TAGANITO MINING CORPORATION v. COMMISSIONER OF INTERNAL REVENUE

.. REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY TAGANITO MINING CORPORATION, Petitioner, -versus- C.T.A. CASE NO. 6597 COMMISSIONER OF INTERNAL Promulgated : REVENUE, Respondent. NOV 12 2004 ~~-4~ X - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - DECISION This case involves a claim for refund in the total amount of P11 ,411 ,383.02 representing petitioner' s alleged excess VAT input taxes paid on petitioner's domestic purchases of taxable goods and services and importation of capital goods for the period January 1 to December 31 , 2001. The facts as culled from the records are as follows : Petitioner is a corporation duly organized and existing under and by virtue of the laws of the Philippines with principal office at 41h Floor, Solid Mills Building, DelaRosa Street, Legaspi Village, Makati City. It is primarily engaged in the business of exploring, / 1 producing and exporting beneficiated nickel silicate ores and chromite ores and registered \ as a VAT-entity with Certificate of Registration No. 94-470-000373 (Annex "C ", I Petition for Review) . The Board of Investments (BOI), likewise, issued a certification that petitioner exported 100% of its total sales volume/value for the calendar year covering January to December 2001. (Annex "E ", Petitionfor Review)

DECISION CTA CASE NO. 6597 Petitioner alleges that for the period January 1, to December 31, 2001 , it generated zero:r_ate~xport sales amounting to Six Hundred Fifty Million Eight Hundred Eighty Nine Thousand Six Hundred Twenty Pesos and 111100 (P650,889,620.11) which were paid for in acceptable foreign currency and accounted for in accordance with the rules of the Bangko Sentral ng Pilipinas (BSP) , pursuant to Section 106 (a)(2)(a)(1) of the National Internal Revenue Code (NIRC). Furthermore, for the same period, petitioner paid the amounts of Eight Million Five Hundred Ninety Eight Thousand Fifty Four Pesos and 891100 (P8,598,054.89) and Two Million Eight Hundred Thirteen Thousand Three Hundred Twenty Eight and 13/ 100 (P2,813 ,328.13), representing VAT input taxes )Jn its domestic purchases of taxable goods and services and priits importation of capital goods, respectively, details of which are as follows : Input VAT on Input VAT on Taxable Zero-rated Domestic Purchases of Importation of Total Exhibits Quarter Export Sales Goods and Services Goods Input VAT K Ist Quarter P169,367,952 .76 p 1,648,013.26 P2,813 ,328.13 p 1,648,013 .26 Q 2nd Quarter 194,080,976.41 2,600,606 .17 P2,813 ,328.13 5,413 ,934 .30 X 3rd Quarter 109,441,430.26 3 ,538 ,974 .68 3,538,974.68 4th Quarter 177,999,260.68 810 ,460 .78 810,460.78 DD P650 , 889 ,620 . 11 P8 ,598 ,054.89 P11 ,411 ,383.02 TOTAL On December 27, 2002, petitioner filed with the respondent' s Excise Taxpayers' Assistance Division under the Large Taxpayers Division, a claim for refund of the VAT input taxes paid (par. (d), Stipulated Facts, Joint Stipulation of Facts) on its domestic purchases of taxable goods and services and importation of capital goods in the aggregate amount of P11 ,411 ,383 .02 for the period January 1 to December 31 , 2001 in accordance with Section U -2 (A) and (B) ofthe 1997 NIRC.

DECISION CTA CASE NO . 6597 For failure to receive any response from the respondent, petitioner filed the instant Petition for Review on January 27, 2003 to forestall the running of the two-year prescriptive period. Respondent filed his Answer on February 28, 2003 and raised the following Special and Affirmative Defenses: "4. He reiterates and repleads 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 Bureau of Internal Revenue; 6. To support its claim, it is imperative on the part of petitioner to prove the following to wit: a. The registration requirements of a Value Added Taxpayer pursuant to Section 6 (a) and (b) of the Revenue Regulations No. 6-97 in relation to Section 4.107-1 (a) of Revenue Regulations No. 7-95. b. That the VAT input taxes of Php: 11,411,383.02 allegedly paid by petitioner from its domestic purchases of services were attributable to its zero-rated sales and such tax has not been applied against any output tax. c. That petitioner' s claim for tax credit or refund of the excess Input Value Added Tax (VAT) was filed within two (2) years after the close of the taxable quarter when the sales were made in accordance with Section 4.106-1 (Re: Refunds or Tax Credits of Input Tax) and Section 4.106-2 (Re: Procedures for Claiming Refunds or Tax Credits of Input Tax) of Revenue Regulation No. 7-95. d. That petitioner' s domestic purchases of services were made in the course of its trade or business, properly supported by invoices or receipts and import entry or other equivalent documents showing that it actually paid VAT in pursuance to Section 4.104-5 (a) & (b) of Revenue Reg. No. 7-95. (Re: Substantiation of Claims for Input Tax Credit). e. The requirements as enumerated under Section 4.104-2 of the Rev. Reg. 7-95. (Re: Persons who can avail of the Input Tax Credits) f. The requirements under Section 4.100-2 in relation to Section 4.102-1 and Section 4.102-2 of the Rev. Reg. No. 7-95, which

DECISION CTA CASE NO. 6597 provides that petitioner's export sale of taxable goods and services to persons doing business outside the Philippines, are paid for in acceptable foreign currency actually or constructively remitted to the Philippines and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas. g. That Petitioner has complied with the governing rules and regulations with reference to recovery of tax erroneously or illegally collected as explicitly found in Sections 112 (A) and 229 of the Tax Code, as amended. 7. Furthermore, and consistent with the well settled principle in taxation, claims for refund are construed strictly against the claimant as they partake the nature of an exemption from tax and it is incumbent upon petitioner to prove that it is entitled thereto under the law. Failure to prove the same is fatal to its claim for tax refund. 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 the vague implications. (Asia Petroleum Co. vs. Llamas 49 Phil 466) " The following issues were stipulated by the parties: (1) Whether or not the amount of Eleven Million Four Hundred Eleven Thousand Three Hundred Eighty Pesos and 02/100 (Php: 11,411,383 .02) representing Petitioner's alleged excess VAT input taxes paid relative to its domestic purchases of goods and services for the period of January 1, 2001 to December 31 , 2001 are attributable to its zero-rated transactions; (2) Whether or not the said excess input VAT was carried over to succeeding quarter and applied against any of Petitioner' s output VAT for the said period; (3) Whether or not Petitioner' s export sales are subject to Value-Added Tax at zero-percent rate; (4) Whether or not Petitioner's alleged export sales in the amount of PhP:650,889,620.11 were paid for in acceptable foreign currency and accounted for in accordance with the rules of the Bangko Sentral ng Pilipinas (BSP); (5) Whether or not the alleged excess input VAT IS sufficiently substantiated by documentary evidence;

DECISION CTA CASE NO. 6597 (6) Whether or not Petitioner is entitled to tax refund. We shall jointly discuss the issues considering that these are interrelated. Petitioner claims that it is a VAT-registered entity whose sales in the amount of P650,889,620.11 for the period January 1, 2001 to December 31, 2001 consisted of direct export sales, the consideration of which was paid for in acceptable foreign currency inwardly remitted to the Philippines and accounted for in accordance with the rules and regulations of the BSP. Thus, its export sales are considered as zero-rated sales which are not subject to the 10% VAT, but which are subject to zero percent (0%) rate pursuant to Section 106(A)(2)(a)(l) of the 1997 NIRC, which provides, viz: "Section 106. Value-Added Tax on Sale ofGoods or Properties.- (A) Rate and Base ofTax. - (1) X X X (2) [Zero-rated Sales.] - The following sales by VAT-registered persons shall be subject to zero percent (0%) rate; (a) Export Sales . - The term 'export sales' means: (1) The sale and actual shipment of goods from the Philippines to a foreign country, 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 services, and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP); XXX XXX xxx" Petitioner further argues that its VAT input taxes for the period January 1 to December 31, 2001 were paid on domestic purchases of taxable goods and services and on importation of capital goods and made in the course of trade or business,

DECISION CTA CASE NO. 6597 undiminished by any VAT output tax, not carried forward to the succeeding quarter or quarters subsequent to the filing of the claim, and which were duly supported by VAT- registered sales invoices and/or official receipts. Such that, it is entitled to refund of said VAT input taxes pursuant to Section 112 (A) and (B) of the 1997 NIRC, pertinent portions are hereunder quoted: "SEC. 112. Refunds or Tax Credits ofInput Tax. - (A) Zero-rated or Effectively Zero-rated Sales. - Any VAT- registered person, whose sales are zero-rated or effectively zero-rated may, within two (2) years after the close 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: Provided, however, That in the case of zero-rated sales under Section 106(A)(2)(a)(l), (2) and (B) and Section 108 (B)(1) and (2), the acceptable foreign currency exchange proceeds thereof had been duly accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP): Provided, further, That where the taxpayer is engaged in zero-rated or effectively zero-rated sale and also in taxable or exempt sale of goods or properties or services, and the amount of creditable input tax due or paid cannot be directly and entirely attributed to any one of the transactions, it shall be allocated proportionately on the basis of the volume of sales. (B) Capital goods. - A VAT-registered person may apply for the issuance of a tax credit certificate or refund of input taxes paid on capital goods imported or locally purchased to the extent that such input taxes have not been applied against output taxes. The application may be made only within two (2) years after the close of the taxable quarter when the importation or purchase was made." We do not agree with petitioner's arguments. A careful perusal of the documentary evidence presented, particularly, the export I sales invoices (part of Exhs. D to D-97) , indubitably showed that the same did ot_ comply with the invoicing requirements provided for under Section 4.108 .1 of Revenue

DECISION CTA CASE NO. 6597 Regulations No. 7-95 in relation to Sections 113 and 23 7 of the 1997 NIRC, for failure to imprint the word "zero-rated" on the export invoices. This case is not one of first impression. We have already passed upon the issue in the case of Taganito Mining Corporation vs. Commissioner of Internal Revenue, CTA Case No. 6384 promulgated January 12, 2004, with the same parties and facts but involving the period January 1 to December 31 , 2000, where we held that the export sales invoices presented by petitioner were invalid as they did not comply with the invoicing requirements provided for under Section 4.108-1 of Revenue Regulations No. 7-95 in relation to Sections 113 and 237 of the National Internal Revenue Code of 1997. Pertinent portions of these provisions of law and regulations are quoted hereunder for easy reference: "Section 4.108-1. Invoicing Requirements. - All VAT-registered persons shall, for every sale or lease of goods or properties or services, issue duly registered receipts or sales or commercial invoices which must show: 1. the name, TIN, and address of seller; 2. date oftransaction; 3. quantity, unit cost and description of merchandise or nature of service; 4. the name, TIN, business style, if any, and address ofthe 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. (Emphasis supplied) XXX XXX xxx" "Section 113. Invoicing and Accounting Requirements for VA T-Registered Persons. - (A) Invoicing Requirements. - A VAT-registered person shall, for every sale, issue an invoice or receipt. In addition to the

DECISION CTA CASE NO. 6597 Page 8 of I3 information required under Section 23 7, the following information shall be indicated in the invoice or receipt; (1) A statement that the seller is a VAT-registered person, followed by his taxpayer's identification number (TIN); and (2) The total amount which the purchaser pays or is obligated to pay to the seller with the indication that such amount includes the value-added tax. (B) Accounting Requirements. Notwithstanding the provisions of Section 233, all persons subject to the value-added tax under Sections 106 and 108 shall, in addition to the regular accounting records required, maintain a subsidiary sales journal and subsidiary purchase journal on which the daily sales and purchases are recorded. The subsidiary journals shall contain such information as may be required by the Secretary of Finance. XXX XXX xxx" "Section 237. Issuance of Receipts or Sales or Commercial Invoices. - All persons subject to an internal revenue tax shall, for each sale or transfer of merchandise or for services rendered valued at Twenty- five pesos (P25 .00) or more, issue duly registered receipts or sales or commercial invoices, prepared at least in duplicate, showing the date of transaction, quantity, unit cost and description of merchandise or nature of service: Provided, however, That in the case of sales, receipts or transfers in the amount of One hundred pesos (PIOO.OO) or more, or regardless of amount, where the sale or transfer is made by a person liable to value-added tax to another person also liable to value-added tax; or where the receipt is issued to cover payment made as rentals, commissions, compensations or fees, receipts or invoices shall be issued which shall show the name, business style, if any, and address of the purchaser, customer or client: Provided, further, That where the purchaser is a VAT-registered person, in addition to the information herein required, the invoice or receipt shall further show the Taxpayer Identification Number (TIN) ofthe purchaser. x x x" In the aforecited case, Taganito Mining Corporation, this court noted that all the export sales invoices did not show the imprinted word "zero-rated", and some of which

DECISION CTA CASE NO. 6597 did not have any "TIN-V" or TIN-VAT", and held that these mv01ces lacked the necessary information required by law and regulations. Moreover, while petitioner in the said case was able to present other documents, such as the Bills of Lading, Export Declarations/ Permits, bank credit/debit advices and ore transport permits to prove actual exportation of its products, we have ruled that these documents were insufficient. In the case of Philippine Bobbin Corporation, CA-G.R. SP No. 59452, February 19, 2001 , the Court of Appeals ruled that these documents are not enough to be entitled to a claim for refund. Rather, these documents, together with - the valid sa s invoices, should be taken collectively as the best means to prove the exportation of goods, thus: "By and large, export sales invoices alone are inadequate proofs that the subject goods were actually exported. Such invoices are merely written accounts of the particulars of merchandise shipped or sent to purchaser or consignee with the value or prices and charges annexed (Philippine Law Dictionary, 3 rd Ed. , p. 495). By no means are they accurate confirmations that goods were actually shipped out of the country. Yet, that is what the law requires. Section 100(a)(2) of the National Internal Revenue Code (then in effect at the time of the alleged exportation) defines "Export Sales" as the sale and shipment 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. In that case, it is imperative for any claimant of a tax refund or credit in relation to the Input VAT paid to prove not only the existence of the sale but also the actual shipment of the goods from e Philippines to a foreign country. Rather than limiting the documentary requirements to just the export invoices, the law specifically enjoined the production of "export documents" to affirm the authenticity of the export sales. In commercial practice, expOrt documents include commercial invoices or receipts, bills of lading, airway bills, and export declarations or permit. These documents, taken collectively, are the best means to prove the exportation of goods." (Underscoring supplied) "

DECISION CTA CASE NO. 6597 Based on all the foregoing, this court finds that herein petitioner' s export sales of P650,889,620.11 for the taxable year 2001 cannot qualify for zero-rating, thus, it is not entitled to a refund of the input VAT attributable thereto. However, with respect to petitioner' s claim for refund of input VAT on capital goods purchased for the taxable year 2001 , we rule to grant the same. Section 112 (B) of the 1997 NIRC, in relation to Section 4.106-1 of Revenue Regulations No. 7-95, provides : � "Section 112. Refunds or Tax Credits oflnput Tax. - XXX XXX XXX (B) Capital Goods. - A VAT-registered person may apply for the issuance of a tax credit certificate or refund of input taxes paid on capital goods imported or locally purchased, to the extent that such input taxes have not been applied against output taxes. The application may be made only within two (2) years after the close of the taxable quarter when the importation or purchase was made. XXX XXX XXX Section 4.1 06-1. Refunds or tax credits of input tax (a) Zero-rated sales ofgoods or properties or services - x x x (b) Capital goods. - Only a VAT-registered person may apply for issuance of a tax credit certificate or refund of input taxes paid on capital goods imported or locally purchased. The refund shall be allowed to the extent that such input taxes have not been applied against output taxes. The application should be made within two (2) years after the close of the taxable quarter when the importation or purchase was made. Refund of input taxes on capital goods shall be allowed only to the extent that such capital goods are used in VAT taxable business. If it is also used in exempt operations; the input tax refundable shall only be the ratable portion corresponding to the taxable operations. "Capital goods or properties refer to goods or properties with estimated useful life greater than one year and which are treated as

DECISION CTA CASE NO. 6597 Page II of 13 depreciable assets under Section 29(f), used directly or indirectly in the production or sale of taxable goods or services." Petitioner must comply with the following requirements in order to be entitled to claim for a refund, to wit: (1 that it is a VAT-registered person or entity; (2),...... the input taxes claimed by petitioner were paid on capital goods; (31 its input VAT payments on capital goods are duly supported by VAT invoices and/or official receipts; (4) /"'" the input taxes have not been applied against its output tax liability; and (5) _.....-the administrative claim for refund was seasonably filed. (Telecommunications Technologies Philippines vs. Commissioner of Internal Revenue, CTA Case No. 6018, November 24, 2003; Air Liquide Philippines, Inc. vs. Commissioner of Internal Revenue and Commissioner of Customs, CTA Case No. 5652, July 6, 2000) Records reveal that petitioner substantially complied with all the aforementioned requirements. Firstly, the fact that petitioner is a VAT-registered entity is not disputed (par. b, Joint Stipulation ofFacts). Secondly, for the taxable year 2001 , petitioner actually paid input VAT amounting to P3 ,598,823.58 on purchases of capital goods which was defined in Section 4.106-l(b) of Revenue Regulations No. 7-95 as goods or properties with the estimated useful life greater than one year and which are treated as depreciable assets under Section 29(f), used directly or indirectly in the production or sale of taxable goods or services. Moreover, these were duly covered by valid VAT invoices and/or official receipts in

DECISION CTA CASE NO. 6597 accordance with Section 4.104-5 of Revenue Regulations No. 7-95. Below 1s the breakdown of the input taxes ofP3,598,823 .58, to wit: EXHIBIT NAME OF SUPPLIER EQUIPMENT AMOUNT INPUT TAX B-633 & B-633A Marubeni Corporation Hydraulic Excavator p 5,149,510.00 p 514,951.00 B-6338 & B-633C Marubeni Corporation 514,328 .00 B-633D & B-633E Marubeni Corporation Hydraulic Excavator 5,143,280.00 B-633F & B-633G First lnt'l. CorEoration 1,749,503 .00 Total Input VAT from Importation Tractor; Wheel Loader 17,495,030.00 34,546 . 13 Diesel Engines 345,461 .34 p 2,813,328.13 p 28,133,281.34 B-34 & B-35 Honda Cars Makati, Inc. Honda CRV p I,019,954.55 p 101 ,995.45 844,545.45 84,454 .55 B-388 & B-389 Ford Edsa, Inc. Ford Ranger 2,530,454 .55 253,045.45 B-686 & B-687 Int'l Heavy Equipment Corp. Vibrator Roller 1,2 50,909 .09 125 ,090.91 2,209,090.91 220,909.09 B-93 1 & B-932 Kubota Agricultural Tractor p 7,854,954.55 p 785,495.45 p 35,988,235.89 p 3,598,823.58 B-1245 & B-1246 Columbian Mftg. Cor�. Shuttle Bus Total Input VAT from Domestic Purchases of Goods Total lnEut VAT on CaEital Goods Likewise, petitioner was able to establish that the abovementioned input taxes in the amount of P3 ,598,823.5 8 were not applied against any output VAT liability during and in the subsequent periods since it did not have any output tax against which the said input taxes can be applied (Exhibits F to JJ, inclusive of sub-markings). Although, petitioner carried over its 2001 unutilized input VAT up to the third quarter of 2002, petitioner deducted the same from the total available input tax ofP29,563,762.78 as part of the amount of P27,553,025.91 indicated as "Any VAT refund!TCC Claimed" in the fourth quarterly VAT return of taxable year 2002 (Exhibit JJ-3-A). Finally, petitioner's claim for refund was timely filed within the two-year prescriptive period both in the administrative and judicial levels reckoned from the respective filing of the quarterly VAT returns for the taxable year 2001. (Atlas

DECISION .CTA CASE NO. 6597 Consolidated Mining and Development Corporation vs. Commissioner of Internal Revenue, Resolution dated July 20, 1998) WHEREFORE, the Petition for Review is hereby PARTIALLY GRANTED. Accordingly, respondent is ORDERED to REFUND to petitioner the amount of THREE MILLION FIVE HUNDRED NINETY EIGHT THOUSAND EIGHT HUNDRED TWENTY-THREE AND 58/100 (P3,598,823.58) representing input VAT paid on capital goods purchased for the taxable year 2001. SO ORDERED. Associate Justice WE CONCUR: ~ c. ~~~f~.Rr- ERNESTO D. ACOSTA Presiding Justice ~~-ro ~ 1}.... ~,l.o CQ. C.AS~TAoNE6DA,~.fSRJ.n . fuANrfo Associate Justice CERTIFICATION I hereby certify that the above decision was reached after due consultation with the members of the Court of Tax Appeals in accordance with Section 13, Article VIII of the Constitution. ~~ - ~ ERNESTO D. ACOSTA Presiding Justice

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY TAGANITO MINING CORPORATION, P etitio ner, - versus- C.T.A. CASE NO. 6597 COMMISSIONER OF INTERNAL REVENUE, Respondent. Promu Igated: NOV .12 2004 X ---- - -- --- ------------ - - -- - -- --- - ------------ - - ~~~~ Concurring and Dissenting Opinion This court denies petitioner's claim for refund represen ting its excess input value-added tax (VAT) paid on its domestic purchases of taxable goods and se rvices and grants its refund claim arising from its importati on of capital goods fo r the peri od from January 1 to December 31 , 2001 . I concur, in part, with the majority opm1on to the extent that it find s petitioner 's input VAT claim on capital goods meritorious. As correctly obse rved by the court, the records reveal that petitioner substantially compli ed with all the requirements for refund, to wit: 1. That it is a VAT-registered person or enti ty; 2. The input taxes claimed by petitioner were paid on capital goods; 3. Its input VAT payments on capital goods are dul y supported by VAT invo ices and/or offi cial receipts; 4. The input taxes have not been applied against its output tax liability; and 5. The administrative claim for refund was seasonably fil ed.

Concurring and Dissenting Opinion '� CTA Case No. 6597 Page 2 Nonetheless, I am expressmg my disagreement with the decision of the majority based on the following reasons: (1 ) th e pronouncement of "defects" in the invoices has no valid basis and (2) the pieces of evidence submitted aside from the supposedly techni cally defective VAT invo ices are adequ ate to merit a favo rable fi nding. At this point, I reckon it appropriate to qu ote the pertin ent provisions of the 1997 Tax Code, namely, Section 113 in relati on to Secti on 23 7, to wit: "Section 113. Invo icin g a nd Accountin g R equirements for VAT r egister ed per sons - (A) Invo icing R equirements - A VAT- registered person, shall, for every sale, issue an invo ice or receipt. In addition to the information required under Section 23 7, the following information shall be indicated in the invoice or receipt: 1. A statement that the seller is a VAT-registered person followed by his taxpayer 's identification number (TIN); and 2. The total amount which th e purchaser pays or is obligated to pay to the seller with the indication that such amount includes the value-added tax. XXX " Section 237. Iss ua nce of R eceipts or Sales of C ommer cial In vo ices. - All persons subj ect to an internal revenue tax shall , fo r each sale, or transfer of merchandise or for services rend ered valued at Twenty five pesos (P25.00) or more, issue duly registered receipts or sales or commercial invoices, prepared at least in duplicate, showing the date of transacti on, quantity, unit cost and desc ription of merchandise or nature of service; Provided however, That in case of sales, receipts or transfers in the amount of One Hundred Pesos (Pl 00.00) or more, regardl ess of amount where the sale or transfe r is made by a person liable to value added tax to another person also li able to value add ed tax; or where the receipt is issued to cover payment made as rentals, commissions, compensati ons, or fees, receipts or invo ices shall be issued which shall show the name, business style, if any, and address of the pu rchaser; customer or client: Provided further, That where the purchaser is a VAT registered perso n, in addition to the info rmation herein req uired, the invo ice or receipt shall further show the Taxpayer's Identification Number (TIN) of the pu rchaser. xxx".

Concurring and Di ssenting Opinion CTA Case No. 6597 Page 3 Based on the fo regoing, it is mandatory to show the fo llowing info m1ati on in a VAT invoice or offi cial receipt, to wit: (1) A statement that the seller is a VAT-registered person; (2) The taxpayers identifi cation number (TIN); (3) The total amount which the purchaser pays or is obligated to pay to the seller indicating the inclusion of the value-added tax; (4) Transaction date; (5) Quantity of merchandi se; (6) Description of merchandise or nature of service; (7) Unit cost; (8) The name, bu siness style, if any, and address of the purchaser, customer or client in the case of sales, receipts or transfe rs in the amoun t of One hundred p esos (Pl 00.00) or more, or regardless of amount, where the sale or transfer is made by a person liable to value-add ed tax to another person also liable to value-add ed tax ; or where the rece ipt is issued to cover payment made as rentals, commissions, co mpensati ons or fees; and (9) The TIN of the VAT-registered purchaser. Noticeably, the term "zero-rated is not among the informati on that must appear on sales invoices or official receipt as a prerequisite for claiming a refund of input VAT paid . It is worthy of emphasis that contrary to the maj ority ' s opinion, now here does it appear in Sectio n 112 (A) of the Tax Code that neglect to imprint the words "zero- rated" w ill automati cally cause the denial of the claim fo r refund . Section 112 (A) of the 1997 Tax Code reads: " (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 qu arter when the sales were made, apply for the issuance of a tax credit certificate or refund of creditable input tax du e or paid attributable to such sales, except transitional input tax, to the extent that such input tax has not been applied aga inst output tax: Provided, however, That in the case of zero-rated sales under Secti on 106(A)(2)(a)(l),(2) and (B) and Section 108 (B)(l ) and (2), the acceptable fo reign currency exchange proceeds thereof had been duly accounted for in acco rd ance w ith th e mles and regul ations of the Bangko Sentral ng Pilipinas (BSP): Provided, further, That where th e tax payer is engaged in zero- rated or effectively zero-rated sale and also in taxab le or exemp t sa le

Concurrin g and Di ssenti ng Opini on CTA Case No. 6597 Page 4 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 bas is of the volume of sales." The tenor of the law apparently pennits all VAT-registered enterprises engaged in zero-rated transactions to claim a refund of their creditable input tax due or paid to the extent that such input tax has not been applied against output tax within a period of two (2) years after the close of the taxable quarter. The only provision that perhaps the requirement of imprinting the word "zero- rated" on the VAT invoice or receipt is Section 4.108-1 of R evenu e R egulations No. 7-95 (The Implementing Ru les and Regulations of the VAT law). Then aga in , the said provision is merely a regulation created for the sole and limited purpose of implementing an otherwise very exact law. Long-settled is the rule that administrative rules and regulations cannot expand the letter and spirit of the law they seek to enforce. Such rules and regulati ons should be confined and limited by the power conferred by the legislature (Commissioner of Internal R evenue vs. Court of Appeals, 240 SCRA 368 (1 995) . And in case of conflict between the basic law and a rul e or regul ati on issued to implement said law, the law prevails because said rul e or regulati on cannot go beyond the tenns and provisions of th e basic law (People vs. Lim, 108 Phil. 1091). Rul es that sub vert the statute cannot be sanctioned (U niver sity of Sto. Tomas vs. Board of Tax Appeals, Accordingly, the court must not give its imprimatur on the patently invalid condition imposed by an administrative issuance that overstepped th e parameters of its authority.

Concurri ng and Dissenting Opinion CTA Case No. 6597 Page 5 Assuming arguendo that there was a violation of the so-called requirement to indicate the word "zero-rated" in th e invoice or receipt, such omission does not automati cally null ify the exports sales invoices fo r purposes of proving expori sales made by th e petitioner. The sales in voices are still material, relevant and competent since they still directly prove the amount of exp01i sales made by the petiti oner. It must be pointed out that "admiss ibility" refers to the qu estion whether or not the evidence is to be considered, while "competency" refers to whether or not the evidence is expressly excluded by law or the ru les. Needless to say, the said invoices comply with the above criterion in both counts. A denial of petitioner's claim for tax credi t/refund on the single ground that there was no indication of the word "zero-rated" in its sales invo ices is a puni shment too harsh, amounting to a denial of the petitioner 's clearly legal and valid claim s. To a certain extent, the absence of the authori ty to print renders the peti tioner accountable only for penalti es under the Tax Code, particularly, Section 264 . And it must be observed th at nullification of the export sales invoice and outri ght deni al of the refund claim are not two of the prescribed penalties. In fac t, BIR Rulin g DA-375- 03 supports thi s findin g, where the Bureau of Intem al Revenu e held thu s: "xxx The fa ct that the official receipts issued by DITFI do not bear the information that DITFI is a VAT-registered taxpayer as requi red under Secti on 4.108-1 of Rev. Regs . No . 7-95 , does not motu p rop io in va lidate the claim for input tax credit of Stanfilco xxx . "Finally, th e Revenu e District Officer (RDO) co ncerned is hereby ordered to imp ose the corres ponding penalty against DITFI as prescribed in Revenue Memorandum Ord er No. 56- 2000, in relation to Section 264 of th e Tax Code of 1997, for failure to issue the prescribed receipts." (Emphasis supplied)

Concurring and Di ssentin g Opinion CTA Case No. 6597 Page 6 Revenue Memorandum Circular No. 42-03 dated Ju ly 15 , 2003, further clarifies this matter. The relevant part states that: "If th e taxpayer did not reflect zero-rated sales in the VAT returns but it is claiming for tax credit or refund based on zero- rated sales, the Revenue Officer should mandatorily establish the existence of zero-rated sales from the audited fin ancial statements, books of acco unts, export invo ices, bills of lading or airway bills and by comparing the reported sales aga inst output tax reflected in the VAT return. When zero-rated sales have been detem1ined despite the fact that spec ific amounts were not categorically refl ected in the VAT retum , the claim may be processed upon sufficient proof of its existence xxx ." (Emphasis supplied) In the case at bar, petitioner has established its right to the tax refund throu gh material and documentary ex hibits. The documents fonnally offered as evidence by the petitioner, for instance, its BOI Certificate of Registration and the export documents such as Export Declaration Permits, Ore Transport Permits, export sales invo ices, official receipts, and bills of ladings clearly prove that the petitioner's export sales were actually made. The substantive and main requirement of the Tax Code requiring the sale and actual shipment of goods in order to be considered as zero-rated sales was satisfactorily complied wi th and sufficientl y prove n befo re this court by the petitioner. Thus, having proven the actual shipment or expott of its products abroad, this conclusively show that being a VAT-registered entity, the petitioner is subj ect to VAT at the rate of zero percent (0%). It must be pointed out that the applicable statutes rather than limiting the documentary requirements to just the export invoices, acknowledge and specifically enjoin the production of "export documents" to prove the fact of export sales. And in commercial practi ce, export documents include commerci al invoices or receipts, bills of lading, airway bills and expott declarations or pem1its. These docum ents, taken collectively are the best means to prove the exportation of goods.

Concurring and Dissenting Opini on CTA Case No. 6597 Page 7 The CTA has issued deci sions supportin g this assertion. In the case of Nichimen Co rporation (Manila Branch) vs. CIR, CTA Case No. 5 746 dated January 4, 2001, thi s court decided to accept bank credit advices to establish the claimant' s zero-rated sales without requiring the production of official receipts. Similarly, in Nichimen Corporation (Manila Branch) vs. CIR, CTA Case No. 5221 dated January 8, 1998, in support of the petitioner's claim that its sales were zero-rated, it only submitted the statements from RCBC to the effect that the acceptable foreign currency has been inwardly remitted and accounted for in accordance with applicable banking regul ations. Although the respondent objected to the refund claim for alleged failure to submit substantial proof that the sales were really zero-rated, this court sti ll held that, "Respondent's demand for additional requirements is unnecessary considering that the documentary and testimonial evidence adduced by the petitioner are uncontroverted. The same evidence has clearly substantiated petitioner 's claim to the satisfaction of the Co urt." The above-mentioned CTA decisions buttress the contention that the court is amenable to admit other proofs or evidence in lieu of VAT invoices to es tab lish the ex istence of zero-rated transactions. It likewise bears emphasis that opposite to what happened in the case at bar, in th e above-cited case of Nichimen Corporation, the petitioner therein co mpletely failed to submit copies of its VAT in vo ices to support its claim for refund. Des pite such omission, this court nonetheless held that other proofs or evidence might still be presented as a substitute for said VAT invoices. The 1997 Tax Code and BIR Regulati ons have a collection of pro visions co nfirmin g further the intention to accept other evidence to substanti ate claims for

Concurrin g an d Di ssentin g Opinion '� CTA Case No. 6597 Page 8 VAT refund , particularly the use of either a VAT invoice or receipt; foremost of which are Sections 110, 113 of th e 1997 T ax Co de, Section 4.106-5 of R evenu e R egul ation No. 7-95 and Section 2 of R evenu e R egul ation No. 3-88. The use of the disjunctive term "or" in the afore-cited provisions co nnotes that either act qualifies as two different evidences of input VAT. It is indicati ve of the objective of the Revenue Bureau to use the same interchangeably in sale of goods, viz., the claimant may present either an invoice or a receipt and it will not have any negative repercussion on its claim. In fact, the word "or" has been defined as a disjunctive particle used to express an alternative or to give a choice of one among two or more things (Black 's L aw Dictionary, 6111 Edition, 1990, page 1095). Hence, the obvious intenti on to include th e word "or" should be interpreted as providing an alternative rather than a limitation. In all of these, never was it shown that the objective of th e lawmakers and the BIR in issuing the numerous regul ations, orders and interpretati ve memoranda is to make the VAT invoice as the sole evidence of input tax. In fact, the contrary is provided . Their manifest intention is to establish the use of VAT invoice and other relevant evidences as equally valid. Consequently, there should be no distinction as to the evidentiary va lue of an invo ice, an official receipt and other documentary evidence to prove the fact of export sales. After all, these Jaws and regulations made no pronouncement as to th e use only of a VAT invoice to the exclusion of all other equally relevant and competent evidence. The elementary rule in statutory construction is that where th e law does not di stinguish, the courts should make no di stinction . Ub i /e.,'C non distinguit nee nos distinguire debemos (Mendoza, et. al. vs. C OMEL EC, et. al. , G. R. No. 149736,

Concurrin g and Di ssenting Opini on CTA Case No. 6597 Page 9 December 17, 2002). Maledicta expositio quo corrupti textum. It is dangerous constru ction whi ch is against the text of the statute. To detennine oth erwise will certainly amount to inappropriate judicial interpretati on. Lastly, it mu st be pointed out that tax cases involved herein are civil in nature. And in civil cases, the qu antum of evidence required to sustain th e proponent of an issue is preponderance of evidence (Section 1, Rule 133, Rules of Court). The Honorable Supreme Court in the case of M unicip ality of M oncad a vs. Cajuigan, 21 Phil. 184, explained that the tern1 "preponderance of evidence" refers to the weight, credit and value of the aggregate on either side. It means that the testimony adduced by one side is more credib le and conclu sive than that of the oth er. So eve n ass uming that export invo ices have evidenti aty valu e as far as proving the fact of exportati on of goods, the other export doc uments prese nted such as commercial in vo ices or rece ipts, bills of lading, airway bills and export declarations or pern1its are far more significant and appropriate instruments to prove the fact of the transaction . Even though the co urt is aware that taxes are the lifeblood of the government, it must also be similarly sensiti ve of its responsibility to apply the principles of justice, equity and fairness as its guide in its difficult tasks of weighing the evidence and of deciding cases. Accordingly, I manifest my position that petitioner should be entitled to the refund or tax credit of the amount of its unutilized input VAT attributab le to its zero- rated sales and input VAT claims on capital goods. 0. ..::.-U? - Q~ ERNESTO D. ACOSTA Presiding Ju sti ce