Colt Commercial, Inc. v. Commissioner of Internal Revenue

SPECIAL FIRST DIVISION [C.T.A. CASE NO. 9340. April 10, 2019.] For: Refund COLT COMMERCIAL, INC. , petitioner , vs. THE COMMISSIONER OF INTERNAL REVENUE , respondent . DECISION MINDARO-GRULLA , J p : The instant case was deemed submitted for decision on April 11, 2018. This refers to a Petition for Review 1 filed by petitioner Colt Commercial, Inc., against respondent Commissioner of Internal Revenue on April 29, 2016, which seeks that judgment be rendered ordering respondent to refund the amount of Two Million Eighty-Two Thousand Three Hundred Seventy-Six Pesos and Forty-One Centavos (P2,082,376.41) representing unutilized input tax payments attributable to its zero-rated sales for the fourth (4th) quarter of taxable year 2013. 2 DETACa Petitioner is a corporation duly organized and existing under the laws of the Republic of the Philippines, with Securities and Exchange Commission (SEC) Reg. No. CS201212819 3 dated July 17, 2012, having its business address at Suite 508 Padilla Delos Reyes Bldg., 232 Juan Luna St., Brgy. 289 Zone 027, Binondo, Manila. 4 It is also registered with the Bureau of Internal Revenue (BIR) as a value-added tax (VAT) taxpayer with Certificate of Registration No. OCN C0000579258 5 dated August 31, 2012. Petitioner is represented by its President, Cyrus S. Chung, Jr. 6 Respondent, on the other hand, is the government official charged with the administration and enforcement of national internal revenue laws, including the granting of refunds and tax credits of taxes erroneously or illegally collected. He holds office at the BIR National Office Building, BIR Road, Diliman, Quezon City. Petitioner is principally engaged in the business of selling cutting tools and hardware. 7 Incidentally, majority of its clients are entities doing business within the economic zone. 8 HEITAD On December 28, 2015, petitioner filed with BIR Revenue District Office (RDO) No. 30 a letter 9 dated December 18, 2015, together with BIR Form No. 1905, 10 regarding an application for VAT refund for the 4th quarter of taxable year 2013. Petitioner claims to have unutilized input tax payments attributable to zero-rated sales to its clients within the economic zone in the total amount of P2,082,376.41. On April 1, 2016, petitioner received a letter 11 dated March 28, 2016 from Revenue District Officer Leonora R. Ruizol of RDO No. 30, denying its claim for VAT refund. Revenue District Officer Ruizol claims that as per verification of petitioner's VAT Returns, they disclosed that petitioner has already applied the entire amount of input tax, subject for refund, against the output tax by way of carrying it over to the first quarter of the subsequent taxable year 2014. 12 aDSIHc Aggrieved, petitioner elevated the matter to this Court through the instant Petition for Review on April 29, 2016. In his Answer, 13 respondent interposed the following Special and Affirmative Defenses, viz. : " SPECIAL AND AFFIRMATIVE DEFENSES 5. On the basis of the foregoing allegations and in further support of the Specific Denials herein set forth, respondent respectfully alleges as her defense that: Claims for refund are construed strictly against the taxpayer and in favor of the Government. 6. It is said that taxes are essential to government's very existence hence, the dictum that "taxes are the lifeblood of the government." And because taxes are the lifeblood of the nation, the court has always applied the doctrine of strict interpretation in construing tax exemptions. A claim for exemption from tax payments must be clearly shown and be based on language in the law too plain to be mistaken. Else wise stated, taxation is the rule, exemption therefrom is the exception. ATICcS 7. For this reason, the right of taxation cannot easily be surrendered, statutes granting tax exemptions are considered as a derogation of the sovereign authority. Since tax refunds are regarded as tax exemptions, therefore, these are to be construed strictissimi juris against the person or entity claiming the exemption. As petitioner already applied input tax claimed against output tax, the claimed refund was properly denied. 8. The instant claim was properly denied through a letter dated March 28, 2016 and served to petitioner on April 1, 2016. 9. In order to be entitled to a refund or issuance of a TCC of input VAT due or paid attributable to zero-rated or effectively zero-rated sales, petitioner must prove compliance with the following requisites: 1) that there must be zero-rated or effectively zero-rated sales; 2) that input taxes were incurred or paid; ETHIDa 3) that such input taxes are directly attributable to zero-rated or effectively zero-rated sales; 4) that input taxes were not applied against any output VAT liability; and 5) that the claim for refund was filed within the two-year prescriptive period. 10. Verification of VAT Returns of petitioner disclosed that it applied the entire amount of input tax, subject for refund against the output tax by way of carrying it over to the 1st quarter of taxable year 2014. 11. As petitioner already applied such input tax against the output tax, then it failed to satisfy the fourth requisite that the input taxes were not applied against any output VAT liability. 12. In an action for refund, the burden of proof is on the taxpayer who claims the exemption and he must justify his claim by the clearest grant under the Constitutional or statutory law and cannot be permitted by vague implications. The taxpayer is charged with the heavy burden of proving that he has complied with and satisfied all the statutory and administrative requirements to be entitled to the tax refund. TIADCc 13. To reiterate, claims for refund are construed strictly against the claimant for the same partake of the nature of exemption from taxation and as such, they are looked upon with disfavor. This is so because exemptions from taxation are highly disfavored in law and he who claims exemption must be able to justify his claim by the clearest grant of organic or statutory law. An exemption from the common burden cannot be permitted to exist upon vague implications. The law does not look with favor on tax exemption and that he who would seek to be thus privileged must justify it by words too plain to be mistaken and too categorical to be misinterpreted." (Citations Omitted) On August 8, 2016, a Notice of Pre-Trial Conference 14 was issued by this Court, setting the case for pre-trial conference on October 6, 2016 at 9:00 a.m. Thereafter, respondent filed its Pre-Trial Brief 15 on September 30, 2016, while, petitioner, on the other hand, filed its Pre-Trial Brief 16 on October 3, 2016. Pre-trial conference ensued. On October 13, 2016, petitioner filed a Motion to Commission Independent Certified Public Accountant, 17 praying that Mr. Garry S. Pagaspas, CPA, LLB, Managing Partner of GPP & Co. CPAS, be appointed as the Independent Certified Public Accountant (ICPA) for the instant case. Finding merit, this Court, in an Order 18 dated February 9, 2017, granted petitioner's Motion and commissioned Mr. Pagaspas after taking his oath as the ICPA for the present case. cSEDTC On October 21, 2016, the parties filed their Joint Stipulation of Facts and Issues 19 (JSFI). Subsequently, on December 6, 2016, a Pre-Trial Order 20 was issued by this Court, adopting the parties' JSFI and, afterwards, deemed the pre-trial terminated. During trial, petitioner offered the testimonies, by way of Judicial Affidavits, of Ms. Cherilyn R. Chung, 21 its Corporate Secretary and Treasurer; Ms. Jennifer S. Maago, 22 its Accounting Head; Mr. Cyrus S. Chung, Jr., 23 its President; and Mr. Garry S. Pagaspas, 24 the court-commissioned ICPA for the instant case. After finishing their respective testimonies, petitioner filed its Formal Offer of Evidence 25 on July 25, 2017, offering Exhibits "P-1" to "P-28-B", inclusive of sub-markings, as its documentary evidence. Thus, in the Resolution 26 dated September 25, 2017, this Court admitted all of petitioner's evidence, except for Exhibit "P-7" for its failure to present the original document for comparison. Thereafter, petitioner was deemed to have rested its case. Petitioner's admitted documentary exhibits are as follows: Exhibit: Description: P-1 Petitioner's SEC Certificate of Registration dated July 17, 2012 P-2 Petitioner's Articles of Incorporation dated June 27, 2012 P-3 Petitioner's General Information Sheet dated July 23, 2013 P-4 Petitioner's Secretary's Certificate dated August 7, 2015 P-5 BIR Certificate of Registration (BIR Form No. 2303) dated August 31, 2012 P-6 Confirmation Letter of Philippine Economic Zone Authority (PEZA) Director-General Lilia B. De Lima, dated February 16, 2016 addressed to CCI's President, Mr. Cyrus S. Chung, Jr., confirming the issuance of VAT-zero rating certifications to CCI's clients/purchasers P-8 Schedule of Petitioner's Sales in 4th Quarter of Taxable Year 2013 P-9 Certified true copy of sales invoices P-10 Schedule of Purchases for period of claim with the following details: Registered Name of Supplier, TIN of Supplier, Invoice No., Date of Invoice, OR No., Date of OR, Amount of Purchase, Input Tax and Total Invoice Amount P-11 Certified true copy of sales invoices for purchase of goods P-12 Copy of BIR Authority to use pre-numbered loose-leaf form dated October 9, 2012 P-13 Cover Letter of Petitioner through Puno and Pearroyo Law Offices dated December 18, 2015, received by the BIR RDO 30 on December 28, 2015 P-14 BIR Form No. 1905 on the request for refund received by BIR RDO 30 on December 28, 2015 P-15-A Certification from Bureau of Customs dated September 8, 2014 P-15-B Certification from Department of Finance-OSS dated November 17, 2014 P-16-A 1st Quarter VAT Return for Taxable Year 2013 P-16-B 2nd Quarter VAT Return for Taxable Year 2013 P-16-C 3rd Quarter VAT Return for Taxable Year 2013 P-16-D 4th Quarter VAT Return for Taxable Year 2013 P-17-A 1st Quarter VAT Return for Taxable Year 2014 P-17-B 2nd Quarter VAT Return for Taxable Year 2014 P-17-C 3rd Quarter VAT Return for Taxable Year 2014 P-17-D 4th Quarter VAT Return for Taxable Year 2014 P-18-A 1st Quarter VAT Return for Taxable Year 2015 P-18-B 2nd Quarter VAT Return for Taxable Year 2015 P-18-C 3rd Quarter VAT Return for Taxable Year 2015 P-18-D 4th Quarter VAT Return for Taxable Year 2015 P-19 Schedule of Inward Remittance with attached Bank Certification P-20 Import Entry and Internal Revenue Declarations duly validated by bank with O.R. and BOC receipts/Confirmation receipts evidencing payment of VAT P-21 Schedule of Importations for period of claim with the following details: Date of Invoice, Supplier, Description of Goods Imported, AWB/BL No. IED/SM No., Date of Arrival, Total Value, Date of Payment, O.R. No. and VAT Payment P-22 Reconciliation of Export Sales and Dollar Remittances P-23 Letter of BIR RDO 30 dated March 28, 2016 P-24 Amended Judicial Affidavit of Cyrus S. Chung Jr. dated February 22, 2017 P-24-A Signature of Cyrus S. Chung Jr. on his Amended Judicial Affidavit found on page 13 thereof P-25 Amended Judicial Affidavit of Cherilyn R. Chung dated February 22, 2017 P-25-A Signature of Cherilyn R. Chung on her Amended Judicial Affidavit found on page 7 thereof P-26 Amended Judicial Affidavit of Jennifer S. Maago dated February 22, 2017 P-26-A Signature of Jennifer S. Maago on her Amended Judicial Affidavit found on page 12 thereof P-27 Judicial Affidavit of Garry S. Pagaspas (Independent Certified Public Accountant) dated March 22, 2017 P-27-A Signature of Garry S. Pagaspas on his Judicial Affidavit found on page 19 thereof P-28 Report of Independent Certified Public Accountant and its annexes dated March 13, 2017 P-28-A Signature of Garry S. Pagaspas in Page 20 of ICPA Report thereof For his part, respondent presented its lone witness Revenue Officer Samilo A. Cortuna, who testified, by way of Judicial Affidavit. 27 Thereafter, on October 9, 2017, respondent filed his Formal Offer of Evidence, 28 offering Exhibits "R-1", Letter of Authority No. 030-2016-00000020 dated January 19, 2016 with attached Checklist of Requirements, and "R-3", Letter dated March 26, 2016, as his documentary evidence. Consequently, in the Resolution 29 dated February 12, 2018, the Court admitted respondent's evidence. Furthermore, the parties were given a period of thirty (30) days within which to submit their respective memoranda. AaCTcI Considering the filing of respondent's Memorandum 30 and that of petitioner's Memorandum, 31 the present case was deemed submitted for decision on April 11, 2018. 32 This Court rules. The sole issue 33 presented to this Court for resolution is whether petitioner is entitled to a tax refund in the amount of Two Million Eighty-Two Thousand Three Hundred Seventy-Six Pesos and Forty-One Centavos (P2,083,376.41) for the fourth quarter of taxable year 2013. After due consideration, this Court finds partial merit in petitioner's claim. The pertinent provisions for the determination of the petitioner's claim are Sections 112 (A) and (C) of the National Internal Revenue Code (NIRC) of 1997, as amended, which read as follows: " SEC. 112. Refunds or Tax Credits of Input Tax . acEHCD (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)(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, 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: Provided, finally , That for a person making sales that are zero-rated under Section 108(B)(6), the input taxes shall be allocated ratably between his zero-rated and non-zero-rated sales." "(C) Period within which Refund or Tax Credit of Input Taxes shall be Made . In proper cases, the Commissioner shall grant a refund or issue the tax credit certificate for creditable input taxes within one hundred twenty (120) days from the date of submission of complete documents in support of the application filed in accordance with Subsection (A) hereof. EcTCAD In case of full or partial denial of the claim for tax refund or tax credit, or the failure on the part of the Commissioner to act on the application within the period prescribed above, the taxpayer affected may, within thirty (30) days from the receipt of the decision denying the claim or after the expiration of the one hundred twenty-day period, appeal the decision or the unacted claim with the Court of Tax Appeals." From the foregoing, in order to be entitled to a refund or tax credit of unutilized input VAT attributable to zero-rated or effectively zero-rated sales, the following requisites must be met: 1. that the taxpayer is VAT-registered; 2. that the claim for refund was filed within the prescriptive period; 3. that there must be zero-rated or effectively zero-rated sales; 4. that input taxes were incurred or paid; 5. that such input taxes are attributable to zero-rated or effectively zero-rated sales; and SDHTEC 6. that the input taxes were not applied against any output VAT liability. Petitioner is a VAT-registered entity. As earlier found, petitioner is a registered VAT taxpayer with Taxpayer Identification No. 008-327-264-000, as evidenced by its Certificate of Registration 34 dated August 31, 2012. Petitioner's administrative and judicial claims were seasonably filed. Verily, based on Section 112 (A) of the NIRC of 1997, as amended, the administrative claim for the issuance of a Tax Credit Certificate (TCC) or refund of unutilized input VAT must be filed with the BIR within two (2) years after the close of the taxable quarter when the zero-rated or effectively zero-rated sales were made. The present claim involves the 4th quarter of taxable year 2013, which closed on December 31, 2013, thus, counting two years therefrom, petitioner had until December 31, 2015 within which to file its administrative claim for TCC or refund. By filing its administrative claim via a letter 35 dated December 18, 2015, together with BIR Form No. 1905, 36 with BIR RDO No. 30 on December 28, 2015, petitioner has filed its administrative claim for refund well within the two-year prescriptive period provided for by law. Now, with regard to petitioner's judicial appeal, Section 112 (C) of the same code further provides that the respondent has one hundred twenty (120) days from the date of the submission of the complete documents, in support of the application for tax refund/credit, within which to grant or deny the claim. In case of full or partial denial, petitioner's recourse is to file an appeal, via a Petition for Review, with this Court within thirty (30) days from receipt of the respondent's decision. However, if after the lapse of the 120-day period and respondent still fails to act on the application for tax refund/credit, petitioner's remedy is to appeal the inaction of the CIR to this Court within thirty (30) days. HSAcaE Perusal of the records reveal that, from the date petitioner filed its administrative claim with the BIR, which was on December 28, 2015, respondent has one hundred twenty (120) days, or until April 26, 2016, within which to act on the said claim. Since respondent, through Revenue District Officer Leonora R. Ruizol, issued a letter 37 dated March 28, 2016 denying the administrative claim, petitioner had thirty (30) days, reckoned from April 1, 2016, the date when petitioner received the said letter, or until May 2, 2016 38 within which to elevate the matter via a judicial appeal before this Court. Evidently, by filing the instant Petition for Review on April 29, 2016, petitioner have, likewise, timely filed its judicial claim. Petitioner had zero-rated or effectively zero-rated sales. In its Articles of Incorporation, 39 it is expressly stated that petitioner is primarily incorporated for the following purposes: 1. To engage in the business of merchandising, distributing and marketing, whether as principal, agent, indenter or manufacturer's representative, wholesale or retail, such as but not limited to industrial, agricultural, manufacturing tools and equipment, engineering products, hardware items, construction materials and electrical supplies, and or any all kinds of goods, wares and merchandise. AScHCD 2. To engage in the business of import and export as principals, factors, representatives, agents or commissioned merchants with respect to buying, selling, trading or dealing in any and all kind of goods, wares, products of all classes and description, distribution, import and export business. As such, petitioner claims that the majority of its clients are entities doing business within the economic zone and registered with the Philippine Economic Zone Authority (PEZA) and Subic Bay Metropolitan Authority (SBMA), which are classified as zero-rated transactions pursuant to Section 106 (A) (2) (c) of the NIRC of 1997, as amended, which reads: " SEC. 106. Value-Added Tax on Sale of Goods or Properties . (A) Rate and Base of Tax. x x x (2) Zero-rated Sales The following sales by VAT-registered persons shall be subject to zero percent (0%) rate: HESIcT xxx xxx xxx (c) Sales to persons or entities whose exemption under special laws or international agreements to which the Philippines is a signatory effectively subjects such sales to zero rate." Relative thereto, the pertinent provision of Revenue Regulations (RR) No. 16-2005, 40 as amended, states that, viz. : " SEC. 4.106-5. Zero-Rated Sales of Goods or Properties . A zero-rated sale of goods or properties (by a VAT-registered person) is a taxable transaction for VAT purposes, but shall not result in any output tax. However, the input tax on purchases of goods, properties or services, related to such zero-rated sale, shall be available as tax credit or refund in accordance with these Regulations. The following sales by VAT-registered persons shall be subject to zero percent (0%) rate: xxx xxx xxx (c) "Sales to persons or entities deemed tax-exempt under special law or international agreement." Sales of goods or property to persons or entities who are tax exempt under special laws, e.g. , sales to enterprises duly registered and accredited with the Subic Bay Metropolitan Authority (SBMA) pursuant to R.A. No. 7227, sales to enterprises duly registered and accredited with the Philippine Economic Zone Authority (PEZA) or international agreements to which the Philippines is signatory, such as, Asian Development Bank (ADB), International Rice Research Institute (IRRI), etc., shall be effectively subject to VAT at zero-rate." Apparently, based on the above-quoted provisions, there is no doubt that the sales of goods to entities registered with the PEZA and SBMA are subject to VAT at zero percent (0%) rate. AcICHD Therefore, to prove that its clients are duly registered with the PEZA, petitioner submitted a confirmation letter 41 dated February 16, 2016 from the PEZA Deputy Director General for Operations, Ms. Mary Harriet O. Abordo, verifying its issuance of VAT Zero-Rating Certifications to the following enterprises: Name of Enterprise Zone Location VAT Cert. Number VAT Cert. Date 1 ALPHA TECHNO PRECISION TOOLINGS, INC. Cavite Economic Zone 730 17-Jan-13 2 APPLIED MACHINING CORPORATION Laguna Technopark-SEZ Laguna Technopark-Annex SEZ 939 28-Jan-13 3 CEBU AOI DEVELOPMENT TECHNOLOGIES CORPORATION Mactan Economic Zone 1636 24-May-13 4 CITIZEN MACHINERY PHILIPPINES, INC. First Philippine Industrial Park-SEZ 97 11-Dec-12 5 CLAYMOUNT ASSEMBLIES PHILIPPINES, INC. Calamba Premiere International Park-SEZ 454 07-Jan-13 6 DAITOH PRECISIONS, INC. Mactan Economic Zone 1578 22-Apr-13 7 DAIWA SEIKO PHILIPPINES CORPORATION Laguna International Industrial Park-SEZ 448 07-Jan-13 8 DELFINGEN PH-FILIPINAS, INC. FORMERLY: SOFANOU (PHILIPPINES), INC. Mactan Economic Zone II-SEZ First Cavite Industrial Estate-SEZ 1569 18-Apr-13 9 DELTA DESIGN PHILIPPINES LLC Carmelray Industrial Park II-SEZ Baguio City Economic Zone 782 18-Jan-13 10 E N CORPORATION Cavite Economic Zone 1259 15-Feb-13 11 EXAS PHILIPPINES, INC. Mactan Economic Zone 1358 27-Feb-13 12 FAMOUS SECRET PRECISION MACHINING, INC. Daiichi Industrial Park-SEZ 362 03-Jan-13 13 FATEC CORPORATION First Cavite Industrial Estate-SEZ 1073 01-Feb-13 14 FERUSCHE STAINLESS, INC. Filinvest Technology Park Calamba-SEZ 1658 05-Jun-13 15 FIRSTEC METALLICS, INC. Light Industry & Science Park I-SEZ 14 04-Dec-12 16 FUJITSU DIE-TECH CORPORATION OF THE PHILIPPINES Laguna Technopark, Inc.-SEZ 450 07-Jan-13 17 GUNMA GOHKIN PHILIPPINE CORPORATION Light Industry & Science Park I-SEZ 313 28-Dec-12 18. HARADA AUTOMOTIVE ANTENNA (PHILIPPINES), INC. FORMERLY: NIPPON ANTENNA (PHILIPPINES), INC. First Cavite Industrial Estate-SEZ 1173 06-Feb-13 19 HITACHI INDUSTRIAL MACHINERY PHILIPPINES CORP. First Cavite Industrial Estate-SEZ 229 21-Dec-12 20 HONDA PARTS MANUFACTURING CORPORATION Laguna Technopark, Inc.-SEZ 121 13-Dec-12 21 IMASEN PHILIPPINE MANUFACTURING CORPORATION Laguna Technopark, Inc.-SEZ 633 15-Jan-13 22 INA MICRO OPTO CORPORATION Mactan Economic Zone II-SEZ 1367 01-Mar-13 23 JFS PRECISION TECHNOLOGY CORP. Golden Mile Business Park-SEZ Baguio City Economic Zone 1732 09-Jul-13 24 KNOWLES ELECTRONICS (PHILIPPINES) CORPORATION Cebu Light Industrial Park-SEZ 968 28-Jan-13 25 KODACHI SEIKI PHILIPPINES, INC. Cavite Economic Zone 1459 13-Mar-13 26 LAGUNA AUTO-PARTS MANUFACTURING CORPORATION Laguna Technopark, Inc.-SEZ 79 10-Dec-12 27 LAGUNA METTS CORPORATION Laguna Technopark, Inc.-SEZ 266 26-Dec-12 28 MAKOTO METAL TECHNOLOGY, INC. Mactan Economic Zone II-SEZ 167 17-Dec-12 29 MANUFACTURING AUTOMATION SOLUTIONS INTERNATIONAL, INC. Calamba Premiere International Park-SEZ 1694 27-Jun-13 30 MEINAN PHILIPPINES, INC. Laguna Technopark, Inc.-SEZ 734 17-Jan-13 31 MENIMA CASTING PRODUCTS, INC. First Cavite Industrial Estate-SEZ 264 26-Dec-12 32 MICRO-MECHANICS TECHNOLOGY INTERNATIONAL, INC. Carmelray Industrial Park II-SEZ 1413 08-Mar-13 33 MICRON PRECISION PHILIPPINES, INC. Calamba Premiere International Park-SEZ 839 21-Jan-13 34 MKP, INC. Cavite Economic Zone 887 23-Jan-13 35 MTE TECHNOLOGY, INC. Carmelray Industrial Park II-SEZ 789 18-Jan-13 36 NAKASHIMA PHILIPPINES CORPORATION FORMERLY: MIKADO PHILIPPINES CORPORATION Cavite Economic Zone 1032 30-Jan-13 37 NEW ELECTRONICS SYSTEM CO., INC. Cavite Economic Zone 431 07-Jan-13 38 NIDEC PHILIPPINES CORPORATION Laguna Technopark, Inc.-SEZ 428 07-Jan-13 39 NIDEC PRECISION PHILIPPINES CORPORATION Laguna Technopark, Inc.-SEZ 443 07-Jan-13 40 NUVALI STEEL PROCESSING CENTER, INC. Laguna Technopark Annex-SEZ 1747 15-Jul-13 41 ORBIS PRECISION TECH., INC. Laguna International Industrial Park-SEZ 306 28-Dec-12 42 PARTS PHILIPPINES, INC. Cavite Economic Zone 1263 18-Feb-13 43 PENTA TECHNOLOGICAL PRODUCTS, INC. Laguna Technopark, Inc.-SEZ 747 17-Jan-13 44 PHILIPPINE KENKO CORPORATION Mactan Economic Zone 1552 12-Apr-13 45 PHILIPPINE NAGANO SEIKO, INC. People's Technology Complex-SEZ 861 22-Jan-13 46 PHILIPPINE PRECISION TECHNOLOGY, INC. Carmelray Industrial Park I-SEZ 1720 08-Jul-13 47 PHILIPPINE SANITARY FITTINGS, INC. Light Industry & Science Park III-SEZ First Cavite Industrial Estate-SEZ 1054 31-Jan-13 48 PHILIPPINES TRC, INC. Lima Technology Center-SEZ 879 22-Jan-13 49 PRECISE PARTS COOPERATION (PPCI), INC. First Cavite Industrial Estate-SEZ 1907 16-Oct-13 50 PRECISE TECHNO, INCORPORATED Cavite Economic Zone 1313 20-Feb-13 51 PROPHILE SOUND INDUSTRIES, INC. Cavite Economic Zone 165 17-Dec-12 52 SEO JIN TRONICS, INC. First Cavite Industrial Estate-SEZ 1709 02-Jul-13 53 SHIMANO (PHILIPPINES), INC. First Philippine Industrial Park-SEZ 1979 18-Dec-13 54 SINAG PRECISION MANUFACTURING LAGUNA, INC. Laguna Technopark, Inc.-SEZ 1827 27-Aug-13 55 SONION PHILIPPINES, INC. First Philippine Industrial Park-SEZ 1095 01-Feb-13 56 SUMINAC PHILIPPINES, INC. First Cavite Industrial Estate-SEZ 355 02-Jan-13 57 SUNNELIT PHILIPPINES CORPORATION Laguna Technopark, Inc.-SEZ 695 16-Jan-13 58 T&S LASER SOLUTIONS, INC. First Philippine Industrial Park-SEZ 30 05-Dec-12 59 TAMIYA (PHILIPPINES), INC. Mactan Economic Zone II-SEZ 1939 11-Nov-13 60 TMX PHILIPPINES, INC. Mactan Economic Zone 1001 29-Jan-13 61 TSUKUBA PHILIPPINE DIECASTING CORPORATION Cavite Economic Zone 718 17-Jan-13 62 URE-SHII TECHNOLOGIES, INC. Golden Mile Business Park-SEZ 2036 28-Oct-14 63 VITALO PACKAGING INTERNATIONAL, INC. Laguna Technopark-SEZ 395 04-Jan-13 64 WACKER NEUSON MANILA, INC. FORMERLY: WACKER MACHINERY PHILIPPINES, INC. First Cavite Industrial Estate-SEZ 383 04-Jan-13 65 YUTAKA MANUFACTURING (PHILIPPINES), INC. Laguna Technopark, Inc.-SEZ 769 18-Jan-13 Accordingly, only the sales made to the above-enumerated enterprises during the 4th quarter of taxable year 2013 shall be entitled to VAT zero-rating for purposes of the subject claim. caITAC However, as to the sales made to SBMA-registered clients, petitioner, unfortunately, failed to provide similar certifications or confirmations from SBMA. As a result, sales thereto shall be denied VAT zero-rating. As noted by the court-commissioned ICPA in his ICPA Report, 42 petitioner had actual export sales in the amount of P2,077,110.82 which were duly supported by (i) airway bills/bills of lading, as proof of actual shipment of goods from the Philippines to a foreign country; 43 (ii) certificate of inward remittances; 44 and, (iii) reconciliation of export sales and dollar remittances, as proof of payment for the goods in acceptable foreign currency. 45 Thus, the ICPA considered the said amount in the computation of petitioner's zero-rated sales. 46 Nonetheless, this Court cannot ascertain whether the airway bills submitted by petitioner actually support the purported zero-rated sales declared by petitioner as the same were unreadable. As such, the claimed actual export sales shall also be denied VAT zero-rating. Corollary, Sections 113 (A) (1), (B) (1), (2) (c) and (3) of the NIRC of 1997, as amended, as implemented by Sections 4.113-1 (A) (1), B (1) and (2) (c) of RR No. 16-05, in relation to Sections 237 and 238 of the same tax code, provide that a VAT taxpayer, like herein petitioner, shall for every sale, barter or exchange of goods or properties, issue a VAT invoice which must contain the following information: TAIaHE " SEC. 113. Invoicing and Accounting Requirements for VAT-Registered Persons . (A) Invoicing Requirements . A VAT-registered person shall issue: (1) A VAT invoice for every sale, barter, or exchange of goods or properties; and xxx xxx xxx (B) Information Contained in the VAT Invoice or VAT Official Receipt . The following information shall be indicated in the VAT invoice or VAT official receipt: (1) A statement that the seller is a VAT-registered person, followed by his Taxpayer's Identification Number (TIN); ICHDca (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: Provided, that: xxx xxx xxx (c) If the sale is subject to zero percent (0%) value-added tax, the term 'zero-rated sale' shall be written or printed prominently on the invoice or receipt; (3) The date of transaction, quantity, unit cost and description of the goods or properties or nature of the service; x x x" (Emphasis Supplied) " SEC. 4.113-1. Invoicing Requirements . (A) A VAT-registered person shall issue: (1) A VAT invoice for every sale, barter, or exchange of goods or properties; and xxx xxx xxx Only VAT-registered persons are required to print their TIN followed by the word 'VAT' in their invoice or official receipts. Said documents shall be considered as a 'VAT Invoice' or VAT Official Receipt. All purchases covered by invoice/receipts other than VAT Invoice/VAT Official Receipt shall not give rise to any input tax. VAT invoice/official receipt shall be prepared at least in duplicate, the original to be given to the buyer and the duplicate to be retained by the seller as part of his accounting records. cDHAES (B) Information contained in VAT invoice or VAT Official Receipt. The following information shall be indicated in VAT invoice or VAT official receipt : (1) A statement that the seller is a VAT-registered person, followed by his TIN; (2) The total amount which the purchaser pays or is obligated to pay to the seller with the indication that such amount includes the VAT; Provided , That: xxx xxx xxx (c) If the sale is subject to zero percent (0%) VAT, the term 'zero-rated sale' shall be written or printed prominently on the invoice or receipt; x x x" (Emphases Supplied) " SEC. 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 , x x x" TCAScE " 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 Commissioner. xxx xxx xxx." (Emphases supplied) In its Amended Quarterly VAT Return 47 for the fourth quarter of TY 2013, petitioner reported total sales of P30,065,138.71, broken down as follows: Sales Type Amount VATable Sales P6,335,479.75 Zero-Rated Sales 23,729,658.96 Total Sales P30,065,138.71 In support of its zero-rated sales amounting to P23,729,658.96 and to prove compliance with the VAT invoicing requirements as mandated by law and pertinent regulations, petitioner submitted its monthly Schedule of Sales 48 and the corresponding supporting sales invoices 49 thereto. ASEcHI However, upon closer evaluation, this Court finds that the following zero-rated sales totaling in the amount of P2,773,125.84 should be disallowed for the reasons hereinafter stated, to wit: Invoice No. Client Amount Exhibit No. Sales to clients without proof of PEZA registration/VAT exemption 4258 Turu Santechno Corporation 6,120.00 P-9 4345 Delfingen West, Inc. 28,000.00 P-33.59 4428 Silan Technologies Corporation 4,530.00 P-9 4741 Silan Technologies Corporation 2,400.00 P-9 4791 Delfingen West, Inc. 12,520.00 P-33.293 4926 Turu Santechno Corporation 12,350.00 P-9 4928 Turu Santechno Corporation 3,840.00 P-9 5010 Delfingen West, Inc. 14,000.00 P-33.408 5046 Turu Santechno Corporation 52,840.00 P-9 5052 Turu Santechno Corporation 19,590.00 P-9 5194 Turu Santechno Corporation 3,900.00 P-9 5289 Delfingen West, Inc. 7,400.00 P-33.555 5292 Turu Santechno Corporation 2,600.00 P-9 5564 Silan Technologies Corporation 8,270.00 P-9 5587 Delfingen West, Inc. 15,000.00 P-33.711 5656 Delfingen West, Inc. 8,000.00 P-33.740 subtotal 201,360.00 Sales to clients without proof of SBMA registration/VAT exemption 4240 Polarmarine, Incorporated 19,800.00 P-33.1 4373 Polarmarine, Incorporated 202,750.00 P-33.74 4374 Polarmarine, Incorporated 4,000.00 P-33.75 4375 Hitachi Terminals Mechatronics Phils., Inc. 4,400.00 P-33.76 4376 Polarmarine, Incorporated 4,600.00 P-33.77 4377 Hitachi Terminals Mechatronics Phils., Inc. 13,100.00 P-33.78 4600 Hitachi Terminals Mechatronics Phils., Inc. 40,000.00 P-33.192 4621 Hitachi Terminals Mechatronics Phils., Inc. 600.00 P-33.199 4656 Polarmarine, Incorporated 68,115.00 P-33.220 4658 Polarmarine, Incorporated 4,000.00 P-33.222 4671 Hitachi Terminals Mechatronics Phils., Inc. 29,900.00 P-33.231 4804 Polarmarine, Incorporated 2,600.00 P-33.300 4805 Polarmarine, Incorporated 600.00 P-33.301 5076 Polarmarine, Incorporated 30,300.00 P-33.438 5173 Hitachi Terminals Mechatronics Phils., Inc. 4,400.00 P-33.486 5219 Polarmarine, Incorporated 28,700.00 P-33.512 5285 Polarmarine, Incorporated 10,600.00 P-33.551 5286 Polarmarine, Incorporated 340.00 P-33.552 5555 Polarmarine, Incorporated 3,600.00 P-33.693 5558 Polarmarine, Incorporated 22,250.00 P-33.694 subtotal 494,655.00 Export sales without proof of actual shipments (illegible Shipment Waybills) 4266 Premtool e.K. 219,930.64 P-33.769 4273 Euroasia Technics SDN BHD 118,869.66 P-33.770 5003 Premtool e.K. 308,425.14 P-33.771 5006 Premtool e.K. 224,281.40 P-33.772 5332 Euroasia Technics Sdn Bhd 59,378.25 P-33.773 5335 Hillmec Engineering Sdn Bhd 75,316.74 P-33.774 5377 Premtool e.K. 193,931.41 P-33.775 5381 Premtool e.K. 80,657.05 P-33.776 5605 Premtool e.K. 302,454.90 P-33.777 5617 Hillmec Engineering SDN BHD 61,770.40 P-33.778 5618 Euroasia Technics SDN BHD 105,629.40 P-33.779 5619 Premtool e.K. 326,465.85 P-33.780 subtotal 2,077,110.84 TOTAL 2,773,125.84 Accordingly, only the amount of P20,956,533.12 represents petitioner's valid zero-rated sales, computed as follows: cTDaEH Reported Zero-Rated Sales P23,729,658.96 Less: Disallowances by this Court 2,773,125.84 Valid Zero-Rated Sales P20,956,533.12 Thus, having resolved that petitioner had VAT zero-rated sales for the 4th quarter of taxable year 2013 in the amount of P20,956,533.12, this Court shall now proceed to determine the amount of input VAT attributable thereto. Petitioner had input taxes attributable to its zero-rated and were not applied against any output VAT liability. Again, in its Amended Quarterly VAT Return for the 4th quarter of taxable year 2013, petitioner reflected input taxes on local purchases and importations of goods other than capital goods in the total amount of P2,842,633.98. From the said amount, P2,082,376.41, net of output tax due, is the subject herein of petitioner's claim for refund, viz. : ITAaHc Input Tax on Purchases of Goods Other than Capital Goods P511,365.98 Importation of Goods Other than Capital Goods 2,331,268.00 Total P2,842,633.98 Less: Output Tax 760,257.57 Excess input tax claimed P2,082,376.41 In support of its total input taxes of P2,842,633.98, petitioner submitted certified true copies of Sales Invoices for Purchase of Goods, 50 and Bureau of Customs' Import Entry and Internal Revenue Declarations 51 (IEIRDs) with receipts/Confirmation receipts evidencing payment of VAT for imported goods. However, upon examination of the said documents, the ICPA noted certain exceptions which failed to meet the substantiation requirements under Sections 110 (A) and 113 (A) and (B) of the NIRC of 1997, as amended, in relation to Sections 4.110-1, 4.110-8 and 4.113-1 of RR No. 16-05, in the total amount of P563,809.26, broken down as follows: 52 cSaATC Description Input VAT Amount Reference (ICPA Report) Printed in thermal paper P422.12 Table 6; Exh P-35 Not under CCI's complete name 20,182.50 Table 7; Exh P-36 Without or incomplete registered address of CCI 264,432.04 Table 8; Exh P-37 Without or incorrect CCI's TIN 70,133.53 Table 9; Exh P-38 Input VAT not separate in invoice 2,990.10 Table 10; Exh P-39 Out of quarter 205,648.97 Table 11; Exh P-40 Total amount not fully compliant P563,809.26 Furthermore, the input VAT in the amount of P221,692.40 shall, likewise, be disallowed for the reasons stated hereafter: CHTAIc Supplier's Name Invoice No. Amount Exhibit No. Reason for the disallowance On Local Purchases G.P. Enterprises, Inc. 504954 P1,466.25 P-34.40 Supported by VAT invoice but without TIN of petitioner G.P. Enterprises, Inc. 507561 384.40 P-34.41 Supported by VAT invoice but without TIN of petitioner Screw City Hardware 265682 6.75 P-34.127 Supported by VAT invoice but with alteration on date without counter-signature subtotal P1,857.40 On Importations Whizcut of Sweden AB 8648923485 P39,983.00 P-34.183 Supported by IEIRD without machine validation; no other documents provided to prove payment of the claimed input VAT YG-1 Tools Aisa Pte. Ltd. 131215637 80,736.00 P-34.200 Supported by IEIRD without machine validation; no other documents provided to prove payment of the claimed input VAT Ehwa Diamond Ind. Co., Ltd. 8361505202 5,779.00 P-34.217 Supported by IEIRD without machine validation; no other documents provided to prove payment of the claimed input VAT Whizcut of Sweden AB 8659392954 93,337.00 P-34.229 Supported by IEIRD without machine validation; no other documents provided to prove payment of the claimed input VAT subtotal P219,835.00 TOTAL P221,692.40 In sum, petitioner's valid input VAT for the 4th quarter of taxable year 2013 only amounts to P2,057,132.32, which is computed as follows: cHDAIS Input VAT per Return P2,842,633.98 Less: Disallowances Per ICPA Report 563,809.26 Per Court's further verification 221,692.40 Total Valid Input VAT P2,057,132.32 Proceeding therefrom, a portion of petitioner's valid input VAT shall be applied against the output VAT liability for the 4th quarter of taxable year 2013 in the amount of P760,257.57. Consequently, only the remaining input VAT of P1,296,874.75 can be attributed to the declared zero-rated sales of P23,729,658.96, which means that only the input VAT of P1,145,317.71 is actually attributable to the zero-rated sales of P20,956,533.12, as seen below: EATCcI Valid input VAT P2,057,132.32 Less: Output VAT 760,257.57 Excess valid input VAT P1,296,874.75 Divide by declared zero-rated sales 23,729,658.96 Multiply by valid zero-rated sales 20,956,533.12 Excess input VAT attributable to valid zero-rated sales P1,145,317.71 All told, petitioner was able to prove that the claimed excess input VAT of P2,082,376.41 for the 4th quarter of taxable year 2013 was not applied against any output VAT in the succeeding quarters. The said amount remained unutilized as it was deducted as "VAT Refund/TCC claimed" in its Amended Quarterly VAT Returns for the 3rd quarter of taxable year 2015. 53 Apparently, the subject claim no longer formed part of the excess input VAT of P278,416.77 54 at the end of the said quarter of taxable year 2015 which can be carried over/applied to the succeeding quarters. Henceforth, it eliminates the possibility that the present claim would be applied to future output VAT liability. ISHCcT WHEREFORE , in view of the foregoing, the instant Petition for Review is PARTIALLY GRANTED . Accordingly, respondent is ORDERED to REFUND or ISSUE A TAX CREDIT CERTIFICATE in favor of petitioner in the reduced amount of P1,145,317.71 , representing unutilized input VAT attributable to its zero-rated sales for the 4th quarter of taxable year 2013. SO ORDERED. (SGD.) CIELITO N. MINDARO-GRULLA Associate Justice Roman G. del Rosario, P.J. and Erlinda P. Uy, J. , concur. Footnotes 1. Docket (Vol. I), pp. 10-22. 2. Statement of the Case, Pre-Trial Order, Docket (Vol. IV), p. 2879. 3. Exhibit "P-1". 4. Exhibit "P-3". 5. Exhibit "P-5". 6. Exhibit "P-4". 7. Exhibit "P-2". 8. Exhibit "P-6". 9. Exhibit "P-13". 10. Exhibit "P-14". 11. Exhibit "P-23"; Exhibit "R-3". 12. Ibid. ; See Paragraph 1.b, Joint Stipulation of Facts and Issues (JSFI), Docket (Vol. IV), p. 2860. 13. Docket (Vol. I), pp. 222-227. 14. Ibid. , pp. 228-229. 15. Id. , pp. 238-242. 16. Id. , pp. 252-267. 17. Docket (Vol. IV), pp. 2815-2819. 18. Ibid. , pp. 2901-2902. 19. Id. , pp. 2860-2868. 20. Id. , pp. 2879-2886. 21. Judicial Affidavit dated February 22, 2017, id. , pp. 2921-2928; Exhibit "P-25". 22. Judicial Affidavit dated February 22, 2017, id. , pp. 2930-2942; Exhibit "P-26". 23. Judicial Affidavit dated February 22, 2017, id. , pp. 2906-2919; Exhibit "P-24". 24. Judicial Affidavit dated March 22, 2017, id. , pp. 3035-3054; Exhibit "P-27". 25. Docket (Vol. IV), pp. 3076-3099. 26. Ibid. , pp. 3215-3216. 27. Judicial Affidavit of Samilo A. Cortuna for Colt Commercial, Inc. vs. Commissioner of Internal Revenue , CTA Case No. 9340 dated September 29, 2016, Docket (Vol. I), pp. 247-251. 28. Docket (Vol. IV), pp. 3223-3226. 29. Ibid. , pp. 3235-3236. 30. Id. , pp. 3237-3243. 31. Id. , pp. 3252-3270. 32. As per Resolution dated April 11, 2018, id. , p. 3247. 33. Par. 2, JSFI, id. , p. 2861. 34. Exhibit "P-5". 35. Exhibit "P-13". 36. Exhibit "P-14". 37. Exhibit "P-23"; Exhibit "R-3". 38. May 1, 2016 is a public holiday and also fell on a Sunday. 39. Exhibit "P-2". 40. "CONSOLIDATED VALUE-ADDED TAX REGULATIONS OF 2005," dated September 1, 2005. 41. Exhibit "P-6". 42. Exhibit "P-28". 43. Marked by the ICPA as Exhibit "P-32" of the ICPA Report. 44. Marked by the ICPA as Exhibit "P-19" of the ICPA Report. 45. Marked by the ICPA as Exhibit "P-22" of the ICPA Report. 46. Par. F, Exhibit "P-28", Docket (Vol. IV), p. 2960. 47. Exhibit "P-16-D". 48. Exhibit "P-8". 49. Exhibit "P-9"; Exhibits "P-33-1" to "P-33-780" of the ICPA Report. 50. Exhibit "P-11". 51. Exhibit "P-20". 52. Par. D, Exhibit "P-28" (ICPA Report), Docket (Vol. IV), p. 2963. 53. Line 23D, Exhibit "P-18-C". 54. Line 29, ibid.