TAGANITO MINING CORPORATION v. COMMISSIONER OF INTERNAL REVENUE

REPUBliC OF THE PHiliPPINES Coon of Tax Appeals QUEZON CITY SECOND DIVISION TAGANITO MINING C.T.A. CASE NO. 6867 CORPORATION, Members: Petitioner, CASTANEDA, JR., Chairperson -versus - UY, and PALANCA-ENRIQUEZ, JJ. COMMISSIONER OF INTERNAL Promulgated: REVENUE, Respondent. JUL 3. 1 2009 / Y- - ~~j_�~ ~- --X 4 X- - -- -- - ------------ --- - ---- --- - ------ - -- DECISION UY, .}_.: Before the Court is a Petition for Review filed by Taganito Mining Corporation , praying for the refund of the amount of FOUR MILLION FOUR HUNDRED FIFTY SEVEN THOUSAND FOURTEEN PESOS AND 85/100 CENTAVOS (li 4,457,014.85), allegedly representing its unutilized input value-added tax (VAT) for the period covering January 1, 2002 to December 31 , 2002. THE FACTS Petitioner, Taganito Mining Corporation , is a corporation duly organized and existing under the laws of the Philippines, with address at 4'" Floor, Soli(~{ 1046

DECISION C.T.A. CASE NO 6867 Page 2 of I 8 Mills Building , De La Rosa St. , Legazpi Village , Makati City.1 It is primarily engaged in the business of exploring , producing , and exporting beneficiated nickel silicate ores and chromite ores,2 and is a duly registered VAT entity, with Certificate of Registration No. 94-470-000373 dated June 15, 1994.3 Likewise, petitioner is registered with the Board of Investments (BOI) as an exporter of beneficiated nickel silicate and chromite ores, with BOI Certificate of Registration No. EP-88-306.4 Respondent, on the other hand , is the duly appointed Commissioner of Internal Revenue vested with authority to exercise the functions of the said office, including inter alia, the power to decide refunds of internal revenue taxes , fees and other charges , penalties imposed in relation thereto , or other matters arising under the National Internal Revenue Code (NIRC) or other laws administered by the Bureau of Internal Revenue (BIR) . He holds office at the BIR National Office Building , Diliman , Quezon City.5 Petitioner filed all its Monthly and Quarterly VAT Returns from January 1, 2002 to December 31 , 2002.6 For easy reference , a summary of the filing dates of the original and amended Quarterly VAT Returns for taxable year 2002 of petitioner is as follows : Nature of the Exhibit(s) Quarter Return Mode of filing FILING DATE G to G-4 Original Electronic April 13, 2002 F 1st Amended Manual April 16, 2002 f I to 1-4 HH to HH-3 Amended Electronic March 31 , 2003 Amended Electronic December 22 , 2003 1 Par. (a), Stipulated Facts, Joint Stipulation of Facts and Simplification of Issues (JSFSI), Docket, p. 92. 2 Par. (b), Stipulated Facts, JSFSI, !d. 3 Par. (c), Stipulated Facts, JSFS I, /d. 4 Par. (d), Stipulated Facts, JSFSI , !d. 5 Par. 2, Petition for Review, Docket, p. 2; Par. I, Answer, Docket, p. 60. 6 Par. (h), Stipulated Facts, JSFSI, Docket, p. 93. 1047

DECISION C.T.A. CASE NO 6867 P to P-3 Original Electronic July 11 , 2002 Amended Manual July 12, 2002 0 2nd Amended March 31, 2003 Amended Electronic December 22 , 2003 R to R-4 Original Electronic October 21 , 2002 Amended Electronic December 22 ,2003 II to 11-3 Original Electronic January 17, 2003 Amended Electronic December 22 , 2003 V to V-2 3ra Electronic JJ to JJ-3 Z to Z-2 4tn KK to KK-3 As can be gleaned from its amended Quarterly VAT Returns7, petitioner reported zero-rated sales amounting to Iii 504,424,545.21 ; input VAT on its domestic purchases of taxable goods (including capital goods) and services amounting to Iii 2,600,280.00; and input VAT on its importations of capital goods amounting to Iii 1,847,371 .32 , the details of which are summarized as follows : Period Covered Zero-Rated Sales Input VAT on Input VAT on Total Input Domestic Importation of VAT 01 /01/02 - 03/31 /02 li 102,842 ,130.25 Capital Goods 04/01/02 - 06/30/02 137 ,493 ,888 .66 Purchases of li 470 ,207.75 07/01/02 - 09/30/02 105 ,764 ,564 .19 Taxable Goods - 686 ,566 .07 10/01/02 - 12/31 /02 158 ,323 ,962 .11 - and Services 2,933 ,083.49 TOTAL p 504,424,545.21 li 470,207.75 li 1,847 ,371 .32 357 ,794 .01 686 ,566.07 - p 4,447,651 .32 1, 085 ,7 12.17 p 1,847,371.32 357,7 94 .01 p 2,600,280.00 On December 1, 2003, Deputy Commissioner Estelita C. Aguirre, OIC, Large Taxpayers Service issued Letter of Authority (LA) No. 2000 00003437 addressed to petitioner, authorizing Revenue Officers Linda R. Macaspac, Julius Rex B Bungabong, and Group Supervisor Rolando M. Balbido of the LT Audit and Investigation Division II of the BIR to examine the books of accounts and other accounting records of petitioner for taxable year 2002.8 Such LA, together with a letter dated December 1, 2003 requesting petitioner 7 Exhibi ts "HH to HH-3", " II to 11-3", "JJ to JJ-3", and " KK to KK-3". 8 BIR Records, p. I026. 1C48

DECISION C.T.A. CASE NO 6867 to submit certain documents , were received on the same date9 by a certain Liza L. Mondejar, the authorized representative of petitioner.10 Subsequently, a Second Notice/Request for Presentation of Records dated January 16, 2004 was sent by the BIR to petitioner and received once again by Ms. Mondejar on April19 , 2004.11 On December 30, 2003, petitioner filed with respondent, through respondent's Excise Taxpayers' Assistance Division under the Large Taxpayers Division, a claim (letter dated December 22, 2003)12 for refund of its excess input VAT paid on its domestic purchases of taxable goods and services and importation of goods amounting to li 4,447 ,651 .32 for the period covering January 1, 2002 to December 31 , 2002.13 In the said claim , petitioner represented , inter alia, that the amount of its total zero-rated export sales from January 1, 2002 to December 31 , 2002 is li 504,424,545.21 .14 On February 10, 2004, petitioner sent a letter dated February 3, 2004 to respondent, stating that, "due to inadvertent errors", it is making some corrections in the amount of zero-rated export sales indicated in its letter dated December 22 , 2003. Thus, instead of the amount of li 504,424,545.21 , petitioner's export sales from January 1, 2002 to December 31 , 2002 should be li 508,904,070.59.15 Due to respondent's failure to act on petitioner's request for refund and in order to preserve its right to claim refund by judicial action , petitioner filed 9 !d., pp. 1023 to 1024, and 1026. 10 Exhibit " 1-a". 11 BIR Records, p. I 022. 12 Exhibit "NN". 13 Par. (g), Stipu lated Facts, JSFSI, Docket, p. 93. 14 Exhi bit "NN". 15 Exhibit "DD" . 1049

DECISION C.T.A. CASE NO 6867 the instant Petition for Review on February 19, 2004.16 However, in the said Petition, the amount of the claim increased to 12 4,457 ,014.85. In his Answer17 filed on April 15, 2004, respondent interposed the following Special and Affirmative Defenses: "4. Petitioner's claim for refund is subject to administrative investigation/examination by the respondent; 5. To support its claim , it is imperative for petitioner to prove the following , viz: a. The registration requirements of a value-added taxpayer in compliance with Sections 6(a) and (b) of the Revenue Regulations No. 6-97 in relation to Section 4.107-1 (a) of Revenue Regulations No. 7-95, and Section 236 of the Tax Code, as amended ; b. The invoicing and accounting requirements for a VAT-registered persons, as well as the fil ing and payment of VAT in compliance with the provisions of Sections 113 and 114 of the Tax Code, as amended ; c. Proof of compliance with the prescribed checklist of requirements to be submitted involving claim for VAT refund in pursuance to Revenue Memorandum Order No. 53-98, otherwise there would be no sufficient compliance with the filing of administrative claim for refund, the administrative claim thereof being mere pro-forma, which is a condition sine qua non prior to the filing of judicial claim in accordance with the provision of Section 229 of the Tax Code, as amended. It is worthy of emphasis that Section 112 (D) of the Tax Code, as amended , requires the submission of complete documents in support of the application filed with the Bureau of Internal Revenue before the 120-day audit period shall apply, and before the taxpayer could avail of judicial remedies as provided for in the law. Hence, petitioner's failure to submit proof of compliance with the above-stated requirements warrants immediate dismissal of the petition for review. 16 Par. U), Stipu lated Facts, JSFSI, Docket, p. 93. Pars. 4 and 12, Petition for Review, Docket, pp. 2 to ~ 5. 17-Docket, pp. 60-63 . 1050

DECISION C.T.A. CASE NO 6867 d. That the input taxes of P4,447,651 .32 allegedly paid by the petitioner on its purchases of goods and services for the taxable year 2002 were attributable to its zero-rated sales and such have not been applied against any output tax and were not carried over in the succeeding taxable quarter or quarters; e. That petitioner's administrative and judicial claims for tax credit or refund of the unutilized input tax (VAT) was filed within two (2) years after the close of the taxable quarter when the sales were made in accordance with Sections 112 (A) and (D) and 229 of the Tax Code, as amended ; f. That petitioner's domestic purchases of goods and services and importation of goods were made in the course of its trade or business, properly supported by VAT invoices and/or official receipts , import entry documents , confirmation receipt evidencing payment of VAT and other documents, such as subsidiary purchase Journal , showing that it actually paid VAT in accordance with Sections 110 (A) (2) and 113 of the Tax Code, as amended , and in pursuance to Section 4.104-5 (a) & (b) of Revenue Regulations No. 7-95 (Re: Substantiation of Claims for Input Tax Credit) ; g. The requirements as enumerated under Section 4.104-2 of the Revenue Regulations 7-95. (Re: Persons who can avail of Input Tax Credits) ; 6. Furthermore, in an action for refund the burden of proof is on the taxpayer to establish its right to refund and failure to sustain the burden is fatal to the claim for refund/credit. This is so because exemptions from taxation are highly disfavored in law and he who claims exemption must be able to justify his claim by the clearest grant of organic or statutory law. An exemption from common burden cannot be permitted to exist upon vague implications. (Asiatic Petroleum Co. [P.I.] v. Llanes, Jockey Club, Inc., 98 Phil. 670) ; 7. Claims for refund are construed strictly against the claimant for the same partake the nature of exemption from taxation ." l ti51

DECISION C.T.A. CASE NO 6867 Page 7 of I8 On August 30, 2006, respondent transmitted to the Court18 the BIR Records pertaining to this case, containing , inter alia, a Memorandum Report19 from the Deputy Commissioner for Special Concerns, Kim S. Jacinto-Henares, addressed to the Chief of the Litigation Division , both of the BIR, regarding the results of examination of petitioner's records conducted by the same, pursuant to LA No. 2000 00003437 and the request for refund of petitioner. During trial , both parties presented their respective evidence and this case was submitted for decision on August 11 , 2009, considering petitioner's "Memorandum" filed on August 5, 2008 and respondent's "Memorandum" filed on July 31 , 2008. Hence, this Decision. THE ISSUES The parties submitted the following issues20 for this Court's resolution : "1. Whether or not Petitioner's sales are export sales; II. Whether or not Petitioner's export sales were paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP) ; Ill. Whether or not Petitioner's input taxes are attributable to its zero-rated transactions; IV. Whether or not Petitioner's input taxes are sufficiently substantiated with VAT invoices or official receipts; V. Whether or not the VAT input taxes being claimed for refund/tax credit by Petitioner has been credit against any output taxes or has been carried forward to the succeeding quarter or quarters ; 18 Docket, p. 2 17. 19 BIR Records, pp. 1088 to 1090. 20 Iss ues, JSFS I, Docket, pp. 93-94. 105 2

DECISI ON C.T.A. CASE NO 6867 VI . Whether or not Petitioner is entitled to a refund of VAT input taxes it paid from January 1, 2002 to December 31 , 2002 amounting to Four Million Four Hundred Fifty Seven Thousand Fourteen and 85/100 (~ 4,457,014.85)." The foregoing issues may be simplified into the sole issue of whether or not petitioner is entitled to a refund in the amount of ~ 4,457 ,014.85, representing its alleged unutilized input VAT for the period covering January 1, 2002 to December 31 , 2002. Petitioner's arguments Petitioner asserts that it is primarily engaged in the business of exploring , producing and export beneficiated nickel silicate ores and chromite ores, and that these ores are 100% exported and/or shipped to foreign countries, specifically to Japan and Australia as certified by the BOI in accordance with Revenue Memorandum Order No. 9-2000; that all of its generated and recorded zero-rated sales from January 1, 2002 to December 31 , 2002 were paid for in acceptable foreign currency, specifically, in US Dollars, which were inwardly remitted to the Philippines and accounted for in accordance with the rules and regulations of the BSP, pursuant to Section 106(A)(2)(a)(1) of the NIRC, as amended. Furthermore, petitioner points out that evidence show that its input VAT were paid for by it in the course of its trade and business and are directly attributable to its zero-rated sales; that the excess input VAT being claimed for refund or tax credit has not been applied against or are undiminished by any of its output VAT for the same or subsequent periods since it has no output VAT on its 100% export sales; and that said input VAT has not been I 10 53

DECI SION C.T.A. CASE NO 6867 carried forward to the succeeding quarter or quarters as the same were deducted by petitioner upon filing of their application for refund with respondent. In addition , petitioner stresses that it properly supported the excess input VAT being claimed by VAT-registered invoices and/or official receipts issued by its suppliers, and official receipts issued by the Bureau of Customs, in accordance with Section 113(A) of the NIRC, as amended , as shown in the report of the independent auditor commissioned by this Court and that it complied with all the requirements of the respondent on claims for refund/tax credit by submitting to respondent all documents which the latter has requested . Respondent's counter-argument Respondent contends that petitioner did not comply with the requirements for filing a claim for refund or tax credit for excess/unutilized input VAT attributed to zero-rated sales and that petitioner is not entitled to a claim for refund or tax credit of its unutilized/excess input VAT because a claim for refund is not ipso facto granted upon filing of the same, since respondent still has to investigate and ascertain the veracity of the claim. THIS COURT'S RULING As noted earlier, there is a disparity between the amount of the refund being claimed at the administrative level and before this Court. In the former, the amount of the claim is 12 4,447,651 .32; while in the latter, the amount is 12 4,457,014.85. Considering however that only a party adversely affected by a decision, ruling or inaction of the Commissioner of Internal Revenue w h ; 105 4

DECISION �' C.T.A . CASE NO 6867 may file an appeal with the Court of Tax Appeals,21 only the amount of claim presented at the administrative level which shall be considered in this case , or the amount of Iii 4,447,651 .32. Proceeding from such consideration, We shall appropriately determine whether petitioner is entitled to the said amount. Section 6(A) of the NIRC of 1997 provides as follows : "SEC. Power of the Commissioner to Make Assessments and Prescribe Additional Requirements for Tax Administration and Enforcement.- (A) Examination of Returns and Determination of Tax Oue.-xxx Any return , statement or declaration filed in any office authorized to receive the same shall not be withdrawn: Provided, That within three (3) years from the date of such filing, the same may be modified , changed , or amended : Provided, further, That no notice for audit or investigation of such return , statement or declaration has, in the meantime, been actually served upon the taxpayer. " Based on the foregoing provision, while the taxpayer (petitioner, in this case) is given a period of three (3) years from the filing of "(a)ny return, statement or declaration " to modify, change or amend the same, he or she may only do so, as long as "no notice for audit or investigation of such return, statement or declaration has, in the meantime, been actually served upon the taxpayer." To give effect thereto , We shall disregard petitioner's amended Quarterly Returns for taxable year 2002 filed on December 22, 2003 which are all subsequent to the date when LA No. 2000 00003437 was served upon petitioner, i.e., on December 1, 2003. " Fi" t poc,.rnph of Soc. t t , R.A. t t 25, "' omoodod by R.A. 9282. rf. 1055

DECI SION C.T.A. CASE NO 6867 Thus, for purposes of determining the propriety of petitioner's refund claim , We shall have as reference points, the amounts in the following table, particularly the total zero-rated sales and total input VAT, which are all reflected in petitioner's original and amended Quarterly VAT Returns22 for taxable year 2002 filed prior to the service of LA No. 2000 00003437 to petitioner by respondent, viz: Period Covered Ze ro-Rated Sales Input VAT on Input VAT on Tota l Input Domestic Importation of VAT 01/01/02- 03/31/02 Fi 102,842 ,130.25 Capita l Goods 04/01 /02 - 06/30/02 137,493 ,888 .66 Purchases of Fi 408 ,685.44 07/01/02 - 09/30/02 105,764 ,564.19 Taxa ble Goods - 579,452 .07 10/01/02- 12/31/02 158,323 ,962.11 - and Servi ces 2,826,371 .53 TOTAL Jii 504,424,545.21 Fi 408 ,685.44 Fi 1,847 ,371 .32 289,797 .09 579,452 .07 - Jii 4,1 04,306.13 979 ,000.21 289,797 .09 Fi 1,847 ,371 .32 Fi 2,256 ,934.81 In this connection , Section 112(A) of the NIRC of 1997 reads : "SEC . 112. Refunds or Tax Credits of Input Tax. - (A) Zero-rated or Effectively Zero-rated Sales. - 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) and (2) , the acceptable foreign currency exchange proceeds thereof had been duly accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP) : Provided, further, That where the taxpayer is engaged in zero-rated or effectively zero-rated sale and also in taxable or exempt sale of goods or properties or services, and the amount of creditable input tax due or paid cannot be directly and entirely attributed to any one of the transactions , it shall be allocated proportionately on the basis of the volume of sales." 22 Exhibits "I to 1-4", "R to R-4", "Y to Y-2", and "Z to Z-3". 105G

.. DECISION C.T.A. CASE NO 6867 This provision lays down the requisites to be entitled to the issuance of a tax credit certificate or refund of creditable input tax due or paid attributable to zero-rated or effectively zero-rated sales. Such requisites are as follows : 1. the claimant must be a VAT-registered person; 2. there must be zero-rated or effectively zero-rated sales; 3. that input taxes being claimed were due or paid ; 4. that such input taxes were attributable to zero-rated or effectively zero-rated sales; 5. that the input taxes were not applied against any output VAT liability; and 6. that the claim for refund was filed within the two-year prescriptive period . We find that petitioner has satisfied all the above requisites. Pertinent to the first requisite, Section 106(A)(2)(a)(1) of the NIRC of 1997 states: "SEC. 106. Value-added Tax on Sale of Goods or Properties. - (A) Rate and Base of Tax. - XXX XXX XXX (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) ;" Thus, in order for petitioner's export sale to qualify for zero-rating , the following requisites must be present: 1. there was a sale and actual shipment of goods from the Philippines to a foreign country; 2. the sale was made by a VAT-registered person ; 105 7

DECISION C.T.A. CASE NO 6867 3. the sale was paid for in acceptable foreign currency or its equivalent in goods or services; and 4. the payment was accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas. As stipulated by the parties, petitioner is a VAT-reg istered person.23 Moreover, petitioner actually sold and shipped its products from the Philippines to foreign countries for the period from January 1, 2002 to December 31 , 2002 as evidenced by its Schedule of Export Sales24 and export documents, such as export sales invoices, export declarations/permits, bills of lading , ore transport permits , and outward foreign manifest. 25 The said export sales generated the amount of US$9,848,000.43, with peso equivalent of 12 508,904,070.60; and were inwardly remitted and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas, as shown by Security Bank Client Advices26. However, there is an apparent discrepancy between the amounts of zero-rated export sales as reflected in petitioner's original and amended Quarterly VAT Returns and as shown in petitioner's export documents. As stated above, petitioner's declared total zero-rated sales for taxable year 2002 amounted only to 12 504,424 ,545.21 ; but as revealed by the said export documents and as represented in petitioner's lette~7 dated February 3, 2004 to respondent, petitioner's export sale amounted to 12 508,904,070.60. Nevertheless , the amounts in the said Returns are controlling . This must be so because the grant of a refund is founded on the assumption that the tax 23 Par. (c), Stipulated Facts, JSFSI , Docket, p. 92. 24 Exhibit "A-11". 25 Exhibits "C- 1" to "C-15", including sub-markings. 26 Included in Exhibits "C-1 " to "C- 15" and sub-markings. 27 Exhibit " DO" . � 1058

DECI SION C.T.A. CASE NO 6867 return is valid ; that is , the facts stated therein are true and correct. 28 Thus, We find that it is the amount of 12 504,424,545.21 as declared in petitioner's returns pertaining to its export sales which qualify for VAT zero-rating . We shall now determine the amount of input VAT attributable thereto. We note that the input VAT being claimed for refund in the amount of 12 4,447,651.32 is higher by 12 343,345.19 when compared to the reported input VAT of 12 4,104,306.13; hence, such difference of 12 343,345.19 shall be denied outright. In addition , the Court-commissioned Independent Certified Public Accountant (CPA) , Mr. Leonardo D. Cuaresma of Punongbayan and Araullo , in his Report dated October 26, 2004, he stated , in part, that: ".. .we have ascertained that the input VAT applied for as tax refund totaling to P4,447 ,651 .32 for the period January 1 to December 31 , 2002 , are: � properly recorded in the Company's books; and � properly supported by original supplier's invoices and/or official receipts . We have also verified that the photocopies of such suppliers' invoices and/or official receipts to be submitted to the CTA and marked as exhibits are faithful reproductions of the original documents examined ."29 However, Mr. Cuaresma noted the following exceptions to such findings :30 Exception Exhibit A-111-A Input Tax Input VAT already claimed in prior months Page ~ 397 ,614 .91 Invoice date is not within the period covered in the 1 claim 33 ,563.49 Invoice has a different VAT number compared with 2 the OR 1,856 .25 3 28 Citibank, N.A. vs. Court ofAppeals, et a!., G.R. No. 107434, October 10, 1997. 29 Exhibi t "A" at page 4 thereof. 30 Exhibit "A- ril". 1G59

DECISION C.T.A. CASE NO 6867 OR is non-VAT registered 4 1,184.09 Invoice and OR are not on file 5 936.36 lit 435,155.10 Upon careful examination of petitioner's 2002 Monthly Schedules of Purchases and Corresponding Input VAT31 for both petitioner's Head Office and Minesite, and the related suppliers' invoices/official receipts , Bureau of Customs (BOC) Import Entry and Internal Revenue Declarations and bank official receipts32, We find the said Report of the Independent CPA in order, subject only to the amount of the claim as determined below. Considering the foregoing , only the amount of 12 3,669,151 .03 out of the 12 4,447,651 .32 input VAT claim represents petitioner's valid and refundable input tax in accordance with Sections 11 O(A) and 113(A) of the NIRC of 1997, as implemented by Sections 4.104-1 , 4.104-5, and 4.108-1 of Revenue Regulations No. 7-9533; computed as follows: Input VAT Claim ~ 4,447,651 .32 Less: Discrepancy between : ~ 4,447,651 .32 -Input VAT claim -Less: Input VAT declared 4,104 ,306 .13 343 ,345 .19 per Quarterly VAT Returns 435 ,155 .10 -Not properly substantiated input VAT lit 3,669,151.03 Valid Input VAT Anent the question of whether or not petitioner's input taxes were applied against any output tax liability, We rule in the negative. Petitioner had no output tax liability against which the input VAT of 12 3,669,151 .03 may be applied or credited , since it had no other sales but zero-rated sales for the four quarters of 2002. Moreover, the input VAT of 12 3,669,151 .03 is entirely attributable to its zero-rated sales 31 Exhibits "A-I -A" and "A-I-8 ". 32 Exhibi ts "B" to "B-8 12". 33 SUBJECT: Consolidated Value-Added Tax Regulations. 1060

.� DECISION C.T.A. CASE NO 6867 Ji 508,904,070.60. However, only the input VAT of Ji 3,636,854.07 is attributable to the substantiated and properly declared zero-rated sales of Ji 504,424,545.21 , computed as follows : Substantiated and Declared Zero-Rated Sales Ji 504,424 ,545 .21 508 ,904 ,070 .60 Total Zero-Rated Sales Multiplied by Valid Input VAT X 3,669 ,151.03 Input VAT Attributable to Substantiated and Jiil 3,636,854.07 Declared Zero-Rated Sales ---------------- Even though petitioner carried over the subject claim to the succeeding quarters until the fourth quarter of 2003, the same was fully deducted as "Any VAT Refund!TCC Claimed" in the fourth quarter of 2003.34 In other words , the subject claim no longer formed part of the Ji 9,127,120.20 excess input VAT as of the fourth quarter of 2003, which was to be carried over/applied to the succeeding first quarter of 2004. Finally, as regards the requirement of filing the claim for refund within the two-year prescriptive period , We likewise confirm petitioner's compliance therewith reckoned from the close of the taxable quarter when the relevant sales were made pertaining to the input VAT, regardless of whether said tax was paid or not. 35 The present claim involves petitioner's input VAT incurred for the four quarters of 2002. Petitioner fi led its claim fo r refund 36 with the Bureau of Internal Revenue on December 30, 2003 and the Petition for Review on February 19, 2004. Both dates of fil ing fall within the two-year prescriptive period reckoned from March 31 , 2002, June 30, 2002 , September 30, 2002 34 Exhibit "MM-3a". 35 Commissioner of Internal Revenue vs. Mirant Pagbilao Corporation (Formerly Southern Energy ~uezon, Inc), G.R. No. 172129, September 12,2008. 3 Exhi bits "BB" and "NN". � 1061

DECISION C.T.A. CASE NO 6867 Page I7 of I8 and December 31 , 2002, the close of the first, second , third , and fourth quarters of 2002, respectively. Evidently, petitioner's administrative and judicial claims for refund of input VAT for the first, second , third , and fourth quarters of 2002 fall within the two-year prescriptive period . In sum , We find petitioner to have sufficiently proven its entitlement to a refund but in the reduced amount of 12 3,636,854.07, representing unutilized input taxes attributable to zero-rated sales from January 1, 2002 to December 31 , 2002. WHEREFORE , premises considered , the instant Petition for Review is hereby PARTIALLY GRANTED. Accordingly, respondent is hereby ORDERED TO REFUND to petitioner the amount of THREE MILLION SIX HUNDRED THIRTY SIX THOUSAND EIGHT HUNDRED FIFTY FOUR PESOS AND 7/100 CENTAVOS (li 3,636,854.07), representing its unutilized input taxes attributable to zero-rated sales from January 1, 2002 to December 31 , 2002. SO ORDERED. EAsR~~~~..s. UtiYce WE CONCUR: ~~~ J~CNkIT~OhC,. CCA.S~ TANE~ DA, J~Q. . OLGA PALANCA-ENRIQUEZ Associate Justice Associate Justice 1062

DECISION C.T.A. CASE NO 6867 ATTESTATION I attest that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court's Division . Ou~fo,C . ~~ - 1 JlJANITO C. CASTANEDA/if{'' , Associate Justice Chairperson CERTIFICATION Pursuant to Article VIII , Section 13 of the Constitution , and the Division Chairperson's Attestation , it is hereby certified that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court. Q.___.,_. o~ ERNESTO D. ACOSTA Presiding Justice 1063