COMMISSIONER OF INTERNAL REVENUE v. PHIL. GOLD PROCESSING & REFINING CORPORATION

Republic of the Philippines COURT OF TAX APPEALS Quezon City En Bane COMMISSIONER OF INTERNAL CTA EB No. 1460 REVENUE, (CTA Case No. 8652) Petitioner, Present: - versus- DEL ROSARIO, P], CASTANEDA, JR., BAUTISTA, UY, CASANOVA, FABON -VICTORINO , MINDARO -GRULLA, RINGPIS-LIBAN, and MANAHAN,Jl PHIL. GOLD PROCESSING & Promulgated: REFINING CORP., .3;;;: OEC 07 2017 . > . r#> . Respondent. X- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - ----X DECISION CASANOVA, .L.: This Petition for Review1 was filed, via registered mail, by the Commissi oner of Internal Revenue on May 27, 2016 pursuant to Section 2 (a)(1) 2 Rule 4 of A.M. No. 05-11-07-CTA, otherwise known as the ,, Revised Rules of the Court of Tax Appeals". It assails the Amended Decision3 dat ed December 1, 2015 and Resolution4 dated April 27, 2016,~ 1 CTA En Bane Rollo, pp. 6-14. z "SEC. 2. Cases within the jurisdiction of the Court en bane.- The Court en bane shall exercise exclusive appellate jurisdiction to review by appeal the following: (a) Decisions or resolutions on motions for reconsideration or new trial of the Court in Divisions in the exercise of its exclusive appellate jurisdiction over: (1) Cases arising from administrative agencies- Bureau of Internal Revenue, Bureau of Customs, Department of Finance, Department of Trade and Industry, Department of Agriculture;" 3 Division Docket (Vol. II), pp. 1336-1344. 4 Ibid., pp. 1363-1368.

DECISION CTA EB No. 1460 (CTA Case No. 8652) rendered by the First Division '!of the Court of Tax Appeals (CTA) in CTA Case No. 8652, which partiallyi,granted Phil. Gold Processing & Refining Corp.'s claim for refund i~ the aggregate reduced amount of P68,143,880.38 representing ! its unutilized input Value Added Tax (VAT) for the 3rct and 4th quarters of fiscal year (FY) ended June 30, 2011. Petitioner Commissione~ of Internal Revenue (CIR) is the one charged with the administrati~n and enforcement of national internal revenue laws, including the granting of refund or tax credit of taxes erroneously or illegally collected, and other refundable or creditable taxes under the Tax Code. He. holds office at the 4th Floor, Bureau of I Internal Revenue (BIR) Nationtll Office Building, Agham Road, Diliman, Quezon City. On the other hand, resp<j>ndent Phil. Gold Processing & Refining Corp. is a domestic corporatipn duly organized and existing under Philippines laws with business ~ddress at the 3rct floor Corinthian Plaza, 121 Paseo de Roxas, Legaspi Village, Makati City. It is primarily engaged in the business of processing, milling, crushing, refining, smelting, and concentrating mineral resourc~s for export, more particularly gold and silver dore. On December 27, 2004, respondent was issued a Certificate of Incorporation by the Securities' and Exchange Commission (SEC) under its former name, LFT Processi!lg Corporation. It is registered with the Board of Investments (BOI) un4er BOI Registration No. 2008-042 dated February 7, 2008 with a status: of non-pioneer with pioneer incentives being located in Less Developed! Area (LDA). Respondent is, also, a VAT- registered taxpayer under � Certificate of Registration OCN 8RC0000036156 dated on March 15, 1996. On April 20, 2011 and Jljlly 25, 2011, respondent, respectively, filed, through the Electronic Filing and Payment System (eFPS), its VAT Returns for the 3rct and 4th quarters of FY ending June 30, 2011. Subsequently, on July 29, 2011, respondent amended and filed its 4th quarter VAT return. Then, on December 10, 2Q12, respondent filed its administrative claim for refund, via an Applica~ion for Tax Credits/Refunds (BIR Form 1914), for the 3rct and 4th quar~ers of FY ending June 30, 2011 in the~

DECISION CTA EB No. 1460 (CTA Case No. 8652) Page 3 ofll amounts of P35,530,279.00 and P41,414,000.64, respectively, with the BIR's Revenue District Office ~RDO) No. 121 - Large Taxpayer Service Excise. On December 13, 2012,� respondent completed the submission of all its documentations before' the Department of Finance's One Stop Shop (DOF-OSS) Inter Agency dredit and Duty Drawback Center. Claiming inaction thereof, respondent then elevated the matter, via a Petition for Review, to the Court of Tax Appeals (CTA) on May 10, 2013. Thereafter, trial ensued. On June 10, 2015, the CTA.-Division rendered a Decisions denying respondent's claim for refund. the court found that respondent failed to prove that the foreign currency it remitted actually pertains to its alleged export sales for the subjlect period. Undaunted, respondent .filed, on July 6, 2015, a Motion for Reconsideration ofthe Decision; dated 10 June 20156. On December 1, 2015, alll Amended Decision7 was promulgated. The CTA-Division reconsidere(J its initial Decision and found partial merit in respondent's MotioQ, the dispositive portion of the said Amended Decision reads as follows: "WHEREFORE, [responrJent]'s Motion for Reconsideration is PARTIALLY GRANTED. Accordingly, [petitioner] is hereby ORDERED TO REFUND' OR ISSUE A TAX CREDIT CERTIFICATE in favor of �. [respondent] in the amount of SIXTY[-JEIGHT MILLION PNE HUNDRED FORTY THREE THOUSAND EIGHT HUND~ED EIGHTY PESOS AND 38/100 (P68,143,880.38) represen~ing its unutilized input VAT for the period covering January 1, 4011 to June 30, 2011 or the third and fourth quarters of fiscal year ended June 30,2011. SO ORDERED.~ 5 /d., pp.1287-1317. 6 /d., pp. 1318-1329. 7 Supra No.3.

DECISION CTA EB No. 1460 (CTA Case No. 8652) Page 4 ofll Then, on December 17, 2015, petitioner filed, through registered mail, a Motion for Reconsideration (of the Amended Decision dated 01 December 2015) 8� He prays that the above Amended Decision be set aside and a new one be rendered denying the Petition for Review for lack of merit. On April 27, 2016, the CTA-Division promulgated the assailed Resolution9, denying petitioner's Motion for Reconsideration. Hence, on May 27, 2016, petitioner appealed the case to the Court En Bane through the instant Petition for Review1o. He prays that the Amended Decision dated Decetnber 1, 2015 be reversed and set aside, and that a new one be rendered denying respondent's claim for refund in its entirety. Meanwhile, on July 4, 2016, respondent filed an Entry of Appearance11 stating that the ~aw firm of Gonzales Batiller Leabres & Reyes with office address as 7th floor, ALPAP I Building, 140 L.P. Leviste Street, Salcedo Village, Makati City, will be its new counsel for the instant case. In a Minute Resolutionq dated July 7, 2016, the CTA En Bane noted the appearance of respondent's new counsel. Consequently, the Court En Bane ordered that dopies of all notices, affidavits, orders, resolutions and other pleadings relative to the instant case be sent directly at its given address. � Thereafter, on July 12,. 2016, the Court En Bane issued a Resolution13 directing respondent to file its comment to the Petition for Review within ten (10) days fr~m receipt thereof. Thus, on August 25, 2016 respondent filed its Comment/Opposition (To the Petition for Review dated 23 May 2016)14.-e- a Division Docket (Vol. II), pp. 1345-1351. 9 Supra No.4. 10 Supra No.1. 11 CTA En Bane Rollo, pp. 43-44. 1z Ibid., p. 47. 13 !d., pp. 49-50. 14 /d., pp. 52-58.

DECISION CTA EB No. 1460 (CTA Case No. 8652) Page 5 ofll On September 21, 2016, a Resolution1s was rendered by the Court 1 En Bane which gave due coude to the instant Petition for Review and, also, granted the parties a peripd of thirty (30) days within which to file their respective memoranda. In compliance, respondent filed its Memorandum (Of the Respondent) 16 on October 17, 2016 while petitioner, on the other hand, failed to file his memorandijm as per Records Verification17 dated November 23, 2016. Accordingly, in a Resolution18 dated December 13, 2016, the Court En Bane deemed the instant ca~e submitted for decision. The sole issue19 raised. by the petitioner in his Petition is "[w]hether the Honorable Fir* Division of the CTA erred in denying herein Petitioner's Motion for R!econsideration." In his Petition, petitioner mainly argues that respondent's failure to comply with the invoicing re~uirements is fatal to its claim for refund. Petitioner insists that respond$nt violated Section 113 of the National Internal Revenue Code (NIRCJ of 1997, as amended, in relation to Section 4.113-1 of Revenue Re!tulations (RR) No. 16-05, by not writing or printing prominently the w<j>rd "zero-rated" on its sales invoice. He continues that, respondent m~rely rubber-stamped the word "zero- rated" on its official receipts !1 which, therefore, directly violates the requirements of the law and regulation. On the other hand, responldent asserts that petitioner's arguments are misguided and, therefore, d~serves scant consideration. Respondent strongly emphasizes that, no le~s than the Supreme Court itself, in the case of Commissioner of Intern~/ Revenue vs. Toledo Power Company20, held that stamping of "zero-ra~ed sales" on receipts and invoices is adequate compliance with the r�quirement of the law since the purpose of the law to segregate zero-rated sales from sales subject to VAT is served.~ 15 /d., pp. 60-61. 16/d., pp. 62-74. 17 /d., p. 75. 1Bfd., pp. 77-78. 19 Issue, Petition for Review, /d., p. 7. zo G.R. No.183880, January 20, 2014.

DECISION CTA EB No. 1460 (CTA Case No. 8652) Page 6 of11 After due consideration, 'We find no merit in the instant Petition. Notably, the issue and. arguments raised by petitioner in the instant Petition for Review are reiterations of those which he already presented in his Motion for R~consideration2 1 and Memorandumzz with the CTA-Division. Unfortunat~ly, no new matter was presented to warrant reversal or modificatibn of the assailed Amended Decision and Resolution. Time and again, We have,consistently ruled that in zero-rated VAT transactions, failure of a taxpayer claimant to comply with the invoicing requirements is fatal to his cl~im for refund or issuance of tax credit certificate. The relevance of the said requirement is obvious - the presentation of invoices and/<i>r receipts will prove the existence and nature of transactions and will be a basis for computation of taxes. On November 1, 2005, with the effectivity of Republic Act (RA) No. 933723, the requirement of writing or printing the term "zero-rated sale" was introduced, followin$ the amendment of Section 113 of the NIRC of 1997. In fact, as early a~ 2007, the rationale for this requirement was elucidated in the case of APPLIED FOOD INGREDIENTS CO., INC. vs. COMMISSIONER OF INTERNAL REVENUE24, wherein We explained that: "x x x If the invoice or ~fficial receipt was not imprinted with 'zero-rated', there i~ a danger that the purchaser of the goods or services mayi! be able to claim input tax on the sale to it by the taxpayer'1 of the goods or services, as the case may be, notwithstarlding the fact that no VAT was actually paid on such goo~s or services since the taxpayer is zero-rated. This is t~e rationale for the mandatory requirement in Revenue Re~ulations No. 7-95 that the words 'zero-rated' be imprinted in' the invoice or receipt, as the case may be. The zero-rated taxpayer should be entitled to a tax credit/refund on input taxe$ paid on its purchase of goods or services subject to the llnandatory compliance with the~ 21 Supra No.8. 22 Division Docket (Vol. II), pp. 1258-1263. 23 "AN ACT AMENDING SECTIONS 27, 2~, 34, 106, 107, 108, 109, 110, 111, 112, 113, 114, 116, 117, 119, 121, 148, 151, 236, 237 ~ND 288 OF THE NATIONAL INTERNAL REVENUE CODE OF 1997, AS AMENDED, AND FOR OTHER PURPOSES" took effect on November 1, 2005. 24 CTA EB No. 359 (CTA Case No. 6513D, June 4, 2008; citing J.R.A. Philippines, Inc. vs. Commissioner of Internal Revenue, CTA Cf:lse No. 128, January 15, 2007.

DECISION CTA EB No. 1460 (CTA Case No. 8652) Page 7 ofll invoicing requirements un~er the regulations. Otherwise, there may result the absurd sit~ation where the government would be crediting/refunding non-existent input tax to purchasers of goods or services of such z�ro-rated taxpayer." (Emphasis Ours) Now, in its arguments, petitioner insists that the words "zero- rated" should be reflected on� respondent's sales invoices but only by written or printed means, to the exclusion of any other methods like that of rubber stamping. We do not agree. Relative to the resolutioij of the instant case are Sections 113 (B) (2) (c) of the NIRC of 1997, as <11mended, in relation to 4.113-1 (B) of RR No. 16-oszs, which provides that: "SEC.113. Invoicing al)d Accounting Requirements for VAT-Registered Persons. -+- XXX (B) Information Contain�d in the VAT Invoice or VAT Official Receipt. - The following information shall be indicated in the VAT invoice or VAT official ~eceipt: XXX (2) The total amount which the purchaser pays or is obligated to pay to the seller with the indication that such amount includes the value-atlded tax: Provided, That: (a) The amount of the tax shall be shown as a separate item in the invoice or recejpt; (b) If the sale is exempt from value-added tax, the term tVAT-exempt sale' shall be written or printed prominently on the invoice or receipt;~ 2s "CONSOLIDATED VALUE-ADDED TAX ~EGULATIONS OF 2005" dated September 1, 2005.

DECISION CTA EB No. 1460 (CTA Case No. 8652) Page 8 ofll (c) If the sale is su~ject to zero percent (0%) value- added tax, the term 'ze~o-rated sale' shall be written or printed prominently on the invoice or receipt; (d) If the sale involves goods, properties or services some of which are subj~ct to and some of which are VAT zero-rated or VAT-exempt, the invoice or receipt shall clearly indicate the bre~kdown of the sale price between its taxable, exempt and zero-rated components, and the calculation of the value-added tax on each portion of the sale shall be shown on the invoice or receipt: "Provided, That the seller may issu� separate invoices or receipts for the taxable, exempt, ann zero-rated components of the sale." (Emphasis Ours) "SECTION 4.113-1. Invoidng Requirements.- x x x (B) Information contailned in VAT invoice or VAT official receipt.- The following information shall be indicated in VAT invoice or VAT official receipt: (1) A statement that the seller is a VAT-registered person, followed by his TIN; (2) The total amount which the purchaser pays or is obligated to pay to the s~ller with the indication that such amount includes the VAT; Ptovided, That: (a) The amount of tax shall be shown as a separate item in the invoice or receipt; (b) If the sale is exempt from VAT, the term 'VAT-exempt 1 sale' shall be written or prtinted prominently on the invoice or receipt; (c) If the sale is subj�ct to zero percent (0�/o) VAT, the term 'zero-rated sa.e' shall be written or printed prominently on the invoice or receipt; (d) If the sale involves goods, properties or services some of which are subject to and some of which are VAT zero-rated or VAT-exempt, the invoice or receipt shall clearly indicate the break-tdown of the sale price betweent?

DECISION CTA EB No. 1460 (CTA Case No. 8652) Page 9 of11 its taxable, exempt and zero-rated components, and the calculation of the VAT on each portion of the sale shall be shown on the invoice oJ1 receipt. The seller has the option to issue separate invokes or receipts for the taxable, exempt, and zero-rated components of the sale." (Emphasis Ours) Verily, there are addition1al information that an invoice and receipt must contain in accordance with the invoicing requirement, such as having the term "zero-rated" iln cases of zero percent (Oo/o) VAT sales. However, by rigidly construin$ that the said term should only be done by written or printed means i$ somewhat isolating the requirement of the law rather than giving life to its meaning. It cannot be gainsaid that the interpretation of a statute imust begin with the literal words of the statute; those words must be. given their plain, usual, and ordinary meaning; and the statute must :,be construed as a whole. Thus, you have to look at the whole statute to 'determine the legislative intent, and not just the portion at issue. Perforce thereto, We Cligain stress that the requirement of imprinting the word "zero-rate~" was added merely so as to distinguish sales that are subject to the re~ular twelve percent (12%) VAT to those that are subject to zero perc~nt (0�/o) VAT and, those that are VAT exempt. In fact, as held by the 'CTA-Division in the assailed Resolution dated April 27, 2016, "Relative to this is th� case of Commissioner of Internal Revenue vs. Toledo Power Cqmpany, where the Supreme Court categorically ruled that mer~ stamping of the words 'zero-rated' on the VAT invoicesjoffici~l receipts is sufficient compliance with the law, to wit: 'In the present case, we agree with the CTA's findings that the words 'zero-rated' appeared on the VAT invoices/official receipt$ presented by the TPI in support of its refund claim. Although the same was merely stamped and not pre-printed, the same is sufficient compliance with the law, since the imprinting of the word 'zero-rated' was required merely to distinguish sales subj~ct to 10% VAT, those that are subject to 0% VAT (zerb-rated) and exempt sales, to enable the Bureau of !Internal Revenue to properly.,...-

DECISION CTA EB No. 1460 (CTA Case No. 8652) implement and enforce the other VAT provisions of the Tax Code.' (Emphasis ozy.rs) In this case, the term 'zero-rated" appears on the face of petitioner's sales invoice~, albeit, they are rubber stamped. Considering the foregoing, the Court finds that petitioner substantially complied wilth the requirement that the word 'zero-rated' must promin~ntly appear on the face of sales invoices covering zero-rated sales. The word 'zero-rated', although rubber stamped, in petitioner's sales invoices serves the purpose of preventing ilts buyers from falsely claiming input VAT from their purchases' when no VAT was actually paid. It also helps segregate sales�that are subject to 12% VAT from those sales that are zero-rated." On a final note, findings qf fact of the Court in Division are entitled to great weight and will no longer be disturbed absent any findings that would otherwise support a co~trary conclusion. 26 It is a long-standing rule that the Court will not ligl]ltly set aside the conclusions reached by the Court in Division which, by the very nature of its function of being dedicated exclusively to the re$olution of tax problems, has accordingly developed an expertise on the ,subject, unless there has been an abuse or improvident exercise of authiority.27 Hence, in view of the foregoing, We find no cogent reason to disturb the assailed Amended Ii>ecision and Resolution rendered by the CTA-Division. WHEREFORE, the Petitiol.n for Review is hereby DENIED for lack of merit. Accordingly, the Amehded Decision dated December 1, 2015 and Resolution dated April 271 2016 in CTA Case No. 8652 are both AFFIRMED.~ 26 Deltek Systems (Philippines) Ltd. vs. Commissioner of Internal Revenue, CTA EB No. 1105 (CTA Case No. 7893), August 12, 2015; citing Microsoft Philippines, Inc. vs. Commissioner of Internal Revenue, G.R. No. 180173, Aprjl 6, 2011; Commissioner of Internal Revenue vs. TeaM (Philippines) Operations Corpor~tion [formerly Mirant (Philippines) Operations I Corporation], G.R. No. 185728, October 1(5, 2013. 27 Ibid.

DECISION CAES~SANOVA Associate Justice CTA EB No. 1460 (CTA Case No. 8652) Page 11 of11 SO ORDERED. WE CONCUR: Presiding Justice ~�h> Q_ a.r~ ,s;_, LOVEL.fa. BAUTISTA Associate Justice :rtfANITO C. CASTANED~�JR. Associate Justice ER~P.' UY Associate Justice ~o\�. ~~iito:G~ ~. ~ _.,6' Associate Justice MA. BELEN M. RINGPIS-LIBAN Associate Justice ~ 7~ /}?"""~ CATHERlNE T. MANAHAN I Assbciate Justice CERTI FICA T I 0 N Pursuant to Article VIII, Section 13 of the Constitution, it is hereby certified that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court. Presiding Justice