MAXIMA MACHINERIES, INC., v. COMMISSIONER OF INTERNAL REVENUE

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY SECOND DIVISION MAXI MA MACHINERIES, CTA CASE NO. 9598 I NC., Members: Petitioner, -versus- Castaneda, Jr., Chairperson, Mindaro-Grulla, Bacorro-Villena, 11. COMMISSIONER OF zo y Promulgated : I NTERNAL REVENUE, JAN 2 2 Respondent. y J: 111."" x------------------------------------------------------------------- -------------x DECISION CASTAN EDA, JR.,}..: THE CASE This Petition for Review filed by Maxima Machineries, Inc. on May 24, 2017, prays for the issuance of a tax credit certificate in the amount of P104,580,305.56, allegedly representing its unutilized input value-added tax (VAT) allocable and directly attributable to its VAT zero-rated sales for the period covering October 1, 2014 to March 31, 2015.1 THE PARTIES Petitioner is a domestic corporation duly organized and existing under and by virtue of the laws of the Republic of the Philippines, with principal business address at 871 Quezon Avenue, ?<-- 1 Summary of t he Case, Pre-Trial Order dated Aug ust 15, 2017, Docket, Vol. V, p. 1898.

CTA Case No. 9598 Maxima Machineries, Inc. vs. Commissioner ofInternal Revenue Quezon City. 2 It is registered with the Bureau of Internal Revenue (BIR) under Tax Identification Number (TIN) 006-618-023-00000.3 On the other hand, respondent Commissioner of Internal Revenue is empowered to perform the duties of his office, including acting upon on protests cases and approval of claims for refund or tax credit as provided by law and implementing regulations. He can be served with pleadings, notices, and other processes at BIR National Office Bldg., BIR Road, Diliman, Quezon City.4 ANTECEDENTS (ADMINISTRATIVE LEVEL) For the period covering the subject claim, petitioner filed with the BIR its Quarterly VAT Returns (BIR Form No. 2550-Q) on the following dates: PERIOD VAT RETURN DATE OF FILING 3rd Quarter- Fiscal Year (FY) Quarterly VAT Return January 23, 2015 2015 (Original)5 June 19, 2015 (October 1, 2014 to December Quarterly VAT Return 31, 2014) (Amended)6 April 21, 2015 4th Quarter- FY 2015 Quarterly VAT Return July 6, 2015 (January 1, 2015 to March 31, (Oriqinalf 2015) Quarterly VAT Return (Amended)8 On December 28, 2016, petitioner filed with the BIR an Application for Tax Credits/Refunds (BIR Form No. 1914) of its unutilized input VAT, covering the 3rd and 4th Quarters of FY 2015, amounting to 1'>36,551,575.64 and !'>68,028,729.92, respectively. 9 JJz- 2 Exhibits "P-1" and "P-2", Docket, Vol. V, pp. 2012 to 2026. 3 Exhibit "P-3", Docket, Vol. V, pp. 2027 to 2029. 4 Par. A.1, Joint Stipulation ofFacts and Issues (JSFI), Docket, Vol. V, p. 1869. 5 Exhibit "P-76", Docket, Vol. V, pp. 2154 to 2155. 6 Exhibit "P-77", Docket, Vol. V, pp. 2156 to 2157. 7 Exhibit "P-78", Docket, Vol. V, pp. 2158 to 2159. 8 Exhibit "P-79", Docket, Vol. V, pp. 2160 to 2161. 9 Exhibit "P-93", Docket, Vol. V, pp. 2177 to 2215.

CfA Case No. 9598 Maxima Machineries, Inc. vs. Commissioner ofInternal Revenue However, the said administrative claim was denied by Ole- Assistant Commissioner, Teresita M. Angeles, in her letter dated April 24, 2017, which was received by petitioner on April 25, 2017.10 PROCEEDINGS BEFORE THIS COURT Petitioner then filed the instant Petition for Review with this Court on May 24, 2017. 11 On June 21, 2017, respondent filed his Answer,12 interposing the following defenses, to wit: "3.1 After review and evaluation of the supporting documents submitted by petitioner, which were found to be altered, its administrative claim for refund was denied. The examination of the supporting certified photocopies of the invoices official receipts for local purchases as well as Import Entry Documents together with Bank Confirmations of VAT payment for importation were made in accordance with the requisites under Sec. 113(A), (B) and Sec. 237 of the National Internal Revenue Code of 1997(NIRC of 1997), as amended, and Sec. 4.113-1(A) and (B) of Revenue Regulation No. 16-2005. 3.2 Since the documents submitted by petitioner were mere photocopies, the authenticity of the entries/information cannot be ascertained outright. The revenue officers cannot merely rely upon the affidavit of the certifying representative/officer of petitioner as to the validity of the invoices/official receipts even if the representative/officer affixed his signature on each and every photocopy of the invoices/official receipts. In addition, the revenue officers found additional entries made in the photocopied documents as to the name indicated as customer, address, business style and/or TIN of petitioner after the issuance of the invoice/official receipt to comply with the invoicing requirements. To reiterate, as the documents were mere photocopies, the revenue officers have [no] means to determine whether the entries were authentic. 3.3 Evaluation of petitioner's Import Entry Documents and Bank Confirmations on VAT payment was based on the provisions of Section 107 of the NIRC and Sec. 4.110-8 of RR 16- 2005. It was noted that the supporting documents submitted were again mere photocopies and the back portion of the Import Entry 'fL 10 Exhibit "P-97", Docket, Vol. V, pp. 2216 to 2218. 11 Docket, Vol. I, pp. 10 to 52. 12 Docket, Vol. II, pp. 717 to 721.

CTA Case No. 9598 Maxima Machineries, Inc. vs. Commissioner ofInternal Revenue Documents showing the basis for the VAT on importation was not included rendering the documents insufficient to support the VAT amount claimed. Attached as Annex 'A' hereof are the discrepancies noted in the supporting documents submitted by petitioner. 3.4 Hence, the following analysis of input tax available for refund: 3rd Quarter Fiscal Year 31 March 2015 1 October 2014 to 31 December 2014 ANALYSIS ON INPUT TAX PURCHASES INPUT TAX PER VAT RETURN 19,991,186.17 2,398,942.34 DOMESTIC PURCHASE OF GOODS IMPORTATION OF GOODS OTHER 880,395,559.19 115,594,865.00 THAN CAPITAL GOODS 43,880,934.00 5,267,712.08 DOMESTIC PURCHASE OF SERVICES TOTAL CURRENT INPUT TAX 123,259,519.42 LESS: OUTPUT TAX FOR THE QTR 76,163.284.36 INPUT TAX AVAILABLE FOR REFUND 47,096,235.06 LESS: INPUT TAX DISALLOWANCE PER REFUND AUDIT 7,124,210.55 VT-1 IMPROPER INVOICING ON 48,244,182.00 LOCAL PURCHASES (8.272.157 .49) VT-2 NO IMPORT ENTRY DOCUMENTS, NO BANK CERTIFICATION ON VAT PAYMENT; INSUFFICIENT SUPPORT (NO BACK PORTION OF IED) EXCESS OF DISALLOWANCE OVER AVAILABLE INPUT TAX FOR REFUND 4TH QUARTER FISCAL YEAR 31 PURCHASES INPUT TAX MARCH 2015 25,973,292.08 3,116,795.05 1 JANUARY 2015 TO 31 MARCH 2015 ANALYSIS ON INPUT TAX: 1,503, 735,800.76 183,321,012.00 VAT PER RETURN 39, 546,209.17 4,745,545.10 DOMESTIC PURCHASE OF GOODS IMPORTATION GOODS OTHER THAN 191,183,352.15 CAPITAL GOODS 140,097,923.47 DOMESTIC PURCHASES OF SERVICES TOTAL CURRENT INPUT TAX 51.085.428.68 LESS: OUTPUT TAX FOR THE QTR 7,751,415.86 INPUT TAX AVAILABLE FOR REFUND LESS: INPUT TAX DISALLOWANCE 1 PER REFUND AUDIT 185.866.048.00 VT-1 IMPROPER INVOICING ON LOCAL PURCHASES (142.532.035.18) tz...- VT-2 NO IMPORT ENTRY DOCUMENTS, NO BANK CERTIFICATION ON VAT PAYMENT; INSUFFICIENT SUPPORT (NO BACK PORTION OF IED) EXCESS DISALLOWANCE OVER AVAILABLE INPUT TAX FOR REFUND

CTA Case No. 9598 Maxima Machineries, Inc. vs. Commissioner ofInternal Revenue 4. In the case of Commissioner of Internal Revenue vs. CE Luzon Geothermal Power Company, Inc., CTA EB No. 1397 (CTA Case No. 7393}, 7 June 2017, the Honorable Court En Bane ruled: 'A distinction must, thus, be made between administrative cases appealed due to inaction and those dismissed at the administrative level due to the failure of the taxpayer to submit supporting documents. If an administrative claim was dismissed by the CIR due to the taxpayer's failure to submit complete documents despite notice/request, then the judicial claim before the CTA would be dismissible, not for lack of jurisdiction, but for the taxpayer's failure to substantiate the claim at the administrative level. When a judicial claim for refund or tax credit in the CTA is an appeal of an unsuccessful administrative claim, the taxpayer has to convince the CTA that the CIR had no reason to deny its claim. It, thus, becomes imperative for the taxpayer to show the CTA that not only is he entitled under the substantive law to his claim for refund or tax credit, but also that he satisfied all the documentary and evidentiary requirements for an administrative claim. It is, thus, crucial for a taxpayer in a judicial claim for refund or tax credit to show that its administrative claim should have been granted in the first place. Consequently, a taxpayer cannot cure its failure to submit a document requested by the BIR at the administrative level by filing the said document before the CTA. X X X" The pre-trial conference case was set and held on July 20, 2017. 13 The Respondent's Pre-Trial Briefwas filed on July 5, 2017;14 while the Pre-Trial Brief for the Petitioner was submitted on July 17, 2017. 15 r Respondent transmitted the SIR Records for the instant case on August 1, 2017. 16 13 Notice of Pre-Trial Conference dated June 28, 2017, Docket, Vol. II, pp. 715 to 716; Minutes of the hearing held on, and Order dated, July 20, 2017, Docket, Vol. V, pp. 1839 to 1840. 14 Docket, Vol. II, pp. 725 to 729. 15 Docket, Vol. IV, pp. 1806 to 1836. 16 Respondent's Compliance, Docket, Vol. V, pp. 1841 to 1843.

CTA Case No. 9598 Maxima Machineries, Inc. vs. Commissioner ofInternal Revenue The parties submitted their Joint Stipulation of Facts and Issues (JSFI) on August 4, 2017Y Thereafter, the Pre-Trial Order dated August 15, 2017 was issued,18 approving and adopting the said JSFI, and deeming the pre-trial terminated. The trial of the case then ensued. During trial, petitioner presented documentary and testimonial evidence. As for its testimonial evidence, petitioner offered the testimonies of the following individuals: (1) Mr. Yusuke Yamada/9 petitioner's Chief Financial Officer; (2) Atty. Conrado M. Briones/0 Court-commissioned Independent Certified Public Accountant (ICPA)21 ; and (3) Jenelyn Palayon-Tagao/2 petitioner's Chief for Government Compliance. The ICPA Report was submitted on November 28, 2017. 23 On December 20, 2017, petitioner filed its Formal Offer of Evidence. 24 Respondent filed his Comment (Re: Petitioner's Formal OfferofEvidence)on December 22, 2017.25 On January 3, 2018, petitioner filed a Manifestation and Omnibus Motion, 26 praying for the Court to: (1) admit the Amended ICPA Report and USB submitted by ICPA Conrado M. Briones; (2) set a hearing date for the presentation of ICPA to identify the Amended !CPA Report, (3) defer the resolution of petitioner's Formal Offer of Evidence; (4) allow the petitioner to submit an Amended Formal Offer of Evidence to include the ICPA Report; and (5) cancel the ~ 17 Docket, Vol. v, pp. 1869 to 1891. 18 Docket, Vol. v, pp. 1898 to 1909. 19 Exhibit "P-102", Docket, Vol. IV, pp. 1156 to 1182; Minutes of the hearing held on, and Order dated, August 30, 2017, Docket, Vol. V, pp. 1924 to 1925. 20 Exhibit "P-209", Docket - Vol. V, pp. 1955 to 1967; Exhibit "P-213", Docket - Vol. V, pp. 2265 to 2269; Minutes of the hearing held on, and Order dated, December 4, 2017, Docket, Vol. V, pp. 1968 to 1969; Minutes of the hearing held on, and Order dated, April 2, 2018, Docket, Vol. V, pp. 2270 to 2271. 21 Oath of Commission dated September 14, 2017, Docket, Vol. V, p. 1926; Minutes of the hearing held on, and Order dated, September 14, 2017, Docket, Vol. V, pp. 1927 to 1929. 22 Exhibit "P-210", Docket, Vol. III, pp. 736 to 746; Minutes of the hearing held on, and Order dated, December 4, 2017, Docket, Vol. V, pp. 1968 to 1969. 23 Exhibit P-207. 24 Docket, Vol. v, pp. 1979 to 2010. 25 Docket, Vol. V, pp. 2226 to 2227. 26 Docket, Vol. V, pp. 2229 to 2232.

CTA Case No. 9598 Maxima Machineries, Inc. vs. Commissioner ofInternal Revenue presentation of respondent's evidence set on February 26, 2018. Respondent failed to file his comment thereon.27 In the Resolution dated February 22, 2018,28 the Court noted petitioner's Manifestation; granted petitioner's motion to set the case for the identification of the Amended ICPA Report; set the presentation of the ICPA on April 2, 2018; directed petitioner to submit the !CPA's Judicial Affidavit at least five (5) days before the said date; granted petitioner's motion to allow the submission of an Amended Formal Offer of Evidence to include the Amended ICPA Report; gave petitioner a period of five (5) days to submit the Amended Formal Offer of Evidence; gave respondent the same period from the above hearing date to file his comment thereon; held in abeyance the resolution on petitioner's Formal Offer of Evidence and motion to admit the Amended ICPA Report and USB; and cancelled the initial presentation of respondent's evidence on February 26, 2018. On April 10, 2018, petitioner filed its Supplemental Formal Offer ofEvidence. 29 Respondent failed to file his comment thereon.30 In the Resolution dated May 18, 2018,31 the Court admitted petitioner's Exhibits, exceptfor the following: 1) Exhibits "P-13"I "P-15"I "P-40"I "P-46"I and "P-48"I for failure to submit originals for comparison; and 2) Exhibits "P-19", "P-45", "P-174-sc", and "P-183-z", for not being found in the records of the case. At the hearing held on May 30, 2018,32 which was set for respondent's presentation of evidence, petitioner's counsel manifested that he will file a Motion for Partial Reconsideration to the Court's Resolution on petitioner's Formal Offer of Evidence. Thus, petitioner was granted a period of ten (10) days to file the said ~ 27 Records Verification dated February 12, 2018, issued by the Judicial Records Division of this Court, Docket, Vol. V, p. 2242. v, 2a Docket, Vol. pp. 2258 to 2260. v, 29 Docket, Vol. pp. 2272 to 2276. 30 Records Verification dated April 23, 2018 issued by the Judicial Records Division of this Court, Docket, Vol. V, p. 2278. 31 Docket, Vol. VI, pp. 2281 to 2282. 32 Minutes of the hearing held on, and Order dated, May 30, 2018, Docket, Vol. VI, pp. 2283 to 2286.

CTA Case No. 9598 Maxima Machineries, Inc. vs. Commissioner ofInternal Revenue Motion. Furthermore, petitioner made a Tender of Excluded Evidence of Exhibits "P-13", "P-15", "P-40", "P-46" and "P-48". In the same hearing, respondent presented his lone witness, Ms. Gracielle Cecilia S. Anaban, a Revenue Officer of the BIR, and orally offered Exhibits "R-1", "R-2" and "R-3". There being no objection interposed by the petitioner, the Court admitted the foregoing exhibits. On May 30, 2018, petitioner filed a Motion for Partial Reconsideration, 33 praying for the Court to admit Exhibits "P-174-sc" and "P-183-z", as its evidence. Respondent failed to file his comment thereon. 34 In the Resolution dated September 5, 2018,35 the Court granted petitioner's Motion for Partial Reconsideration, and admitted Exhibits "P-174-sc" and "P-183-z", and gave the parties thirty (30) days within which to file their respective memorandum. Subsequently, petitioner filed its Memorandum on November 16, 2018;36 while respondent failed to file his memorandumY Thus, in the Resolution dated December 4, 2019,38 the case was considered submitted for decision. However, on December 11, 2018, respondent filed a Motion to Admit Attached Memorandum,39 stating the he failed to file his memorandum due to inadvertence and heavy volume of work. In the Resolution dated February 4, 2019,40 the Court granted petitioner's Motion to Admit Attached Memorandum, and admitted the attached Memorandum. In the same Resolution, the Court '}<-- 33 Docket, Vol. VI, pp. 2287 to 2290. 34 Records Verification dated July 2, 2018 issued by the Judicial Records Division of this Court, Docket, Vol. VI, p. 2298. 35 Docket, Vol. VI, pp. 2300 to 2301. 36 Docket, Vol. VI, pp. 2307 to 2349. 37 Records Verification dated November 19, 2018 issued by the Judicial Records Division of this Court, Docket, Vol. VI, p. 2351. 38 Resolution dated December 4, 2018, Docket, Vol. VI, p. 2352. 39 Docket, Vol. VI, pp. 40 Docket, Vol. VI, pp.

erA Case No. 9598 Maxima Machineries, Inc. vs. Commissioner ofInternal Revenue recalled and set aside the Resolution dated December 4, 2018, and deemed submitted anew for decision the instant case. THE ISSUE RAISED The parties submitted this sole issue for this Court's resolution,41 to wit: "WHETHER PETITIONER IS ENTITLED FOR TAX REFUND FOR THE EXCESS UNUTILIZED INPUT VALUE ADDED TAX (VAT) ALLOCABLE AND DIRECTLY ATTRIBUTABLE TO ITS VAT ZERO RATED SALES FOR THE PERIOD FROM 01 OCTOBER 2014 TO 31 MARCH 2015 AMOUNTING TO PHP104,580,305. 56." Petitioner's argument: Petitioner argues that its claim for tax refund should be granted because all the elements necessary are present. Respondent's counter-arguments: Respondent claims that he denied petitioner's administrative claim for refund on the ground that the latter submitted supporting documents that were mere photocopies, thus, the authenticity of the entries/information therein cannot be ascertained outright. Respondent also claims that since a Decision has been rendered in this case denying petitioner's administrative claim for refund for failure to substantiate the same, petitioner cannot submit documents that it did not submit at the administrative level. Likewise, respondent insists that this Court should only settle the issue on whether the denial was proper given the evidence submitted at the administrative level. c;z__ 41 Par. 9.2, JSFI, Docket, Vol. V, pp. 1869 to 1870.

CTA Case No. 9598 Maxima Machineries, Inc. vs. Commissioner ofInternal Revenue THE COURT'S RULING The Court finds no merit in the instant Petition for Review. Petitioner failed to show that respondent should not have denied its administrative claim in the first place. Respondent invokes the ruling of the Supreme Court in the case of Pilipinas Total Gas, Inc. vs. Commissioner of Internal Revenue ("Pilipinas Total Gas case'')42 � Relative thereto, respondent avers that since he rendered a decision in the administrative level, this Court's jurisdiction becomes strictly appellate in nature. Respondent further argues that since he rendered a decision, the jurisdiction of this Court shifts from a trial court to an appellate tribunal, and thus, this Court should confine itself to the determination of whether the findings of respondent are consistent with law. We agree with respondent. In the Pilipinas Total Gas case, the Supreme Court said: "At this stage, a review of the nature of a judicial claim before the erA is in order. In Atlas Consolidated Mining and Development Corporation v. CIR,43 it was ruled- x x x First, a judicial claim for refund or tax credit in the CTA is by no means an original action but rather an appeal by way of petition for review of a previous, unsuccessful administrative claim. Therefore, as in everv appeal or petition for review. a petitioner has to convince the appellate court that the quasi- judicial agency a quo did not have any reason to deny its claim. In this case, it was necessary for petitioner to show the CIA not only that it was entitled under substantive law to the grant of its claims but also that it satisfied all the documentary and evidentiary requirements for 'fL- 42 G.R. No. 207112, December 8, 2015. 43 G.R. No. 145525, March 15, 2007.

CfA Case No. 9598 Maxima Machineries, Inc. vs. Commissioner ofInternal Revenue an administrative claim for refund or tax credit. Second, cases filed in the erA are litigated de novo. Thus, a petitioner should prove every minute aspect of its case by presenting, formally offering and submitting its evidence to the erA. Since it is crucial for a petitioner in a judicial claim for refund or tax credit to show that its administrative claim should have been granted in the first place, part of the evidence to be submitted to the erA must necessarily include whatever is required for the successful prosecution of an administrative claim. A distinction must, thus, be made between administrative cases appealed due to inaction and those dismissed at the administrative level due to the failure of the taxpayer to submit supporting documents. If an administrative claim was dismissed by the CIR due to the taxpayer's failure to submit complete documents despite notice/request, then the judicial claim before the erA would be dismissible, not for lack of jurisdiction, but of the taxpayer's failure to substantiate the claim at the administrative level. When a judicial claim for refund or tax credit in the CTA is an appeal of an unsuccessful administrative claim. the taxpayer has to convince the CTA that the CIR had no reason to deny its claim. It, thus, becomes imperative for the taxpayer to show the CTA that not only is he entitled under substantive law to his claim for refund or tax credit, but also that he satisfied all the documentary and evidentiary requirement for an administrative claim. It is. thus. crucial for a taxpayer in a judicial claim for refund or tax credit to show that its administrative claim should have been granted in the first place. Consequently, a taxpayer cannot cure its failure to submit a document requested by the BIR at the administrative level by filing the said document before the erA." (Emphases and underscoring ours) Based on the foregoing doctrinal declarations by the High Court, it is now settled that as in every appeal or petition for review, a petitioner has to convince the appellate court that the quasi-judicial agency a quo did not have any reason to deny its claim; and it is necessary for a petitioner to show this Court not only that it was entitled under substantive law to the grant of its claims but also that it satisfied all the documentary and evidentiary requirements for an administrative claim for refund or tax credit. It is crucial for a taxpayer in a judicial claim for refund or tax credit to show that its administrative claim should have been granted in the first place, and should not have been denied. r;z,

CfA Case No. 9598 Maxima Machineries, Inc. vs. Commissioner ofInternal Revenue A careful observation of what transpired in the proceedings before this Court would reveal that petitioner presented its case as if its administrative claim was never acted upon or that there was no decision for this Court to review on appeal per se. In other words, petitioner presented its case before this Court as if it was an original action, despite that respondent had denied its administrative claim. Petitioner did not specifically assail the reasons or bases why its administrative claim was denied in the first place by respondent. It did not argue that the said reasons or bases of respondent were never justified in law. For easy reference, the denial letter dated April 24, 201744 of respondent reads: "CLAIM FOR VAT TCC/ REFUND APR 24 2017 MR. YUSUKE YAMADA CHIEF FINANCE OFFICER MAXIMA MACHINERIES, INC. 871 Quezon Avenue, Brgy. Sta. Cruz Quezon City Sir: Please be informed that your Application for VAT Tax Credit Certificate (TCC) amounting to P36,551,575.64 and P68,028,729,92 for period October 1, 2014 to December 31, 2014 (3'd Quarter Fiscal Year 2015) and January 1, 2015 to March 31, 2015 (41h Quarter Fiscal Year 2015) as filed with the Regular Large Taxpayer Audit Division I was reviewed, evaluated and appropriately acted upon. In reviewing the basis for such claim, we took into consideration the provisions and requisites provided under the National Internal Revenue Code (NIRC) of 1997, as amended, Executive Order (EO) No. 226 as amended by Republic Act (RA) No. 8756, Revenue Memorandum Circular (RMC) No. 54-2014, the guidelines set forth by the Board of Investments (BOI) and Securities and Exchange Commissioner (SEC), relevant decisions laid down by the Court of Tax Appeals (CTA), and documents/records submitted by your Office in support of its claim for tax refund. AUDIT FINDINGS )"V 44 Exhibit "P-97", Docket, Vol. V, pp. 2216 to 2218.

CTA Case No. 9598 Maxima Machineries, Inc. vs. Commissioner ofInternal Revenue Claims for refund are construed strictly against the claimant In evaluating the subject application for VAT Refund of Maxima Machineries, Inc., MMI for brevity, the undersigned revenue officers were guided by the rule that claims for refunds partake of the nature of tax exemptions, and as such, are regarded as in derogation of sovereign authority. (Commissioner ofInternal Revenue vs. Ledesma, 31 SCRA 95) Thus, claim for tax credit/refund are construed strictissimi juris against the taxpayer, which consequently requires that the evidence in support of the claim must likewise be strictly scrutinized and duly proven. (Commissioner of Internal Revenue vs. Procter and Gamble Philippines Mfg. Corp., 204 SCRA 377; Commissioner of Internal Revenue vs. Tokyo Shipping Co., Ltd., 244 SCRA 332). Invoicing and Documentary Requirements The examination of the supporting certified photocopies of the invoices and official receipts for local purchases as well as Import Entry Documents together with Bank Confirmations of VAT payment for importation were made in accordance with the requisites under Sec. 113(A), (B) and Sec. 237 of the NIRC of 1997, as amended, and Sec. 4.113-1 (A) and (B) of Revenue Regulation No. 16-2005. As these were photocopies, the authenticity of the entries/information cannot be ascertained outright. We likewise cannot merely rely upon the affidavit of the certifying representative/officer of MMI as to the general validity of the invoices/official receipts even if the representative/officer affixed his signature upon each and every photocopy of the invoices/official receipts. In addition. there appears to be additional entries made in the photocopied as to the name indicated as customer. address, business style and/or TIN of MMI after the issuance of the invoice/official receipt to comply with the invoicing requirements. However. as these are mere photocopies. there was no means to definitely determine or conclude whether the entries were authentic or regularized. Moreover, evaluation of MMI's Import Entry Documents and Bank Confirmations on VAT payment was based on the provisions of Sec. 107 of the NIRC and Sec. 4.110-8 of Revenue Regulation No. 16-2005. It was noted that the supporting documents submitted were mere photocopies and the back portion of the Import Entry Documents showing the basis for the VAT on importation was not included rendering the documents insufficient to support the VAT amount claimed. Attached to this report is the summary of findings or discrepancies noted per scrutiny of the photocopies of the 'f1-

CfA Case No. 9598 Maxima Machineries, Inc. vs. Commissioner ofInternal Revenue invoices/official receipts/Import Entry Documents as contained in various folders as submitted by MMI. Please refer to Annex A for the discrepancies noted in the supporting documents covering the October 1, 2014 to December 31, 2014 refund application and to Annex B for the discrepancies noted in the supporting documents covering the January 1, 2015 to March 31, 2015 refund application. The analysis of input tax available for refund is presented in the table below: 3'd QUARTER FY MARCH 31, 2015 10.01.14 TO 12.31.14 ANALYSIS ON INPUT TAX PURCHASES INPUT TAX PER VAT RETURN 19,991,186.17 2,398, 942.34 DOMESTIC PURCHASE OF GOODS IMPORTATION OF GOODS OTHER 880,395,559.19 115,594,865.00 THAN CAPITAL GOODS 43,880,934.00 5,267,712.08 DOMESTIC PURCHASE OF SERVICES TOTAL CURRENT INPUT TAX 123,259,519.42 LESS: OUTPUT TAX FOR THE QTR 76.163,284.36 INPUT TAX AVAILABLE FOR REFUND 47,096,235.06 LESS: INPUT TAX DISALLOWANCE PER REFUND AUDIT 7,124,210.55 VT-1 IMPROPER INVOICING ON 48.244,182.00 LOCAL PURCHASES (8.272.157.49) VT-2 NO IMPORT ENTRY DOCUMENTS, NO BANK CERTIFICATION ON VAT PAYMENT; INSUFFICIENT SUPPORT (NO BACK PORTION OF lED) EXCESS OF DISALLOWANCE OVER AVAILABLE INPUT TAX FOR REFUND 4th QUARTER FY MARCH 31, 2015 01.01.15 TO 03.31.15 ANALYSIS ON INPUT TAX PURCHASES INPUT TAX VAT PER RETURN 25' 973,292.08 3,116,795.05 DOMESTIC PURCHASE OF GOODS 183,321,012.00 IMPORTATION GOODS OTHER THAN 1,503, 735,800.76 4,745,545.10 CAPITAL GOODS 39, 546,209.17 191,183,352.15 DOMESTIC PURCHASES OF 140,097,923.47 SERVICES 51.085.428.68 TOTAL CURRENT INPUT TAX 7,751,415.86 LESS: OUTPUT TAX FOR THE QTR INPUT TAX AVAILABLE FOR REFUND 185.866.048.00 ;-.. LESS: INPUT TAX DISALLOWANCE PER REFUND AUDIT VT-1 IMPROPER INVOICING ON LOCAL PURCHASES VT-2 NO IMPORT ENTRY DOCUMENTS, NO BANK CERTIFICATION ON VAT PAYMENT; INSUFFICIENT SUPPORT (NO BACK PORTION OF lED)

CTA Case No. 9598 Maxima Machineries, Inc. vs. Commissioner ofInternal Revenue EXCESS DISALLOWANCE OVER AVAILABLE INPUT TAX FOR (142.532.035.18) REFUND In view of the evaluation and review dutifully performed based on the afore-mentioned provisions and documents presented, please be advised that the Application for VAT TCC of MAXIMA MACHINERIES, INC. the periods October 1, 2014 to December 31, 2014 amounting to P36,551,575.64 and January 1, 2015 to March 31, 2015 amounting to P68,028,729,92 are hereby DENIED. Very truly yours, CAESAR R. DULAY Commissioner of Internal Revenue By: (Signed) TERESITA M. ANGELES OIC-Assistant Commissioner Large Taxpayers Service" (Underscoring ours) With the foregoing discussions, petitioner should have argued and proved before this Court that the above-stated findings do not stand, pursuant to the pertinent provisions of law and jurisprudence, especially in relation to the submitted documents by it at the administrative level, for being mere photocopies, and with regard to the BIR's analysis of input VAT, noting certain discrepancies. To stress, petitioner failed to show that respondent should not have denied its administrative claim in the first place, since it has submitted sufficient documents and the noted discrepancies are not meritorious. As regards respondent's non-reliance to "photocopies" submitted by petitioner, the same may be justified under existing jurisprudence. In Commission of Internal Revenue vs. Hantex Trading Co., Inc.,45 the Supreme Court ruled: "xxx...the general rule is that administrative agencies such as the BIR are not bound by the technical rules of '7r- 45 G.R. No. 136975, March 31, 2005.

CTA Case No. 9598 Maxima Machineries, Inc. vs. Commissioner ofInternal Revenue evidence. It can accept documents which cannot be admitted in a judicial proceeding where the Rules of Court are strictly observed. It can choose to give weight or disregard such evidence, depending on its trustworthiness. xxx. Mere photocopies of the Consumption Entries have no probative weight if offered as proof of the contents thereof. The reason for this is that such copies are mere scraps of paper and are of no probative value as basis for any deficiency income or business taxes against a taxpayer. Indeed, in United States v. Davey,46 the U.S. Court of Appeals (2"d District) ruled that where the accuracy of a taxpayer's return is being checked, the government is entitled to use the original records rather than be forced to accept purported copies which present the risk of error or tampering. XXX XXX XXX The original copies of the Consumption Entries were of prime importance to the BIR. This is so because such entries are under oath and are presumed to be true and correct under penalty of falsification or perjury. Admissions in the said entries of the importers' documents are admissions against interest and presumptively correct. In fine, petitioner acted arbitrarily and capriciously in relying on and giving weight to the machine copies of the Consumption Entries in fixing the tax deficiency assessments against the respondent." (Emphases and underscoring ours) On the basis of the foregoing jurisprudential pronouncements, while administrative agencies, such as the BIR, are not bound by technical rules of evidence, it may, nevertheless, choose to give weight or ignore evidence submitted to it, depending on its trustworthiness. Such being the case, the BIR, as an administrative agency, is given leeway to decide whether to give weight or ignore any evidence submitted to it, depending on its trustworthiness. Respondent was thus justified in not relying on the photocopies submitted by petitioner at the administrative level, and in denying, on the basis thereof, petitioner's administrative claim. In fine, having failed to show that respondent should not have denied its administrative claim in the first place, the instant Petition for Review must already be denied. Nevertheless, even when We are to ignore the ruling in the Pilipinas Total Gas case, the instant judicial claim is still not meritorious. ')t.- 46 543 F.2d 996 (1976).

CTA Case No. 9598 Maxima Machineries, Inc. vs. Commissioner ofInternal Revenue In order that petitioner may validly claim for refund of its supposed unutilized input VAT allegedly attributable to its zero-rated sales for the period covering October 1, 2014 to March 31, 2015, it is imperative that it proves compliance with certain legal requirements. Requisites for the grant of the refund or issuance of TCC under the law. Section 112 of the NIRC of 1997, as amended by Republic Act (RA) No. 9337,47 provides: "SEC. 112. Refunds or Tax Credits ofInput 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 8angko Sentral ng Pilipinas (8SP): 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(8)(6), the input taxes shall be allocated ratably between his zero-rated and non- zero-rated sales. XXX XXX XXX (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. ~ 47 AN ACT AMENDING SECTIONS 27, 28, 34, 106, 107, 108, 109, 110, 111, 112, 113, 114, 116, 117, 119, 121, 148, 1S1, 236, 237 AND 288 OF THE NATIONAL INTERNAL REVENUE CODE OF 1997, AS AMENDED, AND FOR OTHER PURPOSES.

CTA Case No. 9598 Maxima Machineries, Inc. vs. Commissioner ofInternal Revenue 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." Pursuant to the above-quoted provision, jurisprudence has laid down certain requisites which must be complied with by the taxpayer-applicant to successfully obtain a credit/refund of input VAT. Said requisites are classified into certain categories, to wit: Timeliness of the filing of the administrative and judicial claims: 1. the claim is filed with the BIR within two (2) years after the close of the taxable quarter when the sales were made;48 2. in case of full or partial denial of the refund claim, or the failure on the part of the Commissioner to act on the said claim within a period of 120 days from the date of submission of complete documents in support of the application, the judicial claim must be filed with this Court, within 30 days from receipt of the decision or after the expiration of the said 120-day period;49 Taxpaver's registration with the BIR: 3. the taxpayer is a VAT registered; 50 Taxpaver's output VAT: 4. the taxpayer is engaged in zero-rated or effectively zero- rated sales; 51 Jt.- 48 Intel Technology Philippines, Inc. vs. Commissioner of Internal Revenue, G.R. No. 166732, April 27, 2007; San Roque Power Corporation vs. Commissioner of Internal Revenue, G.R. No. 180345, November 25, 2009; and AT&T Communications Services Philippines, Inc. vs. Commissioner ofInternal Revenue, G.R. No. 182364, August 3, 2010. 49 Steag State Power, Inc. (Formerly State Power Development Corporation) vs. Commissioner of Internal Revenue, G.R. No. 205282, January 14, 2019; Rohm Apollo Semiconductor Philippines vs. Commissioner ofInternal Revenue, G.R. No. 168950, January 14, 2015. 50 Intel Technology Philippines, Inc. vs. Commissioner of Internal Revenue, supra; San Roque Power Corporation vs. Commissioner of Internal Revenue, supra; and AT&T Communications Services Philippines, Inc. vs. Commissioner ofInternal Revenue, supra. 51 Id.

CTA Case No. 9598 Maxima Machineries, Inc. vs. Commissioner ofInternal Revenue 5. for zero-rated sales under Section 106(A)(2)(1) and (2); 106(8); and 108(8)(1) and (2), the acceptable foreign currency exchange proceeds have been duly accounted with 8SP rules and regulations; 52 Taxpaver's refund claim for input VAT: 6. the input taxes are due or paid; 53 7. the input taxes are not transitional input taxes; 54 8. the input taxes claimed are attributable to zero-rated or effectively zero-rated sales. However, where there are both zero-rated or effectively zero-rated sales and taxable or exempt sales, and the input taxes cannot be directly and entirely attributable to any of these sales, the input taxes shall be proportionately allocated on the basis of sales volumes; 55 and 9. the input taxes have not been applied against output taxes during and in the succeeding quarters. 56 Timeliness of the filing of petitioner's administrative andjudicial claims. The first requisite pertains to the filing of the refund for tax credit or refund of input VAT before the 8IR, within two (2) years from the close of the quarter when the sales were made. The instant claim covers the periods of October 1, 2014 to December 31, 2014 (Third Quarter of FY 2015) and January 1, 2015 to March 31, 2015 (Fourth Quarter of FY 2015). Counting two (2) years from the respective close of the said quarters, the following table indicates the pertinent last days for the filing of an administrative claim for the said two (2) quarters, to wit: ?z- 52 Id. 53 Id. 54 Id. 55 Intel Technology Philippines, Inc. vs. Commissioner of Internal Revenue, supra; San Roque Power Corporation vs. Commissioner ofInternal Revenue, supra. 56 Intel Technology Philippines, Inc. vs. Commissioner of Internal Revenue, supra; San Roque Power Corporation vs. Commissioner of Internal Revenue, supra; and AT& T Communications Services Philippines, Inc. vs. Commissioner ofInternal Revenue, supra.

erA case No. 9598 Maxima Machineries, Inc. vs. Commissioner ofInternal Revenue Period (FY 2015) Close of the Taxable Last Day to File Quarter Administrative Claim October 1 to December 31,2014 December 31, 2014 December 31, 2016 January 1 to March 31, March 31, 2015 March 31, 2017 2015 - - - -- - - - - - - - - -------- Considering that petitioner's administrative claim [Application for Tax Credits/Refunds (BIR Form No. 1914)] covering the said 2 quarters, was filed with the BIRon December 28, 2016,57 the same was timely made within the 2-year prescriptive period. The second requisite is to the effect that the judicial claim must have been filed within (30) days from receipt of respondent's decision or after the expiration of the 120-day period under Section 112(C). In this case, petitioner received a copy of the Audit Findings dated April 24, 2007, issued by Ms. Teresita M. Angeles, Ole- Assistant Commissioner of Large Taxpayers Service, on April 25, 2017, denying its claim for refund. 58 Thus, petitioner had until May 25, 2017, the last day of the 30-day period, within which to file its judicial claim. Such being the case, petitioner seasonably filed the instant Petition for Review on May 24, 2017. 59 Petitioner's Registration with the SIR. As for its compliance with the third requisite, petitioner has fulfilled the same by presenting its BIR Certificate of Registration No. 8RC0000422546 dated March 8, 2016, which was superseded by new Certificate of Registration with OCN8RC0000556816 dated June 20, 2016, issued by BIR with TIN/VAT Registration No. 006-618-023-000, indicating that it is liable to VAT. 60 Petitioner's output VAT; and refund claim for input VAT ?- 57 Exhibit "P-93", Docket, Vol. V, pp. 2177 to 2215. 58 Exhibit "P-97", Docket, Vol. V, pp. 2216 to 2218. 59 Docket, Vol. I, p. 10. 60 Exhibit "P-3", Docket, Vol. V, p. 2027.

CfA Case No. 9598 Maxima Machineries, Inc. vs. Commissioner ofInternal Revenue As for its compliance with the other requisites, petitioner's Amended Articles of Incorporation shows that its primary purpose is to buy, sell, barter, trade, lease out, manufacture, import, export or otherwise acquire, dispose of, and deal with any kind of goods, wares and merchandise such as spare parts or replacement parts and/or complete assemblies of agricultural, industrial or commercial machineries, automobiles, buses, trucks, tractors or other motor vehicles and/or related machineries and equipment of every kind and description and to carry on such business as manufacturers, wholesalers, importers and exporters, except the manufacture of food, drugs and cosmetics.61 In this case, petitioner maintains that its sales of goods and services to entities registered with PEZA, S8MA, CDA, and 80! during the period October 1, 2014 to March 31, 2015 are subject to zero percent (0%) VAT, pursuant to Sections 106(A)(2)(a)(3),(5) and (c) and 108(8)(3) of the NIRC of 1997, as amended. Petitioner also claims that the indent commissions earned from its sale of services to non-resident foreign corporations doing business outside the Philippines like Marubeni Corporation-Japan and 8omag Fayat Group for the same period are also subject to VAT at zero percent (0%) rate, pursuant to Section 108(8)(2) of the same Code. The pertinent provisions of Sections 106(A)(2)(a)(3), (5) and (c) and 108(8)(2) and (3) of the NIRC of 1997, as amended, state: "SEC. 106. Value-Added Tax on Sale of Goods or Properties. (A) Rate and Base of Tax. - x x x 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: XXX XXX XXX~ 61 Exhibits "P-2" and "P-2-A", Docket, Vol. V, p. 2015.

CfA Case No. 9598 Maxima Machineries, Inc. vs. Commissioner ofInternal Revenue (3) Sale of raw materials or packaging materials to export- oriented enterprise whose export sales exceed seventy percent (70%) of total annual production; XXX XXX XXX (5) Those considered export sales under Executive Order No. 226, otherwise known as the Omnibus Investment Code of 1987, and other special laws; and XXX XXX XXX (c) Sales to persons or entities whose exemption under special laws or international agreements to which the Philippines is a signatory effectively subjects such sales to zero rate." XXX XXX XXX "SEC. 108. Value-added Tax on Sale of Services and Use or Lease of Properties.- XXX XXX XXX (B) Transactions Subject to Zero Percent (0%) Rate. -The following services performed in the Philippines by VAT-registered persons shall be subject to zero percent (0%) rate: XXX XXX XXX (2) Services other than those mentioned in the preceding paragraph rendered to a person engaged in business conducted outside the Philippines or to a non-resident person not engaged in business who is outside the Philippines when the services are performed, the consideration for which is paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP); (3) Services rendered to persons or entities whose exception under special laws or international agreements to which the Philippines is a signatory effectively subjects the supply of such services to zero percent (0%) rate;" Relative thereto, Sections 4.106-5 and 4.108.5 of Revenue Regulations No. (RR) 16-2005, as amended by RR No. 04-07, which implement the foregoing provisions, state: "SEC. 4.106-5. Zero-Rated Sales of Goods or Properties. - XXX j.?-

CTA Case No. 9598 Maxima Machineries, Inc. vs. Commissioner ofInternal Revenue The following sales by VAT-registered persons shall be subject to zero percent (0%) rate: (a) Export sales.- 'Export Sales'shall mean: XXX XXX XXX (3) The sale of raw materials or packaging materials to export-oriented enterprise whose export sales exceed seventy percent (70%) of total annual production; XXX XXX XXX (5) Transactions considered export sales under Executive Order No. 226, otherwise known as the Omnibus Investments Code of 1987, and other special laws. 'Considered export sales under Executive Order No. 226' shall mean the Philippine port F.O.B. value determined from invoices, bills of lading, inward letters of credit, landing certificates, and other commercial documents, of export products exported directly by a registered export producer, or the net selling price of export products sold by a registered export producer to another export producer, or to an export trader that subsequently exports the same; Provided, That sales of export products to another producer or to an export trader shall only be deemed export sales when actually exported by the latter, as evidenced by landing certificates or similar commercial documents; Provided, further, That pursuant to EO 226 and other special laws, even without actual exportation, the following shall be considered constructively exported: (1) sales to bonded manufacturing warehouses of export-oriented manufacturers; (2) sales to export processing zones pursuant to Republic Act (RA) Nos. 7916, as amended, 7903, 7922 and other similar export processing zones; (3) sale to enterprises duly registered and accredited with the Subic Bay Metropolitan Authority pursuant to RA 7227, (4) sales to registered export traders operating bonded trading warehouses supplying raw materials in the manufacture of export products under guidelines to be set by the Board in consultation with the Bureau of Internal Revenue (BIR) and the Bureau of Customs (BOC); (5) sales to diplomatic missions and other agencies and/or instrumentalities granted tax immunities, of locally manufactured, assembled or repacked products whether paid for in foreign currency or not. For purposes of zero-rating, the export sales of registered export traders shall include commission income. The exportation of goods on consignment shall not be deemed export sales until the export products consigned are in fact sold by the consignee: and Provided, finally, that sales of goods, properties or services made by a VAT-registered supplier to a BOI-registered manufacturer/producer whose products are 100% 'j�-

CTA Case No. 9598 Maxima Machineries, Inc. vs. Commissioner ofInternal Revenue exported are considered export sales. A certification to this effect must be issued by the Board of Investment (BOI) which shall be good for one year unless subsequently re- issued by the BOI. XXX XXX XXX (c) Sales to Persons or Entities Deemed Tax-exempt under Special Law or International Agreement" - Sales of goods or property to persons or entities who are tax-exempt under special laws or international agreements to which the Philippines is a signatory, such as Asian Development Bank (ADB), International Rice Research Institute (IRRI), etc., shall be effectively subject to VAT at zero-rate." (Emphasis supplied) XXX XXX XXX 'SEC. 4.108-5. Zero-Rated Sale ofServices. - XXX XXX XXX (b) Transactions Subject to Zero Percent (0%) VAT Rate.- The following services performed in the Philippines by a VAT- registered person shall be subject to zero percent (0%) VAT rate: XXX XXX XXX (2) Services other than processing, manufacturing or re-packing rendered to a person engaged in business conducted outside the Philippines or to a non-resident person not engaged in business who is outside the Philippines when the services are performed, the consideration for which is paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the BSP; (3) Services rendered to persons or entities whose exemption under special laws or international agreements to which the Philippines is a signatory effectively subjects the supply of such services to zero percent (0%) rate;" (Emphases supplied) Further, the special laws specific to this case are Republic Act (RA) No. 7227, as amended by RA No. 9400, otherwise known as "Bases Conversion and Development Act of 1992'; and RA No. 7916, as amended, otherwise known as "The Special Economic Zone Act of 1995': The relevant portions of said laws are quoted hereunder, to wit: "REPUBLIC ACT NO. 9400 ;n.--

CTA Case No. 9598 Maxima Machineries, Inc. vs. Commissioner ofInternal Revenue AN ACT AMENDING REPUBLIC ACT NO. 7227, AS AMENDED, OTHERWISE KNOWN AS THE BASES CONVERSION AND DEVELOPMENT ACT OF 1992, AND FOR OTHER PURPOSES XXX XXX XXX SECTION 1. Section 12 of Republic Act No. 7227, as amended, otherwise known as the Bases Conversion and Development Act of 1992, is hereby amended to read as follows: SEC. 12. Subic Special Economic Zone. - xxx (b) The Subic Special Economic Zone shall be operated and managed as a separate customs territory ensuring free flow or movement of goods and capital within, into and exported out of the Subic Special Economic Zone, as well as provide incentives such as tax and duty-free importations of raw materials, capital and equipment. However, exportation or removal of goods from the territory of the Subic Special Economic Zone to the other parts of the Philippine territory shall be subject to customs duties and taxes under the Tariff and Customs Code of the Philippines, as amended, the National Internal Revenue Code of 1997, as amended, and other relevant tax laws of the Philippines. (c) The provision of existing laws, rules and regulations to the contrary notwithstanding, no national and local taxes shall be imposed within the Subic Special Economic Zone. xxx. SEC. 2. Section 15 of the Republic Act No. 7227, as amended, is hereby amended to read as follows: SEC. 15. Clark Special Economic Zone (CSEZ) and Clark Freeport Zone (CFZ). - Subject to the concurrence by resolution of the local government units directly affected, the President is hereby authorized to create by executive proclamation a Special Economic Zone covering the lands occupied by the Clark military reservations and its contiguous extensions as embraced, covered and defined by the 1947 Military Bases Agreement between the Philippines and the United States of America, as amended, xxx. The CFZ shall be operated and managed as a separate customs territory ensuring free flow or movement of goods and capital equipment within, into and exported out of the CFZ, as well as provide ~

CTA Case No. 9598 Maxima Machineries, Inc. vs. Commissioner ofInternal Revenue incentives such as tax and duty-free importation of raw materials and capital equipment. xxx The provisions of existing laws, rules and regulations to the contrary notwithstanding, no national and local taxes shall be imposed on registered business enterprises within the CFZ. Xxx Duly registered business enterprises that will operate in the Special Economic Zones to be created shall be entitled to the same tax and duty incentives as provided for under Republic Act No. 7916, as amended: Provided, That for the purpose of administering these incentives, the PEZA shall register, regulate, and supervise all registered enterprises within the Special Economic Zones." "REPUBLIC ACT NO. 7916 (as amended by Republic Act No. 8748) AN ACT PROVIDING FOR THE LEGAL FRAMEWORK AND MECHANISMS FOR THE CREATION, OPERATION, ADMINISTRATION, AND COORDINATION OF SPECIAL ECONOMIC ZONES IN THE PHILIPPINES, CREATING FOR THIS PURPOSE, THE PHILIPPINE ECONOMIC ZONE AUTHORilY (PEZA) AND FOR OTHER PURPOSES. XXX XXX XXX SECTION 8. ECOZONE to be Operated and Managed as Separate Customs Territory.- The ECOZONE shall be managed and operated by the PEZA as separate customs territory. The PEZA is hereby vested with the authority to issue certificates of origin for products manufactured or processed in each ECOZONE in accordance with the prevailing rules of origin, and the pertinent regulations of the Department of Trade and Industry and/or the Department of Finance. XXX XXX XXX SECTION 24. Exemption form National and Local Taxes. - Except for real property taxes on land owned by developers, no taxes, local and national, shall be imposed on business establishments operating within the ECOZONE. xxx" Since the Ecozone is viewed as a foreign territory by legal fiction, sales of goods and services made by a VAT-registered person in the Philippine customs territory to an entity registered and operating within the ecozone are considered exports to a foreign ~

CTA Case No. 9598 Maxima Machineries, Inc. vs. Commissioner ofInternal Revenue country subject to zero percent (0%) VAT. The case of Commissioner of Internal Revenue vs. Toshiba Information Equipment (Phils.}, Inc.,62 is instructive, to wit: "This Court agrees, however, that PEZA-registered enterprises, which would necessarily be located within ECOZONES, are VAT-exempt entities, not because of Section 24 of Rep. Act No. 7916, as amended, which imposes the five percent (5%) preferential tax rate on gross income of PEZA- registered enterprises, in lieu of all taxes; but, rather, because of Section 8 of the same statute which establishes the fiction that ECOZONES are foreign territory. xxx An ECOZONE or a Special Economic Zone has been described as - xxx [S]elected areas with highly developed or which have the potential to be developed into agro-industrial, industrial, tourist, recreational, commercial, banking, investment and financial centers whose metes and bounds are fixed or delimited by Presidential Proclamations. An ECOZONE may contain any or all of the following: industrial estates (IEs), export processing zones (EPZs), free trade zones and tourist/recreational centers. The national territory of the Philippines outside of the proclaimed borders of the ECOZONE shall be referred to as the Customs Territory. Section 8 of Rep. Act No. 7916, as amended, mandates that the PEZA shall manage and operate the ECOZONES as a separate customs territory; thus, creating the fiction that the ECOZONE is a foreign territory. As a result, sales made by a supplier in the Customs Territory to a purchaser in the ECOZONE shall be treated as an exportation from the Customs Territory. Conversely, sales made by a supplier from the ECOZONE to a purchaser in the Customs Territory shall be considered as an importation into the Customs Territory. Given the preceding discussion, what would be the VAT implication of sales made by a supplier from the Customs Territory to an ECOZONE enterprise? The Philippine VAT system adheres to the Cross Border Doctrine, according to which, no VAT shall be imposed to form part of the cost of goods destined for consumption outside of the territorial border of the taxing authority. Hence, actual export of goods and services from the Philippines to a foreign country must be free of VAT; while, those destined for use or consumption within the Philippines ~ 62 G.R. No. 150154, August 9, 2005.

CTA Case No. 9598 Maxima Machineries, Inc. vs. Commissioner ofInternal Revenue shall be imposed with ten percent (10%) VAT. 63 (Emphases supplied) Based on the foregoing, sales of goods and services by a VAT- registered taxpayer, such as herein petitioner, to entities located in Ecozones, as well as to SOl-registered entities whose products are 100% exported, are considered ''export sales" subject to zero percent (0%) VAT rate pursuant to Sections 106(A)(2)(a)(3),(5) and (c) and 108(B)(3)of the NIRC of 1997, as amended and as implemented by Sections 4.106-5 and 4.108.5 of RR No. 16-05, as amended. To prove that its clients are duly registered with the PEZA, SBMA, CDC, and BOI, petitioner submitted various Certifications issued by such agencies. Likewise, petitioner presented the letters of the PEZA Director General, Charita B. Plaza dated July 5, 201764 and the Certifications issued by the BOI- Director, Incentive Service, Ms. Erlinda F. Arcellana, on October 18, 201665 and the BOI ore- Executive Director, Atty. Bobby G. Fondevilla, dated June 22, 201766, confirming the issuance of VAT zero-rating certifications to certain clients of petitioner. Listed below are petitioner's clients with the corresponding proof of VAT zero-rating: Name of Customer Proof of VAT zero-rating Exhibit Validity Period No. ADNAMA MINING RESOURCES BOI Certification issued Oct. 16, P-5; P- TYs 2014 & 2015 2016; Confirmation letter from BOI 190-a ASIA PACIFIC ENERGY Confirmation Letter from PEZA P-4 TY 2014 CORPORATION BERONG NICKEL CORPORATION BOI Certification issued Oct. 16, P-5; P-6; TYs 2014 & 2015 2016; BOI Certificate No. 2015-083 P-190-a BIGLIFT PROPERTIES & SBMA Certificates of Tax Exemption P-39; P- October 16, 2013 to 190-f October 15, 2014; DEVELOPMENT CORPORATION March 31, 2015 to March 30 2016 CAGDIANAO MINING BOI Certification issued Oct. 16, P-5; P-7; TYs 2014 & 2015 CORPORATION 2016� BOI Certificate No. 2015-014 P-190-a CARMEN COPPER CORPORATION BOI Certification issued Oct. 16, P-5; P-8; TYs 2014 & 2015 2016� BOI Certificate No. 2015-049 P-190-a CORAL BAY NICKEL Confirmation Letter from PEZA P-4 TYs 2014 & 2015 CORPORATION C.T.P. CONSTRUCTION AND BOI Certification issued Oct. 16, P-5; P-9; TYs 2014 & 2015 MINING CORPORATION 2016� BOI Certificate No. 2015-103 P-190-a FLUOR DANIEL,INC-PHILIPPINES Confirmation Letter from PEZA P-4 TY 2014 FCF MINERALS CORP. BOI Certification issued Oct. 16, P-5; P- TYs 2014 & 2015 2016; BOI Certificate No. 2015-016 10; P- ?z. 63 Now at 12% VAT rate. 64 Exhibit "P-4", Docket, Vol. V, pp. 2029 to 2032. 65 Exhibit "P-5", Docket, Vol. v, p. 2033. 66 Exhibit "P-190-a".

CTA Case No. 9598 Maxima Machineries, Inc. vs. Commissioner ofInternal Revenue HINATUAN MINING BOI Certificate No. 2015-039; 190-a TYs 2014 & 2015 CORPORATION Confirmation letter from BOI P-11; P- HOUSE TECHNOLOGY Confirmation Letter from PEZA TYs 2014 & 2015 INDUSTRIES PTE. LTD. (HTIPL) 190-a November 27, 2013 JAMJLE PROPERTIES (SUBIC) AND SBMA Certificates of Tax Exemption P-4 DEVELOPMENT CORPORATION to November 26, (FORMERLY: JAMJLE Confirmation Letter from PEZA P-41; P- 2014; November 27, EQUIPMENT$ & GENERAL Confirmation Letter from PEZA 190-e 2014 to November MERCHANDISE INC) BOI Certification issued Oct. 16, JGC PHILIPPINES, INC. 2016; BOI Certificate No. 2015-009 P-4 26, 2015 K & A METAL INDUSTRIE~ INC. Confirmation letter from BOI P-4 TY 2014 Confirmation Letter from PEZA P-5; P- TY 2014 KROMINCO, INC. SBMA Certificate of Tax Exemption 12; P- BOI Certification issued Oct. 16, 190-a TYs 2014 & 2015 LAPANDAY DIVERSIFIED 2016; BOI Certificate No. 2015-057 P-190-a PRODUCTS CORP. TY 2015 MAJESTIC LANDSCAPE SBMA Certificates of Tax Exemption CORPORATION (MLC) P-4 TYs 2014 & 2015 MURAMI SUBIC TRADING Confirmation Letter from PEZA CORPORATION P-42; P- July 30, 2014 to July Confirmation Letter from PEZA 190-h 29 2015 MARCVENTURES MINING AND BOI Certificate No. 2015-034 P-5; P- DEVELOPMENT CORPORATION BOI Certification issued Oct. 16, 14; P- TY 2014 & 2015 2016; BOI Certificate No. 2015-085 190-a NORTHEAST GROUP OF Confirmation Letter from PEZA March 4, 2014 to COMPANIES, INC. (FORMERLY: BOI Certification issued Oct. 16, P-43; P- March 3, 2015; March NORTHEAST FREIGHT 2016; BOI Certificate No. 2015-035 44; P- 9, 2015 to March 8, FORWARDERS INc.) Confirmation Letter from PEZA 190-c PHILIPPINE ASSOCIATED Confirmation Letter from PEZA 2016 SMELTING AND REFINING CORPORATION Confirmation Letter from PEZA P-4 TYs 2014 & 2015 PHIL. BATTERIES INCORPORATED (PB!) Confirmation Letter from PEZA P-4 TYs 2014 & 2015 PHILIPPINE GOLD PROCESSING & SBMA Certificate of Tax Exemption TY 2015 REFINING CORP. P-16; P- SBMA Certificates of Tax Exemption 190-a TYs 2014 & 2015 PLATINUM GROUP METALS P-5; P- TYs 2014 & 2015 CORPORATION BOI Cert. of Registration No. 2010- 17; P- TYs 2014 & 2015 190-a TYs 2014 & 2015 R-TECH PHILIPPINES, INC. (RTPI) P-4 TYs 2014 & 2015 P-5; P- RIO TUBA NICKEL MINING 18; P- CORPORATION 190-a SCAD SERVICES (5) PTE., LTD. P-4 (PHIL. BRANCH) (SSPL) SHIN-ETSU MAGNETIC P-4 PHILIPPINES, INC. (SMPI) SMART ELECTRONICS P-4 TY 2015 MANUFACTURING SERVICE PHILIPPINES, INC. P-4 TY 2014 & 2015 FORMERLY: 5AMSUNG P-190-i ELECTRONICS PHILIPPINES October 22, 2014 to MANUFACTURING CORPORATION P-47; P- October 21, 2015 ST. LUKE'S MEDICAL CENTER 190-g January 4, 2014 to (GLOBAL CITY) INC. (SLMCGC!l P-20 January 3, 2015; SUBIC BAY MOTORS January 4, 2015 to CORPORATION January 3 2016 SUBIC CONSOLIDATED ~ PROJECTS, INC. SUNWEST WATER AND ELECTRIC

CTA Case No. 9598 Maxima Machineries, Inc. vs. Commissioner ofInternal Revenue CO. ISUWECO) INC. 206 (as RE Develooer) P-4 TYs 2014 & 2015 TAGANITO HPAL NICKEL Confirmation Letter from PEZA P-5; P- CORPORATION (THPAL) 21; P- TYs 2014 & 2015 BOI Certification issued Oct. 16, 190-a TAGANITO MINING 2016; BOI Certificate No. 2015-009-A P-190-d April 25, 2014 to April CORPORATION 24, 2015 SBMA Certificate of Tax Exemption P-4 TY 2014 TAILIN ABRASIVES CORPORATION Confirmation Letter from PEZA P-4 TYs 2014 & 2015 TOYO-INK COMPOUNDS P-49; P- April 1, 2013 to CORPORATION Confirmation Letter from PEZA March 31 2016 TRANSCOM WORLDWIDE CDC Certificate of Registration and 190-i (PHILIPPINES), INC. (TWPI) P-4 TY 2014 TRANS ASIA CONSTRUCTION Tax Exemotion DEVELOPMENT CORP. Confirmation Letter from PEZA P-4 TYs 2014 & 2015 TRAVELLERS INTERNATIONAL HOTEL GROUP INC (TIHGI) Confirmation Letter from PEZA P-4 TYs 2014 & 2015 UNICHAMP MINERAL PHILIPPINES INC. lUMP]) Confirmation Letter from PEZA P-4 TYs 2014 & 2015 VISAYAS SLAKED LIME CORPORATION (VSLC) Confirmation Letter from PEZA WU KONG SINGAPORE PTE. LTO. (PHIL. BRANCH) (WKSPL) Thus, petitioner's sales to the aforementioned entities for the period covering the third and fourth quarters of FY ending March 31, 2015 qualify for VAT zero-rating. Relative thereto, Sections 113(A)(1) and (2), (8)(1), (2)(c) and (3) of the NIRC of 1997, as amended, and as implemented by Sections 4.113-1(A)(1) and (2), (8)(1) and (2)(c) of RR No. 16-05 provide that a VAT taxpayer, like herein petitioner, shall for every lease of goods or properties, and for every sale, barter or exchange of services, issue a VAT invoice or VAT official receipt which must contain the following information: "Sec. 113. Invoicing and Accounting Requirements for VAT- registered Persons. - (A) Invoicing Requirements. - A VAT-registered person shall issue: (1) A VAT invoice for every sale, barter or exchange of goods or properties; and (2) A VAT official receipt for every lease of goods or properties, and for every sale, barter or exchange of services. ~

CTA Case No. 9598 Maxima Machineries, Inc. vs. Commissioner ofInternal Revenue (B) Information Contained in the VAT Invoice or VAT Official Receipt. -The following information shall be indicated in the VAT invoice or VAT official receipt: (1) A statement that the seller is a VAT-registered person, followed by his Taxpayer's Identification Number (TIN); (2) The total amount which the purchaser pays or is obligated to pay to the seller with the indication that such amount includes the value-added tax: Provide~ That: XXX XXX XXX (c) If the sale is subject to zero percent (0%) value-added tax, the term 'zero-rated sale' shall be written or printed prominently on the invoice or receipt; xxx (3) The date of transaction, quantity, unit cost and description of the goods or properties or nature of the service; and xxx" (underlining supplied) "Sec. 4.113-1. Invoicing Requirements. - (A) A Vat-registered person shall issue: -xxx (1) A VAT invoice for every sale, barter or exchange of goods or properties; and (2) A VAT official receipt for every lease of goods or properties, and for every sale, barter or exchange of services. Only VAT-registered persons are required to print their TIN followed by the word 'VAT' in their invoice or official receipts. Said documents shall be considered as a 'VAT Invoice' or VAT official receipt. All purchases covered by invoice/receipts other than VAT Invoice/VAT Official Receipt shall not give rise to any input tax. VAT invoice/official receipt shall be prepared at least in duplicate, the original to be given to the buyer and the duplicate to be retained by the seller as part of his accounting records. (B) Information contained in VAT invoice or VAT official receipt - The following information shall be indicated in VAT invoice or VAT official receipt: � (1) A statement that the seller is a VAT-registered person, followed by his TIN;

CTA case No. 9598 Maxima Machineries, Inc. vs. Commissioner ofInternal Revenue (2) The total amount which the purchaser pays or is obligated to pay to the seller with the indication that such amount includes the VAT; Provide~ That: xxx (c) If the sale is subject to zero percent (0%) VAT, the term 'zero-rated sale' shall be written or printed prominently on the invoice or receipt; xxx" (emphasis supplied) Anent petitioner's alleged indent commissions from its sale of services to non-resident foreign corporations like Marubeni Corporation-Japan and Bomag Fayat Group, the Supreme Court, in the case of Commissioner of Internal Revenue vs. Burmeister and Wain Scandinavian Contractor Mindanao, Inc.67, laid down the following requisites in order for the sale of services to the said entities be considered as VAT zero-rated under Section 108(8)(2) of the NIRC of 1997, as amended: 1) the services must be other than processing, manufacturing or repacking of goods; 2) payment for such services must be in acceptable foreign currency accounted for in accordance with the BSP rules and regulations; and 3) the recipient of such services is doing business outside the Philippines. In compliance with the third requisite, petitioner submitted the Certificates of Non-Registration of Marubeni Corporation-Japan68 and Bomag Fayat Group69 issued by the Philippine Securities and Exchange Commission (SEC), as well as the Consularized Articles of Incorporation/Association of Marubeni Corporation-Japan70 and Bomag Fayat Group71 to prove that the said clients are non-resident foreign corporations doing business outside the Philippines. With regard to the remaining requisites, petitioner submitted its VAT zero-rated Official Receipts (0Rsf2 and the Certificates of Inward Remittances of Foreign Currency Payments issued by BDO ~ 67 G.R. No. 153205, January 22, 2007. 68 Exhibit "P�50", Docket, Vol. V, p. 2105. 69 Exhibit "P-52", Docket, Vol. V, p. 2122. 70 Exhibit "P-51", Docket, Vol. V, pp. 2106 to 2121. 71 Exhibit "P-53", Docket, Vol. V, pp. 2123 to 2131. 72 Exhibits "P-184-a" to "P-184-d".

CTA Case No. 9598 Maxima Machineries, Inc. vs. Commissioner ofInternal Revenue Unibank, Inc.73 However, a perusal of the said documents reveals that the ORs were issued to Marubeni Corporation, and not to Marubeni Corporation-Japan. Further, petitioner failed to adduce evidence that could prove that the services rendered by petitioner to Marubeni Corporation-Japan and Bomag Fayat Group were services other than processing, manufacturing or repacking of goods. Moreover, petitioner failed to adduce evidence showing that Marubeni Corporation is a non-resident foreign corporation, not doing business in the Philippines and that the services rendered by petitioner to the said entity were services other than processing, manufacturing or repacking of goods. Thus, petitioner's alleged indent commissions from its sale of services to the purported non-resident foreign corporations- Marubeni Corporation-Japan and Bomag Fayat Group failed to qualify for VAT zero-rating under Section 108(8)(2) of the NIRC of 1997, as amended. On the other hand, in its Amended Quarterly VAT Returns for the third74 and fourth 75 quarters of FY 2015, petitioner reported a total sale of P2,944,828,068.33. This, accordingly, includes the zero- rated sales in the amount of P1,138,925,192.54, details of which are as follows: In support of its zero-rated sales, petitioner presented its Schedule of Zero-Rated Sales76 and various invoices, ORs and other related documents77, which were all scrutinized by the !CPA. As per Amended !CPA Report dated January 3, 2018/8 the zero-rated sales in the amount of P143,491,482.28 shall be denied ~ 7' Exhibits "P-191-a" to "P-191-b". 74 Exhibit No. "P-77", Docket, Vol. V, p. 2156. 75 Exhibit "P-79", Docket, Vol. V, p. 2160. 76 Exhibit "P-154", Amended !CPA Report Binder, Part 2 of 4. 77 Exhibits "P-181-a" to "P-187-rt". 78 Exhibit "P-207", Amended !CPA Report Binder, Part 1 of 4, p. 11.

CTA Case No. 9598 Maxima Machineries, Inc. vs. Commissioner ofInternal Revenue VAT zero-rating for failure to comply with the above-stated invoicing requirements: Exhibit Findings 3.-.t Quarter 4'" ~Quarter Total No. Export sale of services which are properly P-184 supported by VAT zero-rated OR issued to p 14 009 655.26 p 37,588 107.54 p 51,597 762.80 toP- companies with foreign address79 184-d Zero-rated sale of goods which are 3 927,836.59 2'h_857 472.34 28 785,308.93 properly supported by VAT zero-rated P-185 invoice/zero-rated sale of services which 3 214,285.71 736 360.00 3 950,645.71 to P- are properly supported by VAT zero-rated 185-an OR but not dated within the quarter (out 22 653,283.03 6,305 700.82 28 968 983.85 of coveredperiod} P-186 Zero-rated sale of goods which are 19 880 044.80 5 774 191.65 25 654 236.45 to P- properly supported by VAT zero-rated 186-c invoice/zero-rated sale of services which 4 534,544.54 are properly supported by VAT zero-rated P143,491,482.28 P-187 OR but without date toP- Zero-rated sale of goods supported by 187-rt documents other than VAT zero-rated P-188 invoice/zero-rated sale of services toP- supported by documents other than VAT 188-z zero-rated OR Zero-rated sale of goods to entities without VAT zero-rating incentive certificate provided P-189 Without supporting documents presented 2 441,020.38 2,093 524.16 - - - Total -~ -~ - - P66,13_{;,125,77 _P77,355,356.51 In addition, the reported zero-rated sales in the amount of P4,310,664.43 shall also be denied VAT zero-rating for the following reasons: Exhibit No. Customer Name Amount 1. Sales to entities with oroofof VATzero-rating but outside the validity period 4th ntr. P-182-hz K & A Metal Industries Inc. p 2 806.63 P-182-hz K & A Metal Industries Inc. , 44 904.45 Subtotal 47.711.08- 2. Sales ofgoods supported by VAT zero-rated sales invoices with unreadable details 3rdntr. P-181-h Carmen CoPPer Coro. p 1 691 610.80 P-181-af FCF Minerals Corooration 1,970.78 P-181-aq FCF Minerals Corporation 218,553.23 P-181-ah FCF Minerals Corporation 27 724.34 P-181-ai FCF Minerals Corooration 42 349.23 P-181-ai FCF Minerals Corooration 27,724.34 P-181-ak FCF Minerals Corporation 27,724.34 P-181-al FCF Minerals Corporation 4,774.10 'P-- 79 This pertains to the alleged indent commissions from Marubeni Corporation which failed to qualify for VAT zero-rating under Section 108(8)(2) of the NIRC of 1997, as amended, as previously discussed.

CTA Case No. 9598 Maxima Machineries, Inc. vs. Commissioner ofInternal Revenue P-181-am FCF Minerals Corporation 27 724.34 P-181-an FCF Minerals Corporation 36,946.69 P-181-ao FCF Minerals Corporation P-181-ap FCF Minerals Corporation 867.00 P-181-aq FCF Minerals Corporation 9,692.78 P-181-ar FCF Minerals Corporation 1 239.40 P-181-as FCF Minerals Corporation 7 998.61 P-181-at FCF Minerals Corporation 1,239.40 P-181-au FCF Minerals Corporation 27,724.34 P-181-av FCF Minerals Corporation 161 568.38 P-181-bi FCF Minerals Corporation 22 894.74 P-181-bk FCF Minerals Corporation 53 241.15 P-181-bl FCF Minerals Corporation 50,850.88 P-181-bm FCF Minerals Corporation 13 238.18 P-181-di FCF Minerals Corporation 22 981.70 P-181-ed FCF Minerals Corporation P-181-ee FCF Minerals Corporation 79.26 P-181-ef FCF Minerals Corporation 102,121.99 P-181-eq FCF Minerals Corporation Marcventures Mining and Development 1104.12 P-181-fl Corporation 32 645.88 Marcventures Mining and Development P-181-fn Corporation so 061.73 P-181-fo Taganito Mining Corp. P-181-fp Taganito Mining Corp. 3 696.00 P-181-io FCF Minerals Corporation P-181-ip FCF Minerals Corporation 13 904.00 P-18l:Qr Carmen CoQPer Corp. 3 424.00 P-182-aq Coral Bay Nickel Corporation P-182-dv House Technoloqy Industries Pte. Ltd. 35 088.00 Subtotal 2 640.00 4thotr. 1100.00 ' P-181-pw Carmen Co~ Col]). P-182-fa House Technologyindustries Pte. Ltd. 504,319.82 1 P-182-fb Majestic Landscape Corporation 4 688.00 P-182-fc Scad Services (S) Pte Ltd 2 325.80 P-182-fe Scad Services (S) pte Ltd Subtotal p 3,237. 837.35 I Total Grand Total " 84h_312.00 121,058.00 50,832.00 10 767.00 h_147.00 , 1,025,116.00 , 4,262,953.35 p 4,310,664.43 Thus, out of the reported zero-rated sales of Pl,l38,925,192.54, only the amount of P991,123,045.83 represents petitioner's valid zero-rated sales for the third and fourth quarters of FY 2015, computed as follows: 3rd Quarter 4th Quarter Total Total Reported Zero-Rated Sales p 416,011,427.35 p 722,913,765.19 p 1,138,925,192.54 Less: Disallowances -- -�- - - ?<--

CTA Case No. 9598 Maxima Machineries, Inc. vs. Commissioner ofInternal Revenue Per !CPA Report 66,136,125.77 77,355,356.51 143,491,482.28 3,237,837.35 Additional disallowances by 1,072,827.08 4,310,664.43 P346,637,464.23 this Court p 644,485,581.60 P991,123,045.83 Valid Zero-Rated Sales Petitioner incurred input taxes during the third & fourth quarters ofFY 2015 which are attributable to its zero-rated or effectively zero-rated sales for the same period For the third and fourth quarters of FY 2015, petitioner declared input taxes in the total amount of P314,833,302.61, out of which the amount of P104,580,305.56 is the subject of petitioner's claim for refund, to wit: .1.11 1.11. &.UA'-'.7 U~ '-''- ....1'-'1'-V .... , O'r11 I ... LUIII.J� 3rd Quarter"" 4th Quarter81 Total Input Tax Deferred on Capital Goods p 2 146 063.69 p 1 950 848.23 p 4 096 911.92 exceeding 1M from Previous Quarter (Line 20/3) 1 950 848.16 1 755 632.72 3 706 480.88 Less: Input Tax on Purchases of p 195 215.53 p 195 215.51 p 390 431.04 Capital Goods exceeding PlM deferred for the succeeding period (Line 23AJ Input tax Amortized for the period Add: Current Input Taxes p 2 398 942.34 p 3 116 795.05 p 5 515 737.39 On Domestic Purchases of 115 594 865.00 Goods Other than Capital 5 265 712.08 183 321 012.00 298 915 877.00 Goods (Line 21F) On Importation of Goods Other 4 745 545.10 10 011 257.18 than Capital Goods (Line 21HJ p 191183 352.15 P314 442 871.57 On Domestic Purchase of p 191.378.567.66 P314 833.302.61 Services (Line 21JJ Total Current Input Tax P123,259,519.42 Total Input Taxes for the period P123 454 734.95 .1.11 YL U..l/\'-.;> U.;> '-'' .71.11./ ._,_L .._1<-11111 , 3rd Quarter 4th Quarter Total p 123,454,734.95 p 191,378,567.66 p 314 833,302.61 Total input taxes for the period Less: Input tax on VATable sale of 7 821 548.34 34 053 683.39 41 875 231.73 machineries from current 21 381,098.78 43,555,100.63 64 936,199.41 purchases 2 395,849.56 523,678.01 Input tax on zero-rated sale of ;.- 2 919,527.57 machineries from current purchases Input tax directly identified and allocable to Government Sales 80 Exhibit "P-77", Docket, Vol. V, p. 2156. 81 Exhibit "P-79", Docket, Vol. V, p. 2160. 82 Petition for Review, Docket, Vol. I, pp. 44 to 48.

CTA Case No. 9598 Maxima Machineries, Inc. vs. Commissioner ofInternal Revenue Input tax on current purchase 59,609 821.87 62 980,989.89 122,590 811.76 of machineries not sold within the quarter ,. 32,246 416.40 ,. 50 265,115.74 ,. 82,511 532.14 Total Common Input tax allocable to VATable and VAT zero-rated sales 399,931 585.75 722 913 765.19 1 122 845 350.94 Multiply by Zero-Rated Sales 1 038 351 765.94 1 890 396 460.79 2 928 748 226.73 Divide by Total Sales Common Input tax allocable VAT ,. 12 420 030.35 p 19 222 075.77 ,. 31 642 106.12 Zero-Rated Sales Add: Input tax directly related to 21 381 098.78 43 555,100.63 64 936 199.41 zero-rated sale of machineries which were imported and sold 2 750 446.51 5 251,553.52 8 002,000.03 in current period p 36,551,575.64 Input tax directly related to p 68,028,729.92 P104,580,305.56 zero-rated sale of machineries which were imported in prior years but sold only this quarter Total Input Taxes claimed for refund In support of its reported input taxes of P314,442,871.57, petitioner submitted various sales invoices, ORs, Import Entry and Internal Revenue Declarations (IEIRDs), Statements of Settlement of Duties and Taxes (SSDTs), Bureau of Customs (BOC) ORs and other related documents83, which were examined by the ICPA. Summarized below are the current input taxes for the third and fourth quarters of FY 2015 in the total amount of P314,442,871.57, as accounted for by the !CPA: 3"' Quarter 4'" Quarter Total Exhibit No. (Amended !CPA Report Binder, Parts 2 and 3 of 4) A. Input tax on current p ,. 7 821 548.34 30 560 806.25 p 38 382 354.59 P-155 to P-156 quarter's importations directly 21,381,098.78 43,556,801.68 64,937,900.46 P-157 to P-158 ~ related to VATable sale of machineries in the same quarter B. Input tax on current quarter's importations directly related to zero-rated sale of machineries in the same quarter 83 Exhibits "P-155-a" to "P-155-al", "P-156-a" to "P-156-t", "P-157-a" to "P-157-n", "P-158-a", "P- 159-a" to "P-159-dl", "P-160-a" to "P-160-ab", "P-161-a" to "P-161-In", "P-162-a" to "P-162- fm", "P-163-a", "P-164-a" to "P-164-c", "P-167-a" to "P-167-ag", "P-168-a" to "P-168-ea", "P- 169-a" to "P-169-z", "P-170-a" to "P-170-pw", "P-171-a" to "P-171-ci", "P-172-a" to "P-172-ao", "P-173-a" to "P-173-abf", "P-174-a" to "P-174-sz", "P-175-a" to "P-175-se", "P-176-a" to "P- 176-bm", "P-177-a" to "P-177-bc" and "P-179-a" to "P-179-x".

CTA Case No. 9598 Maxima Machineries, Inc. vs. Commissioner ofInternal Revenue C. Input tax on current 59 609 819.88 66 472 166.07 126 081 985.95 ' purchase of machineries not sold p 26 782,398.00 p 42 731,238.00 p 69,513,636.00 I within the quarter 7 664L654.42 7 862 340.15 15 526 994.57 P-159 to P-160 D. Common input tax p 34 447 052.42 p 85 040 360.57 allocable to VATable 1"123,259,519.42 p so 593 578.15 1"314,442,871.57 I and zero-rated sales a. Input tax on 1"191,183,352.15 I current quarter's I importations b. Input tax on P-161 to P-166 I current quarter's domestic I _Q_urchases P-167 to P-178 subtotal Total As per ICPA Report, the input VAT in the amount of P130,575,993.1384 was disallowed for failure to meet the substantiation requirements under Sections llO(A), 113(A) and (B), and 237 of the NIRC of 1997, as amended, in relation to Sections 4.110-1, 4.110-2, 4.110-8 and 4.113-1 of RR No. 16-2005, as amended: Exhibit Reference Description 3rd Qtr. 4th Qtr. Total A. Input tax on current quarter's importations directly related to VA Table sale ofmachineries in the same quarter P-156 Supported by *IEIRDs and p 23,801,253.85 p 23,801,253.85 traced to E2M schedule B. Input tax on current quarter's importations directly related to zero-rated sale ofmachineries in the same quarter P-158 Supported by *IEIRDs and 19,333,886.00 19,333,886.00 traced to E2M schedule C. Input tax on current purchase ofmachineries not sold within the_g_uarter P-160 Supported by *IEIRDs and p 726,945.76 35,383,163.31 36,110,109.07 traced to E2M schedule D. Common input tax allocable to VA Table and zero-rated sales a. Input tax on current quarter's importations P-162 Supported by *IEIRDs and p 24,784,189.00 p 10,571,326.00 p 35,355,515.00 traced to E2M schedule P-163 Supported by IEIRDs** 2 663.00 2 663.00 P-165 Traced to E2M schedule only 857,003.00 857,003.00 P-166 Without supporting documents 9,122.00 10,958.00 20,080.00 presented Jh- b. Input tax on current quarter's domestic_p_urchases 84 Exhibit "P-211", Amended !CPA Report Binder, Part 1 of 4, pp. 4 to 7.

CTA Case No. 9598 Maxima Machineries, Inc. vs. Commissioner ofInternal Revenue Domestic purchase of goods properly supported by VAT invoice/purchase of services properly supported by VAT OR, that are issued in the name of P-169 the Petitioner with the 52,628.26 39,198.00 91,826.26 petitioner's complete TIN, 600,651.77 303,786.02 address, business style, and with 14,948.76 valid ATP and signature but the 489,052.61 413,903.55 VAT amount is not shown 1,897,747.76 257,202.80 separately in the invoice/OR 175,441.61 10,850,922.07 Domestic purchase of goods not P130,575,993.13 Jt- P-170 properly supported by VAT 304,900.48 295,751.29 invoice/purchase of services not properly supported by VAT OR Domestic purchase of goods supported by VAT P-171 invoice/purchase of services 118,366.85 185,419.17 supported by VAT OR not dated within the same taxable year or dated in the subsequent quarter Domestic purchase of goods supported by VAT P-172 invoice/purchase of services 9,891.93 5,056.83 supported by VAT OR without date Domestic purchase of goods supported by VAT P-173 invoice/purchase of services 391,511.51 97,541.10 supported by VAT OR without valid Authority to Print (ATP) Domestic purchase of goods supported by VAT P-174 invoice/purchase of services 259,431.88 154,471.67 supported by VAT OR with missing and/or incorrect Company name Domestic purchase of goods supported by VAT P-175 invoice/purchase of services 1,172,878.70 724,869.06 supported by VAT OR with missinq and/or incorrect TIN Domestic purchase of goods supported by VAT P-176 invoice/purchase of services 209,289.21 47,913.59 supported by VAT OR with missing and/or incorrect registered address Domestic purchase of goods supported by VAT P-177 invoice/purchase of services 82,004.76 93,436.85 supported by VAT OR with missing and/or incorrect business style Domestic purchases without P-178 supporting invoices/ORs 4,920,651.70 5,930,270.37 presented Total P33,898,815.04 P96,677,178.09 * IEIRDs are without machine validation. **Actual document pertains to Informal Import Declaration and Entry only.

CTA Case No. 9598 Maxima Machineries, Inc. vs. Commissioner ofInternal Revenue In addition to the above disallowances, the input VAT in the amount of P520,793.62 shall, likewise, be disallowed for the reasons stated hereunder: Exhibit Name of No. Supplier 3rd Qtr. 4th Qtr. Total Reason for disallowance o.b. Common input tax on current quarter's domestic purchases allocable to VA Table and zero-rated sale I Nav Philippines Supported by VAT invoice but p 1,607.14 without the TIN of petitioner P-167-a Corp p 1 607.14 Matatag Cargo Supported by VAT OR wherein Logistics the input VAT amount was not P-167-d Corporation 3 199.21 3 199.21 separately shown Toyota Commonwealth Supported by VAT OR but without P-167-f Inc 1 578.92 1 578.92 the BIR's ATP Toyota Commonwealth Supported by VAT OR but without P-167-g Inc 1 418.40 1 418.40 the BIR's ATP Toyota Commonwealth Supported by VAT OR but without P-167-h Inc 1,204.86 1,204.86 the BIR's ATP Charter Ping An Insurance Supported by VAT OR but without P-167-n Corporation 890.43 890.43 the TIN of petitioner Mendez System Maintenance and Supported by VAT OR wherein Manpower the input VAT amount was not P-167-p Services 599.10 599.10 separately shown Whiteknight Security Agency p 975.74 Supported by VAT OR but without P-167-u Corporation 975.74 the TIN of petitioner Supported by VAT OR wherein Rhotech Pest the input VAT amount was not P-167-w Management 7,200.00 7 200.00 separately shown Whiteknight Security Agency Supported by VAT OR but without P-167-ad Corporation 1 951.48 1 951.48 the TIN of petitioner Over-claimed input VAT (claimed Briceup and amount of P3,068.68 less OR P-167-ag Matchmytrip 2 982.97 2 982.97 amount of P 85.71) Jemtech IT Supported by VAT invoice dated P-168-c Solutions Inc. 814.29 814.29 outside the period of claim Karigalan Inti Supported by VAT OR wherein Travel and Tours the input VAT amount was not P-168-e Corp 96.06 96.06 separately shown Solid Business Machines Center, Supported by VAT invoice dated P-168-f Inc. 383.57 383.57 outside the period of claim Darosan Supported by VAT invoice dated P-168-g Enterprises 273.21 273.21 outside the period of claim Supported by VAT OR wherein Junction Inn the input VAT amount was not P-168-h Mansion 540.00 540.00 SeQaratelyshown Philippine Ports Supported by OR dated outside P-168-i Authority 1.93 1.93 the period of claim World Best Industrial Sales Supported by VAT invoice dated P-168-i Inc 1 409.51 1 409.51 outside the period of claim P-168-k Adam Gas and 1,157.25 1,157.25 Supported by VAT invoice without ,}L

CTA Case No. 9598 Maxima Machineries, Inc. vs. Commissioner ofInternal Revenue Trading Corp. the TIN of petitioner (total of P250.70, P173.60, P173.60, P-168-k Adam Gas and 366.56 366.56 P212.15 and P347.20) P-168-1 Trading Corp. 4 942.50 4 942.50 SK Techno-Lube 2 748.21 2,748.21 Over-claimed input VAT (claimed Corporation 19,500.00 19,SOO.OO amount of P2,073.21 less invoice P-168-1 SK Techno-Lube 1 624.29 amount of P1 706.65) Corporation 10 613.57 Supported by VAT invoice but P-168-n A.L. Gantuangco 1,875.00 P-168-p Construction without the TIN of petitioner Solid Business 12,857.14 Machines Center 6,750.00 Over-claimed input VAT (claimed Inc 728.57 321.43 amount of P7,690.7lless invoice 209.83 amount of P4 942.50) 8 824.29 Supported by VAT invoice but 10 472.14 1 532.14 without the TIN of petitioner and 419.46 input VAT amount was not 5 135.98 separately shown 1 019.80 P-168-r OTR Type Mart 224.52 1 624.29 Supported by document with P-168-t Inc 429.94 unreadable details Jemtech IT 10,613.S7 Solutions Inc. 1 313.54 1 875.00 Supported by VAT invoice but 3 036.34 P-168-u Makati Microshop 2,218.76 12 857.14 without the TIN and address of P-168-v Meridian IT 6 750.00 petitioner Corporation 728.57 Supported by VAT invoice but P-168-ac CRC Enterprises P-168-ai Crest Sun without the address of petitioner P-168-ar Industrial P-168-aw Products Inc Supported by VAT invoice but P-168-bf Jemtech IT P-168-bi Solutions Inc. without the TIN of petitioner P-168-bp Denmark Paints Specialist and Supported by VAT invoice but P-168-bx Hardware Corp Roqson Industrial without the TIN of petitioner P-168-cr Sales Inc Caloocan Supported by VAT invoice but Standard Inc. Dinlys Industrial without the TIN of petitioner Sales Philippine Long 321.43 Supported by VAT invoice but Distance 209.83 Telephone without the TIN of petitioner (PLDT) Company 8 824.29 International 10 472.14 Supported by VAT invoice but Container Terminal 1 532.14 without the TIN of petitioner Services Inc. 419.46 Supported by VAT invoice wherein the input VAT amount was not separately shown Supported by VAT invoice but without the TIN of petitioner Supported by document with unreadable details Supported by VAT invoice but without the TIN of petitioner Supported by VAT OR but without 5 135.98 the TIN of petitioner P-168-cz PLDT Company 1 019.80 Supported by document with P-168-db Zambales Electric 224.52 notation "NOT VALID AS PROOF Cooperative Inc 429.94 P-168-dh International TO CLAIM INPUT VAT" Container Supported by VAT OR but without Terminal Services, Inc. the TIN of petitioner Supported by VAT OR issued not in the name of petitioner P-168-di PLDT Company 1 313.54 Supported by document with P-168-di PLDT Company notation "NOT VALID AS PROOF 3 036.34 2,218.76 TO CLAIM INPUT VAT" Supported by VAT OR but without the TIN ofjletitioner J;c.- Over-claimed input VAT (claimed

CTA Case No. 9598 Maxima Machineries, Inc. vs. Commissioner ofInternal Revenue P-168-dm Conn us Food Inc 1 919.81 1 919.81 amount of P5,255.10 less OR 960.00 960.00 amount of P3 036.34) P-168-dw PLDT Company Over-claimed input VAT (claimed P-168-dy Marilag Business 2 034.69 amount of P21,117.86 less OR and Industrial amount of P19 198.05) Service Inc Supported by VAT OR but without the TIN of petitioner Supported by VAT OR dated 2 034.69 outside the period of claim subtotal P12607.12 P117,755.46 P130362.58 Input tax on purchases ofcapital goods exceeding_1Mil/ion amortized for the period p 195 21S.S3 fO 195,215.51 p 390 431.04 Without supporting documents subtotal P195,215.53 P195,215.51 P390,431.04 Total P207,822.65 P312,970.97 P520,793.62 In sum, out of the reported input VAT of P314,833,302.61 for the third and fourth quarters of FY 2015, petitioner was able to substantiate only the amount of P183,736,515.86, computed as follows: Reported Input Per Court's Substantiated VAT further InDutVAT PeriCPA A. Input tax on current quarter's importations directly related to VATable sale of machineries in the IP same auarter B. Input tax on current quarter's importations directly related to zero-rated sale of machineries in the same C. Input tax on current purchase of machineries not A. Input tax on current -'p .40 quarter's importations directly related to VATable sale of machineries in the B. Input tax on current quarter's importations directly related to zero-rated

CTA Case No. 9598 Maxima Machineries, Inc. vs. Commissioner ofInternal Revenue C. Input tax on current purchase of machineries not sold within the Considering that petitioner is engaged in taxable sales subject to zero percent (0%) and twelve percent (12%) rates, and its input VAT of P1,262,576.02 and P32,316,947.76 (item D. above) for the third and fourth quarters, respectively, cannot be directly or entirely attributed to any of the transactions, the same shall be allocated proportionately on the basis of the volume of its sales for the respective quarters in this wise: Period VAT Sales Sales to Gov't Zero-Rated Sales = Total Sales 3rd Quarter (a) (b) (c) 4th Quarter {d a+b+c) I' 632 503 415.67 1'5,916,?64.52 1'416,011 427.35 p 1,054 431,607.54 1 161 218 472.33 6 264 223.27 722 913 765.19 1 890 396 460.79 Third Quarter Substantiated input VAT attributable to: I' 757,359.96 VAT Sales (1'632 50~415.6liP1,054 43h_607.54 x 1'1,262,576.02) 7 084.73 Sales to Gov't (1'5 916 764.52 /1'1 054 431 607.54 x 1'1 262 576.02) Zero-Rated Sales (1'416 011 427.35/1'1 054 431,607.54 x 1'1 262 576.02) 498 131.93 Total p 1,262,576.02 Fourth Quarter Substantiated input VAT attributable to: p 19,851 410.79 VAT Sales (1'1,161 218,472.33/1'1 890 396 460.79 x 1'32 316,947.76) 107,088.95 Sales to Gov't (1'6 264,223.27/1'1,890 396,460.79 x 1'32 316,947.76) Zero-Rated Sales (1'722 913 765.19/Pl 890,396 460.79 x 1'32,_316,947.76)_ U,_358 448.01 Total p 32 316 947.76 Petitioner also included in its claim the input VAT amounting to P8,002,000.03 which, accordingly, pertains to ''input tax related to zero-rated sale ofmachineries which were imported in prior years but sold only this quarter'~ Petitioner also submitted documents to substantiate its claim. However, as accounted for by the ICPA85, out of the input VAT of P8,002,000.02, only the amounts of P2,438,029.33 and P5,251,553.51 pertaining to the third and fourth quarters, respectively, or a total of P7,689,582.84, were duly supported by 'F- 85 Exhibit "P-211", Amended !CPA Report Binder, Part 1 of 4, p. 10.

CTA Case No. 9598 Maxima Machineries, Inc. vs. Commissioner ofInternal Revenue IEIRDs and SSDTs that could likewise be traced to E2M schedule. Thus, may be refunded. On the other hand, the amount of P312,417.18, which was only traced to E2M schedule cannot be refunded by the Court on the ground that petitioner failed to offer any proof of VAT payment. In view thereof, petitioner's input VAT directly and indirectly attributable to its zero-rated sales amounted to P66,132,369.21, as computed below: 3rd Otr. 4th Otr. Total I' 498 131.93 Input Vat allocable to zero-rated sales " 12 358 448.01 I' 12 856 579.94 Add: Input VAT on current quarter's 21,381 098.78 24 222,915.68 45 604,014.46 importations directly related to zero-rated sale of machineries in 2,438,029.33 5 251,553.51 7 689,582.84 the same quarter Input VAT directly related to zero- p 24,317,260.04 p 41,832,917.20 p 66,150,177.24 ; rated sale of machineries which were imported in prior years but sold only this quarter Total Input VAT attributable to zero-rated sales Petitioner has no excess input VAT available for refund Having determined that petitioner had valid input VAT which may be attributable to its zero-rated sales, the Court shall now determine whether petitioner has excess input VAT attributable to zero-rated sales which was not applied against its output VAT liability. After deducting the input tax attributable to VATable sales to private entities amounting to P35,189,870.89 from its output VAT liability of P215,246,616.56 on the said sales, petitioner still has a net output VAT payable of P180,056,745.67, as computed below: Output VAT per Returns86 3rd Qtr. 4th Qtr. Total I' 139,346,216.68 p 215,246,616.56 Less: Input VAT attributable to " 75,900,399.88 VATable sales to private entities 8,578,907.70 8,578,907.70 (1'757,359.36 + 1'7,821,548.34) (1'19,851,410.79 + 26,610,963.19 Jl::- 26,610,963.19 86 Line 15B of Exhibits "P-77" and "P-79, Docket, Vol. V, pp. 2156 and 2160.

CTA Case No. 9598 Maxima Machineries, Inc. vs. Commissioner ofInternal Revenue 1'6,759,552.40) 8,578,907.70 26,610,963.19 35,189,870.89 Total p 67,321,492.18 P112,735,253.49 P180,056,745.67 Net output VAT Payable Since the input VAT attributable to VATable sales to private entities is not enough to cover its output VAT liability, the input VAT attributable to zero-rated sales shall be utilized against the remaining output VAT liability. However, the input VAT attributable to zero- rated sales of P66,150,177.24 is way lower than the net output VAT payable of P180,056,745.67. Consequently, petitioner still has net output VAT due of Pll3,906,568.43, computed as follows: Net output VAT Payable 3rd Qtr. 4th Qtr. Total I' 67,321,492.18 I' 112,735,253.49 I' 180,056,745.67 Less: Input VAT attributable to zero-rated 24,317,260.04 41,832,917.20 66,150,177.24 sales Net Output VAT Still p 43,004,232.14 p 70,902,336.29 p 113,906,568.43 Due Although petitioner's Amended Quarterly VAT returns for the third and fourth quarters of FY 2015 reflected the respective amounts of P359,624,263.9987 and P420,477,797.6588 as "Input Tax Carried Over from Previous Period'; still, petitioner failed to substantiate the same. Consequently, the input tax carry-over of P359,624,263.99 and P420,477,797.65, cannot be validly applied against petitioner's output tax pursuant to Section llO(A) in relation to Section llO(B) of the NIRC of 1997, as amended, which states: "SEC. 110. Tax Credits.- (A) Creditable Input Tax. - (1) Any input tax evidenced by a VAT invoice or official receipt issued in accordance with Section 113 hereof on the following transactions shall be creditable against the output tax: XXX XXX XXX (B) Excess Output or Input Tax. - If at the end of any taxable quarter the output tax exceeds the input tax, the excess shall be paid by the Vat-registered person. If the input tax exceeds ~ 87 Exhibit "P-77", Line 20A, Docket, Vol. V, p. 2156. 88 Exhibit "P-79", Line 20A, Docket, Vol. V, p. 2160.

CTA Case No. 9598 Maxima Machineries, Inc. vs. Commissioner ofInternal Revenue the output tax, the excess shall be carried over to the succeeding quarter or quarters: xxx." It is worthy to stress that in claiming excess or unutilized input VAT from zero-rated transactions, it is the excess input tax over the output tax which should be refunded to the taxpayer or credited against other internal revenue taxes. Hence, it is important for the taxpayer to prove that it has enough prior year's excess input tax credits to cover its output tax liability for the current taxable year. In cases filed before this Court, which are litigated de novo, party- litigants must prove everv minute aspect of their case.89 Consequently, there being no excess input VAT which may be the subject of a claim for refund or tax credit certificate, the instant claim must be denied. On the final note, the Court reiterates that it is the taxpayer- claimant that has the burden of proof to establish the factual basis of his or her claim for tax credit or refund.90 Tax refunds are in the nature of tax exemptions. As such, they are regarded as in derogation of sovereign authority and to be construed strictissimi juris against the person or entity claiming the refund.91 Thus, an applicant for a claim for tax refund or tax credit must not only prove entitlement to the claim but also compliance with all the documentary and evidentiary requirements.92 Strict adherence to the conditions prescribed by law is required of the taxpayer.93 All told, petitioner failed to sufficiently prove its entitlement to a refund or tax credit of its unutilized input VAT from its zero-rated sales/receipts for the period covering October 1, 2014 to March 31, o::;-.-- 89 Edison (Bataan) Cogeneration Corporation vs. Commissioner ofInternal Revenue, etseq., G.R. Nos. 201665 and 201668, August 30, 2017; Commissioner of Internal Revenue vs. Philippine National Bank, G.R. No. 180290, September 29, 2014; Commissioner of Internal Revenue vs. United Salvage and Towage (Phils.}, Inc., G.R. No. 197515, July 2, 2014; Dizon vs. Court of Tax Appeals, et a!., G.R. No. 140944, April 30, 2008; Atlas Consolidated Mining and Development Corporation vs. Commissioner of Internal Revenue, G.R. No. 145526, March 16, 2007; and Commissioner ofInternal Revenue vs. Manila Mining Corporation, G.R. No. 153204, August 31, 2005. 90 Citibank N.A. vs. Court of Appeals and Commissioner of Internal Revenue, G.R. No. 107434, October 10, 1997. 91 Commissioner ofInternal Revenue v. S.C Johnson and Son, Inc., eta!., G.R. No. 127105, June 25, 1999. 92 Eastern Telecommunications Philippines, Inc. vs. Commissioner ofInternal Revenue, G.R. No. 183531, March 25, 2015, citing J.R.A. Philippines, Inc. vs. CIR, G.R. No. 171307, August 28, 2013. 93 Steag State Power, Inc. (Formerly State Power Development Corporation) vs. Commissioner of Internal Revenue, G.R. No. 205282, January 14, 2019.

CTA Case No. 9598 Maxima Machineries, Inc. vs. Commissioner ofInternal Revenue 2015. Its failure to substantiate that it has sufficient input taxes to offset its output taxes due for the period covered merits the denial of its claim for refund. WHEREFORE, in light of the foregoing considerations, the instant Petition for Review is DENIED for lack of merit. .Q.~-c c..Q.d-~~ "~ J"UANITO C. CASTANEDA, JR. Associate Justice WE CONCUR: W1.t; N. M~- C~ CIELITO N. MINDARO-GRULLA Associate Justice '-.. tA\..uRRO-VILLENA 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. ~-~ c. a..:t-~"0(., " ~ . fuANITO C. CASTANEDA, JR. Associate Justice Chairperson

CTA Case No. 9598 Maxima Machineries, Inc. vs. Commissioner ofInternal Revenue 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. Presiding Justice