TOLEDO POWER COMPANY v. COMMISSIONER OF INTERNAL REVENUE (consolidated with CTA Case Nos. 8512, 8547 & 8596)

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY SPECIAL SECOND DIVISION TOLEDO POWER COMPANY, CTA CASE NOS. 8450, 8512, Petitioner, 8547 & 8596 -versus- Members: CASTANEDA, JR., Chairperson, and MANAHAN, 11. COMMISSIONER OF Promulgated: ~ INTERNAL REVENUE, MAR 1 :, Z019 Cl � Respondent. r � lo #Y1_ l ---- X - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - X RESOLUTION CASTANEDA, JR., J.: For the Court's resolution are the following: 1. petitioner's Motion for Reconsideration1, filed on June 29, 2017, with respondent's Comment/Opposition (Re: Petitioner's Motion to Reopen Proceedings (with Motion for Reconsideration)2, filed on August 2, 2017; and 2. respondent's Motion for Partial Reconsideration Re: Decision dated 9 June 20173, filed on June 29, 2017, with petitioner's Comment (To Respondent's Motion for Partial Reconsideration filed on June 29, 2017)4, filed on July 25, 2017. ~ 1 CTA Case No. 8450, Docket (Vol. V), pp. 2432-2453. 2 CTA Case No. 8450, Docket (Vol. V), pp. 2617-2623. 3 CTA Case No. 8450, Docket (Vol. V), pp. 2560-8568. 4 CTA Case No. 8450, Docket (Vol. V), pp. 2601 -2611.

RESOLUTION CTA Case Nos. 8450, 8512, 8547 & 8596 Both parties seek reconsideration of the Court's Decision (assailed Decision) promulgated on June 9, 2017, the dispositive portion of which reads: "WHEREFORE, premises considered, the Petitions for Review docketed as CTA Case Nos. 8450, 8512, and 8547 covering petitioner's claims for refund for the first, second and third quarters, respectively, are denied for lack of merit. On the other hand, the Petition for Review docketed as CTA Case No. 8596 is PARTIALLY GRANTED. Accordingly, respondent is ORDERED to refund the amount of P3,612,740.75, in favor of petitioner representing the latter's excess input VAT attributable to zero-rated sales/receipts for the fourth quarter of CY 2010. SO ORDERED." Petitioner's Motion for Reconsideration In the subject Motion, petitioner raises the following grounds for the consideration of the Court: "A. There was a mistake on the representation of the commissioned Independent Certified Public Accountant (ICPA) that all the necessary documents had been photocopied and submitted to the Honorable Court. B. Exhibit No. BBB-4493 is compliant with the requirements of Sections 110(A) and 113(A) and (B) of the NIRC of 1997, as amended, in relation to Sections 4.110-1, 4.110-8, and 4.113-1 of Revenue Regulations (RR) No. 16- 05, as amended, and is within the period of the claim. C. Petitioner's sale of power to CEBECO III, which was eventually distributed to a PEZA- ~

RESOLUTION CTA Case Nos. 8450, 8512, 8547 & 8596 registered entity and a HOI-registered 100�/o export entity are subject to VAT zero-rating." By way of opposition, respondent argues that the Court correctly disallowed input VAT for not being properly substantiated by VAT invoices or receipts and for failure to meet the substantiation requirements as prescribed under Sections 110 (A) and 113 (A) and (B), and 237 of the 1997 National Internal Revenue Code (1997 NIRC), as amended, and as implemented by Sections 4.110-1, 4.110- 2, 4.110-8 and 4.113-1 of Revenue Regulations (RR) No. 16-05. Respondent also maintains that the Court correctly disallowed the input tax in the official receipt issued by Cebu Energy Development Corporation (CEDC) on the ground that the same does not contain the calendar year of transaction in violation of the aforesaid VAT laws and implementing rules. He, likewise, claims that CEBECO III is a non-PEZA registered or BOI-registered entity. Thus, petitioner's sales to the said entity should not be subject to zero-rating. Thus, the disallowance made by the Court is proper and lawful. The Court partially grants petitioner's motion. Petitioner seeks reconsideration of the following disallowed input VAT on its domestic purchases of services and importations of goods in the total amount of P63,307,690.40, to wit: Exhibit Invoice/OR i No. No. Supplier 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr 4. Domestic purchases ofgoods and setvices supported by invoices/DRs dated outside the period ofclaim or with no year indicated CEBU ENERGY BBB- DEVELOPMENT 4493 0092 CORPORATION p 9 759 790.40 ,. 9,759,790.40 subtotal 13. Importation ofgoods supported by IEIRD but without machine validation CCC-12 10370392 I AND N p 22 445.00 INTERNATIONAL CORP CCC-14 102813961 MAN DISEL SAS 802 273.00 CCC-15 103813821 I AND N 49 833.00 INTERNATIONAL CORP CCC-16 104522092 TECHNOMARINE CO 561,944.00 CCC-19 104984582 LTD MITSUBISHI p 461 599.00 CORPORATION CCC-20 104522241 FUJI TRADING CO LTD 101 015.00 CCC-21 104984512 FUJI TRADING CO LTD 703 729.00 CCC-22 104984546 EASTERN ENERGY 2,486,778.00 RESOURCES FZE CCC-24 104984756 EASTERN ENERGY 2,4~~~Q~.OQ ------- ~ RESOURCES FZE -

RESOLUTION CTA Case Nos. 8450, 8512, 8547 & 8596 CCC-25 104984747 EASTERN ENERGY 2,393 959.00 p 2 539 536.00 I CCC-26 17175445 RESOURCES FZE CCC-27 107336083 EASTERN ENERGY 1'8. 643 686.00 2 503 151.00 CCC-28 108861103 RESOURCES FZE 118,643 686.00 CCC-29 107336092 EASTERN ENERGY 34 221.00 CCC-30 SN 107336047 RESOURCES FZE CCC-31 SN 108999913 I & N INTERNATIONAL 4 521111.00 48 183.00 CCC-32 SN 108999947 CORP p CCC-33 SN 108861207 HOLCIM TRADING PTE CCC-34 SN 108861137 LTD 2 343 144.00 CCC-35 SN 107336257 CCC-36 SN-1 08999825 Chris Marine AB 2 426 488.00 CCC-37 SN-1 08999807 Eastern Energy CCC-38 SN-108861024 Resources Fze 2 540 278.00 CCC-39 SN-108861173 Eastern Energy CCC-40 SN-108999782 Resources Fze 2 553 446.00 CCC-41 SN-108999764 Eastern Energy CCC-42 SN 108999877 Resources Fze 2 611 779.00 CCC-43 SN 108999886 Eastern Energy 5 588 062.00 CCC-44 SN 107336144 Resources Fze CCC-45 SN 108861234 Eastern Energy 238 927.00 CCC-46 SN 111872241 Resources Fze CCC-47 SN 111872223 9 033.00 CCC-49 SN-1 08999931 Eon Far East Limited CCC-50 SN 108861191 29 612.00 CCC-51 SN 108999895 Fuji Trading Co Ltd I and N International 48 638.00 Corp I and N International 59 378.00 Corp 3 138 963.00 I and N International Corp 81 092.00 I and N International Corp 393 027.00 175 625.00 PT Insani Baraperkasa Sun Machinery & 2 240 191.00 Trading Inc 6 763,191.00 Sun Machinery & Trading Inc 31 038.00 Technomarine Co Ltd 178 775.00 Eastern Energy Resources Fze 1'1,436. 495.00 1'9,598. 019.00 2 370 830.00 II 1 436 495.00 119,598 019.00 1'33 869,700.00 Yashima and Co Ltd 1143 629 490.40 I and N International 1163,307 690.40 Corp Sun Machinery & Trading Inc Eastern Energy Resources Fze subtotal Total per quarter Total Upon scrutiny of the additional documents5 submitted by petitioner, specifically, Bureau of Customs official receipts (ORs), Import Entry and Internal Revenue Declarations (IEIRDs), with machine validation and Statement of Settlement of Duties and Taxes (SSDTs), the Court finds that, out of the disallowed input VAT of P63,307,690.40, petitioner was able to prove the actual payment of input VAT on importations of goods in the total amount of P53,547,899.00, detailed as follows: Jt- 5 Bureau of Customs official receipts (ORs), Import Entry and Internal Revenue Declarations (IEIRDs), with machine validation and Statement of Settlement of Duties and Taxes (SSDTs).

RESOLUTION CTA Case Nos. 8450, 8512, 8547 & 8596 Exhibit No.6 BOC Entry Supplier In_putVAT First Quarter Receipt/ Reference/ IEIRD No. CCCC-1 SSDT CCCC-2 Customs I AND N INTERNATIONAL p 22 445.00 Reference 10370392 CORP CCCC-3/CCC-15 102813961 --- MAN DISEL SAS 802 273.00 CCCC-4 No. I AND N INTERNATIONAL 49 833.00 Second Quarter 170379194 102813821 CORP 561 944.00 CCCC-5 170470544 SN 104522092 TECHNOMARINE CO LTO CCCC-6 p 1,436,495.00 CCCC-7 169637745 subtotal CCCC-8 172045544 104984582 MITSUBISHI CORPORATION p 461 599.00 172013204 104522241 FUJI TRADING CO LTD 101,015.00 CCCC-9 SN 104984512 FUJI TRADING CO LTD 703 729.00 2010-C-1653 EASTERN ENERGY CCCC-10 SN 104984546 RESOURCES FZE 2 486,778.00 2010-C-1462 EASTERN ENERGY Third Quarter 104984756 RESOURCES FZE 2 496,606.00 2010-C-4387 EASTERN ENERGY CCCC-11 104984747 RESOURCES FZE 2 393,959.00 2010-C-3732 CCCC-12 2010-C-715 subtotal p 8,643,686.00 CCCC-13 2010-C-3929 CCCC-14 SN 107336223 EASTERN ENERGY p 2 5391536.00 2010-C-290 RESOURCES FZE Fourth Quarter 2010-C-11904 107336083 EASTERN ENERGY 2,503 151.00 CCCC-15 2010-C-13379 108861103 RESOURCES FZE 34 221.00 CCCC-16 2010-C-7212 107336092 CCCC-17 2010-C-6774 I & N INTERNATIONAL CORP 4,521 111.00 CCCC-18 2010-C-4770 CCCC-19 2010-C-8890 HOLCIM TRADING PTE LTO p 9,598,019.00 CCCC-20 2010-C-9033 subtotal CCCC-21 CCCC-22 2010-C-971 SN 107336047 Chris Marine AB p 48 183.00 CCCC-23 2010-C-800 CCCC-24 2010-C-1291 SN 108999913 Eastern Energy Resources Fze 2 343 144.00 CCCC-25 2010-C-1223 CCCC-26 2010-C-10452 SN 108999947 Eastern Energy Resources Fze 2 426 488.00 CCCC-27 2010-C-1310 CCCC-28 2010-C-4052 SN 108861207 Eastern Energy Resources Fze 2 540 278.00 CCCC-29 2010-C-8243 CCCC-30 2010-C-15296 SN 108861137 Eastern Energy Resources Fze 2 553 446.00 CCCC-31 2010-C-15622 CCCC-32 2010-C-1465 SN 107336257 Eastern Energy Resources Fze 2 611 779.00 CCCC-33 2010-C-7142 CCCC-34 2010-C-12155 SN-108999825 Eon Far East Limited 5 588 062.00 CCCC-35 SN-108999807 Fuji Trading Co Ltd 238 927.00 SN-108861024 I and N International Corp 9 033.00 SN-108861173 I and N International Corp 29 612.00 SN-108999782 I and N International Corp 48 638.00 SN-108999764 I and N International Corp 59 378.00 SN 108999877 PT Insani Baraperkasa 3 138 963.00 SN 108999886 Sun Machinery & Trading Inc 81 092.00 SN 107336144 Sun Machinery & Trading Inc 393 027.00 SN 108861234 Technomarine Co Ltd 175 625.00 SN 111872241 Eastern Energy Resources Fze 2 240,190.00 SN 111872223 Yashima and Co Ltd 6 763,191.00 SN-10899993_L-I-and N International Corp 31 038.00 SN 108861191 Sun Machinery & Trading Inc 178,775.00 SN 108999895 -~c:~stern Energy Resources Fze 2,370 830.00 --~---- ~ -- ---------------- ~------ subtotal P33,869,699.00 - -� ------- - - - - � Total P53,547,899.00 ~ 6 Annexes C-1 to C-35 to petitioner's Motion to Reopen Proceedings (with Motion for Reconsideration) dated June 29, 2017, CfA Case No. 8450, Docket (Vol. V), pp. 2457-2552.

RESOLUTION CTA Case Nos. 8450, 8512, 8547 & 8596 As regards the domestic purchase of service to Cebu Energy Development Corporation (CEDC) in the amount of P9,759,790.40, which was disallowed by the Court for failure to indicate therein the year when the transaction actually occurred, petitioner presented its Tax Compliance Officer, Ms. Mary Ann C. Vergara, to testify on the corrections made by Ms. Leonida R. Tarnate, Finance Officer of CEDC, on the subject official receipt. To corroborate her testimony, Ms. Vergara presented the Sworn Statement issued by Ms. Melissa D. Vidal, CEDC's Finance Manager, on the said matter, as well as the corrected official receipt. Pertinent portions of Ms. Vergara's testimony are herein quoted for ready reference: "21 Q: You also mentioned that Petitioner incurred input VAT on its purchase of electricity from CEDC for the period September 26, 2010 to October 25, 2010, covered under Official Receipt No. 0092, marked as Exhibit BBB-4593. What is your proof in saying so? A: This is covered by CEDC Official receipt No. 0092 issued by CEDC to Petitioner on December 30, 2010. However, Official Receipt No. 0092, marked as Exhibit BBB-4493, was not properly dated, as the year of issue was not indicated on its face. This official receipt was actually issued to Petitioner on December 30, 2010. Thus, on November 29, 2017, Petitioner requested CEDC to rectify the entry made in OR No. 0092 and to indicate the correct date of issuance which is December 30, 2010. The correction was duly initialled and dated by Leonilda R. Tarnate, Finance Officer of CEDC. CEDC likewise issued a Sworn Statement dated November 29, 2017 attesting to the fact that OR NO. 0092 pertains to Petitioner's purchase of electricity for the period September 26, 2010 to October 25, 2010, and that said CEDC OR No. 0092 was issued to Petitioner on December 30, 2010.The Sworn Statement was executed by Melissa D. Vidal, Finance Manager of CEDC. 22. Q: If shown to you the rectified Official Receipt No. 0092 and the Sworn Statement that you 7e-

RESOLUTION CTA Case Nos. 8450, 8512, 8547 & 8596 mentioned, will you be able to recognize them? A: Yes. 23. Q: How are you familiar with the initials of Leonilda R. Tarnate? A: I have encountered the same initials before in the course of fulfilling my duties as Tax Compliance Officer. 24 Q: How are you familiar with the signature of Melissa D. Vidal? A: I have also previously encountered the same in the course of fulfilling my duties as Tax Compliance Officer. 25. Q: I am showing you the following documents: Exhibit No. Description DDDD-5 CEDC Official Receipt No. 0092 dated December 30, 2010 DDDD-5-1 Date and Signature of Leonida Tarnate on Official Receipt No. 0092 DDDD-6 Sworn Statement dated November 29l 2017 DDDD-6-1 Signature of Melissa D. Vidal on the Sworn Statement dated November 29, 2017'17 This Court cannot give credit to the afore-quoted testimony of Ms. Mary Ann C. Vergara, as she appears to have no personal knowledge on the actual correction made by Ms. Tarnate on the subject official receipt. In fact, she merely narrated that petitioner had requested the CEDC to make the necessary correction on the subject official receipt; that a Sworn Statement was executed by CEDC's Finance Manager, Ms. Vidal, who stated therein that the correction or insertion of the year "2010" in the subject receipt was made by CEDC's Finance Officer, Ms. Tarnate; and, that she is familiar with the signatures of Ms. Tarnate and Ms. Vidal since she encountered the same "in the course of fulfilling" her "duties as Tax Compliance Officer" of petitioner. Moreover, the subsequent correction made by CEDC in the official receipt, pursuant to the request made by petitioner, does not~ 7 Judicial Affidavit of Mary Ann C. Vergara, CTA Case No. 8450, Docket (Vol. V), pp. 2706-2707.

RESOLUTION CTA Case Nos. 8450, 8512, 8547 & 8596 rectify the fact that petitioner was issued an official receipt, which is not compliant with the invoicing requirements provided by law. Petitioner must be mindful that the law prescribes that the official receipts must be complete in information upon its issuance. Hence, Exhibit "DDDD-5" cannot, likewise, be given credence by the Court. As such, the disallowance of the claimed input VAT of P9,759,790.40 shall remain. In view of the foregoing, petitioner's valid input VAT is now adjusted to P177,132,532.81, computed as follows: 1st Quarter 2nd Quarter 3n1 Quarter 4th Quarter Total p 38 682 091.71 p 28 830 470.30 Valid Input VAT p 31 718 756.36 p 24 353 315.44 p 123 584 633.81 per the Assailed 1436 495.00 8 643 686.00 Decision 8 P40,118,586.71 P37,474,156.30 9 598 019.00 33 869,699.00 53 547 899.00 Add: P41,316,775.36 P58,223,014.44 P177,132,532.81 Reconsider ed Input VAT on Importatio ns of goods Valid Input VAT as Adjusted Considering that petitioner is engaged both in taxable sales subject to zero percent (0�/o) and twelve percent (12�/o) rates, as well as exempt sales, and its input VAT cannot be directly or entirely attributed to any of the transactions, the Court shall allocate the adjusted valid input VAT proportionately on the basis of the volume of its sales, in this wise: As per Assailed 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Total Decision.8 p 403 664 957.64 p 378 881 751.80 p 489 216 287.95 p 523 898 827.74 p 1 795 661 825.13 Zero-Rated Sale (A) VAT Sales_aJ} 323 285 336.68 254 653_L_568.27 269 413L258.33 164 996 139.32 1 012.348 302.60 Sale to Government (C) 12,567,124.40 15,843,946.40 19,426 859.00 15,062,327.60 62 900,257.40 Exempt Sale (D) 1 217 768.43 678 481.14 1715 904.62 1 576 163.82 5 188 318.01 Total Sales (E) P740 735,187.15 P650 057,747.61 P779 772,309.90 p 705,533 458.48 P2,876 098,703.14 1st Q_tr 2nd Q_tr 3rd Q_tr 4th Q!r Total p 40 118 586.71 p 58 223 014.44 p 177 132 532.81 Adjusted Valid Input VAT p 37 474 156.30 p 41 316 775.36 (F) p 21 862 695.18 17 509,294.87 p 21 841,557.98 p 25,921,463.50 p 43 233 908.54 p 112,859,625.20 Allocation: 680,641.72 13,616,041.15 60,080 506.81 Zero-Rated Sale 14,680,122.89 14,275,047.90 1,242 994.37 [G=(ALE X F)] /c- 3,866,344.40 VAT Sales [H=(B/Ex 913,362.74 1,029,345.57 F)] Sale to Government {C/E xF}_ 8 CTA Case No. 8450, Docket (Vol. V), p. 2410. 9 CTA Case No. 8450, Docket (Vol. V), p. 2410.

RESOLUTION 90,918.39 erA Case Nos. 8450, 8512, 8547 & 8596 65,954.94 P40,118,586.71 Since petitioner's input VAT allocated to VATable sales in the respective amounts of P17,509,294.87, P14,680,122.89, P14,275,047.90 and P13,616,041.15 for the first, second, third and fourth quarters of calendar year (CY) 2010 is not enough to cover its output VAT liability in the amounts of P38,794,240.40, P30,558,428.19, P32,329,591.00 and P19,799,536.72 for the first, second, third and fourth quarters of CY 2010, respectively, the substantiated input VAT attributable to zero-rated sales shall be utilized against the remaining output VAT of P21,284,945.53, P15,878,305.30, P18,054,543.10 and P6,183,495.57 for the first, second, third and fourth quarters of CY 2010, respectively, thereby resulting to excess input VAT of P577,749.65, P5,963,252.68, P7,866,920.40 and P37,050,412.97 for the first, second, third and fourth quarters of CY 2010, respectively, to wit: Output tax on VAT lst_Qtr 2nd_Qtr 3rd Qtr 4th Qtr Total Sales per assailed Decision 11 P38,794 240.40 p 30 558 428.19 p 32 329 591.00 p 19 799 536.72 p 121 481 796.31 Less: Input VAT 17 509 294.87 14 680,122.89 14,275 047.90 1t616 041.15 60 080 506.80 allocated to VAT P21,284 945.53 p 15 878,305.30 p 18 054 543.10 p 6 183 495.57 p 61 401 289.50 Salesfl/J 21 862 695.18 21 841,557.98 25 921 463.50 43 233 908.54 112 859 625.20 Remaining output tax (PS77 749.65) (PS,963,252.68) (P7,866,920.40) (P37,050,412.97) (PS1,458,335. 70) Less: Input VAT allocated to zero- rated sales (G) Excess Input VAT Also, relying on the provision of Revenue Memorandum Circular (RMC) No. 61-05, specifically, Question/Answer 26, petitioner maintains that its sales of power to Cebu III Electric Cooperative (CEBECO III), a pass-through entity, are subject to VAT zero-rating 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. Accordingly, said RMC mandates that the payment of the end-user for the power it purchased, even if passed through a distribution company, shall form part of the generation company's gross receipts. Hence, 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. As such, petitioner concludes that 7--- 10 With P0.01 difference due to rounding off. 11 CTA case No. 8450, Docket (Vol. V), p. 2411.

RESOLUTION CTA Case Nos. 8450, 8512, 8547 & 8596 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. The Court agrees with petitioner's contentions. It bears noting that 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. 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 Jt,

RESOLUTION CfA Case Nos. 8450, 8512, 8547 & 8596 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." 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 "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 ?"--

RESOLUTION CTA Case Nos. 8450, 8512, 8547 & 8596 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. 20,12 Series of 2005 provides how generation companies (GC) shall bill end-user for its charges, to wit: "1. 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 GRand output VAT of the GC or TRANSCO, accordingly. 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. X X X (n) Pursuant to RMC 61-2005, sales of electricity by GC, TRANSCO, and DUs [or~~o Philippine pt- .,.--- 12 Implementing the Recovery of Value Added Tax (VAT) and Other Provisions of Republic Act No. 9337 Affecting the Electric Power Industry.

RESOLUTION CTA Case Nos. 8450, 8512, 8547 & 8596 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" It can be inferred from the foregoing that generation and transmission charges, including the VAT thereon, although billed to the end-user by the 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 (B) (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 BOI- pv

RESOLUTION CTA Case Nos. 8450, 8512, 8547 & 8596 registered 100�/o exporter, then the transaction should qualify for VAT zero-rating. In the instant cases, petitioner sold power to CEBECO III, a duly registered electric cooperative, as evidenced by the Certificate of Registration13 issued by the National Electrification Administration. Accordingly, such sales to CEBECO III are pass through charges and are eventually distributed to BEC and CCC, PEZA and SOl-registered entities, respectively, thus, qualify for VAT zero-rating. Based from petitioner's Schedule of Gross Sales (Vatable, Zero- Rated, VAT-Exempt and Sales to Government)14, petitioner had zero- rated sales of power to CEBECO III in the amount of P141,553,909.52. A scrutiny of petitioner's 0Rs15 and invoices16 issued to CEBECO III and the statements of accounts (SOAs) and ORs issued by CEBECO III to BEC and CCC17 reveals that the amount of zero-rated sales were indicated in the VAT ORs issued by petitioner to CEBECO III. Further, the corresponding VAT sales invoices issued by petitioner to CEBECO III show the breakdown of the power (in kwh) distributed to the end-users, including BEC and CCC, which may be traced to the SOAs issued by CEBECO III to BEC and CCC. However, certain pass through charges to BEC and CCC are not supported by ORs and SOAs upon which the distributed power may be traced. Further, the ORs issued by CEBECO III to BEC and CCC failed to comply with Section 113(B)(2)(c) of the NIRC of 1997, as amended, which provides that "the term 'zero-rated sale' shall be written or printedprominently on the invoice or receipt'~ The details of the foregoing findings are summarized hereunder: ORs issued by petitioner to Sales Invoice issued by SOA issued by CEBECO III to OR issued by CEBECO III to BEC &CCC CEBECO III petitioner to CEBECO III BEC&CCC Charged To OR SI (among Bill Exh. No. Zero-Rated Sales Exh. No. others): kWh Exh. No. kWh used Exh. OR No. Amount First Quarter - - - - � - - - - - � - - � � - - - - - ~ 13 Exhibit "II", CTA Case No. 8450, Docket (Vol. II), p. 737. 14 Exhibit "EEE", Pet's FOE Binder. 15 Exhibits "GGGG", "IIII", "KKKK", "NNN'', "QQQQ", "TITT", "WWWW", "AAAAA", "BBBBB", "EEEEE", "HHHHH", "KKKKK", CTA case No. 8450, Docket (Vol. II), pp. 809-839. 16 Exhibits "EEE-10", "EEE-19", "EEE-25", "EEE-32", "EEE-40", "EEE-44", "EEE-48", "EEE-53", "EEE-60", "EEE-184", "EEE-205" and "EEE-242", Original Box 2, Book 11 of 11. 17 Exhibits "CCCC-1" to CCCC-24" and "DDDD-1" to "DDDD-24", Pet's FOE Binder.

RESOLUTION CTA Case Nos. 8450, 8512, 8547 & 8596 � No supporting SOA to which the power distributed to BEC & CCC may be traced andno supporting OR issued by CEBECO III to BEC&CCC EEE- 094 BEC 1851 266.18 GGGG 2400 P 12 680 426.68 242 8 CCC 1,462 722.00 � The supporting ORs issued by CEBECO III to BEC & CCC was not imprinted with the word ''zero-rated" DODD- BEC 1,587,370.25 DDDD-1 8253119 1,587,370.07 13 025224 p 7,394 824.59 EEE- ecce- 1111 2409 12,134,268.44 10 0963 CCC 1 513,700.00 CCCC-1 8254913 1 488,000.00 13 CN532172 7,363,839.30 KKKK 2416 DODD- BEC 2,181,075.43 DDDD-2 8718047 2,181,075.27 14 025243 11 464 848.53 ecce- EEE- 14 901 903.75 19 0975 CCC 1 506 446.00 CCCC-2 8718048 1482 646.00 14 CN0007900 7 815 805.32 subtotal 39. 716.598.87 Second Quarter � The supporting ORs issued by CEBECO III to BEC & CCC was not imprinted with the word "zero-rated" DODD- BEC 1985 351.70 DDDD-3 8777270 1,985 351.70 15 025284 10 823 404.64 ecce- EEE- NNNN 2423 12 340 720.59 25 0986 CCC 1 366 800.00 CCCC-3 8776858 1 344 000.00 15 CN618818 7 216 064.70 QQQQ 2438 DODD- subtotal BEC 2 015 231.70 DDDD-4 8831777 2,015 231.70 16 030010 10,268 233.56 ecce- EEE- 14,028 177.37 32 0998 CCC 1,51VOO.OO CCCC-4 8831776 1,488 000.00 16 CN0007901 7,488,541.80 26,368,897.96 Third Quat:E.r � The supporting ORs issued by CEBECO III to BEC & CCC was not imprinted with the word "zero-rated" DODD- BEC 1646 252.03 DDDD-5 8894447 1 646,252.03 17 030044 9137 914.96 ecce- 7 725,798.90 EEE- 'L349 758.66 7 404 655.70 TTTT 2449 10,995 457.31 44 1010 CCC 1 462,000.00 CCCC-5 8904118 1,440,000.00 17 CN671345 10 335,192.59 7 554,030.10 www DODD- 11,634 427.91 8 247,224.30 w 2458 BEC 1 808,672.33 DDDD-6 8955437 1,808,672.33 18 030078 ecce- AAAAA 2472 EEE- BBBBB 2483 12 691,694.88 48 1024 CCC 1 509,900.00 CCCC-6 8955436 1,488,000.00 18 CN818992 subtotal DODD- BEC 1,977,511.09 DDDD-7 9010251 1,977,511.09 19 032403 ecce- EEE- 13,943,445.96 53 1040 CCC 1,463,200.00 CCCC-7 8955436 1,440,000.00 19 CN941250 DODD- BEC 2 090,027.63 DDDD-8 9064388 2 090,027.63 20 032442 ecce- EEE- 3,148 687.77 60 1052 CCC 1,409 063.57 CCCC-8 9064389 1,488,000.00 20 CN902014 40,779. 285.92 fourth QJ/.iJ.rter � The supp.r~rting ORs issued bv CEBECO III to BEC & CCC was not imprinted with the word "zero-rated" DODD- BEC 1 962 103.85 DDDD-9 9123877 1 962 103.85 21 032474 9 342 893.30 ecce- CN857748 6 689 616.77 EEE- 9 260 977.48 034903 6,926 311.25 EEEEE 2494 12 168 778.25 184 1067 CCC 1 374 259.49 CCCC-9 9133273 1 349 659.49 21 CN0007902 9 169,293.95 6,856 825.04 DODD- 03499 CN0007903 BEC 1,844,842.86 DDDD-10 9177315 1,844 842.86 22 ecce- EEE- HHHHH 2498 11 593 201.97 40 1082 CCC 1 317,436.97 CCCC-10 9177316 1 292,036.97 22 DODD- BEC 1,907 554.38 DDDD-11 9241042 1 907,554.38 23 ecce- EEE- KKKKK 2510 10,927,146.55 205 1102 CCC 1,371 840.73 CCCC-11 9240579 1 342,640.73 23 subtotal 34,68!1126.77 Total! P141,553,909.52 Thus, the reported zero-rated sales of power to CEBECO III in the amount of P141,553,909.52 shall properly be denied VAT zero- rating. Considering that petitioner had excess input VAT for the four quarters of CY 2010, and only the valid zero-rated sales for the fourth quarter of CY 2010 in the amount of P475,620,199.66 was ?e---

RESOLUTION erA Case Nos. 8450, 8512, 8547 & 8596 computed in the assailed Decision18, the Court shall determine the valid zero-rated sales of petitioner to BEC and CCC for the first, second and third quarters of CY 2010. In support of its zero-rated sales for the first to third quarters of CY 2010, petitioner presented various sales invoices and 0Rs19 issued to BEC and CCC. Upon examination of the said documents, the Court finds that the total amount of P6,051,499.82, representing petitioner's sales to BEC and CCC for the first to second quarters of CY 2010 are not covered by VAT zero-rated ORs, thus, shall be denied VAT zero- rating, to wit: Exhibit OR Amount per Amount per OR Amount No. Schedule20 Disallowed 1st Quarter EEE-68 2218 p 116,667,245.94 p 115,477,518.84 p 1,189,727.10 EEE-86 2224 5~ 000,000.00 EEE-87 2227 49,54~364.82 103,638,063.94 1,094,699.12 121,808,085.43 102,543,364.82 113,795,748.06 EEE-88 2230 39,600,000.00 EEE-89 2233 21,827,358.41 EEE-90 2235 59,101,931.84 120,529,290.25 1,278,795.18 subtotal p 3,563,221.40 2ndfl_uarter 2253 27,492,256.16 EEE-133 2253 EEE-133 8~815,213.48 111,307,469.64 2,488,278.42 p 2,488,278.42 subtotal p 6,051,499.82 Total Consequently, out of the total declared zero-rated sales of P1,795,661,825.13, only the amount of P1,634,466,914.48 represents petitioner's valid zero-rated sales for the four quarters of CY 2010, as computed below: ~ 18 CTA Case No. 8450, Docket (Vol. V), p. 2416. 19 Exhibits "EEE-1" to "EEE-172", FOE Original Box 2, Book 11 of 11. 2o Exhibit "EEE", Petitioner's FOE Binder.

RESOLUTION CTA Case Nos. 8450, 8512, 8547 & 8596 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter-21 Total p 523,898,827.74 p 1,795,661,825.13 Zero-Rated Sales per p 403,664,957.64 p 378,881,751.80 p 489,216,287.95 Returns Less: Disallowances 3,563,221.40 2,488,278.42 13,589,501.31 19,641,001.13 on 39,716,598.87 26,368,897.96 40,779,285.92 34,689,126.77 141,553,909.52 Sales to BEC &CCC 11360,385,137.37 11350,024,575.42 P448,437,002.03 11475,620,199.66 111,634,466,914.48 Sales to CEBECO III Valid Zero-Rated Sales as Adjusted Considering the foregoing, the excess input VAT attributable to zero-rated sales of P51,458,335.70 and the adjusted valid zero-rated sales of P1,634,466,914.48 shall be incorporated in the computation of the refundable input VAT for the CY 2010. Accordingly, petitioner's excess input VAT in the total amount of P51,458,335.70 is attributable to the entire amount of P1,795,661,825.13 zero-rated sales declared by petitioner in its Quarterly VAT Returns for the four quarters of CY 2010. However, only the input VAT of P46,872,156.51 is attributable to the valid zero- rated sales of P1,634,466,914.48, as computed below: 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Total p 577,749.65 p 5,963,252.68 p 51,458,335.70 Excess input p 7,866,920.40 p 37,050,412.97 VAT 403,664,957.64 378,881,751.80 1,795,661,825.13 attributable to 360,385,137.37 350,024,575.42 489,216,287.95 523,898,827.74 1,634,466,914.48 zero-rated p 515,804.96 II 5,509,067.08 II 46,872,156.51 sales 448,437,002.03 475,620,199.66 Divide by II 7,211,162.60 II 33,636,121.86 Declared Zero- Rated Sales Multiply by Valid Zero- Rated Sales Refundable Input VAT attributable to Zero- Rated Sales Respondent's Motion For Partial Reconsideration Respondent contends that petitioner has no excess input taxes for the fourth quarter of taxable year 2010 for the latter failed to substantiate its claims as prescribed under Sections 110 and 113 of the NIRC of 1997 and Sections 4.110-1, 4.110-2, 4.110-8 and 4.113- 1 of RR No. 16-2005; that petitioner failed to prove that its alleged input taxes for the fourth quarter is directly attributable to its zero- ~ 21 Per the Assailed Decision, CTA Case No. 8450, Docket (Vol. V), p. 2416.

RESOLUTION CTA Case Nos. 8450, 8512, 8547 & 8596 rated sales; and that petitioner failed to prove that it had zero-rated or effectively zero-rated sales for the fourth quarter of taxable year 2010 as the sales invoices and ORs issued to BEC and CCC are insufficient in proving that petitioner had zero-rated sales. Respondent's motion is unmeritorious. A cursory reading of the foregoing arguments presented by respondent readily reveals that no new matters or issues have been raised and that they deal with the very same issues which have been thoroughly passed upon at length in our assailed Decision22 dated June 9, 2017. Thus, to discuss them anew is a superfluity. In the case of Shangri-La International Hotel Management, Ltd, et al vs. Developers Group of Companies, Inc.23, the Supreme denied respondent's Motion for Reconsideration for being a mere reiteration of their previous arguments and for failure to raise matters substantially plausible or compellingly persuasive to warrant the reversal of the assailed Decision, to wit: "The bulk of the aforementioned grounds is a mere rehash of movant's previous arguments. While DGCI is correct in stating that a motion for reconsideration, by its very nature, may tend to dwell on issues already resolved in the decision sought to be reconsidered and that this should not be an obstacle for a reconsideration, the hard reality is that movant has failed to raise matters substantially plausible or compellingly persuasive to warrant the desired course of action. Considering that the grounds presently raised have been sufficiently considered, if not squarely addressed, in the subject Decision, it behooves movant to convince the Court that certain findings or conclusions in the Decision are contrary to law. As it is, however, the instant motion does not raise any new or substantial legitimate ground or reason to justify the reconsideration sought." WHEREFORE, premises considered, petitioner's Motion for Reconsideration, is PARTIALLY GRANTED, while respondent's Motion for Partial Reconsideration Re: Decision dated 9June jz, 22 Docket (Vol. V), pp. 2036-2038. 23 G.R. No. 159938, January 22, 2007.

RESOLUTION CTA Case Nos. 8450, 8512, 8547 & 8596 2017, is DENIED for lack of merit. Accordingly, the dispositive portion of this Court's Decision dated June 9, 2017, is hereby amended to read as follows: "WHEREFORE, premises considered, the instant Petitions for Review are PARTIALLY GRANTED. Accordingly, respondent is ORDERED TO REFUND to petitioner the amount of P46,872,156.51, representing the latter's excess input VAT for the first to fourth quarters of CY 2010 attributable to its zero-rated sales/receipts. SO ORDERED." SO ORDERED. I CONCUR: 9--c:~~c.~~.Q Jt1ANITO C. CASTANEDA; JR. Associate Justice ~7- CATHERINE T. MANAHAN Associate Justice