Taganito Mining Corp. v. Commissioner of Internal Revenue

SECOND DIVISION [C.T.A. CASE NO. 8822. May 20, 2016.] TAGANITO MINING CORPORATION , petitioner , vs. COMMISSIONER OF INTERNAL REVENUE , respondent . AMENDED DECISION CASTAEDA, JR. , J p : On September 30, 2015, petitioner filed its Motion for Partial Reconsideration and/or New Trial to seek partial reconsideration and reversal of this Court's Decision promulgated on September 14, 2015, 1 the dispositive portion of which reads: " WHEREFORE , premises considered, the instant Petition for Review is hereby PARTIALLY GRANTED . Respondent is hereby ORDERED TO REFUND OR ISSUE TAX CREDIT CERTIFICATE to petitioner in the reduced amount of P10,343,265.07 representing its unutilized amortized input taxes on importation and domestic purchases of capital goods with aggregate acquisition cost exceeding P1 Million incurred during the taxable years 2010, 2011 and 2012 and are attributable to zero-rated sales in the taxable years 2012 and 2013. SO ORDERED. " In the assailed Decision, the Court disallowed zero-rated sales for the year 2012 amounting to P186,044,021.18 for not being properly substantiated with export documents such as bank client advices for the foreign currency proceeds. For the year 2013, zero-rated sales in the total amount of P626,948,002.23 were disallowed for not being properly supported by bills of lading and bank client advices for the foreign currency proceeds and PEZA Certification of customers. 2 Further, input taxes for the taxable years 2010, 2011 and 2012 in the aggregate amount of P9,335,682.00 were likewise disallowed for failure to comply with the invoicing requirements prescribed by law. 3 In compliance with this Court's Resolution dated October 7, 2015, 4 respondent seasonably filed on October 21, 2015, her Comment/Opposition (Re: Motion for Partial Reconsideration and/or New Trial) . In a Resolution dated December 4, 2015, 5 this Court granted petitioner's motion to reopen the case for the presentation of additional evidence and held in abeyance the resolution of its Motion for Partial Reconsideration . Petitioner's presentation of additional evidence ensued. On March 3, 2016, petitioner filed its Supplemental Formal Offer of Evidence (FOE). 6 Respondent filed her Comment thereto on March 7, 2016. 7 In a Resolution dated April 4, 2016, 8 this Court admitted Exhibits "P-1920", "P-1920-A", "P-1920-B", "P-1920-1", "P-1920-2", "P-1920-3", "P-1920-4", "P-1920-6", "P-1920-6.1", "P-1920-6.2", "P-1920-6.3", "P-1920-6.4", "P-1920-7", "P-1920-8", "P-1920-9", "P-1920-10", "P-1920-11", "P-1920-12", "P-1920-13", "P-1920-14", "P-1920-15", "P-1920-16", "P-1920-17", "P-1920-18", and "P-1920-19" of petitioner's Supplemental FOE but denied admission as to Exhibits "P-1920-5.1" and "P-1920-5.2" for not being "electronic documents" under Section 1 (h) of the Rules on Electronic Evidence (REE) and for petitioner's failure to lay the basis for the introduction of secondary evidence. Likewise in the same Resolution, this Court considered the case submitted anew for decision. Hence, this Amended Decision. THE COURT'S RULING A careful examination of the additional evidence submitted shows that zero-rated sales in the amounts of P159,444,703.78 and P462,266,844.51 for the taxable years 2012 and 2013, respectively, are properly substantiated: Taxable Year 2012 Invoice Forex Exhibit No. Sales in USD Rate Sales in PHP P-442, P-444, P-1920-1 423 1,262,250.00 42.655 53,841,273.75 P-458 to P-461, P-1920-2 426 1,262,250.00 42.955 54,219,948.75 & P-1920-3 433 140,250.00 42.955 6,024,438.75 P-702, P-704, P-1920-4 507 950,760.00 41.180 39,152,296.80 P-667, P-669, P-1920-7 503 148,718.00 41.735 6,206,745.73 TOTAL 3,764,228.00 159,444,703.78 =========== ============ Taxable Year 2013 Invoice Forex Exhibit No. Sales in USD Rate Sales in PHP P-809, P-811, P-1920-8 524 965,260.80 40.705 39,290,940.86 P-810, P-812, P-1920-9 527 127,680.00 40.705 5,197,214.40 P-901, P-1920-10 552 1,081,080.00 43.200 46,702,656.00 P-1225, P-1920-11 685 1,158,300.00 44.150 51,138,945.00 P-1245, P-1247, P-1920-12 545 393,583.93 41.070 16,164,492.01 P-1232 to P-1235, 522 1,471,635.00 40.690 59,880,828.15 P-1920-13 526 169,827.10 40.690 6,910,264.70 P-1297 to P-1300, 660 (3,938.82) 41.155 (162,102.14) P-1920-14 535 57,722.73 41.155 2,375,578.95 P-1301 to P-1303-A, 550 27,361.34 42.270 1,156,563.84 P-1920-14 661 (196.01) 42.260 (8,283.38) P-1304 to P-1307, 662 3,951.58 43.200 170,708.26 P-1920-14 564 113,535.70 43.260 4,911,554.38 P-1308 to P-1311, 663 25,589.13 43.420 1,111,080.02 P-1920-14 606 320,869.11 43.420 13,932,136.76 P-1312 to P-1315, 624 378,477.94 43.610 16,505,422.96 P-1920-14 664 50,942.80 44.610 2,272,558.31 P-1316 to P-1318-A, 665 62,987.18 43.540 2,742,461.82 P-1920-14 644 728,137.18 43.540 31,703,092.82 P-1319 to P-1322, 666 768,504.47 43.540 33,460,684.62 P-1920-14 682 85,389.39 43.540 3,717,854.04 P-1323 to P-1325, 684 1,000,995.01 43.760 43,803,541.64 P-1920-14 802 111,221.67 43.760 4,867,060.28 P-1326, P-1920-14 803 1,676,350.72 44.395 74,421,590.21 TOTAL 10,775,267.95 462,266,844.51 =========== ============ Petitioner did not submit additional supporting documents for the following disallowed zero-rated sales for the taxable year 2012 in the amount of P26,599,317.40, which are not supported by bank credit advices: caITAC Taxable Year 2012 Invoice Forex Exhibit No. Sales in USD Rate Sales in PHP P-443 430 140,250.00 42.655 5,982,363.75 P-451 501 68,714.60 43.070 2,959,537.82 P-468 499 135,408.00 42.720 5,784,629.76 P-530 500 274,388.40 43.270 11,872,786.07 Subtotal 618,761.00 26,599,317.40 ========= =========== Regarding the unsupported difference between the zero-rated sales per VAT Returns 9 and Schedule of Zero-Rated Sales for the taxable year 2013 10 amounting to P164,681,157.71, petitioner avers that the same represents zero-rated sales other than the sale of nickel ore. Further, it submits that its zero-rated sales per VAT returns include all types of sales, including other zero-rated sales, i.e. , not pertaining to its sales of ores from its mining activity, to which its capital goods purchases are not attributable. Hence, the substantiated zero-rated sales pertain only to its sale of ores from mining activities. 11 In the assailed Decision, the Court computed the ratio of petitioner's substantiated zero-rated sales by dividing the same by the zero-rated sales declared per Quarterly VAT Returns. On the other hand, the Independent CPA reported the following: 12 Table I Summary of Petitioner's Revenue under Zero Rated Activities for Taxable Years 2010, 2011, 2012 and 2013 Rental Service Income (Despatch) Subject to Income Subject Zero rated Total zero Year Sale of Ore to Zero rated VAT VAT rated Sales 2010 2,088,982,305 - - 2,088,982,305 2011 2,751,941,163 22,949,279 2,217,720 2,777,108,162 2012 3,093,865,541 28,947,431 2,217,720 3,125,030,692 2013 3,109,100,863 159,074,523 5,606,635 3,273,782,021 It should be noted that for the year 2012, petitioner declared P3,093,865,540.54 zero-rated sales in its VAT returns, 13 which, based on the preceding table in the ICPA report, pertains only to petitioner's zero-rated sales from sale of ores. For the year 2013, petitioner declared a total of P3,273,782,021.06, 14 which includes its zero-rated sales from sale of ore, service (despatch) income, and rental income. It can be inferred that petitioner's zero-rated sales for the year 2012 is underdeclared. Petitioner asserts that its input taxes were directly attributable to its sales from mining activities, thus: 15 Petition for Review "The above input taxes were directly attributable to its zero-rated sales , were paid in the course of its trade and business, are duly supported by invoices and/or receipts, are not carried forward to the succeeding quarter or quarters subsequent to the filing of the claim, and have not been applied against any VAT output tax liability of the petitioner during the same period." (Emphasis supplied.) Memorandum for the Petitioner " Said VAT input taxes were paid by petitioner in the course of its trade and business and are all directly attributable to petitioner's zero-rated export sales ." " Petitioner is engaged solely in zero-rated export sales, except for isolated transactions for which the corresponding output taxes were set-off against its excess input taxes . . . ." (Emphasis supplied.) As it turned out, petitioner had other zero-rated sales for the years 2012 and 2013 other than from mining activities. The ICPA reported how he proceeded to substantiate petitioner's zero-rated sales: 16 "We examined the documents supporting the export sales of mineral ore such as invoices, bank debit advice, bills of lading and export declaration for selling of ore. We referred to the audited financial statement of the Petitioner to determine the amount of the service income from despatch and rental. These revenues are rendered to PEZA registered entities and their mining customers (see exhibits P-1921 to P-1930 for sample documentation) ." (Emphasis supplied.) However, Exhibits P-1921 to P-1930 are nowhere to be found in petitioner's formal offer of evidence. In fact, petitioner's submitted evidence were marked as Exhibits "P-1" to "P-1919-A" only. 17 Thus, petitioner failed to substantiate and prove the nature of its other zero-rated sales and that the capital goods purchased from where input taxes arose and are herein claimed for refund were not used in the generation of such sales. Consequently, the substantiated input taxes cannot be directly and entirely attributed to any of its zero-rated sales and shall be allocated proportionately on the basis of the volume of sales. Petitioner's substantiated zero-rated sales for the taxable years 2012 and 2013 are P3,067,266,223.60 and P3,109,100,863.35, respectively, computed thus: 2012 2013 Total zero-rated sales per ICPA Report P3,125,030,692.00 P3,273,782,021.06 Less: Unsupported zero-rated sales from despatch service and rental income P31,165,151.00 P164,681,157.71 Unsupported zero-rated sales per findings of the Court 26,599,317.40 - Total disallowances P57,764,468.40 P164,681,157.71 Substantiated zero-rated sales P3,067,266,223.60 P3,109,100,863.35 =============== =============== Accordingly, the rate to be used to attribute the substantiated input taxes to the substantiated zero-rated sales shall be adjusted as follows: ICHDca 2012 2013 Properly substantiated zero-rated sales from mining activities P3,067,266,223.60 P3,109,100,863.35 Divided by total zero-rated sales per ICPA Report P3,125,030,692.00 P3,273,782,021.06 Rate 98.15% 94.97% =============== =============== We proceed to determine the amount of unutilized input taxes attributable to petitioner's zero-rated export sales. By submitting additional documents, petitioner was able to prove that out of the total disallowed input taxes of P9,335,682.00, the following in the amount of P7,837,932.00 are already properly substantiated: IEIRD IEIRD/ Year Exhibit No. Payment Date Input Tax 2010 P-1327 to P-1329, P-1920-16 107658476 6/3/2010 P4,098,060.00 2011 P-1337 to P-1343, P-1920-17, 114789647 6/29/2011 3,084,516.00 P-1920-18 2012 P-1350 to P-1353, P-1920-19 119387633 2/10/2012 655,356.00 TOTAL INPUT TAXES FROM IMPORTATIONS P7,837,932.00 =========== Petitioner disagrees with the Court's disallowance of input taxes from domestic purchases of capital goods in the aggregate amount of P1,497,750.00, averring that the same was not put at issue since these were reserved for utilization. 18 However, the Court found that the claimed input taxes for refund amounting to P22,011,331.91 includes input taxes from domestic purchases of capital goods as reported by the Court-commissioned Independent CPA. 19 The subject disallowance, broken down as follows, should be maintained: DOMESTIC PURCHASES Year Exhibit Invoice No. Invoice Date Input Tax Supported by undated invoice 2010 P-1358 C1013008 - P146,678.57 P-1374 A111974 - 170,464.29 P-1375 A111975 - 170,464.29 P-1377 C1013008 - 146,678.57 P-1378-A A112921 - 146,678.57 P-1378-B A112922 - 146,678.57 2012 P-1370 96032 - 112,500.00 Subtotal P1,040,142.86 Supported by invoice without the TIN of the purchaser 2011 P-1366 4007 6/9/2011 P111,321.43 P-1378 C1013126 10/26/2011 183,107.14 Subtotal P294,428.57 Supported by invoice with a different TIN of the purchaser 2011 P-1359 C1009837 7/9/2011 P145,500.00 Subtotal P145,500.00 Supported by service and spare parts invoice showing purchase of supplies 2011 P-1368 07255 6/9/2011 P17,678.57 Subtotal P17,678.57 TOTAL DISALLOWED INPUT TAX FROM DOMESTIC PURCHASES P1,497,750.00 =========== In fine, out of the total P61,377,657.86 input taxes declared by petitioner in its Quarterly VAT Returns for the taxable years 2010, 2011 and 2012, only the amount of P59,579,639.90 is duly substantiated for VAT purposes, to wit: Input taxes from capital goods with acquisition cost exceeding P1M per VAT Returns: Taxable year 2010 P4,628,363.58 Taxable year 2011 17,691,452.70 Taxable year 2012 39,057,841.58 P61,377,657.86 Less: Disallowances 1. Unsupported input taxes Input taxes per VAT Returns P61,377,657.86 Less: Total input taxes per submitted supporting documents ( Schedule I of Exhibit "P-9" ) 61,077,389.90 P300,267.96 2. Not properly supported input taxes as found by the Court 1,497,750.00 1,798,017.96 Substantiated input taxes P59,579,639.90 ============= Consequently, petitioner can only claim the amortized portion of its adjusted properly substantiated input taxes for the taxable years 2012 and 2013 in the total amount of P21,638,603.22, computed hereafter: Asset Invoice Life Monthly No. of No. of Exhibit Date Input Tax (Months) Amortization Months 2012 Months 2013 Total P-1360 6/8/2010 P116,571.43 60 P1,942.86 12 P23,314.29 P23,314.29 P-1361 6/8/2010 116,571.43 60 1,942.86 12 23,314.29 23,314,29 P-1327 to P-1329, P-1920-16 6/3/2010 4,098,060.00 60 68,301.00 12 819,612.00 819,612.00 Total-2010 P4,331,202.86 P866,240.57 P866,240.57 P-1330 to P-1332 4/28/2011 P12,021,962.00 48 P250,457.54 12 P3,005,490.50 P3,005,490.50 P-1333 to P-1336 5/11/2011 918,689.00 48 19,139.35 12 229,672.25 229,672.25 P-1362 3/29/2011 131,250.00 60 2,187.50 12 26,250.00 26,250.00 P-1337 to P-1343, P-1920-17 & P-1920-18 6/29/2011 3,084,516.00 48 64,260.75 12 771,129.00 771,129.00 P-1376 10/13/2011 146,678.57 60 2,444.64 12 29,335.71 29,335.71 Total-2011 P16,303,095.57 P4,061,877.46 P4,061,877.46 P-1344 to P-1349 2/10/2012 P7,756,992.00 48 P161,604.00 11 P1,777,644.00 12 P1,939,248.00 P3,716,892.00 P-1354 to P-1359 3/13/2012 6,081,344.00 48 126,694.67 10 1,266,946.67 12 1,520,336.00 2,787,282.67 P-1350 to P-1353, P-1920-19 2/10/2012 655,356.00 48 13,653.25 11 150,185.75 12 163,839.00 314,024.75 P-1360 to P-1368 4/10/2012 2,310,872.00 48 48,143.17 9 433,288.50 12 577,718.00 1,011,006.50 P-1369 to P-1373 4/16/2012 7,920,347.75 48 165,007.24 9 1,485,065.20 12 1,980,086.94 3,465,152.14 P-1374 to P-1376 5/21/2012 8,781,067.00 48 182,938.90 8 1,463,511.17 12 2,195,266.75 3,658,777.92 P-1384 to P-1389 7/3/2012 915,068.00 48 19,063.92 6 114,383.50 12 228,767.00 343,150.50 P-1390 to P-1394 8/14/2012 2,271,730.00 48 47,327.71 5 236,638.54 12 567,932.50 804,571.04 P-1340 to P-1346 11/12/2012 241,460.00 48 5,030.42 2 10,060.83 12 60,365.00 70,425.83 P-1371, P-1372 11/22/2012 145,928.58 60 2,432.14 2 4,864.29 12 29,185.72 34,050.00 P-1352 to P-1357-A 12/26/2012 1,865,176.00 48 38,857.83 1 38,857.83 12 466,294.00 505,151.83 Total-2012 P38,945,341.33 P6,981,446.28 P9,729,038.90 P16,710,485.18 TOTAL P59,579,639.76* P6,981,446.28 P14,657,156.94 P21,638,603.22 ============= =========== ============ ============ * rounding difference Applying the rate of substantiated zero-rated sales previously computed and petitioner's output taxes due for the taxable years 2012 and 2013, petitioner's adjusted valid input taxes on importation and domestic purchases of capital goods with cost exceeding P1Million which are available for refund amounted to P14,263,324.04, as shown below: TCAScE 2012 2013 TOTAL Substantiated amortized input taxes P6,981,446.28 P14,657,156.94 P21,638,603.22 Multiplied by the rate of substantiated zero-rated sales 98.15% 94.97% Valid input taxes attributable to zero-rated sales P6,852,289.52 P13,919,901.95 P20,772,191.47 Less: Output tax 1,509,020.55 4,999,846.88 6,508,867.43 Refundable input taxes P5,343,268.97 P8,920,055.07 P14,263,324.04 =========== ============ ============ WHEREFORE , premises considered, petitioner's Motion for Partial Reconsideration is PARTIALLY GRANTED . Accordingly, the dispositive portion of the assailed Decision dated September 14, 2015 is amended to read as follows: " WHEREFORE , premises considered, the instant Petition for Review is hereby PARTIALLY GRANTED . Respondent is hereby ORDERED TO REFUND OR ISSUE A TAX CREDIT CERTIFICATE to petitioner in the reduced amount of FOURTEEN MILLION TWO HUNDRED SIXTY THREE THOUSAND THREE HUNDRED TWENTY FOUR PESOS AND 4/100 (P14,263,324.04) representing its unutilized amortized input taxes on importation and domestic purchases of capital goods with aggregate acquisition cost exceeding P1 Million incurred during the taxable years 2010, 2011 and 2012 and are attributable to zero-rated sales in the taxable years 2012 and 2013." SO ORDERED. (SGD.) JUANITO C. CASTAEDA, JR. Associate Justice Caesar A. Casanova and Amelia R. Cotangco-Manalastas, JJ. , concur. Footnotes 1. Docket, Vol. I, pp. 316-347. 2. Ibid . 3. Id. , pp. 338-339. 4. Id. , pp. 399-400. 5. Docket Vol. II, pp. 419-427. 6. Docket Vol. II, pp. 474-479. 7. Ibid. , pp. 515-518. 8. Id. , pp. 519-525. 9. Exhibits "P-1523", "P-1540", "P-1555" and "P-1570". 10. Schedule V of Exhibit "P-9", Docket Vol. I, pp. 229-231. 11. Paragraph 18 of Motion for Partial Reconsideration and/or New Trial, Docket Vol. I, p. 360. 12. Exhibit "P-9", p. 13, Docket Vol. I, p. 214. 13. Exhibits "P-1477", "P-1490", "P-150" 1 and "P-1513" and Schedule XIII of Exhibit "P-9", Docket Vol. I, p. 241. 14. Exhibits "P-1523", "P-1540", "P-1555" and "P-1570" and Schedule XIV of Exhibit "P-9", Docket Vol. I, p. 243. 15. Paragraph 18 of Petition for Review, Docket Vol. I, p. 11 and Paragraphs 14 and 15 of Memorandum for the Petitioner, Docket Vol. I, p. 295. 16. Exhibit "P-9", p. 13, Docket Vol. I, p. 214. 17. Formal Offer of Evidence for the Petitioner, Docket Vol. I, pp. 161-176. 18. Paragraph 19 of Motion for Partial Reconsideration and/or New Trial, Docket Vol. I, p. 360. 19. Schedules I and X of Exhibit "P-9", Docket Vol. I, pp. 224-225 and 236.