Colt Commercial, Inc. v. Commissioner of Internal Revenue

SPECIAL THIRD DIVISION [C.T.A. CASE NO. 9356. December 18, 2018.] COLT COMMERCIAL, INC. , petitioner , vs . THE COMMISSIONER OF INTERNAL REVENUE , respondent . DECISION FABON-VICTORINO , J p : In the instant Petition for Review filed on May 23, 2016, 1 petitioner Colt Commercial, Inc., prays for the refund of its alleged unutilized input Value-Added Tax (VAT) in the amounts of P2,000,256.32 and P1,445,784.19, attributable to its zero-rated sales for the first (1st) and second (2nd) quarters of taxable year (TY) 2014. Petitioner is a domestic corporation, with office address at Suite 508 Padilla Delos Reyes Bldg., 232 Juan Luna St., Brgy. 289, Zone 027, Binondo, Manila. 2 It is principally engaged in the business of selling cutting tools and hardware. 3 It is a VAT-registered taxpayer with Taxpayer Identification No. (TIN) 008-327-264-000. 4 Respondent, on the other hand, is the Commissioner of Internal Revenue (CIR), authorized to act on claims for refund or issuance of tax credit certificate in accordance with the law. He holds office at the BIR National Office Building, Agham Road, Diliman, Quezon City. Petitioner states that it incurred unutilized input tax payments attributable to its zero-rated sales for the 1st and 2nd quarters of TY 2014 in the amounts of P2,000,256.32 and P1,445,784.19, respectively. On March 30, 2016, petitioner filed with BIR Revenue District Office (RDO) No. 30, an administrative claim for refund of the cited excess input VAT for the 1st and 2nd quarters of TY 2014 in the sum of P3,446,040.51. 5 The said claim for refund was however denied through the Letter dated April 21, 2016 of Revenue District Officer Leonora R. Ruizol, 6 hence, this Petition for Review filed on May 23, 2016. On July 12, 2016, respondent filed his Answer 7 arguing that the present claim for refund is premature since its case is still pending investigation with Revenue Region No. 6, BIR Manila. Besides, per record, petitioner has already applied the entire amount of input tax, subject of the claim for refund, against its output tax by carrying over the same to succeeding taxable quarters, specifically from taxable quarters ending March 31, 2013 up to March 31, 2015. Verification of petitioner's VAT Returns revealed that the input taxes amounting to P2,000,256.32 and P1,445,784.19 were not deducted from available input tax corresponding to the period of claim. CAIHTE Respondent also argues that pursuant to Section 112 of the NIRC of 1997, as amended, the remedies of tax refund and input tax carry-over are alternative in nature and the choice of one precludes the other. Finally, respondent invokes the principle that claims for refund are construed strictly against the claimant since they are in the nature of tax exemptions. After the Pre-trial Conference on October 11, 2016, 8 the parties filed their Joint Stipulation of Facts and Issues on October 26, 2016, 9 on the basis of which a Pre-Trial Order was issued on November 23, 2016. 10 To substantiate its case, petitioner presented as its witnesses, Cyrus S. Chung Jr., Cherilyn R. Chung, Jennifer S. Maago and the Court-commissioned Independent Certified Public Accountant (ICPA) Sonny S. Bonilla. Petitioner's President, Cyrus S. Chung testified 11 that petitioner was established on July 17, 2012. It is engaged in the business of selling cutting tools and hardware. It supplies business enterprises in need of cutting tools and other hardware, most of which are within the ecozone and are PEZA 12 and SBMA-registered entities. Petitioner is a VAT-registered entity registered with BIR-RDO No. 30 in Binondo, Manila, as evidenced by its BIR Certificate of Registration dated August 31, 2012. 13 Petitioner filed an administrative claim for refund 14 of its unutilized input tax payments attributable to zero-rated sales to its clients for the 1st and 2nd quarters of TY 2014 in the respective amounts of P2,000,256.32 and P1,445,784.19. It was however denied in a Decision dated April 21, 2016 issued by BIR RDO No. 30 and received by petitioner on April 22, 2016. 15 Upon consultation with its legal counsel, petitioner authorized 16 him to file the instant Petition for Review. Petitioner's Corporate Secretary and Treasurer, Cherilyn R. Chung corroborated 17 the foregoing testimony and added that their counsel advised them to file an administrative claim for refund so that they can utilize their excess input VAT. Hence, they prepared the documents necessary and filed an administrative claim for refund on March 30, 2016 with RDO No. 30. On April 22, 2016, petitioner received a Letter from BIR RDO No. 30 signed by Revenue District Officer, Ms. Leonora Ruizol, denying petitioner's administrative claim for refund 18 prompting them to file the instant case with the Court on May 23, 2016. Witness Jennifer S. Maago testified 19 that as petitioner's accounting head, she was responsible for the preparation, timely filing, payment and submission of tax returns and other reports to the BIR, Securities and Exchange Commission (SEC) and other government agencies. She also corroborated the testimonies of the previous two witnesses and further declared that for the 1st Quarter of TY 2014, petitioner's sales allocation consisted of P10,362,386.09 vatable sales and P23,532,943.34 zero-rated sales with corresponding output tax of P1,243,486.33 and input tax of P3,243,742.65. For the 2nd Quarter of TY 2014, petitioner had P10,190,257.41 vatable sales and P22,615,049.31 zero-rated sales, with an output tax of P1,222,830.89 and input tax of P2,668,615.08. 20 Thus, petitioner incurred an excess input VAT in the amounts of P2,000,256.32 for the 1st Quarter of TY 2014 21 and P1,445,784.19 for the 2nd Quarter of TY 2014. 22 To avoid double recovery, petitioner deducted the amount corresponding to the unutilized and excess input VAT from the total available input VAT item in the Quarterly VAT Return for the 3rd Quarter of TY 2014. 23 Petitioner likewise incurred unutilized input VAT in TY 2013 as evidenced by petitioner's VAT Returns for the 1st to 4th Quarters of TY 2013. 24 The witness admitted that while she prepared most of the documents she identified and is familiar with their contents, she did not have personal knowledge about the transactions involving the said documents as some were either issued by the BIR or prepared by petitioner's counsel or other employees. On petitioner's application to use pre-numbered loose-leaf forms, she explained that she had no participation in the said application but aware that it was granted. Further, the use of pre-numbered loose-leaf invoices was necessary as petitioner printed sales invoices through the computer. However, for collection purposes, petitioner still used hard bound collection receipts. DETACa The Court-commissioned ICPA, Sonny S. Bonilla testified 25 that based on his findings as stated in his ICPA Report dated March 9, 2017, 26 petitioner is entitled to input VAT refund for the 1st and 2nd quarters of TY 2014 but in the reduced amount of P3,427,018.36. He further testified that for the Quarterly VAT Returns for the 1st and 2nd quarter of TY 2014, petitioner did not indicate the amount subject for VAT refund. In any event, in its Amended 3rd Quarter VAT Return, petitioner indicated its intention to claim for VAT refund. He also learned from his audit that in its 4th Quarter VAT Return, petitioner carried over the excess input VAT from the 3rd quarter of TY 2014. After its last witness, petitioner rested its case per Resolution dated July 5, 2017. 27 On October 2, 2017, 28 respondent manifested that he would no longer present any evidence. After respondent filed his Memorandum on November 17, 2017, 29 the case was submitted for decision on December 27, 2017 30 sans any from petitioner. 31 THE ISSUE The parties submitted the following issue 32 for the Court's resolution: Whether petitioner is entitled to a tax refund in the amount of Two Million Two Hundred Fifty-Six Pesos and Thirty Centavos (Php2,000,256.32) for the first quarter of TY 2014 and One Million Four Hundred Forty-Five Thousand Seven Hundred Eighty-Four Pesos and Nineteen Centavos (Php1,445,784.19) for the second quarter of TY 2014, despite its failure to allege in the petition its total sales for the covered period and the total unutilized input tax directly attributable to zero-rated sales. THE COURT'S RULING Sections 112 (A) and (C) of the NIRC of 1997, as amended, pertinently 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, 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 of 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. xxx xxx xxx (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. 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. aDSIHc Thus, to be entitled to refund/TCC of input tax due or paid attributable to zero-rated or effectively zero-rated sales, the following requisites must be satisfied: 1. the taxpayer is VAT-registered; 2. both the administrative and judicial claims were filed within the prescriptive periods; 3. the taxpayer is engaged in zero-rated or effectively zero-rated sales; 4. the input taxes were incurred or paid; 5. the input taxes claimed are attributable to zero-rated or effectively zero-rated sales; and 6. the input taxes have not been applied against any output VAT liability. Petitioner is a VAT- registered taxpayer. It is undisputed that petitioner is a VAT-registered entity as evidenced by its BIR Certificate of Registration No. OCNC0000579258 and Taxpayer's Identification No. 008-327-264-000. 33 Petitioner's administrative and judicial claims were seasonably filed. The second requisite was likewise satisfied. Pursuant to Section 112 (A) of the NIRC of 1997, as amended, petitioner had two (2) years to file a claim for refund/TCC of input VAT attributable to zero-rated or effectively zero-rated sales reckoned from the close of the taxable quarter when the relevant sales were made. Shown below are the relevant dates showing that petitioner's administrative claim for refund was timely filed on March 30, 2016, 34 thus: Period Covered (TY 2014) End of Taxable Quarter End of the Two-year Prescriptive Period 1st Quarter March 31, 2014 March 31, 2016 2nd Quarter June 30, 2014 June 30, 2016 As to the timeliness of petitioner's judicial claim for refund, Section 112 (C) of the NIRC of 1997, as amended speaks of two periods for filing judicial claim for refund, to wit: (1) the period of 120 days for respondent to act on the administrative claim for refund/TCC; and (2) the 30-day period from notice of respondent's adverse ruling or the lapse of the 120-period without any action from respondent, within which to file a judicial claim with this Court. 35 In the landmark case of Commissioner of Internal Revenue vs. San Roque Power Corporation , 36 the Supreme Court held that the taxpayer can seek judicial review of its claim for refund/TCC in either of the following ways: (1) file the judicial claim within 30 days after the respondent denies the claim within the 120-day waiting period, or (2) file the judicial claim within 30 days from the expiration of the 120-day period, if respondent does not act within that period. 37 Accordingly, from the filing of petitioner's administrative claim, together with the supporting documents, on March 30, 2016, respondent had one hundred twenty (120) days or until July 28, 2016 to act on the said claim. Considering that respondent issued a letter denying the claim on April 21, 2016, 38 petitioner had thirty (30) days or until May 23, 2016, 39 within which to file a judicial claim before this Court. Clearly, the instant Petition for Review was also timely filed on May 23, 2016. Petitioner is engaged in zero-rated or effectively zero-rated sales Petitioner's Articles of Incorporation expressly states that it is primarily incorporated for the following purposes: ETHIDa 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. 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. 40 Evidence shows that the majority of petitioner's clients were entities doing business within the economic zone and registered with PEZA and SBMA, whose transactions were classified as zero-rated transactions pursuant to Section 106 (A) (2) (c) of the NIRC of 1997, as amended, to wit: SEC. 106. Value-Added Tax on Sale of Goods or Properties . (A) Rate and Base of Tax . x x x xxx xxx xxx (2) The following sales by VAT-registered persons shall be subject to zero percent (0%) rate: 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. Corollarily, Revenue Regulations (RR) No. 16-2005, as amended, states: SECTION 4.106-5. Zero-Rated Sales of Goods or Properties . x x x 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. Based on the cited provisions, sales of goods to entities registered with PEZA and SBMA are subject to VAT at zero percent (0%) rate. To prove that its clients are duly-registered with the PEZA and SBMA, petitioner submitted various PEZA Certificates of Registration, BIR Certificates of Registration, and PEZA-ERD Forms No. 97-01. 41 Petitioner likewise submitted the letter dated July 5, 2016 42 of PEZA Deputy Director General for Operations, Mary Harriet O. Abordo, to petitioner's President, Cyrus S. Chung, Jr., confirming the issuance of VAT zero-rating certifications to the following entities: Name of Enterprise Zone Location VAT Cert. No. VAT Cert. Date 1 ALPHA TECHNO PRECISION TOOLINGS, INC. Cavite Economic Zone 2014-1122 24 January 2014 2 APPLIED MACHINING CORPORATION Laguna Technopark-SEZ 2014-0172 10 December 2013 3 ASIAN TRANSMISSION CORPORATION Carmelray Industrial Park I-SEZ 2014-1661 01 April 2014 4 CITIZEN MACHINERY PHILIPPINES, INC. FORMERLY: MIYANO PHILIPPINES, INC. First Philippine Industrial Park-SEZ 2014-0023 09 December 2013 5 CLAYMOUNT ASSEMBLIES PHILIPPINES, INC. Calamba Premiere International Park-SEZ 2014-0668 09 January 2014 6 DAITOH PRECISIONS, INC. Mactan Economic Zone 2014-1079 23 January 2014 7 DAIWA SEIKO PHILIPPINES CORPORATION Laguna International Industrial Park-SEZ 2014-0552 02 January 2014 8 DELFINGEN PH-FILIPINAS, INC. FORMERLY: SOFANOU (PHILIPPINES), INC. Mactan Economic Zone II-SEZ 2014-1665 02 April 2014 9 DELTA DESIGN PHILIPPINES LLC Carmelray Industrial Park II-SEZ 2014-0854 16 January 2014 10 EN CORPORATION Cavite Economic Zone 2014-0708 13 January 2014 11 EXAS PHILIPPINES, INC. Mactan Economic Zone 2014-1752 13 May 2014 12 FAMOUS SECRET PRECISION MACHINING, INC. Daiichi Industrial Park-SEZ 2014-0536 02 January 2014 13 FATEC CORPORATION First Cavite Industrial Estate-SEZ 2014-1251 29 January 2014 14 FERUSCHE STAINLESS, INC. Filinvest Technology Park Calamba-SEZ 2014-0573 03 January 2014 15 FIRSTEC METALLICS, INC. Light Industry & Science Park I-SEZ 2014-0534 27 December 2013 16 FUJITSU DIE-TECH CORPORATION OF THE PHILIPPINES Laguna Technopark, Inc.-SEZ 2014-0334 17 December 2013 17 GUNMA GOHKIN PHILIPPINES CORPORATION Light Industry & Science Park I-SEZ 2014-0679 09 January 2014 18 HARADA AUTOMOTIVE ANTENNA (PHILIPPINES), INC. FORMERLY: NIPPON ANTENNA (PHILIPPINES), INC. First Cavite Industrial Estate-SEZ 2014-0146 10 December 2013 19 HISTOTECH PRECISION (PH), INC. Light Industry & Science Park I-SEZ 2014-2017 08 October 2014 20 HITACHI INDUSTRIAL MACHINERY PHILIPPINES CORP. First Cavite Industrial Estate-SEZ 2014-0185 11 December 2013 21 HONDA PARTS MANUFACTURING CORPORATION Laguna Technopark, Inc.-SEZ 2014-0331 17 December 2013 22 IMASEN PHILIPPINE MANUFACTURING CORPORATION Laguna Technopark, Inc.-SEZ 2014-0346 17 December 2013 23 INA MICRO OPTO CORPORATION Mactan Economic Zone II-SEZ 2014-1476 24 February 2014 24 JFS PRECISION TECHNOLOGY CORP. Golden Mile Business Park-SEZ Baguio City Economic Zone 2014-1023 22 January 2014 25 KNOWLES ELECTRONICS (PHILIPPINES) CORPORATION Cebu Light Industrial Park-SEZ 2014-0747 13 January 2014 26 KODACHI SEIKI PHILIPPINES, INC. Cavite Economic Zone 2014-1376 10 February 2014 27 LAGUNA AUTO-PARTS MANUFACTURING CORPORATION Laguna Technopark, Inc.-SEZ 2014-0028 09 December 2013 28 LAGUNA METTS CORPORATION Laguna Technopark, Inc.-SEZ 2014-0607 07 January 2014 29 MAKOTO METAL TECHNOLOGY, INC. Mactan Economic Zone II-SEZ 2014-0638 08 January 2014 30 MANUFACTURING AUTOMATION SOLUTIONS INTERNATIONAL, INC. Calamba Premiere International Park-SEZ 2014-0460 26 December 2013 31 MEINAN PHILIPPINES, INC. Laguna Technopark, Inc.-SEZ 2014-1252 29 January 2014 32 MENIMA CASTING PRODUCTS, INC. First Cavite Industrial Estate-SEZ 2014-1007 21 January 2014 33 MICRO-MECHANICS TECHNOLOGY INTERNATIONAL, INC. Carmelray Industrial Park II-SEZ 2014-0751 13 January 2014 34 MICRON PRECISION PHILIPPINES, INC. Calamba Premiere International Park-SEZ 2014-1419 13 February 2014 35 MKP, INC. Cavite Economic Zone 2014-0905 17 January 2014 36 MTE TECHNOLOGY, INC. Carmelray Industrial Park II-SEZ 2014-0256 13 December 2013 37 NAKASHIMA PHILIPPINES CORPORATION (NPC) FORMERLY: MIKADO PHILIPPINES CORPORATION Cavite Economic Zone 2014-0614 07 January 2014 38 NEW ELECTRONICS SYSTEM CO., INC. Cavite Economic Zone 2014-0141 10 December 2013 39 NIDEC PHILIPPINES CORPORATION Laguna Technopark, Inc.-SEZ 2014-0226 11 December 2013 40 NIDEC PRECISION PHILIPPINES CORPORATION Laguna Technopark, Inc.-SEZ 2014-0680 09 January 2014 41 NIDEC SANKYO PHILIPPINES CORPORATION Laguna Technopark, Inc.-SEZ 2014-1756 16 May 2014 42 NUVALI STEEL PROCESSING CENTER, INC. Laguna Technopark Annex-SEZ 2014-1505 28 February 2014 43 ORBIS PRECISION TECH., INC. Laguna International Industrial Park-SEZ 2014-0946 20 January 2014 44 PARTS PHILIPPINES, INC. Cavite Economic Zone 2014-0787 15 January 2014 45 PENTA TECHNOLOGICAL PRODUCTS INC. Laguna Technopark, Inc.-SEZ 2014-0444 26 December 2013 46 PHILIPPINE KENKO CORPORATION Mactan Economic Zone 2014-1744 13 May 2014 47 PHILIPPINE NAGANO SEIKO, INC. People's Technology Complex-SEZ 2014-0541 02 January 2014 48 PHILIPPINE PRECISION TECHNOLOGY, INC. Carmelray Industrial Park I-SEZ 2014-1663 02 April 2014 49 PHILIPPINE SANITARY FITTINGS, INC. Light Industry & Science Park III-SEZ First Cavite Industrial Estate-SEZ 2014-1750 13 May 2014 50 PHILIPPINES TRC, INC. Lima Technology Center-SEZ 2014-1480 24 February 2014 51 PRECISE TECHNO, INCORPORATED Cavite Economic Zone 2014-1694 11 April 2014 52 PROPHILE SOUND INDUSTRIES, INC. Cavite Economic Zone 2014-0725 13 January 2014 53 RAMCAR TECHNOLOGY, INC. Sta. Maria Industrial Park 2014-1604 17 March 2014 54 SEO JIN TRONICS, INC. First Cavite Industrial Estate-SEZ 2014-1296 03 February 2014 55 SINAG PRECISION MANUFACTURING LAGUNA, INC. Laguna Technopark, Inc.-SEZ 2014-1831 23 June 2014 56 SHIMANO (PHILIPPINES), INC. First Philippine Industrial Park-SEZ 2014-0389 18 December 2013 57 SONION PHILIPPINES, INC. First Philippine Industrial Park-SEZ 2014-0519 27 December 2013 58 SUMINAC PHILIPPINES, INC. First Cavite Industrial Estate-SEZ 2014-0073 09 December 2013 59 SUNNELIT PHILIPPINES CORPORATION Laguna Technopark, Inc.-SEZ 2014-1124 24 January 2014 60 T&S LASER SOLUTIONS, INC. First Philippine Industrial Park-SEZ 2014-0433 20 December 2013 61 TAMIYA (PHILIPPINES), INC. Mactan Economic Zone II-SEZ 2014-0980 21 January 2014 62 TMX PHILIPPINES, INC. Mactan Economic Zone 2014-1035 22 January 2014 63 TSUKUBA PHILIPPINE DIECASTING CORPORATION Cavite Economic Zone 2014-0050 09 December 2013 64 URE-SHII TECHNOLOGIES, INC. Golden Mile Business Park-SEZ 2014-2039 28 October 2014 65 VITALO PACKAGING INTERNATIONAL, INC. Laguna Technopark-SEZ 2014-0671 09 January 2014 66 WACKER NELSON MANILA, INC. FORMERLY: WACKER MACHINERY PHILIPPINES, INC. First Cavite Industrial Estate-SEZ 2014-0678 09 January 2014 67 YUTAKA MANUFACTURING (PHILS.), INC. Laguna Technopark, Inc.-SEZ 2014-0082 09 December 2013 Accordingly, only the sales made to the above-enumerated entities, as well as to the SBMA-registered entities, i.e. , Hitachi Terminals Mechatronics Philippines Corporation and Polarmarine, Inc. , during the 1st and 2nd quarters of TY 2014 shall qualify for VAT zero-rating. cSEDTC In addition, Section 113 (A) (2), (B) (1), (2) (c) and (3) of the NIRC of 1997, as amended, and as implemented by Sections 4.113-1 (A) (2), (B) (1) and (2) (c) of Revenue Regulations (RR) No. 16-05, in relation to Sections 237 and 238 of the same Code, provide that a VAT taxpayer, like petitioner, shall for every lease of goods or properties and for every sale, barter or exchange of services, issue a VAT official receipt which must contain the following information: 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); (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; xxx xxx xxx (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 invoices/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. (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; SDAaTC (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;" (Emphases supplied) SEC. 237. Issuance of Receipts or Sales or Commercial Invoices . All persons subject to an internal revenue tax shall, for each sale and 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. x x x" (Emphases supplied) 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. In its Quarterly VAT Returns 43 for the 1st and 2nd quarters of TY 2014, petitioner reported a total sale of P66,700,636.15, as computed below: VATable Sales Zero-rated Sales Total Sales 1st Quarter P10,362,386.09 P23,532,943.34 P33,895,329.43 2nd Quarter 10,190,257.41 22,615,049.31 32,805,306.72 Total P20,552,643.50 P46,147,992.65 P66,700,636.15 In support of its zero-rated sales and to prove compliance with the VAT invoicing requirements as provided by the afore-quoted laws and regulations, petitioner submitted various certified true copies of its sales invoices 44 issued to its customers, all were examined by the ICPA. AaCTcI Per the ICPA Report, petitioner's zero-rated sales were supported by sales invoices with a total amount of P46,626,058.73, which is greater than the amount reported per VAT Returns by P478,066.08, as shown below: 45 Zero-Rated Sales per VAT Returns Zero-Rated Sales per ICPA Difference 1st Quarter P23,532,943.34 P23,648,761.07 P(115,817.73) 2nd Quarter 22,615,049.31 22,977,297.66 (362,248.35) Total P46,147,992.65 P46,626,058.73 P(478,066.08) The above noted difference of P478,066.08 is attributable to the following: Out of period sale P(13,110.00) Sold to PEZA but treated as VATable sale 10,050.00 Unsupported difference between the actual schedule vis--vis VAT return-1st Quarter 118,877.73 Unsupported difference between the actual schedule vis--vis VAT return-2nd Quarter 362,248.35 Total P478,066.08 Out of the P478,066.08 difference accounted by the ICPA, the amounts of P13,110.00 46 and P10,050.00 47 shall be considered for the purpose of determining the amount of zero-rated sales to which the valid input VAT may be attributed. However, the unsupported differences of P118,877.73 and P362,248.35, which apparently pertain to amounts not actually reported in petitioner's VAT Returns for the subject period, shall be disregarded. Moreover, the following reported zero-rated sales in the amount of P2,559,249.20, shall be disallowed as they were made to entities without proof of PEZA/SBMA registration, thus, cannot qualify for VAT zero-rating, to wit: Invoice No. Invoice Date Client Amount Exhibit No. First Quarter 5728 1/6/2014 SILAN TECHNOLOGIES CORPORATION P7,200.00 ICPA ZSQ1-9 5800 1/8/2014 TURU SANTECHNO CORPORATION 20,140.00 ICPA ZSQ1-41 5803 1/8/2014 PREMTOOL E.K. 108,521.91 ICPA ZSQ1-42 5804 1/8/2014 PREMTOOL E.K. 333,151.28 ICPA ZSQ1-43 5805 1/8/2014 PREMTOOL E.K. 304,273.31 ICPA ZSQ1-44 5920 1/15/2014 DELFINGEN WEST, INC. 129,000.00 ICPA ZSQ1-102 5941 1/16/2014 TURU SANTECHNO CORPORATION 18,540.00 ICPA ZSQ1-115 5942 1/16/2014 TURU SANTECHNO CORPORATION 16,390.00 ICPA ZSQ1-116 6143 1/28/2014 TURU SANTECHNO CORPORATION 940 ICPA ZSQ1-194 6270 2/5/2014 TURU SANTECHNO CORPORATION 3,900.00 ICPA ZSQ1-265 6271 2/5/2014 HILLMEC ENGINEERING SDN BHD 225,270.52 ICPA ZSQ1-266 6356 2/11/2014 SILAN TECHNOLOGIES CORPORATION 4,490.00 ICPA ZSQ1-306 6357 2/11/2014 SILAN TECHNOLOGIES CORPORATION 2,090.00 ICPA ZSQ1-307 6572 2/22/2014 TURU SANTECHNO CORPORATION 12,900.00 ICPA ZSQ1-418 6574 2/22/2014 PREMTOOL E.K. 152,081.46 ICPA ZSQ1-420 6632 2/26/2014 CEBU AOI DEVELOPMENT TECHNOLOGIES CORP. 7,875.00 ICPA ZSQ1-453 6664 2/26/2014 DELFINGEN WEST, INC. 43,000.00 ICPA ZSQ1-469 6687 2/27/2014 SILAN TECHNOLOGIES CORPORATION 3,600.00 ICPA ZSQ1-485 6781 3/6/2014 TURU SANTECHNO CORPORATION 6,500.00 ICPA ZSQ1-540 6901 3/12/2014 EUROASIA TECHNICS SDN BHD 58,718.88 ICPA ZSQ1-611 7033 3/19/2014 PREMTOOL E.K. 109,834.08 ICPA ZSQ1-679 7034 3/19/2014 TURU SANTECHNO CORPORATION 6,500.00 ICPA ZSQ1-680 7085 3/24/2014 TURU SANTECHNO CORPORATION 5,300.00 ICPA ZSQ1-701 7201 3/28/2014 PREMTOOL E.K. 252,568.41 ICPA ZSQ1-753 subtotal P1,832,784.85 Second Quarter 7376 4/8/2014 SILAN TECHNOLOGIES CORPORATION P2,400.00 ICPA ZSQ2-75 7378 4/10/2014 TURU SANTECHNO CORPORATION 3,900.00 ICPA ZSQ2-77 7541 4/22/2014 PREMTOOL E.K. 109,236.30 ICPA ZSQ2-162 7543 4/22/2014 DELFINGEN WEST, INC. 13,200.00 ICPA ZSQ2-164 7699 4/29/2014 TURU SANTECHNO CORPORATION 1,000.00 ICPA ZSQ2-244 7880 5/9/2014 TURU SANTECHNO CORPORATION 3,900.00 ICPA ZSQ2-345 8030 5/7/2014 TURU SANTECHNO CORPORATION 5,000.00 ICPA ZSQ2-411 8103 5/22/2014 TURU SANTECHNO CORPORATION 5,000.00 ICPA ZSQ2-445 8125 5/24/2014 SILAN TECHNOLOGIES CORPORATION 5,840.00 ICPA ZSQ2-454 8126 5/24/2014 SILAN TECHNOLOGIES CORPORATION 4,800.00 ICPA ZSQ2-455 8127 5/24/2014 SILAN TECHNOLOGIES CORPORATION 4,800.00 ICPA ZSQ2-456 8128 5/24/2014 SILAN TECHNOLOGIES CORPORATION 7,220.00 ICPA ZSQ2-457 8147 5/26/2014 PREMTOOL E.K. 90,642.36 ICPA ZSQ2-468 8285 6/2/2014 PREMTOOL E.K. 205,396.75 ICPA ZSQ2-530 8671 6/25/2014 SILAN TECHNOLOGIES CORPORATION 5,230.00 ICPA ZSQ2-735 8672 6/25/2014 SILAN TECHNOLOGIES CORPORATION 5,550.00 ICPA ZSQ2-736 8673 6/25/2014 SILAN TECHNOLOGIES CORPORATION 2,400.00 ICPA ZSQ2-737 8674 6/25/2014 SILAN TECHNOLOGIES CORPORATION 6,140.00 ICPA ZSQ2-738 8677 6/25/2014 SILAN TECHNOLOGIES CORPORATION 3,000.00 ICPA ZSQ2-739 8680 6/25/2014 EUROASIA TECHNICS SON BHD 238,148.94 ICPA ZSQ2-740 8750 6/30/2014 PRECISE PARTS COOPERATION, INC. 3,660.00 ICPA ZSQ2-773 subtotal P726,464.35 Total P2,559,249.20 Based on the foregoing, only the amount of P43,585,683.45 represents petitioner's valid zero-rated sales, computed as follows: EcTCAD 1st Quarter 2nd Quarter Total Total Reported Zero-Rated Sales P23,532,943.34 P22,615,049.31 P46,147,992.65 Add (Less): Adjustments Out of period sale (13,110.00) (13,110.00) Sale to PEZA but treated as vatable sale 10,050.00 10,050.00 Disallowed by this Court (1,832,784.85) (726,464.35) (2,559,249.20) Total Valid Zero-Rated Sales P21,697,098.49 P21,888,584.96 P43,585,683.45 Petitioner incurred and paid input taxes which are attributable to its zero- rated sales and the same were not applied against any output VAT liability For the 1st and 2nd quarters of TY 2014, petitioner incurred input taxes on its local purchases and importations of goods other than capital goods in the total amount of P5,912,357.73, of which the amount of P3,446,040.51, net of output tax due, is the subject of petitioner's claim for refund, to wit: 1st Quarter (Exh. "P-17-A") 2nd Quarter (Exh."P-17-B") Total Input Tax on Purchases of Goods Other than Capital Goods (Line 21F) P407,105.65 P386,548.08 P793,653.73 Input Tax on Importation of Goods Other than Capital Goods (Line 21H) 2,836,637.00 2,282,067.00 5,118,704.00 Total Input Taxes P3,243,742.65 P2,668,615.08 P5,912,357.73 Less: Output Tax (Line 15B) 1,243,486.33 1,222,830.89 2,466,317.22 Excess input tax claimed P2,000,256.32 P1,445,784.19 P3,446,040.51 In support of its total input taxes of P5,912,357.73, petitioner submitted the certified true copies of sales invoices 48 for its local purchases of goods, and Import Entry and Internal Revenue Declarations (IEIRDs), and Bureau of Customs (BOC) receipts/Confirmation receipts 49 evidencing payment of VAT for imported goods. Upon examination of the said documents, the ICPA noted exceptions on local purchases in the total amount of P28,172.39, summarized as follows: 50 Description 1st Quarter 2nd Quarter Total 1. Incorrect TIN of petitioner P9,016.39 P3,040.07 P12,056.46 2. VAT not indicated separately in the invoice 86.06 227.14 313.20 3. Supported by Point of Sale (POS) receipts only 43.93 25.18 69.11 4. Not validated due to unavailability of the supporting documents - 6,120.00 6,120.00 5. VAT erroneously written on VAT exempt sale invoice - 28.06 28.06 6. Unsupported difference between the actual schedule vis--vis VAT return 9,702.28 (116.72) 9,585.56 Total P18,848.66 P9,323.73 P28,172.39 From the above findings, Item Nos. 1 to 5, in the aggregate amount of P18,586.83 shall be disallowed for petitioner's failure 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. As to the unsupported difference of P9,585.56 (Item No. 6), further review reveals that the difference actually amounts to only P9,295.24 for the 1st quarter, which shall be disallowed for being unsupported, and P116.73 51 for the 2nd quarter, which shall be disregarded as it does not form part of the instant claim. The details of the said amounts are presented below: Input Tax per Return Input Tax Per Schedule 52 Difference 1st Quarter P407,105.65 P397,810.41 P9,295.24 2nd Quarter 386,548.08 386,664.81 (116.73) Total P793,653.73 P784,475.22 P9,178.51 In addition, the input VAT on local purchases in the amount of P66,515.66 shall likewise be disallowed for the following reasons: AScHCD Supplier's Name Invoice No. Amount Exhibit No. Reason for disallowance First Quarter Avenue Hardware Corp. 92014 P806.79 ICPA P-91 Supported by VAT invoice with unreadable date Limhuaco Metal Industrial, Inc. 11149 15,642.86 ICPA P-99 Supported by VAT invoice without petitioner's TIN Handyman Do It Best home Ctr. 656684 210.00 ICPA P-123 Supported by tape receipt only True Value 694 130.50 ICPA P-127 Supported by tape receipt only Grindtech Abrasives Corp. 2955 315.00 ICPA P-208 Supported by VAT invoice with alteration on date but without countersignature Sanyoseiki Stainless Steel Corp. 143253 15,857.14 ICPA P-275 Supported by VAT invoice without petitioner's TIN Kimika Industrial Corporation 128394 5,614.29 ICPA P-389 Supported by VAT invoice without petitioner's TIN subtotal P38,576.58 Second Quarter Em-o Industrial Manufacturing Corporation 9634 P1,923.75 ICPA P-675 Supported by VAT invoice without petitioner's TIN Union Hardware 30376 210.00 ICPA P-764 Supported by VAT invoice without petitioner's TIN Union Hardware 30375 182.90 ICPA P-765 Supported by VAT invoice without petitioner's TIN Union Hardware 30435 208.80 ICPA P-797 Supported by VAT invoice without petitioner's TIN Union Hardware 30469 1,456.38 ICPA P-798 Supported by VAT invoice without petitioner's TIN Em-o Industrial Manufacturing Corporation 9931 15,321.80 ICPA P-893 Supported by VAT invoice without petitioner's TIN Kimika Industrial Corporation 129929 1,301.79 ICPA P-973 Supported by VAT invoice without petitioner's TIN Em-o Industrial Manufacturing Corporation 10222 7,333.66 ICPA P-1006 Supported by VAT invoice without petitioner's TIN subtotal P27,939.08 Total P66,515.66 Further, upon examination of the documents supporting the input VAT on importation of P5,118,704.00, 53 the Court finds the same compliant with the invoicing and substantiation requirements prescribed under the law and regulations. In sum, petitioner's valid input VAT for the 1st and 2nd quarters of TY 2014 amounts to P5,817,960.00, as follows: 1st Qtr 2nd Qtr Total Input VAT per Returns P3,243,742.65 P2,668,615.08 P5,912,357.73 Less: Disallowances Per ICPA findings P9,146.38 P9,440.45 P18,586.83 Unsupported difference 9,295.24 - 9,295.24 Additional disallowances by this Court 38,576.58 27,939.08 66,515.66 Total Disallowances P57,018.20 P37,379.53 P94,397.73 Total Valid Input VAT P3,186,724.45 P2,631,235.55 P5,817,960.00 Proceeding therefrom, a portion of petitioner's valid input VAT shall be applied against the output VAT liability for the 1st and 2nd quarters of TY 2014 in the aggregate amount of P2,465,240.43. Consequently, only the remaining input VAT of P3,352,719.57 can be attributed to the declared zero-rated sales of P46,158,042.65 and only the input VAT of P3,155,032.77 is attributable to the valid zero-rated sales of P43,585,683.45, computed as follows: First Quarter Second Quarter Total Valid Input VAT P3,186,724.45 P2,631,235.55 P5,817,960.00 Less: Output VAT liability Output VAT per returns 1,243,486.33 1,222,830.89 2,466,317.22 Less: Output tax on Sale to PEZA but treated as vatable sale (P10,050.00 1.12% x 12%) 1,076.79 1,076.79 Total 1,242,409.54 1,222,830.89 2,465,240.43 Excess Input VAT P1,944,314.91 P1,408,404.66 P3,352,719.57 Divide by Declared Zero-Rated Sales 23,542,993.34 22,615,049.31 46,158,042.65 Multiply by Valid Zero-Rated Sales 21,697,098.49 21,888,584.96 43,585,683.45 Excess Input VAT attributable to Valid Zero-Rated Sales P1,791,870.37 P1,363,162.41 P3,155,032.77 Further, although the claimed input VAT, which includes the refundable amount of P3,155,032.77, was carried over to the succeeding 3rd quarter of TY 2014, the same remained unutilized as it was deducted as "VAT Refund/TCC claimed" 54 in its Amended Quarterly VAT Return for the 3rd quarter of TY 2014. 55 Therefore, the subject claim no longer formed part of the excess input VAT of P7,298,577.24 56 as of the end of the 3rd quarter of TY 2014 that was to be carried over or applied to the succeeding quarters. As such, it eliminates the possibility that the present claim would be applied to future output VAT liability. AcICHD WHEREFORE , the instant Petition for Review filed by petitioner Colt Commercial, Inc., on May 23, 2016, is PARTIALLY GRANTED . Accordingly, respondent is DIRECTED TO REFUND OR TO ISSUE A TAX CREDIT CERTIFICATE in favor of petitioner the amount of P3,155,032.77 , representing its unutilized and excess input VAT attributable to its zero-rated sales for the 1st and 2nd quarters of TY 2014. SO ORDERED. caITAC (SGD.) ESPERANZA R. FABON-VICTORINO Associate Justice Ma. Belen M. Ringpis-Liban, J. , concurs. Footnotes 1. Docket, vol. 1, pp. 10-21. 2. Exhibit "P-1". 3. Exhibit "P-2". 4. Exhibit "P-5". 5. Exhibit "P-13". 6. Exhibit "P-23". 7. Docket, vol. 1, pp. 196-201. 8. Docket, vol. 2, p. 646. 9. Docket, vol. 2, pp. 662-669. 10. Docket, vol. 2, pp. 674-679. 11. See Cyrus S. Chung Jr.'s Judicial Affidavit, Exhibits "P-24" and "P-24-a". 12. Exhibit "P-6". 13. Exhibit "P-5". 14. Exhibits "P-13" and "P-14". 15. Exhibit "P-23". 16. Exhibit "P-4". 17. See Cherilyn R. Chung's Judicial Affidavit, Exhibits "P-25" and "P-25-a". 18. Exhibit "P-23". 19. See Jennifer S. Maago's Judicial Affidavit, Exhibits "P-26" and "P-26-a". 20. Exhibits "P-8", "P-9", "P-10", "P-11", "P-19", "P-20", "P-21" and "P-22", inclusive of sub-markings. 21. Exhibit "P-17-a". 22. Exhibit "P-17-b". 23. Exhibit "P-17-c". 24. Exhibits "P-16-a" to "P-16-d". 25. See Sonny S. Bonilla's Judicial Affidavit, Exhibits "P-27" and "P-27-a". 26. Exhibits "P-28" and "P-28-a". 27. Docket, vol. 2, p. 852. 28. Docket, vol. 2, p. 854. 29. Docket, vol. 2, pp. 862-866. 30. Docket, vol. 2, p. 870. 31. Records Verification Report dated December 12, 2017, docket, vol. 2, p. 868. 32. Joint Stipulation of Facts and Issues, docket, vol. 2, p. 662. 33. Exhibit "P-5". 34. Exhibits "P-13" and "P-14". 35. Rohm Apollo Semiconductor Philippines v. Commissioner of Internal Revenue , G.R. No. 168950, January 14, 2015. 36. G.R. Nos. 187485, 196113, and 197156, February 12, 2013. 37. Supra , Note 37. 38. Exhibit "P-23". 39. May 21, 2016 fell on a Saturday, See Section 1, Rule 22 of Rules of Court. 40. Exhibit "P-2". 41. Exhibit "P-7". 42. Exhibits "P-6"; "ICPA PEZA-1" to "ICPA PEZA-1.4". 43. Exhibits "P-17-A" and "P-17-B". 44. Exhibit "P-9" (labeled as Exhibits "ICPA ZSQ1-1" to "ICPA ZSQ1-762" and "ICPA ZSQ2-1" to "ICPA ZSQ2-773" in the ICPA Report [Exhibit "P-28"]). 45. Exhibit "P-28" (ICPA Report). 46. Annex D of ICPA Report (Exhibit "P-28"); Exhibit "P-8". 47. Exhibit "ICPA ZSQ1-490" of ICPA Report; Exhibit "P-8". 48. Exhibit "P-11". 49. Exhibit "P-20". 50. ICPA Report (Exhibit "P-28"); Annexes G to G.3 of ICPA Report (Exhibit "P-28"). 51. With a difference of 0.01 due to rounding off. 52. Exhibit "P-10". 53. Annex H to H.1 of ICPA Report (Exhibit "P-28"). 54. Line 23D of Exhibit "P-17-C". 55. Exhibit "P-17-C". 56. Line 29 of Exhibit "P-17-C".