COMMISSIONER OF INTERNAL REVENUE v. PHILIPPINE MINING SERVICE CORPORATION

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY En Bane COMMISSIONER OF CTAEB No. 3242 INTERNAL REVENUE, (CTA Case No. 10880) Petitioner, Present: RINGPIS-LIBAN, P.]. - versus- BACORRO-VILLENA, MODESTO-SAN PEDRO, PHILIPPINE MINING REYES-FAJARDO, SERVICE CORPORATION, CU I-DAVID , FERRER-FLORES, Respondent. ANGELES,./1. Promulgated: MAY21 ~ ~ DECISION RINGPIS-LIBAN,L: Before the Court En Bane is a Petition for Review1 flied by petitioner Commissioner oflnternal Revenue (CIR), within an extended period2 granted by this Court,3 seeking the reversal of the Decision promulgated on 21 May 20254 and the Resolution promulgated on 01 October 20255 of the Court's Third Division in CTA Case No. 10880, entitled Philippine Mining Service Corporation v. Commissioner ofInternal Revenue. The dispositive portion of the Division D ecision reads: "ACCORDINGLY, the present Petition for Review is PARTIALLY GRANTED. Respondent is ORDERED to refund petitioner the additional amount of P7,361,177.44, representing petitioner's unutilized and/or unapplied and excess / 1 Rollo, pp. 9-36. 2 /d., pp. 1-7. 3 ld., p . 8 . 4 /d., pp. 38-65, Decision, CTA Case No. 10880, Third Division (Manahan, J.), promulgated 21 May 2025. 5 ld., pp. 67-73, Resolution, CTA Case No. 10880, Third Division (Manahan, J.), promulgated 01 October 2025.

DECISION CTA EB No. 3242 {CTA Case No. 10880) Page 2 of9 input VAT attributable to zero-rated sales for the period covering the 1st and 2nd quarters of taxable year 2020, or from January 1, 2020 to June 30, 2020. SO ORDERED."6 Aggrieved, the CIR moved for partial reconsideration. The Third Division denied the motion through its Resolution dated 1 October 2025, the dispositive portion of which reads: "WHEREFORE, premises considered, the respondent's Motion for Partial Reconsideration (Re: Decision promulgated on 21 l\Iay 2025) is DENIED for lack of merit. SO ORDERED."7 The Court notes that the Petition for Review carries over the caption used before the Division, which placed Philippine Mining Service Corporation (PMSC) as petitioner and the CIR as respondent. Before the Court En Bane, however, it is the CIR that seeks affirmative relief and who stands as the appealing party. Accordingly, the Court motu proprio corrects the caption to reflect the proper party designations: the CIR is the Petitioner and PMSC is the Respondent. The corrected caption shall govern throughout this Decision. THE PARTIES Petitioner CIR is the duly appointed head of the Bureau of Internal Revenue (BIR) with authority, among others, to decide, approve and grant tax credits and/or refunds of unutilized or excess input value-added tax (VAT), and is holding office at 5/F BIR National Office Bldg., Diliman, Quezon City8 Respondent Philippine Mining Service Corporation (PMSC) is a corporation duly organized and existing under the laws of the Republic of the Philippines, with office address at 5/F Mercedes-Benz Tower, Mindanao Avenue, Cebu Business Park, Cebu Cit:y9 It is registered with the BIR under Tax Identification No. (TIN) No. 000-136-814-000; 6 /d., p. 64. 7 /d., pp. 72-73. 8 /d., pp. 10-11. 9 Docket-Val. 1, p. 197, Admitted Facts, Joint Stipulation of Facts and Issues (JSFI). par. 4. 10 fd., par. 5.

DECISION CTA EB No. 3242 {CTA Case No. 10880) Page 3 of9 THE FACTS Asfound by the Third Division and as m!!edfrom the rerords. On February 28, 2022, PMSC filed with the VAT Credit Audit Division of the BIR an Application for Tax Credits/Refunds (BIR Form No. 1914) in the amount of P31,676,798.32, for the period January 1, 2020 to June 30, 2020. 11 On May 10, 2022, P1viSC received the VAT Refund Notice dated April 20, 2022 from the BIR, partially granting its request for refund of excess and unutilized input V1\T for the covered period in the amount of P17,772,357.63. Out of total deductions of P13,904,440.69, only the amount of P12,894,197.86 - representing input tax attributable to sales allegedly not valid for VAT zero- rating- was assailed by Pl\ISC before the Third Division-'c PROCEEDINGS BEFORE THE COURT On June 9, 2022, PMSC filed a Petition for Review before the Third Division, assailing only the BIR's disallowance of P12,894,197.86. Within the extended period granted by the Court,ll the CIR filed his Answer on September 12, 2022. 1" On November 10, 2022, the BIR Records were transmitted to the Court.15 The Pre-Trial Conference was held on November 24,2022. 16 The parties flied their joint Stipulation of Facts and Issues QSFI) on january 10,2023, which the Court approved on january 24, 2023n After trial, all parties' evidence having been admitted and memoranda ftled, the case was submitted for decision on May 24, 2024. 18 On May 21,2025, the Third Division promulgated its Decision19, partially granting PMSC's Petition and ordering the CIR to refund the additional amount of P7,361,177.44. The C:IR moved for partial reconsideration on June 2, 2025, to which PMSC filed its Comment/Opposition on June 18, 2025. The Third Division denied the CIR's motion through a Resolution dated 1 October 2025 20 On October 17, 2025, the CIR filed a Motion for Extension of Time to File Petition for Review. The Court En Bane granted the motion on October 20, ~ 11 Docket-Val. 2, p. 611, Exhibit 'P-3'. 11 /d., pp. 617-632, Exhibit 'P-4'. ' 3 /d. at Note 9, pp. 100-102. '�'/d., pp. 106-117. 15 ld., pp. 149-151, Compliance dated November 9, 2022. 16 /d., pp. 120-122; 175-178, Notice of Pre-Trial Conference dated September 15, 2022; Minutes and Order dated November 24, 2022. 17 /d., pp. 196-198. 18 /d. at Note 11, pp. 726-763, Memorandum of petitioner; id., pp. 765-767, Manifestation of respondent. 19 /d. at Note 4. 10 /d. at Note 5.

DECISION CTA EB No. 3242 {CTA Case No. 10880) 2025, giving the CIR until November 2, 2025 to file its petition. The CIR timely filed the present Petition for Review on October 29, 2025. On January 14, 2026, the Court ordered PMSC to file its Comment. PMSC filed its Comment/Opposition on January 26, 2026."1 The case was submitted for decision on February 18, 2026." ASSIGNMENT OF ERRORS Petitioner Commissioner of Internal Revenue claims that the Third Division erred in ruling that it could give weight to evidence not presented during the investigation done at the administrative level."3 Petitioner Commissioner of Internal Revenue further claims that the Third Division erred in ruling that respondent Philippine l'vlining Service Corporation is partially entitled to the refund sought.14 THE ARGUMENTS OF THE PARTIES Petitioner's Arguments The CIR argues that the Third Division committed reversible error when it admitted and gave weight to documentary evidence not presented before the BIR during the administrative investigation. The CIR invokes Pilipinas Total Gas, Im: v. CommiJSioner of Internal Revenui5for the proposition that because the BIR rendered a decision on P?viSC's administrative claim, the CTA's jurisdiction is appellate in nature and it cannot consider new evidence. The CIR further argues that a taxpayer cannot cure its failure to submit required documents at the administrative level by presenting those same documents before the CTA. On the merits, the CIR reiterates that PMSC failed to comply with Section 112 of the National Internal Revenue Code (NIRC) of 1997, as amended, in relation to Revenue Memorandum Circular (RMC) No. 47-2019, and with the invoicing and substantiation requirements under Sections 113 and 114 of the NIRC and Revenue Regulations (RR) No. 16-2005. The CIR emphasizes that tax refunds are construed strictly against the taxpayer and in favor of the government, and that the burden of proof to establish entitlement to refund lies with the claimany 21 /d. at Note 1, pp. 78-88. 22 /d., p. 89. "/d., pp. 14-17. 24 /d., pp. 18-22. 25 G.R. No. 207112, 8 December 2016.

DECISION CTA EB No. 3242 {CTA Case No. 10880) Page 5 of9 Respondent's Arguments PMSC counters that the Petition merely rehashes arguments previously raised by the em. in his Answer and l'vfotion for Partial Reconsideration before the Third Division, all of which have been thoroughly passed upon and resolved on the merits. 26 Pl\ISC argues that Pzlipinas Total Gas has no application here because the CIR has neither alleged nor proven that PMSC failed to submit documents specifically requested by the BIR during the administrative proceedings. On the contrary, PMSC's administrative claim was partially granted; it was not dismissed for failure to substantiate its claim. PMSC relies on Philippine Airlines, Inc v. Commissioner of Intemal Revem11!1for the settled rule that the CTA is not limited by the evidence presented at the administrative level and may consider new and additional evidence presented by the taxpayer in the judicial proceeding. On the merits, PMSC maintains that it fully substantiated its claim for refund of input VAT attributable to zero-rated sales in Q1-Q2 of TY 2020, and that the Third Division correctly evaluated the evidence and properly reduced the total disallowed zero-rated sales from l"176,353,594.67 to l"75,667,087.29, resulting in an adjusted refundable amount of l"25,133,535.07, of which l"7,361,177.44 remains outstanding after crediting the l"17,772,357.63 already paid by the BIR. THE RULING OF THE COURT The Petition for Review must be DENIED. The Court En Bane is not precluded from considering evidence not presented at the administrative level; the CIR's invocation of Pilipinas Total Gas is misplaced. The CIR's arguments before this Court En Bane are a mere rehash of the same grounds already thoroughly considered and correctly rejected by the Court in Division. Nonetheless, the Court reiterates the applicable legal framework. Section 8 of Republic Act (R.A.) No. 1125, as amended, expressly declares the Court of Tax Appeals a court of record. Being such, the CTA is required to conduct a formal trial de novo where parties must present and formally offer their evidence. The Supreme Court has been categorical on this point in Philippine Airlines, Im: v. Commissioner of Internal Revemtr!8: the CTA is not limited by the fr "/d. at Note 1, pp. 80-85. 27 G.R. Nos. 206079-80 & 206309, January 17, 2018. 28 Supra.

DECISION CTA EB No. 3242 (CTA Case No. 10880) evidence presented during the administrative claim, and the claimant may present new and additional evidence before the CTA to support its case for tax refund. The CTA, as a court of record conducting trial de novo, is not governed strictly by technical rules of evidence and is not precluded from considering evidence not presented at the administrative level, the paramount consideration being the ascertainment of truth. The CIR invokes Pilipinas Total Gm; Im: v. Commissioner ofInternal Revemtt!9 to support the opposite proposition. This reliance is misplaced. As this Court En Bane held in CommiSJioner of Intemal Revenue v. Philippine Geothermal Prod11ction Compa!1)', Im: 30, the rule in Pilipinm Total Gas applies only under three concurring conditions: (a) the BIR specifically requested certain documents from the taxpayer during the administrative proceedings; (b) the taxpayer failed to submit those documents despite the request; and (c) the claim was dismissed precisely because of that failure. All three must be present before a judicial claim may be deemed dismissible. None of these conditions obtain in the present case. The CIR has neither alleged nor established that the BIR issued a specific request for documents that PMSC failed to comply with. !vlore importantly, PMSC's administrative claim was not dismissed - it was partially granted. The BIR approved !'17,772,357.63 of the !'31,676,798.32 claimed; it was the BIR's disallowance of certain zero-rated sales- not PMSC's failure to submit required documents - that drove the controversy before the Third Division. The factual predicate for applying Pilipinas Total Gas is therefore entirely absent. The Third Division correctly admitted and weighed all evidence formally offered by PMSC during the judicial proceedings, consistent with the CTA's plenary jurisdiction as a court of record. PMSC fully substantiated its entitlement to the additional refund of P7,361,177.44. On the merits, the Court adopts the findings of the Third Division. Under Section 112(A) of the NIRC of 1997, as amended by R.A. No. 10963 (TRAIN Law), a VAT-registered person whose sales are zero-rated or effectively zero- rated may, within two 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 attributable to such sales, to the extent that such input tax has not been applied against output tax. The requisites for the grant of a VAT refund are well- settled under Intel Technology Philippines, Im: v. CommiSJiomr ofInternal Reventle11 and San Roque Power Coporation v. Commissioner ofInternal Revenm3 " }/ 29 Supra; Note 25. �3 CTA EB No. 2720, 20 February 2024. 31 G.R. No. 166732, 27 April 2007. "G.R. No. 180345, 25 November 2009.

DECISION CTA EB No. 3242 {CTA Case No. 10880) Page 7 of9 The Third Division methodically evaluated each of the BIR's disallowances and arrived at the following conclusions, which the Court En Bane affirms: (1) PMSC timely flied both its administrative and judicial claims;33 (2) PMSC is a VAT-registered entity;34 (3) PMSC had zero-rated or effectively zero- rated sales during Q1-Q2 of TY 2020, consisting of indirect export sales to PEZA-registered entities under Section 106(A)(2)(a)(S) of the NIRC, as amended, and direct export sales under Section 106(A)(2)(a)(1) of the same Code. 35 With respect to the CIR's specific disallowances, the Third Division correctly: (a) reversed the disallowance of PMSC's zero-rated sales to Philippine Sinter Corporation (PSC) amounting to l"80,596,039.33, which were duly supported by approved PEZA Form No. 8105 permits showing actual delivery into the economic zone, and reduced the remaining PSC disallowance to only l"40,473,576.44 pertaining to transactions not covered by either PEZA permits or credit memoranda; (b) reversed the disallowance of PMSC's sales to Pioneer Float Glass Manufacturing, Inc. in the amount of P6,497,631.73, which were covered by credit memoranda explaining volume adjustments in transit - consistent with P.I\ISC's established practice of issuing loading-point invoices and final invoices upon arrival- while sustaining the disallowance ofl"S,881,812.65 for failure to submit l'viate's Receipts or bills of lading; (c) sustained the disallowances of zero-rated sales to Unichamp Mineral Philippines, Inc. (l"10,122,637.50), Visayas Slaked Lime Corporation (l"10,947,834.56), and Taganito HP1\L Nickel Corporation (P7,512,328.25) for failure to submit bills of lading; (d) reversed the disallowance of PMSC's sales to JFE Shoji Trade Corporation (l"4,442,646.50), the difference representing commissions explicitly provided for under a service agreement duly in evidence; and (e) sustained the disallowance ofl"728,897.89 in sales to Vale Nouvelle Caledonie SAS for absence of proof of inward remittances:'" On the basis of the foregoing, the total disallowed zero-rated sales were properly reduced from l"176,353,594.67 to P75,667,087.29. Applying the proportionate allocation formula under Section 112(A) of the NIRC to the net available input V,\T of P50,132,962.15, the input tax allocated to the adjusted disallowed zero-rated sales amounts to only P5,533,020.43, compared to the P12,894,197.87 found by the CIR. The recomputed net refundable amount is l"25,133,535.07 - of which P17,772,357.63 has already been paid, leaving a balance ofl"7,361,177.44 to be additionally refunded 57 The CIR's invocation of the strict construction principle against the taxpayer is well-taken as a general rule under Atlas Consolidated Mining and Development C01pomtion v. Commissioner of Internal Reven11~8and Commissioner of }/ 33 /d. at Note 1, pp. 46-47. 34 /d. at Note 11, p. 608, Exhibit 'P-2'. 35 /d. at Note 4, pp. 48-49. 36 /d., pp. 51-64. 37 /d., p. 64. 38 G.R. No. 159490, February 18, 2008

DECISION CTA EB No. 3242 {CTA Case No. 10880) Page 8 of9 Internal Revenue v.�Manila Niining C01poration. 39 However, strict construction is not a license to deny a claim that has been fully substantiated. PMSC has demonstrated, through competent documentary evidence, that it satisfied all the requisites for refund under Section 112 of the NIRC. The principle does not countenance the perpetuation of an erroneous disallowance that has been affirmativelv shown to be without basis. ' In fine, the Court En Bane finds no reversible error in the Decision dated 21 May 2025 of the Court's Third Division. The Petition for Review must be DENIED. WHEREFORE, premises considered, the Petition for Review filed by petitioner Commissioner of Internal Revenue is hereby DENIED for lack of merit. The Decision dated 21 May 2025 of the Court's Third Division in CTA Case No. 10880 is hereby AFFIRMED in toto. SO ORDERED. ~. ~l.c..- I - _ MA. BELEN M. RINGPIS-LIBAN Presiding Justice WE CONCUR: ' JEAN MARI~-VILLENA ~o~;te Justice (Inhibited) MARIA ROWENA MODESTO-SAN PEDRO Associate Justice ~~F.~-F~ MARIAN Ifv F. REYES-FAJARDO Associate Justice AHo,iate Justice 39 G.R. No. 153204, August 31, 2005.

DECISION CTA EB No. 3242 (CTA Case No. 10880) Page 9 of9 co~ ~~~~r...,s Asso,iate jttstil'e HENRY t.eGELES Assodate ]11stil'e CERTIFICATION Pursuant to [\rticle 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. 0...-. -1.-t�� I .______ MA. BELEN M. RINGPIS-LIBAN Presiding Justice