Republic of the Philippines

COURT OF TAX APPEALS

Quezon City

FIRST DIVISION
*****************

PHILEX MINING CORPORATION,

Petitioner,
C.T.A. CASE NO. 7391

- versus -
Members:

ACOSTA, Chairperson
COMMISSIONER OF INTERNAL BAUTISTA, and
REVENUE, CASANOVA, JJ.
Respondent.

Promulgated:

M y 2 1 2008 , / .' fOpn,

x- - - - - - - - - - - - - - - - -- ---- -- --- -- --- - - -~---~
DECISION
CASANOVA, J.:

Before Us is a Petition for Review filed by herein petitioner, Philex

Mining Corporation, seeking that judgment be issued ordering respondent to
refund or issue a tax credit certificate in favor of petitioner for the total amount
of P7,594,651.61. The amount claimed allegedly represents unutil ized input
Value Added Tax (" VAT") arising from petitioner's domestic purchases of goods
and services which are attributable to zero-rated sales of mineral products for
the 4th quarter of 2003 ~
CTA CASE NO. 7391
DECISION
Page 2 of 17

THE FACTS
Petitioner, Philex Mining Corporation ("Philex"), is a corporation
organized and existing under the laws of the Philippines with office address at 27
Brixton St., Pasig City. It is engaged in mining business, including the
exploration and operation of mine minerals and the commercial production and
marketing of mine products and is a VAT-registered taxpayer. 1
Respondent is the duly appointed Commissioner of Internal Revenue, with
authority, among others, to decide, approve and grant claims for refund or tax
credit of internal revenue taxes, with office address at the Bureau of Internal
Revenue National Office Building, Agham Road, Diliman, Quezon City.
In the conduct of its business, Philex entered into contracts with three
buyers, to wit:
1. Johnson Matthey Public Limited Company ('Johnson Matthey");
2. Nippon Mining and Metals Co., Ltd. ("Nippon Mining"); and
3. Philippine Associated Smelting and Refining Corporation ("PASAR").

On January 29, 2001, Philex entered into Contract No. 7002 2 with Johnson
Matthey of England covering the delivery by Philex of gold for refining at latter's
refinery at Royston, England. According to the contract, Johnson Matthey, after
it has assayed, refined and correct the value of the gold, has the option to buy
the refined gold from Philex.3 For the 4th Quarter of 2003, Philex made one (1)
shipment of gold bars to Johnson Matthey with a gross value of US$33,296.00.4
On March 22, 2002, Philex entered into a contract5 with Nippon Mining
and Metals Co., Ltd ., of Tokyo, Japan, covering the sale of copper concentrates
for the period April 1, 2002 to March 31, 2003. By virtue of an Assignmen ~

1
1st and 2nd Pars. ofJoint Stipulation of Facts and Issues ("JSF"), Rollo, pp. 65-67, duly approved by this
Court in a Resolution dated June 6, 2006, Rollo, p. 69.
2
Exhibit "E".
3
TSN ofJanuary 9, 2007 hearing, p. 26.
4
Exhibits "F", "F-2 " and "F-2-a ".
5
Exhibit "C"
CTA CASE NO. 7391
DECISION
Page 3 of 17

Contract6 dated July 1, 2002, Nippon Mining assigned all its rights and
obligations pertaining to the aforementioned contract to Pan Pacific Copper Co.
C'Pan Pacific") of Tokyo, Japan. Philex made one (1) shipment of copper
concentrates to Pan Pacific during the 4th quarter with a gross value of
US$4,941,848.00. 7
On April 25, 2003, Philex and PASAR entered into a letter agreements
spelling out the terms and conditions for PASAR's purchase and Philex's sale of
copper concentrates for the period April 1, 2003 to March 2004. Petitioner made
thirteen (13) shipments of copper concentrates to PASAR during the 4th quarter
of 2003 with a gross value of US$16,656,503.00. 9
On January 26, 2004, Philex filed its VAT return 10 for the 4th quarter of
2003. On June 21, 2005, Philex amended the return 11 and reflected zero-rated
sales of P1,209,176,550.97, domestic purchases of goods of P669,496.10 with
input tax of P66,949.61, and importation of goods of P75,277,080.00 with input
tax of P7,527,708.00. 12
On May 9, 2005, Philex filed before the Bureau of Internal Revenue its
Application for Tax Credit/Refund of VAT13 for the period October to December
2003 in the amount of P7,594,657.61 representing excess input VAT for the 4th
Quarter of 2003. 14
On June 22, 2005, Philex also filed its claim for refund or tax credit with
the One Stop Shop Inter-Agency Tax Credit and Duty Drawback Center ("OSSC"~

6
Exhibit "D"
7
Exhibits "F " "F-1" "F-1-a" and "F-1-b"
8 Exhibit "A " , ,
9
Exhibits "F" and "F-3 to F-15 "
10
Annex B of Petition for Review, Rollo. pp. 12-15.
11
Annex B-1, Ibid. pp. 16-19.
12
3'd Par. ofJSF.Ibid.
13
Rollo. 20.
14
lh Par. ofJSF, Ibid.
CfA CASE NO. 7391
DECISION
?age 4 of 17

of the Department of Finance per Application No. 48830 15 in the amount of

P7,594,657.61. 16
Respondent has not granted the refund or tax credit certificate to Philex
for the amount being claimed. 17
Hence, on December 28, 2005, Philex filed the instant petition for review
before this Court pursuant to Sec. 4.106-2(c) of Revenue Regulations No. 7-95
and Sections 112(D) and 229 of the 1997 Tax Code in order to protect its right
and interest and alleging, inter alia, that the continuing inaction of the OSSC,
which includes the respondent Commissioner, is tantamount to a denial of the
application, to the damage and prejudice of petitioner.
Respondent, in her Answer18 filed on February 16, 2006, interposed the
following:
"3. Petitioner's alleged claim for refund/tax credit is subject to
administrative routinary examination/investigation by the
Bureau thru the Department of Finance, One Stop Shop Inter-
Agency Tax Credit and Duty Drawback Center (OSS for
brevity).

4. Taxes paid and collected are presumed to have been paid in

accordance with law; hence, not refundable.

5. In an action for tax refund/credit, the taxpayer has the burden

to establish its right to refund, and failure to sustain the
burden is fatal to the claim for refund.

6. It is incumbent upon petitioner to show that it has complied

with the provisions of Section 204 in relation to Section 229 of
the 1997 Tax Code.

7. Well-established is the rule that refund/tax credits are

construed strictly against the taxpayer as they partake the
nature of exemption from tax ~

15
Rollo. p. 21.
16
5'11 Par. ofJSF, ibid.
17
JO'h Par. ofJSF, ibid.
18
Rollo, pp. 29-32.
CTA CASE NO. 7391
DECISION
Page 5 of 17

SPECIAL AND AFFIRMATIVE DEFENSES

8. Respondent hereby repleads and incorporates by way of

reference the foregoing allegations insofar as material and
relevant hereto further states that:

9. It is the contention of the Respondent that this Honorable

Court has no jurisdiction to take cognizance of the petition on
the ground of non exhaustion of administrative remedies.
Petitioner miserably failed to comply with the administrative
requirements necessary in the processing of its claim for refund
or tax credit in the total amount of Php 7,594,651.61 as
alleged excess or unutilized input VAT for the 4th quarter of
2003. This fact is glaring from the status report of Vat Credit
Application of petitioner dated January 30, 2006 sent by OSS in
reply to the BIR, Litigation Division's request on the status and
progress of claim of the petitioner. A copy of the above status
report of OSS is hereto attached as Annex "A", and made
integral part hereof.

10. Further, the OSS status report stated that the OSS sent three
(3) notices dated October 24, 2005, November 30, 2005 and
December 27, 2005 thru registered mail informing the
petitioner of the additional requirement/documents needed to
expedite the processing of its claim. This notwithstanding,
petitioner continued to ignore/fail to comply with said OSS
notices. "

THE ISSUES
The parties jointly stipulated the following issues 19 for this Court's
resolution:
"1. Whether Petitioner's domestic purchases and importations of
goods which are attributable to its direct and indirect export
sales for the 4th quarter of 2003 are duly supported by
documentary evidence.

2. Whether the accumulated or excess input VAT was not

utilized or applied by Petitioner against output VAT in th ~

19
JSF, Issues to be Resolved, Rollo, p . 66.
'.

CfA CASE NO. 7391

DECISION
Page 6 of 17

same 4th quarter of 2003 or in the succeeding taxable

quarters.

3. Whether or not the export sales were paid for in acceptable

foreign currency and accounted for in accordance with the
rules and regulations of the Bangko Sentral ng Pilipinas.

4. Whether or not Petitioner is entitled to the refund of the

excess input taxes in the total amount of P7,594,657.61 for
the 4th quarter of 2003, due to Petitioner being an exporter of
mineral products."

During trial, petitioner presented documentary and testimonial evidence.

On the other hand, respondent's counsel manifested that she has not received
any report of investigation and is submitting the case for decision.
On January 17, 2008, petitioner filed its Memorandum 20 . Respondent did
not file her Memorandum despite due notice. Hence, on January 22, 2008, this
21
case was submitted for decision.

THE COURT'S RULING

The main issue to be resolved is whether or not petitioner-Philex is
entitled to a refund in the amount of P7,594,651.61 representing excess input
taxes for the 4th quarter of 2003.
Philex alleged that while the VAT return 22 for the 4th Quarter of 2003
reflected excess input tax in the total amount of P80,597,022.11, the
administrative claim for refund filed included only the excess input tax for the
current quarter, which is the 4th quarter of 2003, in the total amount of
3
P7,594,657.61 / consisting of the input tax of P66,949.61 on its domestic
purchases and input tax of P7,527,708.00 on its imported goods ~

20
Rollo. pp. 198-222.
21
Rollo. p. 224.
22
Ibid.
23
Should be P7,594,651.61, as prayed for in the Petition for Review.
''

CTA CASE NO. 7391

DECISION
Page 7 of 17

It is important to note that Section 112 (A) of the 1997 Tax Code 23
provides:

"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:
Provided, howeve~ That in the case of zero-rated sales under
Section 106(A)(2)(a)(1), (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,
furthe~ That where the taxpayer is engaged in zero-rated or
effectively zero-rated sales 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.

Based on the afore-quoted provisions of Section 112 (A), in order to be

entitled to a refund/ tax credit of unutilized input VAT, the following requisites
must be complied with :

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 directly attributable to zero-rated

sales or effectively zero-rated sales

4. that the input taxes were not applied against any output
VAT liability during and in the succeeding quarters; and.Ailll..

23
1997 National Internal Revenue Code.
..
CTA CASE NO. 7391
DECISION
Page 8 of 17

5. that the claim for the refund was filed within the two-year
prescriptive period.

Anent the first requisite, petitioner-Philex claims that its shipments and
sales of gold to Johnson Matthey of London, England and of copper concentrates
to Pan Pacific Copper Co. of Tokyo, Japan (Nippon Mining assigned all its right
and obligations to Pan Pacific Copper Co. of Tokyo, Japan) 24 are VAT zero-rated
pursuant to Section 106(A)(2)(a)(1) of the 1997 Tax Code. Also, Philex alleged
that its sales of copper concentrates to PASAR, a PEZA registered enterprise, are
subject to zero percent (0%) VAT citing as legal bases therefor Section
106(A)(2)(a)(5) of the 1997 Tax Code and Section 23 of R.A. No. 7916, in
relation to Art. 77(2) of the Omnibus Investments Code as well as RMC No. 74-
99 and VAT Review Committee Ruling No. 026-2001.
The Commissioned Independent CPA, Mr. Albert G. Alba, in his report 25
submitted to this Court, noted that petitioner's zero-rated export sales amounting
to US$21,876,451.00 with peso value equivalent of P1,209,176,550.97, as
reported in petitioner's amended VAT return for the 4th quarter of 2003, were as
follows :

Particulars Amount
Current Quarter's Shipments:

Direct exports of copper to Japan US$ 4,941,848.00

Direct export of gold to England 33,296.00
Indirect exports of copper to PASAR 16,656,503.00
US$ 21,631,647.00
Previous Quarters' Shipments
Adjustment to correct previous billings 244,804.00
Total Zero-Rated Sales US$21,876,451.00~

24
Exhibits "C", "C-2" and " D".
25
Exhibit "K"
 CTA CASE NO. 7391
DECISION
Page 9 of 17

To substantiate its export sales for the 4th quarter of taxable year 2003
and that the foreign currency proceeds thereof were duly accounted for in
accordance with the rules and regulations of the Bangko Sentral ng Pilipinas
(BSP), petitioner proffered before this Court its sales invoices 26 , export
declarations27 , bills of lading/airway bills 28 , certificates of remittances by local
banks 29 and entries in petitioner's passbooks in local banks of the payments
received 30
Petitioner's direct exports of copper concentrates and gold to Japan and
England, respectively, may fall within those transactions referred to as subject to
zero percent (0%) VAT under Section 106(A)(2)(a)(l) of the NIRC of 1997,
which states:

"SEC.106. Value-Added Tax on Sale of Goods or

Properties.-

(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 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) ~

26
Exhibit "F-1" to "F-15"
27
Exhibit "F-1-a " to "F-2-a "
28
Exhibit "F-1-b" to "F-15-b "
29
Exhibit "G-1" to "G-5 "
30
Exhibit "G-1-a " to "G-5-d"
 CTA CASE NO. 7391
DECISION
Page 10 of 17

However, Section 106(A)(2)(a)(1) of the NIRC of 1997 should not be read

in isolation but in conjunction with Section 113 of the same Code and as
implemented by Section 4.108-1 of Revenue Regulations No. 7-95, which
prescribes that a VAT registered person like petitioner, shall for every sale, issue
an invoice or receipt which must contain the following information:

"SEC.113. Invoicing and Accounting Requirements for

VAT-Registered Persons.-

(A) Invoicing Requirements.---/\ VAT-registered person

shall, for every sale, issue an invoice or receipt. In addition to the
information required under Section 237, the following information
shall be indicated in the invoice or receipt:

(1) A statement that the seller is a VAT-registered person,

followed by his taxpayer's identification number (TIN); and

(2) The total amount which the purchaser pays or is

obligated to pay to the seller with the indication that such amount
includes the value-added tax."

"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 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 ~

XXX XXX XXX

 CTA CASE NO. 7391
DECISION
Page 11 of 17

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 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 services subject to VAT imposed in Section
100 and 102 of the Code.

Such invoice or receipt must be duly registered with the Bureau of

Internal Revenue as prescribed under Section 237, in relation to Section 238 of
the NIRC of 1997, to wit:

"SEC.237. Issuance of Receipts or Sales or

Commercial Invoices.-AII 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. xxx"

"SEC.238. Printing of Receipts or Sales or Commercial

Invoices.-- All persons who are engaged in business shall secure
from the Bureau of Internal Revenue an authority to print receipts
or sales or commercial invoices before a printer can print the same.

No authority to print receipts or sales or commercial invoices

shall be granted unless the receipts or invoices to be printed are
serially numbered and shall show, among other things, the name,
business style, Taxpayer Identification Number (TIN) and business
address of the person or entity to use the same, and such other
information that may be required by rules and regulations to be
promulgated by the Secretary of Finance, upon recommendation of
the Commission.er.~
 CTA CASE NO. 7391
DECISION
Page 12 of 17

Clearly, from the foregoing provisions, any person claiming VAT zero-rated
direct export sales must present at least three documents, to wit: a) the sales
invoice as proof of sale of goods; b) the export declaration and bill of lading or
airway bill as proof of actual shipment of goods from the Philippines to a foreign
country, and c) bank credit advice, certificate of bank remittance or any other
document proving payment for the goods in acceptable foreign currency or its
equivalent in goods and services. In other words, only export sales supported by
these documents shall qualify for VAT zero-rating under Section 106(A)(2)(a)(1)
of the 1997 Tax Code.

Furthermore, the sales invoices supporting the export sales must comply
with the invoicing requirements under the law and regulations, i.e., they must
contain all the required information namely; a) the imprinted word "zero-rated";
b) the taxpayer's TIN-VAT number; and c) BIR Authority to Print or BIR Permit
number. 31
As earlier stated, petitioner's direct export sales consisted of the following:

Direct exports of:

Copper to Japan US$ 4,941,848.00
Gold to England 33,296.00

A scrutiny of the sales invoice supporting petitioner's direct export sale of

gold to England in the amount of US$33,296.0032 shows that the same is not
duly registered with the BIR as there was no BIR Permit number reflected
thereon. Furthermore, the said invoice has the corresponding Number "Pad-
Aurex 109" while Philex's BIR Permit No. OCN3AU0000030052 issued April 19,
1999 covers 4 pads (100 x 4) with numbers "PX2101 to PX2500", clearly it
appears that the aforesaid invoice was not properly authorized by the BIR to b~

31
Taganito Mining Corporation vs. Commissioner of Internal Revenue, CTA E. B. No. 7 (CTA Case No.
6384), January 31, 2006.
32
Exhibit "F-2 "
CTA CASE NO. 7391
DECISION
Page 13 of 17

printed. In addition, in the same invoice, the word "VAT" after Philex's TIN
number was not imprinted. Hence, considering the existence of violations of the
invoicing requirements under Sections 113, 237 and 238 of the NIRC of 1997
and Section 4.108-1 of Revenue Regulations No. 7-95, the sales of
US$33,296.00 cannot be considered zero-rated sales.
As to petitioner's reported direct export sale of copper concentrates to
Japan in the amount of US$4,941,848.00 (invoice amount is US$4,948,981.47)
the same cannot also qualify for VAT zero-rating. Per petitioner's Summary of
Sales and Remittances 33 it was indicated that the invoice corresponding to the
export sale amount of US$4,941,848.00 is Invoice No. PX-2343. 34 Apparently,
the invoice submitted by petitioner pertains to the 1st quarter of 2004 and falls
outside the subject period of the instant Petition.
With respect to petitioner's indirect export sales to PASAR with reported
total amount of US$16,656,503.00, petitioner cites Section 106(A)(2)(a)(5) of
the NIRC of 1997, as amended, which states:

"SEC. 106. Value-added Tax on Sale of Goods or

Properties. -

(A) XXX

(1) 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:

(5) Those considered export sales under Executive Order No. 226,
otherwise known as the Omnibus Investment Code of 1987, and other
special laws~

33
Exhibit "F "
3
~ Exhibit "F-1 "
 CTA CASE NO. 7391
DECISION
Page 14 of 17

It is worthy to note that sales by a VAT taxpayer from the Customs

Territory to a PEZA entity are considered export sales under Executive Order
{E.O.) No. 226, otherwise known as the Omnibus Investments Code of 1987,
the relevant portions of which read as follows:
"ARTICLE 23. 'Export Sales' shall mean the Philippine port
F.O.B. value, determined from invoices, bills of lading, inward
letters of credit, landing certificates, and other commercial
documents, of export products exported directly by a registered
export producer or the net selling price of export product sold by a
registered export producer to another export producer, or to an
export trader that subsequently exports the same: Provided, That
sales of export products to another producer or to an export trader
shall only be deemed export sales when actually exported by the
latter, as evidenced by landing certificates of similar commercial
documents: Provided, further, That without actual exportation the
following shall be considered "constructively exported" for purposes
of this provision: (1) sales to bonded manufacturing warehouses of
export-oriented manufacturers; {2) sales to export processing
zones; ... " (Emphasis supplied)

"ARTICLE 77. Tax Treatment of Merchandise in the Zone.-

(1) Except as otherwise provided in this Code, foreign and domestic
merchandise, raw materials, supplies, articles, equipment,
machineries, spare parts and wares of every description, except
those prohibited by law, brought into the zone to be sold, stored,
broken up, repacked, assembled, installed, sorted, cleaned, graded,
or otherwise processed, manipulated, manufactured, mixed with
foreign or domestic merchandise whether directly or indirectly
related in such activity, shall not be subject to customs and internal
revenue laws and regulations nor to local tax ordinances, the
provisions of law to the contrary notwithstanding.

(2) Merchandise purchased by a registered zone

enterprise from the customs territory and subsequently
brought into the zone, shall be considered as export sales
and the exported thereof shall be entitled to the benefits
allowed by law for such transaction.

Further, in RMC 74-99, the BIR stated the following, viz: &--
 CfA CASE NO. 7391
. DECISION
Page 15 of 17

"SECfiON 3. Tax Treatment of Sales Made By A VAT

Registered Supplier from the Customs Territory, To A PEZA
Registered Enterprise.-
XXX XXX XXX

3. In the final analysis, any sale of goods, property or

services made by a VAT registered supplier from the Customs
Territory to any registered enterprise operating in the ecozone,
regardless of the class or type of the latter's PEZA registration, is
actually qualified and thus legally entitled to the zero percent (0%)
VAT. Accordingly, all sales of goods or property to such
enterprise made by a VAT registered supplier from the
Customs Territory shall be treated subject to 0/o VAT,
pursuant to Sec. 106(A)(2)(a)(S), NIRC, in relation to Art.
77(2) of the Omnibus Investments Code, while all sales of
services to the said enterprises, made by VAT registered supplies
from the Customs Territory, shall be treated effectively subject to
0% VAT, pursuant to Section 108(8)(3), NIRC, in relation to the
provisions of R.A. 7916 and the "Cross Border Doctrine" of the VAT
system .

This Circular shall serve as a sufficient basis to entitle such

supplier of goods, property or services to the benefit of the zero
percent (0%) VAT for sales made to the aforementioned ECOZONE
enterprises and shall serve as sufficient compliance to the
requirement for prior approval of zero-rating imposed by Revenue
Regulations No. 7-95 effective as of the date of issuance of this
Circular."

Clearly, from the foregoing provisions of Section 106(A)(2)(a)(S) in

relation to Articles 23 and 77(2) of the Omnibus Investments Code and as
clarified under RMC No. 74-99, indirect exports made by a VAT taxpayer, like
herein petitioner, to a PEZA registered entity are legally entitled to the zero
percent (0%) VAT.

Nonetheless, petitioner must substantiate its indirect exports to PASAR by

proper VAT sales invoices. Evidence forwarded to this Court shows that the sales~
CTA CASE NO. 7391
DECISION
Page 16 of 17

invoices35 covering petitioner's indirect exports to PASAR in the amount of

US$16,656,503.00 also fall outside the subject period of claim, which is for the
4th quarter of 2003, the invoices pertain instead to the 1st and 2nd quarters of
2004. Thus, petitioner's reported indirect export sales to PASAR in the amount of
US$16,656,503.00 cannot qualify for VAT zero-rating.

To recapitulate, petitioner failed to prove that its reported direct and

indirect export sales in the amount of P1,209,176,550.97 with US dollar
equivalent of US$21,876,451.00 qualifies for VAT zero-rating.

In view thereof, the Court finds it no longer necessary to discuss the other
issues raised by the parties.

Well-settled is the rule that tax refunds are in the nature of tax
exemptions and as such they are regarded as in derogation of sovereign
authority and to be construed in strictissimi juris against the person or entity
claiming it. 36
WHEREFORE, for failure of petitioner to properly substantiate its claimed
zero-rated sales, the Petition for Review is DISMISSED. Accordingly,
petitioner's refund claim in the amount of P7,594,651.61 is hereby DENIED.
SO ORDERED.

CAESAR A. CASANOVA
Associate Justice

WE CONCUR:

(With Concurring and Dissenting Opinion)

ERNESTO D. ACOSTA
Presiding Justice

35
Exhibits "F-3" to "F-I5"
36
Commissioner of Internal Revenue vs. S.C. Johnson and Son, Inc., 309 SCRA 8 7; Commissioner of
Internal Revenue vs. Tokyo Shipping Co., Ltd., 244 SCRA 332; and Commissioner of Customs vs. Court of
Tax Appeals, 328 SCRA 822
CTA CASE NO. 7391
DECISION
Page 17 of 17

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.

~ l-c - ~,..._
ERNESTO D. ACOSTA
Presiding Justice
Chairperson, First Division
 REPUBLIC OF THE PHILIPPINES
COURT OF TAX APPEALS
QUEZON CITY

FIRST DIVISION

PHILEX MINING CORPORATION, C.T.A. CASE No. 7391

Petitioner,
Members:

ACOSTA, Chairman,
-versus- BAUTISTA, and
CASANOVA,]/

COMMISSIONER OF INTERNAL Promulgated:

REVENUE,
Respondent. M~t'"'
X---------------------------------------------------------------- ---------------X
Concurring and Dissenting Opinion

I assent with the majority that based on Section 112 (A) of the National Internal
Revenue Code (NIRC), in order to be entitled to a refund or tax credit of unutilized
input VAT , the following requisites must be complied with: there must be zero-rated or
effectively zero-rated sales; that input taxes were incurred or paid; that such input taxes
are directly attributable to zero-rated sales or effectively zero-rated sales; that the input
taxes were not applied against any output VAT liability during and in the succeeding
quarters; and that the claim for refund was flied within the two-year prescriptive period.

I likewise agree that petitioner's direct export sales of copper and gold
concentrates to England and Japan the amount ofUS$33,296.00 and 4,941,848.00 cannot
qualify for VAT zero-rating; since the sales invoice petitioner presented to substantiate
its direct export sale of gold to England had the corresponding number reflected "Pad-
Aurex 109" while Philex's BIR Permit No. OCN3AU0000030052 issued April19, 1999
covers 4 pads (100x4) with numbers "PX2101 to PX2500". This clearly shows that the
Bureau of Internal Revenue did not authorize the imprinting to the aforesaid invoice.
Concurring and Dissenting Opinion
CTA Case No. 7391
Page 2 of7

I concur further with the holding of the majority that petitioner's export sales of copper
concentrates to Japan cannot likewise qualify for zero-rating because the invoices
submitted by petitioner pertains to the first quarter of 2004 and fall outside the period of
the instant claim. I also agree that while petitioner's indirect export sales to Philippine
Associated Smelting And Refining Company (PASAR) are considered export sales and
subject to zero-percent (0%) VAT following Section 106(A)(2)(a)(S) of the NIRC, in
relation to Executive Order 226, otherwise known as the Omnibus Investments Code of
1987; nonetheless, for failure of petitioner to substantiate the same by proper VAT sales
invoices (the invoices it presented fall outside the period of the claim), the same cannot
qualify for zero-rating.

Finally, while I partly agree with the majority opinion in so far as it finds the
imprinting of the words "TIN" and 'CVAT" or any indication to that effect in the invoice
and/ or receipt significant for their validity, nevertheless, I am expressing my
disagreement with their view that the sales invoices supporting exports sales must
contain (a) the imprinted word "zero-rated"; (b) the taxpayer's TIN-VAT number; and
(c) BIR Authority to Print of BIR Permit Number, and that their absence will outright
render the invoices invalid, incompetent, irrelevant, and cause the denial of petitioner's
valid claim for refund or tax credit corresponding thereto.

The relevant provisions of the NIRC, namely, Section 113 in relation to Section
237, are hereunder quoted for ready reference:

"Section 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 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.

XXX
Concurring and Dissenting Opinion
CT A Case No. 7391
Page 3 of7

"Section 237. Issuance of Receipts or Sales of 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 case of sales, receipts or transfers
in the amount of One Hundred Pesos (Pl 00.00) or more, 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's Identification
Number (fiN) of the purchaser. xxx".

From the clear wordings of the above-quoted provisions, the following are the
only information that must be indicated in an invoice or official receipt:

(1) A statement that the seller is a VAT-registered person;

(2) The taxpayers identification number (fiN);
(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 merchandise;
(6) D escription of merchandise or nature of service;
(7) Unit cost;
(8) The name, business style, if any, and address of the purchaser, customer or
client in the case of sales, receipts or transfers in the amount of One
hundred pesos (Pl 00.00) 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; and
(9) The TIN of the VAT-registered purchaser.

Save for the "TIN" and "VAT", nothing in the law requires the imprinting of the
term "TIN-VAT" on official receipts / invoices. The same holds true for the BIR
Authority to Print or BIR Permit Number. This has been confirmed in the same
landmark case of Intel Technology Philippines vs. Commissioner of Internal
Revenue,' where it was held, and I quote:

1
G.R. No. 166732, Apri/27, 2007.
Concurring and Dissenting Opinion
CTA Case No. 7391
Page 4 of7

"xxx Only the following items are required to be indicated in

the receipts or invoices: (1) a statement that the seller is a VAT-
registered entity followed by its TIN-V; (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; (3) date of the transaction; (4)
quantity of merchandise; (5) unit cost; (6) description of merchandise or
nature of service; (7) the name, business style, if any, and address of the
purchaser, customer or client in the case of sales, receipt or transfers in
the amount of FlOO.OO or more, or regardless of the amount, where the
sale or transfer is made by a person liable to VAT to another person also
liable to VAT, or where the receipt is issued to cover payment made as
rentals, commissions, compensations or fees; and (8) the TIN of the
purchaser where the purchaser is a VAT-registered person. xxx

XXX XXX XXX

In any case, the above cited provisions of law and revenue

regulations do not provide that failure to reflect or indicate in the
invoices or receipts the BIR authority to print, as well as the TIN-
V, would result in the outright invalidation of these invoices or
receipts. Neither is it provided therein that such omission or failure
would result in the outright denial of a claim for tax credit/ refund.
Instead, Section 264 of the Tax Code imposes the penalty of fine
and imprisonment for, among others, invoices or receipts that do
not truly reflect or contain all the required information, to wit:

Section 264. Failure or Refusal to Issue Receipts

or Sales or Commercial Invoices, Violations Related
to the Printing of such Receipts or Invoices or Other
Violations. -

(a) Any person who, being required under Section

237 to issue receipts or sales or commercial invoices, fails
or refuses to issue such receipts or invoices, issues
receipts or invoices that do not truly reflect and/ or
contain all the informations required to be shown therein
or uses multiple or double receipts or invoices, shall,
upon conviction for each act or omission, be punished by
a fine of not less than One thousand pesos (Pl,OOO) but
not more than Fifty thousand pesos (PSO,OOO) and suffer
imprisonment of not less than two (2) years but not more
than four (4) years.

(b) Any person who commits any of the acts

enumerated hereunder shall be penalized in the same
manner and to the same extent as provided for in this
Section:
Concurring and Dissenting Opinion
CTA Case No. 739 1
Page 5 of7

(1) Printing of receipts or sales or commercial

invoices without authority from the Bureau of Internal
Revenue; or

(2) Printing of double or multiple sets of invoices or

receipts;

(3) Printing of unnumbered receipts or sales or

commercial invoices, not bearing the name, business
style, Taxpayer Identification Number, and business
address of the person or entity. xxx" (Emphasis Supplied)

Applying the Intel case, the failure to print "TIN-VAT" or the BIR Authority to
Print on an invoice is not absolutely necessary for it to be considered a ''VAT invoice".
Neither can such omission or failure result in the outright denial of a claim for tax
credit/refund, since no provision allows such outright rejection. Instead, the erring
taxpayer may only be held liable for the penalty of fine and imprisonment for, among
others, invoices or receipts that do not truly reflect or contain all the required
information under Section 264 of the N IRC.

In fact, even the penal provisions of Revenue Regulations No. 7-95, as further
amended by Revenue Regulations No. 08-02, particularly, Sections 4.110-5 and 4.111-
1, exclude such harsh punishment of automatic denial of the claim for refund. These
sections state:

" SECTION 4.110-5. Penalty Provision. - In accordance w ith

the provisions of the Tax Code of 1997, a person w ho fails to file,
keep or supply a statement, list, or information required herein on
the date prescribed therefor shall pay, upon notice and demand by
the Commissioner of Internal Revenue, an administrative p enalty
of One thousand pesos (P1,000) for each such failure, unless it is
shown that such failure is due to reasonable cause and not to
willful neglect. For this purpose, the failure to supply the required
information for each buyer or seller of goods and services shall
constitute a single act or omission punishable hereof. How ever, the
aggregate amount to be imposed for all such failures during a
taxable year shall not exceed T w enty-five thousand pesos
(P25,000) .

In addition to the imposition of the administrative penalty, willful

failure by such person to keep any record and to supply the correct and
accurate information at the time or times as required herein, shall be
Concurring and Dissenting Opinion
CTA Case No. 7391
Page 6 of7

subject to the criminal penalty under the relevant provisions of the Tax
Code of 1997 (e.g., Sec. 255, Sec. 256, etc.,) upon conviction of the
offender.

The imposition of any of the penalties under the Tax Code of

1997 and the compromise of the criminal penalty on such violations,
notwithstanding, shall not in any manner relieve the violating taxpayer
from the obligation to submit the required documents.

Finally, the administrative penalty shall be imposed at all times,

upon due notice and demand by the Commissioner of Internal Revenue.
A subpoena duces tecum for the submission of the required documents
shall be issued on the second offense. A third offense shall set the
motion for a criminal prosecution of the offender." (Emphasis supplied)

" SECTION 4.111-1. Administrative and penal provisions. (a)

Suspension of business operations. - In addition to other
administrative and penal sanctions provided for in the Code and
implementing regulations, the Commissioner or his duly
authorized representative may order suspension or closure of a
business establishment for a period of not less than five (5) days for
any of the following violations:

(1) Failure to issue receipts and invoices.

(2) Failure to flle value-added tax return as required under
the provisions of Section 110.
(3) Understatement of taxable sales or receipts by 30% or
more of his correct taxable sales or receipts for the
taxable quarter.
(4) Failure of any person to register as required under the
provisions of Sec. 107.

(b) Surcharge, interest and other penalties. - T he interest on unpaid

amount of tax, civil penalties and criminal penalties imposed in Title XI
of the Tax Code shall also apply to violations of the provisions of Title
IV of the Code." (Emphasis supplied)

The Revenue Bureau, in BIR Ruling DA-375-03 confirms this opinion, thus:
"xxx The fact that the official receipts issued by DITFI do not
bear the information that D ITFI is a VAT-registered taxpayer as required
under Section 4.108-1 of Rev. Regs. No. 7-95, does not motu propio
invalidate the claim for input tax credit of Stanfllco xxx.

"Finally, the Revenue District Officer (RDO) concerned is

hereby ordered to impose the corresponding penalty against
DITFI as prescribed in Revenue Memorandum Order No. 56-2000,
in relation to Section 264 of the Tax Code of 1997, for failure to
issue the prescribed receipts." (Emphasis supplied)
r
I
Concurring and Dissenting Opinion
CTA Case No. 7391
Page 7 of7

So even assunung arguendo that there was a violation of the supposed

requirements to indicate the terms "TIN," and ''VAT," as well as the BIR authority to
print, such oversight does not automatically invalidate the sales invoices for purposes of
proving the transactions made by petitioner. The sales invoices are still material, relevant
and competent inasmuch as they still directly prove the amount of sales made by
petitioner.

Accordingly, while I agree with the denial of petitioner's claim for its failure to
substantiate the same, I disagree with the finding that for invoices to be considered valid,
they must contain: a) the imprinted word "zero-rated"; b) taxpayer's "TIN-VAT"
number, and c) BIR Authority to Print.

L-uw.~
E RNESTO D . ACOSTA
Presiding Justice