CTA Case No. 5675 (Decision)

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY KEPCO PHILIPPINES CORPORATION, Petitioner, -versus- C.T.A. CASE NOS . 5675 & 5704 THE COMMISSIONER OF INTERNAL Promulgated : REVENUE, MAR 18 200k Respondent. 21)<7~ ~ X- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - X DECISION This is a consolidated case seeking the refund of alleged unutilized input value- added tax VAT paid on domestic purchases of goods and services (including capital goods) that are attributable to effectively zero-rated sales and creditable VAT withheld for the third and fourth quarters of 1996 in the aggregate sum of P22,172,003 .26, broken down as follows : CTA Case No. Period lnQut VAT Creditable Total Claim 5675 Covered p 4,895,858.01 VAT Withheld p 8,980,725.26 5704 3rd qtr 1996 p 4,084,867 .25 4th qtr 1996 13,191,278.00 13,191,278.00 ~ :18 081 :136 0:1 ~ 4 084 86125 ~ 22112 003 26 Petitioner is a domestic corporation duly organized and existing under the laws of the Republic of the Philippines, with its principal place of business located at Suite 2501- A, 25th Floor, Tektite Tower I, Exchange Road, Ortigas Centre, City of Pasig. It is a Value-Added Tax (VAT) registered taxpayer engaged in the production and sale of

DECISION- CTA CASE NOS. 5675 & 5704 PAGE2 electricity (as an independent power producer), and sells electricity to the National Power Corporation (pars. 1 & 2, Facts Admitted). For the third and fourth quarters of 1996, petitioner alleged that it incurred input VAT in the amounts ofP4,895,858.01 and P13, 191 ,278 .00, respectively, on its domestic purchases of goods and services (including capital goods) that were used in its production and sale of electricity to National Power Corporation (NPC) for the same period. Likewise, petitioner averred that for the income payments it received from NPC for the months of April and June, 1996, the latter withheld creditable VAT in the amounts of P 1,971 ,178.86 and P2,113,688 .39, respectively, or in the sum ofP4,084,867.25 . On September 16, 1998, petitioner simultaneously filed its quarterly VAT returns for the third and fourth quarters of 1996, declaring the following : Exh 1996 Zero-rated Carried-over INPUT VAT Total Creditable Excess VAT Sales from prev gtr this quarter VATW!held Credits carried- over to subs gtr M 3rd qtr p 83,538,812.32 p 9,550,968.83 p 4,895,858.01 p 14,446,826.84 p 4,084,867.25 p 18,531 ,694.09 N 4th qtr 91 ,541 ,490.43 31 ,722,972.90 E 4Q8486Z25 31 ,722,972.90 18,531 ,694.09 13 191 278.00 E H! oaz 136 Q1 On September 18, 1998, petitioner filed with the Bureau of Internal Revenue an application for the effective zero-rating of its sales of electricity to NPC (Annex "F, " Petitionfor Review, page 15, CTA Case No. 5765 docket) . On September 30, 1998, petitioner filed an administrative claim for refund in the amount of P8,980,725 .26 representing the sum of the alleged input VAT payment of P4,895,858.01 directly attributable to its sale of electricity to NPC for the third quarter of 1996 and the creditable VAT of P4,084,867.25 allegedly withheld from the payments it received from NPC for the months of April and June, 1996. Also, on the same date,

DECISIO N- CTA CASE NOS. 5675 & 5704 PAGEJ petitioner filed with this court a claim for the aforesaid amount of P8,980,725 .26 docketed as CTA Case No. 5765 . On December 28, 1998, petitioner filed with the BIR another letter-claim for refund in the amount of Pl3 ,191 ,278 .00 corresponding to its alleged unutilized input VAT attributable to its effectively zero-rated sales to NPC for the fourth quarter of 1996 (Annex "E, " Petition for Review, page 13, CTA Case No. 5704 docket) . On the following day, or on December 29, 1998, petitioner elevated its claim before this court via a Petition for Review, which was docketed as CTA Case No. 5704. On May 12, 1999, the parties filed a Joint Motion to Consolidate CTA Cases Nos. 5675 and 5704 since these cases involve the same parties and the same cause of action. The said motion was granted in open court on the same date (pp. 56-58, CTA Case No. 5675 docket) . Respondent, m his Answer, raised the following Special and Affirmative Defenses : "6. That the herein petitioner is not entitled to the refund of the amounts prayed for in the instant petition for review; 7. That the instant petition for review was prematurely filed as petitioner has not exhausted the administrative remedies required by law and jurisprudence on the actions of this nature as no decision has as yet been rendered by the respondent; 8. Such being the case this Honorable Court has no jurisprudence (sic) over the Petition for Review." On June 8, 1999, the parties submitted their revised Joint Stipulation of Facts and Issues which was approved by this court on June 11 , 1999, limiting the issues to be resolved as follows :

DECISION- CTA CASE NOS. 5675 & 5704 PAGE4 1. That through the proper and correct appreciation and application of the existing laws, regulations, and jurisprudence, and further in conjunction with the proper appreciation of the facts admitted to and to be proven herein, it be resolved whether or not the sale of electricity by a VAT-registered entity to the National Power Corporation (NPC) qualifies as a sale of services subject to a VAT rate of zero percent (0%) or otherwise called a zero-rated VAT transaction; 2. That through the proper and correct appreciation and application ofthe existing laws, regulations and jurisprudence, and further in conjunction with the proper appreciation of the facts admitted to and to be proven herein, it be resolved whether herein petitioner qualifies as a VAT- registered entity, whereby its sales of electricity to the NPC qualify as a zero-rated VAT transaction; 3. That through the proper and correct appreciation and application of the existing laws, regulations, and jurisprudence, and further in conjunction with the proper appreciation of the facts admitted to and to be proven herein, it be resolved whether herein petitioner qualifies as a VAT-registered entity entitled to claim the refund of the unutilized input VAT incurred in connection with petitioner's purchases of supplies, goods, and equipment which were directly used to produce the electricity sold to NPC; 4. That through the proper and correct appreciation and application ofthe existing laws, regulations, and jurisprudence, and further in conjunction with the proper appreciation of the facts admitted to and to be proven herein, it be resolved whether creditable VAT withheld by government agencies from payments made to VAT-registered entities may be the subject of a claim for refund, considering that no VAT output tax exists on the part of the VAT-registered entity for which the creditable VAT withheld may be offset against; and 5. That through the proper and correct appreciation and application of the existing laws, regulations, and jurisprudence, and further in conjunction with the proper appreciation of the facts admitted to and to be proven herein, it be resolved whether herein petitioner qualifies as a VAT-registered entity entitled to claim the refund of the creditable VAT withheld by government agencies from said government agencies' payments to petitioner.

DECISION- CTA CASE NOS. 5675 & 5704 PAGES In its Petitions for Review for both CTA Cases Nos. 5675 and 5704, petitioner cited Section 106(a) of the 1995 Tax Code as basis of its claimed input VAT, asserting that its sales of electricity to NPC are effectively zero-rated. However, on September 26, 2001 , petitioner filed a Motion for Leave of Court to Admit Attached Amended Consolidated Petition for Review in order to include also Section 106(b) of the 1995 Tax Code as basis of the claimed input VAT (pages 145-149, CTA Case No. 5675 docket) . The latter provision allows the refund of unutilized input VAT directly attributable to capital goods. On December 4, 2001 , this court granted petitioner' s motion. To support its claim, petitioner presented testimonial and documentary evidence. Respondent, on the other hand, did not present any controverting evidence and submitted this case for decision based on the pleadings (page 118, CTA Case No. 5675 docket) . Anent the issue of whether or not the sale of electricity by a VAT registered entity to NPC is effectively zero-rated for VAT purposes, the same had already been resolved by this court in the affirmative in a number of similar cases where the controlling law is Section 102(b)(3) [now 108(B)(3)] ofthe Tax Code in relation to Section 13 ofRepublic Act No. 6395 (NPC Charter), as amended, to wit: "Sec. 102. Value-added tax on sale of services and use or lease ofproperties. ~ (a) Rate and base of tax. - xxx "(b) Transactions subject to zero-rate. - The following services performed in the Philippines by VAT-registered persons shall be subject to 0% : "(1) "(2) "(3) Services rendered to persons or entities whose exemption under special laws or international agreements to which the Philippines IS a signatory effectively subjects the supply of such services to zero rate."

DECISION- CTA CASE NOS. 5675 & 5704 PAGE6 "Section 13. Non-profit Character of the Corporation: R'Cemptionfrom All Taxes, Duties, Fees, Imposts and Other Charges by the Government and Government Instrumentalities. - The Corporation shall be non-profit and shall devote all its returns from its capital investment as well as excess revenues from its operation, for expansion. To enable the Corporation to pay its indebtedness and obligations and in furtherance of effective implementation of the policy enunciated in Section One of this Act, the Corporation, including its subsidiaries. is hereby declared exempt from the payment of all forms of taxes. duties. fees. imposts as well as costs and service fees including filing fees. appeal bonds. supersedeas bonds. in any court or administrative proceedings." (Underscoring supplied). Clearly from the foregoing, NPC is an entity with a special charter, which categorically makes it exempt from payment of all taxes, whether direct or indirect, including VAT. Hence, by virtue of the said charter, services rendered by a VAT registered entity to NPC are effectively subject to zero percent (0%) VAT (Mirant Navotas Corporation vs. Commissioner of Internal Re~,enue, CTA Case No. 6044, October 16, 2002). Moreover, no less than the Supreme Court affirmed NPC ' s tax exemption in the case of Maceda vs. Macaraig, Jr., 197 SCRA 771 where the Supreme Court in its Resolution dated June 8, 1993 held that : "A chronological review of the NPC laws will show that it has been the lawmaker' s intention that the NPC was to be completely tax- exempt from all forms of taxes - direct or indirect. XXX XXX XXX One common theme in all these laws is that the NPC must be enable to pay its indebtedness which, as of P.D . No. 938 was P12 Billion in total domestic indebtedness, at any one time, and US$4 Billion in total foreign loans at any one time. The NPC must be and has to be exempt from all forms of taxes if this goal is to be achieved."

DECISION- CTA CASE NOS. 5675 & 5704 PAGE? We now proceed to the second issue of whether or not petitioner' s reported sales for the third and fourth quarters of 1996 ofP83,538,812.32 and P91 ,541 ,490.43 qualify as effectively zero-rated sales. In order to qualify for effective zero-rating under Section 102(b)(3), petitioner must prove: a) that it is a VAT registered entity and (b) that it actually derived sales from services rendered to NPC, an entity exempt from VAT by virtue of Republic Act No. 6395, as amended. The fact that petitioner is a VAT registered entity is admitted. (par. 1, Joint Stipulation ofFacts) . However, while petitioner reported the amounts ofP83 ,538,812.32 and P91 ,541 ,490.43 in its 1996 third and fourth quarterly VAT returns (Exhibits M &N), respectively, as zero-rated sales, it failed to substantiate the same. Petitioner did not submit the corresponding invoices and/or official receipts showing its sales of electricity to NPC for the subject period. Since petitioner failed to submit documents evidencing its reported effectively zero-rated sales for the third and fourth quarters of 1996, it follows that the input VAT payments allegedly attributable thereto cannot be refunded. It is quite clear from the provisions of Section 106(a) [now 112(A)] of the Tax Code that there must be zero-rated or effectively zero-rated sales in order that a refund of input VAT could prosper, to wit: "Sec. 106. Refunds or tax credits of creditable input tax. - (a) Any VAT-registered person. whose sales are zero-rated or effectively zero-rated, may, within two (2) years after the close of the taxable quarter when the sales were made, apply for the issuance of a tax credit certificate or refund of creditable input tax due or paid attributable to such sales, except transitional input tax, to the extent that such input tax has not been applied against output tax: Provided, however, That in the case of zero-

DECISION- CTA CASE NOS. 5675 & 5704 PAGES rated sales under Section 100(a)(2)(A)(i), (ii) and (b) and Section 102(b)(1) and (2), the acceptable foreign currency exchange proceeds thereof had been duly accounted for in accordance with the regulations of the Bangko Sentral ng Pilipinas (BSP). Provided, further, That where the taxpayer is engaged in zero-rated or effectively zero-rated sale and also in taxable or exempt sale of goods or properties or services, and the amount of creditable input tax due or paid cannot be directly and entirely attributed to any one of the transactions, it shall be allocated proportionately on the basis of the volume of sales. (Underlining supplied) With reference to the claimed unutilized creditable VAT withheld, petitioner relied on the following provisions of Section llO(c) [now 114(C)] of the Tax Code in relation to Section 204(3 ) [now 204(C)] of the Tax Code: "(c) Withholding of Creditable Value-Added Tax. - The government or any of its political subdivisions, instrumentalities or agencies, including government-owned or controlled corporations (GOCC ' s) shall, before making payment on account of its purchase of goods from sellers and services rendered by contractors which are subject to the value-added tax imposed in Sections 100 and 102 of this Code, deduct and withhold the value-added tax due at the rate of three percent (3%) of the gross payment for the purchase of goods and six percent (6%) on gross receipts for services rendered by contractors on every sale or installments payment which shall be creditable against the value-added tax liability of the seller or contractor: Provided, however, That the payment for lease or use of properties or property rights to nonresident owners shall be subject to ten percent (10%) withholding tax at the time of payment. For this purpose, the payor or person in control of the payment shall be considered as the withholding agent." (Underlining supplied) "SEC. 204. Authority of the Commissioner to compromise, abate and refund/credit taxes. - The Commissioner may- XXX XXX XXX "(3) Credit or refund taxes erroneously or illegally received, penalties imposed without authority, refund the value of internal revenue stamps when they are returned in good condition by the purchaser, and, in his discretion, redeem or change unused stamps that have been rendered unfit for use and refund their value upon proof of destruction. No credit or refund of taxes or penalties shall be allowed unless the taxpayer files in writing with the Commissioner a claim for credit or refund within two (2) years after the payment of the tax or penalty."

DECISION- CTA CASE NOS. 5675 & 5704 PAGE9 From the aforequoted provisions of Section llO(c) [now 114(C)] ofthe Tax Code, the creditable VAT withheld shall be creditable or applied against the taxpayer' s output VAT liability. However, in case the taxpayer has no output VAT liability against which the creditable VAT withheld may be applied/credited, then such creditable VAT withheld constitutes excessively or erroneously paid tax which is refundable under Section 204(3) [now 204(C)] ofthe Tax Code. Nonetheless, a scrutiny of the certificates supporting the claimed creditable VAT withheld of P4,084,867.25 shows that the same was withheld in April and June 1996 or during the second quarter of 1996 (Exhibits G-112 & G-212). Inasmuch as the claimed amount of P4,084,867.25 is outside of the period covered by the instant Petition for Review, the same shall be denied outright. The only issue left for our determination is whether or not petitioner is entitled to the claimed input VAT payments on capital goods purchased for the third and fourth quarters of 1996. Section 106(b) [now 112(B)] ofthe Tax Code, provides: "Sec. 106. Refunds or tax credits ofcreditable input tax.- (a) x XX "(b) Capital goods. - A VAT-registered person may apply for the issuance of a tax credit certificate or refund of input taxes paid on capital goods imported or locally purchased, to the extent that such input taxes have not been applied against output taxes. The application may be made only within two (2) years, after the close of the taxable quarter when the importation or purchase was made. Relative thereto, Sections 4.104-5 and 4.106-1 ofRevenue Regulations No. 7-95 state, thus: "SEC. 4.106-1. Refunds or tax credits of input tax. - (a) x x x

DECISION- CTA CASE NOS. 5675 & 5704 PAGE 10 (b) X X X "Capital goods or properties" refer to goods or properties with estimated useful l{fe greater than one year and which are treated as depreciable assets under Section 29 (f) , used directly or indirectly in the production or sale of taxable goods or services. " "SEC. 4.104-5. Substantiation of claims for input tax credit. - (a) Input taxes shall be allowed only if the domestic purchase of goods, properties or services is made in the course of trade or business. The input tax should be supported by an invoice or receipt showing the information as required under Section 108 (a) and 238 ofthe Code. x x x" Plainly, from the above provisions, in order to be entitled to a refund/tax credit of input VAT paid on capital goods purchased, petitioner must prove that: 1) it is a VAT registered entity; 2) it paid input VAT on capital goods purchased; 3) its input VAT payments on capital goods are duly supported by VAT invoices or official receipts; 4) it did not offset or apply the claimed input VAT payments on capital goods against any output VAT liability; and 5) the administrative and judicial claims for refund were filed within the two- year prescriptive period. Records reveal that petitioner substantially complied with all the aforementioned requirements. It is undisputed that petitioner is a VAT registered entity. Likewise, it paid input VAT on capital goods purchased. But from among the valid VAT invoices/official receipts submitted, only the following purchases with the corresponding input taxes of P8,325,350.35 can be classified as capital goods: Exhibit Particulars Total Amount Input VAT A-24/340, A-25/340 dormitory construction p 1,909,400.00 p 173,581 .82 A-29/340 to A-31/340 G-1 gravel 205 ,767 .35 18,706.12 A-32/340 to A-33/340 Air-conditioning unit 651 ,320.00 59 ,210.91

DECISION- CTA CASE NOS. 5675 & 5704 PAGE 11 A-66/340 to A-67/340 centrifugal pump 296 ,508 .30 26,955.30 A-71/340 to A-76/340 filter gauge 2 5 0 , 1 9 8 .51 22 ,745.32 A-86/340 to A-89/340 Forklift 1,843,000.00 167,545.45 A-1 05/340 to A-1 08/340 electric motor degreaser 131,320.00 11 ,938 .18 A-129/340 to A-131/340 analytical balance A-156/340 to A-158/340 mach lift hand pallet truck 7 5 , 0 0 0 . 00 6,818.18 A-199/340 to A-201/340 Screwdriver 16,000.00 1,454.55 A-209/340 to A-212/340 board magnetic/stand drafting 12,371.40 1,124.67 A-227/340 to A-229/340 Beaker A-259/340 to A-260/340 office building construction 6 ,500 .00 590 .91 A-272/340 to A-274/340 Refrigerator 2,916.30 265.12 A-275/340 to A-277/340 Motorcycle 1,0 7 6 ,6 0 0 .00 97 ,872 .73 A-289/340 to A-291/340 generator exciter lifter 16,888.00 1,535 .27 A-323/340 to A-326/340 tools for K-1 overhauling 31,850.00 2,895.45 A-339/340 to A-340/340 waterproofing completion works 44,096.00 4 ,008 . 73 Of chemical office build ing 4 ,2 1 4 .90 383 .17 8-15/380 to 8-17/380 boiler & turbine sump pump 1,367,718.55 124,338.05 8-18/380 to 8-20/380 electronic scriber 8-24/380 to 8-26/380 tinted cover of new building 470 ,400.00 42,763 .64 8-41/380 to 8-43/380 Computers 25 ,000 .00 2 ,272 .73 8-44/380 to 8-46/380 Computers 55,590 .00 5,053.64 8-53/380 to 8-55/380 rehab of K1 gas duct 8-71/380 to 8-73/380 Air-conditioning un its 216,050 .00 19,640.91 8-1 08/380 to 8-11 0/380 Computers 291 ,000 .00 26,454.55 8-167/380 to 8-169/380 rehab of MFOT !, 2 & 3 2 ,2 2 4 ,596 . 00 202,236 .00 8-170/380 to 8-171/380 road improvement-infront of office bldg 651 ,320.00 59 ,210 .91 8-175/380 to 8-177/380 K-1 overhauling tools 8-186/380 to 8-189/380 centrifugal pump 96 ,000 .00 8,727 .27 8-190/380 to 8-192/380 sounding tape 1,189,352.44 108,122.95 8-203/380 to 8-205/380 overhead travelling crane 8-226/380 to 8-228/380 desk shell 40 ,872.00 3, 715 .64 8-232/380 to 8-234/380 adjustable wrench 22,833.00 2,075.73 8-264/380 to 8-266/380 allen wrench 101 ,103.75 9,191 .25 8-267/380 to 8-269/380 printer cable and automatic data switch 24 ,300.00 2,209 .09 8-270/380 to 8-272/380 chest type freezer 449,262 .67 40,842 .06 8-273/380 to 8-275/380 File set 198,000.00 18,000 .00 8-285/390 to 8-287/380 drafting chair B-288/380 to 8-270/380 executive table and side cabinets 1,748.00 158.91 8-291/380 to 8-293/380 Furniture 14,009.00 1,2 7 3 .55 8-294/380 to 8-296/380 computer printer 8-297/380 to B-299/380 computer printer 1,770.00 160.91 8-313/380 to 8-315/380 canteen supplies 72 ,077 .50 6,552 .50 8-329/380 to 8-331/380 improvement of kitchen 11,1 65.00 1,015 .00 8-338/380 to 8-341/380 grease gun B-356/380 to 8-358/380 torque wrench 4,000.00 363 .64 C-1 0/244 to C-11/244 rubber mallet 373,362.00 33,942 .00 C-36/244 to C-38/244 rehab of K-1 gas duct contract 566,002.40 51 ,454 .76 C-52/244 to C-54/244 hand tools C-58/244 to C-60/244 tools at materials section 66,000 .00 6,000.00 C-87/244 to C-89/244 camera for mechanical dept 66 ,000 .00 6,000 .00 C-123/244 to C-125/244 Screwdriver 44,700.00 4,063 .64 C-128/244 to C-131/244 electric drill 359,857.00 32,714 .27 C-136/244 to C-138/244 combination wrench 15,010.00 1,364 .55 11,632.00 1,057.45 5,840.00 530 .91 2,992,294 .50 272,026.77 7,125.00 647 .73 2,251 .00 204.64 23,960.00 2,178.18 1,2 4 0 .00 112.73 31 ,702.77 2,882.07 9,520.00 865.45

DECISION- CTA CASE NOS. 5675 & 5704 PAGE 12 C-139/244 to C-141 /244 triangular file 86 ,599 . 50 7,872 .68 C-145/244 to C-147/244 hydraulic jack 63 ,908 .84 5,809.89 C-148/244 to C-150/244 pipe wrench 12 ,310 .00 1,119.09 C-161/244 to C-162/244 rehab of chemical tan k contract 1,37 8,807 .30 125,346 . 12 C-163/244 to C-1 65/244 rehab of K-1 gas duct contract 4,280,21 8.50 389 , 110 .77 C-176/244 to C-178/244 portable handheld transceiver 96 ,000 .00 8,727 .27 D-3/568 to D-4/568 renovation work at warehouses 1 & 3 336,310.80 30 ,573.71 D-5/568 to D-7/568 rehab of K-1 smokestack contract 2 ,629 ,730.75 239 ,066.43 D-15/568 to D-18/568 handle nail hammer 35,220.00 3,201 .82 D-29/568 to D-30/568 renovation work-warehouses 2 & 3 73,165.40 6,651.40 D-42/568 to D-44/568 machine room roof construction 11 7, 500.00 10,681 .82 D-45/568 to D-47/568 civil works for elevator 76 , 500 .00 6,954.55 D-48/568 to D-50/568 Air duct repair 392 ,000 .00 35 ,636 .36 D-54/568 to D-56/568 hydraulic jack 56 ,780 .00 5,161.82 D-66/568 to D-68/568 torque multiplier 187,723.90 17,065.81 D-80/568 to D-82/568 Computer 82 ,900 . 00 7,536 .36 D-97/568 to D-99/568 office renovation/construction 510,131 .00 46 ,375 .55 D-113/568 to D-115/568 rehabilitation of gas duct 58 ,482 .00 5,316.55 D-125/568 to D-127/568 rehabilitation of MFOT #1 , 2 & 3 3,148,511 .30 286 ,228 .30 D- 137/568 to D-139/568 Motorcycle 31 ,850.00 2,895.45 D- 140/568 to D-142/568 expenses for vehicle importation 5,964,321 .00 542 ,211 .00 D-143/568 to D-145/568 rehabilitation of K-1 smokestack 5,259,461 .51 478 , 132.86 D-164/568 to D-166/568 fiberglass stepladders 108,051 .00 9 ,822 .82 D-224/568 to D-226/568 camera 11,980 .00 1,089.09 D-245/568 to D-247/568 mezzanine const at warehouse 2 192,351 .09 17,486.46 D-253/568 to D-254/568 elevator construction 217,800.00 19,800.00 D-255/568 to D-257/568 mini files 184 ,946 .00 16 ,813 .27 D-270/568 to D-272/568 hand tools 47 ,190.00 4,290.00 D-287/568 to D-289/568 improvement of switchgear generating 203 ,076 .72 18,461 .52 room D-290/568 to D-292/568 improvement of emergency diesel gen 592 , 370 .62 53,851 .87 room D-293/568 to D-295/568 improvement of battery storage room 773 ,863 .94 70,351 .27 D-334/568 to D-336/568 HP vectra computer 93 ,500 . 00 8,500.00 D-413/568 to 0-417/568 furniture for dormitory D-447/568 to D-419/568 canteen equipment 251 ,864.00 22 ,896 .73 0-461/568 to 0-463/568 Allen wrench 371,047. 75 33,731 .61 D-476/568 to D-478/568 rehabilitation of K-1 gas duct D-479/568 to D-481/568 Fuji xerox machine 48,175.20 4,379.56 D-541 /568 to D-543/568 Air-conditioning unit 4,027, 404.40 366 ,127 .67 D-550/568 to D-551/568 dormitory construction E-4/351 to E-6/351 cha in hoist 118,000 .00 10,727.27 E-19/351 to E-21/351 Air duct repair 44 ,800 .00 4,072.73 E-57/351 to E-59/351 circular saw E-204/351 to E-206/351 transfer pump 642 ,060 . 00 58 ,369.09 E-224/351 to E-226/351 punch and chisel 109 ,725 .00 9,975 .00 E-251/351 to E-253/351 bearing scriper 588 ,000 .00 E-257/351 to E-258/351 K-2 gas duct & smokestack rehabilitation 53,454 .55 E-298/351 to E-300/351 chest type freezer for canteen 8,900.00 809 09 E-320/351 to E-321/351 dormitory construction 23 ,440 .00 E-339/351 to E-341/351 telephone handsets 76 ,500 . 00 2,130.91 E-348/351 to E-349/351 telephone system 18,974.00 6 ,954 .55 F-4/1 023 to F-6/1 023 micron millennia 25 ,122,240 .00 1,724 .91 F-7/1023 to F-9/1 023 HP 4V laserj et printer and cable 25 ,500 .00 2,283,840.00 642 ,060 .00 2,318.18 50 ,000 .00 58 ,369 .09 198,225.89 4,545.45 398 ,000 .00 18,020 .54 70 ,000 .00 36,181 .82 6,363 .64 (j

DECISION- 74,160.00 6,741 .82 CTA CASE NOS. 5675 & 5704 947,500.00 86,136 .36 PAGE 13 44,854 .50 4,077 .68 F-1 0/1023 to F-12/1 023 Uratex foam for double deck beds 66 ,550 .00 6 ,050 .00 F-24/1 023 to F-25/1 023 dormitory construction 2,356 ,972 .63 214 ,270.24 F-87/1 023 to F-89/1 023 installation of open shelves 1,2 4 6 ,062 .2 0 113,278.38 F-133/1 023 to F-135/1 023 floor crane 593 ,779 .85 53,979.99 F-158/1 023 to F-160/1 023 office renovation/construction 737 ,355 .55 67 ,032.32 F-165/1023 to F-167/1023 rehabilitation of chemical tank 2,013 ,046 .50 183 ,0 0 4 .2 3 F-179/1023 to F-181/1023 office furniture 345 ,4 5 9 . 11 31 ,405 .37 F-182/1 023 to F-184/1 023 rehabilitation of K1 smokestack F-213/1023 to F-215/1023 rehabilitation of K-1 gas duct 7,259.50 659.95 F-216/1023 to F-218/1023 additional works for stiffeners & hanger 99,000.00 9,000 .00 support 437,720.00 39,792 .73 F-219/1 023 to F-221/1 023 fabrication/installation of hopper access 1' 169,711 .07 106,337.37 377,229 .24 34,293.57 door 584,856.00 53,168 .73 F-277/1 023 to F-279/1 023 Air-conditioning unit F-280/1 023 to F-282/1 023 Air-cons for dorm itory 47,000.00 4 ,2 7 2 . 7 3 F-304/1 023 to F-306/1 023 rehab cost of warehouses 1, 2 & 3 311 ,865.00 28,351 .36 F-307/1023 to F-309/1023 construction of AVR room 250,000.00 22,727.27 F-327/1 023 to F-329/1 023 rehab of fuel oil storage tank 148,500.00 13,500.00 F-330/1 023 to F-332/1 023 HP computer 902,880.00 82,080.00 F-333/1 023 to F-335/1 023 chairs/tables for dormitory F-336/1 023 to F-338/1 023 rehabilitation of well p 91 578 853 90 p 8 325 350 35 F-354/1 023 to F-356/1 023 rehabilitation of MFOT #1 , 2 & 3 F-360/1 023 to F-362/1 023 renovation of road/dormitory site Also, petitioner was able to establish that the input taxes of P8,325,350.35 were not applied against any output VAT liability during and in the subsequent period of the claim for refund (Exhibits K, 0 to DD) . Finally, the administrative claims filed on September 30, 1998 and December 28, 1998 as well as the judicial claims filed on September 30, 1998 and December 29, 1998, fell within the two-year prescriptive period counted from September 16, 1998, the date when petitioner filed its 1996 third and fourth quarterly VAT returns. In fine, the court finds petitioner to have sufficiently proven its claim only insofar as the amount of P8,325,350.35 representing input VAT payment on capital goods purchased for the third and fourth quarters of 1996. WHEREFORE, in the light ofthe foregoing, the instant petition is PARTIALLY GRANTED. Accordingly, respondent is hereby ORDERED TO REFUND to petitioner

DECISION- CTA CASE NOS. 5675 & 5704 PAGE 14 the amount of P8,325,350.35 representing input VAT payment on capital goods purchased for the third and fourth quarters of 1996. SO ORDERED. Q__,~- c~ ERNESTO D. ACOSTA Presiding Judge WE CONCUR: ~t;-CZ.~~ ~. JUANITO C. CASTANED~ JR. Associate Judge Associate Judge CERTIFICATION I hereby certify that the above decision was reached after due consultation with the members of the Court of Tax Appeals in accordance with Section 13, Article VIII of the Constitution. L-~. 0 '"-"Y'\- ERNESTO D. ACOSTA Presiding Judge