SEMIRARA MINING CORPORATION (Formerly: SEMIRARA COAL CORPORATION) v. COMMISSIONER OF INTERNAL REVENUE (Consolidated with Case No. 7783)

Rep ubli c o f th e Philip pin es COURT OF TAX APPEALS Quezon City SECOND DIVISION SEMIRARA MINING CORPORATION (formerly: SEMIRARA COAL CORPORATION), Pe titio ner, -ve rsus- CTA CASE NO. 7727 COMMISSIONER OF INTERNAL REVENUE, Res p o nd e nt. X-----------------------------------------------X SEMIRARA MINING CORPORATION (formerly: SEMIRARA COAL CORPORATION), Pe titione r, -ve rsus - CTA CASE NO. 7783 Prese nt : CASTA NED A JR., C hairpe rso n _ COMMISSIONER OF INTERNAL CASANOVA a nd REVENUE , MIND ARO-GR ULLA JJ . Respo ndent . Pro mul g ate d: FEB 1 0 2 ~/ MINDARO -GRULLA, :f..., Th ese are co nsolida ted cases o f two (2) Pe titio ns fo r Review se p ara te ly fil ed b y Semirara M inin g Corpo rati o n (fo rm e rl y Se mirara Coa l Co rpora ti o n) as pe titi o n e r, again st th e Co mmi ss io ne r o f Inte rn a l C..

CTA Case Nos. 7727 and 7783 Page 2 of 25 SEMIRARA MINING CORPORATION v. C IR DECISION Re ve nue (CIR) a s respond en t, fo r th e Court in Divisio n, pursuant to Rule 4, Section 3 (a) (2) , in relation to Rule 8, Sec ti o n 4(o), o f the Re vised Rul es o f th e Court of Ta x Appeals (RR C TA). Petitioner seeks the issuance of a ta x cred it certifica te o r refund of the final va lue-ad ded tax (VAT) e rrone ous ly wit hh e ld by the Notional Powe r Corporation (NPC) and remitted to th e Bureau o f Inte rnal Re ve nu e (BIR) o n its coo l soles for th e period coverin g January 1, 2006 to June 30, 2006 in th e amount of P86, 108,626.10, broken down os follows: CTA Case No . Period Covered Amount of Claim 7727 January 1 to March 3 1, 2006 p 47,560, 418 .57 7783 April 1 to June 30, 2006 38,548,207.62 Total p 86 , 108,626 .19 Petitioner is a domestic corporati o n duly o rganized and existing under the lows o f th e Republic o f th e Philippines, with principal o ffi ce at 2nd Fl oo r, DMCI Plaza, 2281 C hin o Ro ces Avenue, Makoti City, Metro Monilo. 1 It is registered wi th th e BIR os a non-VAT en terpris e engaged in th e coo l mining business, w ith Taxpayer Identification No. (TIN) 000- 190- ( 324-000 and OCN 8RC00000 1811 9.2 1 Par. 1, The Fac ts, Join t Stipulation o f Consolidat ed Fac ts and Issues (J SC FI) , Docket, p. 237 . 2 Exhibit "A" .

'' Page 3 of 25 CTA Case Nos. 7727 and 7783 SEMIRARA MINING CORPORATION v. CIR DE C ISION Respondent is the duly-appointed Commissioner of the Bureau of Internal Revenue (BIR). with office address at the BIR National Office Building, Diliman, Quezon City .3 On July 11, 1977, petitioner's predecessors-in-interest, Vulcan Industrial and Mineral Exploration Corporation and Sulu Sea Oil Development Corporation, entered into a Coal Operating Contract (COC) with the Philippine Government, through the Energy Development Board (EDB) of then Ministry of Energy, pursuant to Presidential Decree (PD) No. 972. 4 Subsequently, the COC and all the rights, privileges and obligations appurtenant thereto were transferred to Semirara Coal Corporation (SCC) by virtue of a Deed of Assignment s dated April 7, 1980. The term of the COC is until the year 20126. The COC implements the declared state policy stated in PD No. 972 to accelerate the exploration, development, exploitation, production, and utilization of the country's coal resources . In line with this policy, Section 16 of the said Decree provided for various incentives {. to operators. Section 16 reads in part as follows: "Section 16. Incentives to Operators. - The provisions of any low to the contrary notwithstanding, a contract executed under this Decree may provide that the operator shall hove the following incentives: a) Exemption from all taxes exc ept income tax; 3 Par. 2, Th e Fa c ts, JSC FI, Do cket , p . 237. 4 Exhibit "B". s Exhibit " C" . 6 Exhibit "D".

CTA Case Nos . 7727 and 7783 Page 4 o f 25 SEMIRARA MINING CORPORATION v. C/R DE C ISION b) Exemp tion from payment o f tariff duties and compe nsating tax on importatio n of machinery and equ ipme nt and spare parts and materials required for the coa l opera tions subjec t to the following condi tions:" Th e fo regoing provision was in turn in corporated in the terms and conditions o f the COC, as amended, to wit: "SECTION V- RIGHTS AND OB LI GATI ONS OFTHE PARTIES XXX XXX XXX 5.2 . Th e OPERATOR shall have th e following rights: a) Exemption from all taxes (natio nal and loca l) excep t income tax; XXX XXX xxx" Petitio ner sells its coa l production, under the COC, to the NPC, a government-owned and con tro ll ed corp o rati on, pursuant to a Coal Supply Agreement? executed between the NPC and petitioner in 1995. Petitio ner allegedly had been selling coal to th e NPC fo r years without payment o f the VAT, pursuant to the exemption granted under PO No. 972, as amended, w hi c h is embodied in the COC, as amended and as provided fo r under Sec ti o n 109 o f the National Inte rnal Revenue Code (NIRC) of 1997 (prior to its ame ndment under Republic Ac t No. {. 9337 ). viz.: "SEC. 109. Exempt Transactions.- The following shall be exempt from the value-added tax: XXX XXX XXX 7 Exhibit "U".

..' Page 5 o f 25 CTA Case Nos . 7727 a nd 7783 SEM IRARA M INING CORPORA TI ON v. CIR DECISION (e ) Sole or importatio n o f cool and natural gas, in w hat ever form o r stol e, and p e trole um products (exce pt lubric ating o il, processed gas, g rease, wa x, and p e tro latum) subjec t to excise lox imposed und er Title VI ; XXX XXX XXX (q) Tra nsa ctio ns w hic h ore exe mpt und er internatio nal a g reem e nts to whic h th e Philippines is a sig nato ry o r und er sp ecial lows, exce pt th ose under Preside ntial Decree Nos. 66, 529 and 1590; XXX XXX xxx" Wh e n Re publi c Act (R A J No. 9337 b ec om e e ffec ti ve o n Nove mbe r l , 2005, Sec ti o n l 09 (E) w as d e lete d fro m th e NIRC o f 1997. A s a res ult, th e NP C b ega n to w ithh o ld a final VAT o f five p e rce nt (5%) o n coo l b illin gs o f p e titi o n e r, o n th e g ro un d that p e titi o n e r's co ol so les ore n o lo n ger exe mpt fro m VAT, pursuant to Sec ti o n ll4( C ) o f RA No. 9337, w hic h stat es : " (C) Withh o ld in g o f Value-adde d Tax. Th e Governm e nt or a ny o f its p o litic al subdivisio ns, instrum e nt a lities or a genc ies, inc ludin g governm e nt-ow ned o r -co ntro lled corpo ra tio ns (GOCCs ) sha ll , b e fore making paym e nt o n acco unt o f e a c h p urc hase o f good s and services w hic h ore subjec t to the va lue-ad d ed tax imposed in Sectio ns l 06 a nd l 08 o f thi s Cod e, dedu c t a nd w ithho ld a final value-add ed tax a t th e ro le o f five perce nt (5%) o f th e g ross paym e nt th ereo f: XXX Th e va lue-a dd ed tax w ithhe ld und er this Sectio n sha ll be rem itted w ithin te n (l 0) days fo llowing th e e nd o f th e m o nth th e w ithho ld ing was mode." Pe titi o ne r a ll ege dly fil e d a pro test o n th e w ithh o ldin g m o d e b y th e NPC a n d thu s fil e d a req u es t fo r a BIR rulin g w ith th e Co mmissio n e r o f Inte rn a l Reve nu e to co nfirm th a t th e so le o f coo l mod e b y p e titi o n e r [.

CTA Case Nos. 7727 and 7783 Page 6 of 25 SEMIRARA MINING CORPORATION v. C IR DE C ISION is still exempt from VAT, notwithstanding the amendments to the NIRC of 1997 by RA No . 9337. On March 7, 2007, the BIR issued BIR Ruling No. 006-20078, confirming the position of petitioner that its sale of coal remains exempt from VAT, to wit: "xxx XXX XXX In view of the foregoing, this office hereby rules that since the main object of the COC for which the tax exemption was granted is the active exploration, development and production of cool resources, SMC's soles of cool produced by virtue of a COC with EDB remain exempt from VAT pursuant to Section 109(k) of the Tax Code, as amended by R.A. 9337, in relation to PO 972, as amended." On May 21, 2007, petitioner filed with the Revenue District Office No. 121 (ROO 121) , Lorge Taxpayer's Division (LTAD) of the BIR, a letter requesting for the issuance of o tax credit certificate in the amount of P163,361,725.37, allegedly representing final withholding VAT on petitioner's cool soles covering the period January to December 2006, which the NPC erroneously withheld and remitted to the BIR.9 On January 21, 2008, the aforesaid request was amended to reflect the correct amount of final VAT withheld for the year 2006, amounting to P163,361 ,87 1.58, based on certifications provided by the ( NPC. IO a Exhibit "I". 9 Exhibit"J". 1o Exhibit "L".

CTA Case Nos. 7727 and 7783 Page 7 of 25 SEMIRARA MINING CORPORATION v. CIR DECISION On January 29, 2008, petitioner filed a letter with the SIR Large Ta xpayer 's Division to follow-up its pending claim for the issuance of a tax credit certificate for the year 2006, drawing parti cular attention to the amount of VAT withheld by the NPC fo r the first quarter of 2006 in the amount of P47,560,418.57 , considering that the two-year prescriptive period for filing a judicial claim for refund or issuance of a tax credit certi ficate for January 2006 was about to expire. 11 There being no immediate action on the claim from respondent and in order to toll the running of the two (2) -ye ar prescriptive period within which to file a judicial claim for refund, petitioner elevated its claim for the first and second quarters of 2006 in the respective amounts of P47,560, 418.57 �and P38,548,207.62 or a total of P86, 108,626.19, before this Court by way of separate Petitions for Review filed on the following dates: CTA Case No. Date of Filing of Period Covered Amount of Claim 7727 Petition for Jan. l lo Mar 31, 2006 p 47 ,560,4 18.57 7783 Review April 1 to June 30, 2006 38,548,207 .62 February 4, 2008 Total p 86,108,626.19 May 6, 2008 Respondent interposed the following Special and Affirmative Defenses in his Answer for CTA Case No. 7727 12 and CTA Case No.� 7783 13 onApril 15, 2008 and June 16, 2008, respectively: 11 Exhibil "N". 12 Docket, pp. 109 to 11 7.

CTA Case Nos. 7727 and 7783 Page 8 o f 25 SfM IRARA MINING CORPORATION v. C/R DECISION "5. Petitioner's c laim for tax re fund is subject to administrative inves tigation and/or exa minatio n by respondent; 6. To support it s cla im, it is impe ra tive for th e petitioner to prove th e foll owing, viz: o.) Th e registration require m e nts o f o volue-odded ta xpayer in compliance with Sectio n 9.236- 1(o) o f Revenue Regulations No. 16-2005, and Sec tio n 236 of th e Tax Code, os amended; b.) The invoic ing and a ccou nting requireme nts for VAT- registered p e rso ns os well os the filing and payment o f VAT in complian ce with th e provisions o f Section 11 3 and 114 o f th e Tax Code, os amended; c. ) Proof o f com plia nce with th e prescribed c hecklist of requ ire m e nts to be submitted invo lving claim for VAT re fund in pursuance with Sec tio n 9.236- 1(o) o f Revenue Regulations No. 16-2005, Revenue Memorandum Order No . 53-98, o th erwise th e re would be no su ffi c ien t complian ce with th e filin g o f administrative c laim for refund whi c h is o .condition sine quo no n prior to th e filing o f judic ial cla im in accordance with th e provision of Section 229 o f th e Tax Code, os amended. It is worthy o f emphasis th a t Sec tio n 11 2 (D) o f th e Tax Code, os amended, requires th e submission o f comple te documents in support o f th e application fil e d with the Bureau o f Internal Revenue before th e 120-doy audit period shall apply and before th e taxpayer could ovo il o f judicial remedies os provided for in th e low. He nce, petitioner's fail ure to submit proof o f compliance with th e above stated requirements warrants th e dismissal o f th e petition for review; d. ) That petitioner's adm inistrative and judicial claims for fo x re fun d was (sic, were ) fil ed within two (2) years after the c lose o f th e taxable quarter w he n th e so les were mode in accordance w ith Sections 112 (A) and (D) a nd 229 of th e Tax Code, os amended ; 7. Taxes paid and co llected by th e Bureau o f Interna l t. Revenue ore presumed to hove been mode in 13 Docket. pp. 122 to 129.

CTA Case Nos. 7727 and 7783 Page 9 o f 25 SEMIRARA MINING CORPORATION v. C/R DE C ISION accordance with law and th e rules and regulatio ns, and th e burden to prove o th erwise is upon the petitioner; 8. Republic Ac t No. 9337 o therwi se known as th e 'New Expanded Value-Added Tax' states th e fo llowing exempt tran sac tion s, to wit: XXX XXX XXX 9. Upo n care ful perusal o f th e above-quoted provision o f th e (sic ) Republic Act No . 9337, said act already amended certain provisions o f th e National Intern a l Revenue Code of 1997 (R .A. 8424) particularly o n Value Add ed Tax (VAT). The said act dele ted among o thers; th e provisio n which grants the tax exe mptio n to th e petitioner unde r R.A. 842 4 regarding th e 'sale or impo rtatio n o f coa l a nd natural gas, in whatever fo rm or sta te; 10. It is worthy to no te that a numbe r of exempt tran sactions fro m VAT und er R.A. 8424 were no t included or adapted as exemp t transactions in th e New Expanded VAT law (R .A. 9337) and this o nly shows the inte ntio n to su bject th ese transac tions in cluding th e sa le or importation o f coa l and gas, th e subjec t o f th e instant petition, into Value-Added Tax (VAT) . O th erwise, if it is ind eed th e inten tion o f th e legislature to include th e same under the exe mpt tran sac tio ns, it sho uld have restated th e sa m e under the New Expanded VAT law as what was done with th e o th er exemp t tran sactio ns; 11. Expressio unius est exclusio alterius. Under this legal maxim in sta tutory constructio n, th e express mention o f one thin g in law means th e exclusio n of o th ers not expressly m entio ned. Thus, th e omission of 'sale or importati on of coa l and natural gas, in whatever fo rm or state' from th e exempt tran sac tio ns under th e New Expand ed VAT Law only means that the same is subjec t to Va lue-Added Tax; 12. Pe titio ne r also seeks tax exemp tio n under th e guise th at th e sa m e was g rant ed under a specia l law. However, in on action fo r re fund, th e burden o f proof is on th e taxpayer to es tablish its right to re fund and failure lo sus tain th e burden is fatal to lhe c laim for tax re fund/credit. This is so because exemptions from ta xa tio n are hig hly disfavored in law and he who claims L

CTA Case Nos. 7727 and 7783 Page 10of25 SEMIRARA MINING CORPORATION v. CIR DECISION exemptio n must be able to justify his cla im by th e clearest grant o f organic or statut ory low. An exemption fro m commo n burden ca nno t be permitted to exist upon vogue implications; 13. The claims fo r refund ore cons trued strictly against th e cla imant fo r th e some partakes th e nature o f exe mption fro m ta xa tion and liberally in favor of the taxing authority; 14. As to th e allegations o f petitioner that its tax exemptio n is protected by th e non-impairment of th e obliga tion co ntra c t clause o f th e Constitution, th e some is misplaced as th e tax exemptio ns granted under a leg isla tive fran c hise ore subject to th e conditio n that th e some shall be subjec t to amendment, alteration or repea l by Co ng ress and when the comm o n good requires ; 15. Based from the foregoing , the petitioner's claim fo r tax re fund and/or credit has no basis in fa c t and in low, hence lhe insto n l petition shou ld be dismissed for absence of cause of action." O n July 8, 2008, petitioner fil ed "Motions fo r Consolidation and Correction" 1 <~ fo r the co nso lidatio n o f CTA Case No. 7783, which was pending before the First Divisi o n of the Court, with CTA Case No. 7727, pending before the Second Div isio n o f the Court, since these cases inv o lve th e same parties and issues; and for the amendment o f the name o f petitioner in the cap ti o n fro m "Semirara Coa l Corpora ti o n " to "Semirara Mining Co rporati on" to re fl ec t petitioner's exis ting corporate ( nome. 14 C TA Case No. 7783 , Doc kef, pp . 150- 156.

CTA Case Nos. 7727 and 7783 Page II o f 25 SEM IRARA MINING CORPORATION v. CIR DECISION In the hearing held on July ll, 200815 and confirming Resolution 16 doted July 25, 2008, this Court's First Division granted the Motion for Consolidation subject to th e co nformity of this Court's Second Division. Likewise, this Court's First Divisi o n approved the change in petitioner's nome in CTA Case No. 7783 from "Se miraro Coo l Corporation" to "Semiraro Mining Corporation". On August 4, 2008, this Court's Second Division issued a Resolution stating its conformity to the consolidation of th e subject coses. 17 On August 26, 2008, petitioner fil e d its Motion for Correction IB to seek the co rre ction or amendment of its nome in the caption of CTA Case No . 7727 to "Semiraro Mining Corporation" to re flect its existing corporate nome. The sa id M o tion was granted by this Co urt in a Reso lutio n 19 doted September 2, 2008. During trial , petitioner presented documentary and tes timonial evidence which includes that o f witnesses Junalina S. Tab o r, Amorlina R. Matulac, and Myra Celeste 0. Dabalos . Thereafter, petitioner filed its Fo rmal O ffe r o f Eviden ce 2o on May 20, 2009, sub mitting Exhibits "A" to {._ 1s CTA Case No. 7783, Docke t, p. 17 4 16 CT A Case No. 7783, Docke t, p. 175. 11 CTA Case No. 7727 , Docke t, p. 180. 1s CT A Case No. 7727, Docke t, pp. 18 1- 183. 19 CTA Case No. 7727, Docke t, p. 215 . 2o CTA Case No. 7727, Docket, pp. 32 1 to 334.

CTA Case Nos. 7727 and 7783 Page 12 of 25 SEM IRARA MINING CORPORATION v. CIR D EC ISION "FF", inclusive of sub-markings. In a Resolution 21 dated June 22, 2009, the afore-mentioned exhibits were admitted, except for Exhibits "B" and "C" on ground of petitioner's failure to identify them during trial. On July 8, 2009 22. petitioner moved for the reconsideration of a Resolution dated June 22, 2009, regarding the non-admission of Exhibits "B" and "C"; which this Court granted in the Resolution 23 issued on the same date. Respondent likewise filed his Formal Offer of Evidence24 on December 8, 2009, which was admitted by this Court in a Resolution 2s dated January 21, 2010. On March 3, 2010, the instant cases were submitted for decision, taking into consideration the parties' Memoranda filed on February 23, 2010 for petitioner and on February 26, 2010 for respondent. In their Joint Stipulation of Consolidated Facts and Issues, the ( parties submitted the following issues for this Court's resolution: "1 . Whether or not petitioner is entitled to a tax refund in the amount of EIGHTY-S IX MILLION ONE HUNDRED EIGHT THOUSAND SIX HUNDRED TWENTY-SIX PESOS AND TEN CENTAVOS (P86, 108,626.1 0) erroneously withheld by NPC for the period January 1, 2006 to June 30, 2006. 21 CTA Case No. 7727. Docket, pp. 338 to 339 . n CTA Case No. 7727. Docket , p. 342. 23 CTA Case No. 7727, Docket. p. 343. 24 CTA Case No. 7727, Docket. pp. 357 to 359. 2s CTA Case No. 7727 . Docket. pp. 367 to 368.

CTA Case Nos. 7727 and 7783 Page 13 of 25 SEMIRARA MINING CORPORA TION v. C IR DECISION 2. Whether or not petitioner filed the Petition for Review within the prescribed period in accordance with Section 112(0) of the 1997 NIRC. 3. Wh e ther or not petitioner's c laim for ta x refund/credit was filed within the two-year (2) prescriptive period in accordance with Section 112(A), (B) and (D) and Section 229 of the 1997 National Internal Revenue Code." Befo re discussing the merits o f petitioner's c laims, this Cou rt finds it appropriate to determine first the timeliness of the filing of the instant claims co nsidering that claims which are filed beyond the reglem e ntory period will no t prosper. Respo ndent, in his M emora ndum, alleges that th e judic ial claims fo r re fund under C TA Case Nos. 7227 and 7783 filed o n February 4, 2008 and May 6, 2008, respectively, had already prescribed since "(p)etitioner filed its administrative claim for refund o n 19 Ma y 2007." Unde r Sec tio n 11 2 (0) o f th e NIRC o f 1997, resp o nd e nt has o ne hundred twe nty (120 ) days within which to process claims for refund o f unutilized input tax; then petitioner has thirty (30) days to appeal the full o r partial C. denial o f th e claim o r th e inac tion of respondent. For easy re feren ce Section 11 2 (0) o f th e NIR C o f 1997, is he reby quoted as fo ll ows : "SEC. 11 2. Refunds or Tax Credits o f Input Tax. - XXX XXX XXX (D) Period within wh ic h Refund o r Tax C redit o f In put Taxes shall be Made.- In pr�oper cases, th e Commissioner shall gran t a re fund or issue the tax credit certifica te for creditable in pu t ta xes within o ne hundred twe nty (120) days from the dote

CTA Case Nos. 7727 and 7783 Page 14 of 25 SEMIRARA MINING CORPORATION v. CIR DECISION of submission of complete documents in support of the application filed in accordance with Subsections (A) and (B) hereof." This Court disagrees with respondent. It must be emphasized that Section 112(0) of the NIRC of 1997, in relation to Sections 112(A) and (B) of the same Code, pertains to tax refund or credit of unutilized input taxes by VAT-registered persons (a) arising from their purchases of goods and services attributable to zero- rated or effectively zero-rated sales or (b) upon retirement from or cessation of business, or due to changes in or cessation of status. Thus, Section 112(0). in relation to Sections 112(A) and (B) of the NIRC of 1997, is inapplicable to the instant claims since petitioner is registered as a non-VAT enterprise and the subject matter of the claims for refund refers to output VAT on petitioner's VAT-exempt sale of coal erroneous ly withheld by the NPC pursuant to Section 114(C) of the NIRC of 1997. The pertinent provisions applicable to the instant cases are C. Sections 204(C) and 229 of the NIRC of 1997, as amended, which are quoted herein below: "SEC. 204. Authority of the Commissioner to Compromise, Abate and Refund or Credit Taxes.- The Commissioner may - XXX XXX XXX (C) Credit or refund taxes erroneously or illegally received or penalties imposed without authority, refund the value of internal revenue stamps when they are returned in good condition by the purchaser, and, in his discretion, redeem or

CTA Case Nos . 7727 and 7783 Page 15 of 25 SEM IRARA MINING CORPORATION v. C/R DE C ISION c hang e unused stamps th a t have bee n ren d ered unfit for use and re fund th eir va lue upon proo f o f destruction. No c redit or re fund o f taxes or p e nalties shall be allowed unless the taxpayer fil es in writing with th e Commissio ner a claim for c redit o r re fund within two (2) years after the payment o f th e tax or penalty: Provided, however, That a return filed showi ng an overpa ym e nt shall be co nsidered as a written claim fo r c redit or re fund." "SEC. 229. Recovery of Ta x Erroneously or 1//ega//y Collected. - No su it or proceeding shall be maintained in any court fo r th e recovery o f any natio nal internal reve nue tax herea fter alleged to have been erro neously o r illega lly assessed or co llected, or of any penalty c laimed to have b een col lected without authority, or o f any sum alleged to have bee n excessive ly or in any manner wrongfully co llec ted, until a claim for re fu nd or c redit has been duly filed with the Commissioner; bu t suc h suit or proceeding may be maintained, whether or not such tax, penalty, or su m has been paid under protest or duress. In any case, no such suit or proceeding shall be fil ed af ter th e expira tion o f two (2) years from th e date of payment o f th e tax or penalty regard less o f any superve ning cause that may arise after payment: Provided, however, That th e Com missioner may, even without a written c laim th ere for. re fund or credit any tax, where on th e face o f th e re turn upon which payment was made, suc h payment appears c learly to have been erroneously pa id ." C le arly, th e law mandates that both the administrative and judicial remedies o f filing a c laim fo r refund o f erroneously paid tax must be done within two (2) years fro m the payment o f the ta x. The in stant claims pertain to fin a l w ithh oldi n g VAT, w hic h must be remitted within te n (10) days fo ll owing th e end of th e month when the C. withholding was made pursuant to Sec ti o n 114(C ) o f the NIRC o f 1997, as amended, to w it: "SEC. 114. Return and Paymen t o f Value-added Tax. - XXX XXX XXX (�~

CTA Case Nos. 7727 and 7783 Page 16 o f 25 SEM IRARA MINING CORPORATION v. C/R D EC ISION (C) Withh o lding o f Value-added Tax. - Th e Governmen t or any o f its political subdivisions, in strum e ntalities or agencies, including government-owned o r -contro lled corpo rations (GOCCs ) shall, before making payment on account o f each purchase o f goods and servi ces which are subjec t to th e value-added tax imposed in Sectio ns 106 and 108 o f this Code, deduct and w ithh o ld a final value-added lox at th e rate o f five percent (5%) o f th e gross payment th e reo f: Provided, That th e payment for lease or use o f properties or property rights to no nresident owners shall be subject to te n percent (10%) withholding ta x at th e time o f payment . For purposes o f this Sectio n, th e payor or person in con tro l o f th e payment shall be considered as th e withholding agent. Th e value-added tax withheld under this Secti o n sha ll be remitted within ten (10) days following th e end o f th e mon Ih th e w ithh o lding was made ." In keeping with Sec ti on 114(C ), the NPC remitt e d to the BIR the final withholding VAT o n the fo ll owing dates: Exhibit Pe riod C overed Date of Filing of Return/ Paym e nt AA-1. AA- 1-a January 2006 AA-2, AA-2-o February 2006 of Tax AA-3, AA-3-a Februa ry 10, AA-4, AA-4-a March 2006 AA-5, AA-5-a April 2006 2006 AA-6, AA-6-a May 2006 Marc h 10, 2006 June 2006 April 10, 2006 May 10,2006 Jun e 9, 2006 July 10, 2006 Counting from February 10, 2006, petitioner had until February 10, 2008 at th e e arlies t within which to file its claims both in the administrative and judicia l ,leve ls. Th e refo re, th e o riginal administrative claim filed on May 2 1, 200726, the amended administrative claim fil ed ( 26 Exhibit "J - 1".

CTA Case Nos . 7727 and 7783 Page 17 of 25 SEMIRARA MINING CORPORATION v. C IR D EC ISION on January 21, 200827, and the Petitions for Review filed on February 4, 200828 and May 6, 200829 fell within the two-year prescriptive period. Finding that the cases were filed within the reglementary period, this Court shall resolve the principal issue which is - whether petitioner is entitled to the tax refund amounting to P86, 108,626.1 0 claimed to be erroneously withheld by the NPC for the period covering January 1, 2006 to June 30, 2006. Petitioner argues that it is entitled to a refund pursuant to PD No . 972 and Section 109(k) of RA No. 9337, and its exemption from which the refund is based was confirmed by no less than the respondent in BIR Ruling No. 006-07. Respondent, however, claims that RA No . 9337 deleted the exemption under Section 109(e) of the NIRC of 1997, which granted petitioner's exemption from VAT. Accordingly, he argues that petitioner's sale or importation of coal and natural gas, in whatever form or state, is subject to VAT. Petitioner's argument is meritorious . The issue is not novel. In a number of decisions involving the same parties and issue but different taxable years, this Court had ruled C. that based on Section 109(k) of RA No. 9337, petitioner is entitled to an 27 Exhibit "L- 1". 28 CTA C ase No. 7727 . 29 CTA C as e No. 7783 .

CTA Case Nos. 7727 and 7783 Page 18 o f 25 SEM IRARA MINING CORPORATION v. CIR DE C ISION exemption from VAT as provided under a special low, specifically, PO No. 9723o. PD No. 972 is a special low, the spirit of which is to accelerate the exploration, development, exploitation, production and utilization of the country's cool resources, and to provide incentives not only to cool users, but more importantly, to operators of cool operating contracts. In order to encourage and promote said policy, the low provided a tax in ce ntive which expressly grants to operators of a contract under said Decree exe mption from all ta xe s except income ta x, thus: "SECTION. 16. In ce ntives to Operators. - The provisions o f any low to the contrary no twithstanding , a contra c t executed under this Decree may provide that the operator shall hove th e following ince ntives: (a) Exe mption from all taxes except income ta x; " Hence, petitioner, as on operator under its Cool Operating ControcP 1, is entitled to exemption from both loc al and notional taxes, e xc ept income ta xes. Pe rtinent is the disquisition in the case o f Semirora Mining ( Corporation vs. Commissioner of Internal Revenue32, to wit: "We agree with petitioner. 30 Presidential Decree No. 972, Promulgating on Ac t to Promote on Acce lera ted Explorati o n. Development, Exploitotion, Production ond Utiliza ti on o f Coo l. 3 1 Exhibit "E". 32 CTA Case No. 7727, Oc tober 13,2009.

CTA Case Nos . 7727 and 7783 Page 19 of 25 SEM IRARA MINING CORPORATION v. CIR DECISION The inhe ren t power o f th e state to impose ta xes in cludes th e p ower to grant ta x exemptio ns. Tax exe mptio ns may b e g rant ed ei th er by the Cons titutio n or by an act o f legislature, subjec t to limitatio ns as th e Co nstitutio n may provide . The tax exemption b e ing availed o f by th e petitioner is a tax exem ptio n g ranted by an act o f leg islature, which is, P.D. No. 972. Und er Sectio n 16 of th e said law, operato rs of coa l operatin g con trac ts are g iven various ince ntives, which include exemp tio n fro m all taxes excep t income tax. Furthermore, th e said incentive or tax exemp tio n provided for by P.D. 972 was embodied and incorporated in Section 5.2 o f th e Coa l Operatin g Contra c t between petitioner and th e Philippine Governmen t. In the present case, th e petitioner is seeking exem ptio n from VAT. As provided unde r Sec tio n 21 o f th e 1997 Tax Code, VAT is one o f th e no tiona I inte rnal revenue taxes, hence, exemption fro m VAT fall s within th e exemp tio ns provided by P.D. 972 and its Coa l Operatin g Contra ct. Furthe rm o re, petitioner's claim for exemp tion from payment o f th e VAT is a lso covered by the 1997 Tax Code no tw ith standing its amendment by R.A. 9337, as provided by Sec tion 109 (K) , whic h reads as follows: 'REPUBLIC ACT NO. 9337 AN ACT AMENDING SECTIONS 27, 28, 34 , 106, 107, 108, 109, 110, 111 , 112, 113, 114,116, 117, 119, 121 , 148, 151 , 236 , 237 AND 288 OF THE NATIONAL INTERNAL REVENUE CODE OF 1997, AS AMENDED , AND FOR OTHER PURPOSES Sec . 7. Section 109 o f the same Code, as amend ed, is hereby further amended to read as fo llows: SEC. 109 . Exempt Transactions. - (1) Subjec t to th e provisions of subsection (2) hereof. th e fol lowing transac ti ons shall be exempt from th e value-added tax: XXX XXX XXX (K) Transa c ti ons which are exempt under international agreements to w hic h the Philippines is a signa tory or under special laws, exc ept th ose under Presidential Decree No. f... 529 ; XXX XXX xxx'

CTA Case Nos. 7727 and 7783 Page 20 of 25 SEMIRARA MINING CORPORATION v. C/R DECISION Based on the aforequoted provision of Section 109, petitioner is entitled to exemption from VAT since its sale of coal is exempted from VAT as provided under a special law, which is PD 972." (Emphasis supplied) As to respondent's allegation that Section 24 of RA No. 9337 repealed the tax exemption under PD No. 972, significant is this Court's ruling in Semiraro Mining Corporation vs. Commissioner of Internal Revenue33, which laid to rest the issue by declaring that petitioner's tax exemption under PD No . 972 still subsists, viz: "As regards the alleged repeal of the provisions pertinent to this case, which according to respondent effectively removed petitioner's exemption from VAT, the repealing c lause of RA 9337. Section 24 pertinently states: 'Sec. 24. Repealing Clouse. - The following lows or provisions of lows ore hereby repealed and th e persons and/or transactions affected herein ore mode subject to the value-added tax subject to the provisions of .Title IV of the Notional Internal Revenue Code of 1997. as amended: (A) Section 13 of R.A. No. 6395 on the exemption from value-added tax of Notional Power Corporation (NPC) ; (B) Section 6, fifth paragraph of R.A. No. 9136 on the zero VAT rote imposed on the soles of generated power by generation companies; and {C) All other lows. acts. decrees. executive orders. issuances and rules and regulations or ports thereof which ore contrary to and inconsistent with any provisions of this Act ore hereby repealed . amended or modified accordingly.' Indeed . there is no indication that RA 9337 repealed PO No. 972 or any section or paragraph thereof, whether express or implied. It has been ruled that a special low such as PO No . 972 cannot be repealed. amended or altered by a subsequent general low by mere implication. If the intent to repea l is not [. 33 CTA Case No. 7867. January 4. 20 11 .

CTA Case Nos. 7727 and 7783 Page 2 1 of 25 SEMIRARA MINING CORPORATION v. CIR DE C I S ION clear, the later act should be construed as a continuation of, and not a substitute for, the earlier act. The legislature is presumed to know the existing laws; if it intended a repeal of the earlier law, it should have so expressed that intention in the subsequent statute. Thus, a statute will not be deemed to have been impliedly repealed by another enacted subsequent thereto unless there is a showing that a plain, unavoidable and irreconc ilable repugnan cy exists between the two . Absent an express repeal, as in this case, a subsequent law cannot be construed as repealing a prior one unless an irreconcilable inconsistency or repugnancy exists in the terms of the new and old laws. An express repeal, is one wherein a statute declares, usually in its repealing clause, that a particular and specific law, identified by its number or title, is repealed. Absent this specific requirement, an express repeal may not be presumed. There being no pla in and irreconcilable repugnancy between the relevant provisions of the pertinent laws and considering that the repealing clause of R.A. No . 9337, specifically Section 24 th e reof did not expressly include P.O. 972 in its enumeration of repealed laws or provisions, it is plciin that the latter has not been repealed by R.A. No. 9337 and petitioner may still invoke in its favor VAT exemption under the COC ." (Emphasis supplied) It is noteworthy that in BIR Ruling No. 006-07, respondent admitted petitioner's exemption from VAT pursuant to Section 16 of PO No. 972, to wit: "In view of th e foregoing, this office hereby rul es !hat since the main object o f the COC for which the tax exemption was granted is the active exploration, development and production of coal resources, SMC's (petitioner's) sales of coo l produced by virtue of a COC with EDB remain exempt from VAT pursuant to Section 109 (k) of the Tax Code, as amended by RA 9337, in relation to PO 972, as amended." Respondent, therefore, cannot just change his mind on on opinion on which petitioner has relied. In summary, petitioner is {. exempted from the payment of VAT.

CTA C ase Nos . 7727 and 7783 Pa ge 22 of 25 SEMIRARA MINING CORPO RA TIO N v. CIR DE C ISION Petitioner proffered various documents to substantiate its claim that the NPC withheld and remitted to the BIR five percent (5%) final withholding VAT on its gross payments for coal purchases from petitioner for the period from January 1, 2006 to June 30, 2006. Among the documents presented were: (a) Monthly Remittance Return of Value-added Ta x and other Percentage Taxes Withheld (BIR Form No . 1600) filed by the NPC with the BIR for the months of January 2006 to June 2006; 34 (b) Alphabetical List of Payees from whom Ta xes were Withheld (BIR Form No . 1600-Schedule II) filed by the NPC with the BIR for the months of January 2006 to June 2006; 35 (c) Revenue Official Receipts (BIR Form No. 2524) ;36 (d) Certificates of Final Tax Withhe ld at Source (BIR Form No. 2306) issued b y the NPC to petitioner;37 (e) NPC's "Certification" dated December 10, 2007, certifying the amount of final VAT withheld by the NPC from its gross payments made to petitioner from January 1, 2006 to June 30, 2006;38 and (f) Comparison of VAT Withheld per NPC Alphalist against BIR Form 2306 for the m o nths of January 2006 to June 200639 . A scrutiny of these d oc uments shows that the total fina l VAT withheld, as reflected in the Monthly Remittance Returns/ Alpha list, in �.. 34 Exhibit s " AA- 1" to "AA-6 " . 35 Exhibit s " AA- 1-b " to "AA-6-b ". 36 Exhibit s " AA- 1-a " to "AA-6-a" . 37 Exhibi ts " Z- 1- 1" to "Z - 1-6 1", "Z-2- 1" to "Z-2-68", "Z-3- 1" to "Z-3-58", " Z-4- 1" to " Z-4-29" , " Z-5- 1" to "Z-5-49", and "Z-6- 1" to "Z-6-7 1" . 38 Exhib its "F", "G " , "H" , " R" , "S " , a nd "T". 39 Exhibit s "BB-1" to "BB-6" .

CTA Case Nos. 7727 and 7783 Page 23 of 25 SEM IRARA MINING CORPORATION v. C/R DE C ISION th e a m ou nt o f P86, 106,632. 15 is hi g he r b y P1.18 w he n co m p ared with th e to ta l fina l VAT w ithh e ld in d ica ted pe r certifica tes in th e a m ou nt of P86, 108,630 .97, as shown be low: Period Ex hibit Per Monthly Per Certifi c ate s Differe nce Covered BB- 1 Rem it t a n c e p 16,652,595 .0 1 p (0.01 1 January 2006 BB-2 Re turns/Alphalist 1.29 February 2006 BB-3 p 16,652,595.00 15,547,5 11 .34 (0 .05) March 2006 BB - 4 15,360,3 10.98 (0.01 ) April 2006 BB - 5 15,547,5 12.63 (0.041 May 2006 BB - 6 15,360,3 10.93 4,758,980.35 - June 2006 15,793,04 1.72 4,758,980.34 17,996, 19 1.57 15,793,04 1.68 17,996, 19 1.57 Total p 86 , 108,632.15 P86 , 108,630.97 p 1.18 As fo und b y the Co urt-co mmissio ne d Indepe nde nt Certifi e d Pu b lic Accou nta nt (CPA ), th e P1.00 d iffe re nce p e rta in s to th e ove r- re mitta nce m ode by th e NPC for th e month o f Febru ary 2006, parti cu larly for th e fin a l w ith holding VAT shown pe r ce rtifica te m arked as Exhibit '"Z-2-58" .40 The remainin g d iffe re nce o f P.18 is due to rou nd in g o ff . In fine, this Cou rt finds pe titio ne r as ha vin g subs ta ntia ted its cla im ed fin a l w ithh o ld in g VAT in th e amou nt o f P86, 108,630.97. However, this Cou rt g ra nts th e lowe r a m ou nt o f P86, 108,626 .10 tha t was p rayed fo r in th e co nso lida ted Petitions for Review . WHEREFORE , th e insta nt Pe titio ns fo r Rev iew ore he reby GRANTED . According ly, re spo ndent is hereby ORDERED to REFUND or to ISSUE A ( 40 Exhibi t "X " , p . 3.

CTA Case Nos. 7727 and 7783 Page 24 o f 25 SEM IRARA M IN ING CORPORATION v. C IR DECISION TAX CREDIT CERTIFICATE in favor o f pe titi oner in th e a m ou nt o f EIGHTY - SIX MILLION ONE HUNDRED EIGHT THOUSAND SIX HUNDRED TWENTY -SIX and 10/ 100 PESOS (P86 ,108,626 . 10) , represe ntin g 5% fin a l VAT o n its coo l sol es, w hic h th e No tio nal Power Corpora ti o n erro n eo usly wi thh e ld an d re mitte d to th e BIR fo r th e pe ri od coverin g January 1, 2006 to Ju ne 30, 2006 . SO ORDERED. WE CONC UR : ~N.M~ . (;~ ~~~c~~q_. CIELITO N . MINDARO-GRULLA Assoc ia te Justic e 1ff.- C1UANITO C . CASTANEDA, a Associa te Justi ce CAESAR A. CASANOVA Associa te Jus ti c e ATTESTATION I a ttest tha t the co ncl usions in the a bove Decisio n were reac hed in consulta tio n be fore the case was assig ned to the writer o f the opinio n o f the Court' s Division. ~J-U:ANtIT:O-Cc..CGAS.TYANLED~A,,/'ff9i...,. Associa te Jus tice C h ai rpe rso n

CTA Case Nos. 7727 and 7783 Page 25 o f 25 SEM IRARA MINING CORPORA TION v. C IR D E CISION C ERTIFI C ATION Pursuan t to Arti c le VIII, Sec tio n 13 of th e Cons tituti on, a nd th e Di-vision C hairpe rso n' s Attes tation, it is he reby cer tifi ed th a i th e conclu sio ns in th e above Decisio n were reached in co nsultation b e fore th e case was assigned to th e write r o f th e opinion o f th e Court' s Divisio n. l._-r-v. ~ ERNESTO D. AC OSTA Presiding Justice