CORAL BAY NICKEL CORPORATION v. COMMISSIONER OF INTERNAL REVENUE

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY THIRD DIVISION CORAL BAY NICKEL CORPORATION, Petitioner, CTA CASE NO. 8451 -versus- Members: BAUTISTA, Chairperson; FABON-VICTORINO, and RINGPIS-LIBAN,JL COMMISSIONER OF INTERNAL REVENUE, Respondent. Promulgated: MAY 1 3 2016 ~~ ; I 2..- q, � - � C. "' ;;._ X-----------------------------------------------------------------------------------------------X DECISION RINGPIS-LIBAN, J. STATEMENT OF THE CASE This is a Petition for Review1 flied by Coral Bay Nickel Corporation against the Commissioner of Internal Revenue to seek the refund of the amount of Thirteen Million Nine Hundred Seventy-Eight Thousand Five Hundred Twenty-Nine Pesos and Twenty-Nine Centavos (P13,978,529.29), allegedly representing its unutilized input value-added tax 0JAT) related to zero-rated sales for the period covering January 1, 2010 up to December 31, 2010/1 1 Docket, vol. 1, pp. 6-16.

DECISION CTA CASE NO. 8451 STATEMENT OF FACTS Petitioner Coral Bay Nickel Corporation is a domestic corporation duly registered with and licensed by the Securities and Exchange Commission (SEC) to do business in the Philippines, with principal office address at Barangay Rio Tuba, Municipality of Bataraza, Palawan? It is a VAT-registered entity as evidenced by its Bureau of Internal Revenue (BIR) Certificate of Registration No. OCN 8RC0000019300, with Taxpayer's Identification Number (TIN) 005- 961-540-000.3 Petitioner is likewise registered with the Philippine Economic Zone Authority (PEZA) as an Ecozone Export Enterprise pursuant to its PEZA Certificate of Registration No. 02-072 dated December 27, 2002.4 On the other hand, respondent is the Commissioner of the Bureau of Internal Revenue, sued in her official capacity, having been duly appointed and empowered to perform the duties of her office, including, among others, the duty to act and approve claims for refund provided by law. She holds office at the BIR National Office Building, Agham Road, Dillman, Quezon City. Petitioner is principally engaged in the business of owning, holding, selling, exchanging, leasing, mortgaging or otherwise disposing of, dealing in, and operating plants for processing, reducing, concentrating, smelting, converting, refining, preparing for market, or otherwise treating metals, minerals and mined products to be used in the production of mixed sulfide of nickel and cobalt, and any and all ingredients, products and by-products of any thereof, and to produce, manufacture, process, refine, treat, sell, use, deal in, distribute, market and otherwise turn to account or dispose of mixed sulfide of nickel and cobalt, and any and all ingredients, products, and by-products of any thereof. 5 On September 1, 2004, petitioner entered into an "Off-Take Agreement"6 with Sumitomo Metal Mining Co. Ltd. (SMM), a corporation organized and existing under the laws of Japan. Under the agreement, petitioner shall sell to SMM all the products it produces and SMM shall purchase all such products from petitioner based on the terms and conditions set forth in the agreement. During taxable year 2010, petitioner exported nickel cobalt mixed sulfide to SMM, pursuant to the "Off-Take Agreement", which qualifies as VAT zero- rated sales in accordance with Section 106(A)(2)(a) of the National Internal Revenue Code (NIRC) of 1997, as amended. Petitioner, in the course of it~ 2 Pars. 1.1 and 1.4, Admitted Facts, Joint Stipulation of Facts and Issues (JSFI), docket, vol. 1, pp. 105-106; Exhibit "A", docket, vol. 2, p. 628. 3 Par. 1.5, Admitted Facts, JSFI, docket, vol. 1, p. 106; Exhibit "D", docket, vol. 2, p. 660. 4 Exhibit "B", docket, vol. 2, p. 645. 5 Exhibit "A-1", docket, vol. 2, pp. 633-644. 6 Exhibit "F", docket, vol. 2, pp. 669-681.

DECISION CTA CASE NO. 8451 trade or business, allegedly incurred and paid VAT input taxes in the total amount ofP13,978,529.29. For taxable year 2010, petitioner filed with the BIR its original and amended Q.....uarterlv VAT Returns on the followin2" dat Period Covered (2010) Date of Filing Return First Quarter7 April22, 2010 First Quarter (Amended)B June 16, 2011 First Quarter (Amended)9 July 21, 2010 Second Quarter1o July 23, 2010 Second Quarter (Amended)11 November 21, 2011 Third Quarter12 October 20,2010 Fourth Quarter13 January 14, 2011 Fourth Quarter (Amended)14 November 21, 2011 On November 29, 2011, petitioner flled an application for tax refund or issuance of tax credit certiflcate (TCC) for its alleged unutilized input VAT in the amount of P13,978,529.29, along with all supporting documents with the Large Taxpayers Audit Investigation Division II (LTAID II) of the Bureau of Internal Revenue.15 Thereafter, petitioner filed the instant Petition for Review on March 30, 2012 before this Court. Within the extended time granted by the Court, respondent filed her Answer16 on June 1, 2012. She interposed that petitioner is not entitled to the refund or tax credit in the amount of P13,978,529.29 representing its alleged unutilized input tax because it failed to submit all necessary and relevant documents in its administrative claim for refund or tax credit of excess input tax attributable to zero-rated sales. Respondent added that petitioner must submit complete documents to support its application for refund pursuant to Section 112(D) of the NIRC of 1997, as amended, otherwise, there will be no sufflcient compliance with the filing of an administrative claim for refund, which is a condition sine qua non prior to the flling of the judicial claim. Respondent likewise asserted that in an action for refund 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 or tax credit/ 7 Exhibit "K", docket, vol. 2, pp. 704-705. 8 Exhibit"K-1", docket, vol. 2, pp. 706-707. 9 Exhibit "K-2", docket, vol. 2, pp. 708-709. 10 Exhibit "L", docket, vol. 2, pp. 710-711. 11 Exhibit "L-1", docket, vol. 2, pp. 712-713. 12 Exhibit "M", docket, vol. 2, pp. 714-715. 13 Exhibit "N", docket, vol. 2, pp. 716-717. 14 Exhibit "N-1", docket, vol. 2, pp. 718-719. 15 Exhibits "E" and "E-2", docket, vol. 2, pp. 661-668. 16 Docket, vol. 1, pp. 73-78.

DECISION CTA CASE NO. 8451 In the Notice of Pre-Trial Conference17, the pre-trial conference was set on July 5, 2012. Accordingly, respondent's Pre-Trial Brie�18 was filed on June 15, 2012; while petitioner's Pre-Trial Brie�19 was filed on July 2, 2012. On July 27, 2012, the parties submitted their Joint Stipulation of Facts and Issues20� Thereafter, the Court issued the Pre-Trial Order21 on August 6, 2012, terminating the pre-trial. Upon motion22 of petitioner, the Court commissioned Mr. Henry M. Tan as the Independent Certified Public Accountant (Independent CPA) for this case. 23 During trial, petitioner presented the following witnesses: Mr. Allen Roy T. Catacutan2\ its Tax Assessment Chief; Mr. Henry M. Tan25, the Independent Certified Public Accountant; Mr. JohnS. Barrientos 26 the QS/CSR Manager of , SMCC Philippines, Inc.; and Engr. Zosimo Oliver P. Villa27, a Geodetic Engineer and an expert in Surveying. Petitioner filed its Formal Offer of Evidence28 on September 20, 2013. In the Resolution29 dated November 6, 2013, the Court admitted petitioner's E hibits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a""' '2JAn'I-"""' 4d1"4"Q'Z"E"'"'' "Z''""N4R"ZI"J444""B-----RE' 111324"""""""4-.'''''' The Court, however, denied the admission of Exhibits ''V-1" to ''V-86", ''W-1" to "W-8", "X-1" to "X-12"' "Y-1" to ''Y-12"' "Z-1" to "Z-9"' "AA-1" to "AA- "1E5"E' -"1B4B0"-1""EtoE"-B14B1-"12t"o' "CC-1" to "C"CE-E8-72"4' 7""DDto-1""EtEo-3"5D9D" -2""E' E"E-3E6-01"" to ' "EE-246" ' ' t~ o 17 Docket, vol. 1, p. 80. 18 Docket, vol. 1, pp. 81-85. 19 Docket, vol. 1, pp. 86-93. 20 Docket, vol. 1, pp. 105-111. 21 Docket, vol. 1, pp. 116-122. 22 Motion to Avail the Provisions of Rule 13 of the Revised Rules of the Court of Tax Appeals, docket, vol. 1, pp. 152-154. 23 Oath of Commission, docket, vol. 1, p. 168. 24 Minutes of the Hearing dated October 18, 2012, docket, vol. 1, p. 151. 25 Minutes of the Hearing dated January 14, 2013 and July 31, 2013, docket, vol. 1, p. 321 and vol. 2, p. 577. 26 Minutes of the Hearing dated June 3, 2013 and September 2, 2013, docket, vol. 1, p. 522 and vol. 2, p. 596. 27 Minutes of the Hearing dated September 2, 2013, docket, vol. 2, p. 596. 28 Docket, vol. 2, pp. 599-627. 29 Docket, vol. 2, pp. 869-870.

DECISION CTA CASE NO. 8451 "EE-458"' "FF-1" to "FF-2"' "GG-1"' "HH-1" to "HH-13"' "II-1" to "II-4"' 2"J8J5-"1"t'o"K"LKL-1-3"8t5o" '"toK"MI"<PM-P3--"11' 0""3Lt"Lo, -"1"Q"MQtMo-1-"3"L4Lt"o-' 1""4QN2"QN' --"21L""L, -t"1oR4R3""N-1tN"o-t"5oL""L' R-"2R08-042"-"'1, """LSLSto-- "00-15", "PP-1" """"11WGGE"" EGGtWtooEGG-"-5"--4BS13"5B'S00""B-00':2:""-X""3'F'X6toF"""-1GT'F"""-TG'GC1-"G"G1CY"-CGtY1o-t--0o131"0"3"F""'9tFTo""FtTZ'o"--Z1C"2H0-C""10G'HC"""G-'HtU1oG"-7UF1""-F"'-2Z1F"0Z"tD-0o1-"5Dt0o'""1DH'""""-HGUA1toHG"UA-Gt-"Ao27F-4-'2'"F1'"D0F"'"1-DVt"1"oIDV6I"2It--A-o"161'"A""'"'"AG"G"to-EWG3GE""WGG'EII"----IB1311-"0"6B"06Bttt""ooo-'' t"oJJJ"-N1"N' N"K-6K"K, "-10"0t0o-"1K"KtoK-"20"'0"0L-L4L8-"1,""tPoP"PL-1L"L-t5o"'"P"MPPM-6M",-1""Q' Q"NQN-1N"-1to" ""UQUQUQ--53"",' a"nRdRR"V-1V"V' "-S1"SSt-o1""VtoV"VS-S2S"-3f"o'r "TIT-1 "o ftope"tTitIioTn-e4r"'to"UsuUbUm-i1t "thtoe failure duly marked exhibits; and Exhibits "Y-13" to "Y-26" for not being identified during trial and for failure of petitioner to submit the duly marked exhibits. Petitioner flied a Motion for Reconsideration (with Motion to Reopen the Casef0 on November 27, 2013, praying for the admission of the denied exhibits. In the Resolution31 dated February 7, 2014, the Court partially granted petitioner's Motion, admitting its Exhibits "V-1" to "V-86", "W-1" to "W-8", "t"11oEX"" E-tt"o1oK-"1""K4BtFo1-BF3""--"Xt21,o2"-"'1""L'"2ELG""EC'-G-1"C2"Y-4-11-t6"o1""'"'t""ot"HLoE"LHEC''-Y--1C124--1"42827"7t"o"'"''"t""o"LHZDL"-HED-11-"E-411-t33o3"""5't"9otZ"o"I"-'I9D"-"L1"ED'"LE"--tA-22o3"8A6"'4-0I""1IE"'-"4Et"ot"Lo-'1L"'""EJ-A2JEt-o8A-154-"""15E' 58"Et"o"K-''1I"""<4BLF-0BLF1""---' 385", "MM-1" to "MM-34"' "NN-1" to "NN-5"' "00-1" to "00-15"' "PP- 1" to "PP-103", "QQ-1" to "QQ-2", "RR-1" to "RR-2", "SS-1" to "SS-2", "t"""""1oTFCGG0"'FTCGG0""F-C0YKGG1---1Y"K--111"3-"tK31"o0t"o-90t2"'o""tT"""o' FZ'Tt""oFHCZ"-"F20LC-H"-"10LGC1'H"0L0-G"-t10--Uo1G174""U"'""8-'Z2"-t"o1Ft0Z"o,"F0D-"F"5"Ht"Do'P-"LH1'PD"L"0"HGPU-AL1-1-G"U-1A2"5G"-t4A"o7"t'--o't2''"1o'"0"F"M""I1FV"ItD"oMFIPV-D-P1"tM1-oAP"D16--A"2t-16"o'6"GA""''"','"W-G'"I3"G"IG""WINQ'E-G-6"NQ-3EGB160NQE""B-0'1---Bt"11"1o"'J-"""1Jt""Jo'WG't-tto1oot"GoW"G'G""""G-"EBNQ5-IGE3<B"QN0'EK-BQN01"-K-X"04-3--36056X1t"""""o"-,'''' "aRndRR"V-1V"'V"-S1S" St-o1""VtoV"VS-S2S".-3"'T"hTe ICTo-u1r"t,toho"wTeIvTer-,4d"e' n"iUedUUpe-t1it"iotnoer"'Us UmUot-i5o"n' to reopen the case and thus, still denied the admission of Exhibits ''Y-13" to "Y-26". Thereafter, petitioner flied a Motion for Reconsideration (On the Motion to Reopen the Casef2, through registered mail on February 26, 2014, which was received by the Court on March 11, 2014, praying that the case ~ 30 Docket, val. 2, pp. 875-891. 31 Docket, val. 2, pp. 904-907. 32 Docket, val. 2, pp. 908-913.

DECISION CTA CASE NO. 8451 reopened for the purpose of identifying Exhibits ''Y-13" to "Y-26". This was granted by the Court in the Resolution33 dated May 20, 2014. Petitioner's witnesses Mr. Allen Roy T. Catacutan34 and Mr. Henry M. Tan35 were recalled to identify Exhibits "Y-13" to "Y-26". Petitioner then filed a Supplemental Formal Offer of Evidence36 on July 25, 2014. In the Resolution37 dated August 8, 2014, the Court admitted petitioner's Exhibits "S4" and "S4-1" but denied its Exhibits ''Y-13", ''Y-14", '"'YY--1254""' "fYor-16f"a'il"uYre-17o"f' "pYe-t1it8i"o'n"eYr -1to9"' s"uYb-m20it"' 't'hYe-21d"u'ly''Y-m2a2r"k' e"dY-2ex3h"i'baintsd. Consequently, petitioner flied a Motion for Reconsideration38 on August 20, 2014, praying for the admission of its denied exhibits. This was granted by the Court in the Resolution39 dated October 13, 2014, admitting Exhibits ''Y-13", ''Y-14"' "Y-15"' "Y-16"' "Y-17"' "Y-18"' ''Y-19"' ''Y-20"' ''Y-21"' ''Y-22"' ''Y- 23", ''Y-24", "Y-25", and "Y-26". Subsequently, respondent presented her sole witness, Revenue Officer Evangeline M. Casipe40 on December 1, 2014. Afterwards, respondent flied a Motion for Leave to Admit Attached Formal Offer of Evidence41 on December 17, 2014. This was granted by the Court in the Resolution42 dated February 16, 2015, which also admitted respondent's Exhibits "R-1", "R-2", "R-3" "R-4" "R-5" "R-6" and "R-6-a" ' ' ' ' 0 Petitioner flied its Memorandum43 on April 21, 2015. On the other hand, respondent failed to file her Memorandum as per Records Verification44 dated May 4, 2015. Thereafter, in the Resolution45 dated May 27, 2015, the instant case was declared submitted for decision. STATEMENT OF ISSUES The parties stipulated the following issues46 for resolution of this Cou~ 33 Docket, val. 2, pp. 937-939. 34 Minutes of the Hearing dated June 26, 2014, docket, val. 2, p. 982. 35 Minutes of the Hearing dated July 21, 2014, docket, val. 3, p. 1032. 36 Docket, val. 2, pp. 1004-1010. 37 Docket, val. 3, pp. 1037-1038. 38 Docket, val. 3, pp. 1042-1045. 39 Docket, val. 3, pp. 1069-1070. 40 Minutes of the Hearing dated December 1, 2014, docket, val. 3, p. 1090. 41 Docket, val. 3, pp. 1094-1098. 42 Docket, val. 3, pp. 1117-1118. 43 Docket, val. 3, pp. 1147-1178. 44 Docket, val. 3, p. 1179. 45 Docket, val. 3, p. 1181. 46 Statement of the Issues, JSFI, docket, val. 1, p. 108.

DECISION CTA CASE NO. 8451 Whether Petitioner is entitled to refund in the amount of Thirteen Million Nine Hundred Seventy-Eight Thousand Five Hundred Twenty-Nine Pesos and Twenty-Nine Centavos (Php13,978,529.29) on its unutilized input VAT attributed to its zero rated sales, for the period January 1, 2010 up to December 31,2010. a) Whether Petitioner is engaged in zero-rated or effectively zero-rated sales; b) Whether the input taxes being claimed are due or paid; c) Whether the input taxes being claimed have not been applied against output taxes during and in the succeeding quarters; d) Whether the input taxes claimed are attributable to zero-rated or effectively zero-rated sales; e) Whether the claim is flied within two years after the close of the taxable quarter when such sales were made. f) Whether petitioner has complied with the provisions of Section 112 of the NIRC of 1997, as amended, in the prescriptive period for flling of administrative and judicial claims for refund and/or issuance of a tax credit certificate. DISCUSSION/RULING Pertinent to petitioner's refund claim is Section 112(A) of the National Internal Revenue Code of 1997, as amended, which allows the refund or tax credit of unutilized input tax attributable to zero-rated or effectively zero-rated sales. Section 112(A) is quoted hereunder for ready reference: "SEC. 112. Refunds or Tax Credits ofInput Tax.- (A) Zero-Rated or Efftctive!J Zero-Rated Safes. - 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 credi~

DECISION CTA CASE NO. 8451 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 (B)(1) and (2), the acceptable foreign currency exchange proceeds thereof had been duly accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (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 of properties or services, and the amount of creditable input tax due or paid cannot be directly and entirely attributed to any one of the transactions, it shall be allocated proportionately on the basis of the volume of sales: Provided, ftnal!J, That for a person making sales that are zero-rated under Section 108 (B)(6), the input taxes shall be allocated ratably between his zero-rated and non-zero-rated sales." Pursuant to the above-quoted provision and, as laid down by the Supreme Court in a number of cases47, a taxpayer engaged in zero-rated or effectively zero-rated transactions may claim a refund/tax credit certificate for input taxes attributable to such sales upon compliance with the following requisites: 1. the taxpayer is engaged in sales which are zero-rated or effectively zero-rated; 2. the taxpayer is VAT-registered; 3. the claim must be flied within two (2) years after the close of the taxable quarter when such sales were made; 4. the creditable input tax due or paid must be attributable to such sales and were not applied against output VAT liability; and 5. the foreign currency exchange proceeds thereof had been duly accounted for in accordance with BSP rules and regulations. The Court finds it appropriate to resolve first the issue pertaining to the timeliness of the filing of petitioner's claim for refund prior to resolving the ~ 47 Commissioner of Internal Revenue vs. Toledo Power Company, G.R. Nos. 195175 & 199645, August 10, 2015; Luzon Hydro Corporation vs. Commissioner of Internal Revenue, G.R. No. 188260, November 13, 2013; Southern Philippines Power Corporation vs. Commissioner of Internal Revenue, G.R. No. 179632, October 19, 2011; Silicon Philippines, Inc. (Formerly Intel Philippines Manufacturing, Inc.) vs. Commissioner of Internal Revenue, G.R. No. 172378, January 17, 2011; AT&T Communications Services Philippines, Inc. vs. Commissioner of Internal Revenue, G.R. No. 182364, August 3, 2010; San Roque Power Corporation vs. Commissioner of Internal Revenue, G.R. No. 180345, November 25, 2009; Intel Technology Philippines, Inc. vs. Commissioner ofInternal Revenue, G.R. No. 166732, April 27, 2007.

DECISION erA CASE NO. 8451 other requisites to determine whether this Court has acquired the proper jurisdiction over the case. Petitioner timely filed its claim The relevant provision in determining the timeliness of petitioner's claim is Section 112(A) and (C) of the NIRC of 1997, as amended, which reads: "SEC. 112. Refunds or Tax Credits ofInput Tax.- (A) Zero-Rated or Efftctive!J Zero-Rated Sales. - Any VAT- registered person, whose sales are zero-rated or effectively zero- rated may, within two (2) years after the close of the taxable quarter when the sales were made, apply for the issuance of a tax credit certificate or refund of creditable input tax due or paid attributable to such sales, except transitional input tax, to the extent that such input tax has not been applied against output tax: Provided, however, That in the case of zero-rated sales under Section 106(A)(2)(a)(1), (2) and (b) and Section 108 (B)(1) and (2), the acceptable foreign currency exchange proceeds thereof had been duly accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (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 of properties or services, and the amount of creditable input tax due or paid cannot be directly and entirely attributed to any one of the transactions, it shall be allocated proportionately on the basis of the volume of sales: Provided, jinal!J, That for a person making sales that are zero-rated under Section 108 (B)(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 ofInput 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, t~

DECISION CTA CASE NO. 8451 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." (Emphasis supplied) In addition, Section 4.112-1 of Revenue Regulations No. 16-2005 states that: "SECTION 4.112-1. Claims for Refund/Tax Credit Certificate ofInput Tax. - (a) Zero-rated and Effective!J Zero-rated Sales of Goods, Properties or Services A VAT-registered person whose sales of goods, properties or services are zero-rated or effectively zero-rated may apply for the issuance of a tax credit certificate/refund of input tax attributable to such sales. The input tax that may be subject of the claim shall exclude the portion of input tax that has been applied against the output tax. The application should be filed within two (2) years after the close of the taxable quarter when such sales were made. In case of zero-rated sales under Sees. 106(A)(2)(a)(1) and (2), and Sec. 106(A)(2)(b) and Sec. 108(B)(1) and (2) of the Tax Code, the payments for the sales must have been made in acceptable foreign currency duly accounted for in accordance with the BSP rules and regulations." (Emphasis supplied) Based on the foregoing provisions, the application for tax credit certificate or refund of unutilized excess 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. The present petition pertains to the taxable quarters ended March 31, 2010, June 30, 2010, September 30, 2010 and December 31, 2010. Counting two years from the said dates, petitioner had until March 31, 2012, June 30, 2012, September 30, 2012 and December 31, 2012, within which to file its administrative claim for issuance of tax credit certificate or tax refund. Thus, petitioner's administrative claim was timely ftled on November 29, 2011, as shown below/

DECISION CTA CASE NO. 8451 CY2010 Close ofthe Taxable Last Day to File Date of Filing of 1st Quarter Quarter Administrative Claim Administrative Claim and 2nd Quarter Submission of Documents 3rd Quarter March 31, 2010 March 31, 2012 4th Quarter June 30, 2010 June 30,2012 November 29, 2011 48 September 30, 2010 September 30, 2012 December 31, 2010 December 31, 2012 Anent petitioner's judicial claim, applying Section 112(C) of the NIRC of 1997, as amended, respondent had 120 days from November 29, 2011 or until March 28, 2012 to act upon petitioner's application for refund. Respondent, however, failed to render a decision on petitioner's administrative claim within that period. Consequently, petitioner had thirty (30) days or until April 27, 2012, within which to appeal its claim for refund before the Court of Tax Appeals. Thus, the Petition for Review was timely ftled on March 30, 2012. The Court shall now determine whether petitioner complied with the other requisites for entitlement to a refund in the amount of P13,978,529.29, allegedly representing its unutilized input VAT attributed to its zero-rated sales for taxable year 2010. Petitioner is a VAT-registered taxpayer It is apparent from the records that petitioner is a VAT-registered entity as evidenced by its BIR Certificate of Registration No. OCN8RC0000019300 duly issued by respondent, with Taxpayer Identification No. 005-961-840-000.49 Petitioner had zero-rated sales and the proceeds thereof were paid in foreign currency duly accounted for in accordance with BSP rules and regulations Petitioner is registered with the Philippine Economic Zone Authority and is primarily engaged in the manufacture of nickel/cobalt mixed sulfide5� for shipment to its sole customer, Sumitomo Metal Mining Co., Ltd., a corporation organized and existing under the laws of Japan, based on an Off-Take Agreement51 . Petitioner asserts that these mixed sulfide are 100% exported and/or shipped to Japan and are paid for in acceptable foreign currency, specifically in US Dollars, which are inwardly remitted to the Philippines and accounted for in accordance with the rules and regulations of the Bangko Sentrai ng Pilipinas (BSP), hence, the same are subject to zero percent (0%) VAT, pursuant to Section 106(A)(2)(a)(1) of the NIRC of 1997, as amended/11' 48 Exhibits "E" to "E-3", docket, vol. 2, pp. 661-668. 49 Exhibit "D", docket, vol. 2, p. 660; Par. 1.5, Admitted Facts, JSFI, docket, vol. 1, p. 106. 50 Exhibits "B" and "C", inclusive of sub-markings, docket, vol. 2, pp. 645- 659. 51 Exhibit "F", docket, vol. 2, pp. 669-681.

DECISION CfA CASE NO. 8451 Section 106(A)(2)(a)(1) of the NIRC of 1997, as amended, provides: "SEC. 106. Value-added Tax on Sale ofGoods or Properties.- (A) &lte and Base ofTax. - XXX XXX XXX (2) The following sales by VAT-registered persons shall be subject to zero percent (0%) 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);" Based on the afore-quoted provision, in order for an export sale to qualify as zero-rated, the following conditions must be present: 1. that there was sale and actual shipment of goods from the Philippines to a foreign country; 2. that the sale was made by a VAT-registered person; 3. that the sale was paid for in acceptable foreign currency or its equivalent in goods or services; and 4. that the payment was accounted for in accordance with the rules and regulations of the BSP. Corollary to the first requisite, Section 113(A)(1), (B)(1), (2)(c) and (3) of the NIRC of 1997, as amended, as implemented by Section 4.113-1(A)(1), B(1) and (2)(c) of RR No. 16-2005, as amended, provides that a VAT taxpayer, like herein petitioner, shall for every sale, barter or exchange of goods or properties, 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 person shall 1ssue:l"'

DECISION CTA CASE NO. 8451 (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 Offtciai 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%) value-added tax, the term 'zero-rated sale' shall be written or printed prominently on the invoice or receipt; XXX XXX XXX (3) The date of transaction, quantity, unit cost and description of the goods or properties or nature of the service; and xxx" (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 b y receipts. Said documents shall be considered as a 'VAT Invoice' or VAT official receipt. All purchases covered

DECISION CTA CASE NO. 8451 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%) VAT, the term 'zero-rated sale' shall be written or printed prominently on the invoice or receipt;" (Emphasis supplied) In addition to the above requirements, the invoice or receipt must be duly registered with the BIR as prescribed under Section 237 in relation to Section 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 sale 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) "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~

DECISION CTA CASE NO. 8451 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." Pursuant to the foregoing provision of Section 106(A)(2)(a)(1) of the NIRC of 1997, as amended, in relation to Sections 113(A)(1), (B)(1), (2)(c) and (3), 237 and 238 of the same Code, and Section 4.113-1 (A)(1), B(1) and (2)(c) of Revenue Regulations No. 16-2005, any VAT-registered person claiming VAT zero-rated direct export sales must present at least three (3) types of documents, 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 other words, only export sales supported by these documents shall qualify for VAT zero-rating under Section 106(A)(2)(a)(1) of the NIRC of1997, as amended. Furthermore, the sales invoices supporting the export sales must be registered with the BIR and must contain all the required information under the law and regulations, such as the imprinted word "zero-rated" and the taxpayer's TIN-VAT number. Petitioner submitted relevant documents such as sales invoices 52 bills of , lading53, advices of incoming foreign remittances issued by Bank of Tokyo- Mitsubishi UFJ Manila Branch54, general ledger for sales 55 and Audited , Financial Statements56 in order to prove the amount of P15,794,429,332.83 zero-rated sales; which was reported in its amended Quarterly VAT Returns for the year 2010, as follows: EXHIBIT NO. TAXABLE YEAR ZERO-RATED SALES "K-2"57 2010 p 3,392,863,165.35 "L-1 "58 3,499,111,657.20 1st Quarter "M"S9 - y 2,429,796,266.53 2nd Quarter 3rd Quarter 52 Exhibits "Y-1" to "Y-13" and "Z-1" to "Z-9". 53 Exhibits "Y-14" to "Y-26". 54 Exhibits "AA-1" to "AA-10". 55 Exhibits "AAA-1" to "AAA-3". 56 Exhibits "BBB-1" to "BBB-36". 57 Docket, vol. 2, pp. 708-709. 58 Docket, vol. 2, pp. 712-713. 59 Docket, vol. 2, pp. 714-715.

DECISION CTA CASE NO. 8451 "N-1"60 I 4th Quarter 6,472,658,243.75 P15, 794,429,332.83 TOTAL However, out of the P15,794,429,332.83 declared zero-rated sales, the Court-commissioned Independent CPA, Mr. Henry M. Tan, accounted for a total amount of P15,602,245,250.86 only, of which only the amount of P15,486,382,071.53 has corresponding foreign currency remittances, detailed as follows: 61 Invoice Bill of Equivalent Amount Amount per Advice Lading oflnvoice in PhP (per of Incoming Serial Exh Amount Per Foreign (Exh Invoice General Ledger Remittance Date No. No. No) (in US$) balances) Peso Equivalent Original Invoicu (Provisional Cakufation Y-14 Y-15 1/18/2010 0083 Y-1 Y-16 23,471,094.84 1,061,785,388.37 23,471,094.84 1,061,785,388.37 Y-17 20,135,990.90 925,651,501.68 20,135,990.90 925,651,501.68 2/11/2010 0084 Y-2 Y-18 31,363,801.43 31,363,801.43 Y-19 31,294,869.82 1,427,805,696.30 31,294,869.82 1,427,805,696.30 3/16/2010 0086 Y-3 Y-20 24,827,177.72 1,395,125,296.58 22,344,459.95 1,395, 125,296.58 Y-21 13,284,561.72 1,166,455,290.82 13,284,561.72 1,049,809,761.74 4/15/2010 0089 Y-4 Y-22 8,405,470.73 8,405,470.73 Y-23 17,963,462.63 616,722,493.29 17,963,462.63 616,722,493.29 5/21/2010 0091 Y-5 Y-24 25,927,656.74 390,005,436.40 23,334,891.06 390,005,436.40 Y-25 22,441,521.60 807,996,549.10 20,197,369.44 807,996,549.10 6/23/2010 0093 Y-6 Y-26 39,749,869.36 1,144,005,998.34 35,774,882.42 1,143,388,920.11 32,760,932.37 987,651,365.62 29,484,839.13 987,826,409.49 7/20/2010 0094 Y-7 Y-14 29,419,524.97 1,690,005,445.71 26,477,572.47 1,694,970,204.39 Y-15 1,432,504,528.81 1,431,541,357.39 8/12/2010 0096 Y-8 Y-16 1,291,723,082.86 1,288,945,879.71 Y-19 9/4/2010 0097 Y-9 Y-20 Y-21 9/27/2010 0098 Y-10 10/28/2010 0100 Y-11 11/25/2010 0101 Y-12 12/20/2010 0104 Y-13 Invoice Adjustments (Final Computation): 3/1/2010 0085 Z-1 1,392,731.58 64,267,598.76 1,392,731.58 64,267,598.76 2,316,328.21 106,852,220.33 2,316,328.21 106,852,220.33 4/1/2010 0087 Z-2 3,563,183.89 164,369,672.84 3,563,183.89 164,369,672.84 7,642, 107.83 337,643,608.15 7,642,107.83 337,643,608.15 4/1/2010 0088 Z-3 5,062,523.13 235,235,199.76 5,062,523.13 235,235,199.76 2,364,946.92 108,697,690.34 2,364,946.92 108,697,690.34 5/4/2010 0090 Z-4 32,412,177.83 752,668.83 32,412,177.83 752,668.83 74,234,037.17 6/1/2010 0092 Z-5 1,693,796.89 74,234,037.17 1,693,796.89 141,094,971.80 3,219,361.85 141,094,971.80 3,219,361.85 15,486,382,071.53 8/2/2010 0095 Z-6 349,053,583.96 15,602,245,250.86 331,540,915.67 11/2/2010 0099 Z-7 12/1/2010 0102 Z-8 12/1/2010 0103 Z-9 The Court found that there is a discrepancy amounting to P192,184,081.97 between the zero-rated sales per petitioner's VAT returns in the amount of P15,794,429,332.83 and the zero-rated sales accounted by the Independent CPA in the amount of P15,602,245,250.86. Other than the credit memos in the amounts of US$4,130.7662, US$9,845.95 63 and US$3,131.126\ , pertaining to downward adjustments to petitioner's sales covered by invoic~ 60 Docket, vol. 2, pp. 718-719. 61 Exhibits "V-18" and "V-19". 62 Exhibit "AA-11". 63 Exhibit "AA-12". 64 Exhibit "AA-13".

DECISION CTA CASE NO. 8451 nos. 0097, 0100, and 0101, petitioner failed to explain such discrepancy. Hence, petitioner's declared zero-rated sales relating to the said discrepancy in the amount of P191 ,446,298.69 shall be denied VAT zero-rating, computed as follows: Zero-Rated Sales per VAT returns P15, 794,429,332.83 15,602,245,250.86 Zero-Rated Sales accounted by the Independent CPA p 192,184,081.97 Discrepancy 737,783.28 Less: Credit Memos p 191,446,298.69 Exh. No. Inv. No. Amt. in US$ Amt. in PhP6s A-11 0097 4,130.76 182,261.52 AA-12 0100 9,845.95 418,610.41 AA-13 0101 3,131.12 136,911.35 17,107.83 737,783.28 Zero-Rated Sales without supporting documents Likewise, there is a P115,863,179.33 discrepancy between the zero-rated sales accounted by the Independent CPA in the amount of P15,602,245,250.86 and those with foreign currency remittances in the amount of P15,486,382,071.53. Such discrepancy representing zero-rated sales without foreign currency remittances shall be denied VAT zero-rating. Moreover, the Court found that the P15,486,382,071.53 zero-rated sales with foreign currency remittances included the amount of P335,489,491.93, which does not have corresponding bills of lading, hence, must also be disallowed: Invoice Amount per Advice of Incoming Foreign Exhibit No. Serial No. Peso Equivalent Remittance (in US$) 64,267,598.76 Z-1 0085 1,392,731.58 106,852,220.33 2,316,328.21 164,369,672.84 Z-2 0087 3,563,183.89 7,272,243.68 335,489,491.93 J Z-3 0088 Zero-Rated Sales without bills of lading In sum, of the P15,794,429,332.83 zero-rated sales reported by petitioner 1n its 2010 amended Quarterly VAT Returns, only the amount of P15,151,630,362.90, as computed below, qualifies for VAT zero-rating under Section 106(A)(2)(a)(1) of the NIRC of 1997, as amended: Zero-Rated Sales per VAT returns p 15,794,429,332.83 Less: Disallowances Without supporting documents P191,446,298.69 Without foreign currency remittances 115,863,179.33 /./ 65 Equivalent Amount of Invoice in Peso (per General Ledger balances) divided by Amount per Invoices in US$ multiplied by US$ amount per Credit Memo.

DECISION CfA CASE NO. 8451 Without bills of lading I 335,489,491.93 642,798,969.95 Valid Zero-Rated Sales I P15,151,630,362.90 Petitioner paid input VAT attributable to zero-rated sales and were not applied against any output VAT In its amended Quarterly VAT Returns for taxable year 2010, petitioner reflected a total amount of P13,978,529.29 input VAT arising from amortization of input VAT on capital goods exceeding P1 ,000,000.00, domestic purchases of goods other than capital goods, and domestic purchases of services for the same period, broken down as follows: 1st Quarter 2nd Quarter (Exh. ''K-2") (Exh. "L-1'') Input Tax Deferred on Capital Goods exceeding P1 J\1illion from p 975,162.34 p 1,044,821.25 Previous Quarter Add: Input Tax on Capital Goods exceeding P1 Iv:Wlion 154,821.43 Purchased this Quarter - Total Unamortized Input Tax on Capital Goods exceeding P1 Iv:Wlion p 1,129,983.77 p 1,044,821.25 Less: Input Tax on Purchases of Capital Goods exceeding P1 1,044,821.25 959,658.73 Iv:Wlion deferred for the succeeding period Amortization of Input Tax on Capital Goods exceeding P1 p 85,162.52 p 85,162.52 Iv:Wlion Add: Input Tax on - 90,889.06 79,161.10 Domestic Purchases of Goods Other than Capital Goods 2,723,698.68 1,838,407.42 Domestic Purchase of Services p 2,899,750.26 p 2,002,731.04 Total Allowable Input Tax 3rd Quarter 4th Quarter (Exh. Total (Exh. "M'') "N-1'') Input Tax Deferred on Capital Goods p 959,658.73 p 874,496.21 p 975,162.34 exceeding P1 Iv:Wlion from Previous Quarter - 127,500.00 282,321.43 Add: Input Tax on Capital Goods p 1,001,996.21 p 1,257,483.77 p 959,658.73 exceeding P1 Million Purchased this Quarter 874,496.21 910,458.69 910,458.69 Total Unamortized Input Tax on Capital p 85,162.52 p 91,537.52 p 347,025.08 Goods exceeding P1 l'vfillion Less: Input Tax on Purchases of Capital 110,692.86 78,871.56 359,614.58 Goods exceeding P1 l'vlillion 4,642,999.37 4,066,784.16 deferred for the succeeding period P4,838,854.75 P4,237 ,193.24 13,271,889.63 Amortization of Input Tax on Capital Goods exceeding P1 Million P13,978,529.29 Add: Input Tax on- ~ Domestic Purchases of Goods Other than Capital Goods Domestic Purchase of Services Total Allowable Input Tax

DECISION CTA CASE NO. 8451 In support of the P13,978,529.29 input taxes, petitioner submitted its Summary List of Purchases66, general ledger for input taxes67, and the related suppliers' invoices and official receipts68� Upon examination of these documents, the Court-commissioned Independent CPA, in the Second Supplemental Report69 dated January 18, 2013, noted the following exceptions on petitioner's claimed input VAT: Findings Amount of Input Exhibit VAT Input VAT on purchases ofgoods: XXX-49 29,478.51 XXX-50 Supported by VAT invoice dated outside period of claim 1,862.40 XXX-51 Supported with VAT invoice with wrong TIN of company 93.54 XXX-52 Supported by VAT invoice not issued in the name of company 5,529.72 Supported by VAT invoice with VAT not separately indicated Subtotal 36,964.17 Input VAT on purchase ofseroim: Supported by VAT OR not issued in the name of company XXX-63 and DDD-1 43,485.78 to DDD-7, Annex 5 Supported by VAT OR with VAT amount not reconciled with VAT claimed by the company Input VAT Should-be Overclaimed Payee OR No. Claim Input VAT Input VAT Jupiter Arms 25107 990.45 940.07 50.38 Properties Inc. Mandarin Oriental 29819A 2,642.76 880.92 1,761.84 Manila Total 3,633.21 1,820.99 1,812.22 1,812.22 XXX-64 Supported by VAT OR with VAT not separately indicated XXX-65 and DDD-1 123,706.84 to DDD-7, Annex 7 Supported by VAT OR dated outside period of claim 645,349.08 XXX-67 to XXX-68 and DDD-1 to DDD- Supported with VAT OR with wrong or no TIN of company 8,273.19 Supported by VAT OR with no registered address of the company 765.67 7, Annex 3 XXX-69 and DDD-1 Supported by VAT OR with no date indicated 1,952.66 to DDD-7, Annex 6 XXX-70 XXX-71 and DDD-1 to DDD-7, Annex 4 Supported by VAT OR with no TIN and registered address of company XXX-72 and DDD-1 92,878.66 to DDD-7, Annex 8 Supported by VAT OR not issued in the name of company and/or no 75,561.83 XXX-73 and DDD-1 registered address or TIN and with VAT not separately indicated 17,992.48 to DDD-7, Annexes Supported by a photocopied VAT OR and with VAT not separately indicated or not issued in the name of company 2,904.86 10, 12 and 16 Supported by non-VAT official acknowledgement receipt or statements of XXX-74 and DDD-1 account (SOAs) to DDD-7, Annex 17 XXX-75 and DDD-1 to DDD-7, Annex 18 ~ 66 Exhibits "BB-1" to "BB-12". 67 Exhibits "CCC-1" to "CCC-17". 68 Exhibits "CC-1" to "CC-87", "DD-1" to "DD-2", "EE-l" to "EE-458", "FF-1" to "FF-2", "GG-1", "HH-1" to "HH-13", "2-1" to "2-4", "JJ-1", "KK-1" to "KK-3", "LL-1" to "LL-385", "MM-1" to "MM- 34", "NN-1" to "NN-5", "00-1" to "00-15", "PP-1" to "PP-103", "QQ-1" to "QQ-2", "RR-1" to "RR-2", "SS-1" to "SS-2", "TI-l" to "TI-2", "UU-1" to "UU-7", "W-1", "WW-1" to "WW-5", "XX- 1", "YY-1", "ZZ-1" to "ZZ-5", "EEE-1" to "EEE-45", "FFF-1" to "FFF-162", "GGG-1" to "GGG- 339", "HHH-1" to "HHH-24", "III-1"-111-66", "JJJ-1", "KKK-1" to "KKK-2", "LLL-1" to "LLL-5", "MMM-1", "NNN-1" to "NNN-6", "000-1" to "000-48", "PPP-1" to "PPP-6", "QQQ-1" to "QQQ- 3", "RRR-1", "SSS-1" to "SSS-3", "nT-1" to "nT-4", "UUU-1" to "UUU-5", and "VW-1" to "VW-2". 69 Exhibits "XXX-1" to "XXX-120".

DECISION CTA CASE NO. 8451 Supported by a VAT OR with wrong registered address of the company 824.78 XXX-76 605.72 XXX-77 and DDD-1 Supported by VAT OR not issued in the name of the company and with to DDD-7, Annexes wrong/no TIN and/or wrong/no registered address of company Supported by VAT OR not issued in the name of the company and with no 13, 14 and 15 TIN and registered address of company 22,641.67 XXX-78 Subtotal 1,038,755.44 Input VAT on pun�hase ofgoods and seroices without supporting do�"Uments 288,221.95 TOTAL P1,363,941.56 The Court finds that aside from the input VAT of P1 ,363,941.56 excepted by the Independent CPA, the following input VAT in the amount of P1,914,851.82 shall likewise 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, in relation to Sections 4.110-1, 4.110-8, and 4.113-1 of Revenue Regulations No. 16-05, as amended, detailed as follows: Exhibit No. Supplier Input VAT 1. Authority to Print unreadable or cannot be seen dearfy on OR 623.22 623.22 EE-360 Philippine Ports Authority 132.12 Subtotal 132.12 Alteration in the name ~~pqyor/purchaser countersigned but authority rifthe 7.56 15.31 2. countersignor cannot be ascertained 5.47 67.08 EEE-7 Philippine Ports Authority 3.00 15.12 Subtotal 7.56 3.00 Name rifpetitioner sttperimposed/stamped on VAT OR but without countersignature rif 7.56 3.00 3. issuer ofOR 3.00 7.56 EE-259 Philippine Ports Authority 3.00 12.43 EE-366 Philippine Ports Authority 160.65 EEE-2 Philippine Ports Authority 66.12 86.80 EEE-9 Philippine Ports Authority 152.92 EEE-10 Philippine Ports Authority 3.94 EEE-11 Philippine Ports Authority ,A/ EEE-12 Philippine Ports Authority EEE-15 Philippine Ports Authority EEE-17 Philippine Ports Authority EEE-30 Philippine Ports Authority EEE-31 Philippine Ports Authority EEE-37 Philippine Ports Authority EEE-38 Philippine Ports Authority FFF-129 Philippine Ports Authority Subtotal 4. Name rifsupplier mnnot be seen in VAT OR EE-439 United Dockhandlers, Inc. EEE-1 United Dockhandlers, Inc. Subtotal 5. No OR per marked evidence EEE-19 I Philippine Ports Authority ' - - - -

DECISION CTA CASE NO. 8451 EEE-23 Philippine Ports Authority 934.83 EEE-42 Philippine Ports Authority 64.32 Subtotal 1,003.09 6. OR date chanJ.,ed without countersignature 3.34 13,194.00 LL-225 Philippine Ports Authority 13,197.34 LL-286 Philippine Ports Authority 3,664.71 4,503.08 Subtotal 1,382.40 9,550.19 7. OR date incomple a.r toyear 1,097.83 EE-330 Philippine Ports Authority 153.86 483.52 EE-356 Philippine Ports Authority 29.52 EE-141 Jupiter Arms Properties Inc. 1,764.73 Subtotal 934.83 27.39 0 R date incomplete as toyear; name ofpcryor countersigned but authori!J ofthe 2,643.74 128.87 8. countersignor cannot be ascertained 217.43 227.27 EEE-3 Philippine Ports Authority 394.55 109.19 EEE-4 Philippine Ports Authority 12,424.35 8,727.83 EEE-24 Philippine Ports Authority 33.30 10.59 EEE-25 Philippine Ports Authority 1,043.62 8,868.57 Subtotal 34,490.62 38,295.93 9. OR dated outside period qfdaim 4,860.00 4,860.00 EE-286 Philippine Ports Authority 333.72 20.19 EE-383 Philippine Ports Authority 27.63 12.43 GG-1 Regen Enterprises 12.43 12.43 LL-16 Philippine Ports Authority 12.43 12.43 LL-18 Philippine Ports Authority 12.43 12.43 LL-19 Philippine Ports Authority ~ LL-20 Philippine Ports Authority LL-21 Philippine Ports Authority LL-42 Philippine Ports Authority LL-43 Philippine Ports Authority LL-64 Philippine Ports Authority LL-65 Philippine Ports Authority LL-66 Philippine Ports Authority LL-67 Philippine Ports Authority LL-68 Philippine Ports Authority LL-69 Philippine Ports Authority LL-71 Philippine Ports Authority LL-72 Philippine Ports Authority LL-73 Philippine Ports Authority LL-74 Philippine Ports Authority LL-75 Philippine Ports Authority LL-76 Philippine Ports Authority LL-109 Philippine Ports Authority LL-110 Philippine Ports Authority LL-111 Philippine Ports Authority LL-112 Philippine Ports Authority LL-113 Philippine Ports Authority LL-114 Philippine Ports Authority

DECISION CTA CASE NO. 8451 LL-115 Philippine Ports Authority 39.35 LL-116 Philippine Ports Authority 30.90 LL-117 Philippine Ports Authority LL-118 Philippine Ports Authority 2.40 LL-119 Philippine Ports Authority 27.63 LL-120 Philippine Ports Authority LL-121 Philippine Ports Authority 3.73 LL-122 Philippine Ports Authority 27.63 LL-123 Philippine Ports Authority 43.49 LL-124 Philippine Ports Authority 11.85 LL-135 Philippine Ports Authority 62.13 LL-138 Philippine Ports Authority 12.43 LL-139 Philippine Ports Authority 51,958.59 LL-140 Philippine Ports Authority 29,696.94 LL-141 Philippine Ports Authority 51,952.54 LL-205 Philippine Ports Authority 59,385.19 LL-206 Philippine Ports Authority 4,395.70 LL-207 Philippine Ports Authority 725.76 LL-208 Philippine Ports Authority 33,735.06 LL-209 Philippine Ports Authority 3,024.00 LL-210 Philippine Ports Authority 4,860.00 LL-211 Philippine Ports Authority 3,272.77 LL-212 Philippine Ports Authority LL-213 Philippine Ports Authority 6.68 LL-214 Philippine Ports Authority 1,340.84 LL-215 Philippine Ports Authority LL-216 Philippine Ports Authority 6.68 LL-217 Philippine Ports Authority 6.68 LL-218 Philippine Ports Authority 4,860.00 LL-219 Philippine Ports Authority 732.24 LL-220 Philippine Ports Authority 727.92 LL-221 Philippine Ports Authority 842.40 LL-222 Philippine Ports Authority 731.16 LL-223 Philippine Ports Authority 3.63 LL-224 Philippine Ports Authority 12.43 LL-228 Philippine Ports Authority 12.43 LL-229 Philippine Ports Authority 32.10 LL-230 Philippine Ports Authority 55.26 LL-231 Philippine Ports Authority 2,667.60 LL-245 Philippine Ports Authority 1,338.02 LL-246 Philippine Ports Authority 3.34 LL-247 Philippine Ports Authority 3,780.00 LL-248 Philippine Ports Authority 2,613.60 LL-249 Philippine Ports Authority 1,569.48 LL-250 Philippine Ports Authority 6.68 LL-251 Philippine Ports Authority 2,532.12 LL-252 Philippine Ports Authority 2,255.59 LL-253 Philippine Ports Authority 1,153.44 6.68 ------- -1....-. 79.67 1,192.23 6.68 ~

DECISION CTA CASE NO. 8451 LL-288 Philippine Ports Authority 4,907.48 LL-289 Philippine Ports Authority 1,708.56 LL-290 Philippine Ports Authority LL-291 Philippine Ports Authority 6.68 LL-292 Philippine Ports Authority 69.83 LL-293 Philippine Ports Authority 69.83 LL-294 Philippine Ports Authority 89.51 LL-295 Philippine Ports Authority 246.95 LL-296 Philippine Ports Authority 79.67 LL-297 Philippine Ports Authority 59.99 LL-298 Philippine Ports Authority 384.71 LL-299 Philippine Ports Authority 394.55 LL-300 Philippine Ports Authority 443.75 LL-301 Philippine Ports Authority 59.99 LL-302 Philippine Ports Authority 305.99 LL-304 Philippine Ports Authority 443.75 LL-309 Philippine Ports Authority 59.99 LL-310 Philippine Ports Authority 1,260.60 LL-368 Philippine Ports Authority 1,439.45 LL-369 Philippine Ports Authority 9.90 LL-370 Philippine Ports Authority 24.85 LL-371 Philippine Ports Authority 12.43 LL-372 Philippine Ports Authority 12.43 12.43 10. OR undated Subtotal 402,713.62 EE-63 DHL Express (Phils) Corp 33.60 Subtotal 33.60 11. Overclaimed input VAT 2,295.70 EE-184 Lengeric Manpower and General Services Inc. 2,295.70 Input VAT Per Claim p 3,696.69 1,511.76 3,203.57 Less: Input VAT per OR 1,400.99 3.34 Overclaimed input VAT 50,217.69 54,936.36 Subtotal 227.14 12. VAT amount changed without countersignature 1,725.00 6,921.43 EE-156 Jupiter Arms Properties Inc. 642.86 EE-442 Vanabell Apparel 3,964.29 13,480.72 LL-233 Philippine Ports Authority 197,126.35 FFF-9 Philippine Ports Authority ~ Subtotal 13. VAT amount countersigned but authority ofthe countersignor cannot be ascertained CC-14 Commander Auto Supply CC-20 Commander Auto Supply CC-24 Commander Auto Supply CC-25 Commander Auto Supply CC-27 Commander Auto Supply Subtotal 14. VAT amount countersigned but countersignor differentfrom issuer of OR EE-4 Cendaur Engineering -- -

DECISION CTA CASE NO. 8451 EE-5 Cendaur Engineering 196,074.16 EE-85 Discovery Tour Inc 4,025.28 EE-87 Discovery Tour Inc 13,127.28 EE-90 Discovery Tour Inc 2,622.24 EE-99 Discovery Tour Inc 5,542.08 EE-100 Discovery Tour Inc 2,382.36 EE-102 Discovery Tour Inc 8,536.44 EE-103 Discovery Tour Inc 16,083.96 EE-104 Discovery Tour Inc 6,056.40 EE-114 Fuii Xerox Phils Inc. 2,692.06 EE-115 Fuji Xerox Phils Inc. 2,746.88 EE-140 Jupiter Arms Properties Inc. 7,833.60 EE-149 J~ter Arms Properties Inc. 2,304.00 EE-164 Jupiter Arms Properties Inc. 1,843.20 EE-166 Jupiter Arms Properties Inc. 2,159.94 EE-436 Tricorn Systems (Phils) Inc. 689.46 EE-437 Tricorn Systems (Phils) Inc. 689.46 EE-438 Tricorn Systems (Phils) Inc. 4,136.79 FF-1 SMCC Phili__22ines Inc. 55,383.60 Subtotal 532,055.53 15. VAT amount unreadable 2,446.99 EE-228 New World Int'l Dev't Phils. Inc. I Subtotal 2,446.99' 16. VAT amount not separate!J indicated in the OR 274.23 I 14,925.30 I CC-75 Mercury Drug Corp 25,161.47 14,882.78 EE-245 North Star Port Dev't Corp. EE-246 North Star Port Dev't Corp. 1,188.00 EE-247 North Star Port Dev't Corp. 170.11 EE-248 Our Lady ofPiat Cargo Hauler EEE-20 DHL Express (Phils) Corp 56,601.89 Subtotal 64,032.48 64,032.48 17. OR with marking "Collected in behalfoJCEU Holdings" 64,032.48 64,032.48 EE-10 Century Properties Mgt. Inc. 64,032.48 320,162.40 EE-11 Century Properties Mgt. Inc. 64,032.20 EE-17 Century Properties Mg!. Inc. 64,032.20 64,032.20 EE-447 Century Properties Mgt. Inc. 192,096.60 EE-448 Century Pro_l)_erties M_gt:. Inc. 309,685.76 Subtotal ~ 18. OR with marking "Collected in behalfoJLeoncio Lim" EE-450 Century Pro_l)_erties J'v!gt:. Inc. EE-452 Century Properties Mgt. Inc. EE-453 Century Properties Mgt. Inc. Subtotal No supporting documents riffered as evidence; No manifestation !ry petitioner to take judicial notice of previous Court decisions involving petitioner, resolving input VAT 19. refund cases pertaininf!, to prior periods Current year amortization of input taxes on purchase of capital goods in previous years used outside PEZA zone V-25 and supported by VAT invoices

DECISION erA CASE NO. 8451 Subtotal 309,685.76 Exhs. DDD-1 Philippine Ports Authority 1,580.54 toDDD-7, Philippine Ports Authority 15.12 Annex 1 162.73 Philippine Ports Authority 1,758.39 Subtotal 1,914,851.82 Total Additional Input VAT Disallowance per this Court's further verification In sum, petitioner was able to properly substantiate its input VAT claim but only to the extent ofP10,699,735.91, computed as follows: Input VAT Claim P1 ,363,941.56 p 13,978,529.29 Less: Disallowances 1,914,851.82 3,278,793.38 Per Independent CPA's findings P10,699,735.91 Per this Court's Further Verification Valid Input VAT Since petitioner's sales for the four quarters of 2010 were all direct export sales, the substantiated input VAT of P10,699,735.91 is entirely attributable thereto. However, the input VAT related to the declared zero- rated sales without supporting documents, foreign currency remittances and bills of lading shall be disallowed. Consequently, petitioner's duly substantiated input VAT attributable to the declared valid zero-rated sales of P15,151,630,362.90 amounts only to P10,264,279.90, computed as follows: Valid Zero-Rated Sales p 15,151,630,362.90 Declared Zero-Rated Sales p 15,794,429,332.83 Multiplied by Valid Input VAT Xp Input VAT Attributable to Valid Zero-Rated Sales p 10,699,735.91 10,264,279.90 As to whether or not the said input VAT was applied against any output VAT and/or carried over to the succeeding taxable quarters, petitioner's Quarterly VAT Returns for the subject period of claim showed that petitioner had no output tax liability against which the claimed input VAT may be applied or credited.70 Even though the claimed amount of P13,978,529.29 was carried over to the succeeding first quarter of 2011 71, the same remained unutilized as petitioner still had no output tax liability for the said period. Moreover, the total claim of P13,978,529.29 was deducted as "VAT Refund/TCC claimed"72 in petitioner's Quarterly VAT Return for the first quarter of 2011; hence, the same is already precluded from being applied to future VAT liability, if any/ 70 Line 19B, Exhibits "K-2", "L-1", "M", and "N-1", docket, vol. 2, pp. 708, 712, 714, and 718. 71 Line 20A, Exhibit "0", docket, vol. 2, p. 720. 72 Line 230, Exhibit "0", docket, vol. 2, p. 720.

DECISION CTA CASE NO. 8451 Tax refunds, being in the nature of tax exemptions, are construed in strictissimi juris against the taxpayer and liberally in favor of the government.73 The burden in claiming tax refund rests upon the taxpayer. In this case, petitioner was able to prove its entitlement to the refund of its unutilized input VAT attributed to its zero-rated sales for the period covering January 1, 2010 up to December 31,2010, in the reduced amount ofP10,264,279.90. WHEREFORE, premises considered, the instant Petition for Review is hereby PARTIALLY GRANTED. Accordingly, respondent is hereby ORDERED TO REFUND in favor of petitioner the amount of P10,264,279.90, representing petitioner's unutilized input VAT attributable to its zero-rated sales for taxable year 2010. SO ORDERED. ~.~ ~ .._" MA. BELEN M. RINGPIS-LIBAN Associate Justice WECONC~ LOVELL R. BAUTISTA 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. r LOVELL R. BAUTISTA Associate Justice Chairperson 73 Eastern Telecommunications Philippines, Inc. vs. Commissioner ofInternal Revenue, G.R. No. 183531, March 25, 2015.

DECISION CTA CASE NO. 8451 CERTIFICATION Pursuant to Article VIII, Section 13 of the Constitution, and the Division Chairperson's Attestation, is it 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