TOTAL (PHILIPPINES) CORPORATION v. COMMISSIONER OF INTERNAL REVENUE

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY SPECIAL FIRST DIVISION TOTAL (PHILIPPINES) CTA Case No. 8253 CORPORATION, Petitioner, -versus- Members: UY, Chairperson, and FABON-VICTORINO, JJ. COMMISSIONER OF INTERNAL REVENUE, Promulgated: Respondent. OCT 24 2013 ; ,.-.gop�-, ' x------------------------------- DECISION UY, J.: This Petition for Review is filed by Total (Philippines ) Corporation , petitioner, on March 31 , 2011 , praying that judgment be rendered by this Court, ordering the Commissioner of Internal Revenue (CIR), respondent, to refund or issue tax credit certificate in its favor in the total amount of 12 111 ,100,273.80, allegedly representing unutilized input value-added tax (VAT) related to VAT zero-rated sales for the taxable period from January 1, 2009 to December 31 , 2009. THE FACTS Petitioner Total (Philippines) Corporation is a domestic corporation duly organized and existing under the laws of the Philippines , with principal office address at Penthouse, Philplans Corporate Center 1012 Triangle Drive , North Bonifacio, Bonifaci ~

DECISION CTA Case No. 8253 Page 2 of22 Global City, 1634 Taguig City.1 It is registered with the Bureau of Internal Revenue (BIR) as a VAT taxpayer with Tax Identification No. 005-145-964-000 .2 Respondent CIR is sued in her official capacity, having been duly appointed and empowered to perform the duties of her office, including , among others , the duty to act on and approve claims for refund or tax credit as provided by law.3 For the year 2009 , petitioner filed its Quarterly VAT Returns at the following dates,4 to wit: Period Original Return First Second Third Fourth Covered April 24 , 2009 Amendment Amendment Amendment Amendment 15 Quarter July 23, 2009 August24, 2009 February 5, 2010 Ap ri l19, 2010 2na Quarter August24, 2009 February 5, 2010 April19, 2010 Ap ril 30, 2010 3ra Quarter October 26, 2009 February 5, 2010 Ap ril 19, 2010 April 30, 2010 January 26, 2010 February 5, 2010 April19 , 2010 April 30, 2010 Apri l 30, 2010 4m Quarter -- -- On November 26 , 2010, petitioner filed its application for tax credit certificate/refund for the unutilized input VAT attributable to zero-rated sales for 2009 in the amount of 12 111 ,100,273.80, along with all supporting documents, with the Large Taxpayers Excise Audit Division II of the BIR. 5 Subsequently, on March 31 , 2011 , petitioner filed the instant judicial claim for refund or issuance of tax credit certificate. On June 10, 2011 , respondent filed her Answer,6 interposing the following special and affirmative defenses, viz: "7. Petitioner's alleged claim for refund is subject to administrative routinary investigation/examination by the Bureau. ~ 1 Par. 1, Summary of Admitted Facts, Joint Stipulation of Facts and Issues (JSFI), Docket, p. 101. 2 Exhibit "C", Docket, p. 324. 3 Par. 2, Summary of Admitted Facts, JSFI, Docket, p. 102. 4 Exhibits "V" to "MM", Docket, pp. 363 to 398. 5 Par. 3, Summary of Admitted Facts, JSFI, Docket, p. 102; Exhibit "D-1 ", Docket, p. 328 . 6 Docket, pp. 63 to 69.

DECISION CTA Case No. 8253 Page 3 of22 8. Petitioner must prove that it paid the alleged VAT input taxes for the period in question . 9. Petitioner must prove that the same alleged VAT input taxes was not utilized against any output tax liability. 10. Petitioner must prove that its sales are VAT zero-rated as contemplated under Section 112(A) of the Tax Code of 1997. 11. Petitioner must prove compliance with the following : a) Registration requirements of a value-added taxpayer under the pertinent provision of the NIRC of 1997, as amended and its implementing regulations ; b) Invoicing and accounting requirements for VAT- registered persons as well as the filing and payment of VAT pursuant to the provisions of Section 113 and 114 of 1997, as amended ; Failure to comply with the invoicing requirements on the documents supporting the sale of goods and services will result in the disallowance of claim for input tax of the taxpayer claimant. (Revenue Memorandum Circular No. 42-2003); c) Petitioner must prove the submission of complete documents in support of the administrative claim for refund pursuant to Section 112(c) of the 1997 NIRC, as amended , and its implementing rules , otherwise, there would be no sufficient compliance with regard to the filing of administrative claim for tax credit/refund which is a condition sine qua non prior to the filing of judicial claim in accordance with Section 112(c) of the NIRC of 1997, as amended ; 12. Petitioner must prove that the alleged VAT input taxes for the period in question are attributable to its alleged VAT zero-rated sales. 13. Petitioner must prove that the claim was filed within the period prescribed by law. J\ 14. In an action for refund , the burden of proof is on the taxpayer to establish its right to refund , and failure to sustain the burden is fatal to the claim for refund . ~-

DECISION CTA Case No. 8253 Page 4 of22 15. Claims for refund are construed strictly against the claimant for the same partake the nature of exemption from taxation . 16. Applications for refund/credit of input VAT with the BIR must comply with the appropriate Revenue Regulations and Revenue memorandum orders. 17. Thus, as cited in the case of ATLAS CONSOLIDATED MINING AND DEVELOPMENT CORPORATION VS . CIR (G .R. NO. 159490, February 18, 2008.), 'Atlas mere allegations of the figures in its amended VAT return for the first quarter of 1993 as well as in its petition before the CTA are not sufficient proof of the amount of its refund entitlement. They do not even constitute evidence adverse to CIR against whom they are being presented. While Atlas indeed submitted several documents, still , the CTA could not ascertain from them the veracity of the figures as the documents presented by Atlas were not sufficient to prove its action for tax credit or refund . Atlas has failed to meet the burden of proof required in order to establish the factual basis of its claim for a tax credit or refund. Neither can we ascertain the veracity of Atlas alleged input VAT taxes which are refundable nor the alleged actual export sales indicated in the amended VAT return . Clearly, it would not be proper to allow Atlas to simply prevail and compel a tax credit or refund in the amount it claims without proving the amount of its claim. After all , tax refunds are in the nature of tax exemptions, and are to be construed strictissimi juris against the taxpayer. It is thus academic whether compliance with the documentary requirements of RR 3-88 is necessary. Suffice it to say that a revenue regulation is binding on the courts as long as the procedure fixed for its promulgation is followed. It has not been disputed that RR 3-88 has been duly promulgated pursuant to the rule-making power of the Secretary of Finance upon the recommendation of the t CIR. As aptly held by the courts a quo, citing Eslao, these RRs or administrative issuances have the force of law and are entitled to great weight. "'

DECISION CTA Case No. 8253 Page 5 of22 On August 25, 2011, the parties submitted their Joint Stipulation of Facts and lssues,7 which the Court approved in the Resolution dated September 2, 2011 .8 During trial, although both parties were given the opportunity to present evidence to support their claims or defenses, it was only petitioner that presented and offered its documentary and testimonial evidence. On the other hand , respondent's counsel manifested during the hearing held on October 25, 2012 , that there is no report of investigation , and that she will no longer present evidence .9 Thereafter, the parties were granted a period of thirty (30) days from said date to file their respective memorandum .10 On January 2, 2013 , this case was submitted for decision , taking into consideration respondent's Memorandum11 filed on December 14, 2012 , and petitioner's Memorandum12 filed on December 21 , 2013.13 Hence, this Decision. THE ISSUES The parties submitted the following issues14 for this Court's resolution , to wit: "A . WHETHER OR NOT PETITIONER'S EXPORT SALES AND SALES TO COMPANIES LOCATED IN SPECIAL ECONOMIC ZONE/FREEPORT ZONES ARE ZERO- RATED SALES. B. WHETHER OR NOT PETITIONER HAS UNUTILIZED INPUT VAT FOR THE TAXABLE YEAR 2009 ARISING FROM ITS DOMESTIC PURCHASES OF TAXABLE 7 Docket, pp. 10 1 to 107. Resolution dated 8 Docket, p. 111. 9 Minutes of the hearing held on October 25 , 201 2, Docket, p. 488. November 14,2012, Docket, p. 490. 10 Resolution dated November 14, 20 12, Docket, p. 490. 11 Docket, pp. 50 1 to 516. 12 Docket, pp. 518 to 529. 13 Resolution dated January 2, 2013 , Docket, p. 532. 14 ISSUES, JSFI, Docket, pp. 102 to 103 .

DECISION CTA Case No. 8253 Page 6 of22 GOODS AND SERVICES AND IMPORTATION OF GOODS, IN THE AMOUNT OF ONE HUNDRED ELEVEN MILLION ONE HUNDRED TWO THOUSAND TWO HUNDRED SEVENTY THREE PESOS AND EIGHTY CENTAVOS (Php 111 ,102 ,273.80) IS PROPERLY ALLOCATED TO ITS ZERO RATED SALES AND SALES TO COMPANIES LOCATED IN SPECIAL ECONOMIC ZONE/FREEPORT ZONES. C. WHETHER OR NOT THE UNUTILIZED CREDITABLE INPUT TAXES FOR THE TAXABLE YEAR 2009 THAT ARE ALLOCATED TO ITS ZERO RATED SALES AND SALES TO COMPANIES LOCATED IN SPECIAL ECONOMIC ZONE/FREEPORT ZONES ARE PROPERLY SUBSTANTIATED BY INVOICES AND OFFICIAL RECEIPTS. D. WHETHER OR NOT THE UNUTILIZED CREDITABLE INPUT TAXES FOR THE TAXABLE YEAR 2009 THAT ARE ALLOCATED TO ITS ZERO RATED SALES AND SALES TO COMPANIES LOCATED IN SPECIAL ECONOMIC ZONE/FREEPORT ZONES WERE NOT UTILIZED IN THE SUCCEEDING TAXABLE QUARTER(S) OR APPLIED AGAINST ANY OUTPUT VAT LIABILITY OF THE PETITIONER. E. WHETHER OR NOT THE PETITIONER SEASONABLY FILED ITS ADMINISTRATIVE AND JUDICIAL CLAIMS FOR REFUND OR ISSUANCE OF TAX CREDIT CERTIFICATE. F. WHETHER OR NOT PETITIONER IS ENTITLED TO A REFUND AND/OR ISSUANCE OF TAX CREDIT CERTIFICATE FOR THE UNUTILIZED CREDITABLE INPUT TAXES FOR THE TAXABLE YEAR 2009 THAT ARE ALLOCATED TO ITS ZERO RATED SALES AND SALES TO COMPANIES LOCATED IN SPECIAL ECONOMIC ZONE/FREEPORT ZONES. r We summarize the foregoing issues into one general issue as follows : whether or not petitioner is entitled to a tax refund or issuance of a tax credit certificate in the total amount of

DECISION CTA Case No. 8253 Page 7 of22 ~ 111 ,100,273.80, representing excess and unutilized input VAT for the four (4) quarters of taxable year 2009. Petitioner's arguments: Petitioner argues that it is entitled to a refund and/or issuance of tax credit certificate for the unutilized creditable input VAT for 2009 that are allocated to its zero-rated sales and sales to companies located in special economic zone/Freeport zones on the ground that said sales are subject to 0% VAT, as provided for in Section 106 of the NIRC. In support thereof, petitioner cites the cases of Commissioner of Internal Revenue v. Toshiba Information Equipment (Phils), lnc.15 and Atlas Consolidated Mining and Development Corporation v. Commissioner of Internal Revenue16, wherein the Supreme Court held in the Atlas case that: "Export processing zones are to be managed as a separate customs territory from the rest of the Ph ilippines, and thus, for tax purposes, are effectively considered as foreign territory. For this reason , sales by persons from the Philippine customs territory to those inside the export processing zones are already taxed as exports." (underscoring supplied). " Thus , for its sales to companies located in special economic zones and Freeport zones, petitioner, as a VAT-registered taxpayer, is allegedly subject to 0% output VAT. Petitioner claims that the portion of input VAT allocated to such zero-rated sales, if not utilized or applied against output taxes, may be refunded or credited , pursuant to Section 112 of the NIRC. According to petitioner, its unutilized creditable input VAT fo r 2009 that are allocated to its zero-rated sales and sales to companies located in special economic zone/Freeport zones are properly r substantiated by invoices and official receipts in accordance with the substantiation requirements mentioned under Section 4.110-8 of Revenue Regulation No. 16-05. Furthermore, petitioner contends 15 G.R. No. 150154, August 9, 2005. 16 G.R. Nos. 141104 and148763, June 8, 2007.

DECISION CTA Case No. 8253 Page 8 of22 that the excess input VAT for 2009 that are allocated to its zero-rated sales were not utilized in the succeeding taxable quarter(s) or applied against any output VAT liability of petitioner. Lastly, petitioner points out that the administrative and judicial claims for refund or issuance of tax credit certificate were filed on time. Respondent's counter-arguments: Respondent, on the other hand , claims that petitioner is not entitled to a tax refund in the amount of f2 111 ,100,273.80 due to its supposed failure to submit complete documents required under Revenue Memorandum Order (RMO) No. 53-98 dated June 1, 199817. Allegedly, the instant claim for refund does not involve the refund of erroneously or illegally collected taxes wherein the taxpayer has the discretion to submit the documents it deems will prove its case. Applications for tax refund/credit of input VAT with the SIR must allegedly comply with the appropriate Revenue Regulations and Revenue Memorandum Orders. Thus, petitioner's omission to submit legally mandated documents is fatal to its claim for refund. Moreover, respondent contends that the instant judicial claim for refund was filed prematurely because the 120 day period given to the Commissioner of Internal Revenue to act on a refund claim under Section 112 of the NIRC will commence to run only after the submission of complete documents by petitioner as required under Revenue Memorandum Order No. 53-98 . Consequently, petitioner's failure to submit the complete documents holds the running of the said 120 day period . Thus, the filing of the instant Petition for Review on March 31 , 2011 is allegedly premature. Lastly, respondent maintains that petitioner failed to exhaust administrative remedies prior to the filing of the instant Petition for Review. While it is true that petitioner filed an administrative claim for refund , the same was not pursued in its full extent as required under the doctrine of administrative remedies . Respondent was not able to examine and evaluate petitioner's claim for tax refund/credit because of petitioner's alleged failure to submit complete documents that are legally mandated . Thus, it cannot allegedly be said that petitioner ~ 17 SUBJECT: Checklist of Documents to be Submitted by a Taxpayer upon Audit of his Tax Liabilities as well as of the Mandatory Reporting Requirements to be Prepared by a Revenue Officer, all of which Comprise a Complete Tax Docket.

DECISION CTA Case No. 8253 Page 9 of22 availed of the remedies in the administrative level before resorting to this Court's intervention. THE COURT'S RULING Although petitioner was able to submit supporting documents relative to its refund claim , the Court however finds that not all the legal requisites for the refund of unutilized or excess input VAT have been fully complied with by petitioner in this case. Respondent judicially admitted that petitioner submitted "all supporting documents" at the administrative level. The contention of respondent to the effect that petitioner failed to submit complete documents required under RMO No. 53-98 is inconsistent with her explicit admissions in the Joint Stipulation of Facts and Issues (JSFI) as follows : "3. Petitioner filed its application for tax credit certificate/refund for the unutilized VAT input taxes attributable to zero rated sales for 2009 in the amount of One Hundred Eleven Million One Hundred Thousand Two Hundred Seventy Three Pesos and Eighty Centavos (Php 111 ,102 ,273.80) along with all supporting documents on November 26, 2010 with the Large Taxpayers Excise Audit Division II of the Bureau of Internal Revenue ."18 (Emphasis supplied) It must be emphasized that the JSFI was executed and submitted by petitioner and respondent themselves.19 The approval of the JSFI by this Court marked the termination of the pre-trial process in this case.20 The admission having been made in a stipulation of facts at pre-trial by the parties, it must be treated as a judicial admission . Under Section 4, Rule 129 of the Rules of Court, a judicial admission requires no proof. The admission may be contradicted only by a showing that it was made through palpable mistake or that no sucht 18 Docket, p. 102. 19 Docket, pp. 10 1 to 107. 20 Resolution dated September 2, 20 11, Docket, p. 111.

DECISION CTA Case No. 8253 Page 10 of22 admission was made. The Court cannot lightly set aside a judicial admission especially when the opposing party relied upon the same and accordingly dispensed with further proof of the fact already admitted . An admission made by a party in the course of the proceedings does not require proof.21 Correspondingly, respondent cannot escape the binding effect of the above-quoted judicial admission . Proper interpretation of the term "complete documents" under Section 112(C) of the NIRC of 1997. Section 112 (C) of the National Internal Revenue Code (NIRC) of 1997, as amended Republic Act No. (RA) 9337 , provides as follows : "SEC . 112. Refunds or Tax Credits of Input Tax. - XXX XXX XXX (C) Period within which Refund or Tax Credit of Input Taxes shall be Made.- In proper cases, the Commissioner shall grant a refund or issue the tax credit certificate for creditable input taxes within one hundred twenty (120) days from the date of submission of complete documents in support of the application filed in accordance with Subsection (A) hereof. In case of full or partial denial of the claim for tax refund or tax credit, or the failure on the part of the Commissioner to act on the application within the period prescribed above, the taxpayer affected may, within thirty (30) days from the receipt of the decision denying the claim or after the expiration of the one hundred twenty day-period , appeal the decision or the unacted claim with the Court of Tax Appeals ." The contention of the respondent that the law requires the submission of complete documents in support of the application filed with the SIR before the 120-day period shall apply, and before the ~ 21 Toshiba Information Equipment (?hils.} , Inc. vs. Commissioner of Internal Revenue, G.R. 157594, March 9, 2010.

DECISION CTA Case No. 8253 Page 11 of22 taxpayer could avail of judicial remedies as provided for in the law, deserves scant consideration . This issue boils down to the proper interpretation of the term "complete documents" under the above- quoted Section 112(C). In Commissioner of Internal Revenue vs. First Express Pawnshop Company, lnc. ,22 the Supreme Court ruled : "The term 'relevant supporting documents' should be understood as those documents necessary to support the legal basis in disputing a tax assessment as determined by the taxpayer. The BIR can only inform the taxpayer to submit additional documents. The BIR cannot demand what type of supporting documents should be submitted . Otherwise , a taxpayer will be at the mercy of the BIR, which may require the production of documents that a taxpayer cannot submit. " (Emphasis supplied) Admittedly, the foregoing ruling refers to the interpretation of the term "relevant supporting documents" under Section 228 of the NIRC of 1997 referring to tax assessments. However, We find no reason not to apply the same doctrine in the interpretation of "complete documents" under Section 112(C) of the same Code. This must be so because of the following reasons : 1. if the determination of the completeness of the documents depends on the BIR, the concerned taxpayer will also be at the mercy thereof; and 2. it has been held that the respondent ought to know the tax records of all taxpayers .23 Thus , the Commissioner can easily decide whether or not to grant the concerned taxpayer's administrative claim for refund or tax credit certificate. In this connection , nothing in RMO No. 53-98 mandates that the list of documents therein stated , insofar as the VAT is concerned , should be submitted in connection with an application for refund or tax credit certificate under the said Section 112, upon the filing thereof. Furthermore , said RMO is explicit, in its subject and objective , that it provides a checklist of documents to be submitted "upon Audit", and that it was issued to "(i)dentify the ~ 22 G.R. No . 172045-46, July 16, 2009 23 See the cases of BPI-Family Savings Bank, Inc. vs. Court ofAppeals, et al. (G.R. No. 122480, April 12, 2000), and Commissioner of Internal Revenue vs. Iron con Builders and Development Corporation (G.R. No . 180042, February 8, 2010).

DECISION CTA Case No. 8253 Page 12 of22 documents to be required from a taxpayer during audit'124 , respectively. In this case, it was not shown that an audit was ever conducted by the BIR in connection with petitioner's application for refund or tax credit certificate. This is manifested by the lack of BIR Records transmitted to this Court, and by the absence of any report of investigation or "status report" concerning petitioner's administrative claim for refund or tax cred it certificate25. But even if We are to assume that an audit was made, it was never established that the respondent ever required petitioner to submit the documents stated in the said RMO . Accordingly, the term "complete documents" under Section 112(C) of the NIRC of 1997, as amended by RA 9337 , should be understood as those documents necessary to support the application for refund or tax credit certificate as determined by the taxpayer. Thus, should the taxpayer decide to submit only certain documents, or should the taxpayer fail , or opt not to submit any document at all , in support of its application for refund or tax credit certificate under Section 112 of the NIRC of 1997, as amended by RA 9337 , then the reckoning date of the 120-day period should be from the filing of the said application . In the instant case, considering that petitioner's administrative claim for refund , along with all the supporting documents, was filed on November 26, 2010 , the 120-day period enunciated under Section 112(C) ended on March 26, 2011 . Petitioner, therefore, had thirty (30) days thereafter or until April 25 , 2011 within which to appeal its claim before this Court. Having done so on March 31 , 2011 , petitioner's judicial claim for refund was timely made. Requisites for the refund of unutilized/excess input VAT. Section 112(A) of the NIRC of 1997, as amended RA 9337, provides as follows : "SEC. 112. Refunds or Tax Credits of Input Tax . - 24 Emphasis supplied ~ 25 Transcript of Stenographic Notes: Hearing held on October 25, 2012, p. 3; Minutes of the hearing held on October 25, 20 12, Docket, p. 488; Resolution dated November 14, 2012, Docket, p. 490.

DECISION CTA Case No. 8253 Page 13 of22 (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 transi3 .tional input tax, to the extent that such input tax has not been applied against output tax: Provided, however, That in the case of zero-rated sales under Section 106(A)(2)(a)(1 ),(2) and (B) and Section 108(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 or properties or services, and the amount of creditable input tax due or paid cannot be directly and entirely attributed to any one of the transactions, it shall be allocated proportionately on the basis of volume of sales: xxx" Based on the foregoing , the requisites for the refund or Issuance of tax credits of unutilized/excess input VAT are the following : 1. The taxpayer must be VAT-registered ; 2. The taxpayer must be engaged in sales which are zero-rated or effectively zero-rated ; 3. The claim must be filed within two years after the close of the taxable quarter when such sales were made; and 4. The creditable input tax due or paid must be attributable to such sales, except the transitional input tax, to the extent that such input tax has not been applied against the output tax .26 Anent the first requisite , petitioner was able to prove that it is a VAT-registered person. 27 26 Silicon Philippines, Inc. vs. Commissioner of Internal Revenue, G.R. No. 172378, January 17, 20 11.

DECISION CTA Case No. 8253 Page 14 of22 As for the second requisite , on the basis the uncontroverted evidence of petitioner vis-a-vis the report of the Court-commissioned independent Certified Public Accountant (CPA)28 , We find that petitioner established that it is engaged in sales which are zero-rated or effectively zero-rated . With regard to the third requisite , the present claim covers the four (4) taxable quarters of 2009 which respectively closed on March 31 , 2009 ; June 30 , 2009 ; September 30 , 2009 and December 31 , 2009. Counting two years from the said dates, petitioner had until March 31 , 2011 ; June 30 , 2011; September 30 , 2011 and December 31 , 2011 , respectively, within which to file its administrative claim for tax credit certificate/refund. Thus, considering that petitioner's administrative claim covering the said four (4) quarters was filed on November 26 , 2010 ,29 the same was timely made, in accordance with Section 112(A) of the NIRC of 1997, as amended by RA 9337. Finally, We look into petitioner's compliance with the last requisite , i.e., the creditable input tax due or paid must be attributable to such sales, except the transitional input tax, to the extent that such input tax has not been applied against the output tax. In its 2009 amended Quarterly VAT Returns respectively filed on April 30, 2010 ,30 petitioner reflected the following : Year 2009 1st Quarter 2nd Quarter Exhibits z EE Vatable Sales/Receipt - Private Fl 4,796,258,630 .09 Sale to Government Fl 4 ,090,765,097.11 Zero Rated Sales/Rece ipts 9 ,63 0 ,56 7 .80 11,641 ,127.16 Exempt Sales/Recei pts 253,231 ,620 .91 Total Sales/Receipts 205 ,816,522.4 8 - - Iii 5,061 '131 ,378.16 Iii 4,306,212,187.39 Output Tax Due Iii 492,047,479.79 Iii 576,947,970.87 Less: Allowable Inpu t Tax Fl 132 ,031 ,599.36 Fl 154 ,561,505.2831 Input Tax Carried Over from Previous Quarter Input Tax Deferred on Capital Goods Exceed ing P1 Million from Previous Quarter 13,273 ,422 .42 r 13 ,049 ,067 .62 27 Exhibit "C", Docket, p. 324. 28 Exhibit "KKKK", at pp. 4 to 5. 29 Par. 3, Summary of Admitted Facts, JSFI, Docket. p. 102 30 Exhibits "Z", "EE", "II", and "MM", Docket, pp. 371 to 372, 381 to 382, 389 to 390, and 397 to 398, respectively. 31 Overstated by P 7.02.

DECISION CTA Case No. 8253 Page 15 of22 Current Transactions: 105 ,990 .83 - Purchases of Capital Goods not exceeding 69 7,2 37 .60 P1Million 1,335,099.84 Purchases of Capital Goods exceed ing P1 Million Domestic Purchases of Goods Other than Capita l 100 ,896 ,109 .61 65,520,765 .85 Goods Importation of Goods Other than Capital Goods 408,267 ,343.42 446,124,975. 93 Domestic Purchase of Services 27,61 7, 043 .00 18,890,694 .37 Total Available Input Tax Less: Deductions from Input Tax fit 682,888,746.24 fit 699,482,108.88 Input Tax on Purchases of Capital Goods ~ 13,049,067.62 ~ 13,393,875 .20 exceeding P1 Mill ion deferred for the succeeding period 526 ,024 .66 405 ,6 54 .72 Input Tax on Sale to Gov't closed to expense - Input Tax allocable to Exempt Sales - VAT Refund/TCC claimed Total 22 ,704 ,675.90 23 ,594 ,72 0.61 Total Allowable Input Tax Net VAT Payable fit 36,279,768.18 fit 37,394,250.53 Less: Tax Credits/Payments VAT withheld on Sales to Government fit 646,608,978.06 fit 662,087,858.35 Tax Still Payable (Overpayment) fit (154,561 ,498.26) fit (85,139,887.47) Year 2009 - - Exhibits Vatable Sales/Receipt- Private fit (154,561 ,498.26) fit (85, 139,887 .47) Sale to Government Zero Rated Sales/Receipts 3rd Quarter 4th Quarter Exempt Sales/Receipts Total Sales/Receipts II MM ~ 4,339 ,747,056.13 ~ 4,864,292,449 .37 Output Tax Due Less: Allowable Input Tax 15 ,933 ,122 .86 12,432 ,220.92 296 ,152,860 .89 313,672 ,677.63 Input Tax Carried Over from Previous Quarter Input Tax Deferred on Capital Goods Exceed ing - - P1 Million from Previous Quarter Current Transactions: fit 4,651,833,039.88 fit 5,190,397,347.92 Purchases of Capital Goods not exceeding P1Million fit 522,681 ,621.47 fit 585,206,960.43 Purchases of Capital Goods exceeding P1 Mill ion ~ 85 ,139,893 .5932 Domestic Purchases of Goods Other than Capital ~ 41 3,945 .6033 Goods 13,393,875.20 Importation of Goods Other than Capital Goods 13,273 ,878 .66 Domestic Purchase of Services Total Available Input Tax - - Less: Deductions from Input Tax 2,775 ,056 .12 Input Tax on Purchases of Capital Goods 913 ,483 .12 exceeding P1 Million deferred for the succeeding 35,524,219 .57 period 44 ,529,775 .95 559 ,379,105.00 Input Tax on Sale to Gov't closed to expense 392 ,939,467. 50 Input Tax allocable to Exempt Sales 35,995 ,143.05 26 ,531 ,845.44 fit 647,361 ,348.00 fit 563,448,340.80 ~ 13,273 ,878.66 ~ 14,926 ,980 .81 473,083 .39 632 ,271.88 - - 32 Overstated by P 6.1 2. 33 Overstated by P 5.67.

DECISION CTA Case No. 8253 VAT Refund/TCC claimed 26 ,605,817 .34 38 ,195 ,059 .97 Total ~ 40,352,779.39 ~ 53,754,312.66 Total Allowable Input Tax ~ 523,095,561.41 ~ 593,607,035.34 Net VAT Payable ~ (413,939.93) ~ (8,400,074.91) Less: Tax Credits/Payments VAT withheld on Sales to Government - - Tax Still Payable (Overpayment) ~ (413,939.93) ~ (8,400,074.91) In summary, as indicated in the Returns, petitioner's total allowable input VAT arising from its domestic purchases of capital goods not exceeding ~ 1Million, domestic purchases of goods other than capital goods, importation of goods other than capital goods, domestic purchases of services and amortization of input VAT on purchases of capital goods exceeding ~ 1Million for the four quarters of 2009 amounted to~ 2, 166,389,797.82, broken down as follows: Period Covered Input VAT 1st Quarter ~ 537,808 ,079.27 2na Quarter 3ra Quarter 531,526,728.41 4th Quarter 465,034,568.55 632,020,421.59 TOTAL ~ 2,166,389,797.82 These amounts per quarter are further broken down as follows: Year 2007 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Input Tax Deferred on 12 13,273 ,422.42 12 13,049,067.62 12 13,393 ,875.20 12 13,273,878.66 Capital Goods 913,483 .12 2,775 ,056 .12 Exceeding P1 Million 697 ,237.60 1,335 ,099 .84 from Previous 12 14,307 ,358 .32 12 16,048,934 .78 Quarter 12 13,970,660.02 12 14,384,167.46 13 ,273 ,878.66 14,926 ,980.81 Add : Input Tax on Capital Goods 13 ,049 ,067.62 13,393 ,875.20 12 1,033,479.66 12 1,121 ,953.97 exceeding P1 Million - - Purchased this 12 921 ,592.40 12 990 ,292.26 quarter 44 ,529 ,775.95 35 ,524 ,219.57 105 ,990 .83 - Total Unamortized 100,896 ,109.61 Input Tax on Capital 65 ,520 ,765.85 Goods exceeding P1Million Less : Input Tax on Purchases of Capital Goods exceeding P1 Million deferred for the succeedinq period Amortization of Input Tax on Capital Goods exceeding P1 Million Add : Input Tax on : Purchase of Capital Goods not exceeding P1Million Domestic Purchases of Goods Other than Capital Goods

DECISION CTA Case No. 8253 Importation of Goods 408 ,267,343.42 446 ,124,975.93 392 ,939,467.50 559 ,379 ,105.00 other than Capital 27,617 ,043.00 18,890 ,694.37 26,531 ,845.44 35,995 ,143.05 Goods Domestic Purchase of (iii 531,526,728.41 Jil 465,034,568.55 (iii 632,020,421.59 Services Total Input Tax (iii 537,808,079.27 Based on the foregoing amounts of input VAT, petitioner computed the input VAT allocable to its declared zero-rated sales for the year 2009 as follows34 : Year2009 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Zero-Rated Sales ~ 205,816,522.48 ~ 313 ,672 ,677.63 ~ 253 ,231 ,620 .91 ~ 296 ,152,860.89 Total Sales 4,306 ,212 ,187.39 5,190,397, 347. 92 5,061 '131 ,378.16 4,651 ,832 ,992 .6435 Zero-Rated Sales/Total Sales 4.779525799% 5.003458752 % 6.366369157% 6.04332687 % Multiply by Input Tax X 537,808 ,079.23 X 531 ,526 ,728.41 X 465,034 ,568.54 X 632 ,020,421 .59 Refundable Claims lit 25,704,675.90 lit 26,594,720.61 lit 29,605,817.34 lit 38,195,059.97 However, notwithstanding the respective amount of the refundable claims for taxable year 2009, as shown above (totaling ~ 120,1 00,273.82), petitioner is just claiming the amounts of ~ 22 ,704 ,675.90; ~ 23,594,720.61; ~ 26,605,817.34 and ~ 38,195,059.97 for the first, second, third and fourth quarters, respectively, which 1n petitioner's computation totals ~ 111,100,273.8036 . Parenthetically, it can be easily discerned that the respective computation of the refund claims per quarter by petitioner is in accordance with the provisions of the aforequoted Section 112(A), to wit: "where the taxpayer is engaged in zero-rated or effectively zero- rated sale and also in taxable or exempt sale of goods or properties or services, and the amount of creditable input tax due or paid cannot be directly and entirely attributed to any one of the transactions, it shall be allocated proportionately on the basis of volume of sales". Thus, for purposes of the fourth requisite for the refund or issuance of tax credits of input VAT, the attribution of the input VAT to 34 Exhibit "D", Docket, p. 326. 35 This amount is not found on petitioner's amended Quarterl y VAT Return for the 3rd quarter of 2009 (Exhibit "II"), but on the original and amended Quarterly VAT Returns of petitioner for the same quarter filed on October 26, 2009 and February 5, 20 10, respectively (Exhibits "FF" and "GG", Docket, pp. 383 to 386), with a minor difference .\.~ of P 0.02 and P 0.04, respectively. \'" " 36 There is an P 0.02 excess if the amounts of the four (4) quarters are added.

DECISION CTA Case No. 8253 Page 18 of22 the zero-rated or effective zero-rated sales of petitioner need not be direct. To prove that it actually incurred the input VAT in the total amount of ~ 2,166,389,797.82 upon which the claimed refund of ~ 111 ,100,273.80 was computed , petitioner presented its Summary Lists of Purchases37, Summary Lists of lmportations38 and the related Import Entry and Internal Revenue Declarations (IEIRDs) and/or Bureau of Customs Form 38-A39, suppliers' invoices and/or official receipts40 . Upon verification of the aforesaid documents, however, the Court-commissioned independent CPA summarized his findings as follows 4 1 : Summary of Findings Exhibit Amounts No Exceptions: Local goods and services FFFF-5 12 31 7,906 ,239.30 Importations Exceptions Noted: FFFF-1 1,652 ,225 ,259.76 12 1,970,131,499.06 a. Supporting documents were not yet provided: Local goods and services FFFF-7 12 26,314 ,164.55 Importations FFFF-3 143,314 ,034.73 b. Without appropriate supporting documents Importations FFFF-2 11 ,171,597.36 c. Supporting documents were dated outside the period of claim : Local goods and services FFFF-6 2 20 ,659 .7 3 d. Supporting documents that did not show the amount of Input VAT on the face of the documents FFFF-8 440 ,949.30 e. Supporting documents without petitioner's TIN FFFF-9 8,57 1,770.56 f. Supporting documents not in the name of petitioner FFFF-4 6,119,131 .77 196 ,152 ,308.00 Total Jiil 2,166,283,807.06 37 Exhibits "AAAA-2", "AAA-2-A" to "AAAA-2-C", "BBBB-2", " BBBB-2-A" to "BBBB- ~ 2-C", "CCCC-2", "CCCC-2-A" to "CCCC-2-C", " 0000-2", and "0000-2-A" to "0 000-2-C". 38 Exh ibits "AAAA-3 ", "AAAA-3-A" to "AAAA-3-C", " BBBB-3", "BBBB-3-A" to "BBBB-3-C", "CCCC-3", "CCCC-3-A" to "CCCC-3-C", "000 0-3", and "0000-3-A" to "ODD0-3 -C". 39 Exhi bits "FFFF-1. 1" to "FFFF- 1.1 90", and "FFFF-2. 1" to "FFFF-2. 3". 40 Exhi bits "FFFF-4. 1" to "FFFF-4.336", "FFFF-5.1 " to " FFFF-5.2239", "FFFF-6.1" to " FFFF-6. 17", " FFFF-8.1 " to "FFFF-8.80", and " FFFF-9.1" to " FFFF-9.789". 41 Exhibit "KKKK", at p. 14.

DECISION CTA Case No. 8253 Page 19 of22 The total amount of J2196,152,308.00 input VAT excepted by the ICPA should be disallowed for not being properly substantiated by VAT invoices or official receipts in accordance with Sections 11 O(A) and 113(A) and (B) of the NIRC of 1997, as amended , and as implemented by Sections 4.110-8 and 4.113-1 of the Revenue Regulations (RR) No.16-2005, as amended . In addition, it should be noted that there is a discrepancy in the amount of J2 105,990.76 between the total allowable input VAT declared in petitioner's Quarterly VAT Returns in the amount of J2 2,166,389 ,797.82 and the input VAT examined by the Court- commissioned independent CPA, Enrico Pizarro , in the amount of J2 2,166,283,807.06. Upon verification , the Court found that the discrepancy of J2 105,990.76 pertains to petitioner's declared input VAT on capital goods not exceeding J2 1 million for the first quarter of 2009. 42 For also being unsubstantiated, the input taxes of J2 105,990.76 shall likewise be disallowed. Apropos, although it is true that this Court is not strictly governed by technical rules of evidence, the invoicing and substantiation requirements under the VAT law must, nevertheless, be followed because it is the only way to determine the veracity of petitioner's claims.43 Therefore, out of petitioner's declared total allowable input tax of J2 2,166,389,797.82 , only the amount of J2 1,970 ,131 ,499.06 , as computed below, represents petitioner's valid input VAT: Total input VAT per Returns Fi 2,166,389,797.82 Less : Disallowances 196 ,152 ,308 .00 Not properly substantiated input VAT per !CPA's 105 ,990 .7 6 report Discrepancy between the input VAT per returns vis-a- Fi 196,258,298.76 vis the input VAT examined by the ICPA tit 1,970,131,499.06 Total Disallowances Valid Input VAT f' At this point, We take into consideration the output VAT reported by petitioner in its Quarterly VAT Returns for the year 2009 42 In the Quarterly VAT Returns for the first quarter of 2009 (Exhibits "V" to "Z", Docket, pp. 363 to 372), the amount shown is �1 105 ,990.83 . 43 Refer to Kep co Philippines Corporation vs. Commissioner of Internal Revenue, G.R. No. 181858, November 24, 20 10.

DECISION CTA Case No. 8253 Page 20 of22 and compare the same with the foregoing substantiated input VAT, to wit: Output VAT 12 492 ,047,479 .79 1st Quarter 576 ,947 ,970 .87 2nd Quarter 522 ,681 ,621.47 3rd Quarter 585 ,206 ,960.43 12 2,176,884 ,032 .56 4th Quarter 1,970 ,131,499.06 Jil 206,752,533.50 Less: Valid Input VAT Output VAT Still Due As shown above, petitioner's claimed input VAT for the year 2009 are not enough to cover its output VAT for the same year. While petitioner reflected in its amended Quarterly VAT Return for the first quarter of 2009, the amount of J2 132,031 ,599.3644 as "Input Tax Carried Over from Previous Period", the Court found that petitioner failed to present VAT invoices or receipts to prove the existence of such amount. Hence, the input VAT carry-over of J2 132,031 ,599.36 cannot be validly applied against petitioner's output VAT pursuant to Section 11 O(A) in relation to Section 11 O(B) of the NIRC of 1997, as amended , which states: "SEC . 110. Tax Credits. - A . Creditable Input Tax . - (1) Any input tax evidenced by a VAT invoice or official receipt issued in accordance with Section 113 hereof on the following transactions shall be creditable against the output tax: XXX XXX XXX (B) Excess Output or Input Tax . - If at the end of any taxable quarter the output tax exceeds the input tax, the excess shall be paid by the VAT-registered person . If the input tax exceeds the output tax, the excess shall be carried over to the succeeding quarter or quarters." Nevertheless, even granting that the input VAT carry-over in the amount of J2 132,031 ,599.36 was properly substantiated by VAT ~ 44 Exhibit "Z", line 20A, Docket, p. 371.

DECISION CTA Case No. 8253 Page 21 of22 invoices or official receipts , it is still not enough to cover the above- computed output VAT still due of 12 206,752,533.50 . Considering that there is no excess input VAT which may be the subject of a claim for refund/tax credit certificate under Section 112(A) of the NIRC of 1997, as amended by RA 9337, the instant claim must be denied. WHEREFORE , all the foregoing considered, the instant Petition for Review is hereby DENIED for lack of merit. SO ORDERED. . ER~.UY Associate Justice I CONCUR: ciate 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. ER~.UY Associate Justice Chairperson

DECISION CTA Case No. 8253 Page 22 of22 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's Special First Division . \ l __ AA-~ c .G;f~~ I ~ - JtJANITo c. CASTANEDA, JR. Acting Presiding Justice