SILICON PHILIPPINES, INC. v. COMMISSIONER OF INTERNAL REVENUE

REPUBliC OF THE PHiliPPINES Coon of Tax Appeals QUEZON CITY �1/BAIIC SILICON PHILIPPINES, INC., C.T.A. E.B: NO. 266 Petitioner, (C.T.A. CASE NO. 6310) Present: -versus - ACOSTA, P.J. CASTANEDA, JR., COMMISSIONER OF INTERNAL �BAUTISTA, REVENUE, UY, CASANOVA, f:!nd Respondent. PALANCA-ENRIQUEZ, JJ. Promulgated: t~AR 2 8 2008 ~t?/~ ~~ X------------------------------------,..------------------ -X //..,f{j"/t./Jl ' DECISION UY, J..: This is a Petition for Review filed before the Court of Tax Appeals En Bane on March 1, 2007 under Republic Act- N_o .. 1125, as amended by Republic Act No. 9282, seeking a review of the Decision ~nd Resolution dated October 11, 2006 and January 11, 2007, respectively, rendered by the First Division of this Court1 ,(Court in Division) in the case of Silicon Philippines, Inc. vs. Commissioner of Internal Revenue in C.T.A. Case No. 6310. ~ The disp.;,itive portions thereofread as follows: 1 Ponencia of Associate Justice Lo~ell� R. Bautista, concurred by Associate Justice Caesar A. Casanova, with Coricmring and Dissenting Opinion by Presiding Justice Ernesto D. Acosta. 3.l6

DECISION C.T.A. EB NO. 266 Page 2 of29; Decision promulgated on October 11, 2006: "IN VIEW OF THE FOREGOING, the instant Petition for Review is hereby DENIED for lack 'bf merit. SO ORDERED." Resolution promulgated on January 11, 2007: "WHEREFORE, premises considered, the Motion is hereby DISMISSED for lack of merit. SO ORDERED."' I THE FACTS � The antecedent facts, as found� by the Court 1n Division, are as follows: l Silicon Philippines Inc., previously known as Intel Philippines ! Manufacturing Inc., is a corporation duly.organized and existing under and 1 by virtue of the laws of the Republic of the Philippines with principal office at J No, 1321 Apolinario Street, Bangkal, Makati City. It is registered as a value- I added tax (VAT) taxpayer effective January 30, 1996, as evidenced by l Certification of Registration .No. 32A-3-002649 and BIR Form No. 1556 - Certification of Registration No. 94:.048-02621. � Petitioner is likewise registered with the Board of Investments (BOI) as a preferred-pioneer enterprise for the production I manufacture and export of tested and untested integrated circuits, such as large scale integrated circuits and 1 microprocessor. The Commissioner of Internal Revenue is the appointed government official vested with authority to exercise the functions of his office, including, among others, the power to refu.n~ any internal revenue tax erroneously o~L I �J.. 1.. 7 "" j

DECISION C.T.A. EB NO. 266 Page 3 of:29 illegally assessed or collected under the National Internal Revenue Code (NIRC) of 1997, as amended, with office address at the BIR National Office Building, Oiliman, Quezon City. On July 22, 1999, petitioner filed its VAT return for the second quarter .of 19.9.9 declaring, . among others, zero-rated sales . of P1 ,81 0, 154,723.64, output VAT of P34,799.57 and excess input taxes of P52,809,939.93 for the said quarter. Convinced t~at it is entitled to the above-mentioned excess input VAT pay"ments of P52,809,939.93, on August 6, 1999, petitioner filed with the One-Stop-Shop Inter Agency Tax Credit and Duty Drawback Center of the Department of Finance an administrative claim for refund or tax credit i. per BIR Form No. 2552 and Claimant Information Sheet with No. 35421. Due to the inaction of the DOF on its claim, on June 29, 2001, petitioner filed a Petition for Review with the Court in Division. in order to toll the running of the two-year prescriptive period provided under Section 229 of the NIRC of 1997. In the Decision dated October 11, 2006 2 the Court in Division found , that petitioner was able to substantiate and prove that its :products were actually sold and shipped abroad; that i~ consideration thereof, it received for~ign cu_rrency payments, which were inwardly remitted in accordance with the rules and regulations of the BSP; and thus, these expo1i sales may prop~rly fall within the export sales ~ransactiCms .subject to zero percent (OO,:o) VAT referred to under Section 106(A)(2)(a)(1) of the NIF.<C of 1997, as ~mended. After a close scrutiCy of petitioner's sales invoices, however, the.,.J -Annex "D", Docket, pp. 74-87. � Jla . I'J"-

------- - DECISION C.T.A. EB NO. :?.66 Page 4 of29 j! Court in Division found that ~hese were not duly registered with the BIR as 1 mandflted under Section 237 of the NIRC of 1997 �and that there was no j' authority to print or BIR permit number, TIN-VAT nuqlber and�the imprinted word "zero-rated" reflected on said invoices. Thus, the Court in Division held that petitioner's reported export sales in the amount of P1 ,81 0,154,723.64 for the second quarter of 1999 cannot qualify for zero-rating under SeCtion 106(A)(2)(a)(1) of the NIRC of 1997; ,. I and without zero-rated sales, the Court in Division denied petitioner's claimed input VAT payment pertaining to its purchase .of goods and services attributable thereto. With respeCt to petitioner's claim for refund on input VAT paid� on imported capital equipment, the Court in Division likewise denied the same and said thus: "Petitioner avers that the total claim of P52,809,939.93 included input VAT paid on impoiiation of goods I capital equipment in the amount of P29, 122,031.00. However, per report of the commissioned CPA, out of the claimed input VAT payment of P29, 12~,031.00, the amount of P7, 125,713.00 was not supported by documents, such FIS Bureau. of Customs (BOC) official receipts or mach�in~ validated� Import Entry and Internal Revenue _Declaration establishing actual payment thereof tQ the BOC, xxx ! While petitioner' was able to prove actual payment of the l l remaining input VAT of P21 ,996,318.00 (P29, 122,031.00 less 1 P7,125,713.00) on its importation, it nonetheless f~iled to jl submit documents, such as detailed schedule of capital goods l purchases, detailed general ledger, and audited financial ! statements proving th<;:~t the related importation qualify as 1 l capital goods. It must be stressed that under Section 4.106- 1,, 1(b) of RR 7-95, in order that items purchased can be classified as capital goods or properties, it must be sh.own 'i 1 that: 1) the goods or properties have economic useful life of more than one year; 2) such goods or properties are treated till as depreciable assets under Section 29(f) [now 34(F) of the ' . Jl9 If'. 1 l l i j

DECISION C.T.A. EB NO. 266 Page 5 of29 NIRC of 1997]; and 3) they are used directly or indirectly in the proc:juction or ~ale of taxable good$ or services . . For petitioner's failure to present documents proving that its importation fall within the definition of ca~;Jital goods under Section 4.106-1(b) of RR 7-95, the claimed input VAT payment of P21 ,996,318.00 allegedly attributable thereto cannot be granted." A Concurring and Disse'nting Opinion was rendered by the Honorable ' Presiding Justice Ernesto D. Acosta, 3 Chairperson of the First Division of this C:ourt, stating his position that peti~ioner .shouid be. entitled to the tax refund or tax credit of the_ amount of its.unutilized input VAT. attributable to its zero-rated sales considering that: "... (1) pertinent provision~ of the 1997 Tax Code do not require. imprinting of the word "zero-rated"; (2) the absence of the term "zero-rated" in the invoice does not affect the admissibility and competency of the same as evidence in support of its refund claim; (3) assuming the propriety of imposing the alleged requirement to imprint the word "zero- rated" in� the invoice, the� invalidation of the same and the j denial of the refund claim are not the legally imposable L penalties for failure to meet such alleged requirement; and (4) l j the other equally valid pieces of evidence presented and formally offer~d are sufficient proof to justify the grant of the VAT refund claim attributable to its zero-rated transactions. Xxx XXX XXX The High Tribunal in the recently promulgated case of I Commissioner of Internal Revenue vs. Seagate Technology (Philippines), G.R. No. 153866, February 11, l 2005, pointed out th~ need to focus only on the legally mandated requirements for claims for VAT refund and l j explained that, A VAT-registered status, as well as l compliance with the invoicing requirements (Section 113 (A) �~ of the Tax Code), is sufficient for the effective zero-rating of I ! the transactions of a taxpayer. The nature of its business and transactions can easily be perused from, as already clearly indicated in, its VAT registration papers and photocopied documents attached, thereto. xxx. Administrative ~ convenience cannot thwart legislative mandate." 'Ibid, Docket, pp. 88-92. .. ' l J i~ 0 j

DECISION C.T.A. EB NO. 26RtL Page 6 of29 ' Petitioner filed through registered mail its Motion for Reconsideration on November 2, 20064 seeking a reversal of the Decision of the Court in ' Division but the same was denied in the subject Resolution promulgated on January 11, 200,7. 5 Hence, this recourse before the Court En Bane pray1ng that the assailed Decision ana Resolution dated October 11, 2006 and January 11, 2007, resp�ectively, be reversed and set aside, and in lieu thereof, a new ' one be rendered granting petitioner's claim for refund I issuance o(Tax � Credit Certificate in the total amount of P52,809,939.93 representing its exc�ess and unutili?:ed input VAT incurred for the second quarter of 1999. I, , These are the grounds relied upon by petitioner in the instant Petition for I Review, to wit: ~ "GROUNDS J I. I 'THE FIRST DIVISION Q~ THE HONORABLE COURT OF I TAX APPEALS ERRE,D IN DENYING PETITIONER'S CLAIM ~ FOR REFUND OR ISSUANCE OF TAX CREDIT .l CERTIFICATE ON THE BASIS OF NON-EXISTENT l GROUNDS, THAT IS, ON ALLEGED VIOLATION OF I INVOICING REQUIREMENTS. ,j l II. l THE FIRST DIVISION OF THE '�HONORABLE COURT OF ~' TAX APPEALS ERRED IN INVALIDATING AND DENYING l OU.TRIGHT THE CLAIM FOR REFUND OF THE ~0 l PETITIONER, THE SAME BEING NOT AMONG THE f PENALTIES PROVIDED FOR UNDER ARTICLE 264 OF THE 1 TAX CODE. I:l Ill. THE FIRST DIVISION OF THE HONORABLE COURT OF l TAX APPEALS ERRED IN NOT GRANTING PETITIONER'S I ~ �~ Annex ''E", Docket, pp. 93-124. j , Annex 'T', Docket, pp. 125-133. ~ J 21 ' I 0 �� j l l J

DECISION C.T.A. EB NO. 266 Page 7 of29- .! I CLAIM FOR REFUND ON ITS IMPORTATION OF CAPITAL I GOOOS"6 l 1. THE ISSUES 1 The issues in this petition,. based on the grounds submitted by I petitioner, are summarized as follows: A. Whether or not p�etitioner violated the invoicing requirement by not reflecting its BIR authority to. print, TIN-VAT number and the imprinted word "zero-rated" in it's export sales invoices and thus operating to forfeit its entitlement to a tax refund I credit of its unutilized input VAT attributable to its zero-rated sales; and B. Whethe' r or not petitione'r was able to prove, through documentary evidence, that items purchased were properly classified as capital goods or properties in order to support its claim for refund or issuance of tax credit certificate for its input VAT on �imported I locally purchased capital equipment., PETITIONER'S ARGUMENTS According to petitioner, the Co~rt'a quo fquf.ld and confirmed that its export sales properly fall within the export sales transactions .subject to zero percent (0%) VAT referred to under Section 106(A)(2)(a)(1) of the NIRC of 1997. And for input VAT attributable 'to zero-rated export sales to be refunded, what the NIRC of 1997 requires, specifically the aforementioned section, is for the export sales to be zero-rated export. And to be zero- rated, th~ sale must comply with the following requisites: "xxx sale .and actual shipment of goods from the Philippines to a foreign country; xxx an~ " Docket, p. 17.

DECISION C.T.A. EB NO: 266 Page 8 of29 paid for in acceptab)e foreign currency and accounted for in accordance with the ru,les and regulations of the Bangko Sentral ng Pilipinas (BSP)". 7 Petitioner further argues that the provisions under the NIRC of 1997, particularly Sections 113, 237 and 238, do not require the taxpayer to reflect its .authority to print in its invoices and failure to print such authority is not penalized by any law or statute such that the invoices which do not contain the BIR authority for petitioner to print its sales invoices are rendered inadmissible in evidence. Further, there is allegedly nothing in the said provision that requires the imprinting of the word "zero-rated" on sales invoices. To quote: "Sec. 113. Invoicing and Accounting Requirements for VAT-Registered Persons.- (A) Invoicing Requirements.- A VAT-registered person shall, for .every sale, issue an invoice or receipt. In addition to th~ information required under Section 237, the following information shall be indicated in the invoice or receipt: (1) A statement that the seller is a VAT registered . person, followed by his taxpayer's identification number; and (2) The total amount which the purchaser pays or is obligated to pay to the seller with the indication that such amount includes the value-added tax. xxx" "Sec. 237. Issuance of Receipts or Sales or Commercial Invoices. - All persons subject to an internal revenue tax shall, for each sale or transfer of merchandise or for services rendered valued at Twenty-five pesos (P25.00) or more, issue duly registered receipts or sales or commercial invoices, prepared at least in duplicate, showing the date of transaction, quantity, unit cost and description of rnerchandise or nature of service: Provided, however, That in the ~case of sales, receipts or transfers in the amount of One Hundred Pesos (P100.00) or more, or regardless of amount, where the 7 Docket, p. 27. #' J23

'I DECISION C.T.A. EB NO. 266 Page 9 of29 sale or transfer is made by a person liable to value-added tax to another person also liable to value-added tax; or where the receipt is issued to cover payment made as rentals, commissions, compensations or fees, receipts or invoices shall be issued which shall show the name, business style, if any, and address of the purchaser, customer or client; Provided,.. further, That where the purchaser is a VAT- registered person, in addition to the information� herein req'uired, the invoice or receipt shall further show the Taxpayer Identification Number (TIN) of the purchaser." "Sec. 238. Printing of Receipts or Sales or Commercial, Invoices. - All persons who are engaged in bu.siness shall secure from the Bureau of Internal Revenue an authority to print receipts or sales or commercial invoices before a printer can print the same. No authority to print receipts or sales or commercial invoices shall be granted unless the receipts or invoices to be printed are serially numbered and shall show, among other things, the name, business style, Taxpayer Identification Number (TIN) and busines.s .address of the person or entity to use the same, and ~uch other information that may be required by rules and regulations to be promulgated by the Secretary of Finance, upon recommendation of the Commissioner. All persons who print receipt or sales or commercial invoices shall rnaintatn a logbook/register of taxpayer who availed of the\r printing services. �The logbook/register shall contain the following information: (1) Names, Taxpayer Identification Numbers: of the persons or entities for whom the receipts or sales or commercial invoices are printed; a.nd ' . ' . (2) Number of booklets, number of sets per booklet, number of copies per set and the serial numbers of the receipts or invoices in each booklet." Petitioner asserts that what the above provisions require 1s the issuance of a "duly registered receipt'1 for sale o'f goods or services. The only provision where the requirement of reflecting "zero-ratea" on the VAT invoice or receipt can get it's authority fr,om is . Revenue .Regulations No. 7- _,j 95, the pertinent portion of which provid~~: . .)#.'

.~ DECISION C.T.A. EB NO. 266 Page 10 of29 "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 ~nd address of seller; 2. date of transaction; ! 3. quantity, unit cost and description of merchandise or nature of service; 4. the name, TIN, business style, if any, and address of i the VAT-registered purcha.s~r. customer or client; l 5. the: word ",zero rated" �,imprinted on the invoice J j covering zero-rated sales; and l � �6. the invoice value or consideration." j Petitioner emphasizes that the above-quoted provision is merely a 1 l ,1, regulation designed ,for the sole and lir:nited objective of implementing a i very exact law. A$ it has been long-established by the Supreme Court, the rule is that administrative rules and regulations cannot expand the letter and spi~it of the law they seek to enforce. Suyh rules and regulations should be corfined and limited by the power conferred by the legislature. With regard the requirement that the TIN-V of the petitioner should be imprinted in the face of the invoice, it states that failure to indicate this information is also not fatal to its claim' for refund or tax credit. Petitigner further submits that imprinting of the TIN-V applies only to )J~11 � domestic or locai sales considering that the seller's output tax, which is the input tax on the part of the local purchaser, may be claimed by the latter as a credit against its own output VAT. Since petitioner exports all Qf its finished p. roducts to a non-resident foreign purchaser, the purpose . of imprinting its TIN-VAT number becomes irrelevant because the transaction � involved are zero-rated export sales and the foreign buyer is not liable for input VA~ and thus,, not entitled as well to input VAT refund.-"~ ,�, '25~ ~ J ~-- \ J

DECISION C.T.A. EB NO. :266 Page II of:29 With respect to the issue regarding the Court in Division's denial of its claim for input taxes arising from importation of capital goods or properties, petitioner mainta~ns that the document~ that it has submitted provin,g the importation of capital goods is enough to show that the goods imported were indeed capital goods. And that it need not present the ledger::;, books, among other in proving that the goods imported were capital goods. Further, th~ law defines capital goods as to include even thosEC goods which are indirectly used .in the production or sale of taxable goods or services. Therefore, the input VAT paid by it on capital goods that were indirectly used in the production or sale of taxable goods or services \ are refundable. .1� RESPONDENT'S COUNTER-ARGUMENTS Respond~nt, in his . C()mment, stresses that the 1nvotc1ng requirements as stated in the NIRC of 1997 and more specifically in Revenue Regulations No. 7-95 must be faithfully complied with before any taxpayer's claim f~r refund or credit can be granted. Moreover, the omission� of the word "zero-rated" and its TIN-VAT number on the face of the invoice is a patent violation of Section 4.108-1 of Revenue Regulations No. 7-95 that explicitly requires that these details be imprinted on the invoices covering zero-rated sales. Respondent's. assetiion allegedly finds support 1n Revenue Memorandum Circular No. 42-2003 (Clarifying Certain Issues Raised Relative to the Processing of Claims for Value-Added Tax [VAT] Credit/Refund), pertinent portion of the said circular provides: ~ . .. . Jlb i l j

., DECISION C.T.A: EB NO. :266 Page 12 of29 "A-13: xxxx If the ciJim for refundfrCC is based on the existence of f zero-rated sales by the taxpayer but it fails to comply with the invoicing requirements in the issuance of saJes invoices (e.g. i failure to indicate the TIN), its claim for tax credit/refund of VAT on its p~rchases shall be denied considering that the l invoice it is issuing to its customers does not depict its being a VAT-registered taxpayer whose sales are classified as zero- t rated sales. Nonetheless, this treatment is without prejudice to I the right of the taxpayer to charge the input taxes to the ! appropriate expense account or asset account subject to 1 depreciation, whichever is applicable. Moreover, the case shall be referred by the processing office to the concerned BIR office for verification of other tax liabilities of the taxpayer." Furthermore, respondent contends that petitioner's claim for refund or credit of alleged input taXEfS paid on capital goods was correctly denied by the Court in Division on the ground that it was petitioner's legal duty to present evidence that the items in question were capital goods. He stressed that petitioner merely had to present documents showing that the goods have the chgracteristics mentio~ed under Section 4.106-1 (b) of Revenue R_egulations No. 7-95, but it failed to do so. THE COURT EN BANC' S RULING The pertinent provisions of the NIRC of 1997 in the instant petition are. as follows: Sedion 106(f\)(2)(a)(1) �.on VAT on the sale of goods or properties; particularly with respect to export sales; and Section 112 (A) and (B) on Refunds or Tax- Credits of Input Tax arising from domestic purchases of taxable goods and services and importation of goods 1 capital equipment in relation with Zero-rated or Effectively Zero-rated Sales. I These provisions provid"'j' . �J "'J o.) (., I 1 i 1 i ! J

DECISION C.T.A. EB 1;10. :266 Page 13 of:29 "Section 106. Value-added Tax on Sale of Goods or Properties. (A) Rate and Base of Tax. -- xxx xxxx ' (2) The following sales by VAT-registered persons shall be subject to zero percent (0%) rate: (a) Export Sales.--The term 'export sales' means: (1.) The sale and actual shipment of goods from the .Philippines to a foreign country, irrespective of any shipping arrangement' that may be agreed upon which may influence or determine the transfer of ownership of the goods so exported and paid for in acceptable foreign currency or its equivalent in goods or services, and accounted: for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP)." I "Section 112. Refunds or Tax Credits of Input Tax.- (A) Zero-rated or Effectively Zero-rated Sqles. - 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-rated sales under Section 106(A)(2)(a)(1 ), (2) and (B) and Section 108 -(8)(1) pntJ (2), th~ acceptable foreign currency exchange proceeds� � thereof had been duly accounted for in accordance with the rules and regula.tions of j the Bangko Sentral ng Pilipinas (BSP): Provided, further, That where the taxpayer� is engaged in zero-rated or effectively l I zero-rated sale and also in taxable or exempt sale of goods or l properties or services, and the am.ount 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 J the basis of the volume of sales. 1 �1 (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." ~ . j ~l8

DECISION C.T.A. EB NO. 266 Page 14 of29 ' Based on the� afore-quoted provisions, export sales, or sales outside the Philippines, are subject to VAT at zero percent (0%) rate, if made by a VAT-registered person. When appliee:l.to the tax base, the zero percent (0�io) rate obviously results in zero tax liability chargeable against the purchaser. The seller of such, transactions charges no output tax, but it can claim a refund or tax credit certificate for the VAT previously charged by suppliers, provided the following requi.sites are� cornplied with: (1) the taxpayer Is engaged in sales which are . zero-rated or effectively zero-rated; (2) the taxpayer is VAT-registered;� (3) the claim must be filed within two years after the close of the taxable quarter when such sales were made; (4) the creditable input tax due or paid must be attributable to such sales, to the extent that such input tax has not been applied against the output tax; and (5) in case of zero-rated sales under Section 106(A)(2)(a)(1) and� (2), Section 106(8), and Section 108(8)(1) and (2), the acceptable foreign currency exchange proceeds thereof had been duly accounted for in accordance with BSP rules a~d regulationsa I The Court in Division, in its assailed Decision, held that petitioner may be entitled to refund or tax credit when it found that the documents submitted "proved th~t petitioner's products were actually sold and shipped abroad and in consideration thereof, petitioner received foreign currency . I ' 8 Intel Technology Philippines, Inc. vs. Commissioner of Internal Revenue, G.R. No. 166732. April 27.2007 (522 SCRA 657). . l l

l. '~.� DECISION ' �~ C.T.A~ EB NO. 266 .! Page 15 of29 I payments, which were inwc;lrdly remitted in accordance with the rules and ' regulations of the BSP. Thus, it said that these export sales may properly fall within the export sales transactions subject to zero percent (0%) V(\T referred to under Section 106(A)(2)(a)(1) of the NIRC of 1997, as amended, � xxx." However, notwithstanding said finding, petitioner's claim was denied by the Court in Division for. its failure to comply with the invoicing requirem~nts as provided under Sections 113, 237 and 238 of the NIRC of 1997, as well as Section 4.108-1 of Revenue Regulations No. 7-95, particularly on registration of s~l~s or commercial invoices or receipts, failure to reflect authority to p~int or BIR permit number, TIN-V and I or the word "zero-rated" in the face of the invoice or receipt as issued. In line with the recent decision of the Supreme Court in the case of Intel Technology Philippines, Inc. vs. Commissioner of Internal �. >.Revenue9 , � involving the same. parties, the Supreme Court clarified the same issue involved in the instant petition of whether or not the provision of Section 113, in relation to Section 237 of the NIRC of 1997, ':'las violated by reason of petitioner's failure to indicate the BIR Authority to Print on its sales , ' invoices. The Supreme Court said that � "It is clear from the forego,ing (pertaining to Sections 113, 237 and 238 of the Tax Code, Sectio'n 4.108-1 of RR 7- 95 and Section 19d of RR 2-90) that while entities engaged in business are required to secure from the BIR an authority to print receipts or invoices and to issue duly registered receipts or invoices, it is not required that the '; BIR authority to prin.t be reflected or indicated therein. 'i Only the following items are required to be indicated in the receipts or invoices: (1) a statement that the seller is a VAT- 9 Ibid.

~ .. . . DECISION C.T.A. EB NO. 266 Page 16of~9 registered entity followed by its TIN-V; (2) the total amount which the purchaser pays or is obligated to pay to the seller with the indication that such amount includes the value-added tax; (3) date of the transaction; (4) quantity of merchandise; (5) unit cost; (6) description of merchandjse or nature of service; (7) the name, business style, if any, and address of the purchaser, customer or client in the case of sales, receipt or transfers in the amount of .P.1 00.00 or more, or reg�ardless of the amount, where the sale or transfer is made by a person liable to VAT ~o another person also liable to VAT, or where the receipt is issued to cover payment made as rentals, commissions, compensati�OF1S or fees; and (8) the TIN of the purchaser where the purchaser is a VAT-registered person. XXX XXX XXX In any case, the above cited prov1s1ons of iaw and revenue regulations do not provide that failure to reflect or indicate in thEe invoices or receip~s the BIR authority to print, as well as ~he.TIN-V, would result in the outright invalidation of these invoices or receipts. Neither is it provided therein that such omission or failure would result in the outright denial of a claim for tax credit/refund. Instead, Section 264 �of the Tax Code imposes the penalty of �fine and� imprisonment for, among others, invoices or receipts that do not truly reflect or contain all the required information, xxx � XXX XXX XXX It bears reiterating that while the pertinent provisions of the Tax Code and the rules and regulations implementing them require entities engaged. iri business. to secure a BIR authority to print invoices or �receipts and to issue duly registered invoicesor receipts, it is not specifically required that the BIR authority to print be reflected or indicated I� . therein. Indeed, what is important with respect to the SIR authority to print is that it has ~een secured or obtained ,f. by the taxpayer, and that invoices or receipts are duly registered." (Emphasis Ours) I I l Ap_plying the foregoing jurisprudential pronouncements, this Court re- l l examined petitioher's documenta�ry evidence, as submitted before the Court .l l in Division, to determine whether or not the ?Ubject sales can qualify as ! zero-rated sales. A~d after due. verification of the invoices I receipts forming~ j i l, .� 'i 1 ,J '�

. .. .. . DECISION �\l~iil'~iJ~(.~>:.;..c.T.A. EB NO. 266 Pagel7of29 part of th,-cords.:of the case under .review, We found that out of the de.clared .zero-rated sales of petitioner of P1 ,81 0, 154,723.64, only the amouht of P1 ,014,477,202.26 was fu�IIy substaA� t'1ated . Tlll�s amount is broken down as follows: Exll. Invoice Date Invoice Amount.in USD Exclla~~e Amount in PllP P12-P14 5-Apr-99 No. 110,430.26 381,005,728 86 P15-P17 6-Apr-99 41 '19 411,876.38 Rate 570,113,868.42 P18-P20 7-Apr-99 4120 165,697.20 P22-P24 7 -Apr-99 -;t121 1 ') ':J.'JJ�"<~ 38.458 4122 P59-.P61 20-Apr-99 3,035,956 00 37.770 P. 9, u8--tP'" 1I .p� ;t -1 ~- � 6,521 04 ~ -� �t-'�-::18 4165 611,916.46 22-Apr-99 "4168 2,956.18 4169 P113-P115 23-Apr-99 4186 165,729 60 4186-a 154,588.89 P155-P157 26-Apr-99 4187 4189 89,643.84 P158-P160 26-Apr-99 4192 20,901 77 41;33 1,509,407.26 P161-P163 27-Apr-99 4194 1,212,845 20 4195 P164-P166. 27 -Apr~99 4196 1,185.00 13,860.00 P170-P172 28-Apr-99 4208 671,744.58 4212 9, 907,060.40 P173-P175 29~(\pr-99 4222 805,453.60 4237 80,560.52 . P176-P178 29-Apr-99 4239 450,860.52 4240 P179-P181 29-Apr-99 4256 268.00 4257 453,177 64 +. fS� �:� -~ '' (:,~::P182-P184 30-Apr-99 681 '165 26 ~~ , 42.,58 .�1� ~!,rp� Subtotal - April 69,069.21 3-May-99 4273 9,948,058.12 1,, :J 7270 1,270,301.87 4275 j;fP201-P203 4276 9,240.00 4279-a 1,557.40 . . ........P206-P208 7 -May-99 4280 890,255.28 359,626.84 P224-P226 9-May-99 4284 14-May-99 4292 134.00 P280-P28~ 15-May-99 4297' 74,628.86 15-May-99 4298 15, 0~4, 357. 12 P284-P286 21-May-99 34,320.76 P287-P289 21-May-99 P326-P328 21-May-99 2,370.00 P329-P331 24-May-99 287,638.16 P332-P334 24-May-99 170,527.61 P353-P355 28-May-99 P587-P589 28-May-99 �. P357-P359 30-May-99 P360-P362 31-May-99 P366-P368 P369-P371 Subtotal- May P393-P395 2-Jun-99 P413-P415 10-Jun-99 P420-P422 6-Jun-99 P423-P425 6-Jun-99 10 Exhibit "P'', CTA Case No. 6310. u ..' ..I

- f�.. j DECISION j C.T.A. EB NO. '266 P<1ge 18 of '29 P426-P428 6-Jun-99 4300 365,395.67 4305 56"3,607.90 P452-P454 10-Jun-99 4311 .6,934.61 P473-P475 14-Jun-99 2,823 54 4314 55,546.30 P477-P479 18-Jun-99 4331 44,906.57 P520-P522 20-Jun-99 4332 50,634.54 P523-P525 20-Jun-99 4333 55,54844 P526-P528 24-Jun-99 4334 14,951.88 'P529-P531 25-Jun-99 4335 2,328.19 4336 P532-P534 25-Jun-99 4337 23.80 P535-P537 26-Jun-99 4338 242 50 P538-P540 26-Jun-99 4350 18,592.74 P541-P543 26-Jun-99 1,676,393 21 26,677,810.73 P581-P583 28-Jun-99 Subtotal- June 37.794 63,357,604.98 TOTAL 1,014,477 ,2D2.26 The rest of petitioner's claimed zero-rated sales in the amount of P795,677,521.38 with invoices without the word "zero-rated" 11 or without supporting airway pills and e~'port documents12 are hereby disallowed. Considering that only the sum of P1,014,477,202.2? qualifies as zero-rated sales, it is but proper that only the portion of the claimed input VAT attributable to such qualified zero-rated sales will be considered for 1,~,i;f:, ;~�v��{efund. The rate to be applied� then should be based on the volume of !:~'"~qualified zer'~:.::~:d sales over petitioner�s total declared zero�rated sales. computed as follows: ,fb .� ;~ 1 Sre Mira1~t (Navotas II) Corporation (Formerly: Southern Energy Navotas II Po1ver, Inc) vs. Coimnissioner of Internal Revenue, CTA EB No. 229, September II, 20Q7: Southern Philippines Power ,Corporation vs. Commissioner of Internal Revenue, CTA' EB No. 214, July 31, 2007: Panasonic Communications Imaging Corporation (if the Philippines, (formerly, MATSUSillTA BUSINESS MACl-llNE CORPORATION OF THE PHILIPPINES) vs. Commissioner of Internal Revenue, CT A EB No. '239, May 23, 2007: Kepco Philippines Corporation vs. Commissioner of Internal Revenue, CTA EB No .. 186, May 17, 2007: Kepco Philippines Corporation vs. Commissioner of Internal Revenue, CTA EB No. 174, May 9, 2007: Applied Food Ingredients Co., Inc: vs. Commissioner of Internal Revenue, CTA EB. No. 220, May 7, 2007; Intel Technology Philippines Inc. vs. Commissioner of�lnternal Revenue, CTA EB No. 181, March 27, 2007; and J.R..A. Philippines Inc. vs. Commissioner of Internal Revenue, CTA EB No. 1'28, January 15, 2007. 12 CTA Case Nos. 6368 and 6480, December 15, 2004, cited in the cases of Mirant (Navotas II) Corporation (formerly Southern Energy Navotas II Povver, Inc. vs. Commissioner of Internal Revenue, CTA Case No. 6418, April II, 2006 (Entr!f or Judgment dated "September 14, '2006) and Takenaka Corp. Phil. Branch VS. Commissioner of.lnternal Rev'en~le, CTA Case No. 675?., January 2007 (Entry of Judgment dated-february 16, 2007). 333

DECISION. C:I.A. EB.:NO_ 266 Page 19of29 Supported zero-rated sC)Ies p 1,014,477,202.26 Divided by total declared 'zero-rated sales p 1,810,154,72364 Rate of supported zero-rated sales 56.04% In a claim for refund or issuance of a tax credit certificate attributable to zero-rated sales, ~hat is to be closely scrutinized is the documentary . substantiation of the input VAT paid, as may be proven by other export . '' documents, rather than the supporting documents for the zero-rated export sales13 . As petitioner has established by sufficient evidence that it is entitled to a refund or issuance of q �tax credit certificate. with the existence of qualified zero-rated sales, ~=md in accordance with the requirements of Sections 106 (A)(2)(a)(1) and 112(A)� of the NIRC of 1997, it becomes necessary now for the Court En Bane to re-evaluate the� documentary evidence on record, specifically, petitioner's unutilized input VAT for the second quarter of 1999, to determine whether or not the same has been The p �� of substantiation of input VAT is necessary to ascertain nd ensure that what will be refunded to the petitioner are only those taxes J� . -);:~~~~l::!~hat have actually been remitted and paid. to the Government, in accordance ( .. :1 with the requirements of the law, and also, to determine whether such input VAT has not yet been utilized by the petitioner in the succeeding quarters . .. Out of the excess unutilized input VAT being claimed for refund by .petitioner amou~J\ng to P52,809,939.93, the amount of P23,687,908.93 .. ;~lertains to input VAT on domestic purchases of goods and services, whil~ '~~~I til~ ' I ,' r::i:}' Supra, Intel Techn~logy Philippines. Inc. vs. Commissioner of Internal Revenue. . -~ '" '

t. �., L. !. II . Ji I .1$!1#2 ' .,If;�.� I : the re,~ning amount of P29, 122,031.00 consists of input VAT on irnpo~ation of capital goods I equiprnen.t. Anent petitioner's refund claim for input VAT on domestic purchases, the Court commissioned independent CPA (ICPA) verified the voluminous ' 14 supporting documents submitted by petitioner and the ICPA Report showed that out of the totar claimed input VA~ on dome.stic purchases, the amount of P6,404,917.86 should be dis�a�llowed for the following reasons: Missing invoice or official receipt p 5,976,048 68 Petitioner is not the actual claimant 228,278.61 Incorrect computation of input VAT 200,590 57 TOTAL p 6,404,917.86 Further evaluation, by this Court, of the documents 15 presented reveal that peti.t.ioner's claim should again be reduced in the amount of . . P3,061, 110.11, broken down as follows: Invoice/OR Invoice/OR Number Ex h. Supplier Date Input Tax 18462 1.) Purchase of services with OR dated outside the period of claim 5709/5961 p 27,272.73 5712/5961 .10,553 64 N-4983 Comfac Corpo~ation 1-Jul-99 5706/5961 8,930 00 5717/5961 4.404 55 D?ta Center Design Corp. 22-Jul-99 5704/5961 5,329.92 5707/5961 4,404 55 Oata Center pesign Corp. 22-Jul-99 5705/5961 4.404.55 5715/5961 4,404.55 Data CenterDesign Corp. 22-Jul-99 5713/5961 5,329 92 5714/5961 8,930.00 Data Center Design Corp. 22-Jul-99 5711/5961 8,930.00 5721/5961 8,930 00 Data Cente~,.Oesign Corp 22-Jul-99 5719/5961 5,329 92 5,329.92 Data Center;Design Corp. 22-Jul-99 5718/5961 5,329.92 Data Center.Design Corp.\ 22-Jul-99 5720/5961 5708/5961 5,329.92 Data Center. Design Corp. I 22-Jul-99 5710/5961 10,553.64 5703/5961 10,553.64 ..Data Center;()esign Corp,, 22-Jul-99 5702/5961 5,138.64 Data CenterDesign Corp. 22-Jul-99 5,138.64" Data Cent~r Design Corp. 22-Jul-99 Data,y~~~~!Wr�~sign�Corp, 22-Jul-99 Data Ceht~~';:!P:~sign Corp; 22-Jul-99 Data Cent~r;:pesjgn Corp. 22-Jul-99 Data Center Design Corp. 22-Jul-99 Data Center. Design Corp i 22-Jul-99 22-Jul-99 Data c ign Corp .� ign Corp. 22-Jul-99 ign Corp. 22-Jul-99 xhibit ''Q", CTA Case No .. 63 I 0. 335 .1" ]ipits ''N-N5033", CTA Case No. 6310. ,~,: ]: - ... ,..

Page 21 of29 N-1109 Data Center Design Corp 9/23/1999 5716/6168 5,329 92 N-1167 Digital Equipment Filipinas Inc. . 1-Jul-99 7054 95,407 83 OMS Engineering &Services 1-Jul-99 12357/6466 1,045.45 1-Jul-99 12356/6466 345.46 OMS Engineering & Services 1-Jul-99 12399/6466 1-Jul-99 '12396/6466 13,09091 N-1233 OMS Engineering & Services 1-Jul-99 12397/6466 3,636 36 OMS Engineering & Service.s 8-Jul-99 12361/6468 3,381.82 29-Jul-99 12390/6471 581.82 OMS Engineering & Services 29-Jul-99 12391/6471 2,072 70 29-Jul-99 12389/6471 N-1239 OMS Engineering & Services 1-Jul-99 1070/1154 26,381 82 OMS Engineering & Services 1-Jul-99 1604/1154 22,609.09 1-Jul-99 1610/1154 18,000 00 N-1284 OMS Enginyering & Services 1-Jul-99 1-Jul-99 1613/1154 625.00 OMS Engineering & Service::; 29-Jul-99 1632/1154 450.00 29-Jul-99 10109/15936 625 00 OS Steel Factors & Construction 1-Jul-99 10105/15936 625.00 1-Jul-99 10013/15831 20,809.09 DS Steel Factors & Construction 15-Jul-99 9202/15831 6,000 00 15-Jul-99 1723/1419 1,07273 N-1292 DS Steel Factors & Construction 1-Jul-99 1721/1419 1,072.73 15-Jul-99 19243/23286 4,453.18 DS Steel Factors & Construction 8-Jul-99 7,600 00 607/559 1,881 82 DS Steel Factors & Construction 8-Jul-99 146410.6 4,409.09 440,663 80 ~-1571 Electro Systems Industries Corp 3052 956 37 Electro Systems Industries Corp. 1,71881 N-157 4 Electro Systems Industries Corp. Electro Systems Industries!, Corp. 1,236 36 N-1640 Flik Industries Inc. 19,263.64 Flik Industries Inc. 99545 N-1657 Foodmach Incorporated 1,109.54 N-1661 Fortress Consultancy Group,lnc. 2,15545 N-2412 Globe Telecom Inc. N-2867 6,16505 N-2873 Genetron Engineering Supply & N-2870 4,965 61 Services Co., Inc. 60.50 Genetron Engineering Supply & �15-Jul-99 3056 12,19018 Services Co., Inc. ' 7,090 90 Genetron Engineering Supply & 22-Jul-99 3058 548.19 Serv'ices Co., Inc. ' 1-Jul-99 534 16-Sep-99 535 2,110.91 N-2897 GRAJM Engineering 29-Jul-99 7672/5469 1,309.09 1,819.00 N-2899 G.RAJM Engineering 2,909.09 �<:e'Gard All Electronic Security 7,000 00 .:.9x;;;terr.~ !rJ.~�til/ .� . �. 12,157.2t � 'Gt;l~f.~\~.ll~f.RJ1~~tronlc Secupty Systems Inc." 29-Jul-99 7671/5469 G~ardAII E:lectronic Security 29-Jul-99 7673/5469 . ~ i,:\~#.w~,;n!3.�1no.::'�> .. ,,. I� :;.:. ! ':':@'riar~:Ait'p[~dronic Security 29-Jul-99 7674/5469 Systems Iric. �'Guard All Electronic Security 29-Jul-99 7083/5469 �Systems Inc. .,~. Gyard All Electronic Security � '22-Jul-99 7538/5481 �Systems Inc. � ~g\:1)' 1: B:~ElC9, .. 1j~h:~l~ctron ic Secur,ity 1-Jul-99 7513/5391 '�' J,pp,': . .,. j 1-Jul-99 7533/5391 .~'If:,,/ � �� . :, I Electronic SecuritY 8-Jul-99 662 28-Jul-99 666 1{' � Systems Inc , 26-Aug-99 .670 22-Jul-99 191 JE Automated Parts Enterprises 29-Jul-99 3148 7-Jul-99 4707' .:'.)!;:Automated Parts Enterprises �.:: �. ,..�.r�"ii;;r!tf�lJ,~,>l~:'F.-3~022J77 ,i ,J.E Automated Parts Enterprises ;f>rome Construction � ��:<'�~~fo~4.i:r�; ;.Lia~g Chi Industry Co Ltd � :~~~.~~401 tyl �' , oodcraft Manufacturing �, ::;i~;..,i,\~,.i'~~~i~'l'�J':~t,~"~~.'~.. : 336 ''

.. pECISION ...:r.A EB NO. ?.66 age 22 of19 - N-3432 Metro Engineering & Supply Co. 15-Jul-99 2362/1682 4,54545 Metro Engineering & Supply Co. 15-Jul-99 2363/1682 2,76773 N-3464 15-Jul-99 332602/285107 20,874.96 NCR Corporation Philippines 15-Jul-99 332601/285107 20,874 96 N-3902 15-Jul-99 1,500 00 N--3905 NCR Corporation Philippines 15-Jul-99 525/637 2,181.82 N-3907 RCF Contractor& Services 22-Jul-99 524/63T 63,154 55 N-3907 RCF Contractor & Services 28-0ct-99 527/638 2,909.09 RCF Contractor & Services . 1'-Jul-99 517/645 N~3907 RCF Contractor&, Services 1-Jul-99 242.00 Skyline Food Services 15-Jul-99 3362 8,927.27 N-4464 Skylir:e Food Services 15-Jul-99 3363 17,13115 Tricon Technical Services Inc. 15-Jul-99 1985/587 10,56741 N-4469 Tricon Technical Services Inc. 22-Jul-99 1998/587 12,960.82 N-4639 � Tricon Technical Services Inc. 8/5/1999 1990/587 2,335.97 Tricon Technical Services Inc. 1407/590 6,639.36 Xybernetiks Softwa~e Devt & Control 7/1/1999 0121.� 99-05- 12,360.66 N-4672 ASB Realty Corp. '�7/1/1999 11/15155 ASB Realty Corp'. 99-05- 15,65682 7/1/1999 25/15155 N-470~ OS Steel Factors & Construction 7/29/1999 1154 16,20000 Micro-Biological Laboratory, Inc. 9/2/1999 19707 12,272.73 N-4777 Reuters Limited 3/30/1999. 22496 11,992.50 N-4803 NCR Corporation Philippines 285372 13,514.69 N-4925 Sub-total p 1,182,070.62 2) Purchase of goods with invoices dated outside the period of claim N-686 Bryan Distributors & Services, Inc. 5-Mar-99 13143 p 312.70 67366 N-161 Alta-Meco, Inc. 4-Mar-99 40632 11,05338 13370 N-719 Camden Industries, Inc. 4-Jan-99 14733 10,778 24 11953 N-803 Comfac Corporation 29-Jul-97 12137 2,004.55 112744 Comfac Corporation 12-Jan-98 67503 2,004.55 ,30-Nov-96 67482 .,l,j~ Comf<jC Corporation i. -- .: � .. 26-Dec-96 67476 2,810.55 11-Mar-99 113420 Comfac Corporation j 113430 2,129.55 113336 Consolidateq lndustriai-Gqsf:!s Inc. 67595 4,717.30 157405 ~~�~~~1-�;~�?!i~::~~~:~~::: ~:::: :~~ 30-Mar-99 158327 70,377.50 27-Mar-99 158034 69,051 61 j;: N;�O~R c6nsolidated Industrial Gases Inc 27-Mar-99 2,566 39 Ji.� :.�~iMfi:lt"Consol~dated lndustnal GC)Jses Inc. 30-Mar-99 1,363.64 I � N,r:.B.~. :; � Consolidated lndustnal Gases Inc. 31-Mar-99 1,090.91 ' ;1.:�;-', .. l. '� Consolidated Industrial Gases Inc. 29-Mar-99 4,71727 N~8~3 ...:: .~, N~834� . Consolidated Industrial Gases Inc. 31-Mar-99 43,433 50 .. Consolidated Industrial Gases Inc. 31-Mar-99 Co"nsolidated Industrial Gases Inc. 4-Dec-98 � '�N. -835 Consolidated Industrial Gases Inc. 28-Nov-98 5,64544 .. { N-862 "1 ,890.91 Y�'. N~863 1,89091 N-864 Consolidated Industrial Gases Inc. 9-Dec-98 109118 1,41818 Consolidated Industrial Gases Inc. 9-Dec-98 109119 1,418.18 Consolidated Industrial Gases Inc. 1-Dec-98 158087 1,41818 .,:9~q.~q;!icjated Industrial Ga1es Inc 1-Dec-98 158086 1,418 18 � .Consolidated lndustnal Gases Inc. 14-Dec-98 109305 1,418.18 Consolidated Industrial Gases Inc 17-Dec-98 109394 r1,418.18 Consolidated.l.ndustrial Gases Inc. 17-Dec-98 109395 1,418.18 '' �;�~: ) . 14-Dec-98 109304 .. 1,418.18 Consolidated ln\]ustrial Gases Inc. 1,418 18 Consolidated Industrial Gases Inc 21-Dec-98 109510 ' !.��� 337 I. ' :I !'I;

y ,.'~~ ...\�.;;~ ':~ ..~�. ,; DEC IS ION;;;:.;:,~,~,~�,li,.:,, � . A'. EB NO. 26~\\'' 23 of29 N-881 Consolidate 26-Feb-99 111571 1,418.18 26-Feb-99 111572 1,418.18 N-882 Con"solidate 12-Mar-99 � 112796 1,418.18 9-Mar-99 112647 1,890.91 N-883 . Consolidated I 22-Feb-99 111414. 1,890.91 19-Feb-99 111318 1,890.91 N-884 Consolidated lnc{ustrial Gases Inc. 16-Feb-99 111186 1,890.91 10-Feb-99 110986 1,890.91 N-885 Consolidated Industrial Gases Inc. 112579 1,890.91 N-886- Consolidated Industrial Gases Inc. 6~Mar-99 112667 112797 945.45 N-887 Consolidated Industrial Gases Inc. 9-Mar-99 111695 1,418.18 12-Mar-99 1-11119 1,890.91 N-888 Consolidated Industrial Gases Inc. 2-Mar-99 113266 1,890.91 N-889 Consolidated Industrial Ga~es Inc. , 13-Feb-99 113295 1,890.91 � .. 26-Mar-99 '11 0826 N-890 Consolidated Industrial Gases Inc. 26-Mar-99 110825 94545 4-Feb-99 109509 1,418.18 N-891 Consolidated Industrial Gases Inc 4-Feb-99 109862 1,418.18 21-Dec-98 109861 1,418.18 N-892 Consolidated Industrial Gases Inc. 8-Jan-99 110152 1,418.18 8-Jan-99 110458 1,418.18 N-893 Consolidated Industrial Gase~ Inc. 15-Jan-99 110459 1,41818 25-Jan-99 110628 N-894 Consolidateq Industrial Gases Inc. 25-Jan-99 110716 ~,418.18 30-Jan-99 110353 N-895 Consolidated Industrial-Gases Inc. 2"Feb-99 110209 1,418.18 22-Jan-99 109819 1,890.91 N-897 Consolidated Industrial Gases Inc. 01498 1,890.91 18-Jan~99 24508 1,89091 N-898 Consolidated Industrial Gases Inc. 1,89091 7-Jan-99 0071 1,890 91 N-900 Consolidated Industrial Gases Inc. 29-Mar-99 995 34,150.35 4-Feb-99 163442 10,750 55 N-903 Consolidated Industrial Gases Inc 29-Mar-99 163423 89,272.72 26-Mar-99 163443 N-904 Consolidated Industrial Gases Inc. 19-Mar-99 163446 413.82 12-Mar-99 163444 383.64 N-905 Consolidated Industrial Gases Inc. 19-Mar-99 163445 767 27 19-Mar-99 157620 383.64 N-906 Consolidated Industrial Gases Inc. 19-Mar-99 163481 383.64 19-Mar-99 163478 383 64 N-907 Consolidated Industrial Gases Inc. 26-Mar-99 1'150 91 31-Mar-99 4894~ 3,060.00 Nc908 Consolidated Industrial Gases Inc. 31-Mar-99 1,102.91 30-Mar-99 4893 1,102.91 N-909 Consolidated Industrial Gases Inc. 30-Mar-99 4899 509 09 31-Mar-99 2075 3,340.91 N-910 Consolidated Industrial Gases Inc. -26-Mar-99 2062 463.64 2092 879.90 N-911 Consolidated Industrial Gases Inc. 26-Mar-~9 2080 365.60 26-Mar~99 2064 N-912 Consolidated Industrial Gases Inc. 2081 100.00 26-Mar-99 2156 293.20 N-995 Cornersteel Systems Corporation 26-Mar-99 2088 1,009.05 26-Mar-99 2154 536 00 �.�., .: ...,,N~1075 Dakilq ,Trading Corp. 26-Mar-99 716 60 f':'',,�~~N~-1157 Daui~Thdustrial Sales 26-Mar-99 408.25 ��~�. "1 ,159 ,J?esigners World Trade Center 26-Mar-99 'h.~,d.i'~~".�'tr,~Y CCf~?.nJX1Jm.[.TlP,Fhhiilsl~.C.,!lHfc)c:o,: 25510~ C:all N-1320 �;;,;~t~~?sy Call N-1321 Easy Call Comm. Phils. lric, 1c~.l;mn- Phils lrJc. 1co~m. Phils. lric; Call Comm. Phils. Inc~ Call Comm. Phils. lnb, . Phils. lrici Phils_ 10c(' I' ndising Merchancjising Merch~.ffidising J'f'~~~ ".I." 33~

DECISION C.T.A. EB NO. 266 Page 24 of29 N-1394 Eker Merchandising 24-Mar-99 2070 155.85 N-1395 Eker Merchandising 26-Mar-99 2071 455.75 26-Mar-99 2084 . 826.00 N-1396 Eker Merchandising 26-Mar-99 2155 208.58 26-Mar-99 2065 394.25 N-1397 Eker Merchandising 26-Mar-99 ' 2083 N-1398 Eker Merchandising 26-Mar-99 2090 76.13 Eker Merchandising 26-Mar-99 2153 50.00 N~1399 Eker Merchandising 26-Mar-99 2085 240.10 Eker Merchandising 26-Mar-99 2072 57.60 N-1400 Eker Merchandising 26-Mar-99 2079 94 95 N-1401 Eker Merchandising 26-Mar-99 2063 273.00 N-1402 Eker Merchandising 26-Mar-99 2073 114.25 N-1403 Eker Merchandising 26-Mar-99 2086 440.65 N-1404 Eker Merchandising 26-Mar-99 2089 52.99 N-1405 Eker Merchandising 26-Mar-99 2087 53 75 N-1406 Eker Merchandising 26-Mar-99 2082 97.00 N-1407 Eker Merchandising 26-Mar-99 2078 456 33 N-1408 Eker Merchandising 26-Mar-99 2151 70.23 N-1409 Eker Merchandising 26-Mar-99 2152 442.00 N-1410 Eker Merchandising 26-Mar-99 2076 59895 N-1411 Eker Merchandising 26-Mar-99 2074 104.23 N-1412 Eker Merchandising 26-Mar-99 2077 .� 96.10 N-1413 Eker Merchandi$ing 26-Mar-99 2091 1,075.15 N-1414 Eker Merchandising. 30-Mar-99 2099 1,105 00 N-1415 Eker Merchandising 29-Mar-99 2093 492.68 N-1416 Eker Merchandising 31-Mar-99 0068754 522.00 N-1417 5-Mar-99 0068531 132.14 N-1418 Eker Merch,~J:)r~islng 10-Feb-99 1660 6,792.50 N-1419 19-Mar-99 1678 9,138.86 N-1622 Festo Inc. �~.i;:~:.\�1H\. 'CI';, 29-Mar-99 13778 27,224.46 N-]629 Festo Inc. , 31-Mar-99 13780 3,201.65 11-Mar-99 0002 27,272 72 '�ii'A(~i~fi;[ 19-Mar-99 1064 6,089.52 29-Mar-99 028. 5,784.73 'i� 23-Jan-99 7,265.81 24-Mar-99 0755 568.18 '11-Mar -99 0871 15,90910 0847 2,727.28 f29-Dec~98 2948 4,14145 2932 4,142.36 18-0ec-98 2945 4,241.82 29-Dec-98 5424. 18240 24-Mar-99 58,348 10 30-Mar-99 5427 16,199.54 4-Mar-99 0272 1,062.18 5-Aug-99 11870 2,299.55 5-Aug-99 11871 2,090 91 5-Aug-99 11876 57,579 72 19-Nov-98 19015 17,996 27 3-Dec-98 38441/38442 10,099 10 5-Mar-9~ �10133 4611 1,144.54; � � 29-Mar-99 5634 13-Jan-99 1,779.00 .~~i'~\~N '\ '1.''� I:; ��'!:_:::!

PECISION C.T.A. EB NO. 266 Page 25 of29 N-4287 Technico 30-Mar-99 033 12,27273 N-4288 Techno Molds Inc. 24-Mar-99 3466 1,100.00 24-Mar-99 3467: 1,320 00 N-4289 Techno Molds Inc. 26-Mar-99 3469 1,95000 24-Mar-99 3468 3,600.00 N-4290 Techno Molds Inc. 30-Mar-99 3472 900 00 N-4291 Techno Molds Inc. 30-Mar-99 3471 675.00 N-4293 Techno Molds Inc. 31-Dec-98 1260 6,363.64 N-4294 Techno Molds Inc. 25-Mar-99 161 N-4384 Tom~Eie KT Electrical Trading 2/12/1999 1728 17,598.69 N-4417 Tratek Asia Inc. 3/30/1999 1821 10,288.77 N-4559 Versatrade Marketing 3/30/1999 1822 11,00878 N-4560 Versatrade Marketing 3/17/1999 1800 N-4561. Versatrade Marketing 3/29/1999 6015 7,183.05 N-4563 Versatrade Marketing 5974 15,17873 N-4640 Zorin System 3/5/1999 0348 N-4642 Zorin System 3/22/1999 2,728.01 N-4666 Alert 1, Inc. 2717 2,454 61 Sub-total 16,064.26 2720 3.) Purchase of services without suppoH,ing OR _!>~~821.3L 19533 N-5014 Genetron Engineering Supply & 6-Apr-99 � 21834 p 40,47773 Sefvices Co., Inc. 21833 20942 10,909.00 N-5015 Genetron Engineering Supply & 6-Apr-99 20943 N-2906 15-Mar-99 20941 890.00 Services Co., Inc: , 21084 2,799 32 21832 Inter Tek Testin'g'�' Services 20145 120.45 23120 1,183.64 N-2907 Inter Tek Testing Services 15-May-99 14808 1,204.55 2,168.19 N-290.8 Inter Tek Testing Services 15-May-99 139. 16,104.55 00049 N-2909 Inter Tek Testing Services 29-Apr-99 00064 973.36 00534 973.36 N-2910 Inter Tek Testing Services 29-Apr-99 28388 973.36 00540 1,000 00 N-2911 Inter Tek Testing Services' 29-Apr-99 00546 1,800.00 00539 2,643 22 N-2912 Inter Tek Testing Services 30-Apr-99 00563 2,880 89 00568 21,410 34 ~~~.~913 ,, Inter Tek Testing Services 15-May-99 00541 26,745 62 N-2914 \"'l\h' ' . . 00062 19,43418 Inter Tl'l.k T!",st.in(;J Services 8-Ap~-99 00090 5,865.30 N-2915 564,630.53 Inter 'f.�.�.,~:~!~~~k.,t-,TH:~i.;~:�,s���ting Services 9-Jun-99 � 12861 11,311.74 N-2916 International Elevator~ Equip Inc. 15-Apr-99 6974 6,109.02 3304 6,493.77 N-3029 Jeeps Enterprises 15-Apr-99 2351 1,154.61 Teradyne ~.~i.ls. Ltd. 9/8/1998 _ _ _8,727.01_ w~~,~-tJ-4953 Teradyne Phils. Ltd. 10/12/1998 p 758,983.74 N-4954 '�1 p 43,952.88 52,099.56 Teradyne Phils. Ltd. 4/12/1999 v\ 7,000.00 .. Teradyne Phils.� Ltd. '3/26/1999 rf 22,391.10 Teradyne Phils. Ltd 4/26/1999 Teradyne Phils. Ltd. 5/3/1999 Teradyne Phils. Ltd. 4/15/1999 . Teradyne Phils. Ltd. 5/24/1999 Teradyne Phils. Ltd. 5/24/1999 Teradyne �Phils. Ltd. 4/26/1999 .Teradyne Phils. Ltd. 10/12/1998 � Teradyne Phils. Ltd. 11/17/1998 Sub-total i 1 �.. !3s~ of goods or services \rit~p,qLsupporting invoices or ORs . �� ' Bryan Distributors & Services, Inc. � 12-Feb-99 Digital E~uipment Fili8in'ls Inc. 26-Apr-99 Liang Ch1 lngJil:~bf.:Y,:�9�9!H9!- .� 20-Mar-99 13-May-99 Metro Engi~~~rir1g & $l,~pply Co. �.' ,. o '' ,�,:::�ji~;�}� I ~

~-. Mic,,r~wontrol Design Technology -Mar-99 633 3,600 00 'r\iij;~6control Design Technology Mar-99 632 34,831 80 7-May-99 04478 26,880 00 Rubicon Printing Corporation p 190,755.34 Sub-total p 17,605.26 17,605 26 5.) Purchase of services supported with Provisional Receipts (PR) only p 35,210.52 N-3375 Manila Genesis 8-Apr-99 147 p 16,363 64 N-337.7 Manila Genesis 14-Apr-99 149 p 16,363.64 Sub-total p 13,768 55 (l~~;t: p 13,768.55 6.) Purchase JJ~!~ervices supported with Non-VAT OR N-4966 T~0~ & Country Agri Reapers, Inc. p 3,136 37 5/26/1999 541 p '3,136.37 p 3,061,110.11 Sub-total �� 7) Purchase of goods supported with VA T-exemp't !n.voice N-4634 Wise & Company Inc._ 4/8/1999 139406 7192 Sub-total 8.) Input VAT on purchase of service~ erroneously computed N- Guard All Electronic Security 23-Feb-99 2908/2910 Systems Inc. ' � Sub-total TOTAL Therefore, out of the total claim of P23,687 ,908.93 pertaining to input VAT on domestic purchases1� of goods and services, petitioner can only validly claim the amount of P14,221 ,880.96, computed as follows: Claimed input VAT on domestic purchases p 23,687,908.93 Disallowance~ ;I1'1'�1��_,�_,_,hl=._ ss: � ,i � � ,;J"I��'w','\;i ___9::...>�~466,027 97 ., p 14,221,880.96 . p 6,404,917 86 :_.;'!_:_: � 1) Per CPA report � 3,061,110.11 "'1''''".' 2) Per Co.�.urt's :v.:erific:ation i ,: Validly �upporteS") illP~.Jt.YAT or;tdpmestic� purchases � ii/: � ;i,) r.: 'I)',}~J!{~\~;<, .'i' \. �.i J Aneflt. P~.ti~ioper's. r1fynd claim for input VAT on importation of 1 �.�..9.&.\9'~/99.P.it:~~~_t:!~~~. ;1:~;:.d,i'.:''~j5rnent ' ":k;i;:' t~e 16 in th\3 amount of P29, 122,031.00, documents , � � �; � r � _w�.�~.~'t..::!f;)f�~:l~:~)~~~1\:~~:~. �~:,~ P.~ji~l~d 1 , �� 1. � ; f~\CY-~~~~~~~l:~0ifp,ined an~ a total of P21 ,924,350.00 should .. . ' . . . .� .. . . d�.o'�' �.. . !; . isal � � on tht:; following reasons: J~~~;::~:.::,! Bank OR No. Input VAT documents p 29,122,031.00 g ; 25,096,576.00 4,025,455.00 p .)41 .. '

l. .,� .. 'l1 . DECI$\.ON C.T.A.!~.B N0.166 Page 27of:29 2.) Outside .of claim 0 998 3943521 p 371,471 00 0-5 9/14/1998 4656990 15,375.00 0-14 4/24/1998 3944783 1,078,402 00 3943432 0-20 4/3/1998 3874782 1,058,934 00 3941487 0-24 2/11/1998 3874780 ' 409,464.00 3874781 0-31 3/6/1998 3942187 1,708,520 00 3942104 0-36 2/11/1998 3943216 1,436,833 00 3942974 0-44 2/11/1998 3941937 143,371 00 ' 4291043 0-51 3/18/1998 367,650.00 0-56 3/17/1998 1,994,508 00 0-60 4/1/1998 303,474.00 0-63 3/30/1998 1,043,006.00 0-67 3/13/1998 1,995,062.00 0-161 5/14/1998 4,364,497 00 0-169 3/28/199!9 341.00 0-173 3/28/1999 3,378 00 Subtotal p 16,294,286.00 3) /ERD 17 notlegibltj : 0-180 4/13/1999 Subtotal p 1,604,609 OQ__ p 1,604,609.00 TOTAL DISALLOWANCES p 21,924,350.00 Consequently, only the amount of P7,197,681.00 was fully substantiated pursuant to the provisions of Section 4.1 04-5(b) of Revenue 87 Input VAT . 009988 p 654,387 00 $,oo;9990 549.00 q009991 3,988 00 . 891 00 5009989 . 3,291,640.00 3,212,699.00 /%l~l~Mc@!�!!ll/.~1,,;! g. 5010793 338.00 99 �.1:~ti~'~Jp1 0796 12,19200 4/fZO'r 999 . '!:}5010797 3,952.00 4/2Q/;;rw99 678.00 ...~9 1 0798 713.00 465 00 :.!~:'&Jl10792 4,985 00 4/20/1999 ' 5010790 773.00 373.00 �....~P~rJ�.i:1(�;.4. i.}1~,J 4/20/1999 5010799 295.00 0-'1:46 . 4/20/~ 999 248.00 4/f0/1 ~:119 .rq01 0800 0-151 4/20/1999 8,515.00 �:�'i��:9.91 0801 I p 7,197,681.00 �.:115010802 0-156 4 /2 0 /...1..�.�:.9,:.l~~..,~~9:i;9TO"TIA�,",':�jU,:IJ~'.~~:..~.~(.5:w,.��,..0..I1 0 7 9 1 . . : '! ',~~�:9i!t~1' �.:\. 17 Import Entry and Revenue Declarc:tion.

DECISION .I.. � . C.T.A. EB NO. 266 Page 28 of 29 � In the light � i foregoing discussiolls, the Court En Bane finds legal basis to partially grant the instant petition as petitioner is entitled to claim a refund for its input VAT for the second quqrter of 1999 in the reduced amount of P12,003,522.52, computed as follows: Validly supported input VAT on domestic purchases p 14,221,88096 Validly supported input VAT on importations 7,197,681 00 Total valid input VAT .claim p 21,419,561 96 Multiply by rate of supported zero-rated sales 56.04% Input VAT claim attributed to substantiated zero-rated sales p. 12,003,522.52 . WHEREFORE, the instant petition is PAR.TIALLY' GRANTED. The~ . �:. .. �.. I '' � assailed Decision a~d Res-olution of the Court in Division dat~d October 11, :���\�~~~006 and January 11, 2007; �:L.�;~rl.~i are hereby REVERSED and SET re~p�~ctively, ' ., ,l.;c. :' ~1.: ASIDE ..� Accordingly, respondent is hereby ORDERED to REFUND or ISSUE a T. A~' ,.-.qC, REDIT CERTIFICATE in favor of petitioner in the reduced amount .3,522.52 represe!Jting unutilized excess input VAT on domestic , �~~~~f �. of goods and services �C\rjd importation ~f goods I capital . pu , ~i~��1~�~M.~�f..c{J;;\:',�~:J~~"l1 '�,,equ, �i.;pm�.. ent attributable to -its zero-rated sales for the second quarter of the taxable year 1999. SO ORDERED. AEs;R~~~~tUiYce WE CONCUR: With Concurring and Dissenting Opinion) ,;} ERNESTO..P. ACOSTA : Presidjrig Justice .J43

'!it'l�' '" it:rim~. C.. TANE~A,~. o~~z Associate Justice Associate Justice CAESA~ANOVA Associate Justice C� E R T I F I C A T I 0 N Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that the conclusions in the above decision were reached in consultation before the case was assigned to the writer of the opinion of the Court En Bane. tt_ ~\.o- a____ ERNESTO D. ACOSTA Presiding Justice