PHILEX MINING CORPORATION v. COMMISSIONER OF INTERNAL REVENUE

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY SECOND DIVISION PH I LEX MINING CORPORATION, C.T.A. CASE NO. 8284 Petitioner, Members: -versus- CASTANEDA, JR.,Chairperson CASANOVA, and MINDARO-GRULLA, JJ. COMMISSIONER OF INTERNAL Promulgated : REVENUE, JUL 30 2012L Respondent. \ 7 2 ~ 2.$ ,.,. . X- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - X DECISION CASANOVA,!,.: The Petition for Review1, filed by petitioner, Philex Mining Corporation, seeks the refund of the amount of P14,117,705.07 representing petitioner's excessjun utilized input taxes for the fourth quarter of 2008. Petitioner is a domestic corporation organized under Philippine laws with principal office at 27 Brixton St., Pasig City. It is engaged in the mining business, including the exploration and operation of mine properties and the commercial production and marketing of mine products. 2 Respondent is the government official charged with the administration and enforcement of national interna l revenue laws, including the granting of refund o~ 1 Docket, pp. 000007-0000 II 2 Stipu latio n of Facts and Issues (" SF I"), par. I, Summary of Facts Admitted, Docket, p. 40

DECISION CTA CASE NO. 8284 tax credit of taxes erroneously or illegally collected, and other refundable or creditable taxes under the Tax Code, with address at BIR National Office, Diliman, Quezon City. 3 The facts of the case, as culled from the records, are as follows: Petitioner is VAT-registered with VAT Registration Certificate No. 35-6- 000731 effective October 29, 1997, under BIR Form No. 2303 as of January 31, 1997. Petitioner, likewise, had its Application for Zero-Rate, pursuant to Sec. 4.100-3 of Revenue Regulations No. 7-95, approved effective April 12, 1998.4 On March 11, 2004, petitioner entered into a Long Term Gold and Copper Concentrates Sales Agreement5 with Pan Pacific Copper Co., Ltd. of Tokyo, Japan for the sale by petitioner to Pan Pacific of copper concentrates starting April 1, 2004. Petitioner made four (4) shipments of its mineral products to its foreign buyers for the 4th quarter of 2008 in the total sales amount of US$53,174,409.6 On January 23, 2009, petitioner filed its original VAT return for the 4th quarter of 2008 and, subsequently on April 27, 2011, its Amended VAT Return which reflected the following: 7 Total zero-rated sales P1,453,670,679.21 Importation of goods 116,240,301.67 Input Tax P13,948,836.20 Purchases of services 1,407,240.59 Input Tax p 168,868.8 ~ 3 " SF!", par. 2, Summary of Facts Adm itted , Ibid 4 " SF!", Summary of Facts Admitted, par. 3, Ibid 5 Exhibit " 8 " 6 Memorandum for the Petitioner, The Facts, par. 2, Docket, p. 78 7 " SF !", Summary of Facts Admitted, par. 4, Docket, p. 4 1

DECISION CTA CASE NO. 8284 Petitioner filed its administrative claim for refund/tax credit with the One Stop Shop Center (OSS) of the Department of Finance on December 8, 2010 for the amount of P14,117,705.07, per Application No. 62464.8 To protect its rights and interest due to respondent's inaction on its claim for refund/tax credit, petitioner filed the instant Petition for Review on May 3, 2011, for its claim covering the 4th quarter of 2008. In her Answer9, filed on May 27, 2011, respondent interposed the following Special and Affirmative Defenses: "4. Petitioner's claim for tax refund is subject to administrative investigation and/or examination by the respondent; 5. Taxes paid and collected are presumed to have been paid in accordance with law and regulations, hence, not refundable; 6. Moreover, in order to validly claim for tax refund, it is imperative for petitioner to prove its compliance with the following, viz: A. The registration requirements of a Value- Added taxpayer under the pertinent provision of the National Internal Revenue Code (NIRC) of 1997, as amended and its implementing revenue regulations; B. The invoicing and accounting requirements for VAT-registered persons, as well as the filing and payment of VAT pursuant to the provisions of Section 113 and 114 of the National Internal Revenue Code (NIRC) of 1997, as amended. Failure to comply with the invoicing requirements on the documents supporting the sale of goods and services will result in the disallowance of the claim for input tax of the taxpayer claimant (Revenue Memorandum Circular No. 42 - 2003);~ 8 " SF!", Summ ary of Admitted Facts, par. 2, Docket, p. 4 I 9 Docket, pp . 24-27

DECISION CTA CAS E NO. 8284 C. The submission of complete documents in support of the administrative claim for tax refund pursuant to Section 112(C) of the National Internal Revenue Code (NIRC) of 1997, as amended, otherwise, there would be no sufficient compliance with regard to the filing of administrative claim for tax refund which is a condition sine qua non prior to the filing of such claim; D. That the input taxes of P14,117,705.07 allegedly representing excess and unutilized input taxes for the 4th Quarter of 2008, were: 1. Paid by petitioner; 2. Attributable to its zero-rated or effectively zero-rated sales; and 3. Such input taxes paid should not have been applied against any output tax. E. The petitioner's claim for tax refund allegedly representing excess and unutilized input taxes for the 4th Quarter of 2008 in the amount of P14,117,705.07 was filed within two (2) years after the close of the taxable quarter when the sales were made in accordance with Section 112(A) of the National Internal Revenue Code (NIRC) of 1997, as amended. 7. Accordingly, the claimants of those refunds bear the burden of proving the factual basis of their claims and of showing, by words too plain to be mistaken, that the legislative intended to exempt them; 8. And finally, basic is the rule that tax refunds are in the nature of tax exemptions and are to be construed strictisisimi juris against the entity claiming the same. Moreover, statutes in derogation of sovereignty such as those containing exemption from taxation should be strictly construed in favor of the State. In this regard, taxation is the rule and exemption is the exception. The law does not look with favor on tax exemption and that he who would seek to be thus privileged must justify it by words too plain to be mistaken and too categorical to be misinterpreted ~

DECISION CTA CASE NO. 8284 On July 19, 2011, the parties filed their Stipulation of Facts and Issues10 which was subsequently approved by this Court per its Resolution promulgated on July 20, 2011. 11 After presentation of its evidence, petitioner filed its Formal Offer of Evidence12 on December 13, 2011, which was admitted by the Court except for Exhibits "F-2-a" and "F-5-a" which were denied admission for not being found in the records of the case. Respondent, having manifested that she will not be presenting evidence, this Court issued a Resolution 13 on February 29, 2012 ordering both parties to submit their respective Memorandum within thirty (30) days from the hearing of February 29, 2012. On March 23, 2012, petitioner filed its Memorandum For the Petitioner14 while respondent filed her Memorandum15 on March 30, 2012. In a Resolution 16 promulgated on April 3, 2012, the case was submitted for decision. The lone issue jointly stipulated by the parties for resolution of this Court is: "Whether or not petitioner is entitled to the refund or tax credit of the alleged excess and unutilized input taxes in the total amount of P14,17,705.07 (sic) for the 4th quarter of 2008."1~ 10 Docket, pp . 40-41 I I Ibid, p. 43 12 Ibid . pp . 66-69 13 Ibid, p. 75 14 Ibid, pp . 77-9 1 15 Ibid , pp . 92-96 16 Ibid . p. 97 17 "SFI", Statement of Issue , Docket, p. 4 1

DECISION CTA CASE NO. 8284 Upon consideration of the findings, disallowances and recommendation of the Court-commissioned independent Certified Public Accountant (ICPA), petitioner prays for the reduced amount of claim of P2,567,435.71 in its Memorandum For the Petitioner filed on March 23, 2012. Thus, this Court will consider the reduced amount as the subject claim of this Petition for Review. Petitioner contends that the legal basis for its claim for refund is Section 112(A) of the National Internal Revenue Code (NIRC) of 1997. Section 112(A) of the NIRC of 1997, provides: "SEC. 112. Refund of 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 issuance of a tax credit certificate or a 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 Banko Sentral ng Pilipinas (SSP): 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 : x x x" The above-quoted provision lays down the requirements for the issuance of tax credit certificate or refund of creditable input tax due or paid attributable to zero-rated sales which must be complied with by the taxpayer-claimant, to wit: 1. the taxpayer is VAT-registered ~

DECISION CTA CASE NO. 8284 2. the taxpayer is engaged in sales which are zero-rated or effectively zero-rated; 3. the creditable input tax due or paid must be attributable to such sales and were not applied against output VAT liability; 4. the foreign currency exchange proceeds thereof had been duly accounted for in accordance with BSP rules and regulations; 5. the claim must be filed within two (2) years after the close of the taxable quarter when such sales were made. With regard to the first requirement, the same is one of the facts admitted by the parties in their duly approved and admitted Stipulation of Facts and Issues. Petitioner's VAT return for the 4th quarter of 2008 reflected zero-rated export sales in the total amount of P1,453,670,679.21 18 . The Court- commissioned ICPA, Mr. Albert G. Alba, noted that this export sale has a US dollar value of US$29,385,558.0019, broken down as follows: Provisio nal Billings for direct export sales of copper to Japan US$ 53 ,174,409.00 Adjustments to previous quarters' provisional billings (23,788,851 .00) US$ 29,385,558.00 Petitioner claims that its shipments and sales of mineral products to Pan Pacific Copper Co. of Tokyo, Japan, a foreign buyer are zero-rated pursuant to Section 106(A)(2)(a)(l) of the NIRC of 1997, as amended. The said section reads as follows: "SEC. 106. Value-Added Tax on Sale of Goods or Prope r t ie s . - '(A) Rate and Base of Tax. -~ 18 Line 17 Exhibit " L-2" 19 EXhI.b.It ,

DECISION erA CAS E NO. 8284 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)." The said provision, however, should not be taken in isolation but should be read in conjunction with Section 113 of the same Code as implemented by Section 4.113-1 of Revenue Regulations (RR) No. 16-2005. Thus, pursuant to the above-quoted provisions, in relation to Section 113(A)(1), (B)(1)(2)(C) 20 of the same Code and Sections 4.113-1(A)(1), B(1) and (2)(C) 21 of Revenue Regulations No. 16-2005, any VAT-registered personfO..._ 20 Sec. 11 3(A)( I), (B)( I), (2), (C) ofN IRC of 1997, as amended "SEC. 113. In voicin g and Accountin g Requirements for VAT-Reg istered Perso ns. - "(A) In voicin g Requirements. - A VAT-registered person sha ll issue : "( I) A VAT invoice for every sa le, barter or exchange of goods or prope1ties; and "(2) A VAT officia l recei pt for every lease of goods or properties, and for every sa le, barter or exchange of se rvices. "(B) Inform a tion Co ntain ed in VAT In voice or VAT Official Rece ipt.- The fo ll owing information sha ll be indicated in the VAT invoi ce or VAT official recei pt: "( I) A statem ent that the se ll er is a VAT-registered person, foll owed by hi s Taxpayer' s Identification Number (T IN); "(2) The total amo unt which the purchaser pays or is ob ligated to pay to the se ll er with the indi cation that such amount inc ludes the va lue-added tax: Provided, That: XXX XXX XXX "(c) If the sa~l e is subj ect to zero percent (0%) value-added tax, the term 'ze ro- rated sa le' shall be written or printed prominently on the invoice or rece ipt; xxx" 21Sec. 4.1 13-1 of Revenue Regulat ions No. I6-2005 "SEC. 4. 113- 1. Invoicing Requirem ents. - (A) A VAT-registered person sha ll issue the followin g: ( I) A VAT invoice for every sa le, barter or exchange of goods or propert ies; and XXX XXX XXX (B) Inform a tion contained in VAT invoice or official receipt. - Th e fo ll owing informat ion shall be indicated in VAT in vo ice or VAT official receipts : ( I) A statement that the se ll er is a VAT-registered person, followed by hi s T IN;

DECISION CTA CASE NO. 8284 claiming VAT zero-rated direct export sales must present at least three (3) types of documents, to wit: (a) the sales invoice as proof of sale of goods; (b) the export declaration and bill of lading or airway bill as proof of actual shipment of goods from the Philippines to a foreign country; and (c) bank credit advice, certificate of bank remittance or any other document proving payment for the goods in acceptable foreign currency or its equivalent in goods and services. In addition to the above requirements, the sales invoices supporting the export sales must be registered with the Bureau of Internal Revenue and contain all the required information under Section 23722 in relation to Section 23823 of the NIRC of 1997 such as the imprinted word "zero-rated" and the taxpayer's TIN - VAT number. Pursuant to its Long Term Gold and Copper Concentrate Sales Agreement with Pan Pacific Copper Co., Ltd. of Tokyo, Japan24, for the period covering the fourth quarter of 2008, petitioner actually shipped mineral products to Pan Pacific ~ (2) The total amount which the purchaser pays or is obligated to pay to the se ll er with the indication that such amount includes the VAT; Provided, That: XXX XXX XXX (c) If the sa le is subj ect to zero percent (0%) va lue-added tax , the term ' zero-rated sa le' shall be writte n or printed prominently on th e invoice or rece ipt; xxx" 22 "SEC. 237. Iss ua nce of Receipts or Sales or Co mm ercial In vo ices. - All persons subj ect to an internal revenue tax shall, for each sa le or transfer of merchandi se or for services rendered valued at Twenty-five pesos (P25) or more, issue du ly registered receipts or sa les or commercial invoices, prepared at least in duplicate, showing th e date of tran saction , quantity, unit cost and description of merchandise or nature of serv ice ...." 23 "SEC. 238. Printin g of Receipts or Sa les or Co mm ercial In vo ices. - All persons who are engaged in business shall sec ure from the Bureau of Internal Revenue an authority to print recei pts or sa les or commercia l invoices before a printer can print the sa me. "No authority to print rece ipts or sa les or commercial invoices shall be granted unl ess the receipts or invoices to be printed are seri ally numbered and sha ll show, among other things, the name, business sty le, Taxpayer Ident ification Number (T IN) and business address of the person or entity to use the same, and such other information that may be required by rul es and regu lations to be promulgated by the Secretary of Fin ance, upon recommendation of th e Commissioner." 24 Exhibit " 8 "

DECISION CTA CASE NO. 8284 Copper, Ltd. of Tokyo, Japan and generated export sales, as shown in petitioner's Schedule of Export Sales25 and various export documents. While the Court noted that the final invoices submitted by petitioner bear dates much later than the dates of shipment indicated in the bills of lading and provisional invoices, petitioner explained that in its direct exports of copper concentrates, it issues two invoices to the buyer. The first is the Provisional Invoice which it issues upon shipment covering 90% of the estimated value of the shipment and the second is the Final Invoice which petitioner issues only after it and its buyer have reached an agreement regarding the final settlement weights, assays and quotations or final value of the shipment, which are determined or done after arrival of the shipment at the port of loading. 26 In other words, the considered date of the sale transaction is the shipment date indicated in the bill of lading. Considering that the bill of lading covering export sales of US$53,174,409.00 were all dated within the fourth quarter of 2008, the related final invoices which carry dates much later than the dates when the sales or shipments were made, are deemed valid. To substantiate its export sales for the 4th quarter of taxable year 2008 and that the foreign exchange proceeds thereof were duly accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP), petitioner proffered its provisional invoices27, final invoices28, bills of ~ 25 Exhibit " E" 26 Clause of Ex hib it " B" 27 Exhibits " E- 1-b" to " E-4-b" 28 Exhib its " E- 1-c" to " E-4-c"

DECISION CTA CASE NO. 8284 lading29, export declarations30, certificates of inward remittances31, and passbook pages showing amounts and dates of remittances32 � Likewise, the foreign currency proceeds derived from said export sales were inwardly remitted and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas as evidenced by the bank certifications issued by petitioner's banks33 and entries in petitioner's passbooks in local banks of the payments received. 34 As to adjustments to correct billings for the previous quarter's shipments in the amount of negative US$23,788,851.00, this Court finds the adjustments proper as shown by provisional35 and final invoices36, bills of lading37 and export declarations38 submitted by petitioner. In fine, petitioner's export sales for the fourth quarter of 2008 in the amount of US$29,385,558 with the peso value equivalent to P1,453,670,679.21 qualify for VAT zero-rated rating. We shall now proceed to determine whether or not petitioner incurred or paid input taxes in connection with its zero-rated export sales and if said input taxes were not applied against any output VAT liability of petitioner.~ 29 Exhibits "E- 1-a" to "E-4-a" 30 Exhibits "E- 1" to "E-4" 31 Exhibits"F- I" to "F-6" 32 Exhibits " F-1-a" to "F-6-a" 33 Ex hibits " F-1" to " F-7" 34 Ex hibits " F- 1-a" to " F-6-a" 35 Ex hibits " E-5 -b" to "E- 12-b" 36 Exhib its " E-5-c" to "E-12-c" 37 Exhibits " E-5-a" to " E-1 2-a" 38 Exhibits "E-5" to "E-1 2"

DECISION CTA CASE NO. 8284 Petitioner's amended VAT return for the 4th quarter of 200839 reflected an input VAT of P13,948,836.20 on importations and input VAT of P168,868.87 on domestic purchases of services totaling to P14,117,705.07, as shown below : Importations - Goods other than Capita l Goods Purchases Input Tax Domest ic Purc hase of Serv ices ~ 116,240,3 01 .67 ~ 13,948,836.20 Total I ,4 0 7,24 0 .59 168,868 .87 J! 117,647,542.26 J! 14,117,705.07 However, the total input VAT of P13,948,836.20 on importations includes the amount of P1 1,5 10, 182.20, as computed below, representing amortization of input taxes on importation of capital goods from the fourth quarter of 2006 to fourth quarter of 2007 which has been previously filed with this Court for refund or issuance of a tax credit certificate, thus constitute a double claim: Input taxes paid on importation of capital goods p, 7,854,823. 00 4th quarter of 2006 13,78 3,800.00 1st quarter 2007 13,3 91 ,381 .00 2nd quarter 2007 12,378 ,170.00 3rd quarter 2007 10 , 14 2 ,737.00 4th quarter 2007 Total p, 57,550,911.00 Five-year amortization period in month s 60.00 Monthly amortization No . of months in a year p, 959,181.85 12.00 p, 11 ,510,182.20 Thus, petitioner's recomputed input VAT claim on importations for the fourth quarter of 2008 amounts to P2,438,654.00 (Pl3,948,836.20 less P11,510,182.20), which may be further broken down as follows: Particulars Amoun t In put taxes paid o n importation: a Suppo1t ed by ori g ina l BCO Rs/ BDAs and lEIRDs (Exhibits G- 1 to G-3 0-a) p, I,466,924 .00 I . Dated in the current 4th q uarter of 2008 754,2 15.00 2. Out of peri od rece ipts dated 3rd qtr of 2008 p, 2,22 1,139.00 39 Exhib it " L-2"

DECISION CTA CASE NO. 8284 b Supported by ori g in a l BCORs/ BDAs only (Exhibits H- 1 to H- 5) 128, 125 .00 I. Dated in th e current 4th quarter of 2008 2. O ut of peri od rece ipts dated 3rd qtr of 2008 79 ,4 6 2 . 0 0 c No supporting BCORs o r lElRDs p 207,587.00 TOTAL 9,928.00 p 2,438,654.00 As regards the input taxes on domestic purchases, the Court- commissioned ICPA noted the following findings40: Particulars p 111 ,717.79 a. Original VAT official receipts (Exhibits J-1 to J-126 3 1,3 4 3.72 1 Dated in the current 4th quarter of 2008 p 143,061. 51 2 Out ofperiod receipts dated 3rd qtr of2 008 25 ,807.36 b. No supporting VAT official receipts p 168,868.87 TOTAL Based on the above !CPA's findings, petitioner's claim in the amount of P900,756.08 shall be disallowed outright for the reasons summarized as follows : Particulars Imoortation Domestic Total a Supported by ori g inal BCORs/ BDAs and lElRDs dated p 754,2 15. 00 p 754,215.00 3rd qu arter of 2008 79 ,4 6 2. 00 79,462 .00 b Suppot1ed by ori g in a l BCORs/ BDAs o nl y dated 3rd 9 ,9 2 8.00 p 3 1,343 .72 31,343.72 quat1er of 2008 p 843,605.00 25 ,807.36 35,735.36 c Suppot1ed by ori g inal VAT offi c ia l rece ipts dated 3rd p 900,756.08 p 57,151.08 quarter of 2008 c No supportin g docum ents TOTAL Moreover, after a scrutiny of the documents (such as the Schedule of Input Taxes on Importation of Goods41 and the related Import Entry and Internal Revenue Declarations (IEIRD's), Bureau of Customs Official Receipts or bank debit advices4 2 Schedule of Input Taxes on Domestic Purchases of Services43 and~ , 40 Exhibit " D", page 5 4 1 Exhibit "G" 42 Exhi bits " G-1 " to "G-30" "G- 1-a" to "G-30-a" " H- I" to " H-5" 43 Exhi bi t " J" ' '

DECISION CTA CASE NO. 8284 the related suppliers' official receipts44) supporting the remaining input taxes of P1 ,706,766 .79 (P2,438,654.00 plus P168,868.87 less P900,756 .08) this Court finds that the following input taxes should be disallowed from petitioner's claim for fa ilure to meet the substantiation requirements under Sections 110(A) and 113(A) of the NIRC of 1997, as amended, and as implemented by Sections 4.11 0-8 and 4.113-1 of Revenue Regulations No. 16-2005 : Suppl ie r In put Exhibits VAT 1) 1) Input Taxes on Importa ti on of Goods Supported by Origin a l BOC OR's or Ba nk Deb it Advices Only The amount of VAT of which cannot be determined DFC Cera mics P32,668.00 "H- 1" Not dated Mining Technologies lnt'l In c. I, 184.00 "H-4" Sub -to t a l P33,852.00 2) Inpu t Taxes on Domestic Purchases of Se rvices supported by doc um ents other th a n offi cia l receipts Supported by Cash Transaction Billing Invoice Asian Terminal Inc. p 86 .63 "J-6 " "J-7" Supported by Cash Transaction Billing Invoice Asian Terminal Inc. 400.48 "J- 13" "J-1 4" Supported by Cash Transaction Bi ll in g Invoice Asian Terminal Inc. 288.78 "J- 16" Supported by Cash Transaction Billing Invoice Asian Terminal Inc. 400.48 "J-17" "J-18" Sub-tota l Assoc. Of Intern ation al Shipping Lin es P1 ,176.37 "J-39" Supported by Clearance p 16.07 "J-40 " "J-55" Supported by Clearance Assoc. Of International Shipping Lines 18 .75 "J-78" "J-79" Supported by Clearance Assoc. Of International Shipping Lin es 5.36 "J-80" Supported by Clearance Assoc. Of Internation al Shipping Lines 16 .07 "J-66" Su pported by Clearance Assoc. Of International Shipping Lines 18 .75 Supported by Clearance Assoc. Of International Shipping Lines 2.68 Supported by Clearance Assoc. Of International Shipping Lines 16.07 Supported by Clearance Assoc. Of International Shipping Lines 18 .75 Supported by Clearance Assoc. Of Internat ional Shipping Lines 90.00 Sub-tota l p 202.50 Supported by Invoice Ex peditors Philippines Inc. 942 .01 Sub-tota l 942.01 TOTAL P36, 172.88 Therefore, only the remaining cla im in the amount of P1,670,593.91 (P1 ,706, 766.79 less P36,172.88) represents petitioner's substantiated input tax~ 44 Exhibits "J-1 " to "J-1 26"

DECI SION CTA CASE NO. 8284 which is attributable to its zero-rated sales for the 4th quarter of 2008, tabulated herein below for easy reference: Input VAT claimed Input VAT on Input VAT on Total Outright disallowances Importation Domestic Purchases p 2,607,522. 87 Total p 2,438,654.00 Additional Di sallowances p 168,868. 87 900,7 56 .08 Substantiated Input VAT 843,605.00 57,15 1.08 Pl ,706,766.79 p 1,595 ,049.00 p 111 ,7 17.79 36, 172. 88 33 ,852.00 2,320.88 !!1,670,593.91 I! 1,561,197.00 I! 109,396.91 Not all of the substantiated input VAT claim of P1,670,593.91, however, is refundable. Pursuant to Section llO(A) of the NIRC of 1997, as amended, in relation to Section 4.110-3 of RR No. 16-2005, input VAT claim on capital goods purchases attributable to zero-rated sales may be claimed in full during the month of acquisition, or spread over a period of time, depending on the aggregate acquisition cost, excluding the VAT component thereof, of the capital goods in the calendar month. If the aggregate acquisition cost exceeds P1 Million, the claim for input tax should be spread over 60 months or the estimated useful life of the capital goods, whichever is shorter. On the other hand, if the aggregate acquisition cost does not exceed P1 Million, the total input taxes will be allowable as credit in the month of acquisition. Records show that the substantiated input VAT on importation in the amount of P1,561,197.00, pertains to petitioner's purchases of capital goods, the aggregate acquisition of which exceeded P1 Million in the calendar month except for the month of December for purchases amounting to P855,141.67 with the related input VAT of P102,617.00. Thus, the input VAT of P1,458,580.00 shall b~

DECISION CTA CASE NO. 8284 spread over 60 months while the input VAT for December in the amount of P102,617.00 shall be allowable for refund/credit in full. Consequently, out of the P1,561,197.00 input VAT incurred by petitioner on capital goods, only the amount of P169,169.32 is creditable or refundable as of December 31, 2008, computed as follows: A ll owab le Inpu t VAT Date Ex hibit Supplier Amount Input VAT Remainin g Total (2008) Month of Mo nths 15-0ct Life Acq ui siti on (2008) 2 1-0ct 2 1-0ct G-l ,G-1-a IN DL Technomasters INC. ~ 96,683.33 ~ 23 ,602.00 60 ~ 393.37 ~ 786.73 P,.J , l80. 10 22-0ct 24 - 0 c t G-2,G-2-a JVSP Marketing Corp. Branch I , 298 ,825.00 155,859.00 60 2,597.65 5, 195 .30 7, 792.95 27-0ct 30-0ct G-3,G-3-a Phoeni x Co nveyor Belt System 4,426,908.33 53 1,229.00 60 8,853 .82 17,707.63 26,56 1.45 7-Nov G-4,G-4-a JV SP Marketing Co rp. Branch 2,482 ,350.00 297,882.00 60 4,964.70 9,929.40 14,894. 10 11-Nov G-5,G-5-a Metritape Inc. 34 7,258.33 41 ,671.00 60 694.52 1,3 89.03 2,083.55 13-Nov G-6,G-6-a Mining Technologies lnt'l. Inc. 129,766.67 15,572 .00 60 259.53 519 .07 778.60 14-Nov G-7,G-7-a lndioator Company 84 ,7 00.00 10, 164.00 60 169.40 338.80 508.20 16-Nov Total for O ctober 2008 ~8,966, 4 9 1 .66 ~ I ,075,979.00 ~53,798.95 17-Nov G-8,G-8-a Varian Austra li a PTY LTO ~ 307,866 .67 ~ 36,944.00 60 ~ 615.73 ~ 6 15.73 ~ 1,23 1.47 18-Nov G-9,G-9-a Metritape Inc. 342,366 .67 4 1,084.00 60 684.73 684.73 1,369.47 19-Nov G- IO,G- Equipos Mineros S.A. 38 1,408.33 45,769.00 60 762.82 762.82 I ,525.63 AESCO Intern ati onal PTE 427 ,966.67 5 1,356.00 60 855.93 855.93 1,7 11.87 21-Nov I 0-a LTD. 338,250.00 40,590.00 60 676.50 676.50 I,353.00 G-II ,G - Metritape Inc. 206,375.00 24,765.00 60 412.75 4 12.75 24 -Nov 119 .62 11 9.62 825.50 11-a Sepor Inc. 59 ,808.33 7,177.00 60 503.12 503 . 12 239 .23 24-Nov G- 12,G- Hooks Industrial Inc. 25 1,558.33 30,187.00 60 336.08 336.08 1,006.23 26-Nov Boart Longyear PTY LTO 168,04 1.67 20, 165.00 60 843.12 843.12 672. 17 12-a DFC Cerami cs 421 ,558.33 50,587.00 60 506. 10 506.10 I ,686.23 11-Dec G- 13,G- Equipos Mineros S.A. 253 ,050.00 30,366.00 60 1,0 12.20 12-Dec 13-a G- 14,G- 14-a G- 15,G- 15-a G-16,G- 16-a G-1 7,G- 17-a G-18 ,G- 18-a H-2 AESCO Internati onal PTE LTD. 30,09 1. 67 3,6 11.00 60 60.18 60. 18 120.37 G- 19,G- Total for Nove mber 2008 ~3. 188,34 1.67 ~ 382,601.00 ~ 11 ,955.00 ~ 12 ,753.37 19-a SYCWIN Coatin g and Wires ~ 99,625.00 ~ II ,955 .00 ~11 , 955 .0 0 In c. H-3 Onesteel Wire Pty Limited 755 ,516.6 7 90,662.00 90,662.00 90,662.00 Total for Dece mb er 20 10 ~ 855, 14 1.67 ~ 102,6 17.00 ~ 102 , 617.00 TOTAL ~ 13 ,009,975.00 ~ 1 ,56 1 , 19 7.00 ~ 169 , 169.32 ...

DECISION CTA CASE NO. 8284 Pag e 17 of 20 In addition, the input VAT on domestic purchases found to be fully substantiated and not exceeding P1 Million in the amount of P109,396.91 is likewise refundable/creditable in full. However, a portion of the substantiated and amortized input VAT on domestic purchases and importations of P278,566 .23 (P169,169.32 plus P109,396.91) shall be applied against petitioner's reported output VAT liability of P4,285.7245 . Consequently, only the remaining input VAT of P274,280.51 can be attributed to the entire zero-rated sales declared and substantiated by petitioner, as herein below computed: Substantiated and amortized input VAT P 169,169.32 Imp ortati on 109 ,396.91 Domestic purchases P 2 7 8 ,566.23 Total 4 ,2 85.72 Less: Output VAT Refundable Input VAT attributable to zero-rated sales P 2 7 4 ,280.51 As evidenced by its Quarterly VAT Returns from the 3rd quarter of 200846 to 2nd quarter of 201047, petitioner was able to prove that the input VAT of P274,280.51 was not applied against any output VAT in the succeeding quarters. While petitioner carried over the claimed unutilized input VAT for the 4 th quarter of 2008 to the succeeding quarters until the 2nd quarter of 2010, the same was deducted as "Any VAT Refund/TCC Claimed"48 from the total available input tax of P263,182,399.1949 in the 2nd quarter of 2010. ~ 45 Line 158 Exhibit " L-2" 46 Exhibit " L-1 " 47 Exhib it " L-8" 48 Exhibit " L-8 Line 230" 49 Exhibit " L-8 Line22"

DECISION CTA CASE NO. 8284 Pag e 18 of 20 We shall now determine the timeliness of the filing of petitioner's administrative and judicial claims. The present claim pertains to the input VAT incurred for the fourth quarter of CY 2008. Under Section 112(A) of the NIRC of 1997: "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. x x x." From December 31, 2008, the close of the taxable quarter covering the fourth quarter of CY 2008, petitioner had until December 31, 2010, within wh ich to file its administrative claim . Thus, petitioner's administrative claim for refund/tax credit, filed on December 8, 2010, with the One-Stop Shop Center (OSS) of the Department of Finance under Application No. 6246450 for the amount of P14,117,705.07, was timely filed. Going now to the timeliness of the filing of petitioner's judicial claim, Section 112(C) [formerly Sec. 112(D)] of the NIRC of 1997, provides thus: "Sec. 112. Refunds or Tax Credits of Input Tax.- (A) X X X. (C) Period within which Refund or Tax Credit ofInput 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 taxpayeraz. 50 Exhibit " M "

DECISION CTA CASE NO. 8284 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." Pursuant to the above provision, the 120-day period commences to run on December 8, 2010 and will expire on April 7, 2011. Upon denial of the claim or the expiration of the 120-day period without any action by the commissioner thereon, only then may the taxpayer-claimant seek judicial recourse to appeal the commissioner's action or inaction on a refund/tax credit claim within a period of 30 days therefrom or until May 7, 2011. Thus, petitioner's judicial claim, the instant Petition for Review, filed on May 3, 2011, was seasonably filed. WHEREFORE, premises considered, the instant Petition for Review is hereby PARTIALLY GRANTED. Respondent is hereby ORDERED TO REFUND OR ISSUE TAX CREDIT CERTIFICATE to petitioner in the reduced amount of P274,280.51 representing its unutilized input VAT for the 4th quarter of 2008. SO ORDERED. ~ CAESAR A. CASANOVA Associate Justice WE CONCUR: Sh.,__A_..~c. ~~ S),, fuANIT-oc. CASTANEDA~JR.: Associate Justice N.t\11~ - G~ 0 N. MINDARO-GRULLA Associate Justice

DECISION CTA CASE NO. 8284 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. JU~AN~iT-OC:. CLAScTA.NE~DA/, 1fQi.~. Associate Justice Chairperson, Second Division 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. ~-[9. 0-....r\.__ ERNESTO D. ACOSTA Presiding Justice