ABB, INC. v. COMMISSIONER OF INTERNAL REVENUE (Consolidated with 8594 & 8674)

REPUBLIC OF THE PHILIPPINES Court ofTax Appeals QUEZON CITY Third Division ABB, INC., CTA CASE NO. 8563 Petitioner, - versus - COMMISSIONER OF INTERNAL REVENUE, CTA CASE NO. 8594 Res pondent. X------------------------------------------------------------X ABB, INC., Petitioner, - versus - COMMISSIONER OF INTERNAL REVENUE, R es ponde n t . X------------------------------------------------------------X ABB, INC., CTA CASE NO. 8674 Petitioner, Members: Bautista, Chairperson - versus - Fa bon-Victorino, and Ringpis-Liban, JJ. COMMISSIONER OF INTERNAL REVENUE, Promulgated: Responden t. MAY 1 1 2016 X------------------------------------------------------------------~--j-o --: --9--6-o --.--,-. --. --.--.--X DECISION BAUTISTA, J: The Case Before the Court are three (3) consolidated Petitions for Review1 filed by petitioner ABB, Inc., (" ABB") on October 25, 2012, December 1 Records, CTA Case No. 8563,8594 and 8674, Vol.l, Petition for Review, pp. 7-96, with annexes; CTA Case No. 8594, Petition for Review, pp. 8-186, w ith annexes; CTA Case No. 8674, Petition for Review, pp. 6-155, w ith annexes.

DECISION CTA CASE NOS. 8563, 8594, & 8674 Page2of31 26, 2012, and July 15, 2013, for CTA Case Nos. 8563, 8594, and 8674, respectively, pursuant to Section 7(a)(2)2 of Republic Act ('RA") No. 11253, as amended by RA No. 92824 and RA No. 95035, which seeks for the Court to render judgment ordering respondent to refund to petitioner the total amount Php55,274,958.71 broken down as follows: 1. Php2,781,796.54, representing erroneously paid output Value Added Tax ("VAT") for the 3rd Quarter of taxable year ("TY") 2010;6 2. Php50,900,510.66, representing erroneously paid output VAT for the periods 4th Quarter of TY 2010 and 1st Quarter of TY 2011;7 and 3. Php1,592,651.51 representing erroneously paid output VAT for the periods 3rd and 4th Quarters of the TY 2011 and 1st Quarter of TY 2012.B The Parties Petitioner ABB is a corporation duly organized and existing under and by virtue of the laws of the Philippines with principal office at Km. 20 West Service Road, South Superhighway, Sucat, Paraftaque; it is engaged in the business of providing automation and power products, systems, and services.9 2 Sec. 7. Jurisdiction. - The Court of Tax Appeals shall exercise: (a) Exclusive appellate jurisdiction to review by appeal, as herein provided. XXX XXX XXX (2)Inaction by the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties in relations thereto, or other matters arising under the National Internal Revenue Code or other laws administered by the Bureau of Internal Revenue, where the National Internal Revenue Code provides a specific period of action, in which case the inaction shall be deemed a denial; 3 An Act Creating the Court of Tax Appeals, as Amended. 4 An Act Expanding the Jurisdiction of the Court of Tax Appeals (CTA), Elevating its Rank to the Level of a Collegiate Court with Special Jurisdiction and Enlarging its Membership, Amending for the Purpose Certain Sections of Republic Act No. 1125, as amended, Otherwise Known as the Law Creating the Court of Tax Appeals, and for Other Purposes. s An Act Enlarging the Organizational Structure of the Court of Tax Appeals, Amending for the Purpose Certain Sections of the Law Creating the Court of Tax Appeals, and for Other Purposes. 6 Records, CTA Case Nos. 8563, 8594 and 8674, Vol. 1, Petition for Review, p. 28. 7 Records, CTA Case No. 8594, Petition for Review, p. 33. s Records, CTA Case No. 8674, Petition for Review, p. 22. 9 Records, CTA Case Nos. 8563, 8594 and 8674, Vol. 1, pp. 7-8; CTA Case No. 8594, pp. 8-9; CTA Case No. 8674, p. 6. r;/

DECISION CTA CASE NOS. 8563,8594, & 8674 Page 3 of31 Respondent Commissioner of Internal Revenue ("CIR"), is the chief of the Bureau of Internal Revenue ("BIR"), who under the law is empowered to perform the duties of said office including, among others, the power to assess and collect all national internal revenue taxes, fees and charges, and to enforce all forfeitures, penalties, and fines connected therewith.1o The Facts National Grid Corporation of the Philippines ("NGCP") is a domestic corporation engaged in the business of operating, maintaining, expanding and developing the transmission network of the Philippines, with principal address at NGCP Building, Quezon Avenue corner BIR Road, Diliman, Quezon City.ll Petitioner entered12 into a Contract13 with NGCP14 for the Wright-Calbayog 138 kV Substation Project ("Wright-Calbayog Project") after winning the bid therefor.ls The Contract provides that petitioner, as the contractor, shall pay all fees and similar expenses in consequence of its obligations under the contract except for import duties and import VAT; and that NGCP should be the consignee of the importation to be supplied by the petitioner.16 The Joint Venture ("JV") of ABB, Inc., and AER Construction & Development Co., Inc. ("JV ABB-AER") entered17 into a Contract with NGCP for the New Naga 138 kV Substation Project ("New Naga Project").18 1o Records, CTA Case Nos. 8563, 8594 and 8674, Vol. 5, Consolidated Joint Stipulation of Fact and Issues ("JSFI") for CTA Case Nos. 8563, 8594, and 8674, par. 1, pp. 2621-2622. n Id., par. 1, p. 2622. 12 Undated Contract but notarized on September 23, 2009; effective on the date specified in Notice to Proceed, see Records, CTA Case Nos. 8563, 8594 and 8674, Vol. 5, Exhibit "P-2," Contract for the Wright- Calbayog 138kV Substation Project, p. 2837. 13 Records, CTA Case Nos. 8563, 8594 and 8674, Vol. 5, Exhibit "P-2," Contract for the Wright - Calbayog 138kV Substation Project, pp. 2834-2843. 14 Id., Exhibit "P-2," Contract for the Wright- Calbayog 138kV Substation Project, p. 2834; NGCP is a corporation duly organized and existing under the laws of the Philippines, it issued an Invitation to Bid for the Wright-Calbayog 138 kV Substation Project. 15 Records, CTA Case Nos. 8563, 8594 and 8674, Vol. 5, Exhibit "P-2," Contract for the Wright - Calbayog 138kV Substation Project, pp. 2834-2843. 16 Id., Article IX, Taxes and Clearances, p. 2839; the effectiveness of this contract was uncontested. 17 Undated Contract but notarized on March 16, 2010; effective on the date specified in Notice to Proceed, see Records, CTA Case Nos. 8563, 8594 and 8674, Vol. 5, Exhibit "P-3," Contract for the New Naga 138 kV Substation Project, p. 2847. 18 Records, CTA Case Nos. 8563, 8594 and 8674, Vol. 5, Exhibit "P-3," Contract for the New Naga 138 kV Substation Project pp. 2844- 2853; the effectiveness of this contract was uncontested. (

DECISION CTA CASE NOS. 8563, 8594, & 8674 Page4of31 Both Contracts are on a turnkey basis, which is defined as a job or contract in which the contractor agrees to complete the work of building and installation to the point of readiness for operation or occupancy.19 To fulfill its obligations under the Contracts, petitioner subcontracted specific segments of the Wright-Calbayog and New Naga Projects to both offshore and onshore subcontractors. The offshore portion of the contracts consists of the complete design, manufacture, testing, supply and delivery, storage, construction, erection, installation, field testing and commissioning of substation, telecommunication, protection and substation control equipment and materials, which were sourced from foreign subcontractors coming from various countries including Taiwan, Sweden, Italy, Thailand, India, Korea, Malaysia, France, Finland, Switzerland, Vietnam, USA, Singapore, New Zealand, Japan, Canada, Indonesia, China and Germany.2o On the other hand, the onshore portion of the Contracts consist of the construction and installation of the materials, machinery and equipment and the performance of related civil works for the two projects and were subcontracted to various local subcontractors.21 On March 16,2009, petitioner was registered as a large taxpayer and was issued BIR Certificate of Registration No. 8RC0000019299 by the BIR Large Taxpayers Division.22 Petitioner filed its Monthly VAT Declaration (BIR Form No. 2550-M) from July 2010 to February 2012, as well as its Quarterly VAT Return (BIR Form No. 2550-Q) for the 3rd and 4th Quarters of TY 19 Defined in the footnote of CIR v. Marubeni Corporation, G.R. No. 137377, December 18, 2001, 372 SCRA 576, citing Websters Third New International Dictionary of the English Language, Unabridged [1993]. 2o Records, CTA Case Nos. 8563, 8594 and 8674, Vol. 5, Exhibit "P-196," New Naga 138kV Substation Project Annex" A", pp. 3365-3569; Exhibit "P-197," Wright-Calbayog 138kV Substation Project Annex" A", pp. 3355-3385. 21 For the Wright-Calbayog Project: 88 Electronics Supply; AER Construction and Development Corp.; Alex Pastrana; Aboitiz Projects T.S. Corp.; Dynamic Geo-environmental Specialist; GIBMA Engineering Services; Hansei Corporation; International Elevator and Equipment; Monark Equipment Inc.; Ocean Coast Shipping Corp.; Rapid Line Tradg. And Installation Services; Sterling Fluid Systems Enterprises; TBS Industrial Services Inc.; and Westco Electrical & Equipment Corp. For the New Naga Project: Aboitiz Projects T.S. Corp.; GIBMA Engineering Services; Hansei Corporation; Rapid Line Tradg. And Installation Services; TBS Industrial Services Inc.; Westco Electrical & Equipment Corp. 22 Records, CTA Case Nos. 8563, 8594 and 8674, Vol. 5, Exhibit "P-30," Certificate of Registration, p. 3552. (

DECISION CTA CASE NOS. 8563,8594, & 8674 PageS o�31 2010; 1st, 3rd and 4th Quarters of TY 2011; and 1st Quarter of TY 2012 as follows: Period Date Filed Exhibit Date Filed Exhibit Original Amended July 2010 8/24/2010 "P-43" 23 10/23/2012 "P-70" 24 August 2010 9/27/2010 10/23/2012 "P-71"26 3rd Q 2010 10/25/2010 "P-44"25 10/23/2012 "P-72" 28 11/22/2010 "P-45" 27 11/8/2012 "P-73"30 Oct 2010 12/22/2010 11/8/2012 "P-74"32 Nov 2010 1/24/2011 "P-46"29 11/15/2012 "P-75"34 4th Q 2010 2/23/2011 "P-47"31 11/20/2012 "P-76"36 I Jan 2011 3/21/2011 11/20/2012 Feb 2011 4/25/2011 "P-48"33 11/20/2012 "P-77"38 1St Q 2011 8/24/2011 "P-49"35 11/21/2012 "P-78" 40 July 2011 9/22/2011 "P-50"37 "P-79" 42 August 2011 10/24/2011 "P-51"39 - 3rd Q 2011 11/23/2011 "P-52" 41 - Oct 2011 12/26/2011 "P-53"43 11/28/2012 "P-80"45 Nov 2011 1/25/2012 "P-54" 44 11/21/2012 "P-81"47 4thQ 2011 2/21/2012 "P-55" 46 Jan 2012 3/26/2012 "P-56" 48 - - Feb 2012 4/25/2012 "P-57" 49 "P-82"50 1St Q 2012 "P-58"51 1/25/2012 "P-59"52 - "P-60"53 - - - "P-83"54 11/22/2012 23 Records, CTA Case Nos. 8563, 8594 and 8674, Vol. 5, pp. 2858-2862, with alphalists. 24 Id., pp. 2960-2965, with alphalists. 25 Id., pp. 2868-2865, with alphalists. 26 Id., pp. 2966-2970, with alphalists. 27 Id., pp. 2868-2872, with alphalists. 28 Id., pp. 2971-2976. 29 Records, CTA Case Nos. 8563, 8594 and 8674, Vol. 5, pp. 2873-2877, with alphalists. 30 Id., pp. 2977-2982, with alphalists. 31 Id., pp. 2878-2882, with alphalists. 32 Id., pp. 2983-2988, with alphalists. 33 Id., pp. 2883-2887, with alphalists. 34 Id., pp. 2989-2994, with alphalists. 35 Records, CTA Case Nos. 8563, 8594 and 8674, Vol. 5, pp. 2888-2892, with alphalists. 36 Id., pp. 2995-3000, with alphalists. 37 Id., pp. 2893-2897, with alphalists. 38 Id., pp. 3001-3006, with alphalists. 39 Id., pp. 2898-2902, with alphalists. 40 Id., pp. 3007-3012, with alphalists. 41 Records, CTA Case Nos. 8563, 8594 and 8674, Vol. 5, pp. 2903-2907, with alphalists. 42 Id., pp. 3013-3018, with alphalists. 43 Id., pp. 2908-2913, with alphalists and eFPS payment details. 44 Id., pp. 2914-2918, with alphalists. 45 Id., pp. 3019-3024, with alphalists. 46 Id., pp. 2919-2924, with alphalists and eFPS payment details. 47 Id., CTA Case Nos. 8563, 8594 and 8674, pp. 3025-3030, with alphalists. 48 Id., pp. 2925-2930, with alphalists. 49 Id., pp. 2931-2935, with alphalists. 50 Id., pp. 3031-3035, with alphalists. 51 Id., pp. 2936-2940, with alphalists. 52 Id., pp. 2941-2945, with alphalists. 53 Id., CTA Case Nos. 8563, 8594 and 8674, Vol. 5, pp. 2946-2950, with alphalists. 54 Id., pp. 3036-3042, with alphalists. (

DECISION CTA CASE NOS. 8563, 8594, & 8674 Page 6of31 CTA Case No. 8563 (Jrd Quarter of2010) On October 24, 2012, the BIR- Large Taxpayers Service, received petitioner's letter application for a claim for tax refundss, of 12% output VAT on gross receipts for services rendered outside the Philippines for July and September 2010, that was erroneously paid and remitted to the BIR, together with the Application for Tax Credits/Refunds (BIR Form No. 1914)56, amounting to Two Million Seven Hundred Eighty One Thousand Seven Hundred Ninety Six and 54/100 Pesos (Php2,781,796.54). On October 25, 2012, petitioner filed a Petition for Review57, docketed as CTA Case No. 8563, which was raffled to the Court's 3rd Division. On November 15, 2012, the 3rd Division issued a Summonsss, requiring respondent to file her Answer to the Petition for Review. On January 15, 2013, respondent filed her Answer to the Petition for Review,s9 raising the following Special and Affirmative Defenses:60 SPECIAL AND AFFIRMATIVE DEFENSES Respondent incorporates and repleads all the foregoing averments and in further support of the Specific Denials herein set forth, respondent CIR respectfully alleges as her defense that: The burden of proof is on the taxpayer to establish its right to a refund, and failure to sustain the burden is fatal to the claim for refund. 55 Records, CTA Case Nos. 8563, 8594 and 8674, Vol. 5, Exhibit "P-231," Administrative Claim for Refund dated October 24, 2012, pp. 3553-3559, with annex. 56 Id., Exhibit "P-232," BIR Form No. 1914, p. 3560. 57 Id., CTA Case Nos. 8563, 8594 and 8674, Vol. 1, pp. 7-96, with annexes. 58 Id., p. 97. 59 Id., Answer, pp. 106-119. 60 Emphases retained. (

DECISION CTA CASE NOS. 8563,8594, & 8674 Page 7 of31 1. It must be stressed right off that taxes remitted to the [BIR] are presumed to have been made in the regular course of business and in accordance with provisions of law. 2. As a matter of course, a claim for refund is subject to investigation as it involves removal of accrued revenue from the coffers of the Government. Pending the closure of this investigation, no grant of refund may be given to petitioner based on the filed claim, it has been held by the Supreme Court that a claim for refund is not ipso facto granted because the [CIR] still has to investigate and ascertain the veracity of the claim. 3. The amount of Two Million Seven Hundred Eighty One Thousand Seven Hundred Ninety Six Pesos and 54/100 ([Php]2,781,796.54) being claimed by petitioner as alleged erroneously paid output taxes on VAT-exempt sale of services for the taxable period July 1, 2010 to September 30, 2010 is not properly documented. 4. Petitioner failed to submit compete documents to support its application for refund. In a case for refund, the taxpayer must prove compliance with the prescribed checklist of requirements to be submitted involving claims for VAT refund pursuant to Revenue Memorandum Order (RMO) No. 53-98, otherwise there would be no sufficient compliance with the filing of an administrative claim for refund, the administrative claim thereof being merely pro-forma. 5. Revenue Memorandum Order ["RMO"] No. 53- 98 was issued to identify the documents required from a taxpayer during audit of the application for refund. XXX XXX XXX 6. In Atlas Consolidated Mining and Development Corporation vs. Commissioner of Internal Revenue, G.R. No. 145526 promulgated on March 26, 2007 the Honorable Supreme Court held: "Petitioner's contention that non-compliance with Revenue Regulations 3-88 could not have adversely affected its case in the CTA indicates a failure on its part to appreciate the nature of the proceeding in that court. 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 every appeal or petition for (

DECISION CTA CASE NOS. 8563,8594, & 8674 Page 8 of31 review, a petitioner has to convince the appellate court that quasi-judicial agency a quo did not have reason to deny its claim. In this case, it is necessary for petitioner to show the CTA not only that it was entitled under substantive law to grant of its claim but also that it satisfied all the documentary evidence and evidentiary requirements for administrative claim for refund or tax credits. Xxx" (Emphases Supplied) 7. It cannot be emphasized enough that mere filing of an administrative claim for refund without submitting the complete documents in support of the application thereof is not conclusive to sustain its contention that it has the right to claim for refund. 8. Basic as it is, claims for refund are construed strictly against the claimant for the same partake the nature of exemption from taxation and are therefore held against the claimant. 9. Here, petitioner failed to substantiate its claim for refund and failed to submit the required documents to prove its entitlement thereto. Hence, the petition must fail. Petitioner's claim for refund is filed out of time[.] 10. Even assuming arguendo but without conceding that payments received by petitioner relating to services contemplated under the offshore portion is not subject to VAT, still, the petition must fail. 11. Section 112(A) of the NIRC explicitly reads: "(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: x x x." (Emphases Supplied) 12. In CIR vs. MIRANT PAGBILAO CORPORATION (Formerly SOUTHERN ENERGY (

DECISION CTA CASE NOS. 8563,8594, & 8674 Page 9of31 QUEZON, INC.), G.R. No. 172129, September 12, 2008, the Honorable Supreme Court held: "xxx As the CA aptly puts it, albeit it erroneously applied the aforequoted Sec. 112(A), "[p]rescriptive period commences from the close of the taxable quarter when the sales where made and not from the time the input VAT was paid nor from the time the official receipt was issued." Thus, when a zero-rated VAT taxpayer pays its input VAT a year after the pertinent transaction, said taxpayer only has a year to file a claim for refund or tax credit of the unutilized creditable input VAT. The reckoning frame would always be the end of the quarter when the pertinent sales or transaction was made, regardeless when the input VAT was paid. Be that as it may, and given that the last creditable input VAT due for the period covering the progress billing of September 6, 1996 is the third quarter of 1996 ending on September 30, 1996, any claim for unutilized creditable input VAT refund or tax credit for said quarter prescribed two years after September 30, 1996, or to be precise, on September 30, 1998. Consequently, MPC's claim for refund or tax credit filed on December 10, 1999 had already prescribed." (Emphasis Supplied) 13. Here, the petition must have been filed on or before 30 September 2012. Unfortunately, it was filed only on 25 October 2012. Claims for tax exemption must be justified by the clearest grant of law[.] 14. Exemptions are never presumed, the burden is upon the claimant to establish his right to exemption beyond reasonable doubt. 15. Petitioner, for all its harping upon the supposed fact that it is exempt from VAT had seemingly failed to justify its alleged exemption by the clearest grant of law. As stated by the Honorable Supreme Court: "Considering that it is a governing principle in taxation that tax exemptions must be construed in strictissimi juris against the taxpayer and liberally in favor of the taxing authority; and one who claims an exemption must be able to justify the same by the clearest grant of organic or statute law. An (

DECISION CTA CASE NOS. 8563, 8594, & 8674 Page 10of31 exemption from the common burden cannot be permitted to exist upon vague implications[.]" (Emphasis Supplied) 16. Again, in The City of Iloilo, Mr. Romeo V. Manikan, in his capacity as the treasurer of Iloilo City, GR No. 167260, February 27, 2009, the Highest Tribunal reiterated: "The right of taxation is inherent in the State. It is a prerogative essential to the perpetuity of the government; and he who claims an exemption from the common burden, must justify his claim by the clearest grant of organic or statute law xxx When exemption is claimed, it must be shown indubitably to exist. At the outset, every presumption is against it. A Well-founded doubt is fatal to the claim; it is only when the terms of the concession are too explicit to admit fairly of any other construction that the proposition can be supported." (Emphasis Supplied) 17. Well to consider that Section 109, Republic Act 8424 clearly enumerates the transactions exempted from VAT. The services claimed by petitioner as tax-exempt do not fall within the exemptions. 18. Further, the BIR Rulings cited by petitioner cannot and should not be made applicable in its case. Verily, BIR Rulings are based only on a set of facts represented by a taxpayer, and made exclusively applicable only to the facts and circumstances thereto. 19. It is said that taxes are essential to government's very existence hence, the dictum that "taxes are the lifeblood of the government." And because taxes are the lifeblood of the nation, the court always applied the doctrine of strict interpretation in construing tax exemptions. A claim for exemption from tax payments must be clearly shown and be based on language in the law too plain to be mistaken. Else wise stated, taxation is the rule, exemption therefrom is the exception. 20. For this reason, the right of taxation cannot easily be surrendered, statutes granting tax exemptions are considered as a derogation of the sovereign authority. Since tax refunds are regarded as tax exemptions, therefore, these are to be construed strictissimi juris against the person or entity claiming the exemption. (

DECISION CTA CASE NOS. 8563,8594, & 8674 Page 11 of31 21. In an action for refund, the burden of proof is on the taxpayer who claims the exemption and he must justify his claim by the clearest grant under the Constitutional or statutory law and cannot be permitted by vague implications. The taxpayer is charged with the heavy burden of proving that he has complied with and satisfied all the statutory and administrative requirements to be entitled to the tax refund. 22. Here, petitioner failed to discharge the burden that it is indeed VAT-exempt. Hence, its claim for refund must fail. On April23, 2013, petitioner filed its Motion to Consolidate and to Defer the Pre-trial Conference61 ("Motion to Consolidate") praying that CTA Case No. 8594 be consolidated with CTA Case No. 8563, since the cases involve the same parties and affect closely related subject matters, which was granted by the Court in a Resolution62 dated May 24, 2013. CTA Case No. 8594 (4th Quarter of2010; 1st Quarter of2011) On December 20, 2012, BIR Large Taxpayers Service received petitioner's letter-application for tax refund,63 together with BIR Form No. 191464, for the refund of 12% output VAT on gross receipts for services rendered outside the Philippines erroneously paid and remitted to the BIR for the 4th Quarter of 2010, 1st, 3rd, and 4th Quarters of 2011, and 1st Quarter of 2012, amounting to Fifty Two Million Four Hundred Ninety Three Thousand One Hundred Sixty Two and 17/100 Pesos (Php52,493,162.17). On December 26, 2012, petitioner filed a Petition for Review6s, docketed as CTA Case No. 8594, which was raffled to the Court's 1st Division. On January 16, 2013, the Court issued a Summons66 addressed to the CIR, ordering her to file her Answer, not a Motion to Dismiss within the time provided. 61 Records, CTA Case Nos. 8563, 8594 and 8674, Vol. 1, pp. 460-469. 62 Id., pp. 475-476. 63 Records, CTA Case Nos. 8563, 8594 and 8674, Vol. 5, Exhibit "P-234," Administrative Claim for Refund dated December 20, 2012, pp. 3544-3550, with annex. 64 Id., Exhibit "P-235," BIR Form No. 1914, p. 3550. ( 65 Records, CTA Case No. 8594, pp. 8-186, with annexes. 66 Records, CTA Case No. 8594, p. 187.

DECISION CTA CASE NOS. 8563,8594, & 8674 Page 12of31 On April 5, 2013, respondent filed a Motion for Leave to File and Admit Attached Answer67, which was granted by the Court through its Resolution6B dated April 10, 2013. Thus, respondent's Answer contains the following special and affirmative defenses:69 SPECIAL AND AFFIRMATIVE DEFENSES Respondent incorporates and repleads all the foregoing averments and in further support of the Specific Denials herein set forth, respondent CIR respectfully alleges as her defense that: The burden of proof is on the taxpayer to establish its right to a refund, and failure to sustain the burden is fatal to the claim for refund. 4. It must be stressed right off that taxes remitted to the [BIR] are presumed to have been made in the regular course of business and in accordance with provisions of law. 5. As a matter of course, a claim for refund is subject to investigation as it involves removal of accrued revenue from the coffers of the Government. Pending the closure of this investigation, no grant of refund may be given to petitioner based on the field claim, it has been held by the Supreme Court that a claim for refund is not ipso facto granted because the [CIR] still has to investigate and ascertain the veracity of the claim. 6. The amount of Fifty Million Nine Hundred Thousand Five Hundred Ten Pesos and 66/100 ([Php]50,900,510.66) being claimed by petitioner as alleged erroneously paid output taxes on VAT-exempt sale of services for the taxable periods 4th Quarter of taxable year 2010 and 1st Quarter of taxable year 2011 is not properly documented. 7. Petitioner failed to submit compete documents to support its application for refund. In a case for refund, the taxpayer must prove compliance with the prescribed checklist of requirements to be submitted involving claims for VAT 67 Records, CTA Case No. 8594, pp. 194-213, with annex. 68 Id., p. 214. ( 69 Emphases retained.

DECISION CTA CASE NOS. 8563, 8594, & 8674 Page 13 of31 refund pursuant to Revenue Memorandum Order (RMO) No. 53-98, otherwise there would be no sufficient compliance with the filing of an administrative claim for refund, the administrative claim thereof being merely pro-forma. 8. [RMO] No. 53-98 was issued to identify the documents required from a taxpayer during audit of the application for refund. For [VAT], the specific documents that need to be submitted are as follows: XXX XXX XXX 9. In Atlas Consolidated Mining and Development Corporation vs. Commissioner of Internal Revenue, G.R. No. 145526 promulgated on March 26, 2007 the Honorable Supreme Court held: "Petitioner's contention that non-compliance with Revenue Regulations 3-88 could not have adversely affected its case in the CTA indicates a failure on its part to appreciate the nature of the proceeding in that court. 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 every appeal or petition for review, a petitioner has to convince the appellate court that quasi-judicial agency a quo did not have reason to deny its claim. In this case, it is necessary for petitioner to show the CTA not only that it was entitled under substantive law to grant of its claim but also that it satisfied all the documentary evidence and evidentiary requirements for administrative claim for refund or tax credits. xxx" (Emphases Supplied) 10. It cannot be emphasized enough that mere filing of an administrative claim for refund without submitting the complete documents in support of the application thereof is not conclusive to sustain its contention that it has the right to claim for refund. 11. Basic as it is, claims for refund are construed strictly against the claimant for the same partake the nature of exemption from taxation and are therefore held against the claimant. (

DECISION CTA CASE NOS. 8563, 8594, & 8674 Page 14of31 12. Here, petitioner failed to substantiate its claim for refund and failed to submit the required documents to prove its entitlement thereto. Hence, the petition must fail. Claims for tax exemption must be justified by the clearest grant of law[.] 13. Exemptions are never presumed, the burden is upon the claimant to establish his right to exemption beyond reasonable doubt. 14. � Petitioner, for all its harping upon the supposed fact that it is exempt from VAT had seemingly failed to justify its alleged exemption by the clearest grant of law. As stated by the Honorable Supreme Court: "Considering that it is a governing principle in taxation that tax exemptions must be construed in strictissimi juris against the taxpayer and liberally in favor of the taxing authority; and one who claims an exemption must be able to justify the same by the clearest grant of organic or statute law. An exemption from the common burden cannot be permitted to exist upon vague implications." (Emphasis Supplied) 15. Again, in The City of Iloilo, Mr. Romeo V. Manikan, in his capacity as the treasurer of Iloilo City, GR No. 167260, February 27, 2009, the Highest Tribunal reiterated: "The right of taxation is inherent in the State. It is a prerogative essential to the perpetuity of the government; and he who claims an exemption from the common burden, must justify his claim by the clearest grant of organic or statute law xxx. When exemption is claimed, it must be shown indubitably to exist. At the outset, every presumption is against it. A well-founded doubt is fatal to the claim; it is only when the terms of the concession are too explicit to admit fairly of any other construction that the proposition can be supported." (Emphasis Supplied) 16. Well to consider that, Section 109, Republic Act 8424 clearly enumerates the transactions exempted from VAT. The services claimed by petitioner as tax-exempt do not fall within the exemptions. (

DECISION CTA CASE NOS. 8563,8594, & 8674 Page 15of31 17. Further, the BIR Rulings cited by petitioner cannot and should not be made applicable in its case. Verily, BIR Rulings are based only on a set of facts represented by a taxpayer, and made exclusively applicable only to the facts and circumstances thereto. 18. It is said that taxes are essential to government's very existence hence, the dictum that "taxes are the lifeblood of the government." And because taxes are the lifeblood of the nation, the court has always applied the doctrine of strict interpretation in construing tax exemptions. A claim for exemption from tax payments must be clearly shown and be based on language in the law too plain to be mistaken. Else wise stated, taxation is the rule, exemption therefrom is the exception. 19. For this reason, the right of taxation cannot easily be surrendered, statutes granting tax exemptions are construed as a derogation of the sovereign authority. Since tax refunds are regarded as tax exemptions, therefore, these are to be construed strictissimi juris against the person or entity claiming the exemption. 20. In an action for refund, the burden of proof is on the taxpayer who claims the exemption and he must justify his claim by the clearest grant under the Constitutional or statutory law and cannot be permitted by vague implications. The taxpayer is charged with the heavy burden of proving that he has complied with and satisfied all the statutory and administrative requirements to be entitled to the tax refund. 21. Here, petitioner failed to discharge the burden that it is indeed VAT-exempt. Hence, its claim for refund must fail. On April 23, 2013, petitioner filed a Motion to Consolidate and to Defer the Pre-Trial Conference7o, stating that CTA Case Nos. 8563 and 8594 involve the same parties and affect closely related subject matters, hence, the two (2) cases must be consolidated and jointly tried in order to serve the best interests of the parties, and to expeditiously settle the issues involved. The Motion was granted by the Court in a Resolution71 dated April30, 2013. 70 Records, CTA Case No. 8594, pp. 217-226. ( 71 !d., p. 228.

DECISION CTA CASE NOS. 8563,8594, & 8674 Page 16of31 CTA Case No. 8674 (Jrd and 4th Quarters of2011; 1st Quarter of2012) On July 15, 2013, petitioner filed a Petition for Review72 for claim for refund of erroneously paid output taxes on VAT-exempt sale/ supply of equipment for the taxable periods 3rd Quarter (July) 2011, 4th Quarter (October) 2011, and 1st Quarter (March) 2012, docketed as CTA Case No. 8674, and was raffled to the Court's 2nd Division. The corresponding Summons73 was issued on July 17, 2013. On August 7, 2013, petitioner filed a Motion to Consolidate and to Defer the Presentation of Witnesses74, praying that CTA Case No. 8674 be consolidated with the consolidated cases of CTA Case Nos. 8563 and 8594, since the cases involve the same parties and affect closely related subject matters. On August 30, 2013, there being no objection on the part of the respondent for the consolidation of CTA Case No. 8674 with CTA Case Nos. 8563 and 8594, the Court issued a Resolution75 granting petitioner's Motion to Consolidate. On October 2, 2013, respondent filed her Answer76 by registered mail in CTA Case No. 8674, which, except for the amount involved, contains the same arguments raised in her Answer in CTA Case No. 8594. Consolidated CTA Case Nos. 8563,8594 and 8674 On December 3, 2013 and December 4, 2013, petitioner and respondent filed their Consolidated Pre-trial Brie�77and Pre-trial Brief attached to her Motion for Leave to Admit Attached78, respectively. On February 4, 2014, the parties filed their Consolidated Joint Stipulation of Facts and Issues.79 n Records, CTA Case No. 8674, pp. 6-155, with annexes. 73 Id., p. 156. 74 Id., pp. 163-171. 75 Id., p. 183. 76 Records, CTA Case Nos. 8563, 8594 and 8674, Vol. 2, pp. 1128-1142. 77 Id., Vol. 3, Consolidated Pre-Trial Brief, pp. 1628-1661. 78 Id., Vol. 5, pp. 2568-2574-a. ( 79 Id., pp. 2621-2634.

DECISION CTA CASE NOS. 8563,8594, & 8674 Page 17of31 On February 24,2014, the Court issued a Pre-trial Order.80 On March 10,2014, petitioner filed a Motion to Amend Pre-trial Order81 and a Manifestation/Comment82. The former was granted by the Court in its May 2, 2014 Resolution83, thereby making the necessary changes to the Pre-trial Order dated February 24, 2014. On July 24, 2014 and August 1, 2014, petitioner filed its Formal Offer of Exhibits ("FOE") with Manifestation84 and its Supplemental FOE85, respectively; which were both resolved by the Court in its October 10,2014 Resolution86. On October 30, 2014, petitioner filed a Motion for Reconsideration87 of the October 10, 2014 Resolution, which was resolved by the Court in its Resolution88 dated January 20,2015. During the hearing on March 24,2015,89 respondent manifested that she has no evidence to present, thereafter, the Court granted the parties thirty (30) days or until April 23, 2015 to simultaneously file their respective memoranda, and this was confirmed by the Court in its Resolution9o dated April1, 2015. On April 23, 2015, petitioner filed its Memorandum91, while respondent filed a Manifestation92 on May 27, 2015, stating that she is adopting the arguments she raised in her Answers as her Memorandum. On May 29, 2015, the Court resolved93 to submit the case for decision, hence, this Decision. 80 Records, CTA Case Nos. 8563, 8594 and 8674, Vol. 5, pp. 2668-2675. ~ 81 Id., pp. 2684-2687. 82 Id., pp. 2688-2691. 83 Id., pp. 2761-2763. 84 Id., pp. 2776-2831. 85 Records, CTA Case Nos. 8563, 8594 and 8674, Vol. 6, pp. 3687-3705. 86 Id., pp. 3798-3800. 87 Id., pp. 3801-3806. ss Id., pp. 3810-3811. 89 Id., Minutes ofMeeting, March 24,2015, p. 3819. 90 Id., p. 3821. 91 Records, CTA Case Nos. 8563, 8594 and 8674, Vol. 6, pp. 3822-3851. 92 Id., pp. 3854-3856. 93 Id., p. 3858.

DECISION CTA CASE NOS. 8563,8594, & 8674 Page 18 o�31 The lssues94 For the Court's resolution are the following issues: 1. WHETHER THE PORTION OF THE WORKS RENDERED BY PETITIONER TO NGCP IS EXEMPT FROM VAT; 2. WHETHER THE 12% OUTPUT VAT ON SUCH PORTION OF THE WORKS RENDERED TO NGCP, CONSTITUTE ERRONEOUSLY PAID TAX UNDER SECTION 229 OF THE 1997 NIRC, AS AMENDED; 3. WHETHER PETITIONER IS ENTITLED TO A REFUND OF THE 12% OUTPUT VAT IN THE TOTAL AMOUNT OF FIFTY FIVE MILLION TWO HUNDRED SEVENTY FOUR THOUSAND NINE HUNDRED FIFTY EIGHT AND 71/100 PESOS (PHP55,274,958.71), WHICH CAN BE BROKEN DOWN AS TWO MILLION SEVEN HUNDRED EIGHTY ONE THOUSAND SEVEN HUNDRED NINETY SIX AND 54/100 PESOS (PHP2,781,796.54) FOR THE 3RD QUARTER OF TAXABLE YEAR 2010, FIFTY MILLION NINE HUNDRED THOUSAND FIVE HUNDRED TEN AND 66/100 PESOS (PHP50,900,510.66) FOR THE PERIODS 4TH QUARTER OF THE TAXABLE YEAR 2010 AND 1ST QUARTER OF TAXABLE YEAR 2011, AND ONE MILLION FIVE HUNDRED NINETY TWO THOUSAND SIX HUNDRED FIFTY ONE AND 51/100 (PHP1,592,651.51) FOR THE PERIODS 3RD AND 4TH QUARTERS OF TAXABLE YEAR 2011 AND 1sT QUARTER OF TAXABLE YEAR 2012; AND 4. WHETHER THE HONORABLE COURT HAS JURISDICTION OVER THE CASE. Petitioner's Arguments Petitioner alleges that the Court has jurisdiction over the instant consolidated cases, and that it has complied with all the administrative requirements for the filing of a claim for refund of erroneously paid taxes under Section 229 of the 1997 National Internal Revenue Code ("NIRC"), as amended. 94 Records, CTA Case Nos. 8563, 8594 and 8674, Vol. 5, Pre-Trial Order, p. 2669. ~

DECISION CTA CASE NOS. 8563,8594, & 8674 Page 19of31 It argues that the offshore portion of the amount invoiced to NGCP in the Wright-Calbayog and New Naga Projects are VAT exempt pursuant to Section 108(A) of the 1997 NIRC, as amended; that VAT is not imposed on services performed outside the Philippines; that the BIR, in its previous rulings, has used the Marubeni case as basis in the exemption of offshore services in a turnkey contract from payment of VAT; that in the case of services, the rule is consumption takes place where the service is performed, following the "situs-of- service principle;" that the VAT attributed to the offshore portion of the contracts with NGCP were reported in the Monthly and Quarterly VAT returns of petitioner and that the same were remitted to the BIR via Electronic Filing and Payment System ("EFPS"); that it filed its amended monthly and quarterly VAT returns for the 3rd and 4th Quarters of 2010, 1st, 3rd, and 4th Quarters of 2011, and 1st Quarter of 2012, to establish that there was an overpayment of VAT; and that NGCP is a VAT exempt entity pursuant to Section 9 ofRA No. 951195. Respondent's Counter-Arguments Respondent counter-argues that a claim for refund is subject to investigation as it involves removal of accrued revenue from the coffers of the Government; that petitioner failed to submit compete documents to support its application for refund; that it must prove compliance with the prescribed checklist of requirements to be submitted involving claims for VAT refund pursuant to RMO No. 53- 98; that claims for refund are construed strictly against the claimant for the same partake the nature of exemption from taxation and are therefore held against the claimant; that CTA Case No. 8563 is filed out of time pursuant to Section 112(A) of the 1997 NIRC, as amended, it should have been filed by September 30, 2012; and that exemptions are never presumed, the burden is upon the claimant to establish his right to exemption beyond reasonable doubt. Moreover, she argues that a claim for exemption from tax payments must be clearly shown and be based on language in the law too plain to be mistaken; that tax refunds are regarded as tax exemptions, therefore, these are to be construed strictissimi juris against the person or entity claiming the exemption; and that in an action for refund, the burden of proof is on the taxpayer who claims the exemption. 95 An Act Granting the National Grid Corporation of the Philippines a Franchise to Engage in the / Business of Conveying or Transmitting Electricity Through High Voltage Back-Bone System of Interconnected Transmission Lines, Substations and Related Facilities, and for Other Purposes.

DECISION CTA CASE NOS. 8563, 8594, & 8674 Page 20 of31 The Ruling of the Court The issues can be summarized as follows: 1. WHETHER THE CTA HAS JURISDICTION OVER THE INSTANT PETITION; AND 2. WHETHER PETITIONER IS ENTITLED TO A REFUND OF ERRONEOUSLY PAID VAT FOR THE OFFSHORE COMPONENT/S OF ITS CONTRACTS WITH NGCP. The Court has jurisdiction over the instant consolidated cases. Respondent maintains that petitioner's claim should be denied on the basis of Section 11296 of the 1997 NIRC, as amended. The Court does not agree. Section 112 of the 1997 NIRC, as amended, pertains to refunds or tax credits of input tax, which is not the issue in this case. Petitioner is seeking refund of erroneously paid VAT for the offshore component of its contract with NGCP. What applies in these cases, as petitioner claims, are Sections 204(C) and 229 of the 1997 NIRC, as amended, which provide as follows: Sec. 204. Authority of the Commissioner to Compromise, Abate, and Refund or Credit Taxes. - The Commissioner may- XXX XXX XXX 96 SEC. 112. Refunds or Tax Credits ofiuput 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)(l), (2) and (b) and Section 108 (B)(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 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

DECISION CTA CASE NOS. 8563, 8594, & 8674 Page 21 of31 (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 change unused stamps that have been rendered unfit for use and refund their value upon proof of destruction. No credit or refund of taxes or penalties shall be allowed unless the taxpayer files in writing with the Commissioner a claim for credit or refund within two (2) years after the payment of the tax or penalty: Provided, however, That a return filed showing an overpayment shall be considered as a written claim for credit or refund. XXX XXX XXX SEC. 229. Recovery of Tax Erroneously or Illegally Collected.- No suit or proceeding shall be maintained in any court for the recovery of any national internal revenue tax hereafter alleged to have been erroneously or illegally assessed or collected, or of any penalty claimed to have been collected without authority, of any sum alleged to have been excessively or in any manner wrongfully collected without authority, or of any sum alleged to have been excessively or in any manner wrongfully collected, until a claim for refund or credit has been duly filed with the Commissioner; but such suit or proceeding may be maintained, whether or not such tax, penalty, or sum has been paid under protest or duress. In any case, no such suit or proceeding shall be filed after the expiration of two (2) years from the date of payment of the tax or penalty regardless of any supervening cause that may arise after payment: Provided, however, That the Commissioner may, even without a written claim therefor, refund or credit any tax, where on the face of the return upon which payment was made, such payment appears clearly to have been erroneously paid. It is clear, therefore, that a taxpayer who claims for refund under Section 229 of the 1997 NIRC, as amended, on the ground of erroneous payment must be able to prove that it has paid the tax and such payment was erroneous.97 It is also clear that the taxpayer must prove that a written claim for the refund or credit thereof was duly filed with the CIR, and that the suit or proceeding was instituted within two (2) years from the date of payment of the tax or penalty. 97 Commissioner of Internal Revenue v. Ericsson Telecommunications, Inc. CTA EB Case No. 947, ( September 12, 2013.

DECISION CTA CASE NOS. 8563,8594, & 8674 Page 22of31 The Court will first discuss the timeliness of the administrative and judicial claims in order to settle the issue on jurisdiction. For VAT-registered taxpayers, VAT is paid on a monthly basis per Section 114(A) of the 1997 NIRC, as amended:98 SECTION 114. Return and Payment of Value-added Tax.- (A) In General. - Every person liable to pay the value- added tax imposed under this Title shall file a quarterly return of the amount of [his/her] gross sales or receipts within twenty-five (25) days following the close of each taxable quarter prescribed for each taxpayer: Provided, however, That VAT-registered persons shall pay the value-added tax on a monthly basis. To emphasize, when the tax sought to be refunded is illegally or erroneously collected, the period of prescription starts from the date the tax was paid.99 In this case, it is on a monthly basis. As culled from the records, the following are the pertinent dates:1oo CTA Period Date of Exhibit Date of filing Date of filing Last Day to Case Payment Admin claim judicial claim File Claims No. Jul-10 "P-61"101 8563 Aug-10 8/24/2010 "P-62"104 for refund for refund 8/24/2012 3rd Q 2010 9/27/2010 "P-63"1os 10/24/2012102 10/25/2012103 9/27/2012 8594 Oct-10 10/25/2010 "P-64"106 10/25/2012 Nov-10 11/22/2010 "P-65"109 12/20/2012107 12/26/2012108 11/22/2012 4th Q 2010 12/22/2010 "P-66"110 12/22/2012 Jan-11 1/24/2011 "P-67"111 -- 1/24/2013 2/23/2011 2/23/2013_ 98 Underscoring ours. 99 Commissioner of Internal Revenue v. Insular Lumber Company and Court ofTax Appeals, G.R. No. L- 24221, December 11,1967,21 SCRA 1237. This case applied Sections 306 (now Section 229) and 309 (now Section 204) of the old National Internal Revenue Code. 100 In CTA Case No. 8674 covering the refunds relating to the Third and Fourth Quarters of 2011 and the First Quarter of 2012, petitioner specifically provided its claims on a monthly basis, hence, the table only includes the months covered by its claim, i.e. July 2011, October 2011 and March 2012, see Records, CTA Case Nos. 8563, 8594 and 8674, Vol. 5, Exhibit "P-234," p. 3545. 1o1 Records, CTA Case Nos. 8563, 8594 and 8674, Vol. 5, p. 2951. 102 Id., Exhibit "P-231," pp. 3553-3559 and Exhibit "P-232," p. 3560. 103 Records, CTA Case Nos. 8563, 8594 and 8674, Vol. 1, pp. 7-96, with annexes. 104 Records, CTA Case Nos. 8563, 8594 and 8674, Vol. 5, p. 2952. 1os Id., p. 2953. 106 Id., p. 2954. 107 Id., Exhibit "P-234," pp. 3544-3549. 108 Records, CTA Case No. 8594, pp. 8-191, with annexes. 109 Records, CTA Case Nos. 8563, 8594 and 8674, Vol. 5, p. 2955. ( no Id., p. 2956. m Id., p. 2957.

DECISION CTA CASE NOS. 8563, 8594, & 8674 Page 23 of31 Feb-11 3/21/2011 "P-68"112 3/21/2013 I 1stQ 2011 4/25/2011 "P-69"113 4/25/2013 I Jul-11 N/ A114 "P-52"115 N/A Oct-11 11/23/2011 "P-55"116 11/23/2013 i 8674 1stQ 2012 N/ A117 "P-60"118 12/20/2012119 7/15/2013120 N/A J As shown on the table above, the claims relating to taxable months of July, August, October and November 2010 have prescribed for having been filed beyond the prescriptive period of two (2) years from their respective dates of payment. A perusal of the Monthly and Quarterly VAT returns submitted by petitioner, reveal that for the months of July 2011 and March 2012, petitioner made no payments. Since petitioner is claiming refund for erroneously paid VAT, it must establish that it actually paid the VAT for the period. A basic principle is that when money is paid to another under the influence of a mistake of fact, it may be recovered in fact,121 hence, if no payment was made, it follows that there is no right to seek refund. Thus, petitioner's claim for the aforementioned months must necessarily fail for being without basis. From the foregoing, the administrative and judicial claims for refund relating to the following periods were filed on time, thus giving the Court jurisdiction over the case. 1. September 2010 2. December 2010 3. January 2011 4. February 2011 5. March2011 6. October 2011 Having determined compliance with the second and third requisites of the remaining claims, the Court will now proceed to the first requisite. 112 Records, CTA Case Nos. 8563, 8594 and 8674, Vol. 5, p. 2958. 113 !d., p. 2959. 114 VAT overpayment. 115 Records, CTA Case Nos. 8563, 8594 and 8674, Vol. 5, pp. 2903-2907, with alphalists. 116 Id., p. 2924. 117 VAT overpayment. 118 Records, CTA Case Nos. 8563, 8594 and 8674, Vol. 5, pp. 2946-2950, with alphalists. 119 Records, CTA Case Nos. 8563, 8594 and 8674, Vol. 6, Exhibit "P-234," pp. 3653-3679. 120 Records, CTA Case No. 8674, pp. 6-155, with annexes. 121 UST Cooperative Store v. Cihj ofManila, et al., G.R. No. L-17133, December 31, 1965, 15 SCRA / 656.

DECISION CTA CASE NOS. 8563,8594, & 8674 Page 24 of31 Petitioner is entitled to refund of erroneously paid VAT for the months of September and December 2010, January, February, March, and October 2011, having complied with the requisites for erroneously paid taxes under Section 229 of the 1997NIRC. Petitioner anchors its claims for the refund of erroneously paid VAT on the offshore component of its Contracts with NGCP. As previously discussed, Section 229 of the 1997 NIRC, as amended, provides that in order for a taxpayer to be entitled to a tax refund or tax credit, it must likewise establish that the taxes paid were illegally or erroneously collected. To prove that part of the services it rendered to NGCP were subcontracted to foreign contractors, Mr. Ramos testified by way of Judicial Affidavit122 that the Contracts123 between petitioner and NGCP are both on a II turnkey basis;" that in order to comply with its obligation under the Contracts, petitioner subcontracted specific segments of the project to foreign subcontractors; the offshore portion of the contract consists of works related to the design, engineering, fabrication, manufacture and supply of imported equipment. In order to support its claim that the contract has an offshore component that was subcontracted to foreign subcontractors that are not engaged in trade or business in the Philippines, petitioner presented the respective Annex II A"124 of each Project125 and the Certificates of Non-registration of Company126 issued by the SEC. 122 Records, CTA Case Nos. 8563, 8594 and 8674, Vol. 6, Exhibit "P-239," Judicial Affidavit in Lieu of Direct Testimony, pp. 3624-3650. 123 The Wright-Calbayog Project, which was executed solely between petitioner and NGCP; and The New Naga Project, which was entered into by the unregistered JV of ABB-AER Construction and Development and NGCP. 124 Contains the list of the equipment that will be sourced from outside the country together with the countries of origin. 125 Records, CTA Case Nos. 8563, 8594 and 8674, Vol. 6, Exhibit "P-196," Annex" A" of the New Naga Project, pp. 3336-3354. 126 Records, CTA Case Nos. 8563, 8594 and 8674, Vol. 6, Exhibits "P-198" to "P-224," Certification of / Non-registration of Company, pp. 3386-3412. (

DECISION CTA CASE NOS. 8563,8594, & 8674 Page 25of31 Petitioner also submitted the Purchase Orders127 provided to its foreign subcontractors with the corresponding specifications that will be needed for the New Naga Project and the Wright Calbayog Project. It is worthwhile to note at this point, that what petitioner ordered from its foreign subcontractors is not the delivery of common goods that are readily available, but rather, the purchase orders are so specific that it has to be tailor-fitted for the projects, in other words, petitioner entered into "contract for a piece of work." Under Article 1467128 of the Civil Code of the Philippines there is contract for a piece of work if the goods are to be manufactured especially for the customer and upon his special order and not for the general market. Thus, as in the case at bar, petitioner subcontracted the design, engineering, fabrication, manufacture and supply of imported equipment to its foreign subcontractors, providing them with the exact specifications that will be needed for the two Projects. In other words, the materials and equipment were specially designed, built and manufactured for petitioner, thus, what the foreign subcontractors actually sold to petitioner are not merely goods, but rather, it undertook to perform services in order to meet the demands of petitioner. Anent the question if the services rendered are subject to VAT, the case of Commissioner of Internal Revenue v. Marubeni Corporation129 is instructive on the matter, wherein the Supreme Court held that:130 Clearly, the service of design and engineering, supply and delivery, construction, erection and installation, supervision, direction and control of testing and commissioning, coordination of the two projects involved two taxing jurisdictions. These acts occurred in two countries Japan and the Philippines. While the construction and installation work were completed within the Philippines, the evidence is clear that some pieces of equipment and supplies were completely designed and engineered in Japan. The two 127 Id., Exhibits "P-84" to "P-113," Purchase Order, pp. 3043-3162. 128 Article 1467. A contract for the delivery at a certain price of an article which the vendor in the ordinary course of his business manufactures or procures for the general market, whether the same is on hand at the time or not, is a contract of sale, but if the goods are to be manufactured specially for the customer and upon his special order and not for the general market, it is a contract for a piece of work. (underscoring ours) 129 G.R. No.137377, December 18,2001,372 SCRA 576. ( 130 Underscoring ours.

DECISION CTA CASE NOS. 8563,8594, & 8674 Page 26of31 sets of ship unloader and loader, the boats and mobile equipment for the NDC project and the ammonia storage tanks and refrigeration units were made and completed in Japan. They were already finished products when shipped to the Philippines. The other construction supplies listed under the Offshore Portion such as the steel sheets, pipes and structures, electrical and instrumental apparatus, these were not finished products when shipped to the Philippines. They, however, were likewise fabricated and manufactured by the sub-contractors in Japan. All services for the design, fabrication, engineering and manufacture of the materials and equipment under Japanese Yen Portion I were made and completed in Japan. These services were rendered outside the taxing jurisdiction of the Philippines and are therefore not subject to contractors tax. While the afore-quoted case speaks of contractor's tax, the Court deems it applicable to the instant case. Section 108131 of the 1997 NIRC, as amended, provides that the phrase "sale or exchange of services" means the performance of all kinds of services in the Philippines for others for a fee, remuneration or consideration. The VAT is a tax on consumption expressed as a percentage of the value added to goods or services purchased by the producer or taxpayer.132 Consumption is the use of a thing in a way that thereby exhausts it. Applied to services, the term means the performance or 131 SEC. 108. Value-Added Tax on Sale of Services and Use or Lease of Properties. - (A) Rate and Base of Tax. - There shall be levied, assessed and collected, a value-added tax equivalent to ten percent (10%) of gross receipts, derived from the sale or exchange of services, including the use or lease of properties: Provided, That the president, upon the recommendation of the Secretary of Finance, shall, effective January 1, 2006, raise the rate of VAT to twelve percent (12%), XXX The phrase "sale or exchange of services" means the performance of all kinds of services in the Philippines for others for a fee, remuneration or consideration, including those performed or rendered by construction and service contractors; stock, real estate, commercial, customs and immigration brokers; lessors of property, whether personal or real; warehousing services; lessors or distributors of cinematographic films; persons engaged in milling, processing, manufacturing or repacking goods for others; proprietors, operators or keepers of hotels, motels, resthouses, pension houses, inns, resorts; proprietors or operators of restaurants, refreshment parlors, cafes and other eating places, including clubs and caterers; dealers in securities; lending investors; transportation contractors on their transport of goods or cargoes, including persons who transport goods or cargoes for hire and other domestic common carriers by land, air and water relative to their transport of goods or cargoes; services of franchise grantees of telephone and telegraph, radio and television broadcasting and all other franchise grantees except those under Section 119 of this Code; services of banks, non-bank financial intermediaries and finance companies; and non-life insurance companies (except their crop insurances), including surety, fidelity, indemnity and bonding companies; and similar services regardless of whether or not the performance thereof calls for the exercise or use of the physical or mental faculties. The phrase 'sale or exchange of services' shall likewise include: xxx 132 Commissioner of Internal Revenue v. American Express International, Inc. (Philippine Branch), G.R. ( No. 152609, June 29, 2005, 462 SCRA 197.

DECISION CTA CASE NOS. 8563,8594, & 8674 Page 27 of31 successful completion of a contractual duty, usually resulting in the performer's release from any past or future liability.1~3 As an indirect tax on services, its main object is the transaction itself or, more concretely, the performance of all kinds of services conducted in the course of trade or business in the Philippines. Hence, for an activity to be taxable, it is not the residence of the payor, or the place where the contract for service is entered into, or the place of payment, but the place where the services were actually rendered.134 Applying this to the instant case, the materials and equipment listed in the offshore component of the contracts for the New Naga and Wright Calbayog Projects were designed, built and fabricated abroad. Clearly then, the services were consummated abroad, hence, beyond the taxing jurisdiction of the BIR. According to petitioner only the gross receipts for services performed in the Philippines should be subject to VAT and that services rendered and performed by petitioner to NGCP outside the Philippines is not subject to VAT. However, petitioner erroneously paid the VAT for the offshore component of the contract. Ms. Bautista testified by Judicial Affidavit,135 that petitioner billed NGCP and included in its billing are the 12% VAT, however, NGCP, being a tax-exempt entity, never paid the said VAT component of the billing, despite this, petitioner issued original invoices136 and official receipts137 to NGCP reflecting vatable sales for all its onshore and offshore services. After realizing its mistake, petitioner cancelled the said original invoices and official receipts and subsequently replaced it with amended invoices138 and amended official receipts139 reflecting the amount of offshore services as exempt sales. Petitioner also amended the affected Monthly VAT Declarations and Quarterly VAT Returns and paid to the BIR the 12% 133 Id. 134 Commissioner of Internal Revenue v. Juliane Baier-Nickel, as represented by Marina Q. Guzman (Attorney-in-fact), G.R. No. 153793, August 29, 2006, 500 SCRA 87. 135 Records, CTA Case Nos. 8563, 8594 and 8674, Vol. 6, Exhibit "P-238," Judicial Affidavit in Lieu of Direct Testimony pp. 3604-3623. 136 Id., Exhibits "P-4" to "P-16," Invoice, pp. 3706-3780. 137 Records, CTA Case Nos. 8563, 8594 and 8674, Vol. 5, Exhibits "P-17'' to "P-18," Official Receipt, pp. 2854-2855. 138 Records, CTA Case Nos. 8563, 8594 and 8674, Vol. 6, Exhibits "P-19" to "P-34," pp. 3731-3746. 139 Records, CTA Case Nos. 8563, 8594 and 8674, Vol. 5, Exhibits "P-35" and "P-36," pp. 2856-2857; ( Vol. 6, Exhibits "P-37" to "P-42," pp. 3747-3752.

DECISION CTA CASE NOS. 8563,8594, & 8674 Page 28 o�31 VAT erroneously imposed on the offshore portion of the transaction. To prove its payment, petitioner presented the eFPS Payment Details140 for the periods subject of its claims. On the other hand, respondent maintains that petitioner is not entitled to such refund for having failed to comply with the checklist of requirements under RMO No. 53-98. The Court does not agree with respondent. A reading of the above-cited Section 229 of the 1997 NIRC, as amended, reveals that it does not require compliance with the invoicing requirements before a taxpayer can claim a refund of erroneously paid tax. Petitioner only needs to prove actual payment of the tax that is being claimed; that the claim for refund was filed before the BIR; and that both the administrative and judicial claims for refund must have been filed within the two (2)-year prescriptive period. Thus, it is of no moment that petitioner failed to comply with the invoicing requirement under Section 113 of the NIRC of1997.141 Records show that petitioner filed through eFPS its Monthly VAT Declarations and Quarterly VAT Returns on the said periods and paid the same electronically as reflected in its original returns of the stated period, as follows:142 CTACaseNo. Period Amount Paid Status eFPS Reference 8563 July 2010 2,072,219.21 Prescribed Exhibit 11P-61 11 8563 August 2010 195,592.56 Prescribed Exhibit 11P-6211 8563 September 2010 2,099,345.50 Exhibit 11P-6311 8594 October 2010 10,559,236.04 Valid Exhibit 11P-6411 8594 November 2010 11,371,840.25 Prescribed Exhibit 11P-6511 8594 December 2010 23,535,566.10 Prescribed Exhibit 11P-6611 8594 January 2011 15,159,447.11 Exhibit 11P-6711 8594 February 2011 13,001,306.74 Valid Exhibit 11P-6811 8594 March 2011 3,019,922.24 Valid Exhibit 11P-6911 8674 Valid 8674 July 2011 0 Valid N/A 8674 October 2011 961,707.19 No Payment Exhibit 11P-5511 March 2012 Valid 0 No Payment N/A 140 Records, CTA Case Nos. 8563, 8594 and 8674, Vol. 5, Exhibit "P-52," p. 2905; Exhibit "P-55," p. 2921; Exhibits "P-61" to "P-69," pp. 2951-2959. 141 Commissioner ofInternal Revenue v. Ericsson Telecommunications, Inc., CTA EB Case No. 947, September 12, 2013. 142 Records, CTA Case Nos. 8563, 8594 and 8674, Vol. 5, Exhibit "P-55," eFPS Payment Details, p. I 2921; Exhibits "P-61" to "P-69," eFPS Payment Details, pp. 2951-2959.

DECISION CTA CASE NOS. 8563,8594, & 8674 Page 29of31 Records disclose that petitioner made an overpayment of Php719,290.02143 for the month of September and Phpl9,887,922.74144 for the month of December. These amounts were extracted from the 3rd and 4th Quarterly VAT Return for the year 2010, respectively. Thus, after a careful examination and review of the evidence presented, petitioner was able to prove that it paid VAT in the aggregate amount of Php39,521,936.87, however, petitioner cannot claim this in full. Only VAT overpayment attributable to the offshore portion of the contract were erroneously paid. Thus, such overpayment shall be allocated accordingly: Period Vatable Zero-Rated Exempt Total Sales Percent~e Ove~ment Allocable Reference Sales Sales Sales (A+B+C=D) Portion September 2010 (A) (B) (C/D=E) __ill _iExF) See Footnote (C) 143 December 2010 68,661,191.50 January 2011 33,683,092.22 7,859,586.17 110,203,869.89 7.1319% (719,290.02) (51,298.76) See Footnote February 2011 115,949,168.51 144 March 2011 53,316,203.10 45,727,816.41 185,846,888.20 347,523,873.12 53.4774% _119,887,922.7<11 _(10,635,552.95) October 2011 172,604,454.16 19,905,183.43 146,419,590.06 219,640,976.59 66.6631% (15,764,554.42) (10,509,148.30) Exhibit "P-76" Grand Total 332,822,696.36 46,461,153.99 232,699,726.69 5.8591% _(1,468,754.66}_ Exhibit "P-77" 100,840,772.41 133,302,430.44 13,634,118.54 633,296,469.24 26.3970% (646,105.40) _(86,055.86) Exhibit "P-78" 844,194,486.04 167,171,342.44 _1170,552.52) Exhibit "P-81" 24,183,024.28 135,260,215.76 7.5679% (1,D35,309.63) 303,262,700.77 10,236,419.07 1,678,625,131.29 (78,351.67) 531,167,944.48 _139,521,936.~ _(21,530,960.05) 143 3rd Qtr of 2010 July 2010 August2010 September 2010 (A) _iC__l D=A-(B+C) Vatable Sales (B~ Zero-Rated Sales Exhibit "P-72" Exhibit "P-71" 68,661,191.50 Exempt Sales 216,790,068.16 Exhibit "P-70" 89,816,598.33 33,683,092.22 Total Sales 112,488,943.06 58,312,278.33 42,221,180.07 Output VAT 27,130,636.76 36,584,670.77 7,859,586.17 356,409,647.98 19,271,050.59 - 110,203,869.89 Input VAT: 26,014,808.23 114,167,999.69 Cap. Goods Exceeding 1M 6,997,473.43 132,037,778.40 8,239,343.00 Goods 1,319,178.44 10,777,991.80 Importation 1,440,795.15 - - Services 17,947,349.00 270,556.09 1,319,178.44 Services by Non Residents 4,472,042.46 4,689,941.00 907,876.25 262,362.81 Total Input Tax 1,655,274.73 5,577,058.00 Less: Input Tax Allocable to Exempt Sales 731,702.44 524,049.08 7,680,350.00 1,056,124.79 Total 25,911,067.49 7,139,820.90 1,760,642. 94 VAT Payable (Output Tax Less Input Tax) 341,606.78 95,939.78 Less: VAT Payment (Exhibit "P-63") 473,804.64 6,798,214.12 111,713.58 6,991,485.38 Overpayment for September 2010 25,437,262.85 11,779,761.21 132,197.86 144 - 6,859,287.52 1,380,055.48 Vatable Sales 11,779,761.21 2,099,345.50 Zero-Rated Sales (719,290.02} Exempt Sales Total Sales 4th Qtr of 2010 October 2010 November 2010 December 2010 0\ltputVAT (A) (B) (C) D=A-(B+C) Input VAT: Exhibit "P-75" Exhibit "P-73" Exhibit "P-74" 115,949,168.51 Goods 327,582,690.84 73,806,086.58 137,827,435.75 45,727,816.41 Importation 116,842,025.52 37,800,466.45 33,313,742.66 Services 303,426,119.61 84,607,867.33 32,971,364.08 185,846,888.20 Services by Non Residents 747,850,835.97 204,112,542.49 347,523,873.12 Total Input Tax 39,309,922.91 196,214,420.36 16,539,292.29 13,913,900.22 Less: Input VAT Allocable to Exempt Sales 8,856,730.40 Total 1,824,719.27 VAT Payable (Output Tax Less Input Tax) 21,470,829.00 195,606.16 613,699.31 1,015,413.80 Less: VAT Payment (Exhibit "P-66") 6,150,126.04 6,828,285.00 6,445,574.00 8,196,970.00 Overpayment for December 2010 1,126,112.94 1,809,375.48 3,214,637.62 379,754.21 29,825,428.52 58,662.94 154,109.74 166,981.53 3,409,693.38 8,208,667.04 9,022,758.53 12,594,002.95 26,415,735.14 674,178.77 407,768.52 2,327,746.09 7,534,488.27 8,614,990.01 10,266,256.86 3,647,643.36 ~ 23,535,566.10 (19,887,922.74)

DECISION CTA CASE NOS. 8563,8594, & 8674 Page 30of31 Basic is the rule in taxation that tax refunds, being in the nature of tax exen1ptions, are construed in strictissimi juris against the taxpayer and liberally in favor of the government. Accordingly, it is a claimant's burden to prove the factual basis of a claim for refund or tax credit."l45 In the case at bar, petitioner has sufficiently proven its entitlement to a refund of erroneously paid VAT, albeit in the reduced amount of Php21,530,960.05. In the case of Filinvest Development Corporation v. Commissioner ofInternal Revenue146, the Supreme Court held in this wise: That no one shall unjustly enrich oneself at the expense of another is a long-standing principle prevailing in our legal system.This principle applies not only to individuals but to the State as well. In the field of taxation where the State exacts strict compliance upon its citizens, the State must likewise deal with taxpayers with fairness and honesty. The harsh power of taxation must be tempered with evenhandedness. Hence, under the principle of solutio indebiti, the Government has to restore to petitioner the sums representing erroneous payments of taxes. In the instant case, petitioner was able to prove that it paid the VAT for the services rendered by the offshore companies when it was not subject to VAT in the first place. Respondent did not even present any evidence that would disprove the fact of payment. Therefore, respondent has the obligation under the law to restore the tax erroneously paid by petitioner. This is also in accord with Article 2154147 of the New Civil Code of the Philippines, which provides that if something is received when there is no right to demand it, and it was unduly delivered through mistake, the obligation to return it arises. WHEREFORE, premises considered, the consolidated Petitions for Review are hereby PARTIALLY GRANTED. Respondent is hereby ORDERED to refund or issue a tax credit certificate in favor of petitioner in the reduced amount of TWENTY ONE MILLION FIVE HUNDRED THIRTY THOUSAND NINE HUNDRED SIXTY AND 5/100 PESOS (Php21,530,960.05). 145 Eastern Telecommunications Philippines, Inc. v. Commissioner ofinternal Revenue, G.R. No. 183531, ~ March 25, 2015. 146 G.R. No. 146941, August 9, 2007, 529 SCRA 605. 147 Article 2154. If something is received when there is no right to demand it, and it was unduly delivered through mistake, the obligation to return it arises.

DECISION CTA CASE NOS. 8563, 8594, & 8674 Page 31 of31 SO ORDERED. WE CONCUR: LOVELL R.tuTISTA Associate Justice I ~. ~ 4 '--' MA. BELEN M. RINGPIS-LIBAN Associate Justice 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. ~ISTA LOVELL Associate Justice Chairperson CERTIFICATION Pursuant to Section 13 of Article VIII 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