TOLEDO POWER COMPANY v. COMMISSIONER OF INTERNAL REVENUE

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY SPECIAL SECOND DIVISION TOLEDO POWER COMPANY, CTA CASE NO. 8792 Petitioner, Members: -versus- CASTANEDA, JR., Chairperson, and MANAHAN, JJ. COMMISSIONER OF Promulgated: INTERNAL REVENUE, NOV 05 2018 / Respondent. ~ t7 .z :Sl> ,. "' � X- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - X AMENDED DECISION CASTANEDA, JR., J.: For resolution are the following: 1. petitioner's Motion for Reconsideration, filed on June 21, 2017, without respondent's comment despite notice per Records Verification dated July 20, 2017; and 2. respondent's Motion for Partial Reconsideration (Re: Decision promulgated on 6 June 2017), filed through registered mail on June 22, 2017 and received by the Court on June 28, 2017, with petitioner's Comment (To Respondent's Motion for Partial Reconsideration dated June 22, 2017), filed on July 19, 2017. f-

AMENDED DECISION CTA CASE NO. 8792 Both parties seek reconsideration of the Court's Decision promulgated on June 6, 2017 (assailed Decision), the dispositive portion of which reads: WHEREFORE, the instant Petition for Review is PARTIALLY GRANTED. Accordingly, respondent is ORDERED TO REFUND to petitioner the amount of P4,127,329.39 representing its unutilized excess input VAT for the four quarters of taxable year 2012 attributable to its zero-rated sales/receipts. SO ORDERED. Petitioner's Motion for Reconsideration To recall, on June 21, 2017, petitioner filed its Motion to Reopen Proceedings (with Motion for Reconsideration), raising the following arguments: 1. There was a mistake on the representation of the commissioned Independent Certified Public Accountant (!CPA) that all the necessary documents had been photocopied and submitted to the Court; and 2. Petitioner's sale of power to Cebu Electric Cooperative III (CEBECO III), which was eventually distributed to a Philippine Economic Zone Authority (PEZA)-registered entity and a Board of Investments (BOI)-registered 100�/o export entity are subject to value-added tax (VAT) zero-rating. In the Resolution dated August 17, 2017, the Court granted petitioner's Motion to Reopen Proceedings while the resolution of petitioner's Motion for Reconsideration and respondent's Motion for Partial Reconsideration (Re: Decision promulgated on 6 June 2017) was held in abeyance.~

AMENDED DECISION CTA CASE NO. 8792 During the hearing held on October 4, 2017, petitioner presented (1) Mr. Joseph Cedric V. Calica, the ICPA1; and (2) Ms. Mary Ann C. Vergara, petitioner's Tax Compliance Officer2� Thereafter, petitioner filed its Formal Offer of Evidence on December 18, 2017. The Court admitted all of petitioner's additional evidence in the Resolutions3 dated February 2, 2018 and May 22, 2018. The parties' respective motions for reconsideration of the assailed Decision were considered submitted for resolution on August 23, 20184 in view of the filing of petitioner's Memorandum on July 27, 2018 through registered mail and received by the Court on August 8, 2018, and the Report of the Records Division dated August 15, 2018 stating that respondent failed to file his memorandum. In the assailed Decision, this Court disallowed petitioner's input VAT in the aggregate amount of P55,964,770.63 out of the total reported input VAT per return of P148,611,453.13.5 Part of the disallowance was a total amount P32,971,348.00 input VAT from importation of goods supported by Import Entry and Internal Revenue Declaration (IEIRD) but without a validation of the payment, or Statement of Duties and Taxes (SSDT) or Bureau of Customs (BOC) official receipt, to wit:6 Exhibit Invoice/ Supplier 1st 2nd lrd 4th Total P-103 OR No. PT KIDECO JAYA Quarter .quarter _Quarter _Q_uarter AGUNG P4 080 063.00 1 to 2 114960325 KSB SINGAPORE PTE P4L080 063.00 p 84 431.00 LTD 696 349.00 94 632.00 696 349.00 12 118730841 SUN MACHINERY and 16 718.00 TRADING INC 32 066.00 1 552 713.00 16 718.00 13 to 15 116409413 KSB SINGAPORE PTE 10 760.00 456 619.00 LTD 156 378.00 32 066.00 16 to 18 116409465 KSB SINGAPORE PTE LTD 10 760.00 19 120767963 156 378.00 20 118553757 YASHIMA and CO LTD 84 431.00 21 to 22 118553741 94 632.00 23 to 25 118553705 FUJI TRADING COL LTD 1 552 713.00 26 to 28 120751303 456 619.00 29 to 31 120751303 IANDN INTL NOMAX LTD NOMAX LTD 1 Minutes of the Hearing dated October 4, 2017, docket, vol. V, p. 2095; Exhibit "P-600", docket, vol. V, pp. 1985-1993. 2 Minutes of the Hearing dated October 4, 2017, docket, vol. V, p. 2095; Exhibit "P-601", docket, vol. V, pp. 2026-2038. 3 Docket, vol. V, pp. 2151-2152 and 2166-2167. 4 Resolution dated August 23, 2018, docket, vol. V, p. 2217. 5 Decision, p. 24, docket, vol. V, p. 1866. 6 Decision, p. 23, docket, vol. V, p. 1865.

AMENDED DECISION CTA CASE NO. 8792 32 to 34 118553522 FUJI TRADING CO LTD 221,585.00 221 585.00 35 to 37 121773251 I AND N 127 011.00 38 INTERNATIONAL p 127 011.00 2 654 991.00 39 to 40 2,654 991.00 2 963 129.00 41 to 43 121773084 PT SION MANDl 44 to 45 123885002 HWAN TAl CEMENT P2 963 129.00 798.00 48 123884993 PRODUCTS CO LTD 798.00 2 616 500.00 121773102 HWAN TAl CEMENT 3,530 132.00 55 to 57 121773181 PRODUCTS LTD 2 616 500.00 58 to 60 PT SION ANUGRAH 3,530 132.00 61 18180153 MANDIRI 121853286 PT SION ANUGRAH 3,388 641.00 3,388 641.00 62 to 63 121853313 MANDIRI 3,521 760.00 3 521 760.00 FORMOSA HEAVY 3 492 053.00 3,492 053.00 64 to 65 116603094 INDUSTRIES 66 CORPORATION 1,371 231.00 1 371,231.00 116603103 PT SION ANUGRAH 116603146 MANDIRI 1 852 731.00 1 852,731.00 121853286 PT SION ANUGRAH MANDIRI 50 577.00 50 577.00 FORMOSA HEAVY INDUSTRIES _(520.00)_ (_520.00) CORPORATION FORMOSA HEAVY INDUSTRIES CORPORATION LONJING HONGKONG COMPANY LIMITED PT SION ANUGRAH MANDIRI TOTAL P4,9921 334.00 P2,409 980.00 P2 782,002.00 P22 787,032.00 P32,971,348.00 Upon examination of the additional documents submitted by the petitioner, particularly, the Statement of Settlement of Duties and Taxes7 issued by the Bureau of Customs, the Court finds that out of the disallowed input VAT of P32,971,348.00, petitioner was able to prove actual payment thereof to the extent of P30,249,469.00, detailed as follows: Exhibit Customs Declarant Supplier Input VAT Reference Reference First Quarter "P-500" 2011-C-24978 2011-114960325 PT KIDECO JAVA AGUNG p 4 080,063.00 2012-116409465 KSB SINGAPORE PTE LTD 32 066.00 "P-501" 2012-C-320 2012-120767963 KSB SINGAPORE PTE LTD Subtotal p 10 760.00 2012-118553757 YASHIMA & CO. LTD "P-502" 2012-C-46809 156L378,00 "P-503" 2012-C-4703 4,279,267.00 Second Quarter "P-504" 2012-C-6876 2012-118553741 FUJI TRADING CO. LTD p 84,431.00 2012-118553705 I AND N INTERNATIONAL Subtotal p 94 632.00 "P-505" 2012-C-879 2012-118553522 FUJI TRADING CO. LTD 221 585.00 "P-506" 2012-C-10044 400,648.00 Third 2012-C-15475 2012-121773251 I AND N INTERNATIONAL p 127,011.00 Quarter 2012-C-18512 2012-121773084 PT SION MANDl "P-507" 2,65~991.00 "P-508" 7 Exhibits "P-500" to "P-518", docket, vol. V, pp. 1897-1936.

AMENDED DECISION CTA CASE NO. 8792 Subtotal p Z782,002.00 Fourth Quarter HWAN TAl CEMENT PRODUCTS CO. "P-509" 2012-C-21910 2012-5~1200002 LTD p 2,963 129.00 798.00 2012-5~1200002 HWAN TAl CEMENT PRODUCTS CO. "P-510" 2012-C-21914 2012-121773102 LTD "P-511" 2012-C-21822 2012-121773181 "P-512" 2012-C-23840 PT SION ANUGRAH MADIRI 2 616,500.00 "P-513" 2012-C-26171 2012-5~1200032 "P-514" 2012-C-27869 PT SION ANUGRAH MADIRI 3,530 132.00 "P-515" 2012-C-26775 2012-121853286A "P-516" 2012-C-27645 2012-121853313 FORMOSA HEAVY INDUSTRIES CORP 3 388 641.00 "P-517" 2012-C-27656 2012-5~1200035 PT SION ANUGRAH MADIRI 3 521 760.00 2012-5~1200036 PT SION ANUGRAH MADIRI 3,492 053.00 2012-5~1200037 FORMOSA HEAVY INDUSTRIES CORP 1 371 231.00 FORMOSA HEAVY INDUSTRIES CORP 1,852 731.00 LONJING HONGKONG COMPANY "P-518" 2012-C-27967 UMITED 50 577.00 Subtotal p 22,787.SS2.00 TOTAL p 30,249,469.00 Thus, petitioner's total substantiated input VAT is now increased to P122,896,151.50, computed as follows: 1st 2nd 3rd 4th Total Quarter _Quarter Quarter Quarter Substantiated Input p 25,526 443.40 p 17,287,108.64 p 19,739,208.80 p 30,093 921.66 p 92 646 682.50 VAT per this Court's June 6, 2017 4,279 267.00 400,648.00 2,782,002.00 22,787 552.00 30 249 469.00 Decision8 P29L805L710.40 P171 687,756.64 P22,521,210.80 P52,881,473.66 P122,896,151.50 Add: Input VAT on Importation of Goods supported by IEIRD and SSDT Substantiated Input VAT, As Adjusted Petitioner also maintains that its sales of power to CEBECO III, a pass-through entity, are considered as zero-rated sales, since the power sold was ultimately consumed by Balamban Enerzone Corporation (BEC), a PEZA-registered entity, and Carmen Copper Corporation (CCC), a SOl-registered 100�/o exporter. Petitioner argues that Revenue Memorandum Circular (RMC) No. 61-05 mandates that the payment of the end-user for the power it purchased, even if it passes through a distribution company, shall form part of the generation company's gross receipts. Hence, petitioner contends that the VAT component of a sale of power from a power generating company which passes through a distribution company prior to the end user is to be treated as if incurred between the end user and the generation company. f1t:- 8 Decision, p. 24, docket, val. V, p. 1866.

AMENDED DECISION CTA CASE NO. 8792 Following this mandate, petitioner deduced that if the end user is subject to zero-rated sales, then the sale made by the power generation company to the distribution company should also be subject to VAT zero-rating. In support of its argument, petitioner invokes Question/Answer 19 and 26 of RMC No. 61-05, which provide: Q19 What is the treatment of sales of electricity (by generation, transmission and distribution companies or electric cooperatives) to PEZA- or SBMA- registered enterprises? A19 Since PEZA- or SBMA-registered enterprises are entitled to the five percent (5�/o) preferential tax rate under R.A. 7916 and R.A. 7227, respectively, sales of electricity by generation, transmission and distribution companies or electric cooperatives shall effectively be subject to the zero percent (0�/o) VAT rate. Sales to enterprises duly-registered and accredited with the SBMA and PEZA shall effectively be subject to zero percent (0�/o) VAT. The zero- percent (0�/o) VAT rate shall not apply to sales made to individuals who are mere residents in the PEZA Ecozone or Subic Bay Freeport and Economic Zone. Q26 What is the treatment of the Generation and Transmission charges including the VAT thereon which are pass through charges of the Distribution Companies and Electric Cooperatives? A26 The Generation and Transmission companies shall bill the end-user through the Distribution Companies and Electric Cooperatives for the sale and transmission of electricity and ancillary services including the VAT thereon. The amount collected from the end-user for such charges shall not form part of the gross receipts of the Distribution Companies and Electric Cooperatives. The Distribution Companies and Electric Cooperatives shall not claim an input tax on such pass-through charges. The amount collected from the end-user ~

AMENDED DECISION CTA CASE NO. 8792 as payment for the generation and transmission charges including the VAT thereon shall form part of the gross receipts and output VAT of the Generation Company or Transmission Company, accordingly. The Distribution Companies and Electric Cooperatives may advance, exclusive of the corresponding VAT, the generation fee to the Generation company. The amount advanced may be offset against the amount collected from the end-user and only the VAT portion of the generation fee shall be remitted to the generation company upon collection from the end-user. The reckoning of the VATable sale between the generation company and the end-user shall be upon collection on the billing made by the Distribution Companies and Electric Cooperatives. Notably, Question/Answer No. 26 of RMC No. 61-05 was later amended by RMC No. 62-12 to read as follows: Q26 What is the treatment of the Generation and other power related charges including the VAT thereon which are pass through charges of the Distribution Companies and Electric Cooperatives? A26 The Generation Companies, Aggregators, Market Operators, Retail Electricity Suppliers, and other suppliers of electricity shall bill the Distribution Companies and Electric Cooperatives for the sale and transmission of electricity and ancillary services including the VAT thereon, if applicable. The VAT shall be remitted by the Distribution Companies and Electric Cooperatives to the Generation Companies, Aggregators, Market Operators, Retail Electricity Suppliers, and other suppliers of electricity together with the payment for generation and transmission services. All collections by Generation Companies, Aggregators, Market Operators, Retail Electricity Suppliers, and other suppliers of electricity from Distribution Companies and Electric Cooperatives pertaining to generation and other VATable charges shall be deemed to include the VAT thereon. Jt-

AMENDED DECISION CTA CASE NO. 8792 The amount collected by the Distribution Companies and Electric Cooperatives from the end-user for such charges, including the VAT thereon, shall not form part of the gross receipts of the Distribution Companies and Electric Cooperatives. The Distribution Companies and Electric Cooperatives shall not claim an input tax on such pass-through charges. The amount collected from the end-user as payment for the generation and other VATable charges including the VAT thereon shall form part of the gross receipts and output VAT of the Generation Company or Transmission Company, accordingly. If the Distribution Companies and Electric Cooperatives pay in advance the generation fee to the Generation company, the amount paid shall be inclusive of the corresponding VAT. The amount advanced may be offset against the amount collected from the end-user.9 In relation thereto, Section 4.108-3(f) of RR No. 16-05 provides what composes the gross receipts of a generation, transmission and distribution company, to wit: SECTION 4.108-3. Definitions and Specific Rules on Selected Services. - XXX XXX XXX (f) Sale of electricity by generation, transmission, and distribution companies shall be subject to 10�/o [now 12�/o] VAT on their gross receipts; Provided, That sale of power or fuel generated through renewable sources of energy such as, but not limited to, biomass, solar, wind, hydropower, geothermal, ocean energy, and other emerging energy sources using technologies such as fuel cells and hydrogen fuels shall be subject to 0�/o VAT. XXX XXX XXX Si- 9 This new procedure shall take effect beginning billing period August 26-September 25, 2012.

AMENDED DECISION CTA CASE NO. 8792 "Gross Receipts" under this Subsection (f) shall refer to the following: (a) Total amount charged by generation companies for the sale of electricity and related ancillary services; and/or (b) Total amount charged by transmission companies for transmission of electricity and related ancillary services; and/or (c) Total amount charged by distribution companies and electric cooperatives for distribution and supply of electricity, and related electric service. The universal charge passed on and collected by distribution companies and electric cooperatives shall be excluded from the computation of the Gross Receipts. XXX XXX XXX Moreover, Energy Regulatory Commission (ERC) Resolution No. 2010, Series of 2005 provides how generation companies (GC) shall bill end-user for its charges, to wit: I. GENERAL PRINCIPLES XXX XXX XXX (k) The GC and TRANSCO shall bill the end-user through the DUs for the sale and transmission of electricity and ancillary services including VAT thereon. The amount collected from the end-user for such charges shall not form part of the GR [gross receipts] of the DUs and shall not be claimed by the DUs as input tax. The amount collected from the end-user as payment for the generation and transmission charges including the VAT thereon shall form part of the GR and output rz,. VAT of the GC or TRANSCO, accordingly. 10 Implementing the Recovery of Value Added Tax (VAT) and Other Provisions of Republic Act No. 9337 Affecting the Electric Power Industry.

AMENDED DECISION CfA CASE NO. 8792 XXX XXX XXX (m) DUs with billing cycles that do not start on the 1st day of each month shall calculate the VAT on a pro-rata basis applied on the distribution component for consumption beginning November 1, 2005. The generation and transmission components shall be billed to their end users upon receipt of the power bills from the GC and TRANSCO. xxx (n) Pursuant to RMC 61-2005, sales of electricity by GC, TRANSCO, and DUs [or] to Philippine Economic Zone Authority (PEZA) or Subic Bay Metropolitan Authority (SBMA) registered enterprises shall effectively be subject to zero (0�/o) VAT rate. XXX XXX XXX II. IMPOSITION OF THE VALUE-ADDED TAX - The appropriate VAT shall be imposed as follows: XXX XXX XXX (c) FOR DISTRIBUTION UTILITIES 1. The DUs shall bill the end-user for the corresponding VAT on the sale and transmission of electricity. The said VAT is neither part of the DU's GR nor input VAT. The DU shall ensure it is revenue-neutral in its collection of said VAT. The VAT on the current month's sale and transmission of electricity shall be billed to the end-users on the next billing cycle. XXX XXX XXX r - Based on the foregoing, generation and transmission charges, including the VAT thereon, although billed to the end-user by the

AMENDED DECISION CTA CASE NO. 8792 distribution companies and electric cooperatives, are not part of their gross receipts; neither can they claim an input tax on such charges. Hence, these charges are considered pass-through charges of the distribution companies and electric cooperatives and the amount collected by them for these charges shall form part of the gross receipts and output VAT of the generation companies. Considering that sales of services by a VAT-registered taxpayer to entities located in ecozones and to SOl-registered manufacturers/producers whose products are 100�/o exported are considered "export sales" subject to zero percent (0�/o) VAT rate pursuant to Section 108(8)(3) of the NIRC of 1997, as amended, then, if the end-user who pays for the sale of electricity and related ancillary services through an electric cooperative for remittance to the generation company is a PEZA-registered entity or a SOl- registered 100�/o exporter, then the transaction should qualify for VAT zero-rating. In this case, CEBECO III is a registered electric cooperative as shown in the Certificate of Registration11 issued by the National Electrification Administration. Petitioner alleges that the sale of power to CEBECO III in the total amount of P138,162,620.07 are pass through charges and directly attributable to BEC and CCC. Hence, the Court considered the documents supporting the total amount of P138,162,620.07, such as the Schedule of Gross Sales (VATable, Zero-Rated, VAT-exempt and Sales to Government)12 with the related sales invoices and official receipts13, billing statements issued by petitioner to CEBECO III14 as summarized in Exhibit "P- 132", statements of account15 issued by CEBECO III to BEC and CCC as summarized in Exhibits "P-133" and "P-134. However, a scrutiny of the said documents shows that out of the sales/receipts of P138,162,620.07, only the amount of P31,530,518.36 qualifies for VAT zero-rating as this can be clearly traced as pass-through charges of CEBECO III to BEC and CCC. Below is the breakdown of the amount of P31,530,518.36: ;..- 11 Exhibit "P-124". 12 Exhibit "P-105". 13 Exhibits "P-105-1" to "P-105-358". 14 Exhibits "P-132-1" to "P-132-11". 15 Exhibits "P-133-1" to "P-133-12" and "P-134-1" to "P-134-24".

AMENDED DECISION CTA CASE NO. 8792 SALES INVOICE BILLING STATEMENT OFFICIAL RECEIPT Amount of For Zero-Rated SI Total OR Invoice Sales Exh. No. Amount Exh. Charged to: Total kWh Exh. No. Amount No. P-132-1 CEBECO III & P-105- 1332 53 981,619.75 8,818 614.94 P-132-4 KABULIHAN 7 998 874.39 P-105- 2733 54,728 416.60 1332/ 12 P-132-8 1 353 186.02 153 1333/ P-132-9 CCC 1334 P-105- 399 900.00 P-105- 50 1396 48 789,689.74 7,829 375.98 BEC 213 2771 53 568J50.86 1382/ 1459 45 503L451.41 7_L_392 333.52 CEBECO III & 8 107 857.27 1383/ P-105- KABULIHAN 1,369 007.36 P-105- 1396 103 306 CCC 370 300.00 2879 46 90~654.04 1459/ P-105- P-105- 1460/ 116 BEC 8,416 333.76 325 1461 CEBECO III & 1,420 941.76 1478 44 903,446.78 7 490 193.92 KABULIHAN 2896 47 519 379.30 1478/ CCC 411900.00 1479/ BEC 1480 CEBECO III & 8_L458 980.52 KABULIHAN 1 282 371.47 CCC 619,100.00 BEC Total 31,530,518.36 The rema1mng amount of P106,632,101.71 should still be disallowed for the reasons stated as follows: SALES INVOICE BILLING STATEMENT OFFICIAL RECEIPT SI Total Amount of Exh. Charged to: OR Amount For Exh. No. Amount Zero-Rated Total kWh Exh. No. Invoice - - - No. A. The supporting official receipt is unreadable P-105- P-105- 358 1317 55 007,010.64 8,366 451.93 - 138 2717 10,000 000.00 - P-105- - 1318 6,924 583.91 - - 139 2718 50 716 968.50 - B. The power distributed to BEC and CCC is not indicated in the supportill9_ sales invoice 1382/ P-105- P-105- 1383/ 52 1382 5 995 611.22 5,982 481.37 - - - 213 2771 53 568 750.86 1396 1444/ P-105- P-105- 1445/ 88 1446 4 112 743.06 4 102 823.97 - - - 273 2869 38,236 137.03 1446 P-105- 1459/ 101 1460 2 176 685.24 2 171417.99 - - - 1460/ 1461 P-105- P-105- 306 2879 102 1461 105 098.79 56,268.11 - - - 46,901 654.04 1478/ P-105- P-105- 1479/ 117 1479 3 236 801.10 3 228 804.45 - - - 325 2896 47 519,379.30 1480 C. The power distributed to BEC and CCC is not indicated in the supporting sales invoice and the amount of zero-rated sales is not indicated in the supportin_g official receipt P-105- P-105- 11 1333 6L589 521.17 6 576 566.19 - - - 152 2732 5 000 000.00 1365/ P-105- P-105- 1366/ 39 1366 5 558 568.32 5 545 934.36 - - - 192 2754 39 547 970.49 1367 D. The amount of zero-rated sales is not indicated in the supporting official receipt P-105- P- CEBECO III & P-105- 1357/ 173 1358/ 24 1357 45L599 219.36 7 470 878.44 132-2 KABULIHAN 7 983,146.02 2744 51 400 984.43

AMENDED DECISION CTA CASE NO. 8792 CCC 1 317,513.01 1359 BEC 438 900.00 - P-105- 6 106 423.96 - - - - 26 1358 6,120 629.76 - CEBECO III & 1401/ KABUL!HAN 7 641,023.06 1402/ 1403 P-105- 6 752 768.35 P- CCC 1157,672 15 P-105- 2753 10 000 000.00 1401/ 38 1365 44 473,702.77 132-3 378 100.00 191 10 000 000.00 1402/ BEC 16 500 000.00 1403 CEBECO III & 8 334,369.58 KABUL! HAN - P-105- 6,018 956.23 P- CCC 1 065 168.57 P-105- 2868 1423/ 86 1444 44 232,236.24 9,525 723.51 132-7 408 500.00 272 2900 1424/ BEC 1425 P-105- P- CEBECO III & 8101 310.94 P-105- 124 1492 41 389 189.19 132- KABULIHAN 1 058 696.08 344 1423/ 10 1424/ CCC 477 400.00 1425 BEC E. No supporting sales invoice wherein the power distributed to BEC and CCC can be determined CEBECO III P-105- 1401/ & KABULIHAN 8 232 405.11 356 2786 10 000 000.00 - 1402/ - 9,506,165.89 P-105- CCC 357 1403 1 066 827.73 2787 4~262 637.97 P- 415 300.00 P-105- 2788 ~035 863.38 132-5 BEC 235 CEBECO III P-105- - 1425 - 454 092.05 & KABULIHAN 8 856 727.78 255 2797 25 000 000.00 2798 25_L_137 550.16 - - - - CCC 1 607 242.33 BEC - 1423 - P- 347 300.00 5 856 012.52 132-6 - P-105- 3 438 606.48 - - 1424 - - 256 1527/ - 1528/ - 8 547 142.00 - - - - 2924 - 1529 TOTAL 106,632,101.71 Thus, petitioner's total valid zero-rated sales/receipts for the four taxable quarters of CY 2012 shall be adjusted to P1,392,238,205.82, computed as follows: 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Total Total Allowed Zero-Rated p 331 302 113.28 p 466 307 238.22 p 400 589 280.68 p 162 509,055.28 p 1 360,707 687.46 Sales/Receipts per this Court's June 6, 2017 8 818-'614.94 7 829 375.98 7L392 333.52 7 490_~193.92 31,530 518.36 Decision P340_L_120_L_728.22 P474,136,614.20 P407,981,614.20 P169_L_999_L_249.20 P1,392,238 205.82 Add: Zero-Rated Sales/Receipts made to CEBECO III attributable to BEC and CCC Total Allowed Zero- Rated Sales/Receipts, As Adjusted

AMENDED DECISION CTA CASE NO. 8792 Consequently, petitioner's excess input VAT attributable to its entire declared zero-rated sales/receipts for CY 2012 is recomputed as follows: 1st Quarter 2nd_Quarter 3rd Quarter 4th Quarter Total Sales per VAT return p 142 290 065.92 P213 266 370.23 P179 525 702.25 p 172 096 239.00 p 707,178 377.40 Vatable Sales/ 13 574 278.83 58,678 256.83 Receipts -Private 15,498 374.80 15 220 068.60 14 385 534.60 Sales to Government 542 930 177.94 501 923 964.17 430,079 791.55 306,678 113.10 1 781,612 046.76 Zero-Rated Sales/Receipts 1 082 505.00 1138 810.24 1133 588.81 1 211 682.00 4,566 586.05 Exempt Sales/ Receipts p 701 801 123.66 P731 549 213.24 P625,124 617.21 p 493 560 312.93 P2 552,035 267.04 Total Allocation Factor (Percentag_e ofeach type_ofsales to total sales): Vatable Sales/ Receipts -Private 20.2749841% 29.1527031% 28.7183863% 34.8683301% 2.3012267% 2.7502776% Sales to Government 2.2083713% 2.0805256% Zero-Rated 77.3623979% 68.6111003% 68.7990490% 62.1358940% Sales/Receipts 0.1542467% 0.1556710% Exempt Sales/ 0.1813381% 0.2454983% Receipts 100.0000000% 100.0000000% Total 100.0000000% 100.0000000% Valid Input VAT, As p 29,805,710.40 P17,687,756.64 P22,521,210.80 P52,881,473.66 P122,896,151.50 Adjusted Input VATAllocation Per Each Type ofSales (Allocation Factor multiplied by Valid Input VAT}: Vatable Sales/ p 6 043 103.04 p 5 156 459.18 p 6 467 728.32 p 18 438,886.80 p 36 106 177.34 Receipts -Private 2 998 870.50 Sales to Government 658 220.75 367 998.30 518 264.12 1454 387.32 83,546,932.00 Zero-Rated 23,058,412.28 12 135,764.45 15 494,378.85 32,858 376.42 Sales/ Receipts 244 171.69 Exempt Sales/ 45 974.32 27 534.71 40 839.54 129 823.12 p 122 896 151.52 Receipts Total p 29,805 710.39 p 17 687 756.64 p 22 521 210.83 p 52 881 473.66 OUTPUT VAT DUE p 17,074 807.91 p 25 591 964.43 p 21 543 084.27 p 20 651,548.68 p 84 861 405.29 Less: Input VAT 6,043 103.04 5 156 459.18 6 467 728.32 18 438 886.80 36_1_106 177.34 allocated to 11,031,704.87 20 435 505.25 15 075 355.95 2 212 661.88 48 755 227.95 VATable Sales/Receipts 23 058 412.28 12,135 764.45 15,494 378.85 32 858 376.42 83,546 932.00 (P12,026,707.41) P8,299,740.80 Balance of Output (P419 022.90) (P30 645 714.54) (P34.r_791,704.05) VAT Due Less: Input VAT allocated to Zero-rated Sales/Receipts Output VAT Still Due/(Excess Input VAT), As Adjusted Based from the foregoing, petitioner had excess input VAT for the CY 2012 in the amount of P34,791,704.05, which can be attributed to its entire declared zero-rated sales/receipts in the amount of P1,781,612,046.76. pe,.-

AMENDED DECISION CTA CASE NO. 8792 However, petitioner was able to properly substantiate only the amount of P1,392,238,205.82 out of its total declared zero-rated sales/receipts of P1,781,612,046.76. Thus, petitioner's refundable excess input VAT attributable to its valid zero-rated sales/receipts of P1,392,238,205.82 amounts only to P27,187,927.75, as computed below: Excess Input VAT attributable to Declared Zero-Rated p 34,791,704.05 Sales/Receipts 1,781,612,046.76 Divided by Declared Zero-Rated Sales/Receipts X 1,392,238,205.82 Multiplied by: Valid Zero-Rated Sales/Receipts Refundable Excess Input VAT Attributable to Valid p 27,187,927.75 Zero-Rated Sales/Receipts, As Adjusted Respondent's Motion for Partial Reconsideration In his Motion for Partial Reconsideration, respondent argues that petitioner failed to prove its entitlement to zero-rating. According to respondent, while he agrees with the Court's ruling that petitioner's sales to CEBECO III are not entitled to zero- rating, he disagrees with the finding that petitioner has proven its sales to BEC and CCC are entitled to zero-rating. While petitioner provided certifications from the PEZA and BOI, respondent argues that petitioner did not provide evidence that these certifications are not yet revoked. Moreover, respondent stresses that the Certification presented by petitioner to prove that CCC is a BOI-registered entity pertains to taxable year 2011 instead of taxable year 2012. In its comment, petitioner contends that respondent failed to substantiate its assertion that petitioner allegedly failed to prove that its transactions with BEC and CCC are subject to VAT zero-rating. On the contrary, petitioner stresses that it was able to duly prove that its transactions with BEC and CCC are subject to VAT zero-rating. As for sales to BEC, petitioner presented BEC's PEZA registration valid for 2012. As for sales to CCC, Revenue Memorandum Order (RMO) No. 9-00 provides that sales to a BOI-registered exporter shall be accorded automatic VAT zero-rating, without need to apply for the same. Moreover, petitioner avers that it submitted BOI Certifications of CCC which are both valid for years 2012 and 2013 citing Exhibit P- 12316. As far as petitioner is concerned, the certifications issued by~ 16 BOI Certification of CCC valid for 2012 only.

AMENDED DECISION CTA CASE NO. 8792 PEZA and BOI are in full effect and it is incumbent upon respondent to prove otherwise. Respondent's motion is bereft of merit. In order to address respondent's argument, the pertinent provisions of the subject BOI Certification17 are reproduced below: CERTIFICATION This is to certify that CARMEN COPPER CORPORATION is registered with the Board of Investments (BOI) pursuant to Executive Order No. 226, otherwise known as the Omnibus Investment Code of 1987, with the following data: XXX XXX XXX Information is hereby given that the firm exported 100�/o of its total sales volume/value for the calendar year covering January 01 to December 31, 2011 based on the attached documents (Annexes B & C) submitted to the BOI, summarized as follows: XXX XXX XXX This Certification is issued pursuant to the Guidelines on the issuance of BOI Certification per Revenue Memorandum Order No. 9-2000 entitled "Tax Treatment of Sales of Goods, Properties and Services made by VAT-registered Suppliers to SOl- registered Manufacturers-Exporters with 100�/o Export Sales" dated February 02, 2000. This Certification is valid from January 01 to December 31, 2012 unless sooner revoked by the BOI Governing Board for any or all of the following grounds: (a) Failure of the herein registered enterprise to~ 17 Exhibit "P-11", docket, val. II, pp. 918-920; Exhibit "P-123".

AMENDED DECISION CTA CASE NO. 8792 comply with any of its BOI registration terms, commitments, and conditions; (b) Failure to export 100�/o in any of the instances set forth in Section 2 of RMO No. 9-2000; (c) Submission of fraudulent documents; and (d) Failure to submit Audited Financial Statements, Annual Income Tax Return and Annual Report on Actual Operations for the year 2011. Since the firm's accounting reporting period ends every 31st day of December, its succeeding applications should be filed within fifteen (15) days from the end of the said calendar year period in order that BOI certification to be issued shall be valid for a period of one (1) year effective from date of the start of the new calendar year. XXX XXX XXX To understand the purpose of this certification and why the above certification is worded as such, Section 3 of RMO No. 9-0018 dated February 2, 2000 is quoted hereunder: SECTION 3. Sales of goods, properties or services made by a VAT-registered supplier to a BOI registered exporter shall be accorded automatic zero-rating, i.e., without necessity of applying for and securing approval of the application for zero-rating as provided in Revenue Regulations No. 7-9~ subject to the following conditions. (1) The supplier must be VAT-registered, (2) The SOl-registered buyer must likewise be VAT- registered; (3) The buyer must be a HOI-registered manufacturerI producer whose products are 100�/o exported. For this purpose a Certification to this effect must be issued by the Board of Investments (BOI) and which~ 18 SUBJECT: Tax Treatment of Sales of Goods, Properties and Services Made by VAT- registered Suppliers to BOI-registered Manufacturers-Exporters With 100% Export Sales.

AMENDED DECISION CTA CASE NO. 8792 certification shall be good for one year unless subsequently re-issued by the HOI; (4) The HOI-registered buyer shall furnish each of its suppliers with a copy of the aforementioned HOI Certification which shall serve as authority for the supplier to avail of the benefits of zero-rating for its sales to said HOI-registered buyers; and; (5) The VAT-registered supplier shall issue for each sale to BOI-registered manufacturer/exporters a duly- registered VAT invoice with the words "zero-rated" stamped thereon in compliance with Sec. 4.108- 1(5) of RR 7-95. The supplier must likewise indicate in the VAT invoice the name and SOl-registry number of the buyer. (Emphasis supplied) In relation thereto, Section 4.106-5(a)(5) of RR No. 16-05 provides: SECTION. 4.106-5. Zero-Rated Sales of Goods or Properties. - xxx The following sales by VAT-registered persons shall be subject to zero percent (0�/o) rate: (a) Export Sales.- "Export Sales' shall mean: XXX XXX XXX (5) Transactions considered export sales under Executive Order No. 226, otherwise known as the Omnibus Investments Code of 1987, and other special laws. XXX XXX XXX For purposes of zero-rating, the export sales of registered export traders shall include commission income. The exportation of goods on consignment shall,h.-

AMENDED DECISION CTA CASE NO. 8792 not be deemed export sales until the export products consigned are in fact sold by the consignee; and Provided, finally, that sales of goods, properties or services made by a VAT-registered supplier to a HOI-registered manufacturerI producer whose products are 100�/o exported are considered export sales. A certification to this effect must be issued by the Board of Investment (BOI) which shall be good for one year unless subsequently re- issued by the BOI. (Emphasis supplied) Moreover, the BOI Guidelines on the Issuance of Certification to BOI-Registered Companies pursuant to BIR Revenue Memorandum Order No. 9-2000 provides that: III. Procedures for the Issuance ofthe 801 Certification For the purpose of issuing the BOI Certification specified under BIR RMO 9-2000, the following operational procedures and other related administrative matters should be observed. A. Application XXX XXX XXX 2. Rling of Request - After checklisting and determination of the firm's compliance with the terms and conditions of its registration, the request for BOI Certification together with all the documentary requirements under III.B of this Guidelines shall be officially filed with the concerned Department of the BOI Industry Planning Group at the BOI Main Office in Makati City; or if located in the provinces, requests may be filed with the respective BOI Regional Offices in the area. Applicant firm with accounting reporting period ending in calendar year(i.e., ending 31 December) should file its application not later than 15 January of the ,._.

AMENDED DECISION CTA CASE NO. 8792 succeeding year in order that the BOI certification to be issued shall be valid for a period .of one (1) year effective 01 January of that year. XXX XXX XXX 5. Issuance of Certification BOI Certification should indicate the one (1) year validity period whether in calendar or fiscal year (e.g., from 01 January 2001 to 31 December 2001, from 01 April 2001 to 31 March 2002). The Executive Director of the Industry Planning Group shall sign the BOI Certification bearing a control number {Annex F). In the absence of the IPG Executive Director, the Executive Director of the Technical Services Group may sign the said Certification. XXX XXX XXX C. Revocation ofCertification The BOI through its monitoring system shall revoke any certification issue herewith based on any or all the following grounds: 1. Failure of the herein registered enterprise to comply with any of its BOI registration terms, commitments, and conditions; 2. Failure to export 100�/o in any of the instances set forth in Section 2 of RMO No. 9-2000; 3. Submission of fraudulent documents. (Emphasis supplied) From the foregoing, it is clear that sales of goods, properties or services made by a VAT-registered supplier to a SOl-registered 100�/o exporter shall be accorded automatic zero-rating, i.e., without necessity of applying for and securing approval of the application for J-

AMENDED DECISION CTA CASE NO. 8792 zero-rating. However, a certification to the effect that the buyer is a SOl-registered manufacturer/producer whose products are 100�/o exported must be issued by the SOl and which certification shall be good for one year. Moreover, the SOl-registered buyer shall furnish each of its suppliers with a copy of the said SOl Certification which shall serve as authority for the supplier to avail of the benefits of zero-rating for its sales to said SOl-registered buyers, and the said certification shall be valid unless revoked by the SOL Hence, while the SOl Certification certifies that CCC exported 100�/o of its total sales volume/value for the period January 1 to December 31, 2011 (and not for the year 2012, the period of petitioner's claim for refund), the same certification specifically states that it is valid from January 1 to December 31, 2012, which is in accordance with Section 3 of RMO No. 9-00, Section 4.106-S(a)(S) of RR No. 16-2005 and the guidelines on the issuance of SOl Certification. Moreover, pursuant to these issuances, said SOl Certification shall remain valid unless revoked by the SOl and shall serve as authority for petitioner to avail of the benefits of zero-rating for its sales to CCC. Considering that there is no showing that the subject SOl Certification was revoked, then, petitioner's sale of electricity to CCC should qualify for VAT zero-rating. Moreover, the Court does not agree with respondent's argument that petitioner must provide evidence that the PEZA and SOl certifications are not yet revoked. There is no law or regulation requiring a VAT-registered supplier to prove that the PEZA/SOl VAT zero-rating certifications issued to its buyers are not yet revoked for VAT zero-rating purposes. Considering that petitioner was able to present the PEZA and SOl VAT zero-rating certifications of SEC and CCC, respectively, and there being no evidence presented that these certifications were already revoked, then, these certification are considered valid and effective. Significantly, in the case of Republic vs. Team (Phils.) Energy Corporation (formerly Mirant [Phils.] Energy Corporation}9, the Supreme Court held that when the taxpayer was able to establish prima facie its right to the refund by testimonial and object evidence, the BlR should present rebuttal evidence to shift the burden of evidence back to the taxpayer, viz: tz- 19 G.R. No. 188016, January 14, 2015.

AMENDED DECISION CTA CASE NO. 8792 "We are likewise unmoved by the assertion of the petitioner that the respondent should have submitted the quarterly returns of the respondent to show that it did not carry-over the excess withholding tax to the succeeding quarter. When the respondent was able to establish prima facie its right to the refund by testimonial and object evidence, the petitioner should have presented rebuttal evidence to shift the burden of evidence back to the respondent. Indeed, the petitioner ought to have its own copies of the respondent's quarterly returns on file, on the basis of which it could rebut the respondent's claim that it did not carry over its unutilized and excess creditable withholding taxes for the immediately succeeding quarters. The BIR's failure to present such vital document during the trial in order to bolster the petitioner's contention against the respondent's claim for the tax refund was fatal." (Emphasis supplied.) Considering that petitioner was able to establish prima facie its right to claim for refund in this case, it was upon respondent to present a rebuttal evidence to shift the burden of evidence back to petitioner to establish its entitlement for a refund. However, respondent failed to present evidence to rebut petitioner's claim. Thus, the Court finds no cogent reason to deny the refund of the substantiated portion of petitioner's claim. WHEREFORE, premises considered, petitioner's Motion for Reconsideration is PARTIALLY GRANTED while respondent's Motion for Partial Reconsideration (Re: Decision promulgated on 6 June 2017) is DENIED. Accordingly, the dispositive portion of this Court's Decision dated June 6, 2017 is amended to read as follows: "WHEREFORE, the instant Petition for Review is PARTIALLY GRANTED. Accordingly, respondent is ORDERED TO REFUND to petitioner the amount of P27,187,927.75 representing its unutilized excess input VAT for the four quarters of taxable year 2012 attributable to its zero-rated sales/receipts." SO ORDERED." Jr.-

AMENDED DECISION CTA CASE NO. 8792 SO ORDERED. I CONCUR: 5k.o-<'~ c.~ J S� OOANITO C. CASTANEDAr 1R. Associate Justice ~--?- CATHERINE T. MANAHAN Associate Justice ATTESTATION I attest that the conclusions in the above Amended Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court's Division. l~~~'c::c~&R Associate Justice Chairperson CERTIFICATION Pursuant to Article VIII, Section 13 of the Constitution, and the Division Chairperson's Attestation, it is hereby certified that the conclusions in the above Amended Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court. Presiding Justice