CARGILL PHILIPPINES, INC. v. COMMISSIONER OF INTERNAL REVENUE ( Consolidated with Case No.7262)

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY SPECIAL FIRST DIVISION ************* CARGILL PHILIPPINES, INC., CTA CASE NOS. 6714 & 7262 Petitioner, Members: ACOSTA, Chairperson - versus - BAUTISTA, and CASANOVA, JJ. COMMISSIONER OF INTERNAL Promulgated: REVENUE, Respondent. x-------------------- - ----------------------------------------~r~~ DECISION CASANOVA, J.: This case is a consolidation of two Petitions for Review separately fi led by petitioner seeking the issua nce of a tax credit certificate for its alleged unutilized and/or unapplied input valued-added tax (VAT) for the period covering April 1, 2001 to August 31, 2004 in the aggregate amount of P50,042,344.39, broken down as follows: CTA Case No. Period Covered Amount of Claim 6714 April 1, 2001 to February 28, 2003 p 27,847,897.72 1 7262 March 1 2003 to August 31 2004 22 194 446.67 Total p 50,042,344.39 Petitioner is a co rporation duly organized and existing under and by virtue of the laws of the Repub lic of the Philippines, with principal office add ress at 14th Floor, Citiba nk Tower, 8741 Paseo de Roxas, Makati City ~ 1 Amended Petition for Review, CTA Case No. 6714, Docket, pp. 57-63 2 Stipulation of Facts, Par. 1, Joint Stipulation of Facts and Issues (JSFI), CTA Case No. 7262, Docket, p. 62; Facts Admitted Par. 1, JSFI, CTA Case No. 6714 , Docket, p. 223 ·11 GO

DECISION CTA CASE NO . 6714 & 7262 Petitioner's primary purpose is "to own, operate, run and manage plants and facilities for the production, crushing, ·extracting or otherwise manufacture and refining of coconut oil, coconut meal, vegetable oil, lard, margarine, edible oil, and other articles of similar nature and their by- products; to engage in research, breeding, developments, production, culture, processing, importation and exportation, and sale by wholesale of agricultural seeds/products of all kinds whatsoever and the rendition of technical assistance and services related thereto; to engage in the import and export business and to deal in all the goods produced and manufactured by it and the by-products thereof at wholesale; to engage in the buy and/or sell, export and/ or import, acquisition, exchange, or otherwise dealing in sugar and other related products by way of wholesale in the domestic as well as export markets and to engage in all activities, including the purchase or lease of machineries and equipment, necessary for the operation thereof. 3 Respondent, on the other hand, is the duly appointed Commissioner of Internal Revenue empowered to perform the duties of his office, including among others, the duty to act upon and approve claims for refund or tax credit as provided by law, with office address at the 5 th Floor, BIR National Office Building, Agham Road, Diliman, Quezon City. 4 Petitioner is registered with the Bureau of Internal Revenue (BIR}" as a VAT enterprise with Tax Identification No. (TIN)/VAT Registration No. 000- <@..... 3 Stipulation of Facts, Par. 6, JSFI, CTA Case No. 7262, Docket, pp . 63-64 4 Facts Admi tted, Par. 2, JSFI, CTA Case No . 6714, Docket, pp. 223-224; Stipulation of Facts, Par. 2, JSFI, CTA Case No. 7262, Docket, p. 62 . 1 ,.. 1 1 ..LO J.

DECISION CTA CASE NO. 6714 & 7262 Page 3 'of 42 110-659-000. 5 As such, it filed its Quarterly VAT Returns for the period April 1, 2001 to August 31, 2004, including the amendments thereto, on the · following dates: Original Return Amended Return Period Covered Filed on Exhibit Filed on Exhibit 2nd Qtr CY 2001 7/25/2001 E,V H (CTA Case 3rd Qtr CY 2001 10/25/2001 No. 6714) 6/11/2002 H-1 , X 4thQtr CY 2001 1/25/2002 K 6/11/2002 K-1 , Z lstQtr CY 2002 4/25/2002 N 6/1 1/2002 N-1, 88 2nd Qtr CY 2002 . 7125/2002 0 1st Qtr FY ending May 31 2003 6 9/25/2002 P, EE I 2nd Qtr FY endinq May 31 2003 12/23/2002 Q , FF 3rd Qtr FY ending May 31 2003 3/24/2003 R, GG 4th Qtr FY ending May 31 2003 6/25/2003 8 1st Qtr FY ending May 31 2004 9/25/2003 c 2nd Qtr FY endinq May 31 2004 12/22/2003 D 3rd Qtr FY ending May 31 2004 3/24/2004 E 4thQtr FY ending May 31 2004 6/25/2004 F 1st Qtr FY er1ding May 31 2005 9/23/2004 G In the said Quart.erly VAT Returns, petitioner reflected an overpayment of P44,920,350.92 for the second quarter of CY 2001 to the third quarter of FY 2003. (April 1, 2001 to February 28, 2003) and P31,915,642.26 for the fourth qua,rter of FY 2003 to the first quarter of FY 2005 (March 1, 2003 to August 31, 2004), computed as follows: 2nd Qtr CY 2001 3rd Qtr CY 2001 4th Qtr CY 2001 Taxable Sales 198,427 281.66 38 1 557 730.23 135930143.05 Zero-Rated Sales 473 354 243.00 580 569 507.00 430,276 914.00 Exempt Sales 347,042 710.03 728 331 292.00 611 710 221.00 Total Sales 1 018 824 234.69 1 690,458,529.23 1 177 917 278.05 Output VAT 19 842 728. 17 38 155 773 .02 13 593 014.31 Less : Input Ta x Carried-over from prev qtr 38 199 071.54 36 933 754.79 27 325 991.94 5 Stipulation of Facts, Par. 3, JSFI, CTA Case No. 7262, Docke t, p. 63 6 Petitioner changed from the calendar year [CY] basis of accounting to the fi sca l year [FY] (TSN, December 9, 2004, CTA 6714, docket, pa.ge 250)

DECISION CTA CASE NO . 6714 & 7262 Presumptive Input Ta x - 4 496 217.15 492 914.62 Domestic purchases 18 577 4li.42 10 621 081.02 16 134 087.46 Total available Input Ta x 56 776 482.96 52 051 052 .96 43 952 994.02 Less Anv VATRefund/TCC Claimed Net Creditable Input Tax VAT Payable/(Excess Input Tax) (36 933 754 .79) (13 895 279.94) (30 359 979.72) Less: Advance Payment - 13 430 712.00 1 840 000.00 Tax Payablef(Overpayment) (36 933,754.79) -(27,325,991.94) (32 199 979.72) 1st Qtr CY 2002 2nd Otr CY 20 0 2 1st Qtr FY 2003 Ta xable Sales 422 325 623.80 169 245 889 .30 63 206 898.90 Zero-Rated Sales 562 453 504.00 652 076 777.48 476 081 386.20 Exempt Sales 702,752 521.00 1 498 589 400.75 817,614 934.90 Total Sales · 1,687,531, 648.80 2 319,912,067.53 1 356 9 0 3 220.00 Output VAT 42 232 562.38 16 924 588.93 6 320 689.89 Less: Input Tax Carried-over from prev qtr 32 199 979.72 34 777 354.76 35 063 698.15 Presumptive Input Ta x - - - Domestic purchases 44 809 937.42 17 210 932.32 9 553 468.44 . Total available Input Tax 77 009 917.14 51 988 287.08 44 617 166.59 Less Any VATRefund/ TCC Claimed Net Creditable Input Tax VAT Payable/(Excess Input Ta x) (34 777 354.76) (35 063 698.15) (38 296 476.70) Less: Advance Payment - - - Tax Payable/(Overpayment) (34 777 354.76) (35,063 698.15) (38 296 476.70) 2nd Qtr FY 2003 3rd Qtr FY 2003 4th Qtr FY 200 3 Taxable Sales 320 894 788.30 250 257 189.10 52 860 375.10 Zero-Rated Sales 559 506 262.00 883 282 689.80 841 599 114.80 Exempt Sales 1 244 467 41 7.39 1 074 034 268.57 956 876 268.40 Total Sa les 2 124 868 467.69 2,207,574 147.47 1,851,335 758 .30 Output VAT 32 089 478.83 25 025 718.9 1 5,286 037.51 Less : Input Ta x Carried-over from prev qtr 38 296 476.70 43 947 479 .27 44 920 350.92 Presumptive Input Ta x 366,627.73 1 346 124.84 1 919 473.9.5 Domestic purchases 36,190,306.68 16,233 369.67 10 613 969.33 Total available Input Ta x 74 853 411.11 61 526 973.78 57 453 794.20 Less Any VATRefund/TCC Claimed Net Creditable Input Tax VAT Payable/ (Excess Input Ta x) (42 763 932.28) (36,501 254.87) (52 167 756.69) Less: Advance Payment 1 183 546.99 8,419 096.05 10,346 816.52 Tax Payable/(Overpayment) (43 947 479 .27) (44,920 350 .92) (62 514 573.21) 1st Qtr FY 2004 2nd Otr FY 2004 3rd Otr FY 2004 Taxable Sales 87 444 776. 10 63 268 426.40 31 675 341.20 Zero-Rated Sales 686 995 052.00 807,345 023.00 1 239 127 372.00 Exempt Sales 1 006 442 323 .06 981 046 593.00 978 272 042.77 Total Sales 1 780 882 151.16 1,851.660 042.40 2 249 074 755 .97

DECISION CTA CASE NO. 67 14 & 7262 Output VAT 8 744 477.6 1 6 326 842.64 .I 3 167 534. 12 Less : Input Ta x Carried-over from prev qtr 62 514 573.2 1 32 928 208.72 26 034 524.98 Presumpt ive Input Tax - - 63 543.83 Domestic pu rcha ses 5 28 1 078.93 3 607 119.81 3 702 213. 10 Total availa ble Input Ta x 67 795 652.14 36 535 328. 53 29 800 28 1.9.1 Less Any VATRefund/TCC Claimed 26 122 965.8 1 4 173 960.91 Net Creditable Input Ta x 41 672 686.33 32 361 367.62 VAT Payable/ (Excess I nput Tax) (32 928 208. 72) (26 034 524 .98) (26 632 74 7. 79) Less: Adva nce Payment - . 419 748.00 Tax Payable/(Overpayment) (32 928 208 .72) (26 034,524 .98) (27 052 495.79 ) 4 th Qtr FY 2004 1st Qtr FY 2005 Ta xable Sales 22 632·468.20 5 341 002.60 Zero-Rated Sa les 1 586 425 474.00 1 202 714 182 .53 Exem pt Sales 1 562 169 435 .00 1 209 725 224.60 Total Sales 3 17 1 2 27 377.20 2,417,780, 409.73 Outpu t VAT . 2 263 246.82 534 100.26 Less : I nput Tax Ca rri ed-over from _Qrev qtr 27 052 495 .79 28 768 355.45 Presumpti ve lnJJut Ta x 45 758.00 - Domestic purchases 3 603 407.48 4 194 111.97 Total availabl e I I}Qut Ta x 30 70 1 66 1. 27 32 962 467.42 Less Any VAT Refun d/TCC Claim ed - 512 724 .9.0 Net Cred itable Input Tax 30 701 661.27 32 449 742 .52 VAT Payable/( Excess In put Tax) (28 438 414.45) (31 915 642.26) Less: Advance Payment 329 941.00 - Ta x Pay a ble f (Ov e~CI}'ment) (28, 768,355.45) (31 915 642.26) ,. On June 27, 2003, petitioner filed with the BIR a written application for the refund of the amount of P26,122,965.81 representing unutilized input VAT for the period April 1, 2001 to February 28, 2003. 7 Due to respondent's inaction on its claim and in order to toll the run ning of the two-year prescriptive period within which to file a judicial claim for refund, petitioner filed before this Court a Petition for Review docketed as CTA Case No. 6714 on June 30, 2003. On July 29, 2003, respondent fil ed his Answe r 8 praying that the Petition for Review be dismissed for lack of merit.~ 7 Facts Ad mi tted, Par. 4, JSFI, CTA Case No . 6714, Docket, p. 224 1i6 ;

DECISION CTA CASE NO. 67 14 & 72 62 On September 29, 2003, petitioner filed with the BIR a supplemental application increasing the amount of unutilized input VAT to· be claimed as refund for the period April 1, 2001 to February 28, 2003 from the original amount of P26,122,965.81 to P27,847,897.72. 9 '· On October 1, 2003, petitioner filed a Motion for Leave of Court to Amend Petition for Review 10 dated September 29, 2003. As stated in paragraph 4 of petitioner's motion: Upon further verification of its supporting documents for the instant claim for refund or issuance of TCC, petitioner determined that its unutilized or unapplied input taxes I attributable to its export sales is P27,847,897.72 and not P26,122,965.81 as indicated in the Petition; for Review filed with the Honorable Court. This court issued a Resolution 11 dated October 22, 2003 granting petitioner's Motion for Leave of Court to Amend Petition for Review and also admitting the Amended Petition for Review filed on October 1, 2003. On December 4, 2003, respond ent filed his Motion for Leave to Amend Answer 12 which th e Court granted in open court oh· February 6, 2004. In his Amended Answer 13 , respondent raised the following Special and Affirmative Defenses : " 4. He reiterates and pleads the preceding paragraphs of this answer as part of his Special and Affirmative Defenses; 5. Petitioner's alleged claim for refund is subject to administrative investigation/examination by the respondent;~ a Docket, pp. 44 -50 9 Facts Admitted, Par. 5, JSFI , CTA Case No. 6714, Docket, p. 224 10 Docket, pp. 53-56 11 CTA Case No. 6714, Docket, p. 100 12 Docket, pp . 102-103 13 CTA Case No . 6714, Docket, p. 105 1165

DECISION CTA CASE NO. 6714 & 7262 6. To support its claim, it is imperative for petitioner to prove the following, viz: a. The registration requirements of a value-added taxpayer in compliance with Section 6(a) and (b) of Reve nue Regulations No. 6-97 in relation to Section 4.107-1(a) of Revenue Regulatio ns No. 7-95 and Section 236 of the Tax Code, as amended; . b. The invoicing and accounting requirements for VAT-reg istered persons, as well as the filing and payment of VAT in compliance with the provisions of Sections 113 and 114 of the Tax Code, as amended; c. Proof of compliance with the prescribed checklist of require ments to be submitted involving claim for VAT refund · in pursuance to Revenue Memorandum Order .· No. 53-98, otherwise there would be no sufficient compliance with the filing of administrative claim for refund, the administrative claim thereof being mere pro'-forma, which is a condition sine qua non prior to the filing of judicial claim in accordance with the provision of Section 229 of the Tax Code, as amenqed. It is worthy of emphasis that Section 112 (D) of the Tax Code, as amended, requires the submission of complete documents in support of the application filed with the Bureau of Internal Revenue before the 120-day audit period shall apply, and before the taxpayer could avail of judicial remedies as provided for in the law. Hence, petitioner's failure to submit proof of compliance with the . above-:stated requirements warrants immediate : dismissal of the petition for review. d. That the input ta xes of P27,847,897.72 allegedly : paid by the petitioner on its purchases of goods and services for the period April 1, 2001 to February 28, 2002 were attributable to its export sales and such have not been applied against ~

DECISION CTA CASE NO. 6714 & 7262 any output tax and were not carried over in the succeeding taxable quarter or quarters; e. That petitioner generated export sales in the aggregate . amount of P4,141,519,935.94 for the same period and those were paid for in acceptable foreign currencies and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP), which were made the basis for the application for refund; f. That petitioner's administrative and judicial claims for tax credit or refund of the unutilized input tax (VAT) was filed within two (2) years after the close of the taxable quarter when the sales were made in · accordance with Sections 112 (A) and (D) and 229 of the Tax Code, as amended; g. That petitioner's domestic purchases of goods and services were made in the course of its trade or business, properly supported by VAT invoices and/or official receipts and other documents, such as subsidiary purchase Journal, showing that it actually paid VAT in accordance with Sections 110 (A) (2) and 113 of the Tax Code, as amended, and in pursuance to Section 4.104-5 (a) & (b) of Revenue Regulations No. 7- 95 (Re: Substantiation of Claims for Input Tax Credit); h. The requirements as enum~rated under Section 4.104-2 of the Revenue Regulations 7-95. (Re: Persons who can avail of the Input Tax Credits); 7. Furthermore, in an action for refund the burden of proof is on the taxpayer to establish its right to refund and failure to sustain the burden is fatal to the claim for refund/credit. Th.is is so because exemptions from taxation are highly disfavored in law and he who claims exemption must be able to justify his claim by the clearest grant of organic or . statutory law. An exemption from common burden cannot be permitted to exist upon vague implications. (Asiatic Petroleum Co. [P.I.] v. Llanes/ 49 Phil. 466 cited in Collector of Internal Revenue v. Manila Jockey Club Inc./ 98 Phil. .670);~

DECISION CTA CASE NO. 6714 & 7262 8. Claims for refund are construed strictly against the claimant for the same partake the nature of exemption from taxation ." On May 31, 2005, petitioner filed with the Large Taxpayers Service of the BIR an administrative claim for refund of unutilized input taxes for the period covering March 1, 2003 to August 31, 2004 in the total amount of P22,194,446.67 .14 On even date, petitioner filed before this Court a Petition for Review 15 docketed as CTA Case No. 7262 praying for the issuance of a tax credit certificate corresponding to its alleged unutilized input taxes for the period · March 1, 2003 to August 31, 2004 in the amount of P22,194,446.67. On July 21, 2005, respondent filed his Answer 16 in CTA Case No. 7262 alleging by way of Special and Affirmative Defenses that: " 4. Petitioner's alleged claim for refund is subject to administrative routinary investigation/examination by the Bureau; 5. The amount of P22,194,446 .67 being claimed by petitioner as alleged unutilized and/or unapplied input VAT for the period covering 1 March 2003 to .31 August 2004 was not properly documented; 6. In an action for refund, the burden of proof is on the taxpayer to establish its right to refund, and failure to sustain the burden is fatal to the claim for refund/credit; 7. Petitioner must show that it has complied with the provisions of Sections 204 (C) and 229 of the Tax Code on the prescriptive period for claiming .· . refund/ credit;@. 14 Stipulation of Facts, Par. 4, JSFI, CTA Case No. 7262, Docke t, p. 63 15 Docket, pp. 1-7 (Case No. 7262 ) 16 Docket, pp. 30-34 (Case No . 7262) 116 3

DECI SION CTA CASE NO. 67 14 & 7262 8. Claims for refund are construed strictly against the claimant for the same partake the nature of exemption from taxation (Commissioner of Internal Revenue vs. Ledesma/ 31 SCRA 95) and such, they are looked upon with disfavor. ( Western Minolco Corp. vs. Commissioner of Internal Revenue/ · 124 SCRA 1211) ." On July 2, 2007, petitioner filed a Motion for Consolidation 17 of CTA Case No. 6714 with CTA Case No. 7262 considering that these cases involve · common questions of law and of facts, albeit for different periods and in view of the necessity of proving that petitioner had sufficient input VAT from previous quarters to apply against its output VAT ·liability. The Court granted the said Motion in a Resolution 18 dated July 10, 2007 . During the proceedings, petitioner proffered testimonial and documentary evidence. Respondent, on th e oth er hand, waived his right to present evidence. 19 Both parties having filed their respective memorandum, the case was submitted fqr decision on August 24, 2009. 20 The ~arties presented the following issues for this Court's resolution: 'I ' CTA Case No. 6714 "1. Whether or not Petitioner has filed its administrative (original and supplemental) and judicial claims for refund or issuance of TCC in the aggregate amount of P27,847,897. 72 within the prescriptive period of two (2) years .~ 17 CTA Case No. 7262, Docket, pp . 357-36 1 18 CTA Case No. 7262, Docket, pp. 470-471 19 CTA Case No. 6714, Docket, p. 676 20 CTA Case No. 6714, Docket, p. 863 1168

DECISION CTA CASE NO. 6714 & 7262 2. Whether or not for the period April 1, 2001 to February 28, 2003, petitioner generated zero-rated export sales. 3. Whether or not the foreign exchange proceeds of petitioner's zero-rated export sales were duly accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP). 4. Whether or not for the period April 1, 2001 to February 28, 2003 Petitioner paid input VAT in the total amount of P27,847,897.72 on its purchases of goods and services attributable to export sales. 5. Whether or not the invoicing and accounting requirements for VAT-registered persons, as well as the filing and payment of VAT for the period covered has been complied with by the Petitioner. 6. Whether or not the checklist of requirements prescribed in Revenue Memorandum Order No. 53 -98 in connection with the administrative claim for refund has been complied with by the Petitioner. 7. Whether or not the aforementioned input VAT in the total · amount of P27,847,897.72 were applied against petitioner's output VAT liability in the succeeding quarters. 8. Whether or not Petitioner is entitled to the claim for refund and/or issuance of a Tax Credit Certificate (TCC) in the amount of P27,847,897.72 representing unutilized and/or unapplied input VAT attributable to export sales for the period April 1, 2001 to February 28, 2003." . CTA Case N o. 7262 " 1. Whether or not Petitioner has unapplied or unutilized input VAT for the 4th quarter of fiscal year ending 31 May 2003, the 1st, 2nd, 3rd and 4th quarters of fiscal year ending 31 May 2004, and the 1st quarter of fiscal year ending 31 May 2005, arising from its purchases of goods and services attributable to its zero- rated export sales ·during the period covering 1 Marc~

DECISION CTA CASE NO . 6714 & 72 62 2003 to 31 August 2004 in the total amount of P22,194,446.67 that can be the proper subject of a claim for refund pursuant to Section 110(8) and Section 112(A) of the Tax Code, as amended. 2. Whether or not the unutilized input taxes for the 4th quarter of fiscal year ending 31 May 2003, the 1st, 2nd, 3rd, and 4th quarters of fiscal year ending 31 May 2004 and the 1st quarter of fiscal year ending 31 May 2005 are substantiated by proper invoices and official receipts; and 3. Whether or not the said unutilized input VAT for the 4th quarter of fiscal year ending 31 May 2003, the 1st, 2nd, 3rd and 4th quarters of fiscal year ending 31 May 2004 and the 1st quarter of fiscal year ending 31 May 2005 were carried over to the succeeding taxable quarter(s) and applied against any of the output VAT liability of the petitioner for the said period." The issues raised by both parties boil down to the principal issue of whether or not petitioner is entitled to the issuance of Tax Credit Certificate (TCC) for its alleged unutilized input VAT covering the periods of April 1, 2001 to February 28, 2003 and March 1, 2003 to Augu st 31, 2004 in the respective amounts of P27,847,897.72 and P22,194,446.67, or in the sum of P50,042,344.39. Petitioner anchors its claim on Sections 110(6) and 112(A) of the NIRC of 1997, as amended, which allow the refund/ta x credit of unutilized input VAT attributable to zero-rated or effectively zero-rated sales, to wit: " SEC. 110. Tax Credits. - (A) Creditable Input Tax. - (1) Any input tax evidenced by a VAT invoice or official receipt issued in accordance with Section 113 hereof on the following transactions shall be creditable against the output tax : XXX XXX XXX ~

DECISION CTA CASE NO . 6714 & 7262 (B) Excess Output or Input Tax - I f at the end of any taxable quarter the output tax exceeds the input tax, the excess shall be paid by the VAT-registered person . If the input tax exceeds the output tax, the excess shall be carried over to the .. succeeding quarter or quarters. Any input tax attributable to the f. purchase of capital goods or to zero-rated sales by a . VAT- registered person may at his option be refunded or credited against other internal revenue taxes, subject to the provisions ofSection 112." "SEC. 112. Refunds or Tax Credits of Input Tax- (A) Zero-rated or Effectively Zero-rated Sales. - Any VAT-registered person, whose sales are zero-rated or effectively zero-rated may, within two (2) years after the close of the taxable quarter when the sales were made, apply for the issuance of a tax credit certificate or refund of creditable input tax due or paid attributable to such sales, except transitional input tax, to the extent that such input tax has not been applied against output tax: Providecf however, That in the case of zero-rated sales under Section 106(A)(2)(a)(1),(2) and (B) and Section 108(6)(1) and (2), the acceptable foreign currency exchange proceeds thereof had been duly accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP): Provided further, That where the taxpayer is engaged in zero-rated or effectively zero-rated sale and also in. taxable or exempt sale of goods or properties or services, and the amount of creditable input tax due or paid cannot be directly and entirely attributed to. any one of the transactions, it shall be· allocated proportionately on the basis of volume of sales." From the foregoing provisions, in order to be entitled to a refund/ta x credit of unutilized input VAT, the following conditions must be present: 1. there must be zero-rated or effectively zero-rated sales; 2. that input taxes were incurred or paid; 3. that such input taxes are attributable to zero-rated sales or effectively zero-rated sales; 4. that the input taxes were not applied against any output VAT liability; and 5. that the claim for refund was filed within the two-year prescriptive period. _t$._. . w, ') 1 .J_ ( .....

DECISION CfA CASE NO . 67 14 & 7262 This Court shall first resolve petitioner's compliance with the fifth requisite which is the timeliness of the filing of the instant claims both in the administrative and judicial levels. The Supreme Court, in the case of Atlas Consolidated Mining and Development Corporation vs. Commissioner of Internal Revenue 21 , held that the two-year prescriptive period for the filing of VAT refund claims is reckoned from the date of filing of the corresponding Quarterly VAT Returns. Although in the case of Commissioner of Internal Revenue vs. Mirant Pagbilao Corporation (Formerly SOUTHERN ENERGY QUEZON, INC.) 22 , the Supreme Court held that the reckoning of the two-year prescriptive period for the filing of a claim for input VAT refund starts from the close of the taxable quarter when the relevant sales were made, this Court finds it proper to apply said ruling to cases filed after the promulgation date of the Mirant case in view of the numerous rulings of the Supreme Court upholding. the prospective application of decisions.23 Records indicate that petitioner originally filed its administrative claim for refund of input VAT covering the period Apr'il 1, 2001 to February 28, 2003 on June 27, 2003 24 and its judicial appeal with this Court, by way of Petition for Review, docketed as CTA Case No. 6714, on June 30, 2003 . On the other hand, petitioner filed its administrative claim for refund of input VAT · ~ 21 G.R. Nos. 14 1104 & 148763, June 7, 2007 22 G.R. No. 172 129, September 12, 2008 23 Sps. Benzonan vs. Court of Appe als, G.R. No. 97998, January 27, 1992; Columbia Pictu res, Inc. vs. Court of Ap pea ls, G.R. No. 110318, August 28, 1996; Co vs. Court of Appea ls, G.R. No. 100776, October 28, 1993; Columbia Pictures, I nc. vs. Court of Appea ls, G.R. No . 1103 18, August 28, 1996; E;'eroto vs. Sandiganbayan (Special Division) G.R. NO. 157294-95, November 30, 2006 24 Facts Admitted, Par, 4, JSFI, CfA Case No. 6714, Docket, p. 224 :>

DECISION CTA CASE NO . 6714 & 7262 covering the period March 1, 2003 to August 31, 2004 and the Petition for Review, docketed as CTA Case No. 7262, on the same day of May 31, 2005. Al l of the preceeding dates of filing fall within the two-year prescriptive period reckoned from the respective dates of filing bf the Quarterly VAT Returns for the periods April 1, 2001 to February 28, 2003 and March 1, 2003 to August 31, 2004. Proceeding to the first requisite, petitioner, in its Quarterly VAT Returns for the subject periods of claim, reflected zero-rated sales in the amounts of P4,617,601,283.48 and P6,364,206,218.33, respectively, detailed as follows: Exhibit Period Covered Zero- Rated Sales CTA Case No. 6714 E V 2nd Qtr - CY 2001 p 473 354 243.00 H-1, X 3rd Qtr - CY 2001 580,569,507.00 K-1 Z 4th Qtr- CY 2001 430 276 914.00 N- 1, BB 1st Qtr - CY 2002 562,453,504.00 0 2nd Qtr- CY 2002 652 076 777.48 P, EE 1st Qtr- FY endinq May 31, 2003 476 081,386.20 Q, FF 2nd Qtr- FY endinq May 3 1 2003 559 506 262 .00 R,GG 3rd Qtr - FY ending May 31, 2003 883,282,689.80 Total P4, 617,601, 283.48 CTA Case No. 7262 B 4th Qtr- FY ending May 31, 2003 p 841,599,114.80 c 1st Qtr - FY endinq May 31, 2004 686 995 052.00 D 2nd Qtr - FY endinq May 31, 2004 807,345,023.00 E 3rd Qtr - FY ending May 31, 2004 1,239,127,372.00 F 4th Qtr- FY ending May 31 2004 1,586,425,474.00 G 1st Qtr - FY ending May 31, 2005 1,202, 714, 182.53 Total P6 364,206, 218 .33 Petitioner maintains that its export sales of coconut oil, the proceeds of which were paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the BSP are subject to zero percent (0%) VAT pursuant to Section 106(A)(2)(a)(1) of the NIRC of 1997, as amended, which states:~ # .. . ~ 1 .!. { " t

DECISION CTA CASE NO. 6714 & 7262 "SEC .106. Value-Added Tax on Sale oF Goods or Pr operties. - . (A) Rate and Base oF Tax,- xxx 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 shipm ent of goods from the Philippines to a foreign country, irrespective 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 se rvices, and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP)." Prescinding from the above law, in order for an export sale to qualify as VAT zero-rated, the following conditions must be present: 1.) there was sale and actual shipment of goods from the Philippines to a foreign country; 2.) the sale was made by a VAT registered person; 3.) the sale was paid for in acceptable foreign currency or its equivalent in goods or services; and 4.) the payment was accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas. Petitioner satisfied all of the above requisites. The fact that petitioner is a VAT registered entity is not disputed 25 . For the periods covering April 1, 2001 to February 28, 2003 and March 1, 2003 to August 31, 2004, petitioner shipped and sold its products of crude coconut oil and copra expeller cake/meal/pellets to various foreign buyers abroad and generated export sales in the respective amounts of P4,617,601,334.09 26 and 27 P6,374,292,417.79 as evidenced by export sales invoices, expo"k_ 25 Sti pulation of Facts, Par. 3, JSFI, CTA Case No. 7262, Docket, p. 62; Exhibit D, CTA Case No. 6714 26 Exhibit "CC-6", Annex A, page 3, CTA Case No. 6714 27 Sum of P6,364,206,217.79 and P10,086,200.00 as appearing in Exhibit " M" attached to Exhibit "P-2" and Exhibit "M.l" attached to Exhibit "P", CTA Case No. 7262 1 ... r: 1 ..L ( J

DECI SION CTA CASE NO . 6714 & 7262 declarations and bills of lad ing .28 Likewi se, th e foreign currency proceeds thereof (in US dollars) were inwardly remitted in accordance with the rules and regulations of the BSP as shown by the bank notices from JP Morgan Chase Bank (Singapore), credit advices from Standard Chartered Bank - Makati and exports bill payment advices from Hongkong and Shanghai 29 Banking Corporation - Manila Main offi ce. A comparison of the total amounts of zero-rated sales for the periods April 1, 2001 to February 28, 2003 and March 1, 2003 to August 31, 2004, as reflected in the Quarterly VAT Returns, with the amounts shown in the summaries of zero-rated sales and related export documents disclosed the following discrepancies: April 1, 200 1 to M arch 1, 2003 to February 28, 2003 Augu st 31, 2004 ( CTA Case No. 67 14) (CTA Case No. 7262) . Ze ro- Rated Sales Per VAT Returns p . 4 617 601,283.48 p 6 364 206 218.33 Ze ro-Ra ted Sales Per Summary/Export Docu ments 4 617 601 334.09 6 374 292 417.79 Difference p (5 0 .61) p (10,086 ,1 99 .46 ) ' Petitioner was unable to account for th e minor discrepancy of P50.61. However, the sales discrepancy of P10,086,199.46 pertains to petitioner's zero-rated sales in March 2003 whi ch were erroneously classified as exempt sales in its VAT Return 30 . ~ 28 Exhibits "000000-1" to "000000-892", CTA Case No. 6714 ; Exhibits "M M-1" to "MM-74" and " MMMM- 1" to " MMMM-74", CTA Case No. 7262 29 Exhibits " PPPPPP-1 " to " PPPPPP-197", CTA Case No . 6714 and Exhibits " MMM -1" to "MMM-74", CTA Case No. 7262 30 Exhibit "M.1" attached to Exhibit "P", CTA Case No. 7262

DECISION CTA CASE NO. 6714 & 7262 Pag e 18 of 42 After having resolved that petitioner had VAT zero- rated export sales for the subject period of claim, we shall now determine the amount of unuti lized excess input VAT attributable thereto. In its Quarterly VAT Returns for the periods April 1, 2001 to February 28, 2003 and March 1, 2003 to August 31, 2004, petitioner's declared input VAT arising from its domestic purchases of goods and services amounted to P169,330,594.43 and P31,001,900.62, respectively, totaling to P200,332,495 .05, broken down as fo llows: Exhibit Period Covered Input VAT CTA Case No. 67 1 4 EV 2nd Qtr CY 2001 p 18 577 411.42 H- 1 X 3rd Qtr CY 2001 10 621,081.02 K-1 Z 4th Qtr CY 2001 16 134,087.46 N-1, BB 1st Qtr CY 2002 44 809,937.42 0 2nd Qtr CY 2002 17 210 932.32 P EE 1st Qtr FY ending May 31, 2003 9 553,468.44 Q. FF 2nd Qtr FY ending May 31 2003 36 190 306.68 R,GG 3rd Qtr FY ending May 31, 2003 16,233,369.67 Subtotal p 169, 330,594.43 CTA Case No. 7262 B 4th Qtr FY ending May 31, 2003 p 10 613,969.33 c 1st Qtr FY ending May 31 2004 5 281 078.93 D 2nd Qtr FY ending May 31, 2004 3 607,119.81 E 3rd Qtr FY ending May 31 2004 3 702 213.10 F 4th Qtr FY ending May 31, 2004 3,603,407.48 G 1st Otr FY ending May 31, 2005 4 194 111.97 Subtotal p 31,001,900.62 Total p 200,332,495.05 Out of the aforestated . input taxes of P200,332,495.05, only the following input taxes, in the aggregate amount of P50,042,344.49, are covered by the instant claims:~ ~ ... .., 1 .a. { i

DECISION CTA CASE NO . 67 14 & 7262 INPUT VAT Balance Not Period Cove r ed Pe r VAT Returns Per Cla i m Claimed Apri l! 2001 to February 28 2003 p 169 330 594.43 p 27 847 897. 72 p 141 482 696 .71 March 1 2003 to Aug. 31 2004 31,00 1 900.62 22 194,446.67 8 807 453 .95 Total P200 332 495 .05 P50 042 344.39 P150 290 150.66 To verify petitioner's inpwt VAT claim for the period April 1, 2001 to February 28, 2003 (for CTA Case No. 6714), the Court commissioned the independent CPA (ICPA) firm, Sycip Gorres Velayo & Co. (SGV & Co.), through its Partner, Mr. Henry M. Tan. Based on SGV & Co.'s review and va lidation of petitioner's input VAT claim, it was observed that petitioner's operations are divided into the following business units31 : BUSINESS UNIT DESIGNATION 1 Oil seeds Oils a. Makati operations Makati b. General Santos City operations GSC c. Marqosatubig operations Margosatubig d. Branch operations Branches 2 Meals and Grains WMT Animal Feeds (Cargill Anim al 3 Nut rition ) CAN a. Baliuaq ooerations Baliuaq b. Pulilan operation s Pulilan c. Villasis operation s Villasis d. General Santos City operatio ns GSC 4 Suqar Sugar 5 Administ ra tion Admi n Petitioner records its transactions based on these business' units. Each business unit is assigned a code to identify which unit the sa les and ' purch~ses pertain to . The following are the activities and tax treatment of petitioner's business units 32 : BUSINES S UNI T ACTIVI TY 1. Oil s Sale of crud e coconut oi l and 31 Exhibit "CC-4", p . 6 32 Ibid 1 ..i..- ...( u()

DECISION CTA CASE NO. 6714 & 7262 copra expeller pellet meal treated as zero-rated . Domestic sales of crude coconut oil are subjected to ro%Vat w hile sales of copra expeller pellet meal to local manufacturers · of animal feeds are treated as VAT- exempt. Sale of soybean meals and other 2. WMT feed ingredients in the domestic This activity is treated market as VAT exempt The Company treats its sales of animal feeds as VAT- Domestic sale of feed ingredients , exempt. On the other 3. CAN animal feeds , and specialty feeds hand , sales of specialty animal feeds are subjected to 10% VAT. Sale of raw sugar is treated as VAT- Domestic sale of raw and refined exempt while the sale 4 . Sugar sugar of refined sugar is subjected to 10% VAT Petitioner's claims for refund include input taxes from Oils and Admin. All input taxes arising from common expenses were claimed under Admin but the subject claim for refund includes only the input taxes arising from Admin expenses that are either directly attributable or allocable to zero-rated sales. No input taxes from Sugar, WMT and CAN (collectively referred to as the "Other Business Units") are subject of the instant claim for refund. 33 Upon examination of petitioner's summary lists of purchases 34 and the related suppliers' invoices and official receipts 35 for the period April 1, 2001 to~ 33 Exhibit "CC-4", p. 7, CTA Case No. 6714 34 Exhibits "EE-1" to "EE-158", "FF- 1" to "FF-46", "GG-1" to "GG-23", "HH-1" to "HH -42: , "II-1" to "II- 41 ", CTA Case No. 6714 35 Exhibits "JJ-1" to "JJ-1068", "KK- 1" to "KK-1116", "LL-1" to "LL-975", "MM-1" to "MM-860 ", "NN-1 " to "NN-1161", "00-1 " to "00-8 18", "PP-1" to " PP-1138", "QQ-1" to "QQ-1097", "RR-1" to "RR-104", "SS- 1" to "SS-111 ", "TI-l " to "TI-132", "UU-1 " to "UU -115", "VV-1" to "VV-111", "WW-1" to "WW-63 ", "XX-1" to "XX- 106", "YY- 1" to "YY- 127", "ZZ-1" to "ZZ-58", "AAA- 1" to "AAA-76 ", " BBB-1" to "BBB- 55", "CCC-1" to "CCC-25", " DDD-1" to "DDD-18", "EEE-1 " to "EEE-25", "FFF-1 " to "FFF-39", "GGG-1" 1l"i 9

DECISION CTA CASE NO. 67 14 & 7262 February 28, 2003 as well as t he fina l and consolidated report of Mr. Henry M. · Tan of SGV & Co. 36 , this Court found that out of the reported input VAT of P169,330,594.43, only the amount of P165,655,103.00 is duly substantiated in accordance with Sections 110(A) and 113(A) of the NIRC of 1997, as amended, in relation to Sections 4.104-1, 4.104-5 and 4.108-1 of Revenue Regu lations (RR) No. 7-95, the pertinent provisions of which are hereinbelow quoted, to wit: NIRC of 1997 "SEC. 110. Tax Credits.- (A) Creditable Input Tax.- (1) Any input tax evidenced by a VAT invoice or official receipt issued in accordance with Section 113 hereof on the following transactions shall be creditable against the output tax : (a) Purchase or importation of goods: (i) For sale; or . (ii) For conversion into or intended to form part of a finished product for sale including packaging materials; or (iii) For use as supplies in the course of business; or (iv) For use as materials supplied in the sale of service; or (v) For use in trade or business for which deduction for depreciation or amortization is allowed under this Code, except automobiles, aircraft and yachts. (b) Purchase of services on which a value-added tax has been actually paid. (2) Th e input tax on domestic purchase of goods or properties shall be creditable. (a) To the purchaser upon consummation of sale and on importation of goods or properties; and~ to "GGG-17", " HHH-1" to "HHH -449 ", "III-1" to "III-459 ", "JJJ-1" to "JJJ-459", "KKK-1" to "KKK- 537", "LLL-1" to "LLL-527", "MMM -r to "MMM-424", "NN N-1" to "NN N-576", "000 -1" to "000-69 7", "PPP- 1" to "PPP-329 ", "QQQ-1" to "QQQ- 501 ", " RRR- 1" to " RRR-229 ", "SSS- 1" to "SSS-348", "TIT-1 " to "TIT-289", "UUU -1" to "UUU-168", "VVV- 1" to "VVV-455: a nd "WWW- 1" to "WWW-536, CTA Case No. 6714 36 Exhi bit "CC-4", CTA Ca se No . 67 14 1l3 0

DECISION CTA CASE NO. 6714 & 7262 (b) To the importer upon payment of the value-added tax prior to the release of the goods from the custody of the Bureau of Customs. However, in the case of purchase of ·services, lease or use of properties, the input tax shall be creditable to the purchaser, lessee or licensee upon payment of the compensation, rental, royalty or fee. (3) A VAT-registered person who is also engaged in transactions not subject to the value-added tax shall be allowed tax credit as follows: (a) Total input tax which can be directly attributed to transactions subject to value-added tax; and (b) A ratable portion of any input tax which cannot be directly .attributed to either activity. The term 'input tax means the value-added tax due from or paid by a VAT-registered person in the course of his trade or business on importation of goods or local purchase of goods or services, including lease or use of property, from a VAT-registered person. It shall also include the transitional input tax determined in accordance with Section 111 of this Code. The term 'output tax means the value-added tax due on the sale or lease of taxable goods or properties or services by any person registered or required to register under Section 236 of this Code." "SEC. 113. Invoicing and Accounting Requirements for VAT-Registered Persons. - (A) Invoicing Requirements. - 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 ta xpayer'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." REVENUE REGULATIONS CRR) No . 7- 95 "SEC. 4.1 0 4-1. Credits for inp ut tax.- 'Input tax' means the value-added tax due from or paid by a VAT-registered person on importation of goods or loca~ ,n 1 ..L O.L

DECISION CTA CASE NO. 67 14 & 7262 Pag e 23 of 42 purchases of goods or services/ including lease or use of prope~ from another VAT-registered person in the course of his trade or business. It shall also include the transitional or presumptive input tax determined in accordance with Section 1OS of the Code. It includes input taxes which can be directly attributed to transactions subject to the value-added tax plus a ratable portion of any input tax which cannot be directly attributed to either the taxable or exempt activity. Any input tax evidenced by a VAT invoice or official receipt issued by a VAT-registered person in accordahce with Section 108 of the Code, on the following transactions, shall be creditable against the output tax: (a) Purchase or importation of goods 1. For sale; or 2. For conversion into or intended to form part of a finished product for sale, including packaging materials; or 3. For as supplies in the course of business; or 4. For use as raw materials supplied in the sale of services; or 5. For use in trade or business for which deduction for depreciation or amortization is allowed under the Code, except automobiles, aircraft and yachts. 'Automobile / as contemplated in this section, shall mean a 4-wheeled luxury motor vehicle, which is used in the trade or business of the VAT taxpayer, propelled by any motive fuel with engine displacement of 2,000 cc or more, and specially designed for the transport of persons and not use primarily for the carrying of freight or merchandise; Provided, however, that the definition shall not apply to those required in the trade or business of . the VAT ta xpayer, such as hotel limousines, funeral hearse, ambulances and similar vehicles:t2'2--

DECISION CTA CASE NO. 67 14 & 726 2 Pag e 24 of 42 (b) Purchase of real properties for which a VAT has actually been paid; (c) Purchase of services in which a VAT has actually been paid; (d) Transactions "deemed sale" under Section 100 (b) of the Code; (e) Presumptive jnput tax allowed to be carried over as provided for in Section 4.105-1 of these Regulations; (f) A VAT-registered person who is also engaged in transactions not subject to VAT shall be allowed input tax credit as follows: 1. Total input which can be directly attributed to transactions subject to VAT; and 2. A ratable portion of any input tax which cannot be directly attributed to either activity." "SEC. 4 .104- 5 . Substantiation of claims 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. Input tax on purchases of real property should be supported by a copy of the public instrument i.e. deed of absolute sale, deed of cond itional sale, contract/agreement to sell, etc., together with the VAT receipt issued by the seller. A casf.l-register machine tape issued to a VAT registered buyer by a VAT-registered seller form a machine duly registered with the BIR in lieu of the regular sales invoice, shall constitute valid proof of substantiation of tax credit only if the name and TIN of the purchaser is indicated in the receipt and authenticated by a duly authorized representative of the seller. (b) Input tax on importations shall be supported with the import entry or other equivalent document showing actual payment of VAT on the imported goodsJ?- 118 3

DECISION CTA CASE NO. 6714 & 7262 (c) Presumptive input tax shall be supported by an inventory of goods as shown in a detailed list to be submitted to the SIR. (d) Input ·tax on "deemed sale" transactions shall be substantiated with the required invoices. (e) Input tax from payments made to non-residents sha ll be supported by a copy of the VAT declaration/return filed by the resident licensee/lessee in behalf of the non-resident licensor/lessor evidencing remittance of the VAT due." "SEC. 4 .1 08- 1. Invoicing Requirements - All VAT- registered persons shall, for every sale or lease of goods or properties or services, is·sue duly registered receipts or sales or commercial invoices which must show:. 1. the name, TIN and address of seller; 2. date of 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. In the case of sale of real property subject to VAT and where the zonal or market value is higher than the actual consideration, the VAT shall be separately indicated in the invoice or receipt. Only VAT-registered persons are required to print their TIN followed by the word "VAT" in their invoice 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. If the taxable person is . also engaged in exempt operations, he should issue separate invoices or receipts for the taxable and exempt operations. A "VAT Invoice" shall be issued only for sales of goods, properties or seriices subject to VAT imposed in Sections 100 and 102 of the Code.~ ll8 4

DECISION CTA CAS E NO . 6714 & 7262 The invoice or receipt shall be prepared at least in duplic·ate, the original to be given to the buyer and the duplicate to be retained by the seller as part of his accounting records. " The substantiated input VAT of P165,655,103.00 is composed of P27,051,054.57 input VAT attributable to petitioner's zero-rated sales and P138,604,048.43 input VAT attributable to petitioner's VATable sales, as computed below: Input Taxes Input Taxes Not Covered by Covered by Total Input Claim Claim Taxes Input ta x on purchases of goods and se rvices : ' a. OILS 23 240 505.46 - 23 240 505.46 b. WMT - - - c. CAN 191 162.28 191 162.28 d. SUGAR 137 646 314.58 137 646 314.58 e. ADMIN 1. Directly attributable to Oils . 3 667 765.08 3 667 765.08 2. Allocable to Oils 939 627.18 939 627.18 3. Directly attributable to other business units 1 980 324.33 1 980 324.33 4. Allocable to other business units 1 664,896.57 1 664 896.57 Unaccounted difference (1.05) (1.05) Total 27_L847[897. 72 141 482,696.71 169 330,594.43 Less: a. Input taxes claim ed on purchases of goods without supporting documents Exhibit " CC-4" Annex J 35 829 .56 35 829 .56 Exhibit "CC-4" Annex UU 1 27 1 017.30 1 27 1 017.30 b. Input ta xes claimed on purchases of services without supporting documents Exhibit "CC-4" Annexes K AA HH 314 401.01 314 401.01 Exhibit "CC-4" page 18 and Annex LL 22 105.19 40 660.29 62 765.48 Exhibit "CC-4" Annex W 13 906.92 13 906.92 c. Input ta xes cla imed on pu rchases of goods supported by documents other than VAT invoices Exhibit "CC-4 " page 18 and Annex MM 2 022.81 3 220.36 5 243 .17 d. In put taxes claimed on purchases of services supported by documents other than VAT ORs Exhibit "CC-4" Annexes M CC 167 499.69 167 499 .69 Exhibit " CC-4" page 18 and Annex NN 10 039.40 19 272.00 29 311.40 Exhibit "CC-4" Annex WW 57 778.96 57 778.96 e. Input ta xes claimed on purchases of goods supported by VAT invoices not issued in petitioner's name

DECISION CTA CASE NO. 6714 & 7262 Exhibit "CC-4" Annex N 1 233.64 1 233.64 f. Input ta xes claimed on purchases of services supported by VAT ORs not issued in petitioner's name Exhibit "CC-4" Annexes 0 II 24 797.89 24 797 .89 g. Input taxes claimed on purchases of qoods supported by non-VAT invoices Exhibit "CC-4" Annex P 13 519.80 13 519.80 h. Input taxes claimed on purchases of goods supported by invoices with pre- printed "TIN" only ~ Exhibit "CC-4" Annex Q 4 332.26 4 332.26 i. Input taxes claimed on purchase Of services supported by non-VAT ORs Exhibit "CC-4" Annexes R EE 92 905.29 92 905.29 Exh ibit "CC-4" paqe 18 and Annex 00 3 635.03 5 826.93 9 461.96 Exhibit "CC-4" Annex XX 5 000.00 5 000.00 j . Input ta xes claimed on purchases of services supported by an OR with pre- printed "TAN-VAT" Exhibit "CC-4" Annex S 150.00 150.00 k. Input ta xes claimed on purchases of services supported by ORs with pre- printed "TIN" only Exhibit "CC-4" Annex DD 6 036.47 6 036.47 I. Erroneous computation of input taxes claimed on purchases of services supported by VAT ORs Exhibit "CC-4" Annexes V FF 7 799.32 7 799.32 Exhibit "CC-4 " paqe 18 and Annex PP 7 238.50 3 949.35 11187.85 Exhibit "CC-4" Annex YY 5 372.45 5 372.45 m. Input tax which the petitioner failed to provide the supporting documents Exhibit "CC-4", under II.D.2, pages 13-14 191162.28 191 162.28 Exhibit "CC-4" ur.1der II.D.3 - Input VAT per claim VS. per schedule - Oils 1.44 1.44 Input VAT per claim vs. per schedule -Admin allocable to Oils 23 943.56 23 943.56 n. Ratable portion of input ta xes claimed on common expenses-Admin attri butable to VAT-exempt sales (P2,484,398 .36 37 x 52.09 % based on adjusted gross sales) 1 294 123.11 1 294 123.11 o. Input ta xes on local purchases of goods supported by photocopied VAT invoices (Exh. "CC-4" Annex T) 16 053.80 16 053 .80 p. Input ta xes on local purchases of services supported by photocopied VAT ORs (Exh. "CC-4 " Annexes U JJ) 8 914.37 8 914 .37 q. Input taxes on local purchases of services supported by photocopied VAT 1 742.45 1 742.45 37 P2,602,368.22 input VAT claim from common expenses (Exh. "CC-4", p. 17) less P117,969.86 (Exh. "CC-4", page 18, nos. 2 to 6 of the Findings)

DECISION CTA CAS E NO. 6714 & 7262 ORs (Exh. "CC-4", Annex CCC) Sub -total 762 459.03 2,913 032.40 3,675 491.43 Total Input Taxes Supported by VAT Invoices/ORs and Relevant Documents 27,085,438 .69 138 569 664.31 165, 655 103.00 Less: Ratable portion of input VAT ·• allocable to VATable sales (Oils) (P2,5 17,248. 56/P4,620 ,118,582 .65 38 x P27,085,438.69) 14 757 .37 (14 757.37) 0.00 Ratable portion of excess input ta xes claimed on com mon expenses - Admin with supporting documents (P2,484,398.36 x .79 % 39 based on adjusted gross sales) 19 626.75 (19 626.75) 0.00 VALID INPUT TAXES COVERED BY CLAIM ATTRIBUTABLE TO ZERO - RATED SALES 27 051,054 .57 VALID INPUT TAXES NOT COVERED BY CLAIM ATTRIBUTABLE TO VATABLE SALES 138 604 048.43 TOTAL VALID INPUT TAXES 165 655 103.00 I n arriving at the foregoing amounts of valid input VAT attributable to zero-rated and VATable sales, the Admin input ta xes were allocated based on the ratio of the related sales to total sales as computed by SGV & Co., to wit: Zero - Rated (0 % ) VATable (10 % ) Exempt Total Gross Sales 4 617 601 283.48 1 941 845 541.92 7 131 699 706.95 13 69 1146 532.35 Less : a. Sales with no supporti ng documents (Exh. "CC- 4 '~ Annex C) 125 380 .00 125 380.00 b. Sa les adjustments with no supporting documents (Exh. "CC- 4// Annex D) 8 688.00 8 688.00 c. Sales adjustments not yet verified (Exh. TC-4 '~ Annexes ~F)_ (307 748.62) (307 748.62) Subtotal .. (173 680 .62) (173 680.62) Adjusted gross sales 4 617 601283.48 1 941 84 5 541.9 2 7 131 873 387.57 13 691 320 212.97 38 Exhibit "CC-4", p. 24 39 Petitioner used a sa les ratio of 34.52 % (average rate for the period covered by the claim) for Oils or an excess over the adjusted sales ra tio for zero-rated sales of 0. 79% 118 7

DECISION CTA CASE NO. 6714 & 7262 33.73% 14.18% 52.09% 100% With reference to the declared input taxes for· the period March 1, 2003 to August 31, 2004 (in CTA Case No. 7262) in the amount of P31,001,900.62, a scrutiny of the report40 of the Court-commissioned independent CPA firm, Punongbayan & Araullo, through its Partner, Mr. Juan Carlos B. Robles and the supporting documents 41 showed that petitioner was able to substantiate, by proper VAT invoices or official receipts, only the amount of P28,101,616.12, representing the sum of the input VAT attributable to zero-rated sales in the amount of P21,473,078.82 and input VAT attributable to VATable sales in the amount of P6,628,537.30, computed as follows: Input Taxes Input Taxes Covered by Not Covered by Total Input Claim Claim Taxes Directly Attributable to Zero-Rated Sales (Oils) 19 848 714.73 19 848 714.73 Admin Input VAT allocated to Zero-Rated Sales 2 345 731 .94 2 345 731.94 Suqar and Admin 8 807 453.95 8 807 453.95 Total 22 194,446.67 8 807,453.95 31,001,900.62 Less : a. Dates indicated on the suppliers' VAT offi cia l receipts are not within the period cove red by the application for tax credit certi fi cate/refund ( Exh. Kl, pages 4 & S) Exhibit K- 1 334 p 163 .64 Exhibit K-1 335 415. 15 Exhibit K- 1 336 5,593.50 Exhi bit K-1 337 5,008.40 Exhibit K-1 338 100,000.00 Exhibit K-1 343 789 .74 Exhibit K-1 357 723 .36 ~ 112 693 zg 112,693.79 112,693 .79 40 Exhibit "P" in CTA Case No. 7262 41 Ex hibits "JJ1 - 1" to "JJ1 - 1590", "JJ2 - 1" to "JJ2 -61 2", "JJ3 " to "JJS ", "JJ3-1 " to "JJ3-5934 ", "JJ4 - 1" to "JJ4-1050" and "JJS- 1" to "JJS -1511", CTA Case No. 7262 l.i 88

DECISION CTA CASE NO. 6714 & 7262 b. Certain information indicated in the suppliers' VAT invoices and/or officia l receipts were altered ( Exh. K.2) 10 532.37 10 532.37 c. Suppliers' VAT invoices and/or official receipts are not under the name of the petitioner (Exh. K3) · 7 782.42 7 782.42 d. Original suppliers' invoices and/or official receipts on file were not examined (Exh. K6) 644.51 644.51 e. Supplier's VAT invoices and/or official receipts do not have BIR permit to print •. Exh. K7 450 .24 450.24 Exh. K7-0thers 4 239.00 4 239.00 f. Transactions supported !:Jy tape receipts ' Exh. KB 23 523.72 23 523.72 Exh. K B-Others 17 942.81 17 942.81 g. Supplier's invoices and/or official receipts are reqi stered as Non-VAT Exh. K9 9 318.05 9 318.05 Exh. K 9-0thers 434.22 434.22 h. Differences in input ta x computation Exh. K11 Excess of Input VAT · Claim over Input VAT per Audit p 33,425.00 33,425.00 33,425.00 Less: Excess of Input VAT per Audit over Input VAT per Claim 5,734.54 Net Amount E'2Z,69Q."'6 Exh. K 11-0thers Excess of Input VAT Claim over Input VAT per Audit p 32,896.55 32,896.55 32,896.55 Less: Excess of Input VAT per Audit over Input VAT per Claim 20,513.04 Net Amount E' 12.383.51 i. Difference between the input VAT per summary listing of local purchases attributable to zero-rated sa les and the input VAT claimed by petitioner (Exh. ''P" page 5) 352 942.34 352 942.34 j . Difference between the input VAT that was properly allocated to zero-rated sales and the allocated input VAT claimed by petitioner Per Claim P2,345,731.94 Per Allocation 2,1Z5.6Z6.53 Difference P 170.0SS.4 1 170 055.41 170 055.41 k. Admin Input VAT attributable to VAT- exempt sales (P4,392,643.91 X 48.34 %)) 2 123 404.07 2 123 404.07 Subtotal 721 367 .85 2, 178_L_916.65 2 900 284.50 ~ 1l8 Q

DECISION CTA CASE NO . 6714 & 7262 VALID INPUT TAXES COVERED BY CLAIM ATTRIBUTABLE TO ZERO- RATED SALES 21 473 078.82 VALID INPUT TAXES NOT COVERED BY CLAIM ATTRIBUTABLE TO VATABLE SALES 6 628,537.30 TOTA~ VALID INPUT TAXES 28 101 616.12 I n arriving at the foregoing valid input taxes attributab le to zero-rated and VATable sa les, the Admin Input VAT of P4,392,643. 91 was all ocated based on the ratio of the re lated sa les to tota l sales as shown below: Zero - Rated (0%) VATABLE (10 % } Exempt Total Gross Sales 6 374 292 417 .79 274 183 243 .1:~ 6 241 450 253.70 12 889 925 914 .62 Add(Less): Zero-Rated sa les erroneously classified as exempt sa les 10 086 200.00 ( 10 086 200.00) - Adjusted gross sales _(wi th support) 6 384 378 617.79 274 183 243.13 6 231 364 053.70 12 889 925 914.62 Adjusted sales ratio 49.53% 2.13 % 48.34% 100.00% Allocated Admin Input VAT 2 175 676 .53 93 563 .32 2 123 404.07 4 392 643 .91 Admin Input VAT per claim Exh. P, Annex IV 4,436,799.24 Less: Supplier's VAT invoices and/or official receipts do not Exh. K.7-0thers have BIR perm it to print 4 239 .00 Transactions supported by tape receipts Exh. K.8-0thers 11 060.04 Supplier's invoices and/or officia l receipts are Exh. K.9-0thers registered as Non-VAT . 434 .22 Excess of Input VAT per claim over input VAT per Exh. K.11-0thers .,'1. . aud it 28 422.07 Subtotal 44 155.33 Valid Admin Input VAT .. 4 39~ 643 .91 ·We proceed to the issue of whether or not the cla imed input taxes were applied against any output VAT liability during and in the succeeding period of claim. Based on the re lated Quarterly VAT Returns, petitioner's VAT transactions for the periods Apri l 1, 2001 to February 28, 2003 and March 1, 2003 to August 31, 2004 may be summarized as fol l ows ~

DECISION CTA CASE NO . 6714 & 7262 April 1, 2001 to Marc h 1, 2003 to Total Feb. 28 200 3 Aug . 31 2004 Output VAT p 194 184 554.44 p 26 322 238 .96 p 220 506 793 .40 Less: Input Tax ·, Carried-over from prev qtr p 38,199 071.54 p 44,920 350.9 1 p 38 199 07 1.54 Presu mptive Input Tax 6 70 1 884.34 2 028 775.78 8 730 660 .12 Domestic purchases 169 330 594.43 31 001 900.62 p 200 332 495.05 Total availa ble Input Ta x p 214 23 1 550.3 1 p 77 951 027.31 247 262 226.71 VAT Payable/( Excess Input Ta x) J20 046 995.8~ J5 1 6·28 788.35) P (26 755 433.3U Less: Advance Payment 24 873 355.04 11 096 505.52 35 969 860.56 Ta x Payablef(Overpa ym e nt) P(44, 920 3 5 0 .91) P(6 2, 725 2 93 .87_2 Pj 6 2L725 293.87_2 The above summary indicates that aside from the input tax credits arising from its domestic purchases for the subject period of claim, petitioner had an input VAT carry-over from previous quarter in the amount of P38,199,071.54, presumptive input ta x in the amou8t of P8,730,660 .12 and adva nce VAT payment of P35,969,860.56 which were applied against the output tax of P220,506,793 .40. In its Quarterly VAT Return for the first quarter of CY 2001, petitioner computed the input VAT carry-over of P38,199,071.54 as follows: Total Output Taxes p 38,700..L447.19 Less: Accumulated Input Ta xes Carried Over from Previous Quarter 21,633,716.56 Sub-total p 17,066,730.63 Less: Total Input Taxes from Current Purchases 55 265,802.17 Excess Input Tax Credits to be Carried Over p _{_38 199[071.54) Using the First-In, First-Out (FIFO) method, i.e., older credits are applied first, the other Court-commissioned ICPA in CTA Case No. 6714, Constantino Guadalquiver & Co. through its Partner, Ms. Katherine 0 . Constantino, noted that the input VAT carry-over of P38,199,071.5 ~

DECISION CTA CASE NO . 6714 & 7262 Pa ge 33 of 42 originated from petitioner's current purchases for the first quarter of CY 2001 in the amount of P55,265,802.17. Although in the normal course of events, the input tax credits from previous quarter will h~ave to be applied first to pay for any current quarter's I output tax liability befbre the current quarter's input tax can be credited, the Court cannot allow petitioner to deduct the output tax for the first quarter of CY 2001 in the amount of P38!700,447.19 against the unsubstantiated input tax carry over from the previous quarter (fourth quarter of CY 2000) in the amount of P21,633,716 .56. To be creditable against the output tax, the input tax carry-over of P21,633,716.56 must be substantiated by proper VAT invoices or receipts as provided for under Section 110(A) in relation to Section 110(6) of the NIRC of 1997, which states: " SEC. 110. Tax Credits.- A. Creditable Input Tax - (1) Any input ta x evidenced by a VAT invoice or official receipt issued in accordance with Section 113 hereof on the following transactions shall be creditable against the output tax: XXX XXX XXX (B) Excess Output or Input Tax - If at the end of any taxable quarter the output tax exceeds the input tax, the excess shall be paid by the Vat-registered person. If the · input tax exceeds the output ta x, the excess shall be carried over to the succeeding quarter or quarters. " As regards th e input VAT on petiti oner's current purchases for the first quarter of CY 2001 in the amount of P55,265,802.17, the Court finds that only the amount of P54,114,735.26 was properly substantiated for VAT purposes, detailed as follows:~

DECISION CTA CASE NO. 6714 & 7262 Exhibit zzzzzzzz Oils Sugar Admin Total Reported Input Taxes 2, 284,966.41 52, 14lt,863.65 838,972.11 55,265,802.17 Less : Input taxes claimed on purchases of goods and services without any supporting Annexes B, documents 0 and U 236,288.56 217.11 829.44 237,335.11 Input taxes claimed on purchase of goods supported by a non- Annexes C VAT invoice and P 818.18 2,946.82 3 765.00 Input taxes claimed on purchases of services supported by documents other than VAT Annexes D ORs and R 68,767.32 15 103.83 83,871.15 Input taxes claimed on purchases of services supported by photocopied ORs with TIN on ly Annex E 8,293.85 8,293.85 Input taxes claimed on purchases of services supported by documents other than VAT Annexes F ORs and V 2,102.22 224,951.89 227,054.11 Input taxes claimed on purchase of services supported by VAT ORs not iSS\.led in the petitioner's name Annex G 813.64 813 .64 Input taxes claimed on purcha se of services supported by photocopied VAT ORs not issued in the petitioner's name Annex H 1,200.96 1,200.96 Erroneous computation of input taxes claimed on purchase of services supported by VAT ORs Annex I 2 594.01 2,594 .01 Input taxes claimed on purchases of goods supported by photocopied VAT invoices Annex J 49,040.15 49,040.15 Input taxes claimed on purchases of services supported by photocopied VAT ORs Annex L 231 215.41 231 215.41 Input taxes claimed on purchases of goods supported by documents other than VAT invoices Annex Q 3 830.03 3,830.03 Input taxes claimed on purchases of services supported by ORs with pre-printed "TIN- VAT" and "N-VAT" Annex W 24,279.53 24,279.53 Subtotal 601, 134.30 249,448 .53 22,710.12 873,292 .95 Total Input Taxes Supporte d by VAT Invoices/ORs and Relevant Documents 1,683,832.11 51,89;l,415.12 816,261.99 54,392,509 .22

DECISI ON CTA CASE NO. 67 14 & 7262. Page 35 of 4 2 Less : Rata ble portion of Admin input VAT allocable to exempt sa les (P8 16,261. 99 x 34 .03 % 4 2 ) 277,773 .96 277,773 .96 Tot al Valid Input Taxes 1,68 3,83 2. 11 51,892,415 .12 538,488 .03 54,114, 735 .26 After having removed petition er's output tax liability for the first quarter of CY 2001 in the amount of P38, 700,447 .19 from its P54,114,735.26 verified input ta x credits on current purchases, th ere stil l remains an input ta x credit of P15,414, 28 8.07, as shown below, which can be carried -over and offset against the output ta x due in the succeeding second quarter of CY 2001: Total Out put Ta xes p 38 700 447. 19 Less: Valid Input Ta x on Current Purcha ses 54 114,73 5. 26 Excess Input Ta x Credits to be Carri ed Ove r to 2nd Qtr CY 2001 p (15 414, 288 .07) With reference to petitioner's declared pres umptive input VAT in the amount of P6, 701,884.34 covering the peri od of April 1, 2001 to February 28, 2003, the Court-commissioned ICPA, Mr. Henry M. Tan, in his final and conso lidated report dated June 23, 2005 , noted as follows 43 : " E. Pr esumptive input tax and advance VAT payments 1. Presumptive input tax Our verification of the supporting documents on the Company's presumptive input taxes amounting to P6,701,884.34 showed that this amount is supported by original copies of invoices of the Company's suppliers of raw sugar. All the supp liers' invoices were dated within th e peri od of claim. The Company computed the presumptive input ta x as 1.5% of gross pu rchases of raw sugar. Total raw sugar purchases for the period covere d by the claim am ounted to P44 6,79 2, 289.33 . ~ 42 Percentage of exempt sa les to total sales fo r the 1st Quarter of CY 200 1 43 Exhibit " CC-4 ", under II.E.l, p. 20

DECISION CTA CASE NO. 6714 & 7262 Furthermore, we noted that the photocopies of the documents submitted to this Honorable Court as evidences (e.g., VAT invoices) were faithful reproductions of the original documents we have examined." The Court agrees with the ICPA's observation that the presumptive 44 input VAT of P6,701,884.34 is duly supported by VAT invoices . Hence, petitioner may validly claim the amount of P6,701,884.34 as deduction from its output tax for the subject period of claim pursuant to Section 111(6)(1) of the NIRC of 1997, as amended, in relation to Section 9 of Revenue Regu lations No. 29-02, which are all quoted herein below for easy reference: "SEC. 111. Transitional/Presumptive Input Tax Credits. - XXX XXX XXX (B) Presumptive Input Tax Credits.- (1) Persons or firms engaged in the processing of sardines, mackerel and milk, and in manufacturing refined sugar and cooking oil, shall be . allowed a presumptive input tax, creditable against the output ta x, equivalent to one and one- half percent ( 1 1/2%) of the gross value in money of their purchases of primary agricultural products which are used as inputs to their production. As used in this Subsection, the term "processing' shall mean pasteurization, canning and activities which through physical or chemical process alter the exterior texture or form or inner substance of a product in such manner as to prepare it for special use to which it could not have been put in its original form or condition . SECTION 9. Presumptive input tax. - Persons or firms engaged in the production and manufacturing of refined sugar for their own account shall be allowed a presumptive input tax, which is creditable against the output ta x, equivalent to one and one-ha lf percent of the gross value in money of their purchases of primary agricultural products which are used as inputs to&.. 44 Exhibits "YYY- 1" to "YYY-378" as summarized in Exhibi ts " XXX- 1" to "XXX-5" l fg r .L ,j

DECISION CTA CASE NO . 6714 & 7262 their production. Pri mary agricultural products sha ll be limited to sugar cane and other agricultural productS: which are main raw materia ls for the production of sugar." However, as to the presumptive input VAT for the period March 1, 2003 to August 31, 2004 in t he amount of P2,028, 775.78, petitioner fai led to provide supporting VAT invoices, hence, it cannot be credited agai nst petitioner's output ta x. Regarding petitioner's claimed P24,873,355.04 advance VAT payments on sale of refined sugar for the period April 1, 2001 to February 28, 2003, petitioner presented Payment Forms (BIR Forms. No. 0605) and Certificates of Advance Payment of VAT totaling P21,883,355.04, detailed as follows: 1) Supported by Payment Forms and Certificates of Advance Payment of VAT Exhibit No . Advance VAT Certificate of Date Paid Paymen t Payment Advance Payment of Form VAT ZZZ-19 ZZZ-20 1/ 14/ 2003 p 145 312.00 ZZZ-22 ZZZ-23 1/ 20/ 2003 697,470.01 ZZZ-25 ZZZ-28 1/ 27/ 2003 676 783 .66 ZZZ-26 ZZZ-27 1/ 14/ 2003 1 304,008.00 ZZZ-29 ZZZ-30 1/24/ 2003 633 916.00 ZZZ-31 zn:-32 1/24/ 2003 398,240.00 ZZZ-34 ZZZ-33 1/29/2003 319,276.00 ZZZ-35 ZZZ-36 2/ 03/ 2003 633 916.00 ZZZ-37 ZZZ-36 2/3/2003 8 512.00 ZZZ-38 ZZZ-39 2/ 3/2003 691,209.07 ZZZ-40 ZZZ-41 2/3/ 2003 37,418.05 ZZZ-42 ZZZ-43 2/10/ 2003 708,543.88 ZZZ-44 ZZZ-45 2/18/ 2003 704 401.55 ZZZ-46 ZZZ-47 2/21/2003 728)65.63 Subtotal p 7,687,371.85 2) Supported by Payment Forms only ZZZ- 1 8/8/2001 p 3, 450 ,000 .00 ZZZ-2 8/ 8/2001 460,000 .00 ZZZ- 3 8/15/2001 460 ,000.00 ·,

DECISION CTA CASE NO. 6714 & 7262 ZZZ-4 8/22/2 001 320 ,712 .00 ZZZ-5 8/28/200 1 460 ,000 .00 ZZZ-6 8/31/2001 460 ,000 .00 ZZZ-7 8/3 1/2 001 3,450, 000 .00 ZZZ-8 9/10/20 01 460 ,000 .00 ZZZ-9 9/17/2001 460 ,000 .00 ZZZ-10 9/28/2 001 460 ,000 .00 ZZZ- 11 10/5/2 001 920 ,000 .00 ZZZ-12 10/5/2 001 460 ,000.00 ZZZ-13 10/5/20 01 460 ,000.00 ZZZ-14 10/29/2002 3 13,536.00 ZZZ-15 . 10/30/2002 153,594.00 ZZZ-16 11 /4/20 02 356,6 38. 00 ZZZ-17 11 / 12/2 002 172, 696 .99 ZZZ- 18 11/19/2 002 187,082 .00 ZZZ-21 1/1 0/2003 223,056.20 ZZZ-24 1/2 1/2 003 508,668 .00 Subtotal p 14,195 ,983 .19 Total p 21,883,355.04 Sections 5 and 7 of RR 7-89 enumerate the required proofs in order that the advance VAT payment on sale of refined sugar may be credited against the output ta x, thus: " SECTION 5. Proof of advance payment - The sugar refinery shall issue a certificate of advance payment in a form prescribed therefore to each owner/s eller upon payment in advance of the VAT as required in Section 3 of these Regulations. This certificate and the official receipt issued by the BIR for the advance payment shall serve as proof of the credit for such advance payment against output tax as provided in Section 7 of these Reg~lations. XXX XXX XXX SECTION 7. Credit for advance payments. - In addition to the input ta x credits allowed under Section 104 of the Ta x Code as implemented by Section 10 of Revenue Regulations No. 5-87, the amount of advance payments made by sellers of refined sugar under these Regulations sha ll be allowed as a credit against their output ta x on the actual gross selling price of refined sugar. The advance payment certificate issued under Section 5 hereof shall be adjusted to the quarterly VAT returns to support the claim for credit of advance ta x payment ." (Emphasis supplied). ~ . (' .., 1 ..I..~I

DECISION CTA CASE NO . 67 14 & 7262 The foregoing provisions of RR No. 7-89 were amended by Sections 5 and 8 of RR No. 29-02 which, respectively, read as follows: "SECTION 5. Proof of advance payment -The Revenue District Office (ROO) concerned or the duly constituted unit in its place such as the Regional Task Force on Sugar, as the Regional Director may decide, shall issue a Certificate of Advan ce Payment of the VAT (Annex A) as required in Section 3 of these Regu lations. This certificate sha ll serve as the authority of the sugar mill/refinery to release the refined sugar described therein, and together with the payment form (BIR Form No. 0605 or its equivalent) andthe SIR- prescribed deposit slip duly validated by the AAB, or the Revenue Official Receipt (ROR) issued by the Revenue Collection Offi cer (RCO) or the duly authorized City or Municipal Treasurer, as the case may be, shall serve as proof of th e payment for the advance VAT wh,ich can be credited against output tax in the filed VAT · Return as provided in Section 8 of these Regulations. SECTION 8. Credit for advance payments. - In addition to the input tax credits allowed under Section 110 of the Code, the amount of advance payments made by sellers of refined sugar under these Regulations shall be allowed as credit against their output ta x on the actual gross selling price of refined sugar. The advance payment certificate issued under Section 5 hereof shal l be attached to the quarterly VAT returns to support the claim for credit of advance VAT payment. " (Emphasis supplied). Based on the aforequoted revenue regulations, the advance VAT payment of P7,687,371.85, duly supported by Payment Forms and Certificates of Advance Payment of VAT, may be applied against petitioner's output tax. However, as regards petitioner's claimed advance VAT payments in the amount of P14,195,983.19, supported merely by Payment Forms, the same cannot be allowed to be credited against its output tax. The Payment Forms shou ld have been machine va lidated or supported by official receipt issued bk_ l.i9 8

DECISION CTA CASE NO. 6714 & 7262 Page 40 of 4 2 the BIR's Authori zed Agent Bank (AAB) or the Revenue Official Receipt (ROR) issued by the Revenue Collection Officer (RCO) or the duly authorized City or Municipal Treasurer. In addition, petitioner should have presented the corresponding Certificate of Advance Payment of the VAT as required under Sections 5 and 7 of RR 7-89, as amended by Sections 5 and 8 of RR 29-02. Also, petitioner's claimed P11,096,505.52 advance VAT payments for the period March 1, 2003 to August 31, 2004 shall be disallowed for petitioner's failure to substantiate the same. Considering all of the above findings, petitioner's verified excess input VAT as of August 31, 2004 amounts to only P3,053,469.99 computed as follows: April 1, 2001 to March 1, 20 0 3 to Feb . 28, 2003 Aug. 31, 2 00 4 Total Output VAT p 194,184,554.44 p 26,322,238 .96 p 220,506, 793.40 Less : Input Tax Carri ed-over from prev qtr p 15,41 4,288.07 p 1, 274 092 .82 p 15,414,288.07 Presumptive Input Tax 6 701 ,884.34 - 6 701 884.34 Domestic purchases 165,655,103.00 28,101,616 .12 193 756,719 .12 Total available Input Tax p 187 771 275.41 p 29 375 708.95 p 215 872 891.54 VAT Payable/ (Excess Input Tax) p 6,413,279 .03 p (3,053 ,469 .99) p 4,633,901.86 Less: Advance Payment 7,687 ,37 1.85 - 7 687 371.85 Tax Pa yabl e / (Ove rp a ym e nt) p (1,274,092 .82) p (3 ,053,469 .99) p (3,0 53, 469 .9 9) 45 As evidenced by petitioner's Quarterly VAT Returns for the first and 46 47 second quarters of FY ending May 31, 2004 as well as the first , third 48 and 49 fourth quarters of FY ending May 31, 2005, the subject input VAT claims of P27,847,897.72 and P22,194,446 .67 covering the periods April 1, 2001 to February 28, 2003 and March 1, 2003 to August 31, 2004, respective ly, were deducted as "Any VAT Refund/ TCC Claimed" from the total availab le inpu ~ 45 Exhibit "C" (Ca se No. 7262) 46 Exhibit " D" Ib id 47 Exhibit "G"' Ibid 48 Exhibit "E8 ': Ibid 4 g Exhibit "F8 " , Ibid I

DECISION CTA CASE NO. 6714 & 7262 tax. This means that no amount of the subject claims for refund was carried- over/applied in the succeedi ng first quarter of FY endi ng May 31, 2006. In fine, this Court finds petitioner to have sufficient ly proven its entitlement to the issuance of Tax Credit Certificate representing unutilized input VAT attributable or allocable to its zero-rated export sales for the period April 1, 2001 to August 31, 2004 in the reduced amount of P3,053,469.99, as computed above. WHEREFORE , the instant PETITION FOR REVIEW is PARTIALLY GRANTED . Respondent Commissioner of Internal Revenue is hereby ORDERED to ISSUE a TAX CREDIT CERTIFICATE in the amount of T HREE MILLION FIFTY THREE THOUSAND FOUR HUNDRED SIXTY NINE AND 99/100 PESOS (P3,053,469.99) in favor of petitioner, represe nting its unutilized input VAT attributable or allocable to its zero-rated export sales for the period April 1, 2001 to August 31, 2004. SO ORDERED . CAESAR A. CASANOVA Associate Justice WE CONCUR : Q~~· Q Vy0..- (With Concurring and Dissenting Opinion) ERNESTO D. ACOSTA Presiding Justice

DECISION CTA CASE NO . 6714 & 7262 UTISTA CERTIFICATION Pursuant to Article 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. q_ __:;:-u.r - ~ ERNESTO D. ACOSTA Presiding Justice Chairman, First Division

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY Special First Division CARGILL PHILIPPINE S, INC., CTA Case Nos . 6714 & 7262 Petitioner, -vers us- COMMISSIONE R OF INTERNAL Memb ers: RE VE N UE i\COSTA , P]. , Respondent. BAUTISTA, and CASANOVA,JJ . Promulg ated: A~ll."a~ X - -- ---------------~--------------~-~------------------------------------ --- - -- ------------ X CONCU RRING AND DI SSENTING OPINION While I concur in the denial of the claim for iss uance of tax credit cer.tificate for the alleged unutilized input VAT in th e P etitions for Review fli ed by Cargill Philippines, Inc., I res pectfully dissent wi th the decisio n of the majority, specificall y in partially allowing therein p eti ti oner's claim fo r issuance o f tax credit certificate as discussed below.

On the issue of timeliness .of the filing of the claims, the majority ruled that, "records indicate that petitioner· originally filed its administrative claim for refund of input VAT covering April 1, 200 1 to February 28, 2003 on June 27, 2003 and its judicial appeal by way of P etition for Review docketed as CTA Case No . 6714 on June 30, 2003. O n the other band, petitioner fli ed its administrative claim for refund o f input VAT covering the period March 1, 2003 to August 31, 2004,. and the Petition for Review docketed as CTA Case No. 7262 on the same day of ~Aa)' 31, 2005. All of the preceding elates of filing fall within the two-year prescriptive. period reckoned from the respective dates of filing the Quarterly VAT Returns for the period 1\pril 1, 2001 to February 28, 2003 and March 1, 2003 to August 31, 2004." Stated otherwise, the majority believes that a taxpaver has to file an administrative an d judicial clairn within the two-year period; otherwise, the taxpayer will lose the option to seek the refund or issuance of tax credit and to appeal the decision of the Commissioner. At this point, it should be em phasized that the applicable law in the cases at bar is Section 112 of the N IRC which unequivocally provides fo r the basis and procedure for tax refunds or credits of input tax attributab le to zero-rated sales, tJiz: Section 112. Refunds or Tax Credits of I11put Tax. - (A) Zero-1'Clted or EffectiveiJ' Zero-rated Sales. - any VAT- registered persor1, whose sales are zero-rated or effectively zero-rated m ay, w ithin two (2) ve ars after th e close of the taxable guarter when the sales we re m ade, apply for th e issuance of a tax c re dit ce rtifi ca te or re fund o f c reditable input tax due o r paid attributable to suc h . sales, except transitional input tax, to the extent that such input tax has not been applied against output tax: Provided, however, That in the case of zero-rated sales und er Section 106(A)(2)(a)(1), (2) and (B) and Section 108 (B) (l ) and (2), the acceptable foreign cu rrency exchange proceeds thereof had been duly accounted for in accordance with the rules and regulations o f the Bangko Sentral ng Pilipinas (BSP): Provided, further, That where the taxpayer is engaged in zero-rated or effectively zero-rated sale and also in taxable or exempt sale of goods of properties or services, and the amount of creditable input tax due or paid cannot 2 1 ~.- (''JJ. . .

be directly and en tirely attributed to any one of the transactio ns, it shall be allocated proporti onately on the basis of th e volum e of sales. (D) Pniod within which Rejimd or Tax Credlt of Input Taxes shall be Made. - In pro per c ases, the Co mmis s ione r s h a ll g rant a refund o r iss ue the tax c re dit ce rtifica te fo r c re ditab le input taxes w ithin one hundred twenty (120) d ays' from the date o f s ubmissio n o f c om lete d oc uments in su ort o f the a pplication filed m acco rdance w ith Sub sections (A) and (B) he reo f. In case of full o r partial denial of tbe claim for tax refund or tax credit, or the failure on th e pa rt of the Co mmissioner to act on th e application within the period prescribed above, th e taxp aye r a ffec ted m ay, w ithin thirty (30) d ays fro m the rec eipt o f th e d ecis ion denying the claim o r a fter the expira tio n of the one hundred tw en ty day-period, a ppeal the d ec isio n o r th e un ac ted cla im w ith th e Co urt o f T ax A ppea ls. (Emphasis Surplied.) T he foregoing provisions clearly state that a VAT -registered taxpayer who desires to refund its unu tilized or excess input VAT attributable to zero-rated sales may apply for refund o r issuance of a tax credit certificate withi n two (2) years from the close of the taxable quarter. The Commi ssion er o f In ternal Revenu e (C ommissioner) shall, in this case, grant the refund or iss ue a tax credit certifi cate within one hun dred twenty (120) days from the submission of complete documents. In case of a denial or inaction by the Commissioner withi1~ the 120-day period, the VAT-registered taxpayer may appeal to the Court within thirty (30) days from receip t of the decision or the lapse of the 120- day period. Flowing from th e ab ove, it is manifest that the aforequ o ted provision s lay down the indispensabl e requirement for the taxpayer to await the decision, or the lapse of the 120-day perio d due to inaction of the Commissioner before it can fil e its claim with this Court. 3 1 ~- 'J i ~ • Ir

T o reiterate, th e following dates are material in the present petitions: CTA Case P eriod Administrative Judicial 120cday period 30 days No. Covered Claim Claim after filing o f after the Administrative 120-day Claim period 67 14 A pril ! , 200 1- June 27, 2003 Jun e 30, 2003 O ctober 25, November Febru ary 28 , 2003 24, 2003 2003 7262 March 1, May3 1;2005 May 31,2005 September 28, October 2003- Augus t 200 5 28,2005 31,2004 Applying, th erefore, Section 112(D) in relation to Sectio ns 112(A) an d (B) o f the NIRC in th e cases at bar, petitioner's filin g o f admini strative claims for refund or issuan ce o f tax credit cer tifica te o n Jun e 27, 2003 and May 31 , 2005 are well within the 2-year p eriod provid ed und er Sec tion 112(A) and (B). H owever, th e judicial claims as shown in th e table ab ove did no t afford th e Respondent-Commi ssioner the 120-day period required in Sectio n 112(D ). In the Peti tion fo r Review docketed as CTA Case No. 67 14, only 3 days have lapsed aft er the filing o f its admini stra tive claim w hen petitioner fil ed its judicial appeal; worse, in P etiti on for Review docketed as CTA Case No . 7262, petitioner fil ed both its administrative and judicial claim on th e same day o f May 31, 2005. Clearly, p etiti oner should have fi led its judicial cl ait~ within thirty days after the lapse o f the 120-day perio d for th e Commission er to rend er a decision o n its administrative claim s. Failin g which, the petition fil ed wi th out o bserving th e 120-day period in Section 11 2(D) is prem ature. Such filing is a violatio n of th e doc trine of exhaustion of administra tive rem edi.es . E xpo unding on th e prem aturi ty o f th e petitions, it is a sound rule th at, before one resorts to the courts, th e administrative rem edy provid ed by law mu st first be 1 exhausted . A par ty seeking an administrative rem edy must no t m erely initiate th e prescribed administrative procedure to ob tain relief, bu t also pursue it to its appropriate co nclu sion before see king judicial in tervention in order to give the administrativ e 1 Ruflno Lopez & Sons, Inc. vs. Court of Ta x Appeals, 100 Phil 580 . 4

agency an opportunity to decide the matter itself correctly and prevent unnecessary and premature resort to court action.~ This non-exhaustion of administrati,re remedies renders the action premature, i.e., the claimed cause of action is not ripe for judicial determination and for that reason a party has no cause of action to ven tilate in court. ' The premature invocation of court's intervention is fatal to one's cause of action. Accordingly. absent any finding of waiver or estoppel, the case is susceptible o f dismissal for failure to state a cause of action 4 Thus, I am in the opinion that it was an error on the part of the majority to have entertained the Glse and eventually partially grant the claim for issuance of tax credit certificate. In the first place, the majority should have dismissed the petitions for its failure to state a cause of action. Accordingly, for reasons sta ted above, I vote for the D ENIAL of the instant petition. ~~-c~ E RNESTO D . ACO STA Presiding Justice 2 Corrunissioner o f Internal Revenue vs. Rosemarie Acosta, G.R. No. 154068, August 3, 2007. 3 Carale vs. Abarintos, G .R. No. 120704, March 3, 1997 . ~ Paat vs. Court of Appeals, G. R. No. 1111 07, January 10, 1997; 266 SCRi\ 167, pp. 175 -177. 5 1 ~06