations under e2M Customs 12-D supported by SADs and SDDTs but not dated within 1'2,163,452.33 January to June 2012 p 43,419.60 3. Input VAT on importations supported by certified true 12-E 219,508.63 copy of Custom's copy of IEIRDs with no date indicated and BOC official receipts not dated within January to , 498,526.00 June 2012 761,454.23 P2,924,906.56 4. Input VAT on importations supported by photocopy 12-F Custom's copy of IEIRDs and BOC official receipts, both not dated within January to June 2012 5. Input VAT on importations supported by SADs but not 12-G supported by any proof of payment 6. Input VAT on importation supported by photocopy of Informal Import Declaration and Entry and BOC official 12-H receipt dated within Janua_ry to June 2012 7. Input VAT on importation supported only by BOC official 12-I receipt not dated within January to June 2012 sub-total Amortization ofInput VAT on Capital Goods exceeding 1'1 Million 1. Charged to expense {not traceable to asset account) 15 2. Over-claimed input VAT amortization under e2M Customs supported by SADs and SSDTs dated within 16 January to June 2012 and payment verified with Bank Certifications 3. Input VAT on importations of capital goods with an aggregate amount exceeding Pl Million not supported by any documents 17 sub-total TOTAL DISALLOWANCES

DECISION CTA CASE NO. 8855 Thus, out of the P20,457,720.53 input VAT reported by petitioner in the first and second quarters of 2012 Quarterly VAT Returns, only the amount of P17,532,813.97 is found to be properly substantiated by supporting documents, computed as follows: Claimed Input VAT per Returns p 20,457,720.53 Less: Disallowances 2,924,906.56 Substantiated Input VAT P17,532,813.97 After applying petitioner's substantiated input VAT of P17,532,813.97 against its output VAT of P3,675,134.43 for the subject period of the claim, there remains an excess input VAT of P13,857,679.54, which can be attributed to the entire zero-rated sales declared by petitioner in the amount of P1,046,234,319.35. Accordingly, only the input VAT of P12,611,698.60 is attributable to the substantiated zero-rated sales of P952,164,600.57, as computed below: Substantiated Input VAT p 17,532,813.97 Less: OutQ_ut VAT 3,675,134.43 Substantiated Excess Input VAT Multiply by substantiated zero-rated sales 13,857,679.54 Divided by total declared zero-rated sales 952,164,600.57 Excess Input VAT allocated to zero-rated sales 1,046,234,319.35 P12,611,698.60 With respect to the sixth requisite, the VAT-registered taxpayer must be able to establish that it has a refundable or creditable input VAT, and the same has not been applied against its output VAT liabilities - information which are supposed to be reflected in the taxpayer's VAT Returns. 50 Here, although petitioner carried over the claimed input VAT of P16,782,586.10, which includes the tax credit of P12,611,698.60, to the succeeding quarters up to the first quarter of taxable year 2014/1 the same remained unutilized until it was deducted as "VAT Refund/ TCC Claimed'152 in the first quarter of taxable year 2014. Thus, the excess input VAT of P41,242,608.9653 as of the end of the first quarter of taxable year 2014 which was carried over to the ~ 50 Atlas Consolidated Mining and Development Corporation vs. Commissioner ofInternal Revenue, G.R. No. 159471, January 26, 2011. 51 Exhibits "P-38" to "P-44". 52 Line 23D of Exhibit "P-44." 53 Line 29 of Exhibit "P-44".

DECISION CTA CASE NO. 8855 succeeding second quarter of taxable year 201454 does not include the subject claim. In sum, petitioner has partially established its entitlement to the issuance of tax credit certificate in the amount of P12,611,698.60, which represents its unutilized input VAT for the first and second quarters of taxable year 2012. WHEREFORE, premises considered, the instant Petition for Review is PARTIALLY GRANTED. Accordingly, respondent is ORDERED TO ISSUE A TAX CREDIT CERTIFICATE in favor of petitioner in the reduced amount of P12,611,698.60, representing its unutilized input VAT in the first and second quarters of taxable year 2012. SO ORDERED. ~�~c.~~ l5J.. WE CONCUR: ,-uANITO C. CASTANEDj(, JR. ~ Associate Justice CAESAR A. CASANOVA ~/)-- /� ~-4/ - Associate Justice AMELIA R. COTANGCO-MANALASTAS Associate Justice CERTIFICATION Pursuant to Section 13 of Article VIII 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. ~:lo C.~~.,~. <JUANITO C. CASTANEDA, JR. Acting Presiding Justice 54 Line 20A of Exhibit "P-45".