MAERSK GLOBAL SERVICES CENTRES (PHILIPPINES) LTD. v. COMMISSIONER OF INTERNAL REVENUE

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY THIRD DIVISION MAERSK GLOBAL SERVICES CTA CASE NO. 9537 CENTRES (PHILIPPINES) LTD, Members: Petitioner, -versus- UY, Chairperson , RINGPIS-LIBAN, and MODESTO-SAN PEDRO, JJ. COMMISSIONER OF INTERNAL Promulgated : REVENUE, e - . . - - f� - ..3 �, ).--# . Respondent. X- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - X AMENDED DECISION UY, ::f..: For resolution are the following : 1) Petitioner's Motion for Partial Reconsideration (of Decision promulgated on June 30, 2020) filed via registered mail on July 30, 2020, with respondent's Comment/Opposition To Petitioner's Motion For Partial Reconsideration Dated July 30, 2020 filed on October 26, 2020; and 2) Respondent's Motion for Partial Reconsideration (Re: Decision promulgated on 30 June 2020) filed on August 20, 2020 with respondent's Comment (on Respondent's Motion for Partial Reconsideration dated 13 August 2020) filed on October 16, 2020. In their respective Motion, the parties seek reconsideration of the Decision promulgated on June 30, 2020, partially granting the Petition for Review, the dispositive portion of which reads : ~

AMENDED DECISION CTA CASE NO. 9537 "WHEREFORE, in light of the foregoing considerations, the Petition for Review is hereby PARTIALLY GRANTED. Accordingly, respondent is ORDERED TO REFUND or TO ISSUE A TAX CREDIT CERTIFICATE in favor of petitioner in the total amount of P34,446,355.43, representing its excess and unutilized input VAT attributable to its zero-rated sales for the four quarters of taxable year 2015. SO ORDERED." Petitioner's Motion for Partial Reconsideration Petitioner argues in its Motion that the Court committed reversible error in disallowing the VAT zero-rating of the sales of services of petitioner that were indisputably made to and paid for by A.P. Moller-Maersk (APMM) and Maersk Line AIS (ML), entities engaged in international shipping. Allegedly, the disallowed sale represented by Official Receipt (O.R.) No. 154 (Exhibit "P-31.4") was examined and verified by the Court-commissioned Independent Certified Public Accountant and was admitted by the Court in the Resolution dated June 19, 2018. Furthermore, the ICPA examination and verifications show that the disallowed sales were actually made to and paid for by APMM and ML, which was not disputed in the Decision. Citing CIR vs. Euro-Philippines Airline Services, lnc. 1 (herein referred to as Euro-Phil case), petitioner argues that Section 108(8)(4) of the NIRC of 1997, as amended, provides that the disallowed Sales should qualify as VAT zero-rated sales. Petitioner also claims that the Court erred in citing Section 113 of the NIRC of 1997, as amended, as basis in disqualifying the disallowed sales from VAT zero-rating. Allegedly, there is nothing in Section 113 that provides the consequence of the VAT zero-rating of sales and that that Euro-Phil case held that non-compliance with section 113 of the NIRC of 1997, as amended, will not qualify sales of services rendered to persons engaged in international shipping or international air-transport operations from VAT zero-rating. 1 G.R. No. 222436, July 23,2018. ~

AMENDED DECISION CTA CASE NO. 9537 Moreover, the disallowed sales qualify as VAT zero-rated sales of services under Section 108(8)(4) as the imperfections in the corresponding official receipts do not negate the established fact that the said services were rendered by petitioner to and paid for by APMM and ML, entities engaged in international shipping. Petitioner points out that there are documents other than the official receipts from the disallowed sales from which the Court can determine the veracity of such sales and their qualification for VAT zero-rating under Section 108(8)(4). According to petitioner, the Court committed reversible error in disallowing the input VAT amounting to P1 ,736,310.49 for supposed non-compliance with substantiation requirements. The official receipts/invoices issued for the disallowed purchases reveal the input VAT amount which petitioner is entitled to claim and that the technical clerical errors in the invoices/official receipts issued for petitioner's disallowed purchases should not obstruct the Court from considering undisputed facts to arrive at a just determination of petitioner's entitlement to the refund of its unutilized excess input VAT from the said purchases. Lastly, petitioner submits that the downward adjustment of petitioner's refund claim to P999,525.00 is improper. Petitioner's excess valid input VAT attributable to its VAT zero-rated sales total to P41 ,090,298.94. Respondent's Counter-arguments to petitioner's Motion for Partial Reconsideration Respondent counter-argues that the Court correctly disallowed the sales for violating the provisions on invoicing and substantiation requirements. Tax refunds are in the nature of tax exemptions and are regarded as in derogation of sovereign authority and to be construed strictissimi juris against the person or entity claiming exemption. The burden of proof is upon him who claims the exemption in his favor and he must be able to justify his claim by the clearest grant of organic or statute law. According to respondent, absence or non-printing of the word "zero-rated" in petitioner's invoices is fatal to its claim for the refundf

AMENDED DECISION CTA CASE NO. 9537 and/or tax credit representing its unutilized input VAT attributable to its zero-rated transactions. Hence, the Court's disallowance is valid. Respondent further asserts that petitioner failed to comply with the substantiation requirements, thus, the disallowance of the subject transaction must be upheld. Respondent's Motion for Partial Reconsideration In his Motion, respondent argues that the Court erred in ruling that petitioner's alleged input tax attributable to zero-rated sales for the period January 1, 2015 to December 31, 2015 were not carried over to the succeeding periods. Allegedly, petitioner failed to overcome the burden that the subject input tax being claimed remained unutilized and have not been applied against any output tax for the current and succeeding quarters of the following TY 2016 for failure to present all the VAT Returns forTY 2015 which would tend to prove that the subject claim was not actually utilized for the subject year. Respondent also argues that the Court erred in ruling that petitioner's input tax in the amount of P35,445,880.43 is attributable to its alleged zero-rated sales. According to respondent, Section 112 of the National Internal Revenue Code (NIRC) of 1997, as amended, uses the phrase "directly attributable", and thus, the fact of petitioner's unutilized input taxes was directly attributable must be established. It is allegedly erroneous to assume that when a taxpayer has zero-rated sales, all its input tax is automatically directly attributable to zero-rated sales without establishing how it factored in the production chain. Respondent further asserts that the input tax must come from purchases of goods and services that form part of the finish product or service of the taxpayer and that the Court should determine that the input tax is "directly attributable" to the zero-rated sales. Petitioner's Counter-arguments to respondent's Motion for Parlial Reconsideration Petitioner counter-argues that the Motion for Partial Reconsideration should be denied at it does not raise any new~

AMENDED DECISION CTA CASE NO. 9537 cogent or substantial ground to warrant the modification of the Decision. According to petitioner, respondent's assertion, that the VAT Returns evaluated by the Court were there pertaining only to taxable year 2015, is false and erroneous. Petitioner stresses that the ICPA's findings was correctly relied upon by the Court. That the said report includes annexes which pertain to the schedule of input VAT incurred by petitioner for TY 2015 and the photocopies of official receipts and sales invoices of petitioner's purchases of capital goods, goods other than capital goods, and services. On the basis thereof, petitioner could not have rendered its zero-rated sales of services without such purchases of capital goods, goods other than capital goods, services as laid out in schedule and as proven in the photocopies of official receipts and sales invoices examined by the ICPA. Petitioner also counter-argues that the reliance of respondent on the cases of Taganito Mining vs. Commissioner of Internal Revenue and Atlas Consolidated Mining and Development Corporation vs Commissioner of Internal Revenue is misplaced since there is evidence on record of petitioner's purchases that are attributable to its zero-rated sales. THE COURT'S RULING Petitioner's Motion for Partial Reconsideration is partly meritorious, with respect to petitioner's disallowed purchases are concerned, but only for the total amount of P28,677.32 only while the remaining amount ofP1,707,633.17 shall remain denied On the other hand, respondent's Motion for Reconsideration is without merit. Petitioner's Motion for Partial Reconsideration As aforementioned, the Court reconsiders a portion of its findings related to petitioner's disallowed purchases in the total amount of P28,677.32 and shall include the said amount in the computation of its valid input VAT.~

AMENDED DECISION CTA CASE NO. 9537 Partial reconsideration of petitioner's disallowed purchases Petitioner contends that it is entitled to the refund of P1 ,736,310.49 as incurred input VAT from its disallowed purchases. Petitioner argues that the official receipts/invoice issued for the disallowed purchases reveal the input VAT amount which petitioner is entitled to claim. That the technical error in the invoices/official receipts issued for petitioner's disallowed purchases should not obstruct the Court from considering undisputed facts to arrive at a just determination of petitioner's entitlement to the refund of its unutilized excess input VAT from the said purchases. After a second hard look at the records of the instant case, the Court reconsiders the disallowance of the following purchases of goods of and services by petitioner for the reasons indicated here below, to wit: Customer Name Input VAT Exhibit Reason Biotech "P-177" p 2,015.13 "P-260" VAT amount is Environmental indicated in the OR Services 15,634.82 "P-321" The purchase was "P-338" DHL 1,281.38 "P-384" made in the year Express 3,703.13 covered by the 6,042.86 refund claim. Globe P28,677.32 VAT amount is Telecom Inc. indicated in the OR VAT amount is Globe indicated in the OR Telecom Inc. Customer name can be found in the latter Icon Interiors part of the OR Total Reconsidered Valid Input VAT However, the Court maintains the disallowance of the following purchases of goods and services made by petitioner for failure to substantiate and comply with the invoicing requirements prescribed under Section 113 (A) and (B) of the NIRC of 1997, as amended: Customer Input VAT Exhibit Reason(s) Name 9,751.76 "P-331" Petitioner failed to substantiate the Globe discrepancy between the amount Telecom Inc. of input VAT being claimed and the (tJ amount of VAT indicated in the OR

AMENDED DECISION CTA CASE NO. 9537 Integrated p 1,296.43 "P-390" Sales Invoice without indication of Computer receipt by authorized signatory Systems 9,531.43 "P-392" Sales Invoice without indication of Integrated receipt by authorized signatory Computer 31,055.90 "P-397" VAT was not separately indicated Systems Integrated 32,128.93 "P-412" VAT was not separately indicated Computer Systems 20,310.00 "P-416" VAT was not separately indicated Integrated The correct amount of VAT cannot Computer 4,200.00 "P-439" be deduced with certainty from the Systems document because of the Integrated 7,259.21 "P-705" alteration and the same was not Computer counter-signed by an authorized Systems 6,241.91 "P-706" signatory Jeon 8,736.65 "P-707" The entries in the OR are doubtful, Software the VAT amount cannot be 8,347.61 "P-708" determined with certainty. Info. Solutions 4,025.32 "P-713" VAT amount is incorrect Description of goods is lacking Soliman 4,062.50 "P-864" Security Description of goods is lacking Services 1,491 ,428.57 "P-1026" Description of goods cannot be Soliman ascertained Security 41,625.00 "P-1027" Description of goods cannot be Services ascertained Soliman 18,000.00 "P-1 028" Security r Services 9,631.95 "P-1117" Soliman P1,707,633.17 Security Services Soliman Security Services Punta De Fabian Inc. Ragojos Heritage Construction Ragojos Heritage Construction Schneider Electric IT Philippines Discovery Suites Total Disallowed Input VAT

AMENDED DECISION CTA CASE NO. 9537 At this juncture, it bears stressing that actions for tax refund are in the nature of a claim for exemption and the law is not only construed in strictissimi juris against the taxpayer, but also the pieces of evidence presented entitling a taxpayer to an exemption is strictissimi scrutinized and must be duly proven. 2 In light of the foregoing findings, the findings of the Court in the assailed Decision pertaining to petitioner's disallowed purchases shall be reduced from P1 ,835,095.07 to P1 ,789,868.49. Hence, the Court's findings in the assailed Decision shall be modified as follows: Input VAT per claim 6,897,992.85 48,087,076.37 Less: Disallowances 1'789,868.49 8,687,861.34 Per ICPA;; 39,399,215.03 Per Court4 Excess Valid Input VAT In sum, out of the claimed input VAT of P48,087,076.37, petitioner has proven the amount of P39,399,988.45 which represents petitioner's valid input VAT. Consequently, only the excess input VAT of P39,399,988.45 can be attributed to the total zero-rated sales declared by petitioner in the amount of P2,151,275,117.96, and the input VAT is modified to P35,486,615.72 which is attributable to the valid zero-rated sales of P1 ,937,639,451.92, computed as follows: Excess Valid Input VAT 39,399,215.03� Divided by Declared Zero-Rated Sales 2,151 ,275,117.96 Multiply by Valid Zero-Rated Sales 1,937,639,451.92 Excess Input VAT Attributable to valid Zero-Rated 35,486,615.72 Sales 2 Atlas Consolidated Mining and Development Corporation vs. Commissioner ofInternal Revenue, G.R. No. 159490, February 18,2008. 3 Disallowances found by the ICPA as adopted by the Court 4 Additiona] disallowances as found by the Court. 5 With Modification./0

AMENDED DECISION CTA CASE NO. 9537 Petitioner failed to substantiate the disallowed zero-rated sales in the amount of P213,635,665.07. In the assailed Decision, the Court disallowed petitioner's VAT zero-rated sales of services to APMM and ML amounting to P213,635,665.07 (or equivalent to US$4,784,458.20) with the following details, to wit: OR OR Date Customer Amount Amount Exhibit Grounds for (in PHP) P-31 disallowance No. (in USD) 137,156,797.47 Not indicated P-31.5 as zero-rated 144 07/01/2016 AP. 3,053,628.94 8,639,203.54 P-31.6 67,839,664.06 sales Moiler 213,635,665.07 Without Maersk supporting OR AJS Zero-rated sales amount 154 18/03/2015 Maersk 193,630.31 not the same Line AJS 155 18/03/2015 Maersk 1,537,198.95 Line AJS Total 4, 784,458.20 Petitioner avers that the Court erred in disallowing the sale represented by O.R. No. 154, allegedly marked as Exhibit "P-31.4", on the ground that it is "Without Supporting OR". Petitioner argues that the said exhibit was admitted in the Court's Resolution dated June 19, 2018 and the same was duly examined and verified by the ICPA. We do not agree. A perusal of petitioner's exhibits that were admitted by the Court in the Resolution dated June 19, 2018 reveal that the document marked as Exhibit "P-31.4" refers to O.R. No. 151 and not to O.R. No. 154. Although it is noted that petitioner attached a copy of O.R. No. 154 to its Motion for Partial Reconsideration, the same cannot be considered by the Court as it was not formally offered as part of petitioner's evidence. Section 34 of Rule 132 of the Revised Rules on Evidence states that "the Court shall consider no evidence which has not been formally offered." To reiterate, records show that the document attached to petitioner's motion, O.R. No. 154 was not formally offered and admitted by the Court. Hence, the Court cannot give probative value thereto as the same was not formally offered and admitted as part of petitioner's supporting evidence in this caseit"'

AMENDED DECISION CTA CASE NO. 9537 Furthermore, petitioner argues that the disallowed sales should qualify as VAT zero-rated sales pursuant to Section 108(8)(4) of the NIRC of 1997, as amended and because of the ruling in the case Commissioner of Internal Revenue vs. Euro-Philippines Airline Services, lnc6 (Euro-Phil) case. Petitioner also avers that nothing in Section 113 of the NIRC of 1997, as amended, provides the consequence of disallowance of the VAT zero-rating of sales and that non-compliance with Section 113 thereof does not disqualify sales of services rendered to persons engaged in international shipping or international air transport operation from VAT zero-rating. Petitioner's argument is misplaced. It is not disputed that petitioner is a VAT registered entity that rendered services to persons engaged in international shipping, pursuant to Section 108 (B) (4) of the NIRC of 1997, as amended. In fact, that was the Court's finding in the assailed Decision. However, petitioner is reminded that its alleged Vat zero-rated sales do not automatically qualify as valid VAT zero-rated sales because petitioner must still prove compliance with mandatory and invoicing requirements of the law. In the case of Miramar Fish Company, Inc. vs. Commissioner of Internal Revenue, 7 the Supreme Court held that non-compliance with the invoicing requirements under the provisions of Section 113 of the NIRC of 1997, as amended, will result in the immediate denial of the refund claim, to wit: "The provisions of Sections 113 and Section 237 of the NIRC of 1997, as amended, and Section 4.108-1 of RR No. 7-95, are clear in enumerating the invoicing requirements necessary to be shown in order to qualify as duly registered receipts or sales or commercial invoices issued by VAT-registered entities, such as petitioner herein, for the purpose of claiming for refund of creditable input tax due or paid attributable to any zero-rated or effectively zero-rated sales. Absent compliance, the unavoidable result is immediate denial of the claim." 6 G.R. No. 222436, July 23, 2018. 7 G.R. No. 185432, June 4, 2014. ~

AMENDED DECISION CTA CASE NO. 9537 Page II of 18 It must be emphasized that compliance with all the VAT requirements provided by tax laws and regulations is mandatory.8 Moreover, the invoicing requirement is reasonable and must be strictly complied with, as it is the only way to determine the veracity of the claim.s Moreover, petitioner's reliance on the ruling of the Euro-Phil case has no leg to stand on. In said case, the Supreme Court did not forego with the mandatory invoicing requirement of the law. The pronouncement of the Supreme Court pertains to the absence of a presumption created by law that the non-imprintment of the word "zero-rated" deems the transaction subject to 12% VAT and that the failure to comply with invoicing requirements as mandated by law does deem the transaction subject to 12% VAT. Petitioner failed to substantiate the discrepancy in the amount of P999,525.00 between the amount of petitioner's refund claim and the amount declare in petitioner's Quarterly VAT Return for the 151 quarter of 2016 and that said amount was not carried over in the succeeding periods. Petitioner alleges that the Court erred in effecting a downward adjustment to petitioner's refund claim. In support of its argument, petitioner relies on the explanation by the Court-commissioned ICPA in the ICPA Report, 10 to wit: "[T]he amount actually being applied for refund of P48,087,076.28 was erroneously presented as 47,087,551.37 per 151 quarter VAT return of taxable year 2016. Upon checking the VAT return for the month of January 2016, the amount however was correct, i.e., P48,087,076.28 (please refer to Exhibit "P-41 ") Nonetheless, in either case, the amount being carried over from previous period was at the same time deducted from total input VAT as VAT refund/TCC 8 Eastern Telecommunications Philippines, Inc. vs. Commissioner of Internal Revenue, G.R. No. 183531, March 25,2015. 9 Kepco Philippines Corporation vs. Commissioner of Internal Revenue, G.R. No. 179961, January 31, 2011. 10 !CPA Report, Docket- Vol. 2, p. 798-r

AMENDED DECISION CIA CASE NO. 9537 Pagel2of18 claimed. Accordingly, it has not been applied against any output VAT." The Court is not convinced. It bears noting that the amount claimed by petitioner as excess input VAT for TY 2015 amounts to P48,087,076.37. However, as noted by the Court, only the amount of P47,087,551.3411 was declared as "VAT Refund/TCC claimed" 12 in petitioner's Quarterly VAT Return for the 1st quarter of 2016. The Court finds that the discrepancy amounting to P999,525.00 was not sufficiently substantiated by petitioner. Thus, the Court cannot ascertain whether the said discrepancy remained unutilized in the succeeding taxable periods. Accordingly, the Court sustains the downward adjustment. Relative thereto, in light of the modified findings of the Court pertaining to petitioner's excess Input VAT attributable to valid zero- rated sales, petitioner's unutilized Input VAT shall be adjusted as follows: Adjusted Excess Input VAT Attributable To P35,486,615.72 valid Zero-rated Sales Less: 999,525.00 P34,487,080.72 Input VAT carried-over the succeeding period Adjusted Unutilized Input VAT Respondent's Motion for Reconsideration As aforementioned, respondent's motion lacks merit. Petitioner was able to show that its excess input taxes for TY 2015 were not applied against any of its output VAT liability. Respondent alleges that petitioner failed to show that the claimed input tax being claimed remained unutilized and have not been applied against any output tax for the succeeding quarters of TY 2016 for failure to present all the VAT Returns forTY 2015. For failure 11 Exhibit "P-40.1 ",Line 23D, refer to the USB (Petitioner's FOE). 12 Exhibit "P-40", Line 23D, refer to the USB (Petitioner's FOE~

AMENDED DECISION CTA CASE NO. 9537 to present II the VAT Returns forTY 2015, the Court allegedly erred in ruling that the claimed input tax remained unutilized based solely on the first quarter VAT Return forTY 2016. Respondent's argument is unavailing. The Court cannot subscribe to respondent's argument that due to petitioner's failure to present all its VAT Returns forTY 2015, the subject claim was not utilized for the TY 2015. Records show that the Quarterly VAT Returns for the First (1 51), 13 Second (2"d), 14 Third (3'd), 15 and Fourth (41h) 16 quarters of 2015 were offered in evidence by petitioner, as well as the Quarterly VAT Returns for the 151 Quarter of 201617 and Monthly VAT Returns for January 201618 were also offered, and all were admitted and considered by the Court in the Resolution dated June 19, 2018. 19 It is noteworthy that aside from the findings made by the court- commissioned ICPA, the Court also verified that the excess input taxes claimed by petitioner for TY 2015 were not applied against any of its output VAT liability. Absent any contrary evidence shown by respondent, the Court sees no reason to disturb its findings. Section 112 (A) of the NIRC of 1997, as amended, does not provide that input VAT should be directly attributable to zero-rated sales. Respondent contends that Section 112 of the NIRC of 1997, as amended, uses the phrase "directly attributable", and thus, the Court should determine that petitioner's unutilized input taxes was directly attributable to its zero-rated sales. As such, respondent avers that the input taxes must come from purchases of goods and services that form part of the finish product or service of the taxpayer, wherein their connection between the purchases and the finished product must be concrete and not imaginary or remote. To bolster his argument, 13 Exhibit "P-15", Docket- Vol. 2, pp. 651 to 652. 14 Exhibit "P-16, Docket- Vol. 2, pp. 653 to 654. 15 Exhibit "P-17", Docket- Vol. 2, pp. 655 to 656. 16 Exhibit "P-18", Docket- Vol. 2, pp. 657 to 658. 17 Exhibits "P-40" to "P-40.1 ", refer to the USB (petitioner's FOE). 18 Exhibits "P-41" to "P-41.1 ", refer to the USB (petitioner's FOE). 19 Docket- Vol. 2, pp. 907 to 90~

AMENDED DECISION CTA CASE NO. 9537 respondent invokes CTA decision, Taganito vs. Commissioner of Internal Revenue (Taganito case), 20 and Supreme Court decisions in Atlas Consolidated Mining and Development Corporation vs Commissioner of Internal Revenue21 (2011 Atlas case) and Atlas Consolidated Mining and Development Corporation vs. Commissioner of Internal Revenue22 (2007 Atlas case), pertaining to the requirement of "direct attributability". We are not convinced. Section 112 (A) of the NIRC of 1997, as amended, provides for the tax credit/refund of creditable input VAT attributable to zero-rated or effectively zero-rated sales, to wit: "SECTION 112. Refunds or Tax Credits of Input Tax. - (A) Zero-rated or Effectively Zero-rated Sales. - Any VAT-registered person, whose sales are zero-rated or effectively zero-rated may, within two (2) years after the close of the taxable quarter when the sales were made, apply for the issuance of a tax credit certificate or refund of creditable input tax due or paid attributable to such sales, except transitional input tax, to the extent that such input tax has not been applied against output tax: Provided, however, That in the case of zero-rated sales under Section 106(A)(2)(a)(1 ), (2) and (B) and Section 108 (8)(1) and (2), the acceptable foreign currency exchange proceeds thereof had been duly accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP): Provided, further, That where the taxpayer is engaged in zero-rated or effectively zero-rated sale and also in taxable or exempt sale of goods or properties or services, and the amount of creditable input tax due or paid cannot be directly and entirely attributed to any one of the transactions, it shall be allocated proportionately on the basis of the volume of sales: Provided, finally, That for a person making sales that are zero-rated under Section 108(8)(6), the input taxes shall be allocated ratably between his zero-rated and nonzero-rated sales. �2 CTA Case No. 8680, September 14,2017. 21 G.R. No. 159741, January 26, 2011. 22 G.R. Nos. 141104 & 148763, June 8, 2007"/1/

AMENDED DECISION CTA CASE NO. 9537 A close reading of the above-cited provision would reveal that the law merely states that the creditable input VAT should be "attributable" to the zero-rated or effectively zero-rated sales. Clearly, nowhere is it stated in Section 112(A) that the refundable creditable input VAT should be "directly attributable" to such sales. It must be remembered that where the law does not distinguish, none must be made. 23 Admittedly, the words "directly ... attributed" were used under the aforequoted provision. However, the said words merely relate to a situation where the creditable input VAT cannot be "directly ... attributed" to any transaction. It does not, in any way, qualify the preceding sentences of the same Section 112(A) which will have the effect of making the refundable input VAT to refer only to those which are "directly attributable" to zero-rated or effectively zero- rated sales. Thus, there is no legal basis for respondent's stand that the fact of "direct attributability" must be established. Furthermore, respondent's reliance in the Decision of the CTA in the Taganito case is also without merit for the reason that CTA decisions do not constitute precedents, and do not bind this Court or the public24 Only Supreme Court decisions, and not CTA decisions), constitute as binding precedents forming part of the legal system. Thus, petitioner cannot invoke the Taganito case. We cannot also rely on the rulings in the Atlas cases also invoked by respondent. This must be so because, the cases were decided under the earlier Revenue Regulations (RR) No. 5-87 dated September 1, 1987, as amended by RR No. 3-77 dated February 15, 1988, Section 16 of which provides, in part, as follows: In all cases, the amount of refund or tax credit that may be granted shall be limited to the amount of value- added tax (VAT) paid directly and entirely attributable to the zero-rated transaction during the period covered by the application for credit or refund." (Emphasis and underscoring supplied) 23 The Commissioner ofInternal Revenue vs. The Commission on Audit. etseq., G.R. Nos. 101976 and 102258, January 29, 1993. 24 Commissioner of Internal Revenue vs. San Roque Power Corporation, G.R. Nos. 187485, 196113 & 197156, February 12, 2013~

AMENDED DECISION CTA CASE NO. 9537 Understandably, on the basis thereof, the Supreme Court required and ruled in the Atlas cases that the input VAT being claimed for refund should be "directly and entirely attributable" to the zero-rated sales. However, RR Nos. 5-87 and 3-88, and the jurisprudential pronouncements interpreting and/or applying the same, could no longer be applied as the same are deemed revoked as provided under Section 23 of Republic Act No. 9337, to wit: "SEC. 23. Implementing Rules and Regulations. - The Secretary of Finance shall, upon the recommendation of the Commissioner of Internal Revenue, promulgate not later than June 30, 2005, the necessary rules and regulations for the effective implementation of this Act. Upon issuance of the said rules and regulations, all former rules and regulations pertaining to value-added tax shall be deemed revoked." (Emphasis and underscoring supplied) Pursuant to the foregoing provision, rules and regulations pertaining to VAT issued before effectivity of RA No. 9337, such as RR Nos. 5-87 and 3-88, shall be deemed revoked upon the issuance of the rules and regulations implementing the said law which should be done not later than June 30, 2005. On June 22, 2005, RR No. 14-200525 was issued by the Secretary of Finance, which became effective on July 1, 2005. Parenthetically, RR No. 14-2005 was later superseded by RR No. 16- 2005 on September 1, 2005, which took effect on November 1, 2005. The latter Revenue Regulation, in turn, has undergone several amendments thereafter. Correspondingly, all Revenue Regulations pertaining to VAT, including RR Nos. 5-87 and 3-88 were deemed revoked as of July 1, 2005. Thus, unless the provisions of the said RR pertaining to the requirement that the input VAT being claimed for refund should be "directly and entirely attributable" to the zero-rated sales, has been retained in the said RR No. 14-2005 and subsequent RR pertaining to VAT, such treatment under the said RR Nos. 5-87 and 3-88 is deemed revoked. A cursory examination, however, of RR No. 14-2005 and subsequent RR pertaining to VAT would reveal that the provisions of RR Nos. 5-87 and 3-88, as to the requirement that the input VAT 25 SUBJECT: CONSOLIDATED VALUE-ADDED TAX REGULATIONS OF 2005)6

AMENDED DECISION CTA CASE NO. 9537 being claimed for refund should be "directly and entirely attributable" to the zero-rated sales, has not been retained. Thus, the aforequoted portion of Section 16 of RR No. 5-87, as amended by RR No. 3-88, is no longer binding, upon the effectivity of RR No. 14-2005, i.e., on July 1, 2005. Considering that the taxable year under consideration is 2015, the provisions of RR Nos. 5-87 and 3-88, as applied to the Atlas cases, may no longer be validly applied to the instant case. WHEREFORE, in light of the foregoing considerations, petitioner's Motion for Partial Reconsideration is PARTLY GRANTED, while, respondent's Motion for Partial Reconsideration is DENIED for lack of merit. Accordingly, the assailed Decision dated June 30, 2020 is hereby amended to read as follows: "WHEREFORE, in light of the foregoing considerations, the instant Petition for Review is PARTIALLY GRANTED. Accordingly, respondent is ORDERED TO REFUND OR TO ISSUE A TAX CREDIT CERTIFICATE in favor of petitioner in the total amount of P34,487,090.7226 representing its excess and unutilized input VAT attributable to its zero-rated sales for the four quarters of taxable year 2015. SO ORDERED." SO ORDERED. ER~P.UY WE CONCUR: Associate Justice C'J'N.. ~ --~-- '------ MA. BELEN M. RINGPIS-LIBAN Associate Justice MARIA R 26 1"35,486,615.72 Less 1"999,525.

AMENDED DECISION CTA CASE NO. 9537 Page18of18 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. ER~P.UY Assoc1ate Justice Chairperson, 3'd Division 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