AIR LIQUIDE PHILIPPINES, INC. v. COMMISSIONER OF INTERNAL REVENUE

Republic of the Philippines COURT OF TAX APP EALS Quezon City SPECIAL SECOND DIVISION AIR LIQUIDE PHILIPPIN ES, CTA CASE NO. 8017 INC ., For: Refund or issuance of a Petitioner, Tax Credit Certificate -versus- Present: CASTAN EDA, JR., Chairperson CASANOVA, and MINDARO-G RU LLA, JJ. COMMISSIONER OF INTERNAL REVENUE, Promulgated : DEC 07 2017~ Respondent. x---------------------------------------------------------------------------------------l-~--~-~-~~-~~~ � AMENDED DECISION MINDARO-GRULLA, J.: This is a case remanded by the Supreme Court involving a Petition for Review filed by Air Liquide Philippines, Inc. on December 29, 2009, seeking the issuance of a tax credit certificate in the amount of Twenty-Three Million Two Hundred Fifty-Four Thousand Four Hundred Sixty-Five Pesos and 64/100 (P23,254,465.64), allegedly representing its unutilized input value-added tax (VAT) paid for the fourth quarter of calendar year (CY) 2007. Petitioner Air Liquide Philippines, Inc. is a domestic corporation duly organized and existing under Philippine laws, with Securities and Exchange Commission (SEC) Certificate No. AS094-00011713. 1 Its principal place of business is at Lot 37, DBP Avenue, FTI Complex, Taguig, Metro Manila. Petitioner is a VAT-registered entity since October 9, 1995, as evidenced by its Bureau of Internal Revenue (BIR) Certificate of Registration No. OCN 9RC0000057089 .2 1 Par. 1, Stipulation of Facts, Joint Stipulation of Facts and I ssues (JSFI), Docket, Vol. 1, p. 454. 2 Par. 3, Stipulation of Facts, JSFI, Docket, Vol. 1, p. 45 5; Exhibit "B".

CTA Case No. 8017 Page 2 of 37 Air Liquide Philippines, Inc. vs. CIR AMENDED DECISION On the other hand, respondent is the duly appointed Commissioner of the Bureau of Internal Revenue who has the power to decide disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties imposed in relation thereto or other matters arising under the National Internal Revenue Code (NIRC) or other laws or portions thereof administered by the BIR. He holds office at the BIR National Office Building, Agham Road, Diliman, Quezon City. Petitioner is engaged in the manufacture, production, purchase, wholesale, importation, marketing and generally deal in all kinds of industrial, medical and specialty liquid gases, other chemicals and residual components. It sells products and renders certain related services to entities registered with the Philippine Economic Zone Authority (PEZA).3 On December 23, 2009, petitioner filed with respondent, through BIR Revenue District Office (RDO) No. 121, an application for issuance of tax credit certificate for its unutilized input VAT for the fourth quarter of CY 2007. On December 29, 2009, the instant Petition for Review was filed. This Court issued a Decision4 on July 3, 2012, the dispositive portion of which provides: "WHEREFORE, premises considered, the present Petition for Review is hereby DISMISSED for lack of jurisdiction. SO ORDERED." On July 20, 2012, petitioner filed a Motion for Reconsideration of the above Decision. On September 24, 2012, this Court denied petitioner's Motion for Reconsideration for lack of merit. 3 Pars. 1 and 2, Stipulation of Facts, JSFI, Docket, Vol. 1, p. 454. 4 Docket, Vol. 2, pp. 871-898. l..

CTA case No. 8017 Page 3 of 37 Air Liquide Philippines, Inc. vs. CIR AMENDED DECISION On October 25, 2012, petitioner filed a Petition for Review with the CTA En Bane, docketed as CTA EB No. 943. On July 29, 2013, the CTA En Bane rendered a Decision granting the Petition for Review, the dispositive portion of which states: "WHEREFORE, premises considered, the instant Petition for Review filed on October 25, 2012 is hereby GRANTED. The assailed Decision dated July 3, 2012 and the assailed Resolution dated September 24, 2012 promulgated by the eTA-Second Division which dismissed the Petition for Review docketed as CTA Case No. 8017, are hereby REVERSED and SET ASIDE. Accordingly, CTA Case No. 8017 is hereby REMAN OED to the eTA-Second Division for the proper and immediate determination of the propriety of the claim for refund or tax credit certificate. Thereafter, the eTA- Second Division shall make a declaration of the specific amount of refund or tax credit certificate to which petitioner is entitled to, If any. SO ORDERED." Respondent filed a Motion for Reconsideration of the above Decision on August 28, 2013. On December 17, 2013, the CTA En Bane denied respondent's Motion for Reconsideration fot lack of merit. Aggrieved by the decision of the CTA En Bane, respondent filed a Petition for Review on Certiorari with the Supreme Court entitled Commissioner ofInternal Revenue vs. Air Liquide Philippine~ Inc., with Docket No. G.R. No. 210646. On July 29, 2015, the Supreme Court rendered a Decision denying respondent's Petition for Review on Certiorari, the dispositive portion of which provides: "WHEREFORE, the Petition is DENIED. The July 29, 2013 Decision and the December 17, 2013 Resolution

CTA case No. 8017 Page 4 of 37 Air Liquide Philippines, Inc. vs. CIR AMENDED DECISION of the Court of Tax Appeals En Bane in CTA EB Case No. 943 are AFFIRMED in toto. Accordingly, the case is REMANDED to the CTA Second Division for the proper determination of the refundable or creditable amount due to the respondent, if any. SO ORDERED." On March 18, 2016,5 this Court received the Entry of Judgment issued by the Supreme Court on September 23, 2015 stating that the Decision rendered in Commissioner ofInternal Revenue vs. Air Liquide Philippines, Inc. on July 29, 2015 has already become final and executory. As a result, the case was set for petitioner's presentation of evidence and petitioner was ordered to submit Supplemental Independent Certified Public Accountant (ICPA) Report. On August 15, 20166 and August 17, 20167, in compliance with this Court's Order dated July 20, 2016, petitioner respectively submitted the Supplemental ICPA Report and the Supplemental Sworn Statements of Armando L. Magpantay Jr., the Court-commissioned ICPA. Petitioner filed its Supplemental Formal Offer of Evidence8 on August 26, 2016, with respondent's Comment filed on September 5, 2016. This Court issued a Resolution9 on October 17, 2016, admitting Petitioner's Exhibits "LLLL-10"I "LLLL-10-a"I "LLLL-10-1"I "LLLL-10-2"I "LLLL-10-3", "LLLL-11", and "LLLL-11-A". Thereafter, the parties were directed to file their memoranda. Petitioner filed its Memorandum10 on November 18, 2016; while respondent filed a Manifestation11 on November 24, 2016, manifesting 5 Docket, Vol. 3, p. 1566. 6 Docket, Vol. 4, pp. 1611-1632. 7 Docket, Vol. 4, pp. 1634-1642. 8 Docket, Vol. 4, pp. 1645-1649. 9 Docket, Vol. 4, pp. 1655-1656. 1o Docket, Vol. 4, pp. 1657-1670. 11 Docket, Vol. 4, p. 1671. <

CTA Case No. 8017 Page 5 of 37 Air Liquide Philippines, Inc. vs. CIR AMENDED DECISION that he will adopt his Answer to the Petition for Review filed on March 12, 201012 as his Memorandum, in lieu of filing a Memorandum. Consequently, this Court issued a Resolution13 on December 12, 2016, declaring the case submitted for decision. Based on the parties' Joint Stipulation of Facts and Issues14, the following are the issues to be resolved: 1. Whether or not petitioner is entitled to the issuance of a tax credit certificate for its unutilized/excess input VAT payments for the 4th Quarter of 2007 amounting to P23,254,465.64; 2. Whether or not petitioner is a value added taxpayer pursuant to the provisions of the National Internal Revenue Code ("NIRC") of 1997 as amended; 3. Whether or not petitioner has complied with the invoicing and accounting requirements for VAT- registered persons as well as the filing and payment of VAT in compliance with the provisions of Sections 113 and 114 of the NIRC; 4. Whether or not petitioner has complied with the submission of complete documents in support of the administrative claim for refund pursuant to Section 112(0) of the NIRC; 5. Whether or not the input taxes of P23,254,465.64 representing petitioner's excess and unutilized input VAT for the 4th Quarter of 2007 were: a. Paid by petitioner; b. Attributable to zero-rated sales; c. Not applied against any output tax; and 12 Docket, Vol. 1, pp. 114-124. 13 Docket, Vol. 4, p. 1675. 14 Docket, Vol. 1, p. 456.

CTA Case No. 8017 Page 6 of 37 Air Liquide Philippines, Inc. vs. CIR AMENDED DECISION 6. Whether or not petitioner's claim for unutilized input VAT was filed within the period prescribed by law. Pertinent to the resolution of the case at bench is Section 112(A) and (C) of the National Internal Revenue Code of 1997, as amended, which provides: "SEC. 112. Refunds or Tax Credits ofInput Tax. - (A) Zero-Rated or Effectively Zero-Rated Sales. - Any VAT-registered person, whose sales are zero-rated or effectively zero-rated may1 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 8angko Sentral ng Pilipinas (8SP): Provided, further, That where the taxpayer is engaged in zero-rated or effectively zero-rated sale and also in taxable or exempt sale of goods of properties or services, and the amount of creditable input tax due or paid cannot be directly and entirely attributed to any one of the transactions, it shall be allocated proportionately on the basis of the volume of sales: Provided, 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 non-zero-rated sales. XXX XXX XXX (C) Period within which Refund or Tax Credit of Input Taxes shall be Made.- In proper cases, the Commissioner shall grant a refund or issue the tax credit certificate for creditable input taxes within one hundred twenty (120) days from the date of submission of compl�te documents in support of the application filed in accordance with Subsection (A) hereof. In case of full or partial denial of the claim for tax refund or tax credit, or the failure on the part of the Commissioner to act on the application within the period prescribed above, the (

CTA Case No. 8017 Page 7 of 37 Air Liquide Philippines, Inc. vs. CIR AMENDED DECISION taxpayer affected may, within thirty (30) days from the receipt of the decision denying the claim or after the expiration of the one hundred twenty day.,period, appeal the decision or the unacted claim with the Colt1rt of Tax Appeals." Pursuant to the above-q~oted provision and as laid down by the Supreme Court in a number of cases15, a taxpayer engaged in zero- rated or effectively zero-rated sales is entitled to a refund or tax credit of input taxes attributable to such sales upon compliance with the following requisites: 1. That the taxpayer-claimant must be VAT-registered; 2. That there must be zero-rated or effectively zero-rated sales; 3. That input taxes were incurred or paid; 4. That such input taxes are attributable to zero-rated or effectively zero-rated sales; 5. That the input taxes were not applied against any output VAT liability during and in the succeeding quarters; and 6. That the claim for refund was filed within the prescriptive period both in the administrative and judicial levels. Petitioner's administrative and judicial claims were timely filed The last requisite had been resolved by the CTA En Bane in its Decision in the case of Air Liquide Philippines, Inc. vs. Commissioner ofInternal Revenue-6, which was affirmed by the Supreme Court in its Decision in the case of Commissioner of Internal Revenue vs. Air Liquide Philippines, Inc.17� The pertinent portion of the CTA En Bane Decision reads as follows: 15 Commissioner ofInternal Revenue vs. Toledo Power Company, G.R. Nos. 195175 and 199645, August 10, 2015; Luzon Hydro Corporation vs. Commissioner of Internal Revenue, G.R. No. 188260, November 13, 2013; Southern Philippines Power Corporation vs. Commissioner of Internal Revenue, G.R. No. 179632, OctOber 19, 2011; Silicon Philippines, Inc. (Formerly Intel Philippines Manufacturing, Inc.) vs. Commissioner ofInternal Revenue, G.R. No. 172378, January 17, 2011; AT&T Communications Services Phtlippines, Inc. vs. Commissioner of Internal Revenue, G.R. No. 182364, August 3, 2010; San Roque Power Corporation vs. Commissioner of Internal Revenue, G.R. No. 180345, November 25, 2009; Intel Technology Philippines, Inc. vs. Commissioner ofInternal Revenue, G.R. No. 166732, April 27, 2007. 16 CTA EB No. 943, July 29, 2013. 17 G.R. No. 210646, July 29, 2015. (

CTA Case No. 8017 Page 8 of 37 Air Liquide Philippines, Inc. vs. CIR AMENDED DECISION "Based on the foregoing, the Supreme Court reiterated that the observance of the 120+30-day period is mandatory and jurisdictional. Taxpayers who file their judical claims for tax refund or issuance of tax credit certificate without observing the 120+30-day period are deemed to have prematurely filed their judical claims, thus depriving the Court of Tax Appeals of jurisdiction over their claims. By way of exception, taxpayers who from December 10, 2003 up to October 6, 2010 filed their judicial claims for tax refund or issuance of tax credit certificate without regard to the 120+30-day period are exempted from the strict application of the same. As was discussed in San Roque, Taganito and PhtYex, premature filing during the excepted period does not constitute an infirmity on the jurisdiction of the Court of Tax Appeals to act on the claim. As can be seen from the records of this case, petitioner filed its administrative claim for its unutilized input VAT for the fourth quarter of taxable year 2007 on December 23, 2009 and its judicial claim on December 29, 2009. Clearly, the administrative claim was filed with the CIR within two years after the close of the taxatl>le quarter when the zero-rated sales were made, as provided in Section 112 (A) of the 1997 Tax Code. Petitioner can also rely on BIR Ruling No. DA-489-03 since the instant judicial claim was filed within the excepted period." This Court will now proceed to determine petitioner's compliance with the remaining requisites for refund of input VAT. Petitioner is a VAT� registered entity with zero-rated sales for the fourth quarter ofCY2007 Petitioner is registered with the BIR as a VAT entity under Certificate of Registration No. OCN 9RC0000057089 and is duly registered with the Securities and Exchange Commission as a business engaged in the manufacture, production, purchase, wholesale, importation, marketing and generally dealing in all kinds of industrial, medical and specialty liquid gases, other chemicals and their residual components.

CTA Case No. 8017 Page 9 of 37 Air Liquide Philippines, Inc. vs. CIR AMENDED DECISION For the fourth quarter of CY 2007, petitioner allegedly sold its products and rendered related services to entities registered with the PEZA, the Subic Bay Metropolitan Authority (SBMA), and the Board of Investments (BOI). Petitioner posits that such sales of goods and related services are considered export sales under Republic Act (RA) No. 7916, as amended by RA No. 8748, RA No. 7227, and Executive Order (EO) No. 226, subject to zero percent (0�/o) VAT under Sections 106(A)(2)(a)(5) and 108(B)(3) of the NIRC of 1997, as amended. "SEC. 106. Value-added Tax on Sale of Goods or Properties. - (A) Rate and Base of Tax. - There shall be levied, assessed and collected on every sale, barter or exchange of goods or properties, a value-added tax equivalent to ten percent (10�/o) of the gross selling price or gross value in money of the goods or properties sold, bartered or exchanged, such tax to be paid by the seller or transferor: Provided, That the President, upon the recommendation of the Secretary of Finance, shall, effective January 1, 2006, raise the rate of value- added tax to twelve percent (12�/o), after any of the following conditions has been satisfi!ed: XXX XXX XXX (2) The following sales by VAT-registered persons shall be subject to zero percent (0�/o) rate: (a) Export Sales.- The term 'export sales' means: XXX XXX XXX (5) Those COf1Sidered export sales under Executive Order No. 226, otherwise known as the Omnibus Investment �ode of 1987, and other special laws." (Emphasis supplied) ' "SEC. 108. Value-added Tax on Sale ofServices and Use or Lease ofProperties. - XXX XXX XXX (

erA Case No. 8017 Page 10 of 37 Air Liquide Philippines, Inc. vs. CIR AMENDED DECISION (B) Transactions Subject to Zero Percent (0%) Rate. - The following services performed in the Philippines by VAT- registered persons shall be subject to zero percent (0�/o) rate: XXX XXX XXX (3) Services rendered to persons or entities whose exemption under s~ecial laws or international agreements to which :the Philippines is a signatory effectively subjects thei supply of such services to zero percent (0�/o) rate." (Emphasis supplied) The Court agrees with petitioner. Sales by a VAT-registere~ taxpayer from the customs territory to entities located in export processing zones are considered export sales under EO No. 226, otherwise known as the "Omnibus Investments Code of 1987", the relevant portions of which read as follows: "ARTICLE 23. 'Export Sales' shall mean the Philippine port F.O.B. value, determined from invoices, bills of lading, inward letters of credit, landing certificates, and other commercial documents, of exports products exported directly by a registered export producer or the net selling price of export products sold by a registered export producer to another export producer, or to an export trader that subsequently exports the same: Provided, That sales of export products to another producer or to an export trader shall only be deemed export sales when actually exported by the latter, as evidenced by landing certificates or similar commercial documents: Provided, further, That without ac:tual exportation the following shall be considered constructively exported for purposes of this provision: (1) sales to bonded manufacturing warehouse$ of export-oriented manufacturers; (2) sales to export processing zones; xxx" (Emphasis supplied) "ARTICLE 77. Tax Treatment ofMerchandise in the Zone. - (1) Except as otherwise. provided in this Code, foreign and domestic merchandise, raw materials, supplies, articles, equipment, machineries, spare parts and wares of every description, except those prohibited by law, brought into the zone to be sold, stored, broken up, repacked, assembled, installed, sorted, cleaned1 graded, or otherwise processed, (

CTA Case No. 8017 Page 11 of 37 Air Liquide Philippines, Inc. vs. CIR AMENDED DECISION manipulated, manufactured, mixed with foreign or domestic merchandise whether directly or indirectly related in such activity, shall not be subject to customs and internal revenue laws and regulations nor t<i> local tax ordinances, the provisions of law to the contrary notwithstanding. (2) Merchandise ~urchased by a registered zone enterprise from the customs territory and subsequently brought into the zone~ shall be considered as export sales and the exporter thereof shall be entitled to the benefits allowed by law for such transaction." (Emphasis supplied) Further, RA No. 7916 otherwise known as "The Special Economic Zone Act of 1995", as amended by RA No. 8748, provides that ECOZONES are considered separate customs territory, and the business establishments operating within the ECOZONES are entitled to certain fiscal incentives. Sections 8 and 23 of RA No. 7916, as amended by RA No. 8748, provide: "SECTION 8. ECOZONE to be Operated and Managed as Separate Customs Territory. - The ECOZONES shall be managed and operated by the PEZA as separate customs territory." "SECTION 23. Fiscal Incentives. Business establishments operating within the ECOZONES shall be entitled to the fiscal incentives as provided for under Presidential Decree No. 66, the law creating the Export Processing Zone Authority, or those provided under Book VI of Executive Order No. 226, otherwise known as the Omnibus Investment Code of 1987. xxx" RA No. 7227, otherwise known as the "Bases Conversion and Development Act of 1992", provides a similar provision treating the Subic Special Economic Zone as a separate customs territory, thus: "SECTION 12. Subic Special Economic Zone.- xxx XXX XXX XXX (b) The Subic Special Economic Zone shall be operated and managed as a separate customs territory ensuring free flow

CTA Case No. 8017 Page 12 of 37 Air Liquide Philippines, Inc. vs. CIR AMENDED DECISION or movement of goods and capital within, into and exported out of the Subic Special Eqonomic Zone, as well as provide incentives such as tax ~nd duty free importations of raw materials, capital and equipment. However, exportation or removal of goods from the territory of the Subic Special Economic Zone to the other parts of the Philippine territory shall be subject to customs duties and taxes under the Customs and Tariff Code and other relevant tax laws of the Philippines;" Since the Ecozone is considered as a foreign territory by legal fiction, sales of goods and services made by a VAT-registered person in the Philippine customs territory to an entity registered and operating within the Ecozone are considered exports to a foreign country subject to zero percent (0�/o) VAT. This was elucidated by the Supreme Court in the case of Commissioner of Internal Revenue vs. Toshiba Information Equipment (Phils.), Inc.18, to wit: "This Court agrees, however, that PEZA-registered enterprises, which would necessarily be located within ECOZONES, are VAT-exempt entities, not because of Section 24 of Rep. Act No. 7916, as amended, which imposes the five percent (5�/o) preferential tax rate on gross income of PEZA- registered enterprises, in lieu of all taxes; but, rather, because of Section 8 of the same statute which establishes the fiction that ECOZONES are foreign territory. XXX XXX XXX Section 8 of Rep. Act No. 7916, as amended, mandates that the PEZA shall manaQe and operate the ECOZONES as a separate customs territory; thus, creating the fiction that the ECOZONE is � foreign territory. As a result, sales made by a suppliler in the Customs Territory to a purchaser in the ECOZONE shall be treated as an exportation from the ,Customs Territory. Conversely, sales made by a su~plier from the ECOZONE to a purchaser in the Custo~s Territory shall be considered as an importation into the Customs Territory. Given the preceding discussion, what would be the VAT implication of sales made by a supplier from the Customs Territory to an ECOZONE enterprise? 1B G.R. No. 150154, August 9, 2005.

CTA Case No. 8017 Page 13 of 37 Air Liquide Philippines, Inc. vs. CIR AMENDED DECISION The Philippine VAT system adheres to the Cross Border Doctrine, according to which, no VAT shall be imposed to form part of the cost of goods destined for consumption outside of the territorial border of ~he taxing authority. Hence, actual export of goods and s~rvices from the Philippines to a foreign country must be free of VAT; while, those destined for use or consumption within the Philippines shall be imposed with ten percent (10�/o) VAT." (Emphasis supplied) Similarly, in the case of Commissioner of Internal Revenue vs. Sekisui Jushi Philippines, Inc. 19, the Supreme Court held: "Notably, while an ecozone is geographically within the Philippines, it is deemed a separate customs territory and is regarded in law as foreign soil. Sales by suppliers from outside the borders of the ecozone to this separate customs territory are deemed as exports and treated as export sale$. These sales are zero-rated or subject to a tax rate of zero percent." (Emphasis supplied) With respect to sales by a VAT-registered supplier to a SOl- registered 100�/o exporter, Section 4.106-5 of Revenue Regulations (RR) No. 16-0520 provides: "SECTION 4.106-S. Zero-Rated Sales of Goods or Properties.- A zero-rated sale of goods or properties (by a VAT- registered person) is a taxable transaction for VAT purposes, but shall not result in any output tax. However, the input tax on purchases of goods, properties or services, related to such zero-rated sale, shall be available as tax credit or refund in accordance with these Regulations. The following sales by VAT-registered persons shall be subject to zero percent (OWo) rate: (a) Export sales. -'Export Sales' shall mean: XXX XXX XXX �19 G.R. No. 149671, July 21, 2006. 2 Consolidated Value-Added Tax Regulations of 2005 issued on September 1, 2005. (

CTA Case No. 8017 Page 14 of 37 Air Liquide Philippines, Inc. vs. CIR AMENDED DECISION (5) Transactions considered export sales under Executive Order No. 226, otherwise known as the Omnibus Investments Code of 1987, and other special laws. 'Considered export sales under Executive Order No. 226' shall mean the Philippine port F.O.B. value determined from invoices, bills of lading, inward letters of credit, landing certificates, and other commercial documents, of export products exported directly by a registered export producer, or the net selling price of e~port products sold by a registered export producer to another export producer, or to an export trader that subsequently exports the same; Providect That sales of export products to another producer or to an export trader shall only be deemed export sales when actually exported by the latter, as evidenced by landing certificates or similar commercial documents; Providect further, That without actual exportation the following shall be considered constructively exported for purposes of these provisions: (1) sales to bonded manufacturing warehouses of export-oriented manufacturers; (2) sales ~o export processing zones; (3) sales to registered export traders operating bonded trading warehouses supplying raw materials in the manufacture of export products under guidelines to be set by the Board in consultation with the Bureau of Internal Revenue (BIR) and the Bureau of Customs (BOC); (4) sales to diplomatic missions and other agencies and/or instrumentalities granted tax immunities, of locally manufactured, assembled or repacked products whether paid for in foreign currency or not. For purposes of zero-rating, the export sales of registered export traders shall include commission income. The exportation of goods on consignment shall not be deemed export sales until the export products consigned are in fact sold by the consignee; and Providect finally, that sales of goods, properties or services made by a VAT-registered supplier to a HOI-registered manufacturer/producer whose products are 11.00�/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) Clearly, petitioner's sales of goods and services to entities registered with the PEZA and SBMA and those registered with the BOI whose products are 100�/o exported are considered "export sales" subject to zero percent VAT rate pursuant to Sections 106(A)(2)(a)(S) and 108(8)(3) of the NIRC of 1997, as amended. (_

CTA Case No. 8017 Page 15 of 37 Air Liquide Philippines, Inc. vs. CIR AMENDED DECISION To substantiate its reported zero-rated sales/receipts of P206,341,201.1621 for the fourth quarter of CY 2007, petitioner presented the sales invoices22 it issued to its clients for the subject period of claim, the Certification23 from PEZA dated April 28, 2010 attesting that the enterprises ,listed therein are registered with PEZA, the Certificates24 of Registration and Tax Exemption issued by SBMA on December 2, 2006 and December 3, 2007 to NIDEC Subic Philipppines Corporation, the Certificate25 of Registration and Tax Exemption issued by SBMA on March 3, 2007 to HHIC-PHIL Inc., the Certification26 issued by the BOI on December 3, 2010 confirming that Shinkozan Corporation and Team Pacific Corporation were endorsed to the BIR for VAT zero-rated transactions within the validity period of January 1 to December 31, 2007, and the letter27 dated December 7, 2010 from PEZA to petitioner confirming that it has issued VAT zero- rating certifications to the PEZA-registered enterprises enumerated therein. A careful examination of these documents shows that petitioner's reported zero-rated sales/receipts in the amount of P57,978,201.30 should be disallowed for the fOllowing reasons: Exhibit Invoice Customer Name Amount of Sale No. In USD Forex Amount Rate28 (in PHP) I a) Sales ofgoods to MME Technologies, Inc. (MME) for which no PEZA Certification for 2007 VAT zero- rating of MME's transactions with its loC;II suppliers ofgoods, properties and setvices was issued, as indicated in the PEZA letter dated December 7, 2010 (Exhibit "Y-5"). Moreover, while it was noted in the said letter that MME's PEZA registration date was November 25, 1999, the same is not indicative of the fact that the said entity was PEZA ,registered during the subject period ofclaim. For the month of October 500.00 44.9740 22,487.00 2814 86921 MME Technoloqies, Inc, 17,737.07 2815 86973 MME Technologies, Inc. 10 343.71 2816 87012 MME Technoloqies Inc, 19,045.91 2817 87085 MME Technologies, Inc. 21104.20 2818 87089 MME Technoloqies Inc. 2819 87117 MME Technologies Inc, 9,078.55 2820 87132 MME Technoloqies Inc. 20 322.90 2821 87135 MME Technologies Inc, 15 194.27 21 Exhibit "M", line 17. 22 Exhibits "2560" to "4508". 23 Exhibit "Y". 24 Exhibits "Y-1" and "Y-2". 25 Exhibit "Y-3". 26 Exhibit "Y-4". 27 Exhibit "Y-5". 28 Exhibits "J", "K", and "L". (

CTA Case No. 8017 Page 16 of 37 Air Liquide Philippines, Inc. vs. CIR AMENDED DECISION 2822 87159 MME Technologies Inc.. 12 089.09 2823 87294 MME Technologies Inc.. 15 037.88 2824 87295 MME Technologies Inc. 23 645.44 2825 87318 MME Technologies Inc. 21 851.44 2826 87320 MME Technologies Inc. 24 669.06 2827 87428 MME Technologies Inc. 16 027.70 2828 87434 MME Technologies Inc. 17 163.12 2829 87494 MME Technologies Inc. 20 681.05 2830 87531 MME Technologies Inc. 2831 87553 MME Technologies Inc. 9 317.49 2832 87559 MME Technologies, Inc. 16 314.35 2833 87561 MME Technologies Inc. 15,829.19 2834 87612 MME Technologies, Inc. 17,792.32 2835 87654 MME Technologies, Inc. 20,622.94 2836 87677 MME Technologies Inc. 16,859.05 2837 87754 MME Technologies Inc. 16,069.04 2838 87755 MME Technologies Inc. 2839 87812 MME Technologies, Inc. 6,896.76 2840 87874 MME Technologies Inc. 14 627.34 2841 87876 MME Technologies Inc. 14 440.66 2842 87878 MME Technologies Inc. 17 624.62 19 842.16 Subtotal 16 419.26 489,133.57 For the month ofNovember 21 973.50 3515 88035 MME Technologies Inc. 500.00 43.9470 13 212.29 3516 88120 MME Technologies Inc. 12 139.92 3517 88125 MME Technologies Inc. 18 887.96 3518 88126 MME Technologies Inc. 12 279.15 3519 88150 MME Technologies Inc. 18 109.91 3520 88187 MME Technologies Inc. 13 822.12 3521 88238 MME Technologies Inc. 11,017.76 3522 88317 MME Technologies Inc. 14,880.84 3523 88336 MME Technologies, Inc. 13 133.38 3524 88337 MME Technologies Inc. 28 147.73 3525 88338 MME Technologies Inc. 12 212.20 3526 88339 MME Technologies, Inc. 13,947.05 3527 88349 MME Technologies Inc. 15 635.62 3528 88380 MME Technologies, Inc. 22,594.13 3529 88412 MME Technologies Inc. 3530 88416 MME Technologies Inc. 7 597.20 3531 88418 MME Technologies Inc. 19 663.93 3532 88479 MME Technologies Inc. 11 518.39 3533 88500 MME Technologies Inc. 15 251.99 3534 88632 MME Technologies Inc. 23 634.39 3535 88644 MME Technologies Inc. 10 647.78 3536 88690 MME Technologies Inc. 21 610.55 3537 88712 MME Technologies Inc. 3538 88717 MME Technologies Inc. 9 053.07 3539 88750 MME Technologies Inc. 12 806.17 3540 88765 MME Technologies Inc. 19 680.44 3541 88833 MME Technologies, Inc. 14 864.72 35,954.88 (

CTA Case No. 8017 Page 17 of 37 Air Liquide Philippines, Inc. vs. CIR AMENDED DECISION 3542 88906 MME Technologies Inc. 500.00 42.7590 20,880.08 3543 88920 MME Technologies Inc. 12 297.22 Subtotal 477,454.37 For the month ofDecember 4148 89064 MME Technologies Inc. 21 379.50 4149 89174 MME Technologies Inc. 11 026.34 4150 89175 MME Technoloqies Inc. 18 159.18 4151 89178 MME Technologies Inc. 17 153.63 4152 89190 MME Technologies Inc. 13 737.62 4153 89208 MME Technologies Inc. 18 031.52 4154 89257 MME Technologies Inc. 17 506.97 4155 89495 MME Technoloqies Inc. 17 023.24 4156 89496 MME Technologies Inc. 29 580.33 4157 89497 MME Technologies Inc. 16 883.62 4158 89498 MME Technologies Inc. 24 397.62 4159 89499 MME Technologies Inc. 17 411.81 4160 89502 MME Technologies, Inc. 25 017.72 4161 89503 MME Technologies, Inc.. 17,161.43 4162 89505 MME Technologies, Inc.. 19,629.61 4163 89506 MME Technoloqies Inc. 13 007.15 4164 89507 MME Technologies, Inc. 21,784.62 4165 89573 MME Technologies Inc. 15 757.69 4166 89633 MME Technologies Inc. 19 524.70 4167 89683 MME Technologies Inc. 15 542.15 4168 89696 MME Technologies Inc. 19 801.21 4169 89802 MME Technologies Inc. 15 234.44 4170 89841 MME Technologies Inc. 4171 89844 MME Technoloqies Inc. 9 301.76 4172 89867 MME Technologies Inc. 8 738.99 Subtotal 10 792.47 Total 433,585.32 1,400,173.26 b) Sales of goods without proof that the corresponding customers were PEZA or SBMA- registered entities or BOI 100% expbrters during the fourth quarter ofCY2007 For the month ofOctober 600.00 44.9740 530 519.00 3177 87966 TST Inc. 600.00 43.9470 26 984.40 3179 86952 TST Inc. 36 400.00 3178 88016 TST Inc. 420.00 3180 87374 Twin V Tech Systems, tnc. 594323.40 Subtotal For the month ofNovember 1J50.00 14 624.00 3602 88845 NSG Micro Optics Phils. Inc. 542,214.65 3725 88480 Pilipinas Shell Petroleum Corp. 26 369.85 3837 88993 TST Inc. 33 600.00 3839 88066 TST Inc. 3838 89044 TST, Inc. 61~558.50 Subtotal For the month ofDecember 1 500.00 4230 89435 NSG Micro Optics Phils., Inc. 524 237.07 4459 89944 TST, Inc.

CTA Case No. 8017 Page 18 of 37 Air Liquide Philippines, Inc. vs. CIR AMENDED DECISION 4461 89095 TST Inc. 600.00 42.7590 25 655.40 4460 89997 TST Inc. 33 600.00 Subtotal 584,992.47 Total 1,797. 874.37 c) Sale ofgoods supported by invoices without the term ''zero-rated sale" written or printed thereon in violation ofSection 113{~(2)(c) ofthe NIRC of1997, as amended. Instead, the invoices bear the statement "Not to be issued for non-VAT/exempt sale ofgoods, properties, or services. Ifissued, sales shall be ~ubjected to VAT". For the month of October 2561 86935 AGC Flat Glass Phils. Inc. 1448.72 44.9740 65 154.73 33 404.51 43.9470 5,103 105.01 2562 87910 AGC Flat Glass Phils. Int. 3 815 529.30 2563 87911 AGC Flat Glass Phils. Inc. 226 672.95 200.00 2564 87959 AGC Flat Glass Phils. Inc. 1 468 028.00 2565 88003 AGC Flat Glass Phils. In�. (224.00) 2587 87928 Air Liquide Pipeline Utilities Services 34,500.00 6 000.00 2588 85798 Air Water Philippines Inc. 34 500.00 2595 87290 Amkor Anam Technoloqv 16 000.00 2596 87508 Amkor Anam Technolog'f 950.00 950.00 2597 87759 Amkor Anam Technoloqy 16 000.00 950.00 2648 86987 Franke Foodservice Syst~ms Phils., Inc. 6,400.00 25 600.00 2649 86988 Franke Foodservice Syst~ms Phils. Inc. 25 600.00 3 800.00 2650 86989 Franke Foodservice Syst~ms Phils. Inc. 25 600.00 2651 87021 Franke Foodservice Syst~ms Phils., Inc. 950.00 12 800.00 2652 87033 Franke Foodservice Systems Phils., Inc. 950.00 16 000.00 2653 87101 Franke Foodservice Systems Phils., Inc. 16,000.00 950.00 2654 87102 Franke Foodservice Syst~ms Phils., Inc. 3 200.00 25 600.00 2655 87178 Franke Foodservice Syst~ms Phils. Inc. 950.00 2 800.00 2656 87179 Franke Foodservice Systems Phils. Inc. 2,000.00 10 200.00 2657 87286 Franke Foodservice Systems Phils. Inc. 2 550.00 13 600.00 2658 87292 Franke Foodservice Systems Phils. Inc. 5 100.00 6 800.00 2659 87361 Franke Foodservice Systems Phils. Inc. 3 400.00 6 800.00 2660 87362 Franke Foodservice Systems Phils. Inc. 13 600.00 1 700.00 2661 87575 Franke Foodservice Systems Phils. Inc. 2662 87638 Franke Foodservice Systems Phils. Inc. 2663 87639 Franke Foodservice Systems Phils. Inc. 2664 87688 Franke Foodservice Systems Phils. Inc. 2665 87689 Franke Foodservice Systems Phils., Inc. 2666 87690 Franke Foodservice Systems Phils. Inc. 2667 87742 Franke Foodservice Systems Phils. Inc. 2668 87758 Franke Foodservice Systems Phils., Inc. 2710 87038 Imasen Philippine Mfq. Corp. 2711 87047 Imasen Philippine Mfg. Corp. 2712 87138 Imasen Philippine Mfq. Corp. 2713 87139 Imasen Philippine Mfg. Corp. 2714 87316 Imasen Philippine Mfg. c;orp. 2715 87324 Imasen Philippine Mfq. Corp. 2716 87325 Imasen Philippine Mfg. Corp. 2717 87341 Imasen Philippine Mfg. Corp. 2718 87342 Imasen Philippine Mfq. Corp. (

CTA Case No. 8017 Page 19 of 37 Air Liquide Philippines, Inc. vs. CIR AMENDED DECISION 2719 87472 Imasen Philippine Mfg. Corp. (1,305.00) 45.0630 6 800.00 2720 87500 Imasen Philippine Mfg. Corp. 1,305.00 43.9470 6 800.00 2721 87501 Imasen Philippine Mfg. Corp. 6,525.00 43.9470 4 250.00 2722 87541 Imasen Philippine Mfg. Corp. 13 600.00 2723 87599 Imasen Philippine Mfg. Corp. 24,067.01 42.7980 2 550.00 2724 87657 Imasen Philippine Mfg. Corp. 10 200.00 2725 87658 Imasen Philippine Mfg. Corp. 3 400.00 2726 87825 Imasen Philippine Mfg. Corp. 13 600.00 2727 87826 Imasen Philippine Mfg. Corp. 5 950.00 2728 87897 Imasen Philippine Mfg. Corp. 10 200.00 2729 87898 Imasen Philippine Mfg. Corp. 3,400.00 2746 86958 ISPL (Phils) Inc. 45,600.00 2747 86959 ISPL (Phils) Inc. 45,600.00 2748 87184 ISPL (Phils) Inc. 91 200.00 2749 87566 ISPL (Phils) Inc. 91,200.00 2750 87636 ISPL (Phils} Inc. 45 600.00 2751 87697 ISPL (Phils) Inc. 45 600.00 2752 87738 ISPL (Phils} Inc. 45 600.00 2753 87774 ISPL (Phils) Inc. 45 600.00 3131 86848 Shi Mfg. & Services (Phils.), Inc. (58,806.85) 3134 87845 Shi Mfg. & Services (Phils.), Inc. 57,350.83 3135 87962 Shi Mfg. & Services (Phils.), Inc. 286,754.17 3137 87186 Shinkonzan Corporation 5 100.00 5 100.00 3138 87713 Shinkonzan Corporation 5 100.00 5 100.00 3139 87833 Shinkonzan Corporation 9 000.00 25,000.00 3140 87894 Shinkonzan Corporation 11,897.714.13 3141 88008 Shinkonzan Corporation 4 005 819.14 5,037 847.35 3176 87153 Tong Hsing 3431209.37 Subtotal 1,030,019.89 For the month ofNovember 5 000.00 3 000.00 3230 88941 AGC Flat Glass Philippines Inc. 34 500.00 6 000.00 3231 88942 AGC Flat Glass Philippin�s Inc. 69 000.00 2 500.00 3232 88984 AGC Flat Glass Philippin�s Inc. 10 000.00 3253 88957 Air Liquide Pipeline Utili~ies Services, Inc. 1 500.00 13 200.00 3259 88105 Amkor Anam Technology 25 600.00 3260 88138 Amkor Anam Technolog<r 3261 88296 Amkor Anam Technology 950.00 3262 88521 Amkor Anam Technology 6 400.00 3263 88591 Amkor Anam Technology 22,400.00 3264 88810 Amkor Anam Technolog<r 1,900.00 3347 88077 Franke Foodservice Systems Phils1Inc. 3348 88078 Franke Foodservice Systems Phils Inc. 950.00 3349 88079 Franke Foodservice Systems Philis Inc. 25 600.00 3350 88160 Franke Foodservice Sys11ems Phils Inc. 3351 88161 Franke Foodservice Sys~ems Phis, Inc. 3352 88325 Franke Foodservice Sys~ems Phiis Inc. 3353 88326 Franke Foodservice Sys~ems Phils Inc. 3354 88327 Franke Foodservice Sys~ems Phils Inc. 3355 88328 Franke Foodservice Sys~ems Phils Inc. 3356 88395 Franke Foodservice Sysbems Phils Inc.

CTA Case No. 8017 Page 20 of 37 Air Liquide Philippines, Inc. vs. CIR AMENDED DECISION 3357 88396 Franke Foodservice Syst~ms Phils, Inc. 19,200.00 6 400.00 3358 88397 Franke Foodservice Systems Phils Inc. 3 800.00 950.00 3359 88398 Franke Foodservice Syst~ms Phils, Inc. 19 200.00 9 600.00 3360 88399 Franke Foodservice Syst~ms Phils, Inc. 6 400.00 9 600.00 3361 88503 Franke Foodservice Systems Phils Inc. 19 200.00 16 000.00 3362 88504 Franke Foodservice Syst~ms Phils, Inc. 950.00 950.00 3363 88650 Franke Foodservice Systems Phils Inc. 10,200.00 3 400.00 3364 88732 Franke Foodservice Systems Phils Inc. 10,200.00 4 250.00 3365 88746 Franke Foodservice Systems Phils Inc. 10,200.00 4,250.00 3366 88789 Franke Foodservice Syst~ms Phils Inc. 10 200.00 4 250.00 3367 88877 Franke Foodservice Syst~ms Phils Inc. 13 600.00 1 700.00 3368 88880 Franke Foodservice Systems Phils Inc. 1 700.00 6 800.00 3414 88240 Imasen Philippine Mfg. Gorporation 17 000.00 2 550.00 3415 88241 Imasen Philippine Mfg. Corporation 13 600.00 2 550.00 3416 88446 Imasen Philippine Mfg. Corporation 6 800.00 1 700.00 3417 88447 Imasen Philippine Mfg. Corporation 45 600.00 45,600.00 3418 88461 Imasen Philippine Mfg. Corporation 45,600.00 45,600.00 3419 88462 Imasen Philippine Mfg. Corporation 45 600.00 45 600.00 3420 88558 Imasen Philippine Mfg. Corporation 45 600.00 3421 88559 Imasen Philippine Mfg. Corporation 726 068.07 5 100.00 3422 88640 Imasen Philippine Mfg. Corporation 5 100.00 9 000.00 3423 88641 Imasen Philippine Mfg. Corporation 25 000.00 3424 88667 Imasen Philippine Mfg. Corporation 12 500.00 25 000.00 3425 88668 Imasen Philippine Mfg. Corporation 37 500.00 25 000.00 3426 88724 Imasen Philippine Mfg. Corporation 37 500.00 12,109,563.82 3427 88725 Imasen Philippine Mfg. Corporation 4 701 809.68 3428 88848 Imasen Philippine Mfg. Corporation 3429 88849 Imasen Philippine Mfg. Corporation 3430 88927 Imasen Philippine Mfg. c;:orporation 3431 88928 Imasen Philippine Mfg. Corporation 3449 88114 ISPL (Phil) Inc. 3450 88256 ISPL (Phil) Inc. 3451 88351 ISPL (Phil) Inc. 3452 88435 ISPL (Phil) Inc. 3453 88568 ISPL (Phil) Inc. 3454 88657 ISPL (Phil) Inc. 3455 88798 ISPL (Phil) Inc. 3795 88988 Shi Mfg. & Services (Phils.), Inc. 16 965.00 42.7980 3798 88638 Shinkozan Corporation 3799 88729 Shinkozan Corporation 3800 89036 Shinkozan Corporation 3831 88402 Tong Hsing Electornics (Philippines) Inc. 3832 88569 Tong Hsing Electornics (Philippines) Inc. 3833 88658 Tong Hsing Electornics (Philippines) Inc. 3834 88739 Tong Hsing Electornics (!Philippines) Inc. 3835 88808 Tong Hsing Electornics (!Philippines) Inc. 3836 88808 Tong Hsing Electornics (!Philippines) Inc. Subtotal For the month ofDecember 3889 89887 AGC Flat Glass Philippines, Inc. c.

CTA Case No. 8017 Page 21 of 37 Air Liquide Philippines, Inc. vs. CIR AMENDED DECISION 3890 89888 AGC Flat Glass Philippines Inc. 43 924.33 41.4010 5 438 206.17 3891 89937 AGC Flat Glass Philippines, Inc. 248 498.91 3892 89984 AGC Flat Glass Philippines, Inc. 200.00 3910 89907 Air Liquide Pipeline Utilities Services Inc. 3916 89101 Amkor Anam Technology 1 818 511.19 3917 89102 Amkor Anam Technology 13 800.00 3918 89246 Amkor Anam Technoloqy 55 200.00 3919 89262 Amkor Anam Technology 69,000.00 3920 89263 Amkor Anam Technology 1 500.00 3921 89310 Amkor Anam Technology 7 500.00 3922 89433 Amkor Anam Technology 1 500.00 3923 89434 Amkor Anam Technology 2,000.00 3924 89619 Amkor Anam Technology 8 000.00 3925 89620 Amkor Anam Technology 2,000.00 3926 89648 Amkor Anam Technology 8 000.00 3927 89658 Amkor Anam Technology 10 000.00 3928 89659 Amkor Anam Technology 10 000.00 3929 89660 Amkor Anam Technology 10 000.00 3930 89665 Amkor Anam Technology 10 000.00 3931 89668 Amkor Anam Technoloqy 2 000.00 3932 89670 Amkor Anam Technology 8 000.00 3933 89765 Amkor Anam Technoloqy 9 000.00 3993 89367 Fastech Electonique Inc. 34 500.00 3994 89146 Franke Foodservice Syst~ms Phils Inc. 39 195.00 3995 89154 Franke Foodservice Systems Phils Inc. 2 850.00 3996 89155 Franke Foodservice Systems Phils Inc. 9 600.00 3997 89217 Franke Foodservice Syst~ms Phils Inc. 9 600.00 3998 89218 Franke Foodservice Systems Phils Inc. 9 600.00 3999 89219 Franke Foodservice Systems Philis Inc. 9 600.00 4000 89260 Franke Foodservice Systems Philis Inc. 950.00 4001 89261 Franke Foodservice Syst~ms Philis Inc. 3 200.00 4002 89340 Franke Foodservice Systems Phils Inc. 1 900.00 4003 89404 Franke Foodservice Systems Phils Inc. 19 200.00 4004 89405 Franke Foodservice Systems Phils Inc. 16 000.00 4005 89406 Franke Foodservice Sys~ms Phils Inc. 22 400.00 4006 89407 Franke Foodservice Systems Phils Inc. 12,800.00 4007 89408 Franke Foodservice Syst~ms Phils Inc. 1,500.00 4008 89409 Franke Foodservice Syst~ms Phils Inc. 10 000.00 4009 89597 Franke Foodservice Syst~ms Phils Inc. 10,000.00 4010 89598 Franke Foodservice Systems Phils Inc. 950.00 4037 89814 HHIC-Phil. Inc. 1,900.00 4038 89815 HHIC-Phil., Inc. 4039 89839 HHIC-Phil. Inc. 4 428,650.00 4040 89842 HHIC-Phil. Inc. 3 921,730.00 4041 89843 HHIC-Phil. Inc. 4042 89889 HHIC-Phil. Inc. 250,750.00 4043 89890 HHIC-Phil. Inc. 374 000.00 4044 89891 HHIC-Phil. Inc. 367 000.00 4045 90001 HHIC-Phil. Inc. 336 500.00 4063 89921 Imasen Philippine Mfq. Corporation 342,000.00 400 000.00 2 447 000.00 121 040.00

CTA Case No. 8017 Page 22 of 37 Air Liquide Philippines, Inc. vs. CIR AMENDED DECISION 4078 89110 ISPL (Phils.), Inc. 19 575.00 41.4010 45 600.00 4079 89326 ISPL (Phils.), Inc. 91 200.00 4080 89562 ISPL (PhiIs.), Inc. 45 600.00 4081 89654 ISPL (Phils.), Inc. 45 600.00 4082 89657 ISPL (Phils. ), Inc. 45 600.00 4083 89769 ISPL (Phils.), Inc. 45 600.00 4415 89940 Shi Mfg. & Services (Phils.), Inc. 810 424.57 4420 89272 Shinikozan Corp. 4421 89364 Shinikozan Corp. 5 100.00 4422 89375 Shinikozan Corp. 5 100.00 4423 89791 Shinikozan Corp. 5 100.00 4424 89796 Shinikozan Corp. 5 100.00 4425 89799 Shinikozan Corp. 10 200.00 4426 89800 Shinikozan Corp. 5 100.00 4427 89801 Shinikozan Corp. 5 100.00 4428 89832 Shinikozan Corp. 5 100.00 4455 89317 Tong Hsing Electornics (Philippines) Inc. 5,100.00 4456 89359 Tong Hsing Electornics (Philippines) Inc. 37,500.00 4457 89647 Tong Hsing Electornics (Philippines) Inc. 25,000.00 4458 89661 Tong Hsing Electornics (Philippines) Inc. 37 500.00 12 500.00 Subtotal Total 26. 932,265.52 50. 939 543.48 d) Sales ofservices or lease offacilities and equipment were not supported by VAT zero-rated official receipts in violation ofSectio(I113{A}(2} ofthe NIRC of1997, as amended For the month ofOctober 25,757.51 44.8630 (224.00) 90.00 43.9470 3 000.00 2895 85836 NT Philippines, Inc. 4 500.00 3058 86933 PSI Technologies Inc. 8 150.00 3062 86936 Samsung Electo-Mechanic Philippines 18 000.00 3158 86946 Team Pacific Corp. 14 000.00 3155 86947 Team Pacific Corp. 38 250.00 3171 86948 Temic Automotive Philippines 6 300.00 3174 86950 Tokyo Steel Philippines Corp. 13 500.00 3175 86951 Tokyo Steel Philippines �orQ. 1155 559.17 3181 86953 Vishay Philippines Inc. 2586 86995 Air Liquide PiQ_eline Utilities Services 400.00 2599 87969 Amkor Whitecap Asia Pacific 900.00 2623 87847 Cam Mechatronics (Phils), Inc. 9 260.00 2896 87849 NT Philippines Inc. 3 955.23 2590 87967 Air Water Philippines Inc. 5 040.00 2603 87970 Analog Devices Gen. Trias 360.00 2622 87974 Bell Electronics Corporation 450.00 2624 87976 Cam Mechatronics (PhilsD. Inc. 2 050.00 2631 87979 Cirtek Electronics Corpo$tion 5 000.00 2639 87980 Continental Temic Electronics Phils. 5 400.00 2731 87986 Integrated Microelectron1ics Inc. 200.00 2757 87987 Ju-Young Electronics Phils. Inc. 1 050.00 2768 87988 Kyocera Kinseki Philippines Inc. 2 670.00 3016 87996 Orient Semiconductor Electronics 27 100.00 3128 88005 Samsung Electo-Mechanic Philippines

CTA Case No. 8017 Page 23 of 37 Air Liquide Philippines, Inc. vs. CIR AMENDED DECISION 2889 88006 Nidec Subic Philippines Corp. 3 500.00 700.00 2968 88007 ON Semiconductors Phil$. Inc. 350.00 3154 88013 Tann Philippines 2 500.00 20,000.00 3173 88015 Temic Automotive Philippines 1,351,920.40 3227 88019 Yutaka Manufacturing Philippines, Inc. Subtotal For the month ofNovember 3269 87972 Austriamicrosystems (Philippines), Inc. (22 500.00) 70 000.00 3266 88020 Analog Devices Gen. Triats Inc. 2,200.00 37 000.00 3267 88021 Analog Devices Gen. Triats Inc. 20 000.00 25 000.00 3447 88022 ISPL (Phil) Inc. 49 440.37 3314 88023 Bell Electronics Corporation 15 000.00 15 000.00 3326 88024 Cirtek Electronics Corp. 39 552.30 3332 Continental Temic Electronics 1125.00 43.9470 88025 (Philippines), Inc. 900.00 43.9470 32 960.25 750.00 43.9470 3443 88029 Ionics Ems Inc. 600.00 43.9470 26 368.20 600.00 43.9470 3445 88030 Ionics Ems Inc. 24 000.00 1,448.72 43.9470 18 000.00 3459 88031 Katolec Philippines Corporation 400.00 43.9470 26 368.20 3482 88032 Luzon Electronics Tehnology, Inc. 90.00 42.7980 9 000.00 8 100.00 3398 88040 Hoya Glass Disk Philippi!11es Inc. 3 000.00 Orient Semiconductor Electronics 6 000.00 3715 88041 Philppines Inc. 63 666.90 3723 88042 Philippines Toei Chemical Corporation 3726 88044 Pricon Microelectronics Ihc. 4 500.00 3755 88045 PSI Technologies Inc 17 578.80 3756 88046 PSI Technologies Inc 798 000.00 3757 88047 PSI Technologies Inc 65 000.00 3753 88048 PSI Technologies Inc 3229 88049 AGC Flat Glass Philippin~s, Inc. 8 150.00 3761 88050 Samsung Electro-Mechancs Philippines 14 000.00 Corporation 13 500.00 3590 88052 Nidec Subic Philippines Corporation 10 000.00 3682 88053 ON Semiconductors Philippines Inc. 2 400.00 3683 88054 ON Semiconductors Philippines Inc. 3 851.82 3813 88060 Team Pacific Corporation 3825 88062 Temic Automotive (Phils,). Inc. 400.00 3840 88067 Vishay Philippines, Inc. 5 040.00 3292 88419 Austriamicrosystems (Philippines), Inc. 7 500.00 3842 88483 Walk-in Customers 3254 88995 Air Water Philippines Inc. 480.00 3265 88997 Amkor Whitecap Asia Patific 450.00 3268 88998 Analog Devices Gen. Trias Inc. 2 050.00 3312 89000 Austriamicrosystems (Philippines), Inc. 5,800.00 3318 89002 Bell Electronics Corporation 3319 89004 Cam Mechatronic (Phils.), Inc. 5,400.00 3331 89007 Cirtek Electronics Corp. 200.00 3338 89008 Continental Temic Electronics (Philippines), Inc. 3433 89014 Integrated Microelectronics Inc. 3458 89015 Ju-Young Electronics (Philippines) Inc.

CTA Case No. 8017 Page 24 of 37 Air Liquide Philippines, Inc. vs. CIR AMENDED DECISION 3472 89016 Kyocera Kinseki Philippir)es Inc. 1,200.00 3481 89017 Littelfuse Philippine, Inc. 3,300.00 3549 89019 5,000.00 3720 89024 MSM Manila Inc. 2,670.00 Orient Semiconductor Electronics 3228 89029 Philppines Inc. 400.00 3233 89031 200.00 3789 89033 2Pi Microwave Technology, Inc. 27,100.00 AGC Flat Glass Philippines Inc. 3 500.00 Samsung Electro-Mechancs Philippines 700.00 Corporation 5 200.00 3592 89034 Nidec Subic Philippines Corporation 350.00 3681 89035 ON Semiconductors Philippines Inc. 2 500.00 12,500.00 3413 89039 Ibiden Philippines Inc. :1,497,076.84 3808 89041 Tann Philippines Inc. 3828 89043 Temic Automotive (Phils.), Inc. 3886 89047 Yutaka Manufacturing (Phils) Inc. Subtotal For the month ofDecember 3938 89049 Analog Devices Gen. Trias Inc. 70,000.00 2 200.00 3939 89050 Analog Devices Gen. Trias Inc. 37 000.00 4076 89051 ISPL (Phils. ), Inc. 20 000.00 25 000.00 3966 89052 Bell Electronics Corporation 48,103.87 3972 89053 Cirtek Electronics Corp. 1,125.00 42.7590 15,000.00 3979 89054 Continental Temic Electronics 15,000.00 (Philippines), Inc. 900.00 42.7590 38,483.10 4072 89058 750.00 42.7590 32,069.25 4074 89059 Ionics Ems Inc. 600.00 42.7590 25,655.40 4088 89060 24,000.00 Ionics Ems Inc. Katolec Phils., Corp. 18 000.00 25 656.57 4113 89061 Luzon Electronics Tehn~logy, Inc. 9 000.00 4047 89069 Hoya Glass Disk Philippil!les, Inc. 8 100.00 3 000.00 4332 89070 Orient Semiconductor Electronics 600.00 42.7590 6 000.00 Philppines Inc. 61 945.82 4342 89071 Philippine Toei Chemical Corporation 1448.72 42.7590 4344 89073 Pricon Microelectronics Inc. 400.00 42.7590 4,500.00 4371 89074 PSI Technologies Inc. 4372 89075 PSI Technologies Inc. 27,500.00 4373 89076 PSI Technologies Inc. 17,103.60 4369 89077 PSI Technologies Inc. 65 000.00 3888 89078 8,150.00 4376 89079 AGC Flat Glass Philippines Inc. 18 000.00 Samsung Electro-Mechancs Philippines 14 000.00 4377 89080 Corporation 15 000.00 Samsung Electro-Mechancs Philippines 38 250.00 Corporation 6 300.00 4220 89081 Nidec Subic Philippines Inc. 13 500.00 31 000.28 4301 89083 ON Semiconductors Philippines Inc. 4443 89089 Team Pacific Corp. 4439 89090 Team Pacific Corp. 4450 89091 Temic Automotive (Phils.), Inc. 4070 89092 Ionics Ems Inc. 4453 89093 Tokyo Steel Philippines Corporation 4454 89094 Tokyo Steel Philippines Corporation 4462 89096 Vishay Philippines Inc. 4412 89114 Shi Mfg. & Services (Phils. ), Inc. 725.00 42.7590

CTA Case No. 8017 Page 25 of 37 Air Liquide Philippines, Inc. vs. CIR AMENDED DECISION 4221 89163 Nidec Subic Philippines Inc. 54 591.65 3980 89274 Continental Temic Electronics 42,500.00 (Philippines), Inc. 4413 89469 Shi Mfg. & Services (Phils. ), Inc. 90.00 41.4010 18 700.00 4414 89470 Shi Mfg. & Services (Phils.), Inc. 18 700.00 3935 89595 Amkor Technology Philippines Inc. 36 400.00 3936 89596 Amkor Technology Philippines Inc. 36 400.00 4222 89700 Nidec Subic Philippines Inc. 41,817.32 3911 89946 Air Water Philippines Int. 3937 89948 Amkor Whitecap Asia Pacific 3 726.09 3941 89949 Analog Devices Gen. Trias Inc. 400.00 3965 89951 Austriamicrosystems (Philippines), Inc. 3968 89953 Bell Electronics Corporation 51040.00 3969 89955 Cam Mechatronic (Phils.), Inc. 10 000.00 3978 89958 Cirtek Electronics Corp. Continental Temic Electronics 480.00 3986 89959 (Philippines), Inc. 450.00 4065 89966 Integrated Microelectronics Inc 2 170.00 4087 89967 Ju-Young Electronics (Philippines) Inc. 4104 89968 Kyocera Kinseki Philippines Inc. 4 600.00 4112 89969 Littelfuse Philippines Inc. 5 400.00 4177 89971 MSM Manila Inc. 4339 89976 Orient Semiconductor Electronics 200.00 Philppines Inc. 1 350.00 3887 89982 2Pi Microwave Technology, Inc. 3 300.00 4406 89986 Samsung Electro-Mechancs Philippines 5 000.00 Corporation 2,670.00 4223 89987 Nidec Subic Philippines Inc. ON Semiconductors Philippines Inc. 400.00 4299 89988 Shinikozan Corp. Ibiden Philippines Inc. 27,100.00 4429 89989 Tann Philippines Inc. 3 500.00 Temic Automotive (Phils.), Inc. 700.00 4062 89992 Nidec Subic Philippines, Inc. 6 000.00 Shi Mfg. & Services (Phils.), Inc. 5,200.00 4438 89994 Shinikozan Corp. 350.00 2 500.00 4452 89996 4219 (84,000.00) - (550.00) 4411 - (6 000.00) 991,612.95 4419 - 3,840,610.19 Subtotal Total GRAND TOTAL- DISALLOWED ZERO-RAtED SALES/RECEIPTS 57,978,201.30 Thus, out of the reported zero-rated sales/receipts of P206,341,201.16, only the amount of P148,362,999.86, representing petitioner's sales of goods, is properly supported by PEZA, SBMA and BOI certifications and VAT zero-rated sales invoices issued in accordance with Section 113(A)(l) and (B) in relation to Section 106(A)(2)(a)(5) of the NIRC of 1997, as amended. The amount of P148,362,999.86 is computed below:

CTA Case No. 8017 Page 26 of 37 Air Liquide Philippines, Inc. vs. CIR AMENDED DECISION October November December Total Zero-Rated Sales/Receipts per VAT P67 808,172.48 P64,179,474.93 P74 352 953.75 P206 341,201.16 Return 29 489 133.57 477 454.37 433 585.32 1 400 173.26 Less: Disallowances Sale of goods to MME 594 323.40 618 558.50 584 992.47 1 797 874.37 Technologies, Inc. for which no PEZA Certification for 2007 VAT 11 897 714.14 12 109 563.82 26 932 265.52 50 939 543.48 zero-rating of MME's transactions with its local suppliers of goods, 1 351,920.40 1497 076.84 991 612.95 3 840 610.19 properties and services was issued, P14,333,091.51 P14,702,653.53 P28,942,456.26 p 57 978,201.30 as indicated in the PEZA letter P53,475,6P0.97 P49,476,821.40 P45 410 497.49 P148 362 999.86 dated December 7, 2010 (Exhibit "Y-5). Moreover, while it was noted in the said letter that MME's PEZA registration date was November 25, 1999, the same is not indicative of the fact that the said entity was PEZA registered during the subject period of claim. Sales of goods without proof that the corresponding customers were PEZA or SBMA-registered entities or BOI 100% exporters during the fourth quarter of CY 2007 Sale of goods supported by invoices without the term "zero- rated sale" written or printed thereon in violation of Section 113(B)(2)(c) of the NIRC of 1997, as amended. Instead, the invoices bear the statement "Not to be issued for non-VAT/exempt sale of goods, properties, or services. If issued, sales shall be subiected to VAT". Sales of services or lease of facilities and equipment without supporting VAT zero-rated official receipts in violation of Section 113(A)(2) of the NIRC of 1997, as amended Total Properly Substantiated Zero-Rated Sales Petitioner incurred/paid input taxes attributable to zero- rated sales for the fourth quarter of CY 2007 and said input taxes were not applied against any output VAT liability during and in the succeeding quarters After resolving that petitioner had VAT zero-rated sales for the subject period of claim in the total amount of P148,362,999.86, the 29 Exhibits "M", line 17, "J-1", "K-1", and "L-1".

CTA Case No. 8017 Page 27 of 37 Air Liquide Philippines, Inc. vs. CIR AMENDED DECISION Court proceeds to determine whether petitioner incurred input taxes in connection thereto. Petitioner submitted various suppliers' official receipts, invoices, Import Entry Internal Revenue Declarations (IEIRDs) and other documents30 in support of the input VAT claim of P23,254,465.64 which was reflected in its Quarterly VAT Return for the fourth quarter of CY 2007 as follows: Input VAT Purchases of Capital Goods not exceedinq P1Million p 6,025.74 Purchases of Capital Goods exceeding P1Million Domestic Purchases of Goods other than Capital Goods 597,447.34 Importation of Goods other than Capital Goods Domestic Purchases of Services 8,331,076.25 Total 3,077,082.28 11,242,834.03 P23,254,465.64 Upon verification of the aforesaid documents, the Court- commissioned !CPA, Mr. Armando L. Magpantay, Jr., noted some exceptions on petitioner's input VAT claim in the aggregate amount of P7,307,683.83, with the following details: Findings Exhibit Input Tax Input VAT on importations and purchases of goods and LLLL-9-1 p 5,773 240.02 services supported by sales invoices/official receipts LLLL-9-2 1 295 842.60 which were dated outside the period of claim LLLL-9-3 213,316.28 Input VAT on purchase of goods and services supported LLLL-9-4 20 097.92 by documents with no printed authority to print LLLL-9-5 5,187.01 Input VAT on importations which original documents cannot be located P7,307,683.83 Input VAT on purchase of goods and services supported by documents other than official receipts and sales invoices (invalid documents) Erroneous VAT computation Total input VAT claims with exceptions The above input taxes of P7,307,683.83 shall be disallowed for not being properly supported by VAT invoices, official receipts or IEIRDs in accordance with SeCtions 110(A) and 113(A) and (B) of the NIRC of 1997, as amended, and as implemented by Sections 4.110-8 and 4.113-1 of RR No. 16-05, as amended. 30 Exhibits "1" to "1901", "1903" to "2148", and "2152" to "2559".

CTA Case No. 8017 Page 28 of 37 Air Liquide Philippines, Inc. vs. CIR AMENDED DECISION In addition, input taxes in the amount of P2,892,660.84, shall likewise be disallowed for failure to meet the substantiation requirements prescribed under the afore-mentioned laws and regulations: Exhibit Supplier Name Invoice/ Offici Date Input VAT al Receipt No. (In PHP) a) Input VAT on purchase of capital goods exceeding P1Million supported by VAT official receipt instead of VAT invoice For the month of October 2007 32 Business Machines Corp. 03977 23-0ct-07 8,625.00 Subtotal 8,625.00 b) Input VAT on purchases ofgoods (other than capital goods) and services supported by invoices/official receipts but the amount of VAT was not separately indicated For the month of October 2007 126-130 Edupro Inc. 7230 27-Nov-07 3 214.29 406051 A 17-Nov-07 209.83 394 Mantrade Development Corp. 03-0ct-07 39740 05-Nov-07 2,840.78 395-401 Martian International Sales 127535 05-Nov-07 545.26 127673 05-Nov-07 500-501 PLOT 127678 05-Nov-07 2,880.00 127679 05-Nov-07 271.69 502-504 PLOT 127680 05-Nov-07 367.43 127681 05-Nov-07 318.24 505 PLOT 127682 05-Nov-07 135.56 127683 05-Nov-07 210.77 506 PLOT 127684 05-Nov-07 875.11 127685 05-Nov-07 166.38 507 PLOT 127686 05-Nov-07 237.83 127687 05-Nov-07 138.83 508 PLOT 127688 05-Nov-07 135.56 127689 05-Nov-07 133.38 509 PLOT 127690 05-Nov-07 230.30 127691 05-Nov-07 12.56 510 PLOT 127692 05-Nov-07 431.54 127693 05-Nov-07 133.38 511 PLOT 127694 05-Nov-07 127695 05-Nov-07 3,000.00 512 PLOT 127696 05-Nov-07 2,588.68 127697 05-Nov-07 513 PLOT 127698 05-Nov-07 190.00 127699 05-Nov-07 133.14 514 PLOT 127700 05-Nov-07 1,155.61 127703 05-Nov-07 244.41 515 PLOT 127704 05-Nov-07 668.38 127705 05-Nov-07 133.14 516 PLOT 127706 05-Nov-07 139.14 127707 139.14 517 PLOT 209.21 200.75 518 PLOT 156.83 519 PLOT 520 PLOT 521 PLOT 522 PLOT 523 PLOT 524 PLOT 525 PLOT 526 PLOT 527 PLOT 528 PLOT 529 PLOT 530 PLOT 531 PLOT 532 PLOT

CTA Case No. 8017 Page 29 of 37 Air Liquide Philippines, Inc. vs. CIR AMENDED DECISION 533 PLDT 127708 05-Nov-07 622.51 127709 05-Nov-07 257.26 534 PLDT 127710 05-Nov-07 217.48 127711 05-Nov-07 133.79 535 PLDT 127712 05-Nov-07 173.29 127713 05-Nov-07 320.75 536 PLDT 127714 05-Nov-07 178.38 27-Nov-07 81,215.88 537 PLDT 632 30-0ct-07 2,939.81 8896 26-Nov-07 6,458.40 538 PLDT 199 20-Nov-07 571.20 539 PLDT 29170 20-Nov-07 216.11 29173 20-Nov-07 407.04 660-664 San Miguel Brewery, Inc. 29174 20-Nov-07 133.68 29175 20-Nov-07 172.19 672-688 Smart Communication Inc. 29176 20-Nov-07 371.87 29177 20-Nov-07 249.24 809 TSTC Corporation 29178 20-Nov-07 515.78 29179 20-Nov-07 196.24 For the month ofNovember 2007 29180 20-Nov-07 328.59 29181 20-Nov-07 203.32 1458-1459 PLDT 29182 20-Nov-07 178.19 29183 20-Nov-07 178.19 1460 PLDT 29184 20-Nov-07 172.19 29185 20-Nov-07 798.92 1461 PLDT 29186 20-Nov-07 246.11 29187 20-Nov-07 1 259.84 1462 PLDT 29188 20-Nov-07 172.19 29189 20-Nov-07 232.21 1463 PLDT 29190 20-Nov-07 3 116.53 29191 20-Nov-07 3 000.00 1464 PLDT 29192 20-Nov-07 172.19 29193 20-Nov-07 603.10 1465 PLDT 29194 20-Nov-07 29195 20-Nov-07 19.51 1466 PLDT 29196 20-Nov-07 200.20 29197 20-Nov-07 172.19 1467 PLDT 29198 20-Nov-07 174.37 29199 20-Nov-07 177.64 1468 PLDT 29200 20-Nov-07 184.19 29201 20-Nov-07 175.19 1469 PLDT 29202 20-Nov-07 1,146.49 29203 20-Nov-07 274.08 1470 PLDT 29204 20-Nov-07 174.37 29205 20-Nov-07 314.43 1471 PLDT 29206 20-Nov-07 619.25 29207 28-Nov-07 264.18 1472 PLDT 10220 3 362.18 08-0ct-07 1473 PLDT 0161 10-Dec-07 278.57 1212 16 742.83 1474 PLDT 1475 PLDT 1476 PLDT 1477 PLDT 1478 PLDT 1479 PLDT 1480 PLDT 1481 PLDT 1482 PLDT 1483 PLDT 1484 PLDT 1485 PLDT 1486 PLDT 1487 PLDT 1488 PLDT 1489 PLDT 1490 PLDT 1491 PLDT 1492 PLDT 1493 PLDT 1494 PLDT 1624-1639 Smart Communication, Inc. For the month ofDecember 2007 2230 Officeland Furniture House 2360 Puregold Price Club, Inc. <

CTA case No. 8017 Page 30 of 37 Air Liquide Philippines, Inc. vs. CIR AMENDED DECISION 2392 San Miguel Brewery, Inc. 0061 05-Dec-07 18 240.00 2393 San Miguel Brewery, Inc. 0055 27-Nov-07 21,096.00 2394 San Miguel Brewery, Inc. 0057 28-Nov-07 17,256.00 Subtotal 209,331.29 c) Input VAT on domestic purchase of goods (other than capital goods) supported by documents other than VAT invoice For the month ofOctober 2007 47 Caloocan Gas Station 135 31-0ct-07 5,161.07 Subtotal 5,161.07 d) Input VAT on domestic purchases ofservices supported by documents other than VAT official receipts For the month ofOctober 2007 391 Manila Water Company 3204778823 01-0ct-07 41,211.46 For the month ofNovember 2007 32,458.38 54 873.57 1154-1155 General Electric Phils., Inc. 160272 15-May-07 3007584492 09-Nov-07 2,880.00 1331 Manila Water Company Various SOA 17-0ct-07 4 821.42 1495-1497 PLOT 45 545.15 For the month ofDecember 2007 181,789.98 1895-1899 Carry-All International Forwarders, Inc. 13461 05-Nov-07 VNH030157705 21-Dec-07 2197 Manila Water Company 409 Subtotal e) Input VAT on domestic purchases of goods (other than capital goods) and services supported by VAT invoice/official receipt but dated outside the period ofclaim For the month ofOctober 2007 667 Siemens 53515421014163 24-Sep-07 8,544.60 53515421014160 24-Sep-07 9 185.88 668 Siemens 53515421014162 24-Sep-07 13 596.84 53515421014162 24-Seo-07 22 644.12 669 Siemens 53515421014159 24-Sep-07 41,024.52 670 Siemens 5466 18-Jan-08 765.00 5065 05-Jun-09 16 553.57 671 Siemens 5214 08-May-09 555134388 01-Auo-07 2 790.00 For the month ofNovember 2007 555140361 29-Sep-07 68 388.19 56149 11-Feb-08 38,990.33 879 caloy Gonzales Paint & Auto Shop, Inc. 1076 08-Feb-08 11.05 967-969 carrv-AII International Forwarders Inc. 381912 08-Apr-08 10-Mar-07 840.00 970-973 Carry-All International Forwarders Inc. 0116 28-Mar-08 4,980.74 287663 28-Mar-08 72 428.57 983 Consolidated Industrial Gases, tnc. 287664 327.06 984 Consolidated Industrial Gases, Inc. 1,018.32 1722 UPS-Delbros International Express, Ltd. For the month ofDecember 2007 1929 Corrosion Technical Services, Inc. 2140-2141 Honda Cars Makati, Inc. 2181 Leadsteel Fabrications 2442 Toyota Shaw Ortigas 2443-2450 Toyota Shaw Ortigas (

CTA Case No. 8017 Page 31 of 37 Air Liquide Philippines, Inc. vs. CIR AMENDED DECISION 2451-2452 I Toyota Shaw Ortigas I 287665 I 28-Mar-08 I 195.07 Subtotal 302,283.86 f) Input VAT on domestic purchase (If services with assigned exhibit number but the corresponding supporting document cannot be found from the records For the month ofDecember 2007 1894 Carry-All International Forwarders, Inc. - - 1 500.00 Subtotal 1,500.00 g) Input VAT on importation of goods (other than capital goods) supported by IEIRDs without machine validation or proolof VATpayment Exhibit Supplier Name AWB/BL Date of Number Arrival For the month ofOctober 2007 2526 Union Engineering 4592460456 01-0ct-07 26,135.00 MNLSE0709230 2527 Singapore Oxygen Air Liquide Pte. Ltd. 04-0ct-07 89_[896.00 2528 Singapore Oxygen Air Liquide Pte. Ltd. 00 23-0ct-07 179,120.00 SINCB7487820 2529 Singapore Oxygen Air Liquide Pte. Ltd. MNLSE0710375 23-0ct-07 80,559.00 00 For the month ofNovember 2007 2531 Cryostar Singapore USI02391675 11/19/2007 62,438.00 MNSE07110390 2532 Singapore Oxygen Air Liquide Pte. Ltd. 08-Nov-07 71,495.00 2535 Singapore Oxygen Air Liquide Pte. Ltd. 0 16-Nov-07 77,358.00 2536 Man Diesel Singapore Pte. Ltd. ULA00872923 22-Nov-07 80,906.00 2537 SPX Vokes Ltd. USI02400215 31-0ct-07 198,828.00 2538 Chart Cryogenic Engineering Systems 1036362 - 796 903.00 For the month ofDecember 2007 GOSUNSNR805 2543 Air Liquide Japan Ltd. 2198 2546 Toray International Inc. 2192760986 31-0ct-07 8 401.00 2553 Singapore Oxygen Air Liquide Pte. Ltd. 14-Nov-07 5,851.00 2554 Turbocompressor 2073575276 2557 Sun Royal Ltd. MNLSE0712101 14-Nov-07 69 727.00 04-Dec-07 76 836.00 2558 SSB Cryogenic Equipment Ltd. 00 24-Dec-07 278,433.00 8166233202 17-Nov-07 79_1_040.00 2,181,926.00 - MISCSIN000059 320 Subtotal h) Input VAT on domestic purchase of'Services supported by official receipt without TIN- VAT and BIR authority to print 836 AGC Flat Glass Philippines, Inc. 210 08-Nov-07 2,043.64 Subtotal 2,043.64 Total Additional Input VAT Disallowances per this Court's Further 2,892,660.84 Verification

CTA Case No. 8017 Page 32 of 37 Air Liquide Philippines, Inc. vs. CIR AMENDED DECISION Thus, out of the P23,2S4,465.64 input VAT claim for the fourth quarter of 2007, only the amount of P13,054,120.97 represents petitioner's properly substantiated input VAT, computed as follows: Input VAT Claim p 23,254,465.64 Less: Disallowances 7,307 683.83 Per !CPA's report 2,892,660.84 Per this Court's further verification p 13,054,120.97 Pro~erly Substantiated lhput VAT However, included in the aforesaid input VAT of P13,054,120.97 is the amount of P327,177.55 pertaining to petitioner's purchases of capital goods exceeding PlMillion, detailed as follows: Input VAT on Purchases of Capital Goods Exceeding P1Million per p 597,447.34 VAT Return31 Less: Disallowances Per !CPA's report (Exhibit "LLLL -9--1 ") Exh. No. Suppli~r October Accent Micro Technologies, Inc. p 10,607.14 2 Accent Micro TechnoloS]ies, Inc. 65,559.86 3 Arceo Corporation 206.17 Arceo Corporation 677.67 13 Arceo Corporation 2,237.00 14 Arceo Corporation 9J91.21 15 Arceo Corporation 10,179.79 16 Arceo Corporation 15,734.09 17 Fairchild Process Controls 8,820.00 18 201 !-Secure Networks & Business 21,428.57 356 321.43 Solutions, Inc. 396.43 689 Stellite Commercial, Inc. 407.14 690 Stellite Commercial, Inc. 460.71 691 Stellite Commercial Inc. 460.71 692 Stellite Commercial, Inc. 814.28 693 Stellite Commercial, Inc. 921.43 694 Stellite Commercial, Inc. 695 Stellite Commercial, Inc. 1,842.85 696 Stellite Commercial, Inc. 3,750.00 834 Zenith Electrical & Ind11 November Materials Unlimited Corporation 6,428.57 1345 Shimadzu Philippines Corporation 88,392.86 1623 31 Exhibit "M", line 21D. (

CTA Case No. 8017 Page 33 of 37 Air Liquide Philippines, Inc. vs. CIR AMENDED DECISION 1723 Up-Town Industrial Sales 2,322.94 1732 Vette Industrial Sales 1/135.18 1733 Vette Industrial Sales 1,141.61 1734 Vette Industrial Sales 1/714.29 1735 Vette Industrial Sales 5,892.86 261 644.79 8,625.00 Per this Court's further verification p 327,177.55 Properly Substantiated Input VAt on Purchases of Capital Goods Exceeding PlMillion Pursuant to Section 110(A)(2) of the NIRC of 1997, as amended, as implemented by Section 4.110-3 of RR No. 16-05, input VAT on capital goods purchases attributable to zero-rated sales may be claimed either in full during the month of acquisition, or spread over a period of time, depending on the aggregate acquisition cost of the capital goods in the calendar month. If the aggregate acquisition cost exceeds P1Million, the claim for input tax should be spread over 60 months or the estimated useful life of the capital goods, whichever is shorter. On the other hand, if aggregate acquisition cost does not exceed P1Million, the total input taxes shall be allowed as credit/refund in the month of acquisition. Applying the cited provisions to the present case, out of the P327,177.55 input VAT related to petitioner's purchases of capital goods exceeding P1Million, only the amount P12,577.91 is creditable for the fourth quarter of CY 2007, computed as follows: Exhibit Supplier Name Input Tax Useful Monthly Allowable Life in Input Tax Input Tax for Months Credit the Fourth Quarter of 2007 For the month ofOctober 2007 1 Accent Micro Technologies1 Inc. p 48,214.28 60 p 803.57 p 2,410.71 188 Fairchild Process Controls 4,752.00 60 79.20 237.60 189 Fairchild Process Controls 1/440.00 60 24.00 72.00 190 Fairchild Process Controls 1,260.00 60 21.00 63.00 191 Fairchild Process Controls 4,200.00 60 70.00 192 Fairchild Process Controls 5,568.00 60 92.80 210.00 204 Fairchild Process Controls 2 376.00 60 39.60 278.40 205 Fairchild Process Controls 2/376.00 60 39.60 118.80 206 Fairchild Process Controls 6/960.00 60 116.00 118.80 207 Fairchild Process Controls 8/280.00 60 138.00 348.00 208 Fairchild Process Controls 10,920.00 60 182.00 414.00 213 Fairchild Process Controls 1 020.00 60 17.00 546.00 436 Nema Electric Co., Inc. 8.44 638 Samaritan Industrial Sales 506.25 60 51.00 337.50 60 5.63 25.31 16.88 (

CfA Case No. 8017 Page 34 of 37 Air Uquide Philippines, Inc. vs. CIR AMENDED DECISION 639 Samaritan Industrial Sales 636.43 60 10.61 31.82 640 Samaritan Industrial Sales 991.07 60 16.52 49.55 641 Samaritan Industrial Sales 482.14 60 8.04 24.11 Subtotal 5,015.98 For the month ofNovember 2007 p 860 Best Value Trading Corp. 861 Best Value Trading Corp. 1,017.86 60 16.96 p 33.93 862 Best Value Trading Corp. 1,017.86 60 16.96 33.93 863 Best Value Trading Corp. 1,285.71 60 21.43 42.86 1025 Centronics Computer Center, 1,285.71 60 21.43 42.86 10,017.86 166.96 333.93 Inc. 60 15,482.14 258.04 516.07 1026 Centronics Computer Center, 60 420.00 7.00 14.00 Inc. 1188.00 60 19.80 39.60 2 880.00 60 48.00 96.00 1137 Fairchild Process Controls 6,960.00 60 116.00 232.00 1138 Fairchild Process Controls 21456.00 60 357.60 715.20 1139 Fairchild Process Controls 1,900.98 60 31.68 63.37 1140 Fairchild Process Controls 2,230.75 60 37.18 74.36 1146 Fairchild Process Controls 4,847.20 60 80.79 161.57 1348 MFT International Corp. 42,000.00 60 700.00 1,400.00 1349 MFT International Corp. 63,000.00 60 1,050.00 2,100.00 1350 MFT International Corp. 60 1399 P.T. Cerna Corporation 62.14 60 1.04 2.07 1400 P.T. Cerna Corporation 107.14 60 1.79 3.57 1606 Samaritan Industrial Sales 291.43 60 4.86 9.71 1607 Samaritan Industrial Sales 392.14 60 6.54 13.07 1608 Samaritan Industrial Sales 787.50 60 13.13 26.25 1609 Samaritan Industrial Sales 1,125.00 60 18.75 37.50 1610 Samaritan Industrial Sales 1,982.15 60 33.04 66.07 1611 Samaritan Industrial Sales 2,485.72 60 41.43 82.86 1613 Samaritan Industrial Sales 3 715.17 60 61.92 123.84 1614 Samaritan Industrial Sales 460.71 60 7.68 15.36 1615 Samaritan Industrial Sales 1 842.85 60 30.71 61.43 1659 Stellite Commercial, Inc. 8 571.43 60 142.86 285.71 1660 Stellite Commercial, Inc. 9 642.86 60 160.71 321.43 1724 UP-Town Industrial Sales_L Inc. 7 702.50 60 128.38 256.75 1725 UP-Town Industrial Sales Inc. 2 272.23 60 37.87 75.74 1730 UP-Town Industrial Sales Inc. 2 454.37 60 40.91 81.81 1736 Vette Industrial Sales 2,917.02 60 48.62 97.23 1737 Vette Industrial Sales 3,055.45 60 50.92 101.85 1738 Vette Industrial Sales p 7,561.93 1739 Vette Industrial Sales p 327,177.55 p 12,577.91 Subtotal Total In sum, petitioner's n�t creditable input VAT amounts to P12,739,521.33, as computed below: Properly Substantiated Input VAT p 13,054 120.97 Less: Unamortized Input VAT on purchases of capital goods exceeding P1 Million (

CTA Case No. 8017 Page 35 of 37 Air Liquide Philippines, Inc. vs. CIR AMENDED DECISION p 327,177.55 Input VAT on purchases of capitGII goods 12,577.91 3141599.64 exceeding P1 Million Less: Input VAT creditable for the fourth P12,739,521.33 quarter of CY 2007 Net Creditable Input VAT However, the net creditable input VAT of P12,739,521.33 is not entirely attributable to petitioner's declared zero-rated sales/receipts since petitioner had also reported VATable and exempt sales/receipts in its Quarterly VAT Return for the fourth quarter of CY 2007 as follows: 32 VATable Sales/ReceiQts Amount Zero-Rated Sales/Rec~ipts p 61,385 521.08 Exempt Sales/Receipts Total Sales/Receipts 206,341,201.16 1,065_~877.70 P268,792,599. 94 Allocating the creditable input VAT of P12,739,521.33 based on the percentage of each type of sales/receipts to total sales/receipts would show that the amount of P9,779,614.97 is attributable to petitioner's declared zero-rated sales/receipts while the rest of the input VAT pertains to VATable sales/receipts and exempt sales/receipts, as shown below: VATable Sales/Receipts Amount Allocation Factor Zero-Rates Sales/ReceiQ_ts p 61,385,521.08 (Percentage to Exempt Sales/Receipts Total Total Sales/Receipts '206,341,201.16 1,065,877.70 SalesI Receiptsj Net Creditable Input VAT p 268,792,599.94 22.837504118% Allocated as follows: 76.765953083�/o VATable Sales/Receipts Zero-Rates Sales/Receipts 0.396542799% Exempt Sales/Receipts Total 100.0000000% p 12 739,521.33 p 2,909,388.71 9,779,614.97 501517.65 p 12,739,521.33 32 Exhibit "M", Lines 15A, 17, 18, and 19A. (

CfA Case No. 8017 Page 36 of 37 Air Liquide Philippines, Inc. vs. CIR AMENDED DECISION After deducting the input VAT attributable to VATable sales in the amount of P2,909,388.7l from petitioner's output VAT liability of P7,366,262.5333, petitioner ~till has a net output VAT payable of P4,456,873.82, computed as follows: Output VAT Payable p 7,366 262.53 Less: Input VAT Attributable! to VATable Sales 2,909,388. 71 Net Output VAT Payable P4,456,873.82 Since petitioner failed to submit VAT invoices/receipts proving the existence of its reporteo input VAT carry-over from previous quarter in the amount of P'115,409,407.9534, the net output VAT payable of P4,456,873.82 shall be offset against the P9,779,614.97 input VAT attributable to the declared zero-rated sales/receipts, thus, leaving an amount of P5,322,,741.15 excess input VAT attributable to the declared zero-rated sales/receipts. However, only the amount of P3,827,145.72 input VAT is attributable to the properly substantiated zero-rated sales, as computed below: Input VAT Attributable to the Declared Zero-Rated p 9,779_L614.97 Sales/Receipts 4,456,873.82 Less: Net Output VAT Payable Excess Input VAT Attributable to the beclared Zero-Rated p 5,322,741.15 Sales/Receipts 148,362,999.86 Multiply by Properly Substantiated Zero-Rated Sales 206,341,201.16 Divide by Declared Zero-Rated Sales/ Receipts Per VAT Return Excess Input VAT Attributable to, Properly Substantiated p 3,827,145.72 Zero-Rated Sales Even though the claimed input VATwas carried over by petitioner in its succeeding Quarterly VAT Returns35, the same remained unutilized until it was deducted as "VAT Refund/TCC Claimed'136 in its Quarterly VAT Return for the third quarter of taxable year 2009. Thus, the excess input VAT of P1S6,871,554.1937 as of the end of the third quarter of taxable year 2009, which was to be carried over to the succeeding fourth quarter of the same taxable year, no longer includes the subject claim. 33 Exhibit "M", Line 158. 34 Exhibit "M", Line 20A. 35 Exhibits "N" to "U" and "LLLL-10-1", pp. 1-14. 36 Exhibit "U-4" and "LLLL-10-1", page 13/14, Line 23D; "LLLL-10", p. 1. 37 Exhibit "U-5" and "LLLL-10-1", page 14/14, Line 29.

CfA Case No. 8017 Page 37 of 37 Air Liquide Philippines, Inc. vs. CIR AMENDED DECISION In sum, petitioner has sufficiently proven its entitlement to refund or issuance of tax credit certificate in the amount of P3,827,145.72, representing its unutilized excess input VAT for the fourth quarter of CY 2007 which is attributable to its zero-rated sales for the same period. WHEREFORE, premise~ considered, the Petition for Review is hereby PARTIALLY GRANTED. Accordingly, respondent Commissioner of Internal Revenue is ORDERED TO ISSUE A TAX CREDIT CERTIFICATE in the amount of P3,827,145.72 in favor of Air Liquide Philippines, Inc., representing its unutilized excess input VAT for the fourth quarter of CY 2007. SO ORDERED. r... ,.,. ~0 M~~-C~ N. MINDARO-GRULLA N. Associate Justice WE CONCUR: _fl- a~~ c.~e4~ CAESAR A. CASANOVA �j\jANITO c. CASTANEDA, JR. Associate Justice Associate Justice ArrESTATION I attest that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court's Division. ~~__,"''-'C.~~ Q CJuANiTo c. CASTANEDA, 1c � 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 Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court. Presiding Justice