PHPC CO. LTD., INC. v. COMMISSIONER OF INTERNAL REVENUE ( Consolidated with Case No. 6897)

REPUBUC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY FIRST DIVISION ************* PHPC CO. LTD., INC., C.T.A. CASE NOS. 6843 Petitioner, and 6897 - versus - Members: ACOSTA, Chairperson BAUTISTA, and CASANOVA, JJ. COMMISSIONER OF INTERNAL Promulgated: REVENUE, J ~o:t.>/tVI Respondent. x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x DECISION BAUTISTA, J.: These consolidated cases seek the refund or issuance of tax credit certificate of petitioner's alleged excess and unutilized creditable input value-added tax (VAT) on domestic purchases of taxable goods and services and importation of goods in the aggregate amount of Pl3,643,946.47, broken down as follows: CIA Case No. Period Covered Amount P2,634, 978.65 6843 October 1, 2001 to December 31, 2001 11.008.967.82 6897 First, second, third and fourth quarters P13 643 946 47 TOTAL of 2002 and first and second quarters of of 2003 /

DECISION C.T.A. CASE NOS. 6843 & 6897 Page 2 Petitioner is a domestic corporation duly organized and existing under and by virtue of Philippine laws, with principal office located at the 11th Floor, Oledan Square, 6788 Ayala Avenue, Makati City, Philippines1. As stated in its Articles of Incorporation, it is engaged primarily in the business of general contractor, builder, founder and more specifically, build, erect, maintain, alter, repair, pull down restore, install and construct facilities for power generation. It has a Securities and Exchange Commission (SEC) Certificate of Registration with No. 189106.2 It is duly registered with the Bureau of Internal Revenue as a VAT Taxpayer as shown by its Certificate of Registration No. 470-000-197-459-V. 3 Respondent, on the other hand, is the duly appointed Commissioner of the Bureau of Internal Revenue (BIR), vested with the authority to act as such, including inter alia, the power to decide, approve and grant refunds and/or tax credits of excess input value-added tax (VAT) and is holding office at the BIR National Office Building, Diliman, Quezon City, where he may be served with summons and other court processes of this Court.4 For the period covering the fourth quarter of 2001, four quarters of 2002 and first two quarters of 2003, petitioner duly filed with the BIR its quarterly VAT returns, including the amendments thereto, reflecting the following: Fourth Quarter 2001 (Exhibit "E") p 80,528,620.09 27,486,805.73 Taxable Sales/Receipts Zero-Rated Sales/Receipts P108 015 425.82 Total Sales/Receipts I 1 Joint Stipulation of Facts and Simplification of Issues, Paragraph 1. 2 Joint Stipulation of Facts and Simplification of Issues, Paragraph 3. 3 Joint Stipulation of Facts and Simplification oflssues, Paragraph 4. 4 Joint Stipulation of Facts and Simplification of Issues, Paragraph 2.

DECISION p 7.320.397.92 C.T.A. CASE NOS. 6843 & 6897 p 5,409,607. 74 Page 3 9,619,319.31 36 154.00 Output Tax Due Less: Input Tax p 15,065,081 .05 Input Tax Carried Over from Previous Quarter p 15,065,081.05 Domestic Purchases p 7 744 683.13 Importation of Goods Total Available Input Tax p 58,427,406.34 Less: Any VAT RefundfTCC Claimed 32,632,091.83 Net Creditable Input Tax Excess Input Tax p 91 059 498.17 First Quarter 2002 (Exhibit "F-3") p 5.842,762.50 Taxable Sales/Receipts p 7,744,683.13 Zero-Rated Sales/Receipts 6,625, 731 .85 Total Sales/Receipts p 14,370,414.98 Output Tax Due 2 634 978.67 Less: Input Tax p 11 735 436.31 Input Tax Carried Over from Previous Quarter p 5 892 673.81 Domestic Purchases-Goods and Services Total Available Input Tax p 57,716,423.86 Less: Any VAT RefundfTCC Claimed 29,479,115.13 Net Creditable Input Tax Excess Input Tax p 87 195 538 99 Second Quarter 2002 (Exhibit "G-3" ) p 5,771.642.39 Taxable Sales/Receipts p 5,892,673.81 Zero-Rated Sales/Receipts 4,608,607.86 Total Sales/Receipts p 10,501 ,281 .67 Output Tax Due 2,373, 999.72 Less: Input Tax p 8,127,281.95 Input Tax Carried Over from Previous Quarter p 2 355 639.56 Domestic Purchases-Goods and Services Total Available Input Tax p 43,685,982.77 Less: Any VAT RefundfTCC Claimed 31 '892,456.48 Net Creditable Input Tax Excess Input Tax p 75 578 439 25 Third Quarter 2002 (Exhibit "H-3") p 4.368.598.27 Taxable Sales/Receipts p 2,355,639.56 Zero-Rated Sales/Receipts 4.918,259.93 Total Sales/Receipts p 7,273,899.49 Output Tax Due 1,557.708.59 Less: Input Tax / Input Tax Carried Over from Previous Quarter Domestic Purchases-Goods and Services Total Available Input Tax Less: Any VAT RefundfTCC Claimed

DEOSION p 5 716 190.90 C.T.A. CASE NOS. 6843 & 6897 p 1 347 592.63 Page 4 p 21 ,277,931 .52 Net Creditable Input Tax 84,692,892. 12 Excess Input Tax P105 970 823.64 Fourth Quarter 2002 (Exhibit "1-3") p 2,127,793.15 Taxable Sales/Receipts Zero-Rated Sales/Receipts p 1,347,592.63 Total Sales/Receipts 7 647 078.74 Output Tax Due p 8,994,671 .37 Less: Input Tax 1 347 592.63 Input Tax Carried Over from Previous Quarter p 7647078.74 Domestic Purchases-Goods and Services p 5 519 285.59 Total Available Input Tax Less: Any VAT Refund/TCC Claimed p 37,547,800.84 Net Creditable Input Tax 66 269 719.89 Excess Input Tax P103 817 520 73 First Quarter 2003 (Exhibit "J-3") p 3 754 780.08 Taxable Sales/Receipts Zero-Rated Sales/Receipts p 5,519,285.59 Total Sales/Receipts 2,536,602.14 Output Tax Due p 8,055,887.73 Less: Input Tax 1 764 505.51 Input Tax Carried Over from Previous Quarter p 6 291 382.22 Domestic Purchases-Goods and Services p 2 536 602.14 Total Available Input Tax Less: Any VAT Refund/TCC Claimed p 13,981 ,802.70 Net Creditable Input Tax 44,293,090.89 Excess Input Tax p 58 274 893 59 Second Quarter 2003 (Exhibit "K-3") p 1.398.180.27 Taxable Sales/Receipts Zero-Rated Sales/Receipts p 2,536,602.14 Total Sales/Receipts 3 683 867.77 Output Tax Due p 6,220,469.91 Less: Input Tax 3,938,161.37 Input Tax Carried Over from Previous Quarter p 2,282,308.54 Domestic Purchases-Goods and Services p 884 128.27 Total Available Input Tax Less: Any VAT Refund/TCC Claimed Net Creditable Input Tax Excess Input Tax According to petitioner, for the period October 1, 2001 to June 30, 2003, it entered into agreements with various enterprises registered with Philippine I

DECISION C. T.A. CASE NOS. 6843 & 6897 Page 5 Economic Zone Authority (PEZA), Clark Development Authority (CDA) and Subic Bay Metropolitan Authority (SBMA) and it provided construction services, which are subject to VAT at zero rate pursuant to Sections 106(A)(2)(c) and 108(6)(3) of the 1997 National Internal Revenue Code (NIRC), as amended. Petitioner further claims that for the year 2001, it incurred excess/unutilized input taxes arising from its domestic purchases of goods and services and importation of capital goods, which are attributable to its zero-rated sales. Petitioner now contends that having generated zero-rated sales and paid input taxes in the course of its trade or business, which are attributable to zero-rated sales and have not been applied to any VAT output tax liability, it is entitled to refund/issuance of tax credit certificate. Consequently, petitioner filed with BIR an administrative claim on December 11, 2003 (Exhibit "0'') but subsequently filed an amended administrative claim on December 30, 2003 (Exhibit "P''). On January 22, 2004, petitioner filed a letter clarifying the exact amount of its claim for refund or issuance of tax credit certificate for the four quarters of 2002 and the first and second quarter of 2003 (Exhibit "Q''). The details of petitioner's claims are as follows: CTA Case No. 6843 FOR THE YEAR 2001 Total Sales Allocation Input Tax Input Tax (B) Rate Exh. Qtr. Zero-rated Attributable to Excess/Unutilized Sales (NB )= (C) (D) Zero-rated Sales (A) (D x C)= (E) E 4th P27,486,805. 73 P100,694,642.22 27.29% P9,655,473.31* P2,634,978.65 P2,634,978,65 The total sales were reduced to P100,694,642.22 fran P108,015,425.82 per return (Exhibit "E") after considering that the total gross receipts of P80, 528,620.09 (Exhibit "E") was reported inclusive of the VAT. I

DECISION C.T.A. CASE NOS. 6843 & 6897 Page 6 *P9,619,319.31 Input Tax on Domestic Pt.rchases + 36.154.00 Input Tax on ImJX)rtation of GO<XIs P9,655,473.31 CTA Case No. 6897 FOR THE YEAR 2002 Total Sales Allocation Input Tax Input Tax Attributable to Excess/Unutilized Exh. Qtr. Zero-rated Rate Zero-rated Sales Sales (0 X C)= (E) (A) (B) (A/B )= (C) (D) F-3 1st P32,632,091.83 p 91,059,498.17 35.83% P6,625,731.85 P2,373,999.72 P2,373,999. 72 G-3 2nd P29,479,115.13 p 87,195,538.99 33.80% P4,608,607.86 P1,557,708.59 P1,557, 708.59 H-3 3'd P31,892,456.48 p 75,578,439.25 42.19% I-3 4th P84,692,892.12 P105,970,823.64 79.92% P4,918,259.93 P2,075,013.86 P1,347,592.63* P7,647,078. 74 P6,111,545.33 Pl. 764.505.51 * P7,070,806.45 FOR THE YEAR 2003 J-3 1st P66,269,719.89 P103,817,520.73 63 .8 3 % P2,536,602.14 P1,619,113.14 P1,138,421.87* K-3 2"d P44,293,090.59 P 58,274,893.59 76.00% P3,683,867.77 P 2,799,739.50 P2.799,739.50 GRAND TOTAL P3,938,161.37 P11,008,967.82 ========= * � P727,421.23 was applied against petitioner's output tax liability, thereby lowering the refundable amount for the third quarter of 2002 from P2,075,013.86 to P1,347,592.63. � P4,347,039.82 was applied against petitioner's output tax liability, thereby lowering the refundable amount for the fourth quarter of 2002 from P6,111,545.33 to Pl,764,505.51. � P480,691.27 was applied against petitioner's output tax liability, thereby lowering the refundable amount for the first quarter of 2003 from P1,619,113.14 to P1,138,421.87. (A verification by this Court of the computations, however would show that the total excessjunutilized input tax for 2002 should be P7,043,806.45 lowering the GRAND TOTAL to P10,981,967.82.) The inaction of respondent on its claim for refund/issuance of tax credit certificate propelled petitioner to file the instant Petitions for Review in order to toll the running of the prescriptive period provided for under the 1997 NIRC, as amended in the following dates to wit: CTA Case No. Date of Filing 6843 December 30,2003 6897 March 22, 2004 I

DEOSION C.TA CASE NOS. 6843 &. 6897 Page 7 On April 19, 2004, petitioner filed an "Omnibus Motion" for the consolidation of the foregoing cases. This Court granted the Motion during the hearing held on April 23, 2004, which was confirmed in a Resolution dated May 7, 2004. Respondent, for his part interposed the following Special and Affirmative Defenses in his Answer: For CTA Case No. 6843 3. He reiterates and repleads the preceding paragraphs of this answer as part of his Special and Affirmative Defenses; 4. Petitioner's alleged daim for issuance of tax credit certificate is still subject to administrative routinary investigation/examination by the respondent's Bureau; 5. Taxes paid and collected are presumed to have been made in accordance with law, hence, not refundable; 6. Petitioner's claim for refund or issuance of tax credit certificate in the amount of P2,634,978.65 as alleged excess and unutilized VAT input tax paid on petitioner's domestic purchases of taxable goods and services and importation of goods for the period covering October 1, 2001 to December 31, 2001 (4th quarter of 2001) were not fully substantiated/documented; 7. In an action for refund/credit, the burden of proof is on the petitioner to establish its right to refund and failure to adduce sufficient proof is fatal to the claim for tax refund/credit; 8. Petitioner's sales of services to Philippine Economic Zone Authority (PEZA) registered enterprises do not qualify as zero-rate VAT; 9. It is incumbent upon the latter to show that it has complied with the provisions under Section 204(c) in relation to Section 229 of the Tax Code. Otherwise, its failure to prove the same is fatal to its claim for refund; 10. Claims for refund are construed strictly against the claimants for the same partake the nature of exemption from taxation (Commissioner of Internal Revenue vs. Ledesma, 31 SCRA 95) and as such, they are looked upon with disfavor (Western Minolco Corp. vs. Commissioner of Internal Revenue, 124 SCRA 1211). I

DECISION C.T.A. CASE NOS. 6843 & 6897 Page 8 For CTA Case No. 6897 4. Assuming without admitting that petitioner filed a claim for refund, the same is subject to investigation by the Bureau of Internal Revenue; s. Petitioner failed to demonstrate that the tax subject of the case at bar was erroneously or illegally collected; 6. Taxes paid and collected are presumed to have been made in accordance with law and regulations, hence, not refundable; 7. Petitioner's claim for tax refund/credit in the amount of Pll,008,967.82 representing alleged unutilized and unapplied input VAT for the four quarters of taxable year 2002 and first two quarters of taxable year 2003 were not fully substantiated; 8. In an action for refund/credit, the burden of proof is on the taxpayer to establish its right to refund and failure to adduce sufficient proof is fatal to the action for tax refund/credit; 9. It is incumbent upon the petitioner to show that it has complied with the provisions of Section 204 in relation to Section 229 of the Tax Code, as amended; and 10. Claims for refund are construed strictly against the claimant for the same partake the nature of exemption from taxation (Commissioner of Internal Revenue vs. Ledesma, G.R. No. L-13509, January 30, 1970, 31 SCRA 95) and as such, they are looked upon with disfavor (Western Minolco Corp. vs. Commissioner of Internal Revenue, 124 SCRA 1211). During trial petitioner presented testimonial and documentary evidence while respondent submitted the case for dedsion without presenting any evidence. Petitioner also moved for the commissioning of an Independent Certified Public Accountant (CPA). The Court granted the motion and commissioned Ms. Emerita Escueta of SGV & Co. as Independent CPA. In the Court's Resolution dated November 6, 2006, the instant case was submitted for dedsion sans the parties' memoranda. I

DECISION C.T.A. CASE NOS. 6843 & 6897 Page 9 Petitioner and respondent jointly stipulated on the following issues in both cases: "1. Whether or not the sale of services by Petitioner to various Philippine Economic Zone Authority (''PEZA''), Clark Development Authority (''CDA") and Subic Bay Metropolitan Authority (''SBMA") registered enterprises are subject to Zero Percent (0%) VAT under Section 108(8)(3) of the National Internal Revenue Code; 2. Whether or not PetitiOner has unutilized creditable input value-added taxes amounting to Php2,634,978.65 for the 4th Quarter of 2001 and amounting to Php11,008,967.82 for the 1st, 2nd, 3rd, and 4th Quarters of 2002 as well as the 1st and 2nd Quarters of 2003, which are proper subjects of a claim for refund; 3. Whether or not said creditable input tax for the 4th Quarter of 2001, 1st to 4th Quarters of 2002 and 1st and 2nd Quarters of 2003, derived from domestic purchases of goods and services and importation of goods, are substantiated by documentary evidence in the form of invoices or official receipts; 4. Whether or not said creditable input tax for the 4th Quarter of 2001, 1st to 4th Quarters of 2002 and 1st and 2nd Quarters of 2003 were carried-over or utilized in the succeeding taxable quarter and applied against any output tax liability of the Petitioner for the same and succeeding taxable periods." Anent the first issue, it is petitioner's positions that the sale of services it made to various Philippine Emnomic Zone Authority, Clark Development Authority, /

DECISION C.T.A. CASE NOS. 6843 & 6897 Page 10 and Subic Bay Metropolitan Authority (SBMA) registered enterprises are subject to zero percent (0%) VAT under Section 108(6)(3) of the 1997 NIRC, as amended. This Court agrees with petitioner for undoubtedly, the questioned transactions fall within those referred to under said Section 108(6)(3), quoted hereunder: "SEC 108. Value-added Tax on Sale of SeNices and Use or Lease of Properties. - XXX (B) Transactions Subject to Zero Percent (0%) Rate.- XXX (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; xxx'' (Emphasis supplied) The spedal laws being referred to by the above quoted law are Republic Act No. 7227, otherwise known as the "Bases Conversion and Development Act of 1992," which provides under Section 12 thereof the tax exemption of Subic Special Economic Zone and Republic Act No. 7916, otherwise known as the "Special Economic Zone Act of 1995" which provides under Section 24 thereof the tax exemption of Ecozones. In conjunction thereto, Revenue Regulations 7-95 provides that: "Section 4.100-2. Zero-rated sales. - A zero-rated sales by a VAT-registered person, which is a taxable transaction for VAT purposes, shall not result in any output tax. However, the input tax on his purchases of goods, properties or services related to such zero- rated sale shall be available as tax credit or refund in accordance with these regulations. The following sales by VAT-registered persons shall be subject toO%: /

DECISION C.T.A. CASE NOS. 6843 & 6897 Page 11 (a) Export sales "Export Sales" shall mean: XXX (5) Those considered export sales under Articles 23 and 77 of Executive Order No. 226, otherwise known as the Omnibus Investments Code of 1987, and other special laws, e.g. Republic Act No. 7227, otherwise known as the Bases Conversion and Development Act of 1992. XXX (c) Sales to persons or entities whose exemption under special laws, e.g. R.A. No. 7227 duly registered and accredited enterprises with Subic Bay Metropolitan Authority (SBMA) and Clark Development (CDA), R.A. No. 7916, Philippine Economic Zone Authority (PEZA), or international agreements, e.g. Asian Development Bank (ADB), International Rice Research Institute (IRRI), etc. to which the Philippines is signatory effectively subject such sales to zero-rate." Furthermore, with respect to the sale of services made to the PEZA registered enterprises, Revenue Memorandum Circular No. 74-99 provides that: "Section 3. Tax Treatment of Sales Made by a VAT Registered Supplier from the Customs Territory to a PEZA registered Enterprise. - (1) If the buyer is a PEZA registered enterprise which is subject to the 5% special tax regime, in lieu of all taxes, except real property tax, pursuant to R.A. No. 7916, as amended: XXX (b) Sale of Service. - This shall be treated subject to zero percent (0%) VAT under the "cross border doctrine" of the VAT System, pursuant to VAT Ruling No. 032-98 date Nov. 5, 1998. (2) If Buyer is a PEZA registered enterprise which is not embraced by the 5% spedal tax regime, hence, subject to taxes under the NIRC, e.g., Service Establishments which are subject to taxes under the NIRC rather than the 5% special tax regime: XXX I

DECISION C.T.A. CASE NOS. 6843 & 6897 Page 12 (b) Sale of Service. - This shall be treated subject to zero percent (O%) VAT under the "cross border doctrine" of the VAT System, pursuant to VAT Ruling No. 032-98 dated Nov. 5, 1998." As can be seen from the above laws and regulations, petitioner's sales of services to PEZA, SBMA, and CDA registered enterprises are subject to zero percent (0%) VAT. Going to the remaining issues, they can be summarized into whether or not petitioner is entitled to refund or issuance of tax credit certificate. Relevant hereto is Section 112 of the 1997 NIRC, as amended, which provides that: "Section 112. Refunds or Tax Credits of Input Tax. - (A) Zero-rated or Effectively Zero-rated Sales. - Any VAT-registered person, whose sales are zero-rated or effectively zero-rated may, within two (2) years after the close of the taxable quarter when the sales were made, apply for the issuance of a tax credit certificate or refund of creditable input tax due or paid attributable to such sales, except transitional input tax, to the extent that such input tax has not been applied against output tax; Provided, however, That in the case of zero-rated sales under Section 106(A)(2)(1), (2) and (b) and Section 108(6)(1) and (2), the acceptable foreign currency exchange proceeds thereof had been duly accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP): Provided, further, that where the taxpayer is engaged in zero-rated or effectively zero- rated sale and also in taxable or exempt sale of goods or properties or services, and the amount of creditable input tax due or paid cannot be directly and entirely attributed to any one of the transactions, it shall be allocated proportionately on the basis of the volume of sales.xxx" From the foregoing, petitioner must comply with the following requisites in order to be entitled to refund or issuance of tax credit certificate representing unutilized/excess input VAT payments attributable to zero-rated or effectively zero- rated sales:

DECISION C.T.A. CASE NOS. 6843 & 6897 Page 13 1. There must be zero-rated or effectively zero-rated sales; 2. That input taxes were incurred or paid; 3. That such input VAT payments are directly attributable to zero- rated sales or effectively zero-rated sales; 4. That the input VAT payments were not applied against any output VAT liability; and 5. That the claim for refund was filed within the two-year prescriptive period. We shall first go to the fifth and final requisite. Compliance thereto by petitioner was already settled by admission of both parties in their Joint Stipulation of Facts and Simplification of Issues.5 Thus, discussion thereof is no longer necessary. Going now to the first requisite. As already discussed, petitioner clearly had zero-rated or effectively zero-rated sales. The only question left unanswered is how much zero-rated or effectively zero-rated sales were generated by petitioner. An examination of the report of the commissioned Independent CPA (Exhibit "T" to "T-59j and petitioner's supporting evidence, such as VAT returns for the questioned period (Exhibit ''E" to ''M'~ inclusive of sub-markings), and various receipts (Exhibit "UU" to ''PPj, shows that petitioner had sale of services to allegedly CDA and SBMA registered enterprises in the amount of P1,549,622.00 and export sales to Loken (Singapore) in the amount of P33,707,095.43. However, the sale of services to said allegedly CDA and SBMA registered enterprises cannot be considered as zero-rated sales because petitioner failed to submit to this Court documents showing their registration, such as Certificates of 5 Paragraphs 21 and 23 /

DECISION C.T.A. CASE NOS. 6843 & 6897 Page 14 Registration, upon which the Court could verify whether said enterprises are really registered with the CDA and SBMA. On the other hand, with respect to the sale of services to Loken (Singapore) the relevant provision of the 1997 NIRC, as amended, is Section 108(8)(2), quoted hereunder: "SEC. 108. Value-added Tax on Sale of Services and Use or Lease of Properties. - 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 (2) Services other than those mentioned in the preceding paragraph rendered to a person engaged in business conducted outside the Philippines or a nonresident 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 Plipinas (BSP); xxx" According to the CPA report, the sales of services to Loken (Singapore) were supported by Bank Credit Advices and by entries of deposits in petitioner's foreign currency bank account. However, a thorough scrutiny of the pieces of evidence of petitioner shows that it failed to actually submit to this Court such Bank Credit Advices or entries of deposit proving that its sale of services to Loken (Singapore) were really paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the BSP. Thus, petitioner's sale to Loken (Singapore) likewise failed to qualify as zero-rated sales. I

DEQSION C.T.A. CASE NOS. 6843 & 6897 Page 15 Accordingly out of the amount of P316,744,782.06 claimed as zero-rated sales by petitioner within the period of the daim, only P281,488,064.63 qualifies for VAT zero-rating. We shall now proceed to the second requirement. The amount of input taxes being claimed by petitioner per quarterly VAT returns amounted to P39,675,621.60. But as correctly noted by the Court commissioned CPA in its report dated May 27, 2005,6 only P24,932,449.63 was supported by valid VAT documents. The amount of 14,743,171.97 was excluded and a detailed summary of the amount and reasons for the exclusions are as follows: For the 4th Quarter 2001 p 10,827.27 a. Domestic purchase of goods supported by offiCial receipts only 17,096.89 b. Domestic purchase of services supported by unregistered 167,359.00 official receipt (OR) c. Domestic purchase of services with wrong support 324 ,773 .64 788,513.46 (provisional receipt only) d. Input taxes claimed not within the coverage of the refund 56,818.08 e. Out of the year period input taxes claimed 44,838.48 f. Input taxes claimed with photocopied supporting documents 96,398.31 g. Unsupported Domestics purchase of services 4.055.897.05 h. Erroneous amount of input taxes claimed P5,562,523.07 i. Unsubstantiated input taxes claimed p 12,090.91 Total for the 4th Quarter of 2001 80,000.00 For the 1st Quarter 2002 235,371 .20 a. Domestic purchase of goods supported by offiCial receipt only 18,181 .82 b. Domestic purchase of goods supported by unregistered invoice c. Out-of-year period input taxes claimed 210,952.76 d. Unsupported Domestic purchase of services 1.851 .012 .95 e. Erroneous amount of input taxes claimed P2,407,609.64 f. Unsubstantiated input taxes claimed p 2.072.73 Total for the 1st Quarter of 2002 26,570.89 For the 2nd Quarter of 2002 289,044.58 a. Input taxes claimed with photocopied supporting documents 483.741 .28 b. Domestic purchase of service supported by TAN official receipts P801,429.48 c. Erroneous amount of input taxes claimed d. Unsubstantiated input taxes claimed Total for the 2nd Quarter of 2002 6 Exhibit "T", pages 4 to 6 /

DECISION p 166,350.00 C.T.A. CASE NOS. 6843 & 6897 4 ,600 .00 Page 16 2 ,023.43 3,181 .82 For the 3rd Quarter 2002 26,481.48 a. Domestic purchase of goods supported by offiCial receipts only b. Domestic purchase of goods supported by stamped TIN VAT invoice 809.014.97 c. Domestic purchase of service supported by Statement of Account only P1 ,011 ,651.70 d. Domestic purchase of service supported by TAN official receipts e. Erroneous amount of input taxes claimed P1 ,133,725.05 f . Unsubstantiated input taxes claimed 6,545.45 13,636.36 Total for the 3rd Quarter of 2002 524 ,128.14 For the 4th Quarter 2002 2 125.317.01 a. Out-of-year period input taxes claimed p 2,783,352.01 b. Unsupported Domestic purchase of goods and services c. Domestic purchase of service supported by TAN official receipts p 53,636.36 d Erroneous amount of input taxes claimed 8,910.00 e. Unsubstantiated input taxes claimed 75 ,818 .18 5 ,363 .64 Total for the 4th Quarter of 2002 7, 387.81 818.18 For the 1st Quarter 2003 a. Input taxes claimed not within the coverage of the refund 720,186.20 b Out-of-year period input taxes claimed p 872,120.38 c Domestic purchase of service with Non-VAT support d Unsupported domestic purchase of service p 228,849.53 e. Domestic purchase of services supported by TAN official receipts 12 ,702 .28 f . Erroneous amount of input taxes claimed 39,281 .82 g Unsubstantiated input taxes claimed 121 ,730.73 Total for the 1st Quarter of 2003 901,921 .34 p 1.304,485.69 For the 2nd Quarter 2003 a. Input taxes claimed not within the coverage of the refund P14,743,171.97 b Domestic purchase of service with Non-VAT support c. Unsupported domestic purchase of goods and services ============== d. Domestic purchase of services supported by TAN official receipts e. Unsubstantiated input taxes claimed Total for the 2nd Quarter of 2003 GRAND TOTAL Finally, with respect to the third and fourth requisites, being interrelated, they shall be discussed jointly. Records show that not all of the substantiated input VAT of P24,932,449.63 can be attributed to petitioner's zero-rated sales since it also had taxable sales for the subject period in the amount of P305,845,184.48 with the related output tax of P30,584,540.30, detailed as follows:

DECISION C.T.A. CASE NOS. 6843 & 6897 Page 17 Taxable Taxable Sales/ Output VAT Quarter Receipts E 4th qtr-2001 p 73,207,836.45 p 7,320,783.64 7 F-3 1st qtr-2002 58,427,406.34 5,842,762.50 G-3 2nd qtr-2002 57 ,716,423 .86 5,771 ,642.39 H-3 3rd qtr-2002 43,685, 982.77 4,368,598.27 1-3 4th qtr-2002 21 ,277,931 .52 2,127,793.15 J-3 1st qtr-2003 37 ,547 ,800 .84 3, 754,780.08 K-3 2nd qtr-2003 13,981.802.70 1.398,180.27 p 305 845 184 48 p 30 584 540.30 As can be seen from the table above, the substantiated input VAT of P24,932,449.63 is not enough to cover petitioner's output VAT liability of P30,584,540.30. This means that the entire input tax of P24,932,449.63 shall be applied against the output tax of P30,584,540.30. Based on the foregoing, it follows that there is no excess/unutilized input VAT which may be the proper subject of claim for refund/issuance of tax credit certificates pursuant to section 112(A) of the 1997 NIRC, as amended. WHEREFORE, the instant Petition for Review is hereby DENIED DUE COURSE, and accordingly, DISMISSED for lack of merit. SO ORDERED. WE CONCUR: L~.~ ERNESTO D. ACOSTA Presiding Justice ~ CAESAR A. CASANOVA Assodate Justice 7 Per VAT return, erroneously computed by petitioner as P7,320,397.92

DECISION C.T.A. CASE NOS. 6843 & 6897 Page 18 CERTIFICATION Pursuant to Article VIII, Section 13 of the Constitution, it is hereby certified that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court's Division. L~-~ ERNESTO D. ACOSTA Presiding Justice Chairperson, First Division