SILICON PHILIPPINES, INC. v. COMMISSIONER OF INTERNAL REVENUE

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY FIRST DIVISION ************* SIUCON PHIUPPINES, INC., C.T.A. CASE NO. 6310 Petitioner, Members: -versus- ACOSTA, Chairperson COMMISSIONER OF INTERNAL REVENUE, BAUTISTA, and Respondent. CASANOVA, JJ. Promulgated: .OCT 11 2006 ,C~J:oo~ DECSION BAUTISTA, L., J.: Before Us is a Petition for Review seeking the issuance c:i a tax credit certificate in the amount of Fifty Two Million Eight Hundred Nine Thousand Nine Hundred Thirty Nine Pesos and 93/100 (P52,809,939.93) allegedly representing input value-added tax paid on domestic purchases of goods and services and importation of goods/capital equipment which are attributable to zero-rated sales covering the second quarter of 1999.

DECISION C.TA. CASE NO. 6310 Page2 Silicon Philippines Inc., (''petitioner''), previously known as Intel Philippines Manufacturing Inc., is a corporation duly organized and existing under and by virtue ri the laws of the Republic of the Philippines with principal office at No. 1321 Apolinario Street, Bangkal, Makati City. It is registered as a value-added tax ("VAT'') taxpayer effective January 30, 1996, as evidenced by Certificate of Registration No. 32A-3-002649 and BIR Form No. 1556 - Certification of Registration No. 9+048-02621. 1 Petitioner is likewise registered with the Board of Investments (''BOI'') as a preferred-pioneer enterprise for the production/manufacture and export of tested and untested integrated circuits, such as large scale integrated circuits and microprocessor. 2 The Commissioner cl Internal Revenue (''respondent'') is the appointed government official vested with authority to exercise the functions of his office, induding, among others, the power to refund any internal revenue tax erroneous or illegally assessed or collected under the 1997 National Internal Revenue Code (''NIRC''), as amended, with office address at the BIR National Office Building, Diliman, Quezon City. On July 22, 1999, petitioner filed its VAT return for the second quarter of 1999 dedaring, among others, zero-rated sales of P1,810,154,723.64, output VAT cl P34,799.57 and excess input taxes of P52,809,939.93 for the said quarter, as follows: 3 Zero-rated Sales Output VAT Domestic INPUT VAT Excess P1 ,810,154,723.64 (a) Purchases Importation (b)+ (c)- (a) Of Goods P52,809,939.93 P34,799.57 (b) (c) P23, 722,708.50 P29,122,031 .00 Convinced that it is entitled to the aforesaid excess input VAT payments of P52,809,939.93, on August 6, 1999, petitioner filed with the One-Stop Shop Inter-Agency Tax Credit and Duty Drawback Center of the Department of Finance (''OOF''), an 1 Exhibits ~AM & ~BM 2 Exhibit "CM l Exhibit "OM

DEOSION C.TA. CASE NO. 6310 Page 3 administrative claim for refund or tax credit thereof per SIR Form No. 2552 and Claimant Information Sheet No. 35421.4 Due to the inaction of the DOF to act on its claim, petitioner appealed before this Court on June 29, 2001. According to petitioner, it generated and recorded export sales in the amount of P1,810,154,723.64 which was paid for in acceptable foreign currency and accounted for in accordance with existing regulations of the Bangko Sentral ng Pilipinas ("SSP''). The said export sales are zero-rated for VAT purposes pursuant to Sections 106{A)(2)(a)(1) and 108(8)(1) of the 1997 NIRC, as amended, and as confirmed by VAT Ruling No. 102(a)(l)-402-88. Moreover, for the same taxable quarter, petitioner alleges that it paid input VAT on domestic purchases of goods and services and importation of goodS/capital equipment in the sum of P52,809,939.93 which were all attributable to its zero-rated sales. On the other hand, respondent, in his Answer, alleges that petitioner's claim for refund is subject to administrative investigation by the Bureau; petitioner must prove that its sales are exp~rt sales contemplated under Section 106(A)(2)(a)(1) of the 1997 NIRC, as amended; in an action for refund, the burden of proof rests upon the taxpayer to establish its right to refund; and failure to sustain the burden is fatal to its claim considering that daims for refund are construed strictly against the claimant for the same partake of the nature of exemption from taxation . The parties jointly stipulated on the following issues for the consideration of the Court: "(a) Whether or not petitioner's daim for VAT refund of an alleged unutilized input VAT for the second quarter of 1999 is duly substantiated/supported by documentary evidence; (b) Whether or not the VAT input taxes have not been applied to any output tax for the period covered in its daim or any succeeding period; and

DECISION C.T.A. CASE NO. 6310 Page4 (c) Whether or not petitioner is entitled to the refund of P52,809,939.93 allegedly representing domestic purchases of goods and services and importation of 2,oods/capital equipment for the period April 1, 1999 to June 30, 1999. " It is the posture of petitioner that its export sales are subject to zero percent (0%) VAT pursuant to Sections 106(A)(2)(a)(1) and 108(8)(1) of the 1997 NIRC, as amended, quoted hereunder for easy reference: SEC. 106. Value Added Tax on Sale ofGoods or Properties. - (A) Rate and Base of Tax. - X X X XXX XXX XXX (2) The following sales by VAT-registered persons shall be subject to zero percent (0%) rate: (a) Export Sales.- The term 'export sales-' means: (1) The sale and actual shipment of goods from the Philippines to a foreign country, ir:respective of any shipping arrangement that may be agreed upon which may influence or determine the transfer of ownership of the goods so exported and paid for in acceptable foreign currency or its equivalent in goods or services, and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP). SEC. 108. Value-Added Tax on Sale of Services and Use or Lease of Properties. - "(A) Rate and Base of Tax. - xxx XXX XXX XXX "(B) Transactions Subject to Zero Percent (OO..V) Rate -The following services performed in the Philippines by VAT-registered persons shall be subject to zero percent (0%) rate: "(1) Processing, manufacturing or repacking of goods for other persons doing business outside the Philippines which goods are subsequently exported, where the services are paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP). 5 Rollo, p. 62

DECISION C.T.A. CASE NO. 6310 PageS Petitioner further contends that even the respondent confirmed the zero-rating of its export sales in VAT Ruling No. 102(a)(1)-402-88,6 the pertinent portion of which reads as follows: ''This refers to your letter dated May 19, 1988 stating that your company is a SOl-registered company on a pioneer status as export producer (per BOI Registration Certificate No. 851010); that your production of manufactured integrated drcuits is exported 100% to your parent company, Intel Corporation, california, U.S.A. and that the services are paid for in acceptable foreign currency. XXX In reply, please be informed that services rendered by VAT-registered persons in connection with the processing, manufacturing or repacking of goods for persons doing business outside the Philippines which goods are subsequently exported, where the services are paid for in acceptable foreign currency inwardly remitted to the Philippines and duly accounted for under the regulations of the Central Bank of the Philippines, shall be subject to zero rate (0%) pursuant to Section 102(a)(1) [now 108(8)(1)] cl the Tax Code, as amended by E.O. 273." To substantiate its export sales for the second quarter cl 1999 and the foreign currency proceeds thereof, petitioner presented before this Court the following documents: Document Exhibit 1. Petitioner's Quarterly VAT Return for the D second quarter of 1999 2. Certificate of Inward Remittances for the L whole year 1999 issued by Citibank, N.A. dated June 15, 2000 3. Petitioner's export sales summary P, P-1 to P-4 for the 2nd quarter of 1999 4. Credit advice and bank statements issued to P-5 to P-597 petitioner by Citibank, N.A., export sales invoices export declarations and air waybills 5. Report of the commissioned independent CPA, Q Eliseo A. Aurellado

DECISION C.T.A. CASE NO. 6310 Page6 This Court finds that the aforementioned documents proved that petitioner's products were actually sold and shipped abroad and in consideration thereof, petitioner received foreign currency payments, which were inwardly .remitted in accordance with the rules and regulations c:l the BSP. Thus, these export sales may property fall within the export sales transactions subject to zero percent (0%) VAT referred to under Section 106{A)(2)(a)(1) c:l the NIRC of 1997, as amended, instead of Section 108(8)(1) of the same Ccx:le, which deals on the sale of services. Furthermore, per its VAT Registration Certificate �w,, (Exhibit petitioner's registered business activity is sale of gocx:ls, not sale ci services. However, Section 106(A)(2)(a)(1) of the NIRC of 1997, as amended, must be read in relation to Section 113 of the same Code, as implemented by Section 4.108-1 of Revenue Regulations No. 7-95 which prescribes that a VAT registered person like petitioner, shall, for e-~ery sale, issue an invoice or receipt which must contain the following information: t- SEC. 113. Invoicing and Accounting Rt!Quirements for VAT Registered Persons. - (A) Invoidng Rt!Quirements. - A VAT-registered person shall, for every sale, issue an invoice or receipt. In addition to the information required under Section 237, the following information shall be indicated in the invoice or receipt: (1) A statement that the seller is a VAT-registered person, followed by his taxpayer's identification number (TIN); and (2) The total amount which the purchaser pays or is obligated to pay to the seller with the indication that such amount includes the value- added tax. SEC. 4.108-1. Invoidng Requirements. - All VAT-registered persons shall, for e-~ery sale or lease c:l goods or properties or services, issue duly registered receipts or sales or commercial invoices which must show: 1. the name, TIN and address of seller; 2. date ci transaction; 3. quantity, unit cost and description of merchandise or nature of service; 4. the name, TIN, business style, if any, and address of the VAT- registered purchaser, customer or client; 5. the word "zero rated" imprinted on the invoice covering zero- rated sales; and 6. the invoice value or consideration.

DEOSION C.TA. CASE NO. 6310 Page 7 XXX XXX XXX Only VAT-registered persons are required to print their TIN followed by the word '"'VAT" in their invoices or receipts and this shall be considered as a "VAT Invoice". All purchases covered by invoices other than "VAT Invoice" shall not give rise to any input tax. (Emphasis supplied) Such invoice or receipt must be duly registered with the Bureau of Internal Revenue as prescribed under Section 237 of the NIRC cl1997, to wit: SEC. 237. Issuance ofReceipts or Sales or Commercial Invoices. - All persons subject to an internal revenue tax shall, for each sale or transfer of merchandise or for services rendered valued at Twenty-five pesos (P25.00) or more, issue duly registered receipts or sales or commercial inv9ices, prepared at least in duplicate, showing the date of trahsaction, quantity, unit cost and description of merchandise or nature of service. x x x (Emphasis supplied) A scrutiny of petitioner's sales invoices7 reveals that they were not duly registered with the BIR as mandated under Section 237 of the NIRC of 1997. There was no authority to print or BIR permit number reflected on said invoices. Basic is the rule that before a printer can print receipts or sales or commercial invoices an authority to print must be secured first from the BIR by all persons who are engaged in business, pursuant to Section 238 of the NIRC of 1997. Pertinent portion of Section 238 is quoted hereunder: SEC. 238. Printing of Receipts or Sales or Commercial Invoices. - All persons who are engaged in business shall secure from the Bureau of Internal Revenue an auth~ to print receipts or sajes or COI1)mercial invoices before a printer can print the same. (Emphasis supplied) The above provision seeks to eliminate the use of unregistered and double or multiple sets of receipts by striking at the very root cl the problem - the printer (Intel case Philippines Manufacturing, Inc. w. Commissioner ofIntemal Revenue, CTA No. 6338, July ~8, 2005 citing Intel Philippines Manufacturing, Inc. w. case Commissioner ofInternalRevenue CTA No. 6~70, November 24, 2003).

DECISION C.T.A. CASE NO. 6310 Page 8 Petitioner nevertheless asserts that it was authorized by the BIR to issue such computerized sales invoices as evidenced by the permit to use computerized accounting records dated May 27, 1998 issued by the BIR in its favor.8 We do not agree. The said permit was only limited to the use of pre-numbered loose leaf computerized books of accounts, such as the General Ledger, Accounts Receivable Subsidiary Ledger, Purchase Register, Export Sales Register and Import Register and did not include the issuance of computerized sales invoices. In the case of Intsl Technology Philippines, Inc. v. Commissioner oFIntsmal Revenue, CTA EB case No. 28 {CTA case No. 6039), September :14, 2005, this Court ruled: After a careful and thorough perusal, evaluation and consideration of the instant Petition for Review, the Court En &nc finds that the absence of the Bureau of Internal Revenue's Permit to Print is fatal to petitioner's claim for refund/tax credit. In the case of Intel Philippines Manufacturing, Inc. vs. case Commissioner of Internal Revenue, CTA No. 6040, promulgated on October 24, 2003, this Court had ruled and we quote: '1t bears to emphasize that the export documents needed to substantiate the claim for refund must comply with the requirements as stated in Sections 113{A} and 238 of the Tax Code Petitioner must show proofand convince this court that it has complied with the substantiation requirements imposed before the documents presented may be considere:f as valid evidence to prove its zero-rated sales ofgoods for VAT purposes under the provisions of Section 113 of the Tax Code in relation to Section 238 of the same axle as well as Section 4.108-1 ofRevenue Regulations No. 7-95. Pertinent provisions as follows: XXX XXX XXX Here, petitioner failed. Oose savtiny of the documents presented showed that all ofpetitioner's export sales invoices (included as part ofexport sales documents marked as Exhibits RR-1 to RR-712) did not have any Bureau ofInternal Revenue Permit to Print, which contravened Section 113 and 238 of the 1997 Tax Code, nor did most of its sales invoices bear the imprinted word "zero-rated", as required under Section 4.108- 8 TSN, July 14, 2004; Exhibit -u�

DECISION C.T.A. CASE NO. 6310 Page 9 1 of Revenue Regulations 7-95. Violation of these mandatory and specific requirements is tantamount to denying such evidence to prove the zero-rated sales of goods for VAT purposes of the petitioner, pursuant to Section 3 of Rule 128 of the 1997 Rules of Court Evidently, petitioner failed to substantiate its demand for refund or issuance of a tax credit certificate. " Rules and regulations with regard to procedures are implemented not to be ignored nor taken for granted, but are to be strictly adhered to for they are developed from the law itself. Though we agree with the Honorable Supreme Court when it said that "rules rJ procedure are mere tools to facilitate the attainment of justice and that strict and rigid application rJ rules which would result in technicalities that tend to frustrate rather than promote substantial justice must always be avoided", we believe that this does not apply to the instant case. It has always been the procedure and a requirement that before any printing rJ invoices or receipts is considered, the Bureau of Internal Revenue Permit to Print should have first been obtained. As an exporter, petitioner is, or should be, aware rJ this. Section 238 of the Tax Code requires that all persons who are engaged in business should secure from the Bureau of Internal Revenue an "authority to print" receipts or sales invoices or commercial invoices before a printer can print the same. Consequently, the only proof to show that such a mandatory requirement has been complied with is by clearly imprinting the said permit number on the invoices itself. In addition, Revenue Regulations No. 2-90 restored the requirement of registering and stamping the newly printed receipts or invoices prior to their use. To quote the pertinent provision: "Sec. 19. Authentication and registration cl books, register, or records, authority to print receipts, sales and commerdal invoices, and registration and stamping of receipts and invoices: XXX XXX XXX (d) Registration and stamping of receipts and invoices. Before being used, the printed receipts, sales or commercial invoices shall be registered with the revenue district officer where the prindpal place of business of the taxpayer is located within thirty (30) days from the date of printing the same. The registration of the printed receipts or invoices shall be evidenced by an appropriate stamp on the face of the taxpayer's copy of the authority to print as well as on the front cover, on the back of the middle invoice or receipt and on the back of the last invoice or receipt of the registered booklet or pad, authenticated by the signature of the officer authorized to place the stamp thereon."

DECISION C.T.A. CASE NO. 6310 Page 10 Blunders and inaccurades of petitioner cannot be tolerated since the law is very clear with its mandatory requirements. Thus, petitioner cannot just bury itself under the Honorable Supreme Court's decision on the relaxation of the rules of procedure. (Underscoring Ours) Therefore, without duly registered VAT sales invoiC25 containing the required information, particularly the BIR authority to print, petitioner's TIN-VAT number, and the imprinted word "zero-rated", petitioner's reported export sales of P1,810,154,723.64 for the second quarter of 1999 cannot qualify for zero-rating under Section 106(A)(2)(a)(1) of the NIRC of 1997. Without zero-rated sales, petitioner's claimed input VAT payment attributable thereto cannot be granted pursuant to Section 112(A) r:l the NIRC of 1997 which allows the refund/tax credit of excess input VAT based on the existence of zero-rated or effectively zero-rated sales, to wit: "SEC. 112. ReFunds or Tax Credits ofInput Tax. - "(A) Zero-rated or Effectively Zero-rated Sales. -Any VAT-registered person, whose sales are zero-rated or effectively zero-rated may, within two (2) years after the close r:l the taxable quarter when the sales were made, apply for the issuance of a tax credit certificate or refund of creditable input tax due or paid attributable to such sales, except transitional input tax, to the extent that such input tax has not been applied against output tax: xxx'' (Emphasis supplied) Notwithstanding the foregoing, petitioner may still claim refund/tax credit of the input taxes paid on capital goods in accordance with Section 112(B) of the NIRC of 1997, which states: "SEC. 112. ReFunds of Tax Oedits ofInput Tax. - XXX XXX XXX "(B) Capital goods. - A VAT-registered person may apply for the issuance of a tax credit certificate or refund of input taxes paid on capital goods imported or locally purchased, to the extent that such input taxes have not been applied against output taxes. The application may be made only within two (2) years after the dose of the taxable quarter when the importation or purchase was made."

DECISION C.T.A. CASE NO. 6310 Page 11 Corollarily, Sections 4.106-1(b) and 4.104-5 of Revenue Regulations No. 7-95 provide as follows: "SEC. 4.106-1. Refunds or tax credits of input tax. - (a) xxx XXX XXX XXX (b) capital Goods- Only a VAT registered person may apply for issuance of a tax credit certificate or refund of input taxes paid on capital goods imported or locally purchased. The refund shall be allowed to the extent that such input taxes have not been applied against output taxes. The application should be made within two (2) years after the close of the taxable quarter when the importation or purchase was made. Refund of input taxes on capital goods shall be allowed only to the extent that such capital goods are used in VAT taxable business. If it is also used in exempt operations; the input tax refundable shall only be the ratable portion corresponding to the taxable operations. ''Capital goods or properties" refer to goods or properties with estimated useful life greater than one year and which are treated as depreciable assets under Section 29 (f), used directly or indirectly in the production or sale of taxable goods or services." "SEC. 4.104-5. Substantiation of daims for input tax credit. -(a) Input taxes shall be allowed only if the domestic purchase of goods, properties or services is made in the course of trade or business. The input tax should be supported by an invoice or receipt showing the information as required under Section 108(a) and 238 of the Code. Xxx: XXX XXX XXX (b) Input tax on importations shall be supported with the import entry or other equivalent document showing actual payment of VAT on the imported goods." Based on the above provisions, in order to be entitled to a refund/tax credit of input VAT paid on capital goods purchased, petitioner has to prove: 1) That it is a VAT registered entity; 2) That input taxes claimed were paid on capital goods duly supported by VAT invoices and official receipts; 3) That it did not offset or apply the claimed input VAT payments on capital goods against any output VAT liability; and 4) That the claim for refund was filed within the two-year prescriptive period both in the administrative and judidal levels (BASF Philippines, Inc. vs. Commissioner o' Internal Revenue, CTA case No. 6283, February 10, 2004, afflnned on January~ 2006 in CTA E.B. No. 47).

DEOSION C.T.A. CASE NO. 6310 Page 12 Based on the evidence on record, petitioner is a VAT registered entity.9 And the VAT returns for the second and third quarters of 199910 proved that the subject claim of P52,809,939.93 (inclusive of the claimed input VAT payment on importation of goods/capital equipment in the amount of P29,122,031.00) was not applied against any output VAT liability. Further, taking into account that the reckoning of the two (2)-year prescriptive period for the filing of a claim for input VAT refund starts from the date of filing of the corresponding quarterly VAT return (JIDECO MANUFACTURING PHIUPPINES, INC. vs. COMMISSIONER OF INTERNAL REVENUE, CTA case No. 6552, September :16, 2004), both the administrative claim for refund filed on August 6, 1999 and the Petition for Review filed on June 29, 2001, fall within the two-year prescriptive period counted from July 22, 1999, the date when petitioner filed its VAT return for the second quarter of 1999. Thus, all the above requisites has been complied with by the petitioner save for the second requisite. Petitioner avers that the total claim of P52,809,939.93 induded input VAT paid on importation of goods/capital equipment in the amount of P29,122,031.00. 11 However, as per the report of the commissioned CPA, out of the claimed input VAT payment of P29,122,031.00, the amount of P7,125,713.00 was not supported by documents, such as Bureau of Customs (BOC) official receipts or machine validated Import Entry and Internal Revenue Declaration establishing actual payment thereof to the BOC12, pursuant to Section 4.104-5 of Revenue Regulations No. 7-95, detailed as follows: Claimed Ref. Input Tax MC-0404-99 MC-0404-99 p 341.00 MC-0404-99 MC-0404-99 3,377.00 MC-0404-99 MC-0404-99 3 8, 855 .0 0 2,769,963.00 8,663 .00 2,571.00 9 Exhibit "Aw 10 Exhibits �o� &. "G" 11 Page 3, Petition for Review; Exhibits "D" &. "R" 12 Under Exception "A", Exhibit "Qw

DEOSION C.T.A. CASE NO. 6310 Page 13 MC-0404-99 9,078.00 MC-0404-99 696, 595 .00 N-MN905095 N-MN905095 6,105.00 JV-MN905095 1,542,092.00 N-MN905095 JV-MN905095 978,022.00 MC-060199 977,974.00 MC-060299 MC-060399 76,482.00 MC-060499 784.00 MC-060599 MC-060699 5,856.00 MC-060799 598.00 559.00 6,803 .00 668.00 327.00 p 7125 713 00 While petitioner was able to prove actual payment of the remaining input VAT of P21,996,318.00 (P29,122,031.00 less P7,125,713.00) on its importation, it nonetheless failed to submit documents, such as the detailed schedule of capital goods purchases, detailed { general ledger, and audited finandal statements proving that the related importation qualify as capital goods. It must be stressed that under Section 4.106-1(b) of RR No. 7-95, in order that the items purchased can be classified as capital goods or properties, it must be shown that: 1) the goods or properties have economic useful life of more than one year; 2) such goods or properties are treated as depreciable assets under Section 29(f) [now 34(F) of the NIRC d 1997]; and 3) they are used directly or indirectly in the production or sale of taxable goods or services. For petitioner's failure to present documents proving that its importation fall within the definition of capital goods under Section 4.106-1(b) of RR No. 7-95, the claimed input VAT payment of P21,996,318.00 allegedly attributable thereto cannot be granted. IN VIEW OF THE FOREGOING, the instant Petition for Review is hereby DENIED for lack of merit.

DECISION C.T.A. CASE NO. 6310 Page 14 SO ORDERED. WE CONCUR: ' ~ .......y-0~~~6 ERNESTO D. AGOSTA Presiding Justice CAESAR A. CASANOVA Associate Justice CERTIFICATION Pursuant to Artide VIII, Section 13 of the Constitution, it is hereby certified that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court's Division. Cl_14_. CL-t_ ERNESTO D. ACOSTA Presiding Justice Chairperson, First Division

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY FIRST DIVISION SILICON PHILIPPINES, INC. , C.T.A. CASE No. 6310 Pe t itione r , Me mb e rs: -vers us- ACOSTA, Chairman, BAUTISTA, and . CASANOVA, JJ. COMMISSIONER OF INTERNAL Pro mul gated: REVENUE, OCT~oo,.., Respondent. ~ X--- -------- -- -- --- -------- -- ---------------------------------- -- --------------- -- -- Concurring and Dissenting Opinio With du e respect to my esteemed co lleagues, although I agree with the majo rity as regards its dec ision to deny petiti oner's claim fo r refund or issuance of tax credit certifi cate fo r its unutili zed/excess inpu t va lue-added tax paid on cap ita l goods coverin g the seco nd quarter of 1999, on the ground th at petiti oner fa il ed to submit documents and other pi eces of evidence to prove that the goods were ca pitalized in its book of acco unts and subj ected to deprec iati on, I wish to mani fest my di ssent with res pect to the portion of the Decision that fo und the export sa les invo ices/recei pts in va lid, incompetent, and irreleva nt fo r fa ilure to impri nt the te rm "zero-rated" and the subsequent deni al of petitioner's claim fo r tax refund or issuance of tax credit certificate for its ze ro-rated sa les. Contrary to the view of the majority, ( I) pertinent prov isions of the 1997 Tax Code do not require imprinting of the word "zero-rated"; (2) the absence of the term

Concurring and Di ssentin g Opinion CTA Case No . 63 I0 "zero-rated" in the in vo ice does not affect the admi ss ibility and competency of the same as evidence in support of its refund claim ; (3) ass umin g the propriety of impos ing the alleged requirement to imprint the word "zero-rated" in the in vo ice, the in va lidatio n of the same and the denia l of the refund claim are not the legall y imposable penalties fo r failure to meet such alleged requirement; and (4) the other equ all y va li d pieces of ev idence presented and for mall y offered are suffic ient proof to j usti fy the gra nt of the VAT refund claim attribu ta bl e to its ze ro-rated transact ions. The relevant prov isions of th e 1997 Tax Code, namely, Sections 11 3 and 237, prov ide as fo ll ows: "Secti on 113. Invo icing and Acco untin g Requirements for VAT registered persons- (A) Invo icin g Requi rements - A VAT-reg istered person, shall , fo r every sa le, issue an invo ice or rece ipt. In addit io n to the inform at ion required under Secti on 237, the fo ll ow ing info rm ati on shall be in dicated in the in vo ice or rece ipt: 1. A state ment that the seller is a VAT-registered person fo ll owed by hi s tax paye r's identificati on num ber (T IN) ; and 2. The tota l amount which the purchase r pays or is ob ligated to pay to the se ller with the indi cation that such amount in cludes the va lue-add ed tax." XXX XXX XXX "Section 237. Iss uance of Receipts or Sales of Co mm ercial In vo ices. - All persons subj ect to an intern al revenue tax shall , fo r each sale, or transfer of merchandi se or fo r se rvices rendered va lued at Twenty five pesos (P25. 00) or more, iss ue dul y registered rece ipts or sa les or commercial invoices, pre pared at least in dupli cate, show ing the date of transacti on, qu ant ity, un it cost and desc ri pti on of merchandise or nature of service; Provided however, That in case of sa les, rece ipts or transfers in the amount of One Hundred Pesos (P100.00) or more, regard less of amount, where the sa le or transfer is made by a perso n lia bl e to va lue add ed tax to anoth er person also liab le to va lue-added tax; or where the rece ipt is issued to cover pay ment made as re ntals, commi ss ions, compensat ions or fees , receipts or

.. Concurring and Dissentin g Opinion CTA Case No. 63 I0 in vo ices shall be issued whi ch shall show the name, bu siness style, if any, and address of the purchase r; customer or client: Provided f urther, That where the purc hase r is a VAT registered person, in addition to the inform ation herein required, the invoice or rece ipt shall furth er show the Tax paye r's Identificati on Number (T IN) of the purc hase r. xxx." Clea rl y from th e forego in g, the onl y inform ation required to be indi cated in an invoice or offi cial rece ipt, as a precondition for its va lidity and for claiming a refund claim of input VAT paid , are: (1) A statement th at th e se ll er is a VAT-registered person; (2) The taxpaye rs identificati on number (TIN); (3) The total amount which the purchase r pays or is obli ga ted to pay to the se ller ind icatin g the inclusion of the va lue-ad ded tax; (4) Transacti on date; (5) Quantity of merchandi se; (6) Descripti on of merchandi se or nature of service; (7) Unit cost; (8) The name, bu siness style, if any, and address of the purchase r, customer or cli ent in the case of sa les, rece ipts or transfers in the amount of One hundred pesos (Pl 00 .00) or more, or regardless of amount, where the sa le or transfer is made by a person li able to value-added tax to another person also liabl e to value-added tax; or where the rece ipt is issued to cover payment made as rentals, commi ssions, compensations or fees; and (9) The T IN of the VAT-reg istered purchase r. Li kew ise, th e tenor of Secti on 11 2 (A) of th e Tax Code permits all VAT- registered ente rpri ses engaged in zero-rated transactions to cla im a refun d of their creditabl e input tax du e or paid to the extent that such input tax has not been applied aga inst outpu t tax wi thin a peri od of two (2) yea rs after the close of the taxable qu arter. And nowh ere is it shown th at failure to imprint the word "zero-rated" in the invoice will ca use the outri ght rejection of the refund claim . Th e lone prov ision where the "requirement" of imprinting the term "zero- rated" on th e VAT in vo ice can claim to get its auth ority from is Section 4.108- 1 of Revenue Reg ul ati ons No. 7-95 (The implementing Rules and Regulations ofthe VAT

Concurring and Di ssenting Opinion CTA Case No. 63 10 law) . However, the sa id prov tston is merely a regul ati on created fo r the so le and limited purpose of implementing a very exact law. Long-establi shed is the lega l prin ciple th at ad mini strative rul es and reg ul ations cann ot ex pand the letter and sp irit of the law they seek to enforce. And in case of conflict betwee n the bas ic law and a rul e or regul ation issued to implement said law, the law preva il s because sa id rule or regul ati on ca nn ot go beyo nd the term s and provi sions of the bas ic law (Peo ple vs. Lim , 108 Phil. 1091). The Hi gh Tribunal tn th e rece ntl y promul gated case of Commissioner of Intern al Revenu e vs. Seagate Technology (P hilippines), G.R. No. I53866, February 11, 2005, pointed out th e need to foc us onl y on the lega ll y mandated requirements for claim s fo r VAT refund and ex pl ain ed th at, A VAT-registered status, as well as compliance with the invoicing requirements (Sec tion I 13 (A) of the Tax Code), is sufficient for the effective zero rating ofthe transactions of a taxpayer. The nature of its business and transactions can easily be perused fro m, as already clearly indicated in, its VAT registration papers and p hotocopied documents attached thereto. xxx. Administrative co nvenience cannot thwart legislative mandate. Consequentl y, th e requi sites to be entitled to the refund/tax credit of un applied or unuti Iized in put VAT are as fo ll ows: I. There mu st be ze ro-rated or effecti ve ly zero-rated sa les ; 2. T hat inpu t taxes were in curred or paid ; 3. T hat the input taxes are attributab le to such zero-rated or effective ly ze ro-rated sa les; 4. T hat the input taxes were not appli ed aga in st any outpu t VAT li ability; a nd 5. T he claim for refund was fil ed within the two-year prescriptive peri od. As fo und by the maj ority, the petiti oner has sati sfi ed the forego ing requi sites and establi shed its ri ght to the tax refund th ro ugh dul y submitted materi al and

Concurring and Di ssenting Opinion CTA Case No. 63 10 doc um enta ry exhibits. The doc uments fo rm all y offered as ev idence by th e peti tioner, parti cularl y, export doc um ents, such as, export sa les in vo ices, export dec larati ons and airway bill s, export sa les summ ary, certificate of Inward Remi ttances, among oth ers, suffi cientl y prove th at the petiti oner' s export sales were actu all y made. The substantive and main requirement of the Tax Code, which is the actual sa le and shipm ent of goods to be considered as zero-rated sa les, was sati sfactoril y compli ed with and effective ly proven before thi s Court by th e petitioner. Acco rdin gly, I manifest my di ssent to the maj ority opini on insofar as it fi nds that the term "zero-rated" mu st be imprinted in the export sa les in vo ice/rece ipt to be a va lid evidence in c laiming for refund of or issuance of tax credi t certificate fo r excess input taxes, notwithstanding th e requirement stated in a BIR Regul at ion; and that failure to do so will not cause the outri ght deni al of petiti oner's claim es pec iall y as in thi s case where there are other pieces of evidence proving the ex port transactions and the taxpaye r's VAT status. Q~. t:~ ERNESTO D. ACOSTA Pres idin g Ju sti ce