PILIPINAS TOTAL GAS, INC. v. COMMISSIONER OF INTERNAL REVENUE

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY ENBANC PILIPINAS TOTAL GAS, INC., C.T.A. EB CASE No. 674 Pe t i tio n e r, (C.T.A. Case No. 7777) - versus- Present: Acosta, PJ, Castaneda, Jr., Bautista, Uy, Casanova, Palanca-Enriquez, Fa bon-Victorino, Mindaro-Grulla, and Cotangco-Manalastas, JJ. COMMISSIONER OF INTERNAL Promulgated: REVENUE, t'vb1k,c~~ Respo nde nt. JAN 0 5 2012 ?.~(!/ -'t; 'J>r... I X- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - X DECISION COTANGCO-MANALASTAS, J. : This reso lves the Petition for Review 1 fil ed by Pilipinas Total Gas, Inc., on August 27, 2010, pursuant to Section 18 of Republic Act (R. A.) No . 11 25, as amended by Section 11 of R. A. No. 9282, and Section J(b), Rule 8 of the 2005 Revised Rules of the Court of Tax Appeals (RRCTA), assailing the Decision 2 and Resolution 3 promulgated by the Second Divi sion of thi s Court on April 8, 2010 and August I 0, V 2010, respectively. The di spositi ve porti ons of which reads: 1 Rollo, pp. 1-33 . 2 Rollo, pp. 37-53, Dec ision dated April 8, 2010 penn ed by Associate Justi ce Cielito N. Mindaro-G rull a in th e case ent itl ed Pilip inas Total Gas, Inc., vs. Comm issioner of Internal Revenue, CTA Case No. 7777. 3 Rollo, pp. 54-56, Reso lution dated August 10,20 10 penn ed by Assoc iate Justi ce C ielito N. Mindaro- Grull a in th e case entitl ed Pilipinas Total Gas, Inc., vs. Commissioner of Internal Revenue, CTA Case No. 7777 .

DECISION Page 2 of37 C.T.A . EB CASE No. 674 (C. T.A. Case No . 7777) Pilipinas Total Gas, In c. vs. Commissioner ofInternal Revenue Decision dated April 8, 20 10: "WHEREFORE , prem ises co ns id ered, th e Petit io n fo r Rev iew is he re by DENIED for lack of mer it. SO ORDERED." Resolution dated August 10, 2010 : "WHEREFORE , the in stant Mot io n fo r Reco nsiderati o n is hereby DENIED fo r lack of mer it. SO ORDERED." Petiti oner is seeking for the reversal and setting as ide of the above-quoted Decision and Resolution, and in lieu thereof, a judgment be rendered ordering the Commissioner of Intern al Revenue (CIR) to grant petitioner's clai m fo r refund or issuance of tax credit certificate in the total amount of P l 7,528,906.7 1, allegedl y representing excess and unutilized input value added tax (VAT) fo r taxable year 2006, arising from its zero-rated sales to Philippine Economi c Zone Authority (PEZA) and Clark Development Corporation (C DC)-registered entiti es. ANTECEDENT FACTS The fac ts, as narrated by the Court in Division in its Decision.f, are reproduced hereunder: " Petiti o ne r is a do mesti c co rpo rati o n dul y o rgani zed a nd ex istin g und e r th e laws o f th e Philippines, with prin c ipa l pl ace o f bu sin ess located at MOD 12 1 East Sc ience Avenue, Lagun a Techn o park, Bina n Lagun a. It is e ngaged in th e sa le, tra nsportati o n, a nd di stributi on of indu stri a l gases as we ll as the sa le of gas equipm e nt a nd oth er re lated bu sin esses o n w ho lesa le bas is. ~ 4 Supra, Note 2.

DECISION Page 3 of37 C.T. A. EB CASE No . 674 (C. T.A. Case No. 7777) Pilip inas Total Gas, In c. vs. Commissioner of Int ernal Revenue It is reg istered w ith the Burea u o f Intern a l Revenu e (BIR) as a VAT taxpaye r, with T axpaye r Identificati o n N o. 004-609-53 8-000, as ev ide nced by its Ce r1ifi cate of Reg istrati o n N o. 3 RC00000 3 1647. Respo nd ent, o n th e oth e r ha nd , is th e duly a ppo inted Commi ss io ne r of the Bureau of Inte rnal Revenu e e mpowe red to pe rfo rm th e duti es of sa id offic e includin g, amon g oth e rs, th e powe r to decide, a pprove, a nd grant refund s o r tax c redits of e rro neo usly o r excess ive ly pa id taxes. Respo nd ent ho ld s o ffice at th e BIR N ati o na l Offi ce Building, Agha m Road, Diliman, Quezon C ity . Petiti o ner fil ed w ith respo ndent its Q uarterly V AT Return s a nd Fin a l A me nd ed Qu a r1erl y VAT Return s fo r th e fo ur quarters of 2006 o n the fo ll o win g date s: Yea r Exh. Date Filed of Ex h. Date fil ed of th e 2006 Qu arte rl y VAT Fin a l Ame nded "N " Qu a rte rly VAT Return s "Z" " LL" Re turn s I st "J" Apri I 25, 2006 " XX" September 19, Qtr 200 7 Septembe r 19, 2"d "W" Jul y 25, 2006 2007 Qtr Septe mber 19, 3'd " II " October 23, 2007 Se pte mbe r 19, Qtr 2006 2 00 7 4'" " UU" Ja nu ary 23, Qtr 2007 On July 3 1, 200 7, petiti o ner fil ed an admini strative cl a im fo r tax refund /tax credit of the a ll eged excess input tax fo r taxabl e year 2006, in the a mo unt of Pl 7,52 8,906 . 17, befo re the BIR Revenue Di stri ct Offi ce N o. 057- Biiia n, Lag un a. However, res po ndent had not iss ued a fin a l dec isio n o n sa id c la im for refund o r tax credit. He nce, petiti o ne r fil ed th e in sta nt Petiti o n for Rev iew o n April 24, 2008 . In An swer, respo nd ent inte rposed th e fo ll owin g Speci a l and Affi rm ati ve Defe nses: "4. She re ite rates a nd re- pleads th e precedin g paragra ph s of thi s An swer as part of her Special Affirmative Defenses; 5. Petitioner' s alleged claim for refund is subject to admini strati ve in vesti gati o n/examin ati o n by res po nd ent 's Burea u; 6. Petiti o ne r failed to de mo nstrate th at th e am o unt a ll egedl y paid was e rron eou s ly or ill egally collected; ~

DECI SION Page 4 of 37 C.T.A. EB CASE No. 674 (C.T.A. Case No. 7777) Pilipinas Total Gas, Inc. vs. Commissioner of Internal Revenue 7. Taxes co ll ected are presum ed to be in accord ance with laws and regul ati o ns; 8. Petiti o ne r' s c la im for refund has presc ribed a lready in view of Secti o n 11 2(C) of the 1997 Natio na l Inte rn a l Revenue Code which provides that: ' Secti o n 11 2. Refun ds or Tax C redi ts of Input Tax - (C) Peri od w ith in w hich Refun d or Tax C redit of Input Taxes sha ll be Made. - In pro per cases, th e Co mmi ss io ne r sha ll g ra nt a refund o r iss ue th e tax c redit certifi cate fo r credi tab le inpu t taxes w ithin one hundred twenty (1 20) days from the date of submission of complete documents in support of th e a ppli cat io n fil ed in accorda nce with Subsection (A) hereof. In case offu ll or partial denial of th e c la im for tax refund or tax c redi t or th e failure on the part of the Commissioner to act o n th e a pplicati on w ithin th e pe ri od prescri bed above, the taxpayer affected may, within (30) days from the rece ipt of the dec is io n deny ing the c la im or after the expiration of th e o ne hundred twe nty day-period, a ppea l the dec is io n o r th e un acted c la im w ith the Co urt of Tax A ppea ls ' . - (Ita li cs suppli ed) He nce, w hen peti tio ner fil ed its admini strati ve c la im for tax refund/credit w ith the Bu rea u of In te rn a l Revenue ( ' BIR ' ) Revenue Di stri ct Offi ce No . 57 o n 3 1 Jul y 200 7, respo nde nt had 120 days w ithin whi c h to dec ide o n pet iti o ner' s c la im for tax refun d/credit. A nd in case of full o r part ia l de ni a l of the c la im o r fa ilure of respo nd e nt to act o n the appli cati o n w ithin the 120 day period, petiti o ner has 30 days to a ppea l th e dec isio n o r in actio n w ith the Co urt of Tax Appea ls. T hu s, res po nde nt had to re nder a dec is io n w ithin 120 days fro m 31 Jul y 200 7 o r until 28 Novembe r 2007. In the event that res ponde nt fa il ed to act upo n pet iti o ner's c la im for tax refund /credit, petiti oner has 30 days from 2 8 Novembe r 2007 or until V 2 8 Decembe r 2007 to appea l th e un acted c la im w ith th e Co urt of Tax

DECI SION Page 5 of 37 C.T.A. EB CASE No . 674 (C.T.A. Case No. 7777) Pilipinas Total Gas, Inc. vs. Com missioner of Internal Revenue Appea ls. Petiti o ner fi led th e in sta nt Pet iti o n for Review with the Co urt of Tax Appea ls o nly o n 24 Apr il 2008, a lm ost fo ur (4) mo nth s after th e lapse of the pe ri od a ll owed by law to fil e the j ud ic ia l c la im fo r tax refund/credit w ith the Court of Tax a ppea ls. Th is be in g so, th e in stant petiti on fo r rev iew was c lea rl y fi led o ut of time . T he a bove- me nti oned periods are c learly g iven fo r stri ct comp li a nce as a pre requi si te before see king redress in a com pete nt court . S uc h statutory periods are set to prevent de lays as we ll as e nh a nce th e o rd erly a nd speedy d isc harge of j ud ic ia l fun ct io ns (Agpa lo, Statuto ry Co nstru cti o n, T hird Editi o n 1995 , p. 266). For thi s reason, the courts co nstrue these prov is io ns of statutes as ma ndatory (Ibid ., c itin g A lvero vs. De Ia Rosa, 76 Ph il. 428, 434). T he power to tax is the most effective in strum e nt to ra ise needed reve nu es to fi nance a nd supp01t th e myr iad act ivities of the gove rnm ent fo r the de livery of basic se rv ices esse ntia l to the pro moti o n of th e gene ra l we lfare a nd e nh anceme nt of peace, progress, a nd prosper ity of the peop le Mactan Cebu Inte rn at io na l A irpo rt A uth ori ty vs. Marcos, 261 SC RA 667, 690). Conseq uent ly, a ny de lay in impl eme ntin g tax meas ures wo ul d be to th e detrim e nt of the public. It is fo r this reason that c la ims fo r refun d a re req ui red to be do ne w ithin ce rta in ti me fra mes. In the in stant petit io n, the fai lu re of petiti o ner to co mpl y w ith suc h peri ods is fata l to its ca use. 9. Ass umin g w ith o ut ad mitting that th e subject c la im fo r refund has not yet prescribed, it is impe rati ve for the pet itione r to prove its compli ance w ith the fo llow ing: a. T he reg istrat io n requireme nts of a va lu e-added taxpaye r under the perti nent provision of the Nati o na l Intern a l Revenue Code of 1997, as a me nd ed, and its impl e ment in g revenu e regul ati o ns; b. T he invo ic ing and acco unt in g requireme nts for VAT-reg istered pe rso ns, as we ll as the fi lin g and pay me nt of VAT pursuant to the prov is io ns of Secti o ns I 13 and 11 4 of the Tax Code of 1997, as amended . Fai lure to comp ly wi th the invo ic ing require me nts o n th e doc um e nts suppo rtin g th e sa le V of goods a nd se rv ices w ill res ult in th e d isa ll owa nce

DECI SION Page 6 of 37 C.T.A. EB CASE No . 674 (C. T.A. Case No. 7777) Pilip inas Total Gas, In c. vs. Commissioner ofInternal Revenue o f th e c la im fo r input tax of th e taxpaye r c la ima nt ( Reve nu e Me mo randum C irc ul ar No. 42-2 003); c. The s ubmi ss io n of compl ete doc um e nts in suppo rt of the admini strati ve cl a im fo r refund purs uant to Secti o n I 12 (C) of th e T ax Code of 1997, as a me nd ed, o th erwi se, th ere wo uld be no s uffici e nt co mpli a nce w ith regard to the filin g of admini strati ve c la im fo r refund whi ch is a co nditi o n s ine qua no n prior to th e filin g of judi c ia l c la im in accorda nce w ith Secti o n 229 of th e Tax Code, as a me nd ed ; d. Th at the input taxes of P 17,52 8,906.1 7 a ll egedly re presentin g unutili zed input VAT fro m its do mestic purc hases of goods a nd serv ices and impo rtati o n of goods we re: 1. pa id by the petiti one r; 11. attributa bl e to its zero-rated o r effecti ve ly ze ro- rated sa les; a nd , 111. s uc h input taxes pa id sho uld not have bee n appli ed aga in st any o utput tax; e. Th at petiti o ner's c la im fo r tax c redit o r re fund of the unutili zed input tax (VAT) in th e am o unt of Pl 7,52 8,906 . 17 was fil ed w ithin two (2) yea rs a fter th e c lose of th e taxabl e qua rter w he n th e sa les were made in accorda nce w ith Secti o n 11 2 (A) of the T ax Co de of 1997, as a mended ; f. Th at petiti o ner has compli ed w ith th e governm g rul es a nd regul ati o ns w ith refe re nce to recove ry of tax erro neo us ly o r illegally co ll ected as expli c itly provided in Secti o ns 11 2 (A) and 229 of th e T ax Code, as ame nd ed . I0 . Mo reove r, in an acti o n for tax refund , th e burde n of proof rests upo n th e tax paye r to esta bli sh by s uffi c ient a nd compete nt ev id ence its e ntitl e me nt to a c la im fo r refund ; I I . Bas ic is th e rul e that tax refund s are in th e nature of tax exempti o ns V a nd a re to be co nstru ed stri cti ss imi juris aga in st th e ent ity c la imin g

DEC I SION Page 7 of37 C.T.A. EB CASE No . 674 (C.T.A. Case No . 7777) Pilipinas Total Gas, Inc. vs. Commissioner of Internal Revenue the same (Philipp ine Geothermal, In c ., vs. Co mmi ss ioner of Internal Revenue, G .R. No. 154028, July 27, 2005). Moreover, statutes in de rogati on of sovere ignty suc h as those co ntai ning exemption from taxatio n sho ul d be stri ctl y co nstru ed in favor of the State. In this regard , taxati on is the rul e a nd exempt ion is th e exce pt io n. T he law does not look w ith favor on tax exempti ons and th at he w ho woul d seek to be thu s pri vi leged mu st justify it by word s too pla in to be m istaken and too catego ri ca l to be mi s inte rpreted . (SeaLand Service, Inc ., vs. Co urt of Appea ls, 357 SC RA 444)." Durin g tri al, petit ioner presented its doc um enta ry and testi moni al ev idence to support its c la im . Howeve r, respond e nt ' s co un se l man ifested that she is wa iv in g th e ri ght of responde nt to prese nt ev ide nce a bsent a n a ud it re po rt . O n Ja nu ary 5, 2010, thi s Co urt issued a Reso luti on submittin g thi s case fo r Decis ion, consid eri ng that petiti oner an d respo nde nt have already submitted th e ir Me mo ra nda o n Decembe r 28, 2009 and Janu a ry 4, 20 10, respect ive ly . T he parti es ' j o intly stipul ated iss ues are as fo ll ows: 1. Wh eth er or not Petit ioner's j udi c ia l c la im fo r tax refund of unutili zed input VAT w ith thi s Honorab le Court was fil ed out of tim e . 2. Wh eth e r or not the Petiti oner has co mp li ed w ith the substa nti ati on require ments as prov id ed by law. 3 . Wh eth e r or not th e input taxes of P 17,528,906.17 a ll eged ly re presentin g unutili zed inpu t VAT from its do mesti c purc hases of goods a nd serv ices and importati on of goods, we re: a. pa id by Petitione r; b. attributa bl e to its ze ro-rated or effecti ve ly zerorated sa les; a nd c. not applied against any output tax 4. Wh eth e r or not Petiti one r is entitl ed to its c laim fo r refun d or iss ua nce o f TCC on its unut ili zed input tax attr ibuta bl e to zero- rated sa les in th e a moun t of P 17, 528,906. 17 in c urred fo r taxable year 2006." T he fo rego in g iss ues may be summ ed up into th e s in g le iss ue of V w heth er or not petiti oner is entitl ed to a refund or iss ua nce of tax credi t

DECISION Page 8 of37 C.T.A. EB CASE No . 674 (C.T.A. Case No . 7777) Pilipinas Total Gas, Inc. vs. Commissioner of Int ernal Revenue certificate in the amount of P 17,528,906 . 17, allegedly representing petitioner' s unuti lized input taxes for the taxable year 2006. T he Rulin g of the Court in Division The Court in Division denied the petition. While the Court a quo agrees with petitioner that its sales to PEZA and CDC- registered enterprises are subject to zero percent (0%) VAT, the Court in Division found that petitioner failed to sufficiently substantiate its reported zero-rated sales to said enterprises, as well as the input VAT on its domestic purchases of goods and services for taxable year 2006. Further, the Court in Division declared that even though the court- commissioned Independent Certified Public Accountant (ICPA) attested and confirmed that he examined the original copies of the documents, such as petitioner' s VAT returns, official receipts, invoices, the said documents, however, were not presented and forma lly offered in evidence before this Court. A Motion for Reconsideration was filed by petitioner on April 27, 2010, however, said Motion was likewise denied by the Court a quo for lack of merit. Undaunted, petitioner filed the instant Petition for Review 5 . On September 20, 2010, the Court En Bane ordered respondent CIR to file her comment within ten ( 10) days from receipt of resolution.6 Respondent ' s Comment7 was sent by registered mai l on October 13 , 2010 , and was received by this Court on V October 22, 2010. 5 Supra Note I. 6 Rollo , pp. 58-59 . 7 Rollo, pp. 68-83 .

DECISION Page 9 of 37 C.T.A. EB CASE No . 674 (C.T.A . Case No . 7777) Pilipinas Total Gas, Inc. vs. Commissioner of Internal Revenue In response to respondent ' s Comment, petitioner filed its Reply (To Respondent's Comment)8 on November 4, 2010. In a Resolution9 dated November 2, 2010, the parties were ordered to submit their respective Memoranda within a non-extendible period of thirty (30) days from receipt thereof. Petitioner filed its Memorandum on December 8, 2010, whereas respondent' s Memorandum was received by this Court on January I0, 2011 ; thus, the above-captioned case was submitted for decision on January 19, 2011. ISSUES The foregoing account, as revealed by the records of this case, leads this Court to resolve the following controversies: I. Whether this Court through its Second Division erred in denying petitioner' s claim for refund or tax credit of its unutilized input VAT for taxable year 2006 on the following grounds, to wit : [i] petitioner' s failure to sufficiently substantiate its reported zero-rated sales to PEZA and CDC-registered enterprises; and [ii] petitioner' s failure to formally offer the pieces of evidence in support of its claim, i.e. official receipts and invoices. II. Whether petitioner is entitled to refund or issuance of a tax credit certificate (TCC) in the amount of P17 ,528 ,906.71 , allegedly representing excess and unutilized input VAT for taxable year 2006, arising from its zero-rated sales to PEZA and CDC-registered V enterprises. 8 Rollo, pp. 89-98 . 9 Rollo, pp. 87-88 .

DECISION Page 10 of37 C.T.A . EB CASE No . 674 (C.T.A. Case No . 7777) Pilipinas Total Gas, Inc. vs. Commissioner ofInternal Revenue III . Whether this Court is bereft of jurisdiction to try the instant case on the ground of prescription ofjudicial claim. Arguments o(Petitioner Petitioner disagrees with the findings of the Court in Division that it failed to formally offer the VAT returns, official receipts, invoices, and other supporting documents to support its claim for refund or tax credit. According to petitioner, a perusal of its Formal Offer of Evidence and Supplemental Formal Offer of Evidence shows that all of the VAT returns, sales invoices and official receipts for taxable year 2006 were formally offered in evidence, and all such exh ibits were admitted by the Court in Division. In particular, petitioner pointed out that Exhibits "A" up to "XX", consisting of petitioner's monthly and quarterly VAT returns for taxable year 2006, were included in petitioner's Formal Offer of Evidence dated February 12, 2009 and admitted in the Resolution dated March 25, 2009. Exhibits " RRRR", " SSSS" and "TTTT", consisting of petitioner' s quarterly VAT return for the first quarter of taxable year 2007, were offered in the Supplemental Formal Offer of Evidence dated October 23, 2009 and admitted in the Resolution dated November 23, 2009. As to sales invo ices and official receipts, petitioner asserts that these were included in petitioner's Formal Offer of Evidence. Pages 16 to 24 of the Formal Offer of Evidence covers sales invoices and official receipts numbered 1-4,755 ; pages 25 to 27 covers sales invoices and official receipts numbered 4,756-5 ,929; and pages 36 to 43 covers sales invoices and official receipts numbered 5,930-7,132. jr

DECISION Page II of37 C.T.A. EB CASE No . 674 (C.T.A. Case No. 7777) Pilipinas Total Gas, Inc. vs. Commissioner of Internal Revenue In addition, petitioner argued that the ICPA commissioned by the Court in Division has identified, pre-marked , and submitted all the sales invoices and official receipts involved in the claim for refund or tax credit. Petitioner finally manifests that upon verification with the Records Division of this Court on April 22 , 2010 , it was able to confirm that the VAT returns, sales invoices and official receipts relevant to petitioner's claim are in the actual custody of this Court. In its Reply to respondent ' s Comment, petitioner expresses its dissension to respondent's allegation that its judicial claim was filed out of time. Petitioner maintains that while its administrative claim was timely filed on July 31, 2007, the final submission of various supporting documents occurred on December 13 , 2007 with Revenue District Office No. 57 [Exhibits "QQQQ" and " UUUU"]; thus, pursuant to Section 112 (C) of the National Internal Revenue Code (NIRC) of 1997, as amended, respondent had one hundred twenty ( 120) days from December 13 , 2007 , or until April 11, 2008, within which to decide on the administrative claim, and in turn, petitioner had thirty (30) days from the lapse of the 120-day period, or until May 11 , 2008 , within which to file an appeal with thi s Court. Hence, petitioner insists that its petition was timely filed with the Court in Division on April 24, 2008. Arguments o[Respondent Respondent manifests that this Court is bereft of jurisdiction to hear and decide on petitioner's claim for refund and/or issuance of tax credit certificate allegedly representing unutilized input VAT for the taxable year 2006 on the ground that petitioner's judicial claim was filed beyond the " 120-30 day period" provided V under Section 112 (C) of the NIRC of 1997, as amended.

DECI SION Page 12 of37 C.T.A. EB CASE No . 674 (C.T.A. Case No . 7777) Pilipinas Total Cas, Inc. vs. Commissioner of Internal Revenue lso, respondent avers that petitioner fa iled to co mply w ith the requisites for refund of input tax under the pertinent provisions of the N IRC of 1997, as amended, and other pertinent rul es and regulations gove rning the applicati on fo r tax refund or issuance of tax credit certificate. Respondent submits that petitioner fa il ed to prove that the substantiated input VAT is entirely attributable to the reported zero-rated sales of petitioner considering that petitioner has vatabl e transactions subject to twelve ( 12%) percent and zero-rated transactions. To support its argument, respondent ci tes Section 4.110.-4 of Revenue Regulations (RR) No. 16-2005. Acco rding to res pondent, the audi t report did not specificall y and catego ricall y stated which of the input tax being claimed by petitioner are directly attributable to its zero- rated transaction, the court commi ssioned ICPA attributed all the input VAT being claimed to petiti oner's a lleged zero-rated transacti ons when it is evident that there ex ists transacti ons subj ect to 12% VAT rate. THE RULING OF THE COURT EN BAN C The Petition fo r Review is hinged principall y on Secti on 11 2 (A) and (C) of the NIRC of 199 7, as amended, which pertains to refunds or tax credits of input tax attri butable to zero-rated or effecti ve ly zero-rated sales, viz : "SEC. I 12 . Refunds or Tax Credits ofInp ut Tax. - "(A) Zero-Rated or Effectively Zero- Rated Sales. - Any VAT- registe red pe rso n, w hose sa les a re ze ro- rated o r effecti ve ly ze ro-rated may, w ithin two (2) years afte r th e c lose of th e taxabl e qu arte r w he n th e sales were made, a pply fo r th e iss ua nce o f a tax credit certifi cate o r refund of credita bl e input tax du e o r pa id attributa bl e to s uch sa les, exce pt trans iti o na l input tax, to th e extent th at s uc h input tax V has not been a pplied aga inst o utput tax: Provided, however, T hat in

DECI SION Page 13 of37 C.T.A. EB CASE No . 674 (C.T.A. Case No. 7777) Pilipinas Total Gas, Inc. vs. Commissioner of Internal Revenue the case of zero-rated sa les under Secti on I06(A)(2)(a)( I), (2) a nd (b) a nd Secti on I08 (B)( I) and (2), th e acceptabl e fo reign c urrency exchange proceeds the reof had been dul y accounted fo r in accord a nce w ith th e rul es and regul ati ons of th e Ba ngko Se ntra l ng Pilipinas (S SP): Provided, fur ther, T hat whe re the taxpayer is engaged in ze ro-rated or effecti ve ly zero- rated sale and also 111 taxabl e or exempt sa le of goods of properti es or serv ices, and the a mo unt o f credi ta bl e input tax du e or pai d cann ot be d irectl y and e ntire ly attributed to any one of the tra nsacti ons, it sha ll be a ll ocated pro porti onate ly on th e bas is of th e vo lume of sa les: Provided, finally, T hat for a person makin g sa les th at a re zero-rated under Secti o n I 08 (8)(6), th e input taxes sha ll be all ocated ratab ly between hi s zero- rated and non-zero- rated sa les. "(B) Cancellation of VAT Registration. - xxx "(C) Period within which Refund or Tax Credit of Input Taxes shall be Made. - In proper cases, th e Commi ss ione r shall gra nt a refund or issue th e tax c redit certifi cate for credita ble input taxes w ithin one hundred twenty ( 120) days from the date of submi ss ion of compl ete doc um e nts in support of th e appli catio n fil ed in acco rd ance w ith Subsecti on (A) hereof. "In case of full or pa rti a l deni a l of th e claim for tax refund or tax credit, or th e fa il ure on the part of th e Comm iss ione r to act on the applicati on w ithi n th e pe ri od prescribed above, the taxpayer affected may, w ithin thirty (3 0) days from th e recei pt of th e dec is ion deny in g th e claim or afte r the expirati on of th e one hundred twenty day- pe ri od, a ppea l th e dec is ion or th e un acted c la im w ith th e Co urt of Tax A ppea ls. "( D) Manner of Giving Refu nd.- xxx." It is readily apparent fro m the above-quoted provision that a taxpayer engaged V m zero-rated or effecti vely zero-rated transactions may apply for tax refund or

DECISION Page 14 of37 C.T.A . EB CASE No. 674 (C.T.A. Case No. 7777) Pilipinas Total Gas, In c. vs. Commissioner of Int ernal Revenue issuance of TCC for unutilized input VAT provided the following requisites are satisfied : ( 1) the taxpayer is VAT registered; (2) the taxpayer is engaged in zero-rated or effectively zero-rated sales; (3) the input taxes were incurred or paid; (4) the input taxes have not been applied against output taxes during and in the succeeding quarters; (5) the input taxes claimed are attributable to zero-rated or effectively zero- rated sales; (6) the claim was applied/filed within the period prescribed in Section 112(A) and (C) of the N IRC of 1997, as amended. Timeliness of Petitioner's judicial claim for refund or tax credit of input VATfor taxable year 2006. Before the Court En Bane proceeds in resolving the first two issues, We deem it appropriate to first resolve the third issue pertaining to the timeliness of petitioner's judicial claim for refund or tax credit of input tax, seeing that the resolution of this controversy is pivotal in determining whether this Court should proceed with the disquisition of the other issues raised in this petition. In determining whether petitioner Pilipinas Total Gas, Inc. timely filed its judicial claim for refund or issuance of TCC of unutilized input VAT, reference must be made to the aforementioned provision of Section 112(C) of the NIRC of 1997, as amended. Section 11 2(C) clearly provides that the CIR has " 120 days from the date of submission of the complete documents in support of the application [for tax V refund/credit]," within which to grant or deny the claim. In case of full or partial

DEC I SI ON Page 15 of37 C.T.A. EB CASE No. 674 (C.T.A. Case No . 7777) Pilipinas Total Gas, Inc. vs. Commissioner ofInternal Revenue denial by the CIR, the taxpayer' s recourse is to file an appeal before the Court of Tax Appeals (CTA) within 30 days from receipt of the decision of the CIR. However, if after the 120-day period the CIR fails to act on the application for tax refund/credit, the remedy of the taxpayer is to appeal the inaction of the CIR to the CTA within 30 days. 10 In this case, records show that: ���-������ Administra tive Submitted E nd of 120 Days End of 30 J ud icia l C laim C la im F iled for th e BIR Days from the F il ed Qua rters Supporting expira tion of Co mmissioner th e 120 days Ap r il 24, 2008 (2 00 6) Docum ents to Decide the with the BIR 11 May 11 , 2008 C la im I51 to 41' � July 31 , 2007 December 13 , 2007 April 11, 2008 Petitioner filed its administrative claim for refund for all the quarters of 2006 on July 31 , 2007, pursuant to Section 112(C) of the NIRC of 1997, as amended, the CIR has 120 days, from the date of submission of the complete documents in support of the application for tax refund/credit, within which to grant or deny the claim. The records of this case affirm petitioner' s all egation that while its administrative claim was filed on July 31 , 2007 , the final submission of various supporting documents occurred on December 13 , 2007 with Revenue District Office No . 57 considering that petitioner was ab le to sufficiently substantiate the same by furnishing this Court with a copy of its letter 12 to BIR sending the documents in support of its input VAT refund/ tax credit, which letter was attached as Exhibit " UUUU" to its Supplemental Formal Offer of Evidence 13 . The respondent having interposed no objection to the aforesaid V Supplemental Formal Offer of Evidence, the said formal offer was admitted by the �1 Commissioner of Internal Revenue v. Aichi Forging Company of Asia, Inc., G.R. No. 184823, October 6, 20 I0. 11 Division Docket, p. 493 , Exhibit " UUUU". 12 Division Docket, p. 493 , Exhibit " UUUU" . 13 Division Docket, pp. 464 -494.

DECI SION Page 16 of 37 C.T.A. EB CASE No . 674 (C.T.A. Case No . 7777) Pilipinas Total Gas, Inc. vs. Comm issioner of Int ernal Revenue Court a quo in a Resolution14 dated November 23 , 2009 . Thus, the Court En Bane is persuaded that December 13, 2007 is the reckoning point in counting the 120-day period . Counting 120 days from December 13, 2007, respondent CIR had until April 11, 2008 within which to decide the claim for refund/tax credit, consequentl y, petitioner had 30 days from April 11 , 2008 or until May 11, 2008 w ithin which to appeal to thi s Court . Clearl y, respondent CIR' s allegation imputing prescription on petiti oner' s j udicial cl aim does not have a leg to stand on, petitioner' s judicial claim was fi led on April 24, 2008, whi ch is definitely within 120 days from the date of submi ssion of complete documents, i.e. April 11, 2008, and within 30 days from the lapse of the 120-day period, i.e. May 11 , 2008. Hence, w ith regard to petiti oner' s judicial claim fo r refund/tax credit of input VAT fo r the taxable year 2006, We find the same to have been fil ed within the period allowed under Section 11 2(C) of the NIRC of 1997, as amended, as it was fil ed on April 24, 2008, thus, has not yet prescribed. Whether the Court m Division erred in denying petitioner's claim for refund/tax credit of input VATfor taxable year 2006 on the ground that petitioner failed to substantiate its claim for failure of petitioner to formally offer the evidence in support of its claim. Afte r having ascertained the timeliness of petitioner's j udicial claim for refund/tax credit of input VAT for taxable year 2006, the next issue relevant to the V proper adjudication of the instant petition is whether the Court in Di vision correctl y 14 Division Docket, p. 500 .

DECI SION Page 17 of 37 C.T.A. EB CASE No. 674 (C.T.A. Case No. 7777) Pilipinas Total Gas, Inc. vs. Commissioner of Internal Revenue ruled that petitioner fail ed to substantiate its claim for refund/tax credit fo r fai lure of petitioner to have the pi eces of ev idence in support of its claim, parti cularly, sales invoices and offi cial receipts, fo rmally offered in ev idence. After going over the records of this case and due consideration of the parties ' arguments, We fi nd that the pi eces of evidence, i. e. sales invoices, official receipts, needed to be assessed, reviewed and evaluated by thi s Court for the purpose of verify ing the authenticity and veraci ty of the independent auditor' s conclusions and petitioner's claim , were in fac t presented and identi fied in open court, and fo rmall y offered in evidence. Invoices and O{ficial Receipts: Pre-marked In the case at bar, petiti oner moved to refer the vo lum inous documents to be introduced in evidence to an ICPA. Section 5, Rule 12 of the RRCTA governs the procedure in the presentation of vo luminous documents, viz: RULE 12 TRIAL XXX SEC. 5. Presentation of voluminous documents or long accounts. - In th e inte rest of speedy admin istrati o n of j ustice, the fo ll ow in g rul es sha ll govern the presentati o n of vo lumino us doc ume nts or lo ng acco unts, s uc h as rece ipts, invoices a nd vo uchers, as ev id ence to estab li sh certa in fac ts : (a) S umm a ry and C PA certi ficatio n. - T he pa rty w ho des ires to introduce in ev id e nce s uch vo lum ino us doc um e nts o r lo ng acco unts must, upo n moti o n a nd a pprova l by the Co urt, refer the vo lumin o us d oc um e nts to a n ind epe nd ent Ce rt ifi ed Publi c Acco unta nt (CPA) fo r th e purpose of prese ntin g : ( I) a s umma ry conta rnrn g, a mo ng othe r matters, a c hro no log ica l li sting of the numbe rs, dates a nd amo un ts covered by th e in vo ices or rece ipts and the a mo unt(s) of taxes pa id a nd (2) a cert ifi cati o n of an ind epende nt C PA attestin g to the V co rrectn ess of th e co nte nts of th e summa ry after maki ng a n

DECISION Page 18 of37 C.T. A. EB CASE No. 674 (C .T.A . Case No. 7777) Pilip inas Total Gas, Inc. vs. Commissioner of Internal Revenue examin ati o n, eva luati o n and a udit of vo lumin o us rece ipts, in vo ices o r lo ng acco unts. The nam e of th e Ce rtifi ed Public Acco unta nt or pa rtn e r of a profess io na l partnership of certifi ed public acco unta nts in c harge mu st be stated in the mo ti o n. T he Court sha ll iss ue a commi ss io n a uth o ri z in g him to conduct an a udit a nd , the reafter, testi fy re lati ve to such summ a ry a nd ce rtifi cati o n. (b) Pre- ma rkin g a nd ava il ability of o ri g in a ls. - Th e rece ipts, invo ices, vo uc he rs o r othe r doc ume nts cove rin g th e sa id acco unts o r pay me nt to be introdu ced in ev id ence mu st be pre-ma rked by th e party conce rned and submitted to the Co urt in orde r to be made access ibl e to the adverse party who des ires to chec k a nd verify the co rrectn ess of th e summ ary a nd C PA certifi cati o n. T he o ri g in a l co pi es o f th e vo lumin o us rece ipts, in vo ices o r acco unts mu st be ready fo r verifi cati on a nd compa ri so n in case do ubt o n its a uth e nticity is rai sed during th e hearin g o r reso luti o n of the fo rm a l offe r of ev id e nce. (n) Records show that the ICPA has provided thi s Court the above-mentioned summary (Exhibits "NNNN-5" to "NNNN-5- 12" ; "NNNN-8" to "NNNN-8- 12"; "NNNN- 11 " to "NNNN- 11 - 12"), and the !CPA likewise attested and confirmed that he examined the ori ginal copies/certified true copi es of petiti oner's documents, such as petitioner's Monthl y and Quarterly VAT returns, official receipts, invoices, Schedule of Sales and Receipts, PEZA VAT zero-rating certi ficates, CSEZ Certificates of Registration and Tax Exemption and other supporting documents. The ICPA also testified that he has pre-marked the said documents. 15 As regards the invo ices and official rece ipts, an inspection of the records at hand shows that the invoices and offi cial rece ipts from January to December 2006 were conspicuously pre-marked as "Supporting Documents" with reference numbers (numbered 1 until 7,132). Each invo ice and offi cial receipt has its own di stincti ve V reference number. 15 Exhib it " PPPP".

DEC ISION Page 19of37 C.T.A. EB CASE No . 674 (C.T.A. Case No. 7777) Pilipinas Total Gas, Inc. vs. Commissioner of Internal Revenue The e reference numbers were intricately appended on each of the invoices and official receipts; they are visible on and can be traced on the last columns of each summary, i.e. Summary List of Purchases, Schedule of Sales and Receipts, and Summary of Official Receipts. On the last column of each row of the said summary and schedules there can be found a specific reference number which points to a particular invoice or official receipt on record - which this Court can look into in order to verify the authenticity and veracity of the !CPA's conclusions. Also, these reference numbers of the invoices and official receipts were likewise chronologically listed in petitioner's Formal Offer of Evidence to support a particular summary or schedule. In view of the foregoing considerations, the Court is of the sense that petitioner has substantially complied with the requisite pre-marking of the invoices and official receipts. Invoices and O[ficial Receipts: Presented Before the Court and Formally Offered Crucial to the issue on formal offer of evidence is Section 34, Rule 132 of the Revised Rules of Court which provides : "SEC. 34. Offer ofevidence. - The Court shall consider no ev iden ce which has not been formally offered. The purpose for which the evidence is offered must be specified ." In the case of People vs. Villanueva 16 the Supreme Court had the occasion to , reiterate its ruling in the case of Heirs o f Pedro Pasag v. Parocha 17 viz : , The rule on formal offer of evidence is not a trivial matter. Failure to make a formal offer within a considerable period of time shall be deemed a waiver to submit it. Consequently, as in this case, any evidence that has not been offered shall be excluded and rejected. ~ 16 G .R. No. 181829, September I, 20 I0. 17 G.R. No . 155483 , April27, 2007 ,522 SCRA 410.

DEC ISION Page 20 of 37 C.T.A. EB CASE No. 674 (C.T.A. Case No. 7777) Pilipinas Total Gas, Inc. vs. Commissioner of Internal Revenue xxxx T he Rules of Court [prov ide] that ' the court shall consider no ev idence which has not been formally offered.' A fo rma l offer is necessary because j udges are mandated to rest their findin gs of facts and their j udgment only and strictly upon the ev idence offered by the parties at the trial. Its function is to enable the trial j udge to know the purpose or purposes for w hich the proponent is presenting the ev idence. O n the other hand, this allows opposing patties to examine the ev idence and object to its admi ssibility. Moreover, it fac ilitates review as the appellate court w ill not be required to review documents not previously scrutini zed by the trial court. xxxx Thus, the trial court is bound to consider only the testimonia l ev idence presented and exc lude the documents not offered. Documents w hich may have been identified and marked as exhi bits during pre-trial or trial but which were not fo nnally offered in ev idence cannot in any manner be treated as evidence. Neither can such unrecognized proof be ass igned any ev identiary weight and va lue. It must be stressed that there is a sign ificant distinction between identification of documentary ev idence and its formal offer. The fo rmer is done in the course of the pre-trial, and tria l is accompanied by the marking of the ev idence as an exhibit; w hile the latter is done only when the party rests its case. The mere fact that a particular document is identified and marked as an exhi bit does not mean that it has a lready been offered as patt of the evidence. It must be emphasized that any evidence which a party desires to submit for the consideration of the court must formally be offered by the party; otherwise, it is excluded and rejected. Clearly, without a forma l offer of ev idence, courts are constrained to take no notice of the evidence even if it has been marked and identifi ed.18 In the case before us, records mani fes t that the pieces of evidence, i.e. invoices, official receipts, were presented and identi fie d in open court. The invoices V and official receipts pre-marked as "Supporti ng Documents" with reference numbers 18 Far East Bank & Trust Co. vs. Commissioner of Int ernal Revenue, G. R. No. 149589, September 15, 2006.

DECISION Page2 1 of37 C.T.A. EB CASE No. 674 (C.T.A . Case No. 7777) Pilipinas Total Gas, Inc. vs. Commissioner of Internal Revenue from 1 until 7,132 were identified and presented in open court during the hearing held on January 13 ,2009 , fol lowing is an excerpt of the ICPA ' s testimony 19: ATTY. CAPPLEMAN : Q. Mr. W itness, in yo ur judic ial Affidavit yo u likewise mention ed that yo u have exa min ed the origi nal co pi es of petiti o ner's offi c ia l receipts and invoices. Do yo u have copies of the same with yo u? MR. FERNANDO: A. I have the machin e reprodu cti o ns of those documents, your Hon o rs. ATTY. CAPPLEMAN : Q. Can yo u id entify th e sa me? JUSTICE BAUTISTA: Yo u id e ntify th ose docume nts by bun c h. MR. FERNANDO: A. Yes, your Hono rs . This bun c h of doc um e nts, yo ur Hon o rs, represents the offic ia l rece ipts iss ued by Pilipinas Total Gas, In c., for the pe ri od Janu a ry 2006 to December 2006. Exhibits "NNNN " w ith submarkin gs Exhibits " NNNN-1 " to "NNNN-1 - 12". Thi s bunch of docum ents represents th e co py of offi c ia l recei pts and sa les or charged in vo ice of input VAT c la im for th e mo nth of Ja nua ry 2006 to December 2006, yo ur Ho nors. Whil e thi s bunch of documents s upports th e sa les invo ice iss ued by Pilipinas Total Gas, In c ., for the period January 2006 to December 2006, your Ho no rs. J UST ICE BA UT ISTA: A II ri ght. ATTY. CAPPLEMAN : Q. Mr. Witn ess, do you affirm a nd confirm that these a re the faithfu l re prod ucti o ns of th e o ri g inal s w hi c h yo u have examined? MR. FERNANDO: A. V Yes, Ma' am. 19 Pp. 14- 16, Transcript of Stenographic Notes for the January 13, 2009 heari ng.

DECISION Page 22 of37 C.T.A. EB CASE No. 674 (C.T.A. Case No. 7777) Pilipinas Total Gas, Inc. vs. Commissioner of Int ernal Revenue Furthermore, a careful scrutiny of petitioner's Formal Offer of Evidence (FOE) filed on February 12, 2009 reveals that the invoices and official receipts pre- marked as "Supporting Documents" with reference numbers 1 to 7, 132 were formally offered in evidence. Petitioner's FOE, pages 16-24, lists down the "Summary List of Purchases" for the months of January to December 2006, marked as Exhibits "NNNN-5-1" up to "NNNN-5-12". On the same pages it is noticeable that, other than the "Summary List of Purchases", each exhibit actually includes the "Supporting Documents" with corresponding reference numbers for that particular summary; in other words, one exhibit number (e.g. "NNNN-5-1 ") embraces or covers two (2) separate pieces of evidence, i.e. "Summary List ofPurchases " and the "Supporting Documents ". Upon verification, We were able to confirm that these so-called "Supporting Documents" are indeed copies of official receipts and sales/charge invoices for taxable year 2006 with reference numbers. Clearly, the invoices and receipts subject of the aforesaid Summary List of Purchases were in fact formally offered and can be traced on pages 17 to 24 of petitioner's FOE captioned as follows: "Supporting documents for Exhibit NNNN-5-1 per reference no. 1-438 "; "Supporting documents for Exhibit NNNN-5-2 per reference no. 439-886 "; "Supporting documents for Exhibit NNNN-5-3 per reference no. 887-1323 "; "Supporting documents for Exhibit NNNN-5-4 per reference no. 1324- 1723 "; "Supporting documents for Exhibit NNNN-5-5 per reference no. 1724-2 134 "; "Supporting documents for Exhibit NNNN-5-6 p er reference no. 2135-25 15 "; "Supporting documents for Exhibit NNNN-5- 7 p er reference no. 25 16-2888 "; v "Supporting documents for Exhibit NNNN-5-8 p er reference no. 2889-32 71";

DECI SION Page 23 of37 C.T.A. EB CASE No. 674 (C.T.A. Case No. 7777) Pilipinas Total Gas, Inc. vs. Comm issioner a./ Internal Revenue "Supporting documents for Exhibit NNNN-5-9 per reference no. 32 72-3630 "; "Supp orting documents f or Exhibit NNNN-5 -1 0 per reference no. 363 1-4014 "; "Supporting documents .for Exhibit NNNN-5- 11 per reference no. 401 5-4400 "; "Supporting docu ments.for Exhibit NNNN-5- 12 per reference no. 440 1-4 755 ". Below is an excerpt of petitioner's FOE for easier appreciation of our findin gs: Exhibit Descripti on Purpose XXX XXX XXX NNNN-5- 1 Summ ary List of Purchases To prove th at th e inde pe nde nt for th e month of Ja nu ary C PA co nducted th e required 2006 [Emp hasis ours} verifi cat io n of Petiti oner' s In vo ices, Offic ia l Rece ipts a nd Supportin g documents for Summ ary Li st of Purc hases fo r th e mo nth of Ja nu ary 2006 and Exhibit NNNN -5- 1 as per th at th e sa id doc um ents support a nd substa nti ate Petiti oner's re fe re nc e no. 1-43 8 c la im fo r tax refund/ issuance of tax credit certifi cate fo r taxabl e [Emphasis ours] year 2006. To prove th at the amo unt of Input Tax c la imed by Pet iti one r fo r taxab le year 2006 ts duly substa nti ated by doc umentary ev ide nce; To prove th at th e vari o us invo ices a nd rece ipts 111 support of Petiti oner' s input tax fo r 2006 a re in co mpli ance with th e invo ic in g requireme nts prov ided und er Secti on I 13 of the 1997 Tax Code a nd as imp leme nted under Secti o n 4. 113- 1 of Revenue Regu latio ns No. 16-05 To prove that th e inde pe nde nt C PA has condu cted the ve rifi cati o n of petiti oner's VAT return s a nd oth e r supportin g doc um ents a nd th at th e fo rego ing doc um e nts support a nd sub stanti ate Petitioner's claim fo r tax refund/ iss ua nce of TCC fo r taxabl e year 2006. NNNN -5-2 Summary List of Purc hases To prove that th e inde pe nde nt for th e month of Febru ary C PA co ndu cted th e required ~----------~2_0_0_6~[�_,_n~ ph' _as_i_s _o_u_~~l______~v_e_r_if_it c_a_t_i o_n____o_f____P_e_t_it_i o_n_e_r '_s_J ~

DEC ISION Page 24 of37 C.T.A. EB CASE No. 674 (C.T.A. Case No. 7777) Pilipinas Total Gas, In c. vs. Commissioner of Internal Revenue Supportin g d oc um ents fo r In vo ices, Officia l Rece ipts and Exhibit NNNN-5-2 as per Summa ry List of Purc hases for refe rence no. 439-886 th e month of Ja nu ary 2006 and [Emp hasis ours} th at th e sa id doc ume nts support a nd substant iate Pet iti oner' s c laim fo r tax refund/ iss uance of tax c redit certifi cate fo r taxabl e year 2006. To prove th at th e a mo unt of Input Tax c la im ed by Petit ione r for taxabl e year 200 6 IS d uly substa nti ated by docume ntary ev ide nce; To prove th at th e vario us in vo ices a nd recei pts 111 support of Petiti one r' s inpu t tax fo r 2006 are in compli a nce w ith th e invo ic ing require me nts prov ided under Secti on 113 of th e I997 Tax Code a nd as impl e me nted under Sectio n 4. 113- 1 of Reve nue Regulati ons No. 16-05 To prove th at th e independ ent C PA has co nducted the verifi cati on of petiti one r's VAT return s and oth er supportin g doc ume nts and th at th e forego ing doc ume nts support a nd substa nti ate Petiti oner' s claim for tax refund/ iss ua nce of TCC for taxabl e year 2006. Xxx XXX XXX Further, li sted on pages 25-2 7 of petitioner's FOE are the Schedule of Sales and Receipts fo r the months of January to December 2006 marked as Exhibits "NNNN-8- 1" up to "NNNN-8- 12". The invo ices and receipts subj ect of the said Schedule ofSales and Receip ts were also formall y offered and can be traced on pages 26 and 27 of petitioner's FOE collecti vely labelled as "Supp orting documents for Exhibit NNNN-8- 1 to Exhibit No . NNNN-8-6 per reference no. 4756-5302" and "Supporting docu ments for Exhibit NNNN-8- 7 to Exhibit No . NNNN-8- 12 per V reference no. 5303-5929".

DECISION Page 25 of37 C.T.A . EB CASE No. 674 (C.T.A. Case No. 7777) Pilipinas Total Gas, Inc. vs. Com missioner ofInternal Revenue Also, pages 36-43 of petitioner's FOE li st down the Summary of Official Receipts for the months of January to December 2006 marked as Exhibits "NNNN- 11-1" up to "NNNN-11-12". The invoices and receipts subject of the said Summary of Official Receipts were likewise formally offered and can be traced on pages 36 to 43 of petitioner' s FOE co llectively captioned as follows : "Supporting documents for Exhibit NNNN-11-1 per reference no. 5930-6047"; "Supporting documents fo r Exhibit NNNN- 11 -2 per reference no. 6048-611 9"; "Supporting documents for Exhibit NNNN- 11 -3 per reference no. 6120-6225 "; "Supporting documents for Exhibit NNNN- 11 -4 per reference no. 62 26-6316 "; "Supporting documents for Exhibit NNNN- 11 -5 per reference no. 63 17-6408 "; "Supporting documents for Exhibit NNNN- 11 -6 per reference no. 64 09-6513 "; "Supporting documents for Exhibit NNNN-11- 7 per reference no. 6514-6613 "; "Supporting documents for Exhibit NNNN-11-8 per reference no. 6614-6 715 "; "Supporting documents for Exhibit NNNN-11 -9 per reference no. 6716-6829 "; "Supporting documents for Exhibit NNNN-11-10 per reference no. 6830-6927"; "Supporting docu ments fo r Exhibit NNNN- 11 -11 per reference no. 6928- 7046 "; "Supporting documents.for Exhibit NNNN- 11-1 2 per reference no. 704 7-7132 ". It is indubitably visible to the eye that the invoices and official receipts pre- marked as " Supporting Documents" with reference numbers 1 to 7, 132 were all listed on petitioner' s FOE, and the purpose/s for which these pieces of evidence were offered had also been specified . We deem thi s to be suffic ient compliance with the rule on offer of evidence which plainl y provides that 'the Court shall consider no evidence which has not been formally offered. The purpose (or which the evidence V is offered must be speci{ied' 20 . 20 Secti on 34, Rul e 132 ofthe Rev ised Rules of Co urt .

DECISION Page 26 of37 C.T.A. EB CASE No . 674 (C.T.A. Case No. 7777) Pilipinas Total Gas, Inc. vs. Commissioner of Internal Revenue This Court is aware and accede to the rule and well-settled principle in this jurisdiction that 'while the CTA is not governed strictly by technical rules ofevidence, as rules ofprocedure are not ends in themselves but are primarily intended as tools in the administration of justice, the presentation of the purchase receipts and/or invoices is not [a} mere procedural technicality which may be disregarded considering that it is the only means by which the CTA may ascertain and verify th e truth of respondent 's claims ,2 1 however, such failure to present the purchase receipts and invoices is not obtaining in this instance, and thus, the aforementioned precept finds no application in the case at bar. The invoices and official receipts were pre-marked as "Supporting Documents" with reference numbers I to 7, 132, and these reference numbers were incorporated and consciously made to appear on each of the summary, schedules, and forma ll y offered on petitioner's FOE. By the manner these invoices and official receipts were pre-marked and incorporated by reference numbers to the summary, schedules and formall y offered on petitioner's FOE, - buttressed by the fact that all these documents are in the custody of this Com1 - We are confident that this Court has all the means by which to ascertain and verify the truth of petitioner's claim . As mentioned earl ier, the main object of having the evidence pre-marked and submitted to the Court is to attain the ultimate goal of making the documents 'accessible to the adverse party who desires to check and verify th e correctn ess of the summary and CPA certification ' 22 . To reiterate, the invoices and official receipts were pre-marked by reference numbers, incorporated in the summary andV 21 Atlas Consolidated Mining and Development Corporation vs. Commissioner of Int ernal Revenue, G.R. No. 145526, March 16,2007. 22 paragraph (b) Section 5, Rule 12 of the RRCT A.

DECI SION Page 27 of37 C.T.A. EB CASE No. 674 (C.T.A. Case No . 7777) Pilipinas Total Gas, Inc. vs. Commissioner of Internal Revenue schedules, fo rmally offe red in the FOE, and currently in the custody of thi s Court; thus, to this Court's mind , the spirit of thi s rul e and jurisprudential precept has been achieved and gratified. As pronounced by the Supreme Court in the case of Philippine Phosphate Fertilizer Corporation vs. Commissioner ofInternal Revenue23 " We re ite rate the fundame nta l prin c ipl e that tec hni ca l rules of procedure are not e nd s in th e mse lves but are prima rily des ig ned to a id in the admini strati o n of j usti ce. A nd in cases before tax co urts, Rul es of Court a ppli es o nl y by ana logy o r in a suppl etory c ha racter a nd w heneve r practi cabl e a nd co nve ni e nt sha ll be libe ra lly constru ed in o rde r to pro mote its o bj ecti ve of sec urin g a just, speedy and in expens ive di spos it io n of every acti o n and proceedin g. T he quest fo r o rd erly Qresentati o n of iss ues is not a n abso lute. It s ho uld not ba r th e co urts fro m consi de rin g un d isQ uted fac ts to a rrive at a ju st dete rmin atio n of a controversy. T hi s is beca use, after a ll , the Qaramo unt cons id e rati o n re ma in s th e ascerta inm ent of truth . Secti on 8 of R.A . No. 11 25 c reatin g th e CTA a lso express ly prov ides that it sha ll not be govern ed stri ctly by tec hni ca l rul es of ev id e nce. And, in the case of BPI-Family Savings Bank, Inc. vs. Court of Appeal/ 4 the Sup reme Court explicitly pronounced that: " .. .Techni ca liti es a nd lega li sms, however exa lted, sho uld no t be mi s used by the governme nt to keep mo ney not be lo ng in g to it a nd th ere by e nri ch itse lf at th e expe nse of its law-abid ing c iti zens . If th e State expects its taxpayers to o bserve fa irn ess and ho nesty in pay in g the ir taxes, so mu st it a ppl y th e sa me sta ndard aga in st itse lf in refundin g excess pay me nts of s uch taxes. Ind eed, th e State mu st lead by its own exa mpl e of ho nor, di g ni ty a nd upri g htness ." In this regard , while We share the Court a quo 's stance in being a stro ng V proponent of the rule on formal offer of evidence under Secti on 34, Rule 132 of the 23 G. R. No . 14 1973 , June 28,2005 . 24 G. R. No . 122480 , April 12, 2000, 33 0 SC RA 507, 509-5 10.

DECISION Page 28 of37 C.T.A. EB CASE No. 674 (C.T.A. Case No. 7777) Pilipinas Total Gas, Inc. vs. Comm issioner ofInternal Revenue Rules of Court, which essentially states that courts cannot consider evidence which was not formally offered, We beg to differ with respect to the Court in Division 's finding that petitioner failed to substantiate its claim for refund/tax credit due to petitioner' s lapse in having the pieces of evidence in support of its claim , particularly, invoices and official receipts, formally offered in evidence. As pointed out in the above di scourse, the pieces of ev idence, i.e. invoices, official receipts, needed by this Court verify the authenticity and veracity of the independent auditors conclusions and petitioner's claim, were pre-marked by reference numbers and incorporated in the summary and schedules, presented in open court, formally offered in evidence, and currently in the custody of thi s Court. Whether petitioner is entitled to refund or issuance of TCC in the amount of P1 7,528,906. 71, allegedly representing excess and unuti/ized input VAT for taxable year 2006, arising from its zero- rated sales to PEZA and CDC-registered enterprises. Having established that the pteces of evidence, i.e. sales invoices, official receipls, in suppot1 of petitioner's claim for refund/tax credit were formally offered in evidence and that petitioner' s judicial claim for refund/tax credit of input VAT for taxable year 2006 was timely filed , it is now appropriate for this Court to proceed in giving due course to the instant Petition for Review for the purpose of determining whether petitioner is enti tled to refund or the issuance of TCC in the amount of P17,528,906. 71 representing its excess and unutili zed input VAT incurred for taxable V year 2006 attributable to zero-rated sales to PEZA and CDC-registered enterpri ses.

DEC I SI ON Page 29 of37 C.T.A. EB CASE No. 674 (C.T.A. Case No . 7777) Pilipinas Total Cas, Inc. vs. Commissioner ofInternal Revenue As earlier discussed, one must be guided and abide by the provision of the NIRC of 1997, as amended, specifically Section 112 (A), in claiming a refund/tax credit of unutilized input VAT attributable to zero rated or effectively zero-rated sales. The aforesaid provision mandates that the following requisites be satisfied before a taxpayer engaged in zero-rated or effectively zero-rated transactions may be granted a refund/tax credit for unutilized input VAT: (1) the taxpayer is VAT registered; (2) the taxpayer is engaged in zero-rated or effectively zero-rated sales; (3) the input taxes were incurred or paid ; (4) the input taxes have not been applied against output taxes during and in the succeeding quarters; (5) the input taxes claimed are attributable to zero-rated or effectively zero- rated sales; (6) the claim was applied/filed within the period prescribed in Section 112(A) and (C) of the NIRC of 1997, as amended. Inasmuch as We have already resolved the issue on the timeliness of petitioner' s judicial claim, this Court shall now proceed in determining whether petitioner was able to satisfactorily meet the first five requisites for the grant of its claim for refund/tax credit of its unutilized input VAT for taxable year 2006 arising from its zero-rated sales. For the year 2006 , petitioner generated sales in the form of goods and services to entities duly registered with PEZA and Clark Special Economic Zone (CSEZ) as ~

DECISION Page 30 of 37 C.T.A. EB CASE No . 674 (C.T.A. Case No . 7777) Pilipinas Total Gas, Inc. vs. Commissioner of Int ernal Revenue evidenced by the various sales invoices25 and official receipts26 issued by petitioner to its customers, certifications27 issued by PEZA and Certificates28 of Registration and Tax Exemption issued by CDC. Such sales qualify for VAT zero-rating under Section 106(A)(2)(a)(5) of the NIRC of 1997, as amended , in relation to Articles 23 and 77 ( 1) and (2) of Executive Order No. 226 , also known as the "Omnibus Investment Code of 1987, Sections 106(A)(2)(c) and 108(8)(3) ofthe NIRC of 1997, as amended , in relation to Section 15 of Republic Act (RA) No. 7227 otherwise known as the " Bases Conversion Development Act of 1992", as amended by RA No . 9400 , Sections 23 and 24 of RA No . 7916 otherwise known as "The Special Economic Zone Act of 1995", as amended by RA No . 8748. The VAT zero-rating of sales of goods and services to ecozone entities is in consonance with the Cross Border Doctrine under the Philippine VAT system as clarified by the BIR in Section 3.3 Revenue Memorandum Circular No. 74-99 and affirmed by the Supreme Court in Commissioner of Internal Revenue vs . Toshiba Information Equipment (Phils.) , Inc. ,29 and Commissioner of Internal Revenue vs. Sekisui Jushi Philippines, Inc. 30 However, a comparison of the amounts of zero-rated sales/receipts as reflected in petitioner's Quarterly VAT Returns and as shown in its monthly Summary of Sales and Receipts for the same period revealed a discrepancy in the amount of P88 ,771.68 , V broken down as follows: 25 Reference Nos. 4756-5302 and 5303-5929. 26 Reference Nos. 5930 to 7 132 . 27 Exhibits NNNN-9-1 to NNNN-9-33 . 28 Exhibits NNNN-9-34 to NNNN-9-36. 29 G.R. No. 150154, August 9, 2005 . 30 G.R. No . 149671 , Jul y 2 1, 2006 .

DECI S ION Page31 of37 C.T.A. EB CASE No . 674 (C.T .A. Case No. 7777) Pilipinas Tala! Gas, In c. vs. Commissioner ofInternal Revenue Per Return Per Summary of Sa les Discrepancy and Receipts p 88,771.67 Year 2006 Amo un t Ex h. Amou nt Ex h. 0.01 J a nu a ry p 14,439,298.68 NNNN-8- 1 0 .00 Fe bru a ry NNNN-8-2 0 .00 March 15,976 ,890.62 NNNN-8-3 Total - 1st Qtr 15,872 ,534 .00 p 88,77 1.68 April May p 46 ,377,494.97 "N" p 46,288,723.30 J un e p 13,202 ,583 .70 Total - 2nd Qtr NNNN-8-4 Jul y Aug ust 16,860,502 .89 NNNN -8-5 Se pt e mb e r Total - 3rd Qtr 14,805 ,735.45 NNNN-8 -6 October November 44,868,822 .05 "Z'' p 44,868,822.04 Dece mber p 16,078 ,94 7.02 Total - 4th Qtr NNNN-8-7 Grand Tota l 14,0 10,0 17. 86 NNNN-8-8 14,065 ,432 .3 1 NNNN-8-9 44 , 154,397 . 19 "LL" p 44,154,397. 19 p 18, 158, 125 .72 NN NN -8- 10 15,74 1,625 .68 NNNN-8- 11 16,4 18,808.2 1 NNNN-8-12 50,3 18,559.61 " XX" p 50,318,559.61 p 185,7 19,273.82 p 185,630,502.14 Since petitioner failed to substantiate the amount of P8 8,77 1. 68 , the same shall be denied VAT zero-rating. Moreover, a careful scrutiny of the documents supporting petitioner' s clai med zero-rated sales/rece ipts in the amount of P185 ,630,502. 14 showed that the amount of P 11 ,806,953.22 s ho uld be di sall owed for the fo llowing reasons 3 1 : Findings Amount I. Sa les of services supported by offic ia l receipts with no word "zero- p 6,837,5 18.00 rated" in vio lati on of Secti on 11 3(8 (2)(c) of the N IRC of 1997 , as 2, I 15,8 1I. 19 amended 2. Sa les of goods to entit ies with no certificat ion s from PEZA or C DC 59 1,948.65 3. Sa les of goods su pported by invo ices w ith no word "zero-rated" in I,058,505 .38 vio lat ion ofSection 11 3(8 )(2)(c) ofth e N IRC of 1997 , as amended I,203, 170.00 4 . Sa les of services and others not supported by offic ia l rece ipts P II ,806,953.22 5. Zero-rated sales w ith no supporting documents TOTAL Thus, Petitioner was able to properl y substanti ate its reported zero-rated sales/receipts for taxable year 2006 but onl y to the extent of P 173 ,823 ,548.92, V computed as fo llows : 3 1 See Annex A attac hed herew ith for de ta iIs.

DEC IS ION Page 32 of37 C.T.A. EB CASE No. 674 (C.T.A . Case No. 7777) Pilipinas Total Gas, Inc. vs. Com missioner of Internal Revenue Declared zero-rated sa les/receipts p 185,7 19,273 .82 Less: Unsubstantiated difference in zero-rated 88,77 1.68 sa les/rece ipts as reflected per VAT return s I I,806,953.22 and per summary p 173,823,548.92 Other Disa llowances Su bsta ntiated ze r o- r ated sa les Consequentl y, only the portion of the input VAT claim attributable to the substantiated zero-rated sales/receipts of P173 ,823,548.92 will be considered for refund. The rate to be applied is based on the total amount of reported zero-rated sales/rece ipts and is computed as follows : Substantiated zero-rated sa les/rece ipts p 173 ,823,548 .92 Divided by total dec lared zero-rated sa les/receipts 7 P 185,7 19,273.82 Rate of q ua lifi ed ze ro-rated sa les/r eceipts 93.59% Petitioner's input VAT claim of P 17,528,906.17 represents the input VAT incurred on its domestic purchases and importation of goods and serv ices less the output tax due plus the VAT paid per its Quarterly VAT Returns for taxable year 2006 , as shown below: In put tax for the O utpu t tax for VAT Pa id per qua rter the qua rter Ex h. Qtr. retur ns VAT C la im I Sl p 4,263,850 .64 p 63,727.00 p 4,2 19,241.74 N 4,471 ,971.03 259,440 .00 p 19,1 18 . 10 2"d 4, 199,696.88 122 ,2 10.42 4,2 90,363 .03 z 3'0 4,923 ,668.58 23 ,443 .96 77 ,832 .00 4, 114, 149.59 4,905 , 15 1.81 LL 4" P l 7,859, 187.1 3 p 468,82 1.38 36,663 . 13 p 17,528,906. 17 TOTAL XX 4,927 . 19 p 138,540.42 The Court-commissioned independent CPA 32 tasked to verify petitioner's claim recommended for the disallowance of the following input taxes in the amount of P1 , 161 ,284.50 before allocation33 : Item Nature Ex hi bit Amoun t I. Input VAT on purchase of goods and services supported by docum ents where the address and NNNN-10-6 p 732 ,395 .28 2. T IN of the Co mpany is not indicated Input VAT on purchase of goods and se rvices without orig ina l su pport ing documents NNNN-10-1 182 ,802.91 ,'2 Mr. Armando T. Fernando , a Partner of Dy Go Fernando and Com pany. 33 Page 5 of Exhibit 0000.

DECIS ION Page 33 of37 C.T.A. EB CASE No. 674 (C.T.A . Case No . 7777) Amount Pilipinas Total Gas, Inc. vs. Commissioner of Internal Revenue 158,973.65 It.e, m Nat ure Ex hi bit 53,343.09 .) . Input VAT on purchases of goods and serv ices NNNN-10-3 NNNN-10-5 32, 160 .97 where no withholding taxes were recogni zed I ,608.60 NNNN-10-2 4 . Input VAT on purchase of goods and services NNNN-10-4 p 1, 16 1,284.50 with identified errors in VAT computation 5. Input VAT on purchase of goods and services supported by official receipts not in the name of the Co mpany 6. Other invalid input VAT claims on purch ase of goods and services Disa llowed inpu t VAT cl a im s be fo re a llocatio n The Court agrees with the ICPA's findings except for the input taxes under nos. 3 and 4. The input VAT of P 158,9 73.65 under no . 3 of the ICPA 's findings shall not be disallowed for the reason that petitioner's failure to withhold expanded withholding tax from its purchases does not affect the amount of input tax incurred on the said purchases. As regards the input VAT of P53 ,343.09 under no . 4 of the !CPA 's findings pertaining to petitioner's purchases of goods and services with identified errors in VAT computation, only the amount of Pl ,533.90 representing the excess of the P26,270.09 claimed input VAT over the correct input VAT of P24,736.19 on the following purchases shall be deni ed: Month S upp lie r Re ference Input Taxes Correct Disa llowed May Ins ul ar Life Hea lth Care, Inc . Num ber C la im ed In put Tax Input Tax June BPIIMS Insurance Corporati on p 266.40 p 1,089.81 Nov. BPI/ MS Insurance Co rporation 2095 p I,356.2 1 2495 4,438.80 4,359.68 79. 12 4030 20 , 110 . 11 20,475.08 p 24,736. 19 364.97 p 26,270.09 p 1,533.90 While petitioner's claimed input VAT of P6,894.04 on the following purchases were correctly computed , the same shall be denied for the following reason s: I Mo nth S upp lier I Re fere nce In put Taxes I Number C la im ed I. Purchases of servi ces s upported by documents oth er than ORs (s uch as delivery receipt and statement of accou nt) I~ ~~--------~----------------~~

DEC IS ION Page 34 of37 C.T.A. EB CASE No. 674 (C.T.A. Case No. 7777) Pilipinas Total Gas, Inc. vs. Commissioner of Internal Revenue Mo nth Supp lier Refere nce In put Taxes Feb Blu Boz Number Claimed 804 p 18 . 18 Aug Globe Telecom 3248 131.95 PLOT 325 1 I, 124.7 1 PLOT 3252 173 . 16 PLOT 3523 283.90 PLOT 3254 928 .58 PLOT 3255 363 .66 Dec Globe Telecom 4751 342 .98 Globe Telecom 4752 159.43 2. Purchases of services s upported by ORs dated outside the period of claim Dec PLOT 4732 I , 130.97 PLOT 4733 491 .62 PLOT 4734 187 . 88 PLOT 4735 1, 114 .54 PLOT 4736 442.48 Tota l p 6,894.04 In other words, out of the P53 ,943.09 input VAT disallowed by the ICPA, the amount of P44,9 15 . 15 (P53,343.09 less PI ,533.90 less P6 ,894.04) represents petitioner's valid claim as it was properly computed and supported by VAT invoices and official receipts. In fine , the ICPA 's recommended di sallowances shall be reduced to the amount ofP957,395.70, computed as follows: Input VAT Disallowances per !CPA's Report p I, 161 ,284 .50 Less: Input VAT Claims found to be valid by the Co urt p 158,973 .65 203 ,888.80 Pe r !C PA 's Finding No.3 44 ,915.15 p 957,395.70 Per !C PA 's Finding No.4 Adjusted Input VAT Di sa llowances per ICPA's Report In addition to the above disallowances, petitioner's claim should be reduced by the following input taxes totaling P1 , 126 ,013.41 34 : Findi ngs Input Tax I. Purchases of services not supported by official recei pts in violation of Section p 494,712 . 17 113(A)(2) of the N IRC of 1997, as amended 336,276.35 2. Purchases of goods not s upported by sa les invoices in vio lation of Section 113(A)(l) of the N IRC of 1997, as amended 34 See Annex 8 attached herewi th for detai ls.

DEC IS ION Page 35 of37 C.T.A. EB CASE No . 674 (C.T.A. Case No . 7777) Pilipinas Total Gas, Inc. vs. Commissioner ofInternal Revenue Input Tax Fi nd ings 152 ,664 .2 7 3. Purchases of services supported by official receipts with the phrase "Not a valid 28,057.72 20,212.27 source of input tax" indicated thereon 21,788.92 4 . Purchases of goods supported by invoices which are not le.gible 5. Purchases of goods or services with overclaimed input tax 71,766.00 6. Purchases of goods or services with no supporting documents 7.1mportation of goods supported by IE IRD which has no machine validation as to 535.7 1 p 1' 126,013.41 the amount paid for customs duties and taxes (including VAT) 8.Purchase of services supported by an official receipt which is dated outside the period of claim TOTAL Thus, petitioner' s valid input VAT on domestic purchases and importation of goods and services amounts to only P15 ,445,497.06 and only P14,455,440.70 thereof is attributable to Petitioner's qualified zero-rated sales, as computed below: Input VAT Claim p 17,528,906.17 Less: Disallowances p 957,395.70 Per ICPA's Report, as adjusted Per this Court's further verification I , 126,013.41 2,083,409.11 Validly supported input VAT Mu ltiply by rate of qualified zero-rated sa les p 15 ,445 ,497.06 In p ut VAT cla im att r ib uta ble to q ua lified zero-ra ted sa les 93 .59% p 14,455,440.70 Finally, anent the fourth requisite, petitioner's claim is net of its output liability for the year 2006. In its amended Quarterly VAT Returns for the four quarters of the same taxable year, petitioner deducted the following amounts as "Any VAT Refund/TCC Claimed": 35 VAT Refund /TCC Qua rter Ex hi bi t C la im ed 1'1 N p 4,219,241.74 2"d 3rd z 4,290,363.03 411 LL 4,114,149.59 XX 4,905,151.81 T OTAL p 17,528,906.1 7 Thus, petitioner could not have possibly utilized the substantiated input VAT of Pl4,455 ,440.70 in the succeeding quarters. In view of the foregoing, petitioner's refundable claim amounts to Pl4,455 ,440.70. [/ 35 Line 23 0 of Exhibits " N", "Z" , " LL" and "XX" .

DECISION Page 36 of37 C.T.A. EB CASE No. 674 (C.T.A. Case No . 7777) Pilipinas Total Gas, Inc. vs. Commissioner of Internal Revenue WHEREFORE, premi ses considered, the instant Petition fo r Review is hereby GRANTED but in a reduced amount of Pl4,455,440.70. Accordingly, the appealed Decision dated April 8, 2010 and Resolution dated August 10, 2010 are hereby REVERSED and SET ASID E. Respondent is ORDERED TO REFUND, or in the alternati ve, ISSUE A TAX CREDIT CERTIFICATE in favo r of the petitioner in the amount of P 14,455 ,440.70 representing excess and unutilized input VAT for taxable year 2006, ari sing from its zero-rated sales. SO ORDERED. /1.4-/-- ~~ WE CONCUR: AMELIA R. COTANGCO-MANALASTAS Associate Justice ~" � c.~ ERNESTO D. ACO""'STA Presiding Justi ce / Q ___ .-J- c. a.r~ Q_ . (I votfto~m the Court a quo dtd~ion as evidence adverted to was not formally offered.) JUANITO C. CASTANEDA, JR. Associate Justi ce J2_ (I join Associate Justice Castaneda, Jr.) CAESAR A. CASANOVA Assoc iate Justice j_,~~tn~~ ';;Jh~onf:tf/%f/~nion) OLGA PALANCA-ENRIQUEZ Associate Justice ~ ~ - M~ --~~ (ljoin Associate Justice Castaneda, Jr.) CIELITO N. MINDARO-GRULLA Associate Justi ce

DEC ISIO N Page 37 of37 C.T.A. EB CASE No. 674 (C.T.A. Case No. 7777) Pilipinas Total Gas, In c. vs. Commissioner of Int ernal Revenue CERTIFICATION Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that the conclusions in the above Decision were reached in consultation with the members of the Court En Bane before the case was assigned to the writer of the opinion of the Court. \___....;<& � (2_ r- ERNESTO D. ACOSTA Presiding Justice

CTA EB No. 674 (7777) ANN EX A Pilipinas Total Gas vs. CIR DISALLOWED ZERO- RATED SALES FOR THE TAXABLE YEAR 2006 PER VERIFICATION OF THE COURT Ref.# I nv./ OR # Customer Amount ( PhP) 1. Sale ofservices supported by official receipts with no word ''zero-rated" 4756 4506 Rohm Apollo Electronic Co., Ltd. 265,000.00 4757 4515 Ushio Philippines, Inc. 33,605.00 4758 4455 Airwater Philippines 40,000.00 4761 4456 Showa Aluminum Mfg. 183,921.50 4782 4553 Airwater Philippines 21,911.40 4798 4435 Epson Precision (Phils.) Inc. 20,000.00 4800 4299 F-Tech Phils. Mfg. 47,622.34 4803 4436 Hitachi Global Storage Technologies 45,000.00 4806 4482 Rohm Apollo Electronic Co., Ltd . 60,000.00 4808 4461 Rohm Mechatech 5,500.00 4814 4431 Yokohama Tire Phils. 33,000.00 4815 4484 Futaba Corp. Phils. 10,600.00 4816 4484 Futaba Corp. Phils. 10,984.00 4817 4468 Airwater Philippines 62,000.00 4822 4367 Nanox Phils. 28,000.00 4835 4519 Fortunecross Phils. 1,000.00 4843 4484 Futaba Corp. Phils. 22,300.00 4850 4467 Airwater Philippines 4,500.00 4859 4314 Rohm Apollo Electronic Co., Ltd. 60,000.00 4879 4559 Airwater Philippines 21,693.00 4882 4449 Epson Precision (Phils.) Inc. 20,000.00 4884 4561 F-Tech Phils. Mfg. 47,147.67 4887 4606 Hitachi Global Storage Technologies 45,000.00 4892 4560 NEC Tokin Electronics 37,188.00 4917 4627 Yokohama Tire Phils. 33,000.00 4918 4574 TDK Phils. Corp. 18,594.00 4919 4522 Nanox Phils. 28,000.00 4920 4613 Hitachi Global Storage Technologies 18,648.00 4922 4315 Rohm Mechatech 5,500.00 4931 4617 Hoya Glass Disk Phils. 87,454.00 4941 4653 Epson Precision (Phils.) Inc. 29,640 .00 4942 4756 Hitachi Global Storage Technologies 18,700.00 4944 4648 Hitachi Global Storage Technologies 59,000.00 4952 4590 TDK Phils. Corp. 80,573.00 4956 4572 Airwater Philippines 21,911.40 4958 4537 Nanox Phils. 28,000 .00 4961 4616 Yokohama Tire Phils. 33,000 .00 4964 4593 F-Tech Phils. Mfg. 17,070.46 4977 4628 Hitachi Global Storage Technologies 45,000.00 4981 4570 NEC Tokin Electronics 36,810.00 4983 4315 Rohm Mechatech 5,500.00 5018 4626 Epson Precision (Phils .) Inc. 20,000.00 5022 4665 Rohm Apollo Electronic Co., Ltd . 60,000.00 5031 4804 TDK Phils. Corp. 31,140.00 5032 4598 Ushio Philippines, Inc. 36,330.00 5033 4596 Toshiba Information Equipt. 57,090.00 5041 4587 NEC Tokin Electronics 37,285.20 5067 4591 Airwater Philippines 21,749.70 5070 4645 Epson Precision (Phils .) Inc. 20,000.00 5072 4593 F-Tech Phils. Mfg. 17,287.90 5083 4638 Hitachi Global Storage Technologies v 45,000.00 5090 4681 Rohm Apollo Electronic Co., Ltd. 60,000 .00

CTA EB No. 674 (7777) ANN EXA Pilipinas Total Gas vs. CIR Amount ( PhP) Ref.# Inv./OR # Customer 28,000 .00 5094 4540 Nanox Phils. 33,000.00 5097 4751 Yokohama Tire Phils. 5103 4371 Rohm Mechatech 5,500.00 5108 4697 Rohm Apollo Electronic Co., Ltd . 62,400.00 5123 4762 Hitachi Global Storage Technologies 51,000.00 5129 4802 NEC Tokin Electronics 38,059 .20 5132 4371 Rohm Mechatech 5136 4673 Airwater Philippines 5,500 .00 5141 4759 Epson Precision (Phils.) Inc. 1,365.00 5147 4713 Nanox Phils. 96,114.00 5150 4718 Yokohama Tire Phils. 28,000.00 5171 4805 Airwater Philippines 33,000.00 5174 4807 F-Tech Phils. Mfg . 22,201.20 5179 4755 Hitachi Global Storage Technologies 17,646.78 5187 4697 Rohm Apollo Electronic Co., Ltd. 45,000.00 5188 4697 Rohm Apollo Electronic Co., Ltd. 60,000.00 5202 4377 Epson Precision (Phils.) Inc. 72,000.00 5215 4697 Rohm Apollo Electronic Co., Ltd. 20,000 .00 5216 4697 Rohm Apollo Electronic Co., Ltd . 60,000.00 5222 4813 NEC Tokin Electronics 72,000.00 5235 4694 Rohm Mechatech 38,239.20 5242 4812 Airwater Philippines 5,500 .00 5245 4815 F-Tech Phils. Mfg. 22,306.20 5250 4770 Hitachi Global Storage Technologies 17,730.24 5292 4868 Ushio Philippines, Inc. 45,000 .00 5295 4774 Epson Precision (Phils.) Inc. 90,000.00 5297 4712 Nanox Phils. 20,000 .00 5300 4777 Yokohama Tire Phils. 28,000 .00 5314 4379 Ushio Philippines, Inc. 33,000.00 5323 4904 Hoya Glass Disk Phils. 34,865.00 5369 4823 F-Tech Phils. Mfg. 35,920.00 5373 4913 Epson Precision (Phils.) Inc. 17,186.08 5377 4812 Airwater Philippines 20,000.00 5383 4793 Hitachi Global Storage Techno logies 21,621.60 5384 5529 Hitachi Global Storage Technologies 45,000.00 5385 4865 Airwater Philippines 51,000.00 5387 4818 NEC Tokin Electronics 18,920 .00 5401 4868 Ushio Philippines, Inc. 37,065.60 5408 4796 Yokohama Tire Phils. 45,000.00 5409 4915 Nanox Phils. 33,000.00 5410 4883 Rohm Apollo Electronic Co. , Ltd . 28,000.00 5411 4883 Rohm Apollo Electronic Co ., Ltd. 60,000.00 5412 4882 Roh m Mechatech 72,000.00 5459 4829 Airwater Philippines 5,500 .00 5460 4929 Epson Precision (Phils.) Inc. 21,333.90 5461 4828 F-Tech Phils. Mfg. 20,000.00 5462 4918 Hitachi Global Storage Technologies 16,957.40 5463 4916 Nanox Phils. 45,000.00 5464 4831 NEC Tokin Electronics 28,000 .00 5465 4883 Rohm Apollo Electronic Co., Ltd. 36,572.40 5466 4883 Rohm Apollo Electronic Co., Ltd. 60,000 .00 5467 4882 Rohm Mechatech 72,000 .00 5468 4380 Ushio Philippines, Inc. 5,500.00 5469 4924 Yokohama Tire Phils. 45,000 .00 5525 5529 Hitachi Global Storage Technologies 33,000.00 5526 5503 Hoya Glass Disk Phils. v 18,700.00 74,590 .50

CTA EB No. 674 (7777) ANN EXA Pilipinas Total Gas vs. CIR Amount (PhP) Ref.# Inv./OR # Customer 98,377.50 5527 5503 Hoya Glass Disk Phils. 9,500.00 5552 4746 Ushio Philippines, Inc. 5563 4836 Airwater Philippines 21,088.20 5564 5512 Epson Precision (Phils.) Inc. 20,000.00 5565 4835 F-Tech Phils. Mfg. 16,762.11 5566 5517 Hitachi Global Storage Technologies 45,000.00 5567 4725 Nanox Phils. 28,000.00 5568 4831 NEC Tokin Electronics 36,151.20 5569 5471 Rohm Apollo Electronic Co., Ltd. 60,000.00 5570 5471 Rohm Apollo Electronic Co., Ltd. 72,000.00 5571 5452 Rohm Mechatech 5572 4748 Ushio Philippines, Inc. 5,500.00 5573 4942 Yokohama Tire Phils. 45,000.00 5618 5540 Hitachi Global Storage Technologies 33,000.00 5619 5524 Toshiba Information Equipt. 11,472.00 5633 5004 Yokohama Tire Phils. 5635 5011 Epson Precision (Phils.) Inc. 8,194.00 5640 5534 Airwater Philippines 1,360,600.00 5641 5536 Epson Precision (Phils.) Inc. 5642 4845 F-Tech Phils. Mfg. 18,915.00 5643 5529 Hitachi Global Storage Technologies 20,932.80 5644 4954 Nanox Phils. 20,000.00 5645 5533 NEC Tokin Electronics 16,638.59 5646 4967 Rohm Apollo Electronic Co., Ltd . 45,000 .00 5647 4967 Rohm Apollo Electronic Co., Ltd. 28,000.00 5648 5470 Rohm Mechatech 35,884.80 5649 5473 Ushio Philippines, Inc. 60,000.00 5650 5515 Yokohama Tire Phils. 72,000.00 5684 5531 TDK Phils. Corp. 5688 5458 Fuji Electric Phils. Inc. 5,500.00 5728 4749 Clarion Mfg. Corp. 45,000.00 5776 5202 Toshiba Information Equipt. 33,000.00 5781 4970 Nanox Phils. 108,386.64 5782 4966 Ro hm Mechatech 11,210.00 5783 4848 Airwater Philippines 27,000.00 5784 4850 F-Tech Phils. Mfg. 49,163.40 5788 4847 NEC Tokin Electronics 28,000.00 5790 2601 Fuji Electric Phils. Inc. 5791 4963 Ushio Philippines, Inc. 5,500.00 5792 5543 Yokohama Tire Phils. 20,857.20 Sub-total 16,578.49 35,755.20 35,000.00 45,000.00 33,000 .00 fi837,Sl8.00 2. Sale ofgoods to entities wtth no certification from PEZA or CDC 4762 6373 Yield Ltd., Inc. 15,860.10 52,867 .00 4763 6374 Yield Ltd., Inc. 104,340.00 4779 6392 Yield Ltd., Inc. 8,800 .00 106,368.40 4809 6423 Suncal l Corp. 78,300.00 4833 6466 Tomoe Shokai Co. Ltd. 6,600.00 24,800.58 4849 6468 Yield Ltd., Inc. 6,600.00 4895 6516 Su ncall Corp. 5,282.07 6,600.00 4933 6554 Tomoe Shokai Co. Ltd. 108,990 .00 4984 6610 Suncall Corp. 500 .o o v 5044 6676 lOESS 5092 6727 Suncall Corp. 5104 6740 Yield Ltd., Inc. 5118 6750 Nidec Precision Phils.

CTA EB No. 674 (7777) ANNEXA Pilipinas Total Gas vs. CIR Ref.# Inv./OR # Customer Amount (PhP) 5127 6761 Yield Ltd., Inc. 79,425.00 5142 6777 OMTPI 165,813.36 5190 6825 Suncall Corp. 5223 6859 Yield Ltd., Inc. 4,400.00 5239 6877 Yield Ltd., Inc. 42,222 .71 5271 6909 Suncall Corp. 159,330.00 5306 6939 Tomoe Shokai Co. Ltd. 5309 6944 Yield Ltd., Inc. 6,600 .00 5310 6945 Yield Ltd ., Inc. 27,640.80 5317 6956 Sumisetsu Phils. 245,312.00 5360 7002 First Sumiden 52,320.00 5389 7031 Suncall Corp. 146,320.72 5497 7144 Suncall Corp. 5524 7172 Yield Ltd., Inc. 5,406.00 5611 7318 Suncall Corp. 6,600 .00 5617 7324 Yield Ltd., Inc. 4,400.00 5625 7341 Yield Ltd ., Inc. 165,858.00 5677 7296 Suncall Corp. 8,800.00 5709 7366 Suncall Corp. 150,360.00 5746 7403 Sun Machinery 75,566.05 5747 7404 Tomoe Shokai Co. Ltd . 2,200.00 5798 7464 Yield Ltd., Inc. 4,400.00 5823 7489 Suncall Corp . 23,381.28 5904 7569 Suncall Corp. 3,597.12 5928 7594 Yield Ltd., Inc. 49,660.00 Sub-total 6,600.00 6,600.00 147,090.00 2,11~811.19 3. Sale ofgoods supported by invoices w1th no word "zero-rated" 4777 6390 Epson Precision (Phils.) Inc. 8,974 .65 427,500.00 5027 6655 Rohm Apollo Electronic Co., Ltd . 108,000.00 5028 6656 Hitachi Global Storage Technologies 47,020.00 454.00 5122 6755 T&S Laser Solutions S91,948.6S 5308 6943 Toshiba Information Equipt. Sub-total 4. Sale ofservices and others not supported by an official receipt 5636 7255 Hitachi Global Storage Technologies 18,700.00 18,993.00 5738 7395 Hoya Glass Disk Phils. 20,000 .00 45,000 .00 5779 7443 Epson Precision (Phils.) Inc. 60,000.00 72,000.00 5780 7444 Hitachi Global Storage Technologies 21,000.00 230,000.00 5785 7449 Rohm Apollo Electronic Co., Ltd. 11,450.00 20,000.00 5787 7451 Rohm Apollo Electronic Co., Ltd . 45,000.00 28,000.00 5835 7502 PHCP, Inc. 5,500.00 5847 7508 PHCP, Inc. 45,000.00 33,000.00 5862 7526 Airwater Philippines 21,000.00 20,592.60 5864 7528 Epson Precision (Phils.) Inc. 16,368.18 5865 7529 Hitachi Global Storage Technologies v 35,301.60 5866 7530 Nanox Phils. 60,000.00 5867 7531 Rohm Mechatech 5868 7532 Ushio Philippines, Inc. 5869 7533 Yokohama Tire Phils. 5870 7534 PHCP, Inc. 5871 7535 Airwater Philippines 5872 7536 F-Tech Phils. Mfg. 5873 7537 NEC Tokin Electronics 5874 7538 Rohm Apollo Electronic Co., Ltd.

CTA EB No. 674 (7777) ANNEXA Pilipinas Total Gas vs . CIR Amount (PhP} Ref.# Inv./OR # Customer 72,000.00 64,600.00 5875 7539 Rohm Apollo Electronic Co., Ltd. 95,000 .00 5919 7585 Yokohama Tire Phils. 5926 7592 Philippines HKR Inc. 1,058,505.38 Sub-total 72,000.00 5. Zero-rated sales with no supporting documents 285,000.00 6533 Ushio Philippines, Inc. 824,760.00 6662 T&S Laser Solutions 6839 Ushio Philippines, Inc. 11,110.00 7081 TDK Phils. Corp. 6,300 .00 7386 TDK Phils. Corp. 4,000.00 7516 Hoya Glass Disk Phils . 1,203, 170.00 Sub-total 11,806,953.22 ~ TOTAL

CTA EB No. 674 (7777) Annex B Pilipinas Total Gas vs. CIR Amoun t ( Ph P) ADDITIONAL DISALLOWANCES PER VERIFICATION OF TH E COURT 110,000.00 1,320.00 Ref. No. Suppl ier OR / Invoi ce No. Date 210.00 1/31/2006 1. Purchase ofservices not supported by an official receipt 1/31/2006 17,981.75 1/31/2006 3,576.14 2 Ingasco, Inc. 191578 1/31/2006 1,065.00 1/31/2006 3 Ingasco, Inc. 207880 1/31/2006 30,071.70 1/31/2006 289.66 4 Ingasco, Inc. 207878 942.65 4/17/2006 196 .65 5 Ingasco, Inc. 107875 4/10/2006 656 .32 4/25/2006 161.58 6 Ingasco, Inc. 207408 4/25/2006 346.61 176.45 11 Ingasco, Inc. 207386 5/24/2006 318 .18 5/24/2006 27.27 12 Ingasco, Inc. 207385 5/24/2006 132 .07 212.46 362 Globe Telecom 138.03 363 PLDT 58001987858 1,131.19 457 .27 364 PLDT 58001987858 217.42 365 PLDT 58001987858 1,228.37 419.89 366 PLDT 58001987858 375 .00 214 .75 367 PLDT 58001987858 430.93 438.36 397 Globe Telecom 129.11 294.82 403 Smart Communication 1,056 .63 435 Mobile Carwash 183.55 446 .16 812 Globe Telecom 1,129.50 813 Globe Telecom 5,887.20 120,000.00 814 Globe Telecom 251.09 815 PLDT 375.00 241.07 816 PLDT 392.89 307.42 817 PLDT 1,155.37 176.67 818 PLDT 454 .31 1,119.71 819 PLDT 5,880.00 1,260.00 829 Smart Communication 4,440 .00 1,890.00 1297 Globe Telecom 192.86 1298 Globe Telecom v 187.25 1299 Smart Communication 375 .00 1309 Globe Telecom 1319 PLDT 1320 PLDT 1321 PLDT 1322 PLDT 1323 PLDT 1492 Ingasco, Inc. 211501 1493 Ingasco, Inc. 211500 1667 Globe Telecom 41280905 1671 Smart Communication 1703 Isuzu Pasig 21471 1704 Isuzu Pasig 21470 1715 PLDT 58002139534 1716 PLDT 58002139533 1717 PLDT 58002139532 1718 PLDT 58002157272 1719 PLDT 58002157271 1731 PCM Industrial Sales, Inc. 4867 1732 PCM Industrial Sales, Inc. 4868 1733 PCM Industrial Sales, I nc. 4869 2093 Globe Telecom 37 2108 Globe Telecom 8 2109 Globe Telecom 14 2110 Smart Communication 84652617

CTA EB No. 674 (7777) Annex B Pilipinas Total Gas vs . CIR Ref. No. Supplier OR/Invoice No. Date Amount ( PhP) 2117 Globe Telecom 38 5/24/2006 147.39 2129 PLOT 58002190612 6/13/2006 329 .82 2130 PLOT 58002190611 6/20/2006 1,022.63 2131 PLOT 58002190610 221.91 21 32 PLOT 58002208352 544 .17 2141 PCM Industrial Sales, Inc. 480 .00 2142 PCM Industrial Sales, Inc. 4884 2,160.00 2143 PCM Industrial Sales, Inc. 4886 16,925 .76 2484 Globe Telecom 4892 188.11 2486 Globe Telecom 219.93 2488 PLOT 58002190612 8/7/2006 1,136.65 2489 PLOT 58002190611 7/17/2006 528 .79 2490 PLOT 58002190610 7/24/2006 183 .86 2491 PLOT 58002208352 7/28/2006 1,314 .18 2492 PLOT 58002208351 7/31/2006 310 .86 2493 Smart Communication 375 .00 2520 PCM Industrial Sales, Inc. 85640177 3,360 .00 2521 PCM Industrial Sales, Inc. 4955 852 .24 2522 PCM Industrial Sales, Inc. 4921 1,850.04 2523 PCM Industrial Sales, Inc. 4933 968.45 2524 PCM Industrial Sales, Inc. 4936 11,555 .90 2851 Globe Telecom 4943 190.58 2852 Globe Telecom 192 .86 2855 PLOT 58002316731 1,113 .09 2856 PLOT 58002316732 428 .07 2857 PLOT 58002297586 184.77 2858 PLOT 58002297587 971.04 2859 PLOT 58002297588 342.41 2864 Smart Communication 375.00 3247 Globe Telecom 86633895 228 .88 3249 Globe Telecom 192.86 3259 Smart Communication 087640095 7/28/2006 385 .95 3278 PCM Industrial Sales, Inc. 4995 9/11/2006 10,986.72 3279 PCM Industrial Sales, Inc. 4997 9/11/2006 1,167.04 3608 Globe Telecom 300.45 3609 Globe Telecom 088681462 8/2/2006 200 .87 3610 Globe Telecom 221623 10/31/2006 192.86 3617 Smart Communication 5016 10/4/2006 376 .03 3632 Ingasco, Inc. 5022 10/9/2006 707 . 14 3633 PCM Industrial Sales, Inc. 1,026 .00 3634 PCM Industrial Sales, Inc. 5059 11/13/2006 9,000.00 4006 Globe Telecom 5060 11/13/2006 381.16 4012 Smart Communication 5061 11/13/2006 479 .13 4013 Globe Telecom 196.19 4014 Republic Courier Service, Inc. 225151 12/31/2006 365 .29 4022 PCM Industrial Sales, Inc. 5085 12/11/2006 19, 542.32 402 3 PCM Industrial Sales, Inc. 5088 12/13/2006 35,373 .55 4024 PCM Industrial Sales, Inc. 5089 12/13/2006 11,697.35 4371 Globe Telecom 5090 12/13/2006 184.83 4372 Globe Telecom 399 .65 4398 Smart Communication Page 2 of 4 481.03 4403 Ingasco, Inc. 697 .24 4411 PCM Industrial Sales, Inc. 732.11 4413 PCM Industrial Sales, Inc. 2,019 .60 4414 PCM Industrial Sales, Inc. 19,563.30 4415 PCM Industrial Sales, Inc. 726 .00 ~

CTA EB No. 674 (7777) Annex B Pilipinas Total Gas vs. CIR Ref. No. Suppl ier OR/Invoice No. Date Amount (PhP) 4460 Ingasco, Inc. 225153 12/31/2006 2,643.48 4461 Ingasco, Inc. 225152 12/31/2006 2,618 . 18 4462 Ingasco, Inc. 225150 12/31/2006 2,100 .00 4516 Ingasco, Inc. 224726 12/19/2006 4674 Ingasco, Inc. 223853 12/6/2006 17.79 4738 Globe Telecom 35.57 4750 Smart Communication 185.82 Sub-total 472.96 494,712.17 2. Purchase ofgoods not supported by an invoice 13 Beta Chemicals, Inc. 11505 2/24/2006 3,600 .00 11427 2/17/2006 3,600.00 18 Beta Chemicals, Inc. 11456 2/10/2006 3,600.00 1274 2/3/2006 3,656 .36 19 Beta Chemicals, Inc. 1759 3/3/2006 128105 3/3/2006 300 .00 360 Anrah LT. Products, Inc. 4490 5/12/2006 1,568.14 4484 4/10/2006 12,283.66 837 Anrah LT. Products, Inc. 1884 4/7/2006 14,686.98 428055 5/16/2006 1,366.07 843 Tricorn Dynamics, Inc. 12031 6/30/2006 3,524.60 11945 6/23/2006 4,821.43 887 Pacific Carbonic Corp. 2423 5/25/2006 3,857.14 3918 6/7/2006 66,306.72 893 Pacific Carbonic Corp. 39137 6/26/2006 2279 5/19/2006 64 .61 1295 Anrah I.T. Products, Inc. 4,285.71 12054 7/7/2006 4,079.46 1714 Pilipinas Shell Petroleum Corp. 13087 7/28/2006 4,705.41 13088 7/28/2006 3,857.14 1739 Beta Chemicals, Inc. 434079 7/18/2006 3,857 . 14 2421 7/19/2006 8,678.57 1740 Beta Chemicals, Inc. 437715 8/16/2006 3,750 .00 12275 9/15/2006 62,904.00 1748 VAF Enterprises 23284 8/25/2006 4,841.54 54951 9/22/2006 3,857 . 14 1749 Manila Fluid System, Inc. 441678 9/14/2006 1,671.43 3871 9/1/2006 1750 Marman Trading 2048 9/22/2006 355.92 4536 11/6/2006 4,595 .69 2111 Anrah I.T. Products, Inc. 12602 11/17/2006 3,337 . 17 12487 10/27/2006 2134 Pilipinas Shell Petroleum Corp. 6457 10/6/2006 433 .71 444904 10/13/2006 15,723.71 2144 Beta Chemicals, Inc. 1576 11/17/2006 4,800 .00 12707 12/8/2006 6,000 .00 2145 Beta Chemicals, Inc. 12610 11/24/2006 12603 11/17/2006 1,899.11 2146 Beta Chemicals, Inc. 6527 11/17/2006 4,071.43 23341 11/3/2006 2,142.86 2487 Pi lipinas Shell Petroleum Corp. 448369 11/14/2006 4,800.00 4861 11/10/2006 4,800.00 2530 VAF Enterprises 142010 11/3/2006 4,800.00 4619 11/27/2006 2854 Pilipinas Shel l Petroleum Corp. 24335 11/30/2006 423.21 4171 11/27/2006 144.64 2899 Beta Chemicals, Inc. 4,477.49 2,427 .86 2901 Toolec Inc. 644 . 14 396.96 2906 Festa Inc. v 3,942.86 3250 Pilipinas Shell Petroleum Corp. 119 .30 3266 Anrah I.T. Products, Inc. 3270 The Great Swan Lake Trading 3272 Pacific Carbonic Corp. 3280 Beta Chemicals, Inc. 3281 Beta Chemicals, Inc. 3289 to 3291 Jetmar Industrial Sales 3611 Pilipinas Shel l Petroleum Corp. 3631 Cebu Legacy Enterprises 3642 Beta Chemicals, Inc. 3643 Beta Chemicals, Inc. 3645 Beta Chemicals, Inc. 3647 Jetmar Industrial Sales 3655 Toolec Inc. 3997 Pilipinas Shell Petroleum Corp. 4005 Anrah I.T. Products, Inc. 4010 Tricorn Dynamics, Inc. 4011 Anrah LT. Products, Inc. 4034 Toolec Inc. 4036 Manila Fluid System, Inc.

CTA EB No. 674 (7777) Annex B Pilipinas Total Gas vs. CIR Ref. No. Supplier OR/Invoice No. Date Amount (PhP) 4042 Genequipt Sales 2347 11/22/2006 385.71 4373 Pilipinas Shell Petroleum Corp. 1969 12/15/2006 3,999 .23 4392 Anrah I.T. Products, Inc. 9024 12/8/2006 1,462.50 4409 Pacific Carbonic Corp. 4569 18,723 .94 4416 Beta Chemicals, Inc. 12901 2/2/2007 5,689.29 4420 Jetmar Industrial Sales 7356 2/2/2007 4424 Manila Fluid System, Inc. 4195 5/18/2007 900 .00 4731 Pilipinas Shel l Petroleum Corp. 6788 12/29/2006 60.99 4741 AXN Tyre Medic Center 540 1/16/2007 Sub-total 1/5/2007 4,138 .24 857.14 336,276.3S J. Purchase ofsetvices supported by official receipt with "Not a valid source ofinput tax" 2137 PCM Industrial Sales, Inc. 2535 8/11/2006 907 .20 2,867 .64 2138 PCM Industrial Sales, Inc. 2536 8/11/2006 2,396 .64 3,407.52 2139 PCM Industrial Sales, Inc. 2621 7/28/2006 1,021.92 2140 PCM Industrial Sales, Inc. 2620 7/28/2006 651.60 1,916.26 2894 PCM Industrial Sales, Inc. 2581 10/3/2006 817.32 2895 PCM Industrial Sales, Inc. 2578 9/15/2006 136,390.02 3276 PCM Industrial Sa les, Inc. 2596 10/27/2006 1,500.19 787.96 3277 PCM Industrial Sales, Inc. 2631 11/3/2006 3635 PCM Industrial Sales, Inc. 2600 11/24/2006 4025 PCM Industrial Sales, Inc. 2645 11/30/2006 4410 PCM Industrial Sales, Inc . 2710 2/2/2007 Sub-total 4. Purchase ofgoods supported by invoices which are not legible 1474 Ingasco, Inc. 211571 4/18/2009 6,855 .01 5/27/2006 7,067 .57 1790 Ingasco, Inc. 213626 5/26/2006 6,823.86 5/6/2006 7,311.28 1800 Ingasco, Inc. 213592 28,057.72 1/31/2006 2012 Ingasco, Inc. 212524 2/19/2006 1,169.59 10/16/2006 160 .85 Sub-total 12/21/2006 43.39 5. Purchase ofgoods or setvices w1th overclaimed input tax 18,838.44 788 Ingasco, Inc. 191507 832 Manila Bulletin Publishing 5521667 4007 Toyota Balintawak Inc. 78425 4747 Insular Life Health Care, Inc. 131677 Sub-total 6. Purchase ofgoods or setvices w1th no supporting documents 1807 Ingasco, Inc. 213557 5/25/2006 7,554 .99 5/22/2006 5,754 .63 1853 Ingasco, Inc. 213316 8/19/2006 7,351.11 1,128.19 3230 Ingasco, Inc. 198145 PLDT 58002208351 Sub-total 7. Importation ofgoods supported by IEIRD which is not validated 71,766.00 3650 Bureau of Customs Sub-total 8. Purchase ofsetvices supported by an official receipt which is dated outside the period of claim 4421 Best Value Trading Corp. 2929 1/5/2007 535 . 71 Sub-total 535.71 TOTAL ==1=,1=26=,0=13=.4=1 =1v_..

REPUBLIC OF THE PHILIPPINES Court ofTax Appeals QUEZON CITY En Bane PILIPINAS TOTAL GAS, INC., CTA EB CASE NO. 674 Petitioner, (CTA Case No. 7777) Present: -versus- Acosta, P.J. Castaneda, Jr. Bautista, Uy, Casanova, Palanca-Enriquez, Fa bon-Victorino, Mindaro-Grulla, and Cotangco-Manalastas, JJ. COMMISSIONER OF INTERNAL Promulgated: REVENUE, IAN 0 5 2012 fM7L11.?.f.:P ;t!7 ' r.~ ~ ~nov ~ Respondent. x-------------------------------------------------------------------------------------------------------------x SEPARATE CONCURRING OPINION BAUTISTA, [. A perusal of the relevant law and jurisprudence convinces me that at the time of the filing of the administrative claim on July 31, 2007, and the subsequent Petition for Review with this Court on April 24, 2008, relative to a claim for refund of input value-added tax ("VAT") attributable to zero-rated sales for the four quarters of the taxable year 2006, the prevailing jurisprudence then is that the two (2)-year prescriptive period is reckoned from the filing of the quarterly return, which this Court has ::;:::~:;o::~i:::.along line of dec~ions, and has continued to guide mxpay?

SEPARATE CONCURRING OPINION CTA EB CASE NO. 674 (CTA Case No. 7777) Page 2 of4 Therefore, while I concur with the findings of the Court sitting En Bane that petitioner's administrative and judicial claims have been filed within the period allowed under Section 112(C) of the 1997 National Internal Revenue ("NIRC"), as amended, I, nonetheless, must point out my different view. The factual circumstances present in the case at bench should make this Court consider the principle which states that "where there has been justifiable reliance on Our decisions, and those who have so relied may be substantially harmed if retroactive effect is given, where the purpose of the new rule can be adequately effectuated without giving it retroactive operation, or where retroactive operation might greatly burden the administration of justice, then it is Our duty to apply the new rule prospectively."l This Court has been consistent that, even after the Petition for Review was filed on 2008, the Court has continued to invoke the rule that the reckoning of the two (2)-year prescriptive period for the filing of claims for VAT refund/ tax credit certificate starts from the date of filing of the corresponding quarterly VAT returns, in similar cases such as Takenaka Corp. Phil. Branch v . CIR, CTA Case No. 6762, March 20, 2006; Mirant (Navotas 11) Corporation v . CIR, CTA Case Nos. 7234 & 7295, October 2, 2008; and CE Luzon Geothermal Power Co. v. CIR, CTA Case Nos. 6792 & 68~ November 25, 2008. 1 Magtoto v . Manguera, et al., G.R. Nos. L-37201-02, L-37424, and L-38929, March 3, 1975, 63 SCRA 4, Concurring Opinion penned by Justice Felix Q. Antonio, with Justices Antonio P. Barred o and Cecilia Muii.oz-Palma, con cu r r i n g.

SEPARATE CONCURRING OPINION CfA EB CASE NO. 674 (CfA Case No. 7777) Thus, the rule that the reckoning of the two (2)-year period is the date of filing of the quarterly VAT return has become a well-established doctrine and adopted in numerous decisions of this Court, the Court of Appeals and even the Supreme Court until the latter issued a ruling wherein the two (2)-year period is reckoned, not from the filing of the return, but from the close of the taxable quarter when the sales were made. Further, the use of the word "may" in Section 112(C) of the 1997 NIRC, as amended, indicates that the judicial recourse within thirty (30) days after the lapse of the one hundred twenty (120)-day period is directory and permissive, and not mandatory nor jurisdictional as long as the said period is within the two (2)-year prescriptive period under Sections 1122 and 2293 of the 1997 NIRC.4 Therefore, if the two (2)-year prescriptive period is about to expire, there is no n eed to wait for the 2 SEC. 112. Refunds or Tax Credits of Input Tax. - (A) Zero-ra ted or Effectively Zero-ra ted 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 quar ter 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, hawever, That in the case of zero-rated sales under Section 106(A)(2)(a)(1),(2) and (B) and Section 108 (B)(l) and (2), the acceptable foreign currency exchange proceeds thereof had been duly accounted for in accordance w ith the rules and regulations of the Bangko Sentral ng Pilipinas (BSP): Provided, fu rther, 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 d ue or paid cannot be directly and entirely attributed to any one of the transactions, it shall be allocated proportiona tely on the basis of the volume of sales. 3 SEC. 229. Recoven; 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, 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, w here on the face of the return upon which payment was made, such payment appears clearly to have been erroneously paid . I ' Commi$ione< of lnt<mal R~enue v. Aiohi Fooging Company of M ia, Ino, CTA EB O.Se No. 416, Febouary) 2D09.

SEPARATE CONCURRING OPINION CTA EB CASE NO. 674 (CIA Case No. 7777) denial of the claim by the Commissioner of Internal Revenue or its inaction after the expiration of the one hundred twenty (120)-day period before the taxpayer can lodge its appeal with this Court.S Otherwise, the Court will be deprived of jurisdiction to entertain the case.6 Based on the foregoing discussion, while I concur with the grant of the present Petition for Review, I maintain my view that the two (2) year prescriptive period should be reckoned from the filing of the relevant return, and that the period provided under Section 112(C) of the 1997 NIRC, as amended, is merely directory and not mandatory nor jurisdictional. Accordingly, I vote for the GRANT of the Petition for Review. BAUTISTA s Commissioner of Internal Revenue v. CE Cebu Geothermal Power Company, Inc., CTA EB No. 426, May 29, 2009 . 6 Commissioner of Internal Revenue v. Accenture, Inc., CTA EB No. 410 (CTA Case No. 7387), March 18, 2009.

REPUBLIC OF THE PHILIPPINES Court ofTax Appeals QUEZON CITY ENBANC PILIPINAS TOTAL GAS, INC., C.T.A. EB NO. 674 Petitioner, (C.T.A. CASE No. 7777) Present: -versus- ACOSTA, Presiding Justice, CASTANEDA, JR. , COMMISSIONER OF INTERNAL BAUTISTA, REVENUE, UY, CASANOVA, Respondent. PALANCA-ENRIQUEZ, FABON-VICTORINO, MINDARO-GRULLA, and COTANGCO-MANALASTAS, JJ. Promulgated: 0 5 20~2 t!t~~~t{._/l~ JAN ...._..= --=._....::......;;:...;:,..;.,:;;___....cZ..'-.;.;J:t..lSP;' -(, IV"\ � X ---------------------------------------------------------------------------------------- X SEPARATE CONCURRING OPINION PALANCA-ENRIQUEZ, J.: This case is an appeal by Pilipinas Total Gas, Inc. from the Decision dated April 8, 2010 of the Second Division in C.T.A. Case No. 7777, which denied petitioner's claim for refund of unutilized input VAT on the ground (jfJJ

C.T.A. EB NO. 674 2 (C.T.A. CASE NO. 7777) SEPARATE CONCURRING OPINION that petitioner failed to sufficiently substantiate its zero-rated sales for taxable year 2006 considering that petitioner's official receipts, invoices and other supporting documents were not formally offered in evidence before the Second Division, docketed as C.T.A. EB No. 674. In C.T.A. EB No. 674, the Ponente, however, reversed said Decision dated April 8, 2010 of the Second Division on the ground that the invoices and official receipts in question were pre-marked and presented before the Second Division and formally offered in evidence. With due respect, after a careful examination of the records of the case, I agree with Justice Amelia R. Cotangco-Manalastas, the Ponente in C.T.A. EB No. 674, that the supporting documents, invoices and official receipts in question were formally offered in evidence before the Second Division, even if only the schedules bear the corresponding exhibit numbers. A perusal of petitioner's Formal Offer of Evidence filed before the Second Division shows that although only the "Summary Lists of Purchases" were marked as Exhibits "NNNN-5-1" to "NNNN-5-12", each exhibit, e.g. Exhibit "NNNN-5-1", includes a caption "Supporting Documents for "@Jflsite Exhibit NNNN-5-1 per reference no. 1-438", below it, it, the

C.T.A. EB NO. 674 3 (C .T.A. CASE NO. 7777) SEPARATE CONCURRING OPINION purpose for which said documents were being offered. This is true as regards the other NNNN-5 Exhibits. The "Supporting Documents" referred to therein are copies of official receipts and sales/charge invoices for taxable year 2006, with corresponding reference numbers. Therefore, it is evident that the "Supporting Documents" mentioned in petitioner's Formal Offer of Evidence are part and parcel of the mother Exhibits "NNNN-5-1" to "NNNN-5-12". Clearly, said invoices and official receipts, subject of said "Summary List of Purchases", were formally offered in evidence. Considering that said "Supporting Documents" were formally offered in evidence, it is my humble view that there is substantial compliance with Section 34, Rule 132 of the Revised Rules ofCourt. In fact, in the case of Dizon vs. Court of Tax Appeals, 553 SCRA 128, citing the cases ofPeople vs. Napat-a (179 SCRA 407) and People vs. Mate (1 03 SCRA 484), the Supreme Court ruled that documents not formally offered may be admitted and considered in evidence if (1) the documents have been duly identified by testimony duly recorded, and (2) the documents have been incorporated in the records of the case.

C.I.A. EB NO. 674 4 (C.I.A. CASE NO. 7777) SEPARAIE CONCURRING OPINION During the hearing held on January 13, 2009, the Court- Commissioned Independent CPA identified the official receipts and invoices issued by petitioner for the period January 2006 to December 2006 (TSN, Jan. 13, 2009, pp. 14-16). Thus, it is clear that the official receipts and invoices in question were duly identified by the testimony of the ICPA. With more reasons, therefore, that petitioner's claim for refund of input VAT should not be denied on the ground that petitioner's official receipts, invoices and other supporting documents were not formally offered in evidence before the Second Division. In view hereof, I concur with Justice Amelia R. Cotangco-Manalastas, the Ponente in C.T.A. EB No. 674, to reverse and set aside the Amended Decision dated April 8, 2010 of the Second Division and accordingly, to grant the Petition For Review in C.T.A. Case No. 7777 in the reduced amount ofP14,455,440.70. ~,k~~~ OLGA PALANCA-ENRIQUEZ Associate Justice