PHILEX MINING CORPORATION v. COMMISSIONER OF INTERNAL REVENUE

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY FIRST DIVISION PHILEX MINING CORPORATION, C.T.A. CASE NO . 8044 Petitioner, - versus - Members: ACOSTA, Chairperson UY,and FASON-VICTORINO, JJ. COMMISSIONER OF INTERNAL Promulgated : REVENUE, 9: 0f"...,.. . Respondent. x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - DECISION Fa bon- Victorino, J.: This case involves a claim for refund or issuance of a tax credit certificate (TCC) in the amount of Php12,887,505.59, allegedly representing input value-added tax (VAT) attributable to zero-rated sale for the first (1 st) quarter of taxable year 2008, filed by petitioner Philex Mining Corporation on March 29, 2010. Petitioner alleges that it is a duly organized and existing J domestic corporation with principal office at 27 Brixton St., Pasig 000 129

DEOSION CTA CASE NO. 8044 Page2of28 City. It is engaged in mining business, including the exploration and operation of mine properties and the commercial production and marketing of mine products. It is a registered VAT taxpayer with VAT Registration Certificate No. 35-6-000731 effective October 29, 1997. It has an approved Application for Zero-Rate, pursuant to Section 4.100-3 of Revenue Regulations No. 7-95, effective April 12, 1998. 1 Respondent, on the other hand, is the government official charged with the administration and enforcement of the national internal revenue laws, with the authority to grant refund or tax credit of taxes erroneously or illegally collected, and other refundable or creditable taxes under the Tax Code. She holds office at the BIR National Office, Diliman, Quezon City. During the 1st quarter of 2008, petitioner sold and shipped its production of mineral products to a foreign buyer as direct exports. The said sale amounted to Php2,166,288,788.31 and was paid for in acceptable foreign currency duly accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas. 1 Pars. 1 and 2, Summary of Facts Admitted, Stipulation of Facts and Issues (SF!), docket, p. 39. 000130

DEaSION CTA CASE NO. 8044 Page3of28 During the same period, it purchased imported goods and availed domestic services in the amount of Php99,342,433.34 and Php8,053,446.59, respectively, all for use in its mining operations, production and sale of its mine products. For the said purchases, petitioner paid input tax of Php11,921,092.00 and Php966,413.59, respectively, or in the sum of Php12,887 ,505.59. On April 22, 2008, petitioner filed its original or tentative VAT return for the l 5t quarter of 2008. Subsequently or on December 11, 2009, it filed an amended return for the said quarter reflecting the following2 : Zero-rated sales Amount Input Tax Importation of goods Domestic purchase of services P2 166,288,788.31 - 99,342,433.34 8 053,446.59 Pll 921 092.00 966 413.59 On March 4, 2010, petitioner filed a claim for refund/tax credit with the One-Stop-Shop Center of the Department of Finance, per Application No. 49810, covering its unutilized input VAT for the first quarter of 2008 in the amount of !/' Php12,887,505. 59. 3 2 Par. 3, Summary of Facts Admitted, SF!, docket, p. 39. 3 Par. 4, Summary of Facts Admitted, SF!, docket, p. 40. 000131

DEaSION CTA CASE NO. 8044 Page4of28 About twenty-five (25) days thereafter or on March 29, 2010, petitioner filed the instant Petition for Review allegedly to preserve its right to claim for refund of its excess and unutilized input taxes for the first quarter of 2008 hinged on the ground of inaction on the part of respondent. In her Answer4 filed on May 6, 2010, respondent moves to dismiss the petition raising the following Special and Affirmative Defenses as grounds therefore, viz: "4. The claim for refund is still undergoing routinary investigation. Said claim for refund had just been filed on 4 March 2010 and the instant Petition was filed before this Honorable Court on 10 March 2010, barely six (6) days after the filing of the claim for refund/tax credit before the One Stop Shop of the Department of Finance; 5. Claims for refund are strictly construed against the taxpayer as the same partakes the nature of a tax exemption; 6. The taxpayer has the burden to show that the taxes were erroneously or illegally paid. Failure on the part of the Petitioner to prove the same is fatal to its cause of action; 7. The Petitioner should prove that the input tax of the Petitioner remains to be / unutilized." 4 Docket, pp. 24-25. 000132

DEGSION CTA CASE NO. 8044 Page5of28 The parties filed their respective pre-trial briefs,5 followed by their Stipulation of Facts and Issues6 on May 21, 2010, which the Court approved in its Resolution 7 dated May 27, 2010. Trial ensued during which petitioner presented two witnesses, namely: 1) Eileen C. Rodriguez, a Manager in its Accounting Department; and 2) Albert G. Alba, the Court Commissioned Independent Certified Public Accountant (ICPA). Witness Eileen Rodriguez, by way of a Judicial Affidavit8, testified that she is a manager in the Accounting Department of petitioner. As such, she is tasked to supervise and review the preparation and filing of various tax returns, including the filing of claims for refund of overpaid or excess taxes. On April 22, 2008, petitioner allegedly filed its original or tentative VAT return for the first quarter of 2008 which was amended on December 11, 2009 to reflect the zero-rated sales in the amount of Php2,166,288,788.31. ~ 5 Docket, pp. 26-28 and pp. 30-34. 6 Docket, pp. 39-40. 7 Docket, p.42. 8 Docket, pp.43-48. 000133

DEGSION CTA CASE NO. 8044 Page6of28 She continued to say that during the first quarter of 2008, petitioner's copper concentrates productions were sold to Pan Pacific Copper Co. Ltd, a Japanese company based in Tokyo, Japan. The sale is covered by a "Long Term Gold and Copper Concentrates Sales Agreement" dated March 11, 2004. Under the said agreement, the buyer is required to pay the price of each shipment of copper concentrates in two (2) stages. First, a provisional payment at the time of shipment equivalent to ninety percent (90%) of the provisional price as determined by the seller based on shipped weight and the seller's provisional assay. The second stage is the final payment to cover the balance of the concentrate value upon presentation of the final invoice after all data necessary to determine the final settlement are available. This explains the delay in the issuance by petitioner of the Final Invoices. All payments by the Japanese Company were in United States Dollar deposited in an account designated by the Seller or Buyer, as the case may be. As the commissioned ICPA, Albert G. Alba testified that he conducted an audit pertinent to the present claim for refund or issuance of tax credit certificate of petitioner. In relation / 000134

DEaSJON CTA CASE NO. 8044 Page7of28 thereto, he prepared a Repore dated July 20, 2010 submitted to the Court on July 22, 2010, copy furnished respondent. His examination and validation of petitioner's pertinent documents show that out of the excess input tax paid for the first quarter of 2008 in the amount of Php12,887,505.59, Php403,320.59 was used by petitioner to pay its output tax for the quarter. The balance of Php12,887,505.59 was deducted as VAT refund/TCC claimed in the fourth quarter of 2009 and not carried over to the first quarter of 2010. On January 3, 2011, the Court, sans any comment or opposition from respondent, admitted the documents formally offered by petitioner on November 5, 2010. 10 During the hearing on March 3, 2011, respondent's counsel submitted the case for decision without presentation of any evidence on the ground of lack of records from the Bureau of Internal Revenue. 11 On April 12, 2011, the Petition for Review was submitted j for decision taking into consideration the Memorandum of 9 Docket, pp. 60-82. 10 Docket, pp. 102-103. 11 Docket, p. 104. 000135

DEGSION CTA CASE NO. 8044 Page8of28 petitioner filed on April 4, 2011, again, sans respondent's Memorandum. 12 THE ISSUE The lone issue13 as stipulated by the parties is as follows: "WHETHER OR NOT PETITIONER IS ENTITLED TO THE REFUND OF THE EXCESS INPUT TAXES IN THE TOTAL AMOUNT OF PHP12,887,505.59 FOR THE 1st QUARTER OF 2008 REPRESENTING ITS UNUTILIZED INPUT VAT FOR THE PURCHASE/IMPORTATION OF GOODS AND SERVICES ON ACCOUNT OF ITS BEING A PRODUCER AND EXPORTER OF MINERAL PRODUCTS." THE COURT'S RULING The Court finds the petition partly meritorious. Claims for refund or tax credit of input tax attributable to zero-rated or effectively zero-rated sales is governed by Section 112(A) of the National Internal Revenue Code (NIRC) of 1997, as amended, which states, thus: / "SEC. 112. Refunds or Tax Credits of Input Tax. - 12 Docket, p. 127. 13 Docket, p. 40. 000.136

DEGSION CTA CASE NO. 8044 Page9of28 (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)(l), (2) and (b) and Section lOB(B)(l) 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 of properties or services, and the amount of creditable input tax due or paid cannot be directly and entirely attributed to any one of the transactions, it shall be allocated proportionately on the basis of the volume of sales: Provided, finally, That for a person making sales that are zero-rated under Section 108(6)(6), the input taxes shall be allocated ratably between his zero-rated and non-zero-rated sales." Hence, to be entitled to a refund, the claimant must establish compliance with the following requisites: 1. there must be zero-rated or effectively zero-rated sales; 2. that input taxes were incurred or paid; 3. that such input taxes are attributable to zero-rated or / effectively zero-rated sales; 000.137

DEGSION CTA CASE NO. 8044 Page10of28 4. that the input taxes were not applied against any output VAT liability; and 5. that the claim for refund was filed within the two-year prescriptive period .14 Over and above the foregoing requirements, the claimant must file the Petition for Review before the CTA within the period prescribed under Section 112(C) of the NIRC, which reads as follows: "(C) Period within which Refund or Tax Credit of Input Taxes shall be Made. - In proper cases, the Commissioner shall grant a refund or issue the tax credit certificate for creditable input taxes within one hundred twenty (120) days from the date of submission of complete documents in support of the application filed in accordance with Subsection (A) hereof. In case of full or partial denial of the claim for tax refund or tax credit, or the failure on the part of the Commissioner to act on the application within the period prescribed above, the taxpayer affected may, within thirty (30) days from the receipt of the decision denying the claim or after the expiration of the one hundred twenty day- period, appeal the decision or the unacted claim with the Court of Tax Appeals." The provision allows the affected taxpayer to appeal before / the CTA within thirty (30) days from receipt of the decision or 14 Phi/ex Mining Corporation vs. Commissioner of Internal Revenue, CTA Case No. 7587, December 8, 2009. 000138

DEGSJON CTA C4SE NO. 8044 PageJJ of28 from inaction of the Commissioner of Internal Revenue after the lapse of the one hundred twenty (120)-day period. Paramount however, is the timeliness of the filing of the claim for refund or TCC in the administrative as well as in the judicial level. Under Section 112 (A) of the NIRC of 1997, as amended, a taxpayer must file an application for refund or tax credit of unutilized or excess creditable input VAT attributable to its zero- rated or effectively zero-rated sales within two (2) years after the close of the taxable quarter when the sales were made. The ruling of the Supreme Court in the case of Commissioner of Internal Revenue vs. Mirant Pagbilao Corporation (formerly Southern Energy Quezon, Inc.), 15 settled this issue well enough. As carefully explained in the said case, the reckoning of the two-year prescriptive period for the filing of a claim for refund of input VAT under Section 112 (A) of the NIRC of 1997 commences 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. J 15 G.R. No. 172129, September 12, 2008. 000139

DECISION CTA CASE NO. 8044 Page12of28 The subject of the present claim for refund or issuance of a tax credit certificate is petitioner's unutilized or excess creditable input VAT, attributable to zero-rated or effectively zero-rated sales for the first quarter of 2008. Hence, counting from March 31, 2008 or the close of the first quarter, petitioner had until March 31, 2010, within which to file its administrative claim with respondent. Evidently, petitioner's application for refund with the One-Stop-Shop Center of the Department of Finance was filed within the two-year prescriptive period on March 4, 2010. However, the same is not true with filing of the instant Petition for Review. From March 4, 2010 or the date petitioner's application for refund was filed with the BIR and presumably the date of its submission of complete documents supporting its application for refund, the Commissioner of Internal Revenue had one hundred twenty (120) days or until July 2, 2010, within which to decide on the claim. After the lapse of the said 120-day period without any action on her part, petitioner had thirty (30) days or until August 1, 2010, within which to seek judicial recourse. J 000140

DEOSION CTA CASE NO. 8044 Page13of28 In the instant case, petitioner worked against time and prematurely filed its Petition for Review on March 29, 2010 or barely twenty-five (25) days from the filing of its administrative claim, clearly without waiting for the 120-day period to lapse. Evidently, petitioner failed to exhaust the administrative remedies available under the law. As stressed in a litany of cases, a party with an administrative remedy must not only initiate the prescribed administrative procedure to obtain relief, but also pursue to its appropriate conclusion before seeking judicial intervention in order to give the administrative agency an opportunity to decide the matter by itself correctly and prevent unnecessary and premature resort to the court. 16 If a litigant goes to court without first pursuing his administrative remedies, his action is premature as he has no cause of action to ventilate in Court. His case is simply not ripe for judicial determination. 17 But time and again, it has been ruled that failure to exhaust available administrative remedies will not deny the Court of its jurisdiction over the case as the same will amount only to a judicial petition wanting a cause of action. 16 Carale vs. Abarintos, G.R. No. 120704, March 3, 1997. 17 Aboitiz vs. Collector of Customs, 83 SCRA 271; Abe-Abe vs. Manta, 90 SCRA 531. 000141

DECISION CTA CASE NO. 8044 Page14of28 Jurisprudential precept that failure to exhaust administrative remedies is not jurisdictional cannot be denied. The non-exhaustion of administrative remedies merely renders the action premature which means that the claimed cause of action is not ripe for judicial determination and for that reason a party has no cause of action to ventilate in court. 18 Since the failure to exhaust administrative remedies is not jurisdictional, the defense of failure to exhaust administrative remedies is waivable or may be considered waived if not seasonably raised in a motion to dismiss or in the Answer pursuant to Section 1, Rule 9 of the Rules of Court. 19 Under the said provision, defenses and objections not pleaded either in a motion to dismiss or in the answer are deemed waived, except if dismissal is based on the following: (1) lack of jurisdiction; (2) litis pendencia; (3) res judicata; and (4) prescription. An examination of the record shows that respondent failed to raise the defense of prematurity in the filing of the instant petition in his Answer thereto. Neither was respondent able to 18 Supra, note 16. 19 Rule 9, Sec. 1. Defenses and objections pleaded. - Defenses and objections not pleaded either in a motion to dismiss or in the answer are deemed waived. However, when it appears from the pleadings or the evidence on record that the court has no jurisdiction over the subject matter, that there is another action pending between the same parties for the same cause, or that the action is barred by a prior judgment or by statute of limitations, the court shall dismiss the claim. 000.142

DEOSION CTA C4SE NO. 8044 Page15of28 raise it as ground in a Motion to Dismiss. Moreover, it was jointly stipulated 20 that the instant petition was filed with the Court within the period of limitation prescribed under Section 112(C) of the NIRC of 1997, as amended. Such act may be considered as a waiver of the said defense on the part of respondent. In fine, the Court may aptly take cognizance of the instant Petition for Review. On the remaining requirements for the entitlement to a refund, viz, to prove the existence of its alleged zero-rated sales generated pursuant to Section 106(A)(2)(a)(1) of the NIRC, petitioner offered as evidence its Long Term Gold and Copper Concentrates Sale Agreement with Pan Pacific Copper Co., Ltd. of Tokyo, Japan21, Schedule of Export Sales-1st quarter of 200822, Export Declarations23, Bills of Lading 24, Provisional Invoices25, Final Invoices26, Summary of Sales and Remittances for 1st quarter of 200827, Certificates of Remittances issued by local 20 Paragraph 6, Summary of Facts Admitted, Stipulation of Facts and Issues, Docket, p. 40. 21 Exhibit "B". 22 Exhibit "E". 23 Exhibits "E-1" to "E-10". 24 Exhibits "E-1-a" to "E-10-a". 25 Exhibits "E-1-b" to "E-10-b". 26 Exhibits "E-1-c" to "E-10-c". 27 Exhibit "F". 000143

DEGSION CTA CASE NO. 8044 Page 16 of28 banks28, and passbook pages showing amounts credited and dates of remittances. 29 Relevantly, Section 106(A)(2)(a)(1) of the NIRC provides: "SEC. 106. Value-added Tax on Sale of Goods or Properties. - (A) Rate and Base of Tax. - xxx 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)." For an export sale to qualify as VAT zero-rated, the following conditions must concur, to wit: 30 28 Exhibits "F-1" to "F-6". 29 Exhibits "F-1-a" to "F-6-b". 30 Note 14, supra. 000144

DECISION CTA CASE NO. 8044 Page17of28 1. there was sale and actual shipment of goods from the Philippines to a foreign country; 2. the sale was made by a VAT-registered person; 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 (BSP). The fact that petitioner is a VAT-registered entity is not disputed. Thus, the existence of the alleged export sales, including the payment of acceptable foreign currency for such sales, which should be accounted for in accordance with the rules and regulations of the BSP, must be established. The Court-commissioned ICPA Albert G. Alba revealed in his Report31 dated July 20, 2010 that petitioner's zero-rated export sales amounted to US$54,657,954.00 with peso equivalent of Php2,166,288,788.31, as indicated in petitioner's Quarterly VAT Return for the first quarter of 2008, broken down as follows: / Provisional billings for direct exoort of coooer to Jaoan US$ 49 818 459.00 Adjustments to previous quarters' provisional billings 4 839 495.00 Total Zero-rated Sales uss 54 657 954.00 31 See note 9, supra. 000145

DEQSION CTA CASE NO. 8044 Page18of28 Further scrutiny reveals that the amount of US$49,818,459.00 consists of sales to the following: Pan Pacific Copper Co. Ltd. Japan US$ 17 389 736.00 Louis Dreyfus Commodities Metals Suisse SA 15 590 026.00 Louis Dreyfus Commodities Metals Suisse SA 16 838 697.00 Provisional billings for direct export of copper US$ 49,818L459.00 A closer examination of the sales invoices supporting petitioner's direct export sales of copper for the first quarter of 2008 to Louis Dreyfus Commodities Metal Suisse SA of Switzerland in the total amount of US$32,428,723.00 (US$15,590,026.00 + US$16,838,697.00) shows that they were not duly registered with the BIR. Per BIR Permit No. OCN3AU0000030052 dated April 19, 1999, petitioner was authorized to print sales invoices bearing serial numbers from PX2101 to PX2500. 32 However, the invoices supporting petitioner's direct export sales of copper to Louis Dreyfus Commodities Metal Suisse SA of Switzerland had serial numbers PX2540 and PX2542, which were obviously printed outside the authority of petitioner to print. Considering that the sales invoices issued thereto were not duly registered with the BIR in y/' 32 Reflected in final sales invoices marked as Exhibits "E-2-c" and "E-3-c". 000146

DEGSION CTA CASE NO. 8044 Page19of28 violation of Section 237,33 in relation to Section 23834 of the NIRC of 1997, such sales could not qualify for VAT-zero rating. 35 As regards petitioner's direct export sales of copper concentrates to Pan Pacific Copper Co. Ltd. of Japan for the first quarter of 2008 in the amount of US$17,389,736.00, the same qualify for VAT zero-rating. It was established that petitioner sold and actually shipped its mineral products to Pan Pacific Copper Co., Ltd. of Tokyo, Japan and generated export sales in the amount of US$17,389,736.00 as shown in its Schedule of Export Sales36 and various export documents such as provisional 37 and final 38 sales invoices, bills of lading 39, and export declarations40. The foreign currency proceeds of US$17,389,736.00 derived from said export sales were inwardly remitted and 33 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 xxx. 34 SEC. 238. Printing of Receipts or Sales or Commercial Invoices. - All persons who are engaged in business 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 xxx. 35 Phi/ex Mining Corporation vs. Commissioner of Internal Revenue, CTA Case No. 7063, February 24, 2009. 36 Exhibit "E". 37 Exhibit "E-1-b". 38 Exhibit "E-1-c". 39 Exhibit "E-1-a". 40 Exhibit "E-1". 000147

DEGSION CTA CASE NO. 8044 Page20of28 accounted for in accordance with the rules and regulations of the BSP as evidenced by the Summary of Sales and Remittances41 , certification issued by local bank42, and entry in petitioner's passbook with local bank43 . As to the adjustments to correct billings for previous quarter's shipments in the amount of US$4,839,495.00, the Court finds the adjustments proper as shown in the provisional44 and final 45 sales invoices, bills of lading46, and export declarations47 submitted by petitioner. Hence, petitioner's direct export sales of copper concentrate to Pan Pacific Copper Co. Ltd. of Japan for the first quarter of 2008 in the total amount of US$22,229,231.00 (US$17,389,736.00 add US$4,839,495.00) with peso equivalent of Php881,023,352.76 as computed below, qualifies for VAT zero-rating, viz: Declared Zero-Rated Sales in Peso 2,166 288,788.31 54 657 954.00 Divided by Zero-rated Sales in US$ Average peso to dollar rate 39.6335506504 Multiplied by Substantiated Zero-rated Sales in US$ / 22 229 231.00 41 Exhibit "F" 42 Exhibit "F-1". 43 Exhibit "F-1-a". 44 Exhibits "E-4-b" to "E-10-b". 45 Exhibits "E-4-c" to "E-10-c". 46 Exhibits "E-4-a" to "E-10-a". 47 Exhibits "E-4" to "E-10". 000148

DEUS/ON 881,023,352.76 I CTA CASE NO. 8044 Page21 of28 I Substantiated Zero-Rated Sales in Peso With the finding that petitioner has VAT zero-rated export sales for the first quarter of 2008 in the amount of US$22,229,231.00, with peso equivalent of Php881,023,352.76, the determination of the amount of input tax attributable thereto is in order. In its Quarterly VAT Return 48 covering the first quarter of 2008, petitioner reflected an input VAT of Php11,921,092.00 on importations and an input VAT of Php966,413.59 on domestic purchases totaling to Php12,887,505.59, as shown below: Purchases Input Tax Importation of Goods other than Capital Goods p 99 342 433.34 p 11 921 092.00 Domestic Purchase of Services Total 8 053 446.59 966 413.59 p 107,395 879.93 p 12,887 505.59 In support of the above-mentioned input taxes, petitioner presented its Schedule of Input Taxes on Importations of Goods49 and the related Import Entry and Internal Revenue Declarations (IEIRDs) 50, Bureau of Customs Official Receipts/ 48 Exhibit "K-10". 49 Exhibits "G" and "H". 50 Exhibits "G-1-a" to "G-43-a" and "H-1" to "H-16". 000149

DEUS!ON CTA CASE NO. 8044 Page22of28 (ORs) or bank debit advices51 , Schedule of Input Taxes on Domestic Purchases of Services52, and the related suppliers' official receipts53, all examined by the ICPA. Per the !CPA's Report, the following input taxes in the total amount of Php10,689,981.62 should be disallowed from petitioner's claim for failure to meet the substantiation requirements under Sections 110(A) and 113(A) of the NIRC of 1997, as amended by Republic Act No. 9337, and as implemented by Sections 4.110-8 and 4.113-1 of Revenue Regulations No. 14-05, to wit: SUPPLIER DATE EXHIBIT NO. INPUT VAT :1. Input VAT on importation ofgoods supported by original Bureau ofCustoms official receipts (BCORS) 1 bank debit advices (BOAS) andImport Entry and Internal Revenue Declarations {IEIRDS) dated outside period ofclai,.., Fourth quarter of 2007 ABB India 11/19/07 G - 26 I G - 26 -a p 168 455.00 David Brown Gear Industries Limited 11119107 G - 27 I G - 27 - a 112 566.00 Vikinq Pump 11122107 G-28IG-28-a 13 359.00 Cubex Limited 11j_26107 G-291G-29-a 13~05.00 Atlas Copco Rock Drills AB 11128107 G-301G-30-a 29 645.00 Metso Minerals (Asia Pacific) 20 286.00 12105107 G - 31 I G - 31- a Sumitomo(SHI) Cycle Drive Asia Pacific Ltd 12107107 G - 32 I G - 32 - a 238 875.00 Emerson Process Manaqement 12110/07 G-33IG-33-a 40 823.00 Minino Technoloaies Int'l Inc. 121_10107 G-34IG-34-a 36,923.00 Normet Corporation 12/11107 G - 35 I G - 35 - a 14 829.00 Metso Minerals Process Grin 12113107 G-36IG-36-a 33 008.00 Falk Australia pty Ltd 12113107 G - 37 I G - 37 - a 154 196.00 Earnstead International 12118107 G-381G-38-a 9 233.00 Twiflex Limited 121_19107 G-391G-39-a 1~36.00 Metso Minerals France SA 12/26/07 G-40/G-40-a 8 909.00 Metso Minerals Australia 12127107 G-41IG-41-a 117 127.00 51 Exhibits "G-1" to "G-43". 52 Exhibit "I". 53 Exhibits "1-1" to "I-88". 54 Exhibit "G", not dated in the current quarter-fourth quarter of 2007. 000150

DEOSION CTA CASE NO. 8044 Page23of28 Metso Minerals Australia 12/_27/07 G- 42 I G- 42- a 12~61.00 Cubex Limited 12/27/07 G - 43/ G - 43- a 31038.00 Subtotal p 1,306. 274.00 2. Input VAT on importation ofgoods supported by original Import Entry and Internal Revenue Declarations_fiEIRDS} but without machine validation'5 � Shin Caterpillar Mitsubushi Ltd. 01/07/08 H-1 p 1,428,327.00 Alvenius Industries AB 01/10/08 H-2 107 440.00 AlA Enoineerinq Ltd. 01/10/08 H-3 892 836.00 Nasaco International LLC 011_21/08 H-4 136 847.00 Fuji Trading_ Co. Ltd. 01L21/08 H-5 199 948.00 Boart Longyear pty Ltd. 01/21/08 H-6 299,624.00 AlA Engineering Ltd. 01/22/08 H-7 755 615.00 AlA Engineering Ltd. 01/28/08 H-8 891178.00 Unionland International Limited 01/29/08 H-9 260 947.00 AlA Enoineerinq Ltd. 021_27/08 H- 10 1 011 726.00 Imoala Plastics_pty_Ltd. 031_04[08 H- 11 171 655.00 Metso Minerals (JHB) 03/04/08 H- 12 582,966.00 Artmark Associates Inc. 03/05/08 H- 13 649 205.00 AlA Engineering Ltd. 03/05/08 H- 14 859 704.00 Ekof Flotation GMBH 03/05/08 H- 15 144 075.00 Subtotal p 8d9MJ93.00 3. Input VAT on importation ofgoods supported by original Imf"rt Entry and Internal Revenue Declarations_fiEIRDS} dated outside_period ofclaim' . Vikinq Pump 12/12/07 H- 16 p 63 045.00 Subtotal p 63,04S.OO 4. Input VAT on domestic purchases ofservices supported by original VAT official receipts in the name of the~titioner but dated outsidep_eriod ofclaim'7 � Second Quarter of 2008 Wealth Securities Inc. 04/01/08 I- 59 p 1 890.00 Wealth Securities Inc. 04/02/08 I- 60 3 588.48 Crowne Plaza Galleria Manila 04/25/08 I- 61 14 276.98 Second Quarter of 2008 p 19,755.46 Fourth quarter of 2007 Skv Freight Forwarders Inc. 01JfJ7/[)7 I- 62 1 842.32 Famous Pacific Forwarding Phils. Inc. 11/05/07 I- 63 1 495.03 International Container Terminal 11/15/07 I- 64 1 815.48 International Container Terminal 11/16/07 I- 65 57.76 Schenker Phils. Inc. 11/22/07 I- 66 216.00 DHL Global Forwarding (Phils.l Inc. 11/28/07 I- 67 410.76 Ceva Logistics Philipj)ines Inc. 11/28/07 I- 68 675.14 DHL Global Forwarding (Phils.) Inc. 12/01/07 I- 69 108.00 Mercury Freight International Inc. 12/04/07 I- 70 249.60 ZIM Loqistics Philippines Inc. 12/05/07 I- 71 1 121.40 / 55 Exhibit "H", dated in the current quarter. 56 Exhibit "H", not dated within the taxable quarter but dated within the taxable year. 57 Exhibit "!", not dated in the current quarter-second quarter of 2008 and fourth quarter of 2007. 000.151

DEGSION CTA CASE NO. 8044 Page24of28 International Container Terminal 12/05/07 I- 72 885.93 Miascor Logistics Corporation 12/06/07 I- 73 214.67 All Tansport Network Inc. 12/10/07 I- 74 538.80 DHL Global Forwarding (Phils.) Inc. 12/10/07 I- 75 108.00 Filsov ShiPPina Co. Inc. 12/11/07 I- 76 139.82 International Container Terminal 12/11/07 I- 77 400.48 Shoreline Marine Surveyors Co. 12/12/07 I- 78 128.57 DHL Express (Phils.) Corp. 12/12/07 I- 79 114.00 Philippines Skvlanders Inc 12/13/07 I- 80 1 822.17 DHL Global Forwarding (PhiIs.) Inc. 12/13/07 I- 81 381.60 Airspeed International Corp, 12/13/07 I- 82 198.00 DHL Express (Phils.)Coro. 12/14/07 I- 83 Schenker Phils. Inc. 12/19/07 I- 84 66.40 Association of International Shipping 12/19/07 I- 85 108.00 International Container Terminal 12/19/07 I- 86 DHL Global Forwarding (Phils.) Inc. 12/26/07 I- 87 16.07 Philippines Skvlanders Inc 12/28/07 I- 88 2 576.16 Fourth auarter of 2007 p 108.00 64.77 Subtotal p 15 862.92 35.618.38 5. Inout VAT on domestic ourchases ofservices with no suooorting VAT offidal receiots<B. Dated in the current_quarter p 108.00 Schenker Phils. Inc. Mining Petroleum Services Corp. 117 817.11 United Phils. Drilling Co. Inc. 164 198.28 DHL Global Forwarding (Phils.) Inc. 108.00 United PhiliPPines Drillina Co. Inc. 184 817.92 United Philiooines Drillina Co. Inc. 41 942.82 United Philippines Drilling Co. Inc. 153 374.22 United Philippines Drilling Co. Inc. 193 896.24 Subtotal p 856,262.59 6. Input VAT was not separately indicated on the ORs supporting petitioner's domestic purchases. UTI (Global Loaistics) Inc. 01/09/08 I -3 p 144.00 Acestar International Service Corp. 01/16/08 1-8 218.30 Warranted Safe Arrivals Phil. Inc. 01/16/08 I- 9 1 365.77 Airsoeed International Corp. 01/16/08 I- 10 198.00 Association of International Shipping 01/22/08 I - 12 16.07 Association of International Shipping 01/23/08 I- 16 2.68 Association of International Shipping 01/25/08 I- 20 18.75 Transworld Brokeraae Corp. 02/01/08 I- 28 196.80 Crowne Plaza Galleria Manila 02/08/08 I- 35 11160.00 Ocean Link Container Terminal Center 02/08/08 I- 36 1 048.24 Skv Freight Forwarders Inc. 02/15/08 I- 40 1 048.25 Crowne Plaza Galleria Manila 02/21/08 I- 41 11 378.33 Nearos Naviaation Co. 02/27/08 I- 45 3 545.30 Association of International Shipping 02/27/08 I- 46 18.75 Skv Freight Forwarders Inc. 03/07/08 I- 53 327.04 58 Exhibit "J". 0001.52

DEOSION CTA CASE NO. 8044 Page25of28 Cameos Lanuza Co. Inc. 03/31/08 I- 57 6 819.12 Campos Lanuza Co. Inc. 03/31/08 I- 58 6 240.00 30,42S.03 Subtotal p 1 877.73 7. Input VAT on domestic purchases supported by NON VAT official receipts. 4J91.79 6.069.S2 Sky Freight Forwarders Inc. 01/25/08 I- 18 p Sky Freight Forwarders Inc. 03/28/08 I- 56 Subtotal p 8. Discrepancy between Input VAT per claim and Input VAT per supporting VAT OR. Peooles Air Cai"Qo and WarehousinQ Co. Inc. 02/27/08 I- 47 per claim p 370.25 per suooortino (176.15) Subtotal p 194.10 Grand Total p 10,689,981.62 From the foregoing table, only the amount of Php2,197,523.97 (Php12,887,505.59 less Php10,689,981.62) representing petitioner's valid input tax attributable to its declared zero-rated sales for the first quarter of 2008 may be claimed for refund or TCC. However, a portion of the substantiated input tax of Php2,197,523.97 shall be applied against petitioner's reported output VAT liability of Php403,320.5959 . Consequently, only the remaining input VAT of Php1,794,203.38 can be attributed to the entire zero-rated sales of Php2,166,288,788.31 and only the input VAT of Php729,697.30 is attributable to the substantiated zero-rated sales of Php881,023,352.76, computed as follows:/ 59 Exhibit "K-10", Line 156. 000153

DEaSION CTA CASE NO. 8044 Page26of28 Substantiated Input VAT p 2,197,523.97 less: Output Tax for the 1st Quarter Excess Input Tax attributable to zero-rated sales 403 320.59 Substantiated Zero-rated Sales p 1,794,203.38 Divided by Total Reported Zero-Rated Sales Multiplied by Substantiated Excess Input VAT p 881,023,352.76 Excess Input Tax Attributable to 2 166 288 788.31 Substantiated Zero-Rated Sales 1 794 203.38 p 729 697.30 Finally, petitioner's Quarterly VAT Returns60 from the second quarter of 2008 to the first quarter of 2010 proved that the input VAT of Php1,794,203.38 was not applied against any output VAT in the succeeding quarters. Even though petitioner carried over the claimed unutilized input VAT for the first quarter of taxable year 2008 to the succeeding second quarter of 2008 until the fourth quarter of 2009, the same was deducted as "Any VAT Refund/TCC Claimed"61 from the total available input tax of Php119,712,651.93 in the fourth quarter of 2009. In other words, the subject claim no longer formed part of the excess input VAT of Php105,894,938.5562 as of the fourth quarter of 2009, which was carried over to the succeeding first quarter of 2010. 63 / 60 Exhibits "K-11" to "K-18". 61 Exhibit "K-17", line 23D. 62 Exhibit "K-17", line 29. 63 Exhibit "K-18". 000~54

DEaSJON CTA C4SE NO. 8044 Page27of28 WHEREFORE, the instant Petition for Review is hereby PARTIALLY GRANTED. Accordingly, respondent is hereby ORDERED TO REFUND in favor of petitioner the amount of SEVEN HUNDRED TWENTY-NINE THOUSAND SIX HUNDRED NINETY-SEVEN PESOS AND THIRTY CENTAVOS (Php729,697.30), representing the latter's excess/unutilized input tax attributable to substantiated zero-rated sales for the first quarter of 2008. SO ORDERED. ON-VICTORINO We concur: Q.......;;:~ o~ ERNESTO D. ACOSTA Presiding Justice ON LEAVE ERLINDA P. UY Associate Justice 000155

DEGSION CTA CASE NO. 8044 Page28of28 CERTIFICATION Pursuant to Article VIII, Section 13 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's Division. 0E~.N...E.ASliT:>O. (b.....A_ D. ACOSTA Presiding Justice 0001.56