DUMEX PHILIPPINES, INC v. COMMISSIONER OF INTERNAL REVENUE

REPUBLIC OF THE PHILIPPINES Court ofTax Appeals QUEZON CITY Special Third Division DUMEX PHILIPPINES, INC., CTA CASE N0.7790 Petitioner, (CTA EB No. 917) Members: -versus- BAUTISTA, Chairperson, and COTANGCO-MANALASTAS, JJ. COMMISSIONER OF Promulgated: INTERNAL REVENUE, AUG 1 n 2015 Respondent. X---------------------------------------------------~ --------------3--: -2----<-=->-/'-�----�------------X DECISION BAUTISTA, [.: The Case The Petition for Review seeks for the issuance of a tax credit certificate ("TCC") in the total amount of Fifty-Nine Million Nine Hundred Seventy Thousand Seven Hundred Ninety-Nine Pesos and Forty-Eight Centavos (PhP59,970,799.48), representing unutilized/ excess input value-added tax ("VAT") on importation of goods and domestic purchases of goods and services froi:n the commencement of its operations until the cancellation of its VAT registration. The Parties Petitioner Dumex Philippines, Inc. ("DPI") is a domestic corporation duly organized and existing under the laws of the Republic of the Philippines, with principal address located at E. Rodriguez Jr.r v /

Amended Decision CTA Case No. 7790 (CTA EB No. 917) Page 2 o�47 Avenue, Ugong Norte, Quezon City.l It is registered under Tax Identification Number ("TIN") 005-519-191-000 with Revenue District Office ("RDO") No. 40 of the Bureau of Internal Revenue ("BIR") in Cubao, Quezon City for VAT purposes.2 Respondent Commissioner of Internal Revenue (" CIR") is the public officer vested with the power to decide, approve and grant refunds or tax credits. She may be served with summons and other court process at the 2nd Floor BIR Building, Quezon Avenue, corner Scout Santiago, Quezon City.3 The Facts The relevant antecedents are succinctly recited by the Court En Bane in its Decision dated June 25,2013, as follows:4 "On July 20, 2007, petitioner's Board of Directors approved the cessation of its operations effective July 31, 2007. On September 25, 2007, petitioner filed with BIR RDO No. 40 an Application for Tax Clearance, which was received by the BIRon September 26,2007. On September 26, 2007, petitioner, likewise filed an Application for Registration Information Update to cancel its VAT registration due to permanent closure of its business. On November 5, 2007, petitioner also filed with the BIR an administrative claim for issuance of a TCC in the amount of PhP59,970,799.48, representing its unused/ excess input VAT credits as of August 31, 2007 from importation of goods and domestic purchases of goods and services. 1 Records, CTA Case No. 7790, p. 1. 2 !d., p. 3. ~ 3 !d., p. 333. 4 !d., pp. 834-835; penned by Associate Justice Lovell R. Bautista, with Associate Justice Olga Palanca- ( �� Enriquez (Retired), and Associate Justice Amelia Cotangco-Manalastas concurring.

Amended Decision CTA Case No. 7790 (CTA EB No. 917) Page 3 o�47 And on May 26, 2008, due to respondent's inaction thereto, petitioner filed the ... Petition for Review. On June 16, 2008, respondent filed her Answer, interposing the following Special and Affirmative Defenses: '5. Claims for refund are strictly construed against the taxpayer as the same partakes the nature of a tax exemption; 6. The [p]etitioner should prove its legal basis for claiming the amount being refunded; 7. The [p]etitioner should show proof that the [sic] it has unutilized input taxes; and 8. Failure on the part of the [p]etitioner to prove the same is fatal to its cause of action.' On July 21, 2008, the parties entered their Joint Stipulation of Facts and Issues, which was approved by the Court in a Resolution dated July 25, 2008. During trial, petitioner presented its evidence, while respondent was deemed to have waived her right to present evidence for failure to appear despite due notice. On January 5, 2010, the Court issued a Resolution transferring the case to the Third Division of the Court [(hereinafter referred to as the "CTA-Third Division")], pursuant to CTA Administrative Circular No. 01-2010, entitled "Implementing the Fully Expanded Membership in the Court ofTax Appeals" [d]ated January 5, 2010. On August 23, 2011, the Court resolving respondent's [']Motion to Dismiss, with petitioner's Opposition/ Comment (to Respondent's Motion to / . Dismiss)['], dismissed the same for lack of merit. (

Amended Decision CTA Case No. 7790 (CTA EB No. 917) Page4 of47 On September 26, 2011, the case was submitted for decision, considering petitioner's [']Memorandum (of Petitioner Dumex Philippines, Inc.)['] filed on June 25, 2011, sans respondent's [']Memorandum[']."S On April 3, 2012, the CTA-Third Division rendered its Decision denying petitioner's claim for failure of petitioner to present the Certificate of Tax Clearance (" CTC"), as prescribed in Sections 52(C) and 235 of the 1997 National Internal Revenue Code, as amended ("Tax Code"). The dispositive portion of which states: "WHEREFORE, the Petition for Review is hereby DENIED. SO ORDERED."6 On April 26, 2012, a "Motion for Reconsideration (of Petitioner Dumex Philippines, Inc. relative to the Decision of the Honorable Court dated April 3, 2012)"7 was filed. Respondent failed to file any comment/opposition thereto despite due notice.s On June 25, 2012, the CTA-Third Division issued a Resolution9 denying petitioner's Motion for Reconsideration for lack of merit. On July 12, 2012, petitioner filed its Petition for Review before the Court En Bane and alleges that it was able to secure the CTC. Therefore, it prays that the Court En Bane shall admit and take judicial notice of the same; that the Petition for Review be given due course; that the Decision of the CTA-Third Division be set aside; and that its claim be refunded in the amount of PhP59,970,799.48.JO On the other hand, respondent failed to file her Comment.11 ~ 5 Id. 6 Id., p. 694. 7 Id., pp. 696-708. s Id., p. 739. 9 Id., p. 743. to Id., pp. 752-757. n Id., p. 607.

Amended Decision CTA Case No. 7790 (CTA EB No. 917) Page 5 o�47 On December 13, 2012,12 the parties were required to submit their respective memoradum within a period of thirty (30) days from receipt of the resolution. On February 14, 2013, petitioner filed its "Memorandum (of Petition-Appellant Dumex Philippines, Inc.),13 while respondent failed to file her memorandum.14 After considering the memorandum filed by petitioner, the Court En Bane notes that petitioner filed its application for CTC on September 26, 2007; that the CTC was only issued on July 5, 2012 by the Division Chief of the Collection of BIR Revenue Region No. 7; that it is now introducing the CTC as new evidence before it; and that it urges it to take judicial notice and admit the same together with the Verification Slip issued by the Division Chief Division Chief of the Collection of BIR Revenue Region No. 7.15 Since the aforestated documents are not among the documents which the Court can take judicial notice of pursuant to Section 1 Rule 129, of the Rules of Court, the Court En Bane ruled that a hearing was necessary so that both parties can be heard with regard to these documents. Therefore, the Court En Bane, on June 25, 2013, promulgated a Decision16 which ordered the setting aside of the Decision dated April3, 2012 and Resolution dated June 25,2012 of the CTA-Third Division, and ordered the remanding of the case for the reception evidence. The dispositive portion of which states: "WHEREFORE, premises considered, the Petition for Review is hereby partly GRANTED. The Decision dated April 3, 2012 and the Resolution dated June 25, 2012, both of the CTA-Third Division, are hereby SET ASIDE. The case is hereby REMANDED to the CTA- Third Division for the reception of the following documents as evidence: a) Certificate of Tax Clearance dated July 5, 2012 issued by the Division Chief of the~ 12 Id. 13 Id., pp. 815-827. 14 Id., p. 829. 1s Id., pp. 832-841. 16 Id., pp. 832-842.

Amended Decision CTA Case No. 7790 (CTA EB No. 917) Page 6 of47 Collection Division of BIR Revenue Region No. 7; b) Verification Slip dated July 5, 2012 issued by the Division Chief of the Collection Division of BIR Revenue Region No. 7; and, c) letter instructing the cancellation of petitioner's Certificate of Registration No. 3RC0000075223 issued by the Regional Director of Revenue Region No.7, Jonas DP Amora. Thereafter, the CTA-Third Division is directed to make a proper and immediate determination of the propriety of the claim for refund or tax credit certificate, and consequently, make a declaration of the specific amount of refund or tax credit certificate to which petitioner is entitled to, if any. SO ORDERED."17 On October 22, 2013, petitioner filed a "Motion To Set Hearing (of Petitioner Dumex Philippines, Inc.)"18 with the CTA-Third Division for the purpose of presenting and identifying the following documents as evidence:19 1. CTC dated July 5, 2012 issued by the Division Chief of the Collection Division of BIR Revenue Region No. 7, Ms. Ruth Vivian G. Gadia; 2. Verification Slip dated July 5, 2012 issued by the Division Chief of the Collection Division of BIR Revenue Region No.7, Ms. Gadia; and 3. Letter instructing the cancellation of petitioner's Certificate of Registration No. 3RC0000075223 issued by the Regional Director of Revenue Region No.7, Mr. Jonas DP Amora. On November 4, 2013,20 the CTA-Third Division resolved to set the case for the presentation of the aforestated documents including additional testimonies of witnesses21 who would identify and / authenticate the same. / 17 Emphasis Supplied. 1s Records, pp. 846-849. 19 Id., p. 847. 2o Id., pp. 851-852. 21 Revenue Region No.7 of the BIR Regional Director Jonas DP Amara, Administrative Officer of the Collection Division Amore Bati, and Secretary Melanie Capitan.

Amended Decision CTA Case No. 7790 (CTA EB No. 917) Page 7 of47 After a postponement of the scheduled hearing on January 16, 2014,22 on the February 20, 2014 hearing,23 the following documents were marked: Exhibit Description of the Document AAAA24 Judicial Affidavit of Regional Director of AAAA-125 Revenue Region No. 7, Mr. Amora BBBB26 Signature of Mr. Amora on page 2 of Exhibit II AAAA" BBBB-127 Letter of Mr. Amora addressed to petitioner informing the latter that its Certificate of Registration numbered 3RC0000075223 has been cancelled. Signature of Mr. Amora on Exhibit "BBBB" While on the May 29, 2014 hearing,2s the following Exhibits were marked: Exhibit Description of the Document CCCC29 CTC dated July 5, 2012 issued by the Division Chief of the Collection Division of BIR Revenue CCCC-13� Region No. 7, Ms. Gadia DDDD31 Name and signature of Ms. Gadia Verification Slip dated July 5, 2012 issued by the DDDD-132 Division Chief of the Collection Division of BIR Revenue Region No. 7, Ms. Gadia Signature of Ms. Gadia On July 22, 2014, the CTA-Third Division resolved to admit Exhibits "BBBB," "CCCC," and "DDDD," and ordered the parties to file simultaneously within fifteen (15) days their respective Supplemental~ Memoranda.33 22 Records, p. 859. 23 Id., p. 866. 24 Id., pp. 862-863. 2s Id., p. 863. 26 Id., p. 865. 27 Id. 28 Id., p. 889. 29 Id., p. 890. 3o Id. 31 Id., p. 891 32 Id. 33 Id., p. 889.

Amended Decision CTA Case No. 7790 (CTA EB No. 917) Page 8 o�47 In compliance with the order of the CTA-Third Division, petitioner filed its Supplemental Memorandum on June 9, 2014,34 while respondent failed to file her Supplemental Memorandum within the period granted.35 Thus, on August 20,2014, the CTA-Third Division promulgated a Resolution36 submitting the case for Amended Decision. The Issues37 I. WHETHER THE PETITIONER INDEED CANCELLED ITS VAT REGISTRATION DUE TO CESSATION OF BUSINESS; II. WHETHER THE PETITIONER HAS ACCUMULATED AND INCURRED EXCESS AND UNUTILIZED INPUT VAT IN THE AMOUNT OF PHP59,970,799.48 ARISING FROM THE IMPORTATION OF GOODS AND DOMESTIC PURCHASES OF GOODS AND SERVICES WHICH WERE NOT APPLIED AGAINST ANY OUTPUT TAX DURING THE PERIOD COVERED BY THE CLAIM; and III. WHETHER THE UNUTILIZED INPUT VAT OF PETITIONER IS SUBSTANTIATED BY DOCUMENTARY EVIDENCE. The Ruling of the Court The prevailing rule on claims for tax credit or tax refund of excess and unutilized VAT on account of cessation of business is Section 112(B) of the Tax Code, which provides: "SEC. 112. Refunds or Tax Credits of Input Tax. - / XXX XXX XXX 34 Id., pp. 893-900. 35 Id., p. 906. 36 Id. 37 Id., p. 685.

Amended Decision CTA Case No. 7790 (CTA EB No. 917) Page9 o�47 (B) Cancellation of VAT Registration. - A person whose registration has been cancelled due to retirement from or cessation of business, or due to changes in or cessation of status under Section 106(C) of this Code may, within two (2) years from the date of cancellation, apply for the issuance of a tax credit certificate for any unused input tax which may be used in payment of his other internal revenue taxes." (Emphasis ours) From the above-quoted Section of the Tax Code, a taxpayer whose VAT registration has been cancelled due to retirement of business is entitled to a refund or issuance of a TCC when the following requisites are present:38 1. It was a VAT-registered entity; 2. Its VAT registration has been cancelled due to retirement from or cessation of business, or due to changes in or cessation of status under Section 106 (C) of the Tax Code; 3. It has unused input tax; and 4. It has applied with the BIR for the issuance of TCC for such unused input tax within two (2) years from the date of the cancellation of its VAT registration. The Court finds it appropriate to determine first petitioner's compliance with the last requisite pertaining to the timeliness of the filing of the instant claim since it will determine the necessity of resolving the other requisites. Based on the records of the case, petitioner's Board of Directors resolved to cease its operations effective July 31, 2007, as evidenced by a Board Resolution dated July 20, 2007. Subsequent thereto, on September 26, 2007, petitioner filed an Application for Tax Clearance, and an Application for Registration Information Update to cancel its VAT registration with the respondent. Thus, effective October 1, 2007, petitioner's VAT registration is considered cancelled. Counting two (2) September 16, 2011. Revenue,~ ted Swedish Steels Phils., Inc. vs. Commissioner of Internal

Amended Decision CTA Case No. 7790 (CTA EB No. 917) years from the said date of cancellation, petitioner has until October 1, 2009 to apply for refund or the issuance of a tax credit certificate of its unused input tax.39 Therefore, the administrative claim filed with respondent on November 5, 2007, and the Petition for Review filed with the CTA- Third Division on May 26, 2008, were made within the prescribed period.40 Now the Court shall proceed to determine the other requisites. For the first requisite, it has been complied with as shown by petitioner's Certificate of Registration with the BIR.41 For the second requisite, relevant is the provision of Section 4.106- 2 of Revenue Regulations ("RR") No. 7-95, which provides: "SEC. 4.106-2. Procedures for claiming refunds or tax credits of input tax - XXX XXX XXX (b)Cancellation of VAT registration - A person whose VAT registration has been cancelled due to retirement from or cessation of status under Section 100(c) of the Code may, within two (2) years from the date of cancellation apply for the issuance of a tax credit certificate for any unused internal revenue taxes. However, he shall be entitled to a refund if he has no pending internal revenue tax liabilities." (Emphasis ours) From the foregoing, a person whose registration has been cancelled due to cessation of business must show that it has no pending internal revenue tax liabilities. ( 39 Records, p. 692. 4o Id. 41 Id., Joint Stipulation of Facts and Issues, p. 43.

Amended Decision CTA Case No. 7790 (CTA EB No. 917) Page 11 of47 In the case SMI-ED Philippines Landholdings, Inc. vs. Commissioner of Internal Revenue ("SMI-ED En Bane Case"),42 the CTA En Bane had the occasion to discuss the indispensable requirement of a CTC. The CTA En Bane ruled: "The rationale behind these Sections43 is to insure that no corporation may escape payment of taxes and other liabilities to the government simply by opting to dissolve the corporation and retire from business or reorganize its business." Undoubtedly, a CTC is an essential requirement for a claim of unutilized/excess input VAT on importation of goods and domestic purchases of goods and services from commencement of its operations until the cancellation of its VAT registration, as prescribed by Section 112(B) of the Tax Code. In the instant case, the Court En Bane noted that petitioner filed an application for CTC on September 26, 2007, and it was only on July 5, 2012 when the CTC was issued by the respondent, or after the promulgation of the CTA-Third Division Decision and Resolution dated April3, 2012 and June 25, 2012, respectively.44 Taking now into account petitioner's presentation of the CTC,45 the second requisite is complied with. For the third requisite, the Court shall consider the VAT invoicing requirements provided by Sections 4.104-5 and 4.108-1 of RR No. 7-95, and Section 4.113-1 of RR No. 16-2005, to wit: "SECTION 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 of the Code. Input tax on purchases of real property should be supported by a 42 CTA EB No. 208 (CTA Case No. 6740), February 27,2008. 43 In reference to Section 4.106-2 of RR No. 7-95. 44 Records, CTA EB No. 917, penned by Presiding Justice Roman G. Del Rosario, with the concurrence of the Associate Justices Juanito C. Castaneda, Jr., Lovell R. Bautista, Erlinda P. Uy, Caesar A. Casanova, Esperanza R. Pabon-Victorino, Cielito N. Mindaro-Grulla, Amelia R. Cotangco- rV Manalastas and Ma. Belen M. Ringpis-Liban. 45Jd., p. 890.

Amended Decision CTA Case No. 7790 (CTA EB No. 917) Page 12 o�47 copy of the public instrument i.e. deed of absolute sale, deed of conditional sale, contract/agreement to sell, etc., together with the VAT receipt issued by the seller. A cash-r~gister machine tape issued to a VAT registered buyer by a VAT-registered seller form a machine duly registered with the BIR in lieu of the regular sales invoice, shall constitute valid proof of substantiation of tax credit only if the name and TIN of the purchaser is indicated in the receipt and authenticated by a duly authorized representative of the seller. (b) Input tax on importations shall be supported with the import entry or other equivalent document showing actual payment of VAT on the imported goods. (c) Presumptive input tax shall be supported by an inventory of goods as shown in a detailed list to be submitted to the BIR. (d) Input tax on 'deemed sale' transactions shall be substantiated with the required invoices. (e) Input tax from payments made to non-residents shall be supported by a copy of the VAT declaration/return filed by the resident licensee/lessee in behalf of the non-resident licensor/lessor evidencing remittance of the VAT due." (Emphasis ours) "SECTION 4.108-1. Invoicing Requirements- All VAT- registered persons shall, for every sale or lease of goods or properties or services, issue duly registered receipts or sales ~ or commercial invoices which must show: 1. the name, TIN and address of seller; 2. date of transaction; ~

Amended Decision CTA Case No. 7790 (CTA EB No. 917) Page 13 o�47 3. quantity, unit cost and description of merchandise or nature of service; 4. the name, TIN, business style, if any, and address of the VAT-registered purchaser, customer or client; 5. the word 'zero rate' imprinted on the Invoice covering zero-rated sales; and 6. the invoice value or consideration. In the case of sale of real property subject to VAT and where the zonal or market value is higher than the actual consideration, the VAT shall be separately indicated in the invoice or receipt. Only VAT-registered persons are required to print their TIN followed by the word 'VAT' in their invoice or receipts and this shall be considered as a 'VAT Invoice.' All purchases covered by invoices other than 'VAT Invoice' shall not give rise to any input tax. If the taxable person is also engaged in exempt operations, he should issue separate invoices or receipts for the taxable and exempt operations. A 'VAT Invoice' shall be issued only for sales of goods, properties or services subject to VAT imposed in Sections 100 and 102 of the Code. The invoice or receipt shall be prepared at least in duplicate, the original to be given to the buyer and the duplicate to be retained by the seller as part of his accounting records." (Emphases ours) ('-/"' "SEC. 4.113-1. Invoicing Requirements.-- (A) A VAT-registered person shall issue:--

Amended Decision CTA Case No. 7790 (CTA EB No. 917) Page 14 of47 1. A VAT invoice for every sale, barter or exchange of goods or properties; and 2. A VAT official receipt for every lease of goods or properties, and for every sale, barter or exchange of services. Only VAT-registered persons are required to print their TIN followed by the word 'VAT' in their invoice or official receipts. Said documents shall be considered as a 'VAT Invoice' or 'VAT official receipt.' All purchases covered by invoices/receipts other than VAT Invoice/VAT Official Receipt shall not give rise to any input tax. VAT invoice /official receipt shall be prepared at least in duplicate, the original to be given to the buyer and the duplicate to be retained by the seller as part of his accounting records. (B) Information contained in VAT invoice or VAT official receipt. - The following information shall be indicated in VAT invoice or VAT official receipt: A statement that the seller is a VAT-registered person, followed by his TIN; The total amount which the purchaser pays or is obligated to pay to the seller with the indication that such amount includes the VAT; Provided, That: (l)A statement that the seller is a VAT-registered person, followed by his TIN; (2) The total amount which the purchaser pays or is obligated to pay to the seller with the indication that such amount includes the VAT; Provided, / That: i.� a. The amount of tax shall be shown as a separate item in the invoice or receipt;

Amended Decision CTA Case No. 7790 (CTA EB No. 917) Page 15 o�47 b. If the sale is exempt from VAT, the term 'VAT-exempt sale' shall be written or printed prominently on the invoice or receipt; c. If the sale is subject to zero percent (0%) VAT, the term 'zero-rated sale' shall be written or printed prominently on the invoice or receipt; d. If the sale involves goods, properties or services some of which are subject to and some of which are VAT zero-rated or VAT-exempt, the invoice or receipt shall clearly indicate the break-down of the sale price between its taxable, exempt and zero-rated components, and the calculation of the VAT on each portion of the .sale shall be shown on the invoice or receipt. The seller has the option to issue separate invoices or receipts for the taxable, exempt, and zero-rated components of the sale. (3) In the case of sales in the amount of one thousand pesos (PhP1,000.00) or more where the sale or transfer is made to a VAT-registered person, the name, business style, if any, address and TIN of the purchaser, customer or client, shall be indicated in addition to the information required in (1) and (2) of this Section."46 (Emphases ours) The Court shall adopt the findings of the Independent Certified Public Accountant ("ICPA") Report47 dated March 23, 2009 on the following disallowed items: 1) Input VAT claims with no supporting documents: a) Missing APVs, CRVs, JVs and/ or I 46 RR No. 16-05. 47 Records, pp. 176-213.

Amended Decision 13,713,375.16 21,317,404.60 CTA Case No. 7790 (CTA EB No. 917) 5,696,099.71 Page 16 of 47 1,571,996.98 335,932.75 supporting invoices and official receipts 14,516,680.89 b) Input VAT claims supported by 1,822,924.11 Draft Import Entry and Internal 514,538.74 Revenue Declaration c) Input VAT claims with no 111,006.51 supporting vatable invoices and/ or receipts 78,504.35 d) Input VAT claims supported by 101,754.21 photocopied VAT registered/VAT TIN invoices and receipts 7,769.43 2) Input VAT claims with supporting documents other than those 4,478.78 17,184,479.00 enumerated in Section 4.110-7 of RR 23,896.23 16-2005 a) Input VAT claims supported by 2,925.75 invoices on purchases of services, and official receipts for purchase Php38,501,883.60y of goods b) Supported by other documents c) Supported by Non VAT/Zero rated invoices and/ or official receipts d) Supported by invoices and receipts named to other Companies/ individual e) Input VAT claims were more than the actual input vat rate per invoices and/or receipts f) Supported by Vatable invoices and/or receipts which have no date g) Supported invoices and receipts with no VAT TIN h) Supported by duly VAT registered tape receipts without the necessary information such as the name, address and TIN of the purchaser i) Supported by invoices and receipts with no VAT registration j) Supported by invoices and/ or official receipts with tampered VAT registration and/ or VAT TIN TOTAL DISALLOWANCES PER ICPAREPORT

Amended Decision CTA Case No. 7790 (CTA EB No. 917) Page 17 o�47 Thus, the ICPA finds that the following items shall be the adjusted input VAT48 for the period June 1, 2000 to August 31, 2007: PARTICULARS AMOUNT OF INPUT VAT 1. Summary of Input VAT claims on importations of Php98,135,960.45 goods supported by Import Entry And Internal Revenue Declaration Form with reference import entry 77,374,352.40 and serial numbers. 7,990,924.20 2. Summary of Input VAT claims on purchases of goods 6,885,608.95 and/ or services supported by VAT registered/VAT Php190,386,846.00 TIN Invoices and Official Receipts. 3. Summary of Input VAT claims on purchases of goods and/ or services supported by Vatable invoices and/or receipts attached to the system generated Payable Management Report and/ or CRVs which were properly posted in the General Ledger. 4. Summary of Input VAT claims supported by Debit Notes/Debit Memos in reference to BIR Ruling [DA- 614-04] dated December 6, 2004 TOTAL The Court is now tasked to determine whether the alleged properly substantiated input VAT per ICPA Report in the total amount of Php190,386,846.00 have complied with the invoicing requirements prescribed in Sections 4.104-5 and 4.108-1 of RR No. 7-95 and Section 11 of Republic Act ("RA") No. 9337,49 as implemented in Sections 4.113-1 (A) and (B) of RR No. 16-2005. VAT on Importations Pursuant to Section 4.104-5(b) of RR No. 7-95, as amended by RR No. 16-2005, "input tax on importations shall be supported with the import entry or other equivalent document showing actual payment of VAT on the imported goods." Per ICPA Report,so the total allowable input tax on importations amount to PhP98,135,960.45, broken down as follows per year: 48 Id., ICPA Report, p. 192. ..--_,.. 49 An Act Amending Sections 24, 28, 34, 106, 107, 108, 109, 110, 111, 112, 113, 114, 116, 117, 119, 121, 148, 151, 236, 237 and 288 of the National Internal Revenue Code of 1997, as amended, and for Other Purposes, July 1, 2005. SORecords, p. 193.

Amended Decision CTA Case No. 7790 (CTA EB No. 917) Page 18 of47 YEAR PER ICPA REPORT 2000 3,383,207.00 14,628,591.00 2001 8,859,261.00 2002 20,925,942.00 2003 26,956,745.00 2004 22,3051783.45 2005 1,076,431.00 2006 TOTAL PhP98,135,960.45 ALLOWABLE INPUT VAT PERICPA REPORT --------------- A perusal of the Exhibits51 as marked by the ICPA, and considered by the ICPA as allowable input VAT on importations, show that there are importations which do not provide a breakdown and proof of payment of input VAT on importations. Below is a table that provides the allowable input VAT on importations per ICPA Report, per Court's further verification, and the allowable input VAT: YEAR ALLOWABLE DISALLOWANCE ALLOWABLE INPUTVATON PER COURT'S INPUTVATON 2000 IMPORTATIONS FURTHER IMPORTATIONS 2001 VERIFICATION 2002 PERICPA 2003 2004 3,383,207.00 3,383,207 .OOi 0.00 2005 14,628,591.00 9,518,217.00ii 5,110,374.00 2006 8,859,261.00 8,510,369.00 '-TOTAL 20,925,942.00 348,892.00iii 20,925,942.00 26,956,745.00 0.00 26,057,178.00 22,305,783.45 7,207,055.78 1,076,431.00 899,567.00iv 1,076,431.00 PhP98,135,960.45 15,098,727.67V PhP68,~~7,349. 78 0.00 PhP29,248,610.67 Thus, from the total allowable input VAT per ICPA Report in the total amount of PhP98,135,960.45, the Court shall disallow the total amount of PhP29,248,610.67 for failure to comply with the substantiation requirements i.e., absence of breakdown of input VAT and absence of proof of payment, as prescribed by Section 4.104-5 o f / 51 Records, Formal Offer of Evidence, Exhibits "ZZ 1-1" to "ZZ 7-3."

Amended Decision CTA Case No. 7790 (CTA EB No. 917) RR No. 7-95, as amended by RR No. 16-2005. Therefore, the total allowable input VAT on importations is PhP68,887,349.78. Domestic purchases of goods and services The Court shall determine whether the input VAT claims on purchases of goods and/or services supported by VAT registered/VAT TIN Sales Invoices ("Sis") and Official Receipts ("ORs") in the total amount of PhP77,374,352.40 have indeed complied with the substantiation requirements as provided in the ICPA Report. The Court deems it best to divide the discussion of this item into two portions, which is based on the periods covered, i.e. June 1 2000 to October 31, 2005; and November 1, 2005 to August 31, 2007. As for the period June 1, 2000 to October 31, 2005, the input VAT must be duly substantiated in accordance with Sections 4.104-5 and 4.108-1 of RR No. 7-95. While for the period November 1, 2005 to August 31, 2007, the input VAT must be duly substantiated in accordance with Section 11 of the RA No. 9337, as implemented in Sections 4.113-1 (A) and (B) of RR No. 16-2005. PERIODS COVERED INPUT VAT TOTAL CLAIMS PER ICPA a) June 1, 2000 to June 1 to December i October 31, 2005 31,2000 REPORTS2 i b) November 1, 2005 2001 PhP4,994,606.44 PhP67,626,648.28 to August 31,2007 5,679,915.33 2002 9,747,704.13 14,762,612.91 PhP77,374,352.�g_ 2003 12,436,165.80 15,571,110.66 2004 January 1 to October 14,182,237.14 31,2005 PhP2,837,548.58 November 1 to 6,591,468.62 December 31, 2005 318,686.93 2006 TOTAL January 1 to August 31,2007 a) For the Period Tune 1, 2000 to October 31, 2005- PhP67,626,648.28/ ; sz Id.

Amended Decision CTA Case No. 7790 (CTA EB No. 917) Page 20 o�47 Below is a table containing the list of Exhibits that should be disallowed for this period for failing to comply with the substantiation requirements under Sections 4.104-5 and 4.108-1 of RR No. 7-95. It must be noted that during this period the "VAT is computed by multiplying the total amount indicated in the SI or OR by 1/11," pursuant to Section 4.104-4 of RR No. 7-95. DATE EXHIBITS BOX DISALLOWED TOTAL NO. INPUT VAT 1) Details in the OR and SI is no longer visible Year 2000 AAA 1-8 2 64.66 Year 2000 AAA 1-21 2 65.55 Year 2000 AAA 1-255 2 44.43 Year 2000 AAA 1-267 2 71.73 Year 2000 AAA 1-391 2 52.00 Year 2000 AAA 1-394 2 100.91 Year 2000 AAA 1-480 2 30.00 Year 2000 AAA 1-558 2 7.27 Year 2001 AAA2-54 3 217.27 Year 2001 AAA 2-190 3 227.27 Year 2001 AAA2-494 3 79.55 Year 2002 AAA 3-338 7 5,827.50 Year 2003 AAA4-3876 17 272.73 7,060.87 2) No SI was provided to support the input VAT claimed on domestic purchases of goods Year 2000 AAA 1-268 2 40.91 Year 2001 AAA 2-1117 5 5,000.00 Year 2002 AAA3-3282 11 117,090.91 122,131.82 3) No OR was provided to support the input VAT claimed on domestic purchases of services Year 2001 AAA 2-1098 to AAA 2-1113 5 5,829.81 Year 2001 AAA 2-1410 6 ..

Amended Decision CTA Case No. 7790 (CTA EB No. 917) Page 21 o�47 52,920.00 Year 2001 AAA 2-1689 to AAA 1696 6 1,984.63 Year 2002 AAA3-552 7 1,467.33 Year 2003 AAA4-264 12 1,000.00 Year 2003 AAA4-265 12 65.00 Year 2003 AAA4-1283 13 11,025.00 Year 2003 AAA4-1290 13 2,822.40 Year 2003 AAA 4-1773 to AAA 4-1782 14 3,696.94 Year 2003 AAA 4-2438 to AAA 4-2446 15 1,513.60 Year 2003 AAA 4-2448 to AAA 2449 15 803.55 Year 2003 AAA 4-2451 to AAA 4-2453 15 623.37 Year 2003 AAA 4-2455 to AAA 4-2458 15 1,735.70 Year 2003 AAA 4-2460 to AAA 4-2462 15 1,084.03 Year 2003 AAA4-2862 16 184.51 Year 2003 AAA4-3776 17 90.91 Year 2004 AAA 5-705 (APV 27697) 19 69,759.01 Year 2004 AAA5-3674 22 8,183.00 Year 2004 AAA 5-3675 22 8,166.67 Year 2004 AAA 5-3676 22 8,166.67 Jan-05 to Oct-05 AAA 6-153 23 45,000.00 Jan-05 to AAA 6-264 to AAA Oct-05 6-269 23 27,712.37 Jan-05 to Oct-05 AAA 6-1816 25 9,463.69 263,298.19 ~ 4) Supporting Sis or ORs were issued not in the name of petitioner Year 2000 AAA 1-9 2 407.51 Year 2000 AAA 1-24 2 68.00 Year 2000 AAA 1-70 2 45.45

Amended Decision CTA Case No. 7790 (CTA EB No. 917) Page 22 of47 Year 2000 AAA 1-81 2 17.50 14.64 Year 2000 23.48 36.34 AAA 1-157 2 94.47 17.00 Year 2000 68.73 42.50 AAA 1-237 2 43.53 33.36 Year 2000 26.59 12.73 AAA 1-374 2 26.84 15.91 Year 2000 46.75 AAA 1-396 2 8.50 55.71 Year 2000 22.73 1,818.19 AAA 1-396 2 75.82 Year 2000 AAA 1-408 2 Year 2000 AAA 1-408 2 Year 2000 AAA 1-413 2 Year 2000 AAA 1-415 2 Year 2000 AAA 1-416 2 Year 2000 AAA 1-418 2 Year 2000 AAA 1-419 2 Year 2000 AAA 1-421 2 Year 2000 AAA 1-433 2 Year 2000 AAA 1-433 2 Year 2000 AAA 1-435 2 Year 2001 AAA2-8 3 Year 2001 AAA 2-346 3 Year 2001 AAA 2-520 3 3,022.28 5) Input VAT on domestic purchases of goods were supported by ORs instead Sis Year 2000 AAA 1-373 2 37.91 Year 2000 AAA 1-377 2 13.48 Year 2000 AAA 1-395 2 26.82 Year 2000 ~'- ---��- AAA 1-447 2 34.09_ I \

Amended Decision CTA Case No. 7790 (CTA EB No. 917) Page 23 o�47 Year 2000 AAA 1-459 2 90.41 38.82 Year 2000 11.82 66.36 AAA 1-484 2 30.73 27.32 Year 2000 23.45 12.00 AAA 1-509 2 70.63 17.27 Year 2000 24.00 36.45 AAA 1-513 2 144.55 67.73 Year 2000 31.81 AAA 1-521 2 Year 2000 AAA 1-564 2 Year 2001 AAA2-20 3 Year 2001 AAA2-30 3 Year 2001 AAA2-34 3 Year 2001 AAA 2-140 3 Year 2001 AAA 2-141 3 Year 2001 AAA2-1269 5 Year 2002 AAA3-584 7 Year 2004 AAA5-1616 20 Year 2004 AAA 5-3834 22 805.65 6) Input VAT on domestic purchases of services were supported by Sis instead of ORs Year 2000 AAA 1-104 2 105.09 Year 2000 AAA 1-200 2 68.43 Year 2000 AAA 1-367 2 49.12 222.64 7) Input VAT on domestic purchases of services were supported by undated ORs Year 2003 AAA 4-2761 to AAA I 4-2774 16 53,346.15 Year 2004 AAA 5-1657 to AAA 5-1663 20 71,837.47 Year 2004 AAA 5-1690 to AAA 5-1692 AAA 5-1694 to AAA 5-1715 20 59,108.47 184,292.09 8) No VAT was actually paid by petitioner based on the SI and OR provided Year 2002 I l I 8 AAA 3-963 21,666.671 21,666.67 ....... -�

Amended Decision CTA Case No. 7790 (CTA EB No. 917) Page 24 o�47 9) Input VAT on domestic purchase of services was supported by OR without BIR Authority to Print Year 2004 AAA 5-291 18 78,414.02 78,414.02 10) Missing Exhibits Year 2000 AAA 1-349 2 12.34 Year 2000 AAA 1-364 2 21.82 Year 2000 AAA 1-381 2 135.45 Year 2002 AAA3-132 7 10,636.36 Year 2004 AAA 5-1180 19 27,430.15 Year 2004 AAA5-2701 21 6,633.87 Year 2004 AAA5-2702 21 35,000.00 79,869.99 11) Excess input VAT claim Year 2001 AAA 2-555 to 2-577 4 0.08 Year 2001 AAA 2-1209 to AAA 2-1213 AAA 2-1218 to AAA 2-1221 AAA 2-1242 5 82,701.02 Year 2001 AAA 2-1389 to AAA 2-1390 6 3,140.61 Year 2001 AAA2-1391 6 550.00 Year 2001 AAA 2-1404 6 133.59 Year 2002 AAA 3-219 to AAA 3-222 7 258,143.54 Year 2002 AAA 3-2014 to AAA 3-2025 AAA 3-2027 to AAA 3-2028 AAA 3-2030 to AAA 3-2032 9 30,441.40 Year 2003 AAA4-388 12 97,181.82 Year 2003 AAA4-553 12 70,616.73 Jan-05 to AAA6-456 to AAA 6- Oct-05 457 AAA 6-459 to AAA 6-466 AAA 6-468 to AAA 6-478 23 - ------- 8,583.65 551,492.44 ~

Amended Decision PhP1,~12,276.66 CTA Case No. 7790 (CTA EB No. 917) Page 25 o�47 AAA 6-480 to AAA 6-485 AAA 6-491 to AAA 6-492 TOTAL DISALLOWED INPUT VAT Consequently, only the remaining amount of Php66,314,371.6253 represents petitioner's valid input VAT for the period June 1, 2000 to October 31, 2005. Accordingly, the disallowed input VAT on purchases of goods and services per year beginning June 1, 2000 to October 30,2005 may be summarized as follows: YEAR INPUT VAT DISALLOWANCES PROPERLY CLAIMS PER SUBSTANTIATED June 1 to ICPAREPORT December INPUT VAT 31,2000 4,994,606.44 4,992,253.43 2001 5,679,915.33 2,353.01vi 5,525,030.96 154,884.37vii 2002 14,762,612.91 445,418.26viii 14,317,194.65 2003 12,436,165.80 246,062.44ix 12,190,103.36 2004 15,571,110.66 372,798.87X 15,198,311.79 January 1 to 14,182,237.14 90,759.71 xi 14,091,477.43 October 30, 2005 TOTAL PhP67,626,648.28 PhP1,31~_,276.66 PhP66,314,371.62 b) For the Period November 1, 2005 to August 30, 2007- PhP9,747,704.13 The notable amendment in the invoicing requirements by Section 4.113-1 (B) of RR No. 16-05 of Section 4.108-1 of RR No. 7-95 is the mandatory requirement that "the amount of tax shall be shown as a separate item in the invoice of receipt." Below is the list of Exhibits thaV"'- complied with the aforementioned amendment: ( 53 Php67,626,648.28 less Php1,312,276.66

Amended Decision CTA Case No. 7790 (CTA EB No. 917) DATE RANGE OF EXHIBITS THAT BOX ALLOWED EXHIBITS COMPLIED WITH FOR THE PERIOD SECTION 4.113-1 (B) NO. VAT OF RR NO. 16-05 Nov-05 AAA 6-2956 to AAA AAA 6-2995 27 2,727.27 6-3239 AAA 6-3170 AAA 6-3243 AAA 6-3244 27 1,000.00 AAA 6-3347 27 7,822.06 Dec-05 AAA 6-3240 to AAA 27 20,492.00 6-3472 27 2,727.27 TOTAL ALLOWED INPUT VAT from Nov 1 to Dec 31, 2005 34,768.60 Jan-06 AAA 7-1 to AAA 7- 167 AAA 7-32 28 3,950.50 AAA 7-58 28 77.91 AAA 7-58 28 593.60 AAA 7-104 28 1,115.64 AAA 7-107 28 39,772.73 AAA 7-109 28 64,040.00 AAA 7-143 28 109.09 AAA 7-143 28 109.09 AAA 7-146 28 18.55 AAA 7-146 28 136.00 AAA 7-160 28 25.27 AAA 7-163 28 77.91 AAA 7-165 28 35.09 AAA 7-166 28 77.91 AAA 7-182 Feb-06 AAA 7-168 to AAA AAA 7-190 28 6,254.18 (Feb 1, 7-343 AAA 7-203 2006 AAA 7-204 12% 28 493.37 VAT) 28 121.50 1/ - --- - - -------- 28

Amended Decision CTA Case No. 7790 (CTA EB No. 917) 74.09 AAA 7-240 28 76.22 AAA 7-267 AAA 7-268 28 717.86 AAA 7-269 AAA 7-271 28 2,488.39 AAA 7-285 AAA 7-289 28 522.70 AAA 7-291 AAA 7-308 28 321.43 AAA 7-317 AAA 7-321 28 6,370.71 AAA 7-336 AAA 7-337 28 626.79 AAA 7-338 AAA 7-339 28 1,860.00 AAA 7-353 AAA 7-357 28 631.61 AAA 7-364 AAA 7-401 28 482.14 AAA 7-407 AAA 7-421 28 89.36 AAA 7-442 AAA 7-444 28 253.63 AAA 7-503 AAA 7-513 28 128.57 28 109.09 28 128.57 Mar-06 AAA 7-344 to AAA 28 37.71 7-577 28 30.07 28 375.00 28 600.00 28 49.08 28 74.53 28 33.96 28 94.50 28 3,400.00 28 39,150.00 \~

Amended Decision CTA Case No. 7790 (CTA EB No. 917) AAA 7-519 28 842.13 AAA 7-520 AAA 7-520 28 92.68' AAA 7-527 AAA 7-527 28 114.72 AAA 7-536 AAA 7-564 28 100.00 AAA 7-585 AAA 7-745 28 53.57 AAA 7-751 AAA 7-796 28 140.79 AAA 7-798 AAA 7-799 28 102.00 AAA 7-806 Apr- AAA 7-578 to AAA AAA 7-807 29 23,640.00 June 7-826 AAA 7-808 2006 AAA 7-818 AAA 7-823 AAA 7-930 29 1,200.00 AAA 7-931 AAA 7-931 29 888.21 AAA 7-932 AAA 7-966 29 600.00 AAA 7-986 AAA 7-1014 29 46.93 AAA 7-1014 29 31.16 29 1,016.57 29 1,971.43 29 1,045.29 29 861.00 29 32.14 July- AAA 7-827 to AAA 29 20.89 Dec. 7-1108 2006 29 19.93 29 39.11 29 22.50 29 600.00 29 3,889.29 29 37.50 29 ~

Amended Decision CTA Case No. 7790 (CTA EB No. 917) Page 29 o�47 AAA 7-1038 29 24.64 46.07 AAA 7-1052 29 53.57 1,200.00 AAA 7-1075 29 214,466.47 TOTAL ALLOWED INPUT VAT IN 2006 600.00 600.00 YEAR AAA-8-1 to AAA-8- 600.00 152.14 2007 43 AAA8-3 29 600.00 2,552.14 AAA 8-15 29 AAA8-21 29 AAA8-23 29 '------ - -�--- AAA8-28 29 TOTAL ALLOWED INPUT VAT FROM JAN 1 TO AUGUST 30, 2007 Consequently, the computation of the disallowed input VAT claims for the period November 1, 2005 to August 31, 2007 is summarized, as follows: YEAR INPUT VAT DISALLOWED PROPERLY CLAIMS PER FOR FAILURE TO SUBSTANTIATED November 1 ICPAREPORT COMPLY WITH to December SECTION 4.113 (B) INPUT VAT OF RR NO. 16-05 31,2005 2,837,548.58 2,802,779.98 34,768.60 2006 6,591,468.62 6,377,002.15 214,466.47 January 1 to August 31, 318,686.93 316,134.79 2,552.14 PhP9,747,704.13 PhP9,495,916.92 PhP251,787.21 2007 TOTAL Thus, out of the total amount of Php9,747,704.13 input VAT claim per ICPA Report found to be supported by VAT registered Sis and ORs for the period November 1 2005 to August 31, 2007, only the total amount of PhP251,787.21 shall be considered as allowable Input VAT since its respective Sis or ORs had expressly indicated "the amount of tax as a separate item" pursuant to Section 4.113-1 (B) (a) of RR No. 16-05/ � I

Amended Decision CTA Case No. 7790 (CTA EB No. 917) Page 30 o�47 Hence, the Exhibits not found in table above which amounts to PhP9,495,916.92 shall be disallowed. Below is a summary of the disallowed input VAT claims on domestic purchases of goods and services for the period June 1, 2000 to October 31, 2005, and for the period November 1, 2005 to August 31, 2007: a) June 1, 2000 PERIOD DISALLOWANCES TOTAL to October COVERED 31,2005 2,353.01 PhP1,312,276.66 June 1 to December 154,884.37 9,495,916.92 b) November 1, 31,2000 445,418.26 2001 246,062.44 ----------- 2005 to 2002 372,798.87 2003 PhP10,808,193.58 August 31, 2004 90,759.71 2007 January 1 to 2,802,779.98 October 31,2005 6,377,002.15 November 1 to December 31,2005 316,134.79 2006 January 1 to August 31, 2007 TOTAL Vatable invoices and/or receipts that are attached to system generated payable management report and/or Check Register Vouchers (CRVs) On this portion, the Court shall discuss whether the input VAT claims on purchases of goods and/ or services supported by VAT registered/VAT TIN Sis and ORs attached to the system generated Payable Management Report and/ or Check Register Vouchers ("CRVs") in the total amount of PhP7,990,924.20 have indeed complied with the substantiation requirements as found in the ICPA Report. The Court shall divide the discussion into two basing on the periods, namely, (i) for the period June 1, 2000 to October 31, 2005; and~ (ii) for the period November 1, 2005 to August 31, 2007. f

Amended Decision CTA Case No. 7790 (CTA EB No. 917) For the period June 1, 2000 to October 31, 2005, the prevailing substantiation requirements are those provided in Sections 4.104-5 and 4.108-1 of RR No. 7-95, while the prevailing invoicing requirements for the period November 1, 2005 to August 31,2007 shall be those provided in Section 11 of RA 9337, as implemented in Sections 4.113-1 (A) and (B) of RR No. 16-2005. a) For the period June 1, 2000 to October 31, 2005 The table below provides for the Exhibits that are disallowed after further verification by the Court for the period June 1, 2000 to October 31, 2005, for failing to present the Sis for each purchase of goods and ORs for each purchase of services, as required under Section 4.104-5 of RR No. 7-95, as follows: DATE RANGE OF EXHIBIT BOX NO. DISALLOWED VAT EXHIBITS AMOUNT FOR THE 30 30 1,777.08 PERIOD 30 127.26 30 724.08 Year BBB-1-1 to BBB 1-9 to BBB 1-17 30 259.93 30 27.11 2000 BBB-1-318 BBB 1-27 1,205.94 BBB 1-34 to BBB 1-39 PhP4,121.40 BBB 1-43 BBB 1-44 BBB 1-49 to BBB 1-53 DISALLOWED INPUT VAT IN 2000 From the foregoing table, the disallowed input VAT on VATable Sis and/ or ORs that are attached to system generated payable management report and/ or CRVs, for the period June 1, 2000 to October 30,2005, amounts to PhP4,121.40. b) For the period November 1, 2005 to August 31, 2007 There is a notable amendment in the invoicing requirements in Section 4.108-1 of RR No. 7-95 when compared with the invoicing requirements in Section 4.113-1 (B) of RR No. 16-05. The latter revenue regulation requires that "the amount of tax shall be shown as a separate item in the invoice or receipt." Consequently, the table below shall provide a list of exhibits which complied with the aforementioned requirements: ~�

Amended Decision CTA Case No. 7790 (CTA EB No. 917) Page 32 of47 Date Range of Exhibits that Box No. Allowed Input Exhibits complied with VAT Amount for the period Section 4.113-1 30 (B) of RR 16-05 30 385.71 720.00 YEAR BBB-1-1 to BBB 6-19 1,105.71 2006 BBB-1-318 BBB 6-28 ALLOWABLE INPUT VAT IN 2006 The Exhibits not found above shall be disallowed as it failed to comply with Section 4.113.1(B) of RR No. 16-05. Thus, the allowable input VAT attached to the system generated payable management report/and or CRVs per ICPA Report is in the total amount of PhP7,990,924.20. However, the Court shall disallow the total amount of PhP70,202.38 for failure to present the Sis for each purchase of goods or ORs for each purchase of services. Thus, the total allowable input VAT on VATable Sis and/ or ORs that are attached to the system generated payable management report and/ or CRVs is PhP7,928,964.62. The table below summarizes the foregoing: YEAR INPUT VAT COURT'S ALLOWED INPUT ATTACHED TO DISALLOWANCES VAT June 1 to UPON FURTHER December 31, SYSTEM GENERATED VERIFICATION 2000 PAYABLE 4,121.40 5,175,065.69 MANAGEMENT REPORT AND/OR CRVS PER ICPA REPORT 5,170,944.29 2001 1,178,225.17 . 0.00 1,178,225.17 2002 138,138.27 0.00 138,138.27 2003 843,898.72 0.00 843,898.72 2005 592,531.06 0.00 592,531.06 2006 67,186.69 66,080.98 1,105.71 TOTAL PhP7,990,924.20 PhP70,202.38 PhP7,928,964.62 /"

Amended Decision CTA Case No. 7790 (CTA EB No. 917) Input VAT claims supported by Debit Notes/Debit Memos The amount PhP6,885,608.9554 representing input VAT claims supported by Debit Notes/Debit Memos shall be disallowed since the input tax are not supported by a SI or an OR, pursuant to Sec. 4.104-5 of RR No. 7-95 and Section 4.108-1 of RR No. 16-05. Properly Substantiated Input VAT pursuant to Secs.4.104-4, 4.104-5 and 4.108-1 o(RR 7-95 and Sees. 4.113-1 (A) and (B) of RR 16-05 In sum, the properly substantiated input VAT for the period June 1, 2000 to October 31, 2005 and the period November 1, 2005 to August 30, 2007, pursuant to Sections 4.104-4, 4.104-5, and 4.108-1 of RR No. 7- 95 and Sections 4.113-1(A) and (B) of RR No. 16-05 is computed as follows: Input VAT claimed by Dumex per ICPA 228,888,729.6055 Report 21,317,404.60 38,501,883.60 Less: Disallowances 17,184,479.00 A. Per ICPA findings: 29,248,610.67 1. Input VAT claims with no supporting 10,808,193.58 documents 2. Input VAT claims with supporting 70,202.38 documents other than those enumerated in Section 4.110-7 of RR ~ 16-2005 B. Per Court's Findings (as previously discussed): 1. Input VAT claims on Importations 2. Input VAT claims on Purchases of goods and/ or services supported by VAT registered Invoices and Official Receipts 3. Vatable invoices and/ or receipts that are attached to system generated payable management report and/ or CRVs 4. Input VAT claims supported by Debit 54 Annex Fof Sum man; ofAnnexes for Exhibit "SSS" 55 Records, p.191.

Amended Decision 6,885,608.95 CTA Case No. 7790 (CTA EB No. 917) Page 34 o�47 47,012,615.58 Notes/Debit Memos in reference to Php143,374,230.42 BIR Ruling [DA -614-04] dated December 6, 2004 PROPERLY SUBSTANTIATED INPUT VAT Since the output VAT in the amount of PhP171,266,703.9556 is found to be in order and the adjusted input VAT of petitioner in the amount of PhP143,374,230.42 per computation, is lesser than the former, then petitioner has no excess unutilized input VAT which may be refunded as provided on Sections 4.104-4, 4.104-5 and 4.108-1 of RR No. 7-95 and Sections 4.113-1 (A) and (B) of RR No. 16-05, to wit: Output Tax declared per VAT 171,266,703.95 returns (from 2000 to August 2007) 143,374,230.42 Less: Properly Substantiated Input PhP27,892,473.53 VAT No Excess Unutilized Inp_ut VAT WHEREFORE, premises considered, petitioner's Petition for Review is hereby DENIED for lack of merit. SO ORDERED. LOVELL \{. BAUTISTA Assodate Justice I CONCUR: ~L~ AMELIA R. COTANGCO-MANALASTAS Associate Justice 56 Id., p. 212.

Amended Decision CTA Case No. 7790 (CTA EB No. 917) Page 35 of47 ATTESTATION I attest that the conclusions in the above Amended Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court's Division. Associate Justice Chairperson CERTIFICATION Pursuant to Section 13 of Article VIII of the Constitution, and the Division Chairperson's Attestation, it is hereby certified that the conclusions in the above Amended Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court's Special Division. Presiding Justice YEAR2000 EXHIBIT DISALLOWED REASON FOR DISALLOWANCE INPUT VAT -- zz 1-1 zz 1-2 386,614.00 No proof of payment of input VAT zz 1-3 zz 1-4 380,802.00 No proof of payment of input VAT zz 1-5 zz 1-6 244,898.00 No proof of payment of input VAT ZZ1-7 244,898.00 No proof of payment of input VAT zz 1-8 172,794.00 No proof of payment of input VAT 105,513.00 No proof of payment of input VAT 95,339.00 No proof of payment of input VAT 260,643.00 No proof of payment of input VAT

Amended Decision CTA Case No. 7790 (CTA EB No. 917) Page 36 of47 zz 1-9 245,789.00 No proof of payment of input VAT 203,305.00 No proof of payment of input VAT zz 1-10 203,305.00 No proof of payment of input VAT 164,007.00 No proof of payment of input VAT zz 1-11 144,036.00 No proof of payment of input VAT 101,856.00 No proof of payment of input VAT zz 1-12 96,677.00 No proof of payment of input VAT zz 1-13 91,158.00 No proof of payment of input VAT 84,595.00 No proof of payment of input VAT zz 1-14 83,971.00 No proof of payment of input VAT 73,007.00 No proof of payment of input VAT zz 1-15 zz 1-16 zz 1-17 zz 1-18 zz 1-19 TOTAL Disallowed Input VAT for Taxable Year 2000 ii EXHIBIT PhP3,383,207.00 REASON FOR DISALLOWANCE YEAR2001 AMOUNT OF DISALLOWED INPUT VAT ZZ2-3 389,983.00 No breakdown of input VAT Disallowed 389,983.00 Input VAT due to No 246,677.00 No proof of payment of input VAT breakdown of 126,109.00 No proof of payment of input VAT input VAT 147,510.00 No proof of payment of input VAT 129,118.00 No proof of payment of input VAT zz 2-12 1 zz 2-15 zz 2-31 zz 2-32

Amended Decision 125,140.00 No proof of payment of input VAT CTA Case No. 7790 (CTA EB No. 917) 157,776.00 No proof of payment of input VAT Page37 of47 127,364.00 No proof of payment of input VAT 123,623.00 No proof of payment of input VAT zz 2-33 128,209.00 No proof of payment of input VAT zz 2-34 129,466.00 No proof of payment of input VAT zz 2-35 130,681.00 No proof of payment of input VAT zz 2-36 273,249.00 No proof of payment of input VAT zz 2-37 154,855.00 No proof of payment of input VAT zz 2-38 268,268.00 No proof of payment of input VAT zz 2-39 139,102.00 No proof of payment of input VAT zz 2-40 265,425.00 No proof of payment of input VAT zz 2-41 148,691.00 No proof of payment of input VAT zz 2-42 151,213.00 No proof of payment of input VAT zz 2-43 146,055.00 No proof of payment of input VAT zz 2-44 142,286.00 No proof of payment of input VAT zz 2-45 137,504.00 No proof of payment of input VAT zz 2-46 138,743.00 No proof of payment of input VAT zz 2-47 265,311.00 No proof of payment of input VAT zz 2-48 480,951.00 No proof of payment of input VAT zz 2-49 150,279.00 No proof of payment of input VAT zz 2-50 127,486.00 No proof of payment of input VAT zz 2-51 145,616.00 No proof of payment of input VAT zz 2-52 135,142.00 No proof of payment of input VAT zz 2-53 zz 2-54 zz 2-55 zz 2-56 -~

Amended Decision CTA Case No. 7790 (CTA EB No. 917) Page 38 of47 zz 2-57 129,753.00 No proof of payment of input VAT zz 2-58 zz 2-59 131,765.00 No proof of payment of input VAT zz 2-60 zz 2-61 128,309.00 No proof of payment of input VAT zz 2-62 zz 2-63 224,295.00 No proof of payment of input VAT zz 2-64 zz 2-65 124,152.00 No proof of payment of input VAT zz 2-66 zz 2-67 117,146.00 No proof of payment of input VAT zz 2-68 zz 2-69 131,366.00 No proof of payment of input VAT zz 2-70 zz 2-71 117,048.00 No proof of payment of input VAT zz 2-72 zz 2-73 115,003.00 No proof of payment of input VAT zz 2-74 zz 2-75 144,947.00 No proof of payment of input VAT zz 2-76 zz 2-77 129,984.00 No proof of payment of input VAT zz 2-78 zz 2-79 145,682.00 No proof of payment of input VAT zz 2-80 11,545.00 No proof of payment of input VAT ----- 133,282.00 No proof of payment of input VAT 136,050.00 No proof of payment of input VAT 147,562.00 No proof of payment of input VAT 134,137.00 No proof of payment of input VAT 148,045.00 No proof of payment of input VAT 151,920.00 No proof of payment of input VAT 132,010.00 No proof of payment of input VAT 129,789.00 No proof of payment of input VAT 133,962.00 No proof of payment of input VAT 126,804.00 No proof of payment of input VAT 126,804.00 No proof of payment of input VAT /

Amended Decision CTA Case No. 7790 (CTA EB No. 917) Page 39 of47 zz 2-81 136,845.00 No proof of payment of input VAT zz 2-82 129,764.00 No proof of payment of input VAT zz 2-83 128,696.00 No proof of payment of input VAT zz 2-84 131,522.00 No proof of payment of input VAT zz 2-85 168,789.00 No proof of payment of input VAT zz 2-86 173,527.00 No proof of payment of input VAT zz 2-87 131,772.00 No proof of payment of input VAT zz 2-88 134,110.00 No proof of payment of input VAT Disallowed 9,128,234.00 Input VAT due to No PhP9,518,217.00 Proof of Payment of AMOUNT OF Input VAT DISALLOWED TOTAL INPUT VAT Disallowed Input VAT for Taxable Year 2001 iii EXHIBIT REASON FOR DISALLOWANCE YEAR2002 zz 3-23 112,207.00 No proof of payment of input VAT zz 3-29 121,402.00 No proof of payment of input VAT zz 3-58 115,283.00 No proof of payment of input VAT iv TOTAL PhP348,892.00 REASON FOR DISALLOWANCE Disallowed YEAR2004 Input VAT AMOUNT OF for Taxable DISALLOWED Year 2002 INPUT VAT EXHIBIT

Amended Decision CTA Case No. 7790 (CTA EB No. 917) Page 40 of47 zz 5-1 237,679.00 No proof of payment of input VAT zz 5-29 342,466.00 No proof of payment of input VAT zz 5-79 319,422.00 No proof of payment of input VAT v TOTAL PhP899,567.00 REASON FOR DISALLOWANCE Disallowed YEAR2005 Input VAT AMOUNT OF for Taxable DISALLOWED Year 2004 INPUT VAT EXHIBIT zz 6-1 369,381.00 No proof of payment of input VAT ZZ6-2 298,421.00 No proof of payment of input VAT ZZ6-3 259,407.00 No proof of payment of input VAT ZZ6-4 340,457.00 No proof of payment of input VAT 330,153.00 No proof of payment of input VAT zz 6-5 344,035.00 No proof of payment of input VAT ZZ6-6 351,648.00 No proof of payment of input VAT zz 6-7 284,966.00 No proof of payment of input VAT zz 6-8 265,382.00 No proof of payment of input VAT ZZ6-9 350,144.00 No proof of payment of input VAT 345,599.00 No proof of payment of input VAT zz 6-10 275,680.00 No proof of payment of input VAT zz 6-11 344,956.00 No proof of payment of input VAT zz 6-12 316,910.00 No proof of payment of input VAT zz 6-13 345,454.00 No proof of payment of input VAT zz 6-14 273,435.00 No proof of payment of input VAT zz 6-15 286,402.00 No proof of payment of input VAT zz 6-16 286,845.00 No proof of payment of input VAT zz 6-17 zz 6-18 350,101.00 No proof of payment of input VAT zz 6-19 251,929.00 No proof of payment of input VAT 345,347.00 No proof of payment of input VAT zz 6-20 341,161.00 No proof of payment of input VAT zz 6-21 291,012.00 No proof of payment of input VAT zz 6-22 ' --�� -�- - zz 6-23 ... ,_,_,.� -

Amended Decision 328,542.00 No proof of payment of input VAT CTA Case No. 7790 (CTA EB No. 917) 284,019.00 No proof of payment of input VAT Page 41 of47 276,093.00 No proof of payment of input VAT 263,395.00 No proof of payment of input VAT zz 6-24 274,360.00 No proof of payment of input VAT zz 6-25 zz 6-26 I zz 6-27 zz 6-28 363,406.00 No proof of payment of input VAT zz 6-29 zz 6-30 174,993.00 No proof of payment of input VAT zz 6-31 zz 6-32 343,129.00 No proof of payment of input VAT zz 6-33 zz 6-34 343,008.00 No proof of payment of input VAT zz 6-35 zz 6-36 306,831.00 No proof of payment of input VAT zz 6-37 zz 6-38 105,072.13 No proof of payment of input VAT zz 6-39 zz 6-40 225,422.00 No proof of payment of input VAT zz 6-41 zz 6-43 276,917.00 No proof of payment of input VAT zz 6-44 zz 6-45 371,298.00 No proof of payment of input VAT zz 6-47 zz 6-57 294,199.00 No proof of payment of input VAT zz 6-58 zz 6-59 307,382.00 No proof of payment of input VAT zz 6-65 282,558.00 No proof of payment of input VAT 319,410.00 No proof of payment of input VAT 336,786.00 No proof of payment of input VAT 329,694.00 No proof of payment of input VAT 403,318.00 No proof of payment of input VAT 288,825.54 No proof of payment of input VAT 374,374.00 No proof of payment of input VAT 411,786.00 No proof of payment of input VAT 149,617.00 No proof of payment of input VAT 415,468.00 No proof of payment of input VAT /-

Amended Decision CTA Case No. 7790 (CTA EB No. 917) Page42 of 47 TOTAL PhP15,098,727.67 Disallowed Input VAT for Taxable Year 2005 vi EXHIBITS BOX DISALLOWED REASON FOR DISALLOWANCE NO. VAT AMOUNT DATE AAA 1-8 2 Details in the OR/Invoice is no longer Year 2000 64.66 visible Year 2000 AAA 1-9 2 407.51 Not in the name of Dumex Year 2000 Details in the OR/Invoice is no longer AAA 1-21 2 Year 2000 65.55 visible Year 2000 Year 2000 AAA 1-24 2 68.00 Not in the name of Dumex Year 2000 Year 2000 AAA 1-70 2 45.45 Not in the name of Dumex Year 2000 Year 2000 AAA 1-81 2 17.50 Not in the name of Dumex Year 2000 AAA 1-104 2 105.09 Sales Invoice was provided instead of OR Year 2000 AAA 1-157 2 14.64 Not in the name of Dumex Year 2000 Year 2000 AAA 1-200 2 68.43 Sales Invoice was_r_rovided instead of OR Year 2000 Year 2000 AAA 1-237 2 23.48 Not in the name of Dumex Year 2000 44.43 Details in the OR/Invoice is no longer Year 2000 AAA 1-255 2 71.73 visible Year 2000 Details in the OR/Invoice is no longer Year 2000 AAA 1-267 2 visible Year 2000 AAA 1-268 2 40.91 No Invoice was provided Year 2000 AAA 1-349 2 12.34 Missing Exhibit Year 2000 Year 2000 AAA 1-364 2 21.82 Missing Exhibit Year 2000 Year 2000 AAA 1-367 2 49.12 Sales Invoice was__E_rovided instead of OR Year 2000 Year 2000 AAA 1-373 2 37.91 OR was provided instead of Sales Invoice Year 2000 Year 2000 AAA 1-374 2 36.34 Not in the name of Dumex Year 2000 Year 2000 AAA 1-377 2 13.48 OR was provided instead of Sales Invoice Year 2000 Year 2000 AAA 1-381 2 135.45 Missing Exhibit Year 2000 52.00 Details in the OR/Invoice is no longer Year 2000 AAA 1-391 2 visible 100.91 Details in the OR/Invoice is no longer AAA 1-394 2 visible AAA 1-395 2 26.82 OR was provided instead of Sales Invoice AAA 1-396 2 94.47 Not in the name of Dumex AAA 1-396 2 17.00 Not in the name of Dumex AAA 1-408 2 68.73 Not in the name of Dumex AAA 1-408 2 42.50 Not in the name of Dumex AAA 1-413 2 43.53 Not in the name of Dumex AAA 1-415 2 33.36 Not in the name of Dumex AAA 1-416 2 26.59 Not in the name of Dumex AAA 1-418 2 12.73 Not in the name of Dumex AAA 1-419 2 26.84 Not in the name of Dumex AAA 1-421 2 15.91 Not in the name of Dumex AAA 1-433 2 46.75 Not in the name of Dumex AAA 1-433 2 8.50 Not in the name of Dumex AAA 1-435 2 55.71 Not in the name of Dumex /

Amended Decision CTA Case No. 7790 (CTA EB No. 917) Page43 of47 Year 2000 AAA 1-447 2 34.09 OR was provided instead of Sales Invoice 90.41 OR was provided instead of Sales Invoice Year 2000 AAA 1-459 2 Details in the OR/Invoice is no longer Year 2000 30.00 visible 38.82 OR was provided instead of Sales Invoice AAA 1-480 2 11.82 OR was provided instead of Sales Invoice 66.36 OR was provided instead of Sales Invoice Year 2000 AAA 1-484 2 30.73 OR was provided instead of Sales Invoice Year 2000 AAA 1-509 2 Details in the OR/Invoice is no longer 7.27 visible Year 2000 AAA 1-513 2 27.32 OR was provided instead of Sales Invoice Year 2000 AAA 1-521 2 PhP2,353.01 Year 2000 AAA 1-558 2 Year 2000 AAA 1-564 2 TOTAL DISALLOWED INPUT VAT IN 2000 vii EXHIBITS BOX DISALLOWED REASON FOR DISALLOWANCE NO. VAT AMOUNT YEAR AAA2-8 Year 2001 3 22.73 Not in the name of Dumex Year 2001 AAA2-20 3 Year 2001 3 23.45 OR was provided instead of Sales Invoice Year 2001 AAA2-30 3 Year 2001 3 12.00 OR was provided instead of Sales Invoice Year 2001 AAA2-34 3 Year 2001 3 70.63 OR was provided instead of Sales Invoice Year 2001 AAA2-54 3 Details in the OR/Invoice is no longer Year 2001 3 Year 2001 AAA 2-140 3 217.27 visible Year 2001 3 Year 2001 AAA 2-141 4 17.27 OR was provided instead of Sales Invoice Year 2001 AAA 2-190 5 24.00 OR was provided instead of Sales Invoice Year 2001 5 Details in the OR/Invoice is no longer Year 2001 AAA 2-346 5 227.27 visible Year 2001 AAA2-494 5 Year 2001 1,818.19 Not in the name of Dumex AAA2-520 6 Details in the OR/Invoice is no longer AAA 2-555 79.55 visible to 2-577 AAA2- 75.82 Not in the name of Dumex 1098 to AAA2- 0.08 Excess Input VAT 1113 5,829.81 No OR was Provided AAA2- 5,000.00 No Invoice was Provided 1117 82,701.02 Excess Input VAT AAA2- 1209 to 36.45 OR was provided instead of Sales Invoice AAA2- I 1213 ' AAA2- ! 1218 to AAA2- i 1221 3,140.61 Excess Input VAT i AAA2- 1242 AAA2- 1269 AAA2- 1389 to AAA2- 1390 I

Amended Decision CTA Case No. 7790 (CTA EB No. 917) Page44 of47 Year 2001 AAA2- 1391 6 550.00 Excess Input VAT 133.59 Excess Input VAT Year 2001 AAA2- 52,920.00 No OR was provided 1404 6 1,984.63 No OR was provided PhP154,884.37 Year 2001 AAA2- 1410 6 Year 2001 AAA2- 1689 to AAA 1696 6 TOTAL DISALLOWED INPUT VAT IN 2001 viii EXHIBITS BOX DISALLOWED VAT REASON FOR DISALLOWANCE NO. AMOUNT YEAR AAA 3-132 Year 2002 AAA 3-219 7 10,636.36 Missing Exhibit Year 2002 to AAA 3- 7 258,143.54 Excess Input VAT Year 2002 222 5,827.50 Details in the OR/Invoice is no longer Year 2002 7 1,467.33 visible Year 2002 AAA3-338 7 144.55 Year 2002 AAA3-552 7 No OR was provided OR was provided instead of Sales AAA 3-584 Invoice AAA3-963 8 21,666.67 No VAT was actually paid Year 2002 AAA3- 30,441.40 Excess Input VAT 117,090.91 No Invoice was provided 2014 to PhP445,418.26 AAA3- 2025 AAA3- 2027 to AAA3- 2028 AAA3- 2030 to AAA3- 2032 9 Year 2002 AAA3- 3282 11 TOTAL ALLOWABLE INPUT VAT IN 2002 ix EXHIBITS BOX DISALLOWED VAT REASON FOR DISALLOWANCE NO. AMOUNT YEAR AAA4-264 12 1,000.00 No OR was provided Year 2003 AAA4-265 12 No OR was provided Year 2003 65.00 Year 2003 AAA4-388 12 97,181.82 Excess Input VAT Year 2003 AAA4-553 12 70,616.73 Excess In_Eut VAT Year 2003 AAA4- 1283 13 11,025.00 No OR was provided ------- -

Amended Decision CTA Case No. 7790 (CTA EB No. 917) Page 45 o�47 Year 2003 AAA4- 1290 13 2,822.40 No OR was provided Year 2003 AAA4- 3,696.94 No OR was provided 1773 to 1,513.60 No OR was provided 803.55 No OR was provided AAA4- 623.37 No OR was provided 1782 14 1,735.70 No OR was_provided Year 2003 AAA4- 1,084.03 No OR was_provided 2438 to 53,346.15 OR is undated AAA4- 184.51 No OR was provided 90.91 No OR was provided 2446 15 Details in the OR/Invoice is no longer 272.73 visible Year 2003 AAA4- PhP246,062.44 2448 to AAA2449 15 Year 2003 AAA4- 2451 to AAA4- 2453 15 Year 2003 AAA4- 2455 to AAA4- 2458 15 Year 2003 AAA4- 2460 to AAA4- 2462 15 Year 2003 AAA4- 2761 to AAA4- 2774 16 Year 2003 AAA4- 2862 16 Year 2003 AAA4- 3776 17 Year 2003 AAA4- 3876 17 TOTAL DISALLOWED INPUT VAT IN 2003 X EXHIBITS BOX DISALLOWED VAT REASON FOR DISALLOWANCE I NO. AMOUNT YEAR AAA5-291 18 78,414.02 NO BIR PERMIT indicated in the OR Year 2004 AAA5-705 Year 2004 19 69,759.01 No OR was provided (APV 19 Year 2004 27697) 20 27,430.15 Missing Exhibit Year 2004 AAA5- OR was provided instead of Sales Year 2004 1180 20 AAA5- 67.73 Invoice 1616 AAA5- 71,837.47 OR is undated 1657 to AAA5- 1663 (./---

Amended Decision CTA Case No. 7790 (CTA EB No. 917) Page46 of47 Year 2004 AAA5- I 1690 to AAA5- 1692 AAA5- I 1694 to AAA5- 1715 20 59,108.47 OR is undated I Year 2004 AAA5- 2701 21 6,633.87 Missing Exhibit Year 2004 AAA5- 2702 21 35,000.00 Missing Exhibit Year 2004 AAA5- 3674 22 8,183.00 No OR was_I>rovided Year 2004 AAA5- 3675 22 8,166.67 No OR was provided Year 2004 AAA5- 3676 22 8,166.67 No OR was provided OR was provided instead of Sales Year 2004 AAA5- 31.81 Invoice 3834 22 PhP372,798.87 TOTAL DISALLOWED INPUT VAT IN 2004 xi EXHIBITS BOX DISALLOWED VAT REASON FOR DISALLOWANCE NO. AMOUNT YEAR Jan-05 to AAA6- Oct-05 Jan-05 to 153 23 45,000.00 No OR was provided Oct-05 27,712.37 No OR was provided Jan-05 to AAA6- Oct-05 8,583.65 Excess Input VAT 264to 9,463.69 no OR was provided Jan-05 to Oct-05 AAA6- 269 23 AAA6- 456 to AAA6- 457 AAA6- 459to AAA6- 466 AAA6- 468 to AAA6- 478 AAA6- 480 to AAA6- 485 AAA6- 491 to AAA6- 492 23 AAA6- ~� 1816 25

Amended Decision PhP90,759.71 CTA Case No. 7790 (CTA EB No. 917) Page47 of47 TOTAL DISALLOWED INPUT VAT FROM JAN 1 TO OCT 30 2005 ~