Colt Commercial, Inc. v. Commissioner of Internal Revenue

SPECIAL SECOND DIVISION 1 [C.T.A. CASE NO. 9539. January 14, 2019.] COLT COMMERCIAL, INC. , petitioner , vs .COMMISSIONER OF INTERNAL REVENUE , respondent . DECISION CASTAEDA, JR. , J p : This case is a claim for refund in the total amount of P3,577,338.15 which allegedly represents petitioner's unutilized input tax payments attributable to its zero-rated sales for the third (3rd) and fourth (4th) quarters of taxable year 2014. THE PARTIES Petitioner Colt Commercial, Inc. is a corporation duly organized and existing under the laws of the Philippines, with business address at Suite 508 Padilla Delos Reyes Bldg.,232 Juan Luna St.,Barangay 289 Zone 027, Binondo, Manila. 2 Petitioner is registered with Revenue District Office No. 30 Binondo, Manila, as a Value-Added Tax (VAT) taxpayer, with Taxpayer Identification No. 008-327-264-000. 3 On the other hand, respondent Commissioner of Internal Revenue (CIR) 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 Bureau of Internal Revenue (BIR) National Office Building, BIR Road, Diliman, Quezon City. THE FACTS Petitioner is principally engaged in the business of selling cutting tools and hardware. Majority of its clients are entities doing business within the economic zones, such as the Philippine Economic Zone Authority (PEZA) and Subic Bay Metropolitan Authority (SBMA). Intrinsically, petitioner's sales to its clients in the economic zones are classified as effectively zero-rated transactions pursuant to Section 106 (2) (C) of the National Internal Revenue Code (NIRC) of 1997, as amended. On February 3, 2016, petitioner filed its amended Quarterly VAT Returns for the third (3rd) 4 and fourth (4th) 5 quarters of taxable year 2014, allegedly reflecting unutilized input tax payments in the amount of One Million Eight Hundred Twenty Four Thousand Six Hundred Sixty Eight and Forty Three Centavos (P1,824,668.43) and One Million Seven Hundred Fifty Two Thousand Six Hundred Sixty Nine and Seventy Two Centavos (P1,752,669.72),respectively. On September 29, 2016, petitioner filed its Administrative Claim for Excess Input VAT Refund 6 for the 3rd and 4th quarters of taxable year 2014. Thereafter, claiming inaction thereof, petitioner filed the instant Petition for Review 7 on February 24, 2017. On April 20, 2017, respondent filed his Answer, 8 interposing the following special and affirmative defenses, viz .: "It is incumbent upon petitioner to prove that it is entitled to the refund sought because a claim for refund is not ipso facto granted upon filing of the claim. xxx xxx xxx 9. It must be pointed out that taxes remitted to the Bureau are presumed to have been made in the regular course of business and in accordance with provisions of law. 10. All claims for refund are governed by one same rule: that respondent still has to investigate and ascertain the veracity of the claim. AS the Supreme Court stated in one case, 'A corporate taxpayer's option to avail of tax credit does not, however, mean that it is ipso facto granted.' Hence, petitioner's alleged claim for refund is subject to administrative routinary investigation/examination by the Bureau of Internal Revenue. 11. Also to support its claim, it is imperative for petitioner to prove and present the following: a. The registration requirements of a value-added taxpayer in compliance with [S] ection 6 (a) and (b) of Revenue Regulations No. 6-97 in relation to Section 4.107-1 (a) of Revenue Regulations No. 7-95, and Section 236 of the Tax Code, as amended; CAIHTE b. The invoicing and accounting requirements for VAT-registered persons, as well as the filing and payment of VAT in compliance with the provisions of Section 113 and 114 of the Tax Code, as amended; c. Proof of compliance with the prescribed checklist of requirements to be submitted involving claim for VAT refund pursuant to Revenue Memorandum Order No. 53-98, otherwise there would be no sufficient compliance with the filing of an administrative application for refund which is a condition sine qua non prior to the filing of a judicial claim in accordance with Section 112 of the Tax Code, as amended. This requires the submission of complete documents in support of the application filed with the Bureau of Internal Revenue before the 120-day audit period shall apply, and before the taxpayer could avail of the judicial remedies as provided for in the law. Hence, petitioner's failure to submit proof of compliance with the above-stated requirements warrants immediate dismissal of the petitioner [sic] for review; d. That the input taxes of Php3,577,338.15 allegedly incurred by petitioner for the 3rd and 4th Quarters of 2014 was attributable to its zero-rated sales and such have not been applied against any output tax and were not carried over to the succeeding taxable quarter or quarters; e. That petitioner's administrative and judicial claims for tax credit or refund of the unutilized input tax (VAT) was filed within the periods provided in Sections 112 (A) and (C) of the Tax Code, as amended; f. That petitioner's domestic purchases of goods and services were made in the course of trade or business, properly supported by VAT invoices and/or official receipts and other documents, such as subsidiary purchase Journal showing that it actually paid VAT in accordance with Sections 110 (A)(2) and 113 of the Tax Code, as amended, and pursuant to Section 4.104-5 (a) and (b) of Revenue Regulations No. 7-95 (Re: Substantiation of Claims for Input Tax Credits); g. The requirements as enumerated under Section 4.104-5 of Revenue Regulations No. 7-95 (Re: Substantiation of Claims for Input Tax Credits). 12. With due respect, respondent humbly manifests that petitioner failed to substantiate its claim that it is entitled to the refund being prayed for. Petitioner failed to comply with the invoicing and accounting requirements laid down in Section [s] 113, 114 and 236 of the NIRC of 1997, as amended, and its implementing rules and regulations under RR 16-2005. 13. In addition, petitioner was not able to prove that it has strictly complied with the submission of all supporting and relevant documents provided under Revenue Memorandum Order (RMO) No. 53-98 and other existing rules and regulations to warrant the grant of application for refund. 14. The aforementioned provisions of the NIRC as well as the existing rules and regulations are necessary to establish its claim that indeed there is the presence of valid zero-rated sales that would warrant the grant of administrative application for refund on its unapplied/unutilized input VAT as well as the submission of supporting documents to corroborate the claim being applied for. 15. Further, Section 4.108-1 of Revenue Regulations No. 7-95 specifically enumerates the information that must appear on the face of the receipt or invoice issued by all VAT-registered persons. Section 4.108-1 of Revenue Regulations No. 7-95. Invoicing Requirements. All VAT-registered persons shall, for every sale or lease of goods or properties or services, issue duly registered receipts or sales or commercial invoices which must show: 1. the name, TIN and address of seller; 2. date of transaction; 3. quantity, unit cost and description of merchandise or nature of service; 4. the name, TIN, business style, if any, and address of the VAT-registered purchaser, customer or client; 5. the word 'zero rated' imprinted on the invoice covering zero-rated sales; and 6. the invoice value or consideration. 16. The requirement of imprinting the word 'zero-rated' is useful, practical and necessary not only with respect to the proper implementation of the provisions of the 1997 NIRC on zero-rated transactions but more importantly, to prevent the granting of refund or tax credit to non-existent input VAT. xxx xxx xxx 20. Another, petitioner must likewise prove that the input taxes have not yet been applied against its output taxes during and in the succeeding quarters. 21. As here, it was made apparent from the VAT returns of the taxpayer that the entire amount of the input tax, sought to be refunded, was already been carried over to the 4th Quarter VAT Return for taxable year 2014, amounting to Php7,298,577.24 and to the 1st Quarterly VAT Return for taxable year 2015, amounting to Php6,510,915.49. 22. Per report of the examiner the said amounts also include the excess input taxes carried over from the 1st and 2nd Quarter of 2014. Hence, the input tax being claimed by petitioner has already been applied against its output tax. xxx xxx xxx Petitioner's claim for refund [was] filed out of time. 25. It must be stressed as well that Section 112 (A) of the NIRC explicitly reads: '(A) Zero-Rated or Effectively Zero-Rated Sales . Any VAT-registered person, whose sales are zero-rated or effectively zero-rated may, within two (2) years after the close of the taxable 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: x x x.' xxx xxx xxx 27. Here, the petition must have been filed on or before 30 September 2016 for the 3rd quarter claim and 31 December 2016 for the 4th quarter claim. Unfortunately, it was filed only on 24 February, 2017. Tax refund must be construed strictissimi juris. xxx xxx xxx 29. 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 construed strictissimi juris against the person or entity claiming the exemption. 30. 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 and satisfied all the statutory and administrative requirements to be entitled to the tax refund. 31. Following the premise above-mentioned, petitioner has the burden of proving that the right to such tax refund indubitably exists and well-founded doubt is fatal to its claim." (Citations Omitted) On May 3, 2017, respondent filed his Pre-Trial Brief for the Respondent 9 while, petitioner, on the other hand, filed its Pre-Trial Brief 10 on May 8, 2017. Thereafter, a Joint Stipulation of Facts and Issues 11 (JSFI) was filed by the parties, via registered mail, on May 26, 2017. Consequently, on June 9, 2017, the Court issued a Pre-Trial Order 12 which deemed the pre-trial terminated. During trial, petitioner presented its witnesses: the instant case's Independent Certified Public Accountant (ICPA),Sonny S. Bonilla; petitioner's corporate President, Mr. Cyrus S. Chung, Jr.;its corporate Secretary and Treasurer, Ms. Cherilyn R. Chung; and, its Accounting Head, Ms. Jennifer S. Maago. After their respective testimonies, petitioner filed its Formal Offer of Evidence (with CD Volumes 1 and 2) 13 on October 2, 2017, offering Exhibits P-1 to P-27-A, inclusive of sub-markings, as its documentary evidence. In a Resolution 14 dated November 17, 2017, the Court admitted petitioner's evidence except for the following exhibits for petitioner's failure to present their original copies for comparison: Exhibit No. Description P-7 series PEZA Certificate of Registration, BIR Certificate of Registration and PEZA Form ERD 97-01 of Petitioner's clients/purchasers P-9 Certified True Copy of Sales Invoices P-11 Certified True Copies of Sales Invoices for purchase of goods P-20 Import Entry and Internal Revenue Declarations duly validated by bank with O.R. and BOC receipts/Confirmation receipts evidencing payment of VAT Meanwhile, in the Order 15 dated November 22, 2017, the Court noted counsel for respondent's manifestation that she has no witness to present in this case. Henceforth, the Court gave respondent a period of thirty (30) days within which to submit his Memorandum, while, on the other hand, gave petitioner a period of twenty (20) days within which to submit its Memorandum. In compliance, petitioner submitted its Memorandum 16 on January 3, 2018, while respondent's Memorandum 17 was filed on December 22, 2017. Accordingly, in the Resolution 18 dated January 22, 2018, the instant case was deemed submitted for decision. THE ISSUE The sole issue 19 to be resolved in this case is whether petitioner is entitled to a refund in the amount of P1,824,668.43 and P1,752,669.72 for the 3rd and 4th quarters of taxable year 2014, respectively, representing the unutilized input VAT it incurred in the 3rd and 4th quarters of taxable year 2014. Petitioner's Arguments Petitioner argues that its claim for refund was filed on time. Its administrative claim was filed within the two-year period provided under Section 112 of the NIRC of 1997, as amended, while its judicial appeal complied with the mandatory 120-day and 30-day periods provided under the same law. Thus, petitioner insists that it is entitled to the amount sought to be refunded. Petitioner further contends that its sales are considered zero-rated under Section 106 (A) (2) of the NIRC of 1997, as amended. Moreover, petitioner maintains that its unutilized input VAT for the 3rd and 4th quarters of taxable year 2014 is duly substantiated by its documentary evidence. Respondent's Arguments Respondent primarily asserts that petitioner failed to prove that it has duly complied with the documentary requirements needed to claim refund. He also argues that the subject input tax being claimed for by petitioner has already been applied against its output taxes. THE COURT'S RULING After due consideration, the Court finds the instant Petition is partly meritorious. Section 112 (A) and (C) of the 1997 NIRC, as amended, provides the basis for refund or tax credit of input tax attributable to zero-rated or effectively zero-rated sales, to wit: "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 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. x x x" 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. DETACa 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." Based on the foregoing, in order to be entitled to a refund or issuance of a Tax Credit Certificate (TCC) for unutilized input VAT attributable to zero-rated or effectively zero-rated sales, the following requisites must be complied with, viz .: 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 6. That the input taxes were not applied against any output VAT liability. In the instant case, petitioner has sufficiently proven its compliance with the first requisite :that it is a VAT-registered entity, registered with Revenue District Office No. 30, Binondo, Manila with Taxpayer Identification No. (TIN) 008-327-264-000. 20 With regard to the second requisite :the Court finds that petitioner have timely filed its administrative and judicial claims. Under Section 112 (A) of the 1997 NIRC, as amended, the administrative claim for the issuance of a TCC or refund of 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. Considering, the present claim covers the 3rd and 4th quarters of TY 2014, the close of the taxable quarter would be September 30, 2014 and December 31, 2014, respectively. Counting two years therefrom, petitioner had until September 30, 2016 and December 31, 2016, respectively, within which to file its administrative claim for refund/TCC. Clearly, the administrative claim for refund was timely filed by petitioner on September 29, 2016. As to the timeliness of petitioner's judicial appeal, Section 112 (C) of the NIRC of 1997, as amended, provides that the CIR has 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 by the CIR, the taxpayer's recourse is to file an appeal before this Court within thirty (30) days from receipt of the decision of the CIR. However, if after the 120-day period, the CIR fails to act on the application for tax refund/credit, the remedy of the taxpayer is to appeal the inaction of the CIR to this Court within 30 days. From the filing of petitioner's administrative claim, together with the supporting documents, on September 29, 2016, respondent had one hundred twenty (120) days or until January 27, 2017 to act on the said claim. Since respondent failed to act on the said claim after the lapse of the 120-day period, petitioner had 30 days or until February 27, 2017 21 within which to file a judicial claim before this Court. Evidently, petitioner's judicial appeal by way of a Petition for Review filed on February 24, 2017 is well within the period provided by law. As to the third requisite :the Court finds that petitioner is engaged in zero-rated or effectively zero-rated sales. As stated in its Articles of Incorporation, 22 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 and 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. Incidentally, petitioner claims that 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). Under Section 106 (A) (2) (c) of the NIRC of 1997, as amended, such transactions are classified as zero-rated, viz .: "SEC. 106. Value-Added Tax on Sale of Goods or Properties . (A) Rate and Base of Tax. x x x (1) x x x (2) The following sales by VAT-registered persons shall be subject to zero percent (0%) rate: x x x (a) x x x (b) x x x (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, Section 4.106-5 (c) of Revenue Regulations (RR) No. 16-2005, 23 as amended, states that: "SEC. 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: (a) x x x (b) x x x (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." aDSIHc Clearly, 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. To prove that its clients are duly registered with the PEZA, petitioner submitted a Confirmation Letter 24 dated July 5, 2016, from the PEZA Deputy Director General for Operations, Ms. Mary Harriet O. Abordo, addressed to petitioner's President Mr. Cyrus S. Chung, Jr.,validating 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 E N 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 NEUSON 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 However, with respect to its alleged SBMA registered clients, petitioner was not able to submit any document to substantiate its entitlement to VAT zero-rating. Thus, only the sales made to the above-enumerated PEZA entities during the 3rd and 4th quarters of TY 2014 shall qualify for VAT zero-rating. In line with this, Sections 113 (A) (1), (B) (1), (2) (c) and (3) of the 1997 NIRC, 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 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: "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; (3) The date of transaction, quantity, unit cost and description of the goods or properties or nature of the service; and 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 (2) x x x 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. (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: (a) x x x (b) x x x (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 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: x x x xxx xxx xxx." (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. TIADCc xxx xxx xxx." In petitioner's Amended Quarterly VAT Returns 25 for the 3rd and 4th quarters of TY 2014, it reported a total sales of P78,219,628.95, detailed below as follows: Exhibit Period Covered Vatable Sales Zero-Rated Sales Total sales P-17-C 3rd Quarter P9,075,906.44 P27,832,672.40 P36,908,578.84 P-17-D 4th Quarter 9,433,303.05 31,877,747.06 41,311,050.11 Total Total P18,509,209.49 P59,710,419.46 P78,219,628.95 In support of its zero-rated sales and to prove compliance with the VAT invoicing requirements, petitioner submitted its Summary of Zero-Rated Sales 26 and the corresponding supporting sales invoices, 27 which were examined by the court-commissioned ICPA, Mr. Sonny S. Bonilla. In his report, the ICPA noted and verified that there were transactions attributable to export sales, thus, are considered zero-rated sales. The said export sales were made to customers namely, Euroasia Technics SDN BHD, Premtool E.K.,PT Power Machine Tools and TKM Industries (M) SDN BHD. In addition, the ICPA also claims that one customer, Ebara Benguet, Inc.,is registered with the Board of Investments (BOI) were the BOI issued a certification and a list where the said customer is included. 28 Unfortunately, however, petitioner failed to provide proof of actual exportation of the alleged export sales, and also, that of the purported BOI certificate of registration of Ebara Benguet, Inc. Furthermore, the letter and list issued by the BOI which supposedly supports the BOI registration of Ebara Benguet, Inc. were among the documents 29 which were not ascertained by the ICPA as faithful reproduction of the originals. Therefore, the Court cannot consider the claimed sales of goods to the said entities as entitled to VAT zero-rating. More so, the ICPA found that petitioner's alleged zero-rated sales to the PEZA entities supported by sales invoices only had a total amount of P59,673,984.96, which is lower than the amount reported per VAT Returns by P36,434.50, as shown below: 30 Zero-Rated Sales per ICPA Zero-Rated Sales per VAT Returns Difference 3rd Quarter P27,830,415.84 P27,832,672.40 (P2,256.56) 4th Quarter 31,843,569.12 31,877,747.06 (34,177.94) Total P59,673,984.96 P59,710,419.46 (P36,434.50) The ICPA continues that the above-noted difference of P36,434.50 is attributable to the following: 31 a Out of period sale (Exhibit ICPA D-1) P(37,900.00) b Difference between actual invoice vis--vis per schedule-3rd quarter (Exhibit ICPA-ZSQ3-263 and ICPA-ZSQ3-564) (48,800.00) c Out of period credit memo-4th quarter (Exhibit ICPA OP 1) 31,844.99 d Difference between actual invoice vis--vis per schedule-4th quarter (Exhibit ICPA-ZSQ4-739) 100.00 e Unsupported difference between the actual schedule vis--vis VAT return-4th quarter 18,320.50 Total P(36,434.51) 32 Out of the P36,434.51 difference accounted by the ICPA, items a to c in the aggregate amount of P54,855.01 33 shall be considered for the purpose of determining the amount of zero-rated sales to which the valid input VAT may be attributed. On the other hand, the difference between the actual invoice vis--vis per schedule in the amount of P100 and the unsupported difference of P18,320.50 (items d & e above) which apparently pertain to the amounts not actually reported in petitioner's VAT Returns for the subject period shall be disregarded. Also, the following reported zero-rated sales in the total amount of P3,407,517.97, shall be disallowed and, thus, cannot qualify for VAT zero-rating since they were made to entities without proof of PEZA/SBMA/BOI registration and of actual export sales, viz .: Invoice No. Client Amount Exhibit No. 34 Third Quarter Export Sales without proof of actual exportation 9315 PREMTOOL E.K. P224,018.61 ICPA-ZSQ3-284 9381 EUROASIA TECHNICS SDN BHD 5,856.20 ICPA-ZSQ3-317 10081 PREMTOOL E.K. 75,504.56 ICPA-ZSQ3-689 Sales to clients without proof of PEZA/SBMA registration 8785 POLARMARINE, INC. 2,600.00 ICPA-ZSQ3-23 8789 PRECISE PARTS COOPERATION, INC. 10,200.00 ICPA-ZSQ3-25 8903 POLARMARINE, INC. 7,800.00 ICPA-ZSQ3-87 8904 POLARMARINE, INC. 1,950.00 ICPA-ZSQ3-88 8905 POLARMARINE, INC. 39,383.00 ICPA-ZSQ3-89 8998 POLARMARINE, INC. 14,500.00 ICPA-ZSQ3-128 8999 POLARMARINE, INC. 18,582.00 ICPA-ZSQ3-129 9083 POLARMARINE, INC. 3,500.00 ICPA-ZSQ3-172 9165 CEBU AOI DEVELOPMENT TECHNOLOGIES CORP. 19,100.00 ICPA-ZSQ3-203 9242 CEBU AOI DEVELOPMENT TECHNOLOGIES CORP. 5,300.00 ICPA-ZSQ3-245 9243 CEBU AOI DEVELOPMENT TECHNOLOGIES CORP. 8,950.00 ICPA-ZSQ3-246 9190 TURU SANTECHNO CORPORATION 5,860.00 ICPA-ZSQ3-220 9244 POLARMARINE, INC. 3,800.00 ICPA-ZSQ3-247 9245 POLARMARINE, INC. 33,120.00 ICPA-ZSQ3-248 9246 POLARMARINE, INC. 76,020.00 ICPA-ZSQ3-249 9247 POLARMARINE, INC. 70,750.00 ICPA-ZSQ3-250 9248 POLARMARINE, INC. 14,000.00 ICPA-ZSQ3-251 9249 TURU SANTECHNO CORPORATION 1,440.00 ICPA-ZSQ3-252 9322 POLARMARINE, INC. 5,500.00 ICPA-ZSQ3-290 9530 POLARMARINE, INC. 90,300.00 ICPA-ZSQ3-392 9618 HITACHI TERMINALS MECHATRONICS PHILS. CORP. 68,000.00 ICPA-ZSQ3-431 9643 HITACHI TERMINALS MECHATRONICS PHILS. CORP. 4,400.00 ICPA-ZSQ3-441 9644 POLARMARINE, INC. 98,350.00 ICPA-ZSQ3-442 9768 POLARMARINE, INC. 77,050.00 ICPA-ZSQ3-506 9908 PRECISE PARTS COOPERATION, INC. 11,160.00 ICPA-ZSQ3-582 10053 POLARMARINE, INC. 61,200.00 ICPA-ZSQ3-669 10079 WARREN & BROWN PHILIPPINES 1,600.00 ICPA-ZSQ3-688 10095 PRECISE PARTS COOPERATION, INC. 14,860.00 ICPA-ZSQ3-694 10134 SILAN TECHNOLOGIES CORPORATION 14,000.00 ICPA-ZSQ3-717 10169 POLARMARINE, INCORPORATED 4,000.00 ICPA-ZSQ3-738 subtotal 1,092,664.37 Fourth Quarter Export Sales without proof of actual exportation 10398 TKM INDUSTRIES (M) SDN BHD P16,696.10 ICPA-ZSQ4-21 10399 PREMTOOL E.K. 52,242.65 ICPA-ZSQ4-22 10423 PREMTOOL E.K. 87,071.08 ICPA-ZSQ4-40 10424 PREMTOOL E.K. 8,707.11 ICPA-ZSQ4-41 10453 TKM INDUSTRIES (M) SDN BHD 16,704.87 ICPA-ZSQ4-56 10513 EUROASIA TECHNICS SDN BHD 147,840.45 ICPA-ZSQ4-86 10807 PREMTOOL E.K. 113,246.09 ICPA-ZSQ4-267 10831 EUROASIA TECHNICS SDN BHD 18,001.16 ICPA-ZSQ4-278 11012 TKM INDUSTRIES (M) SDN BHD 21,646.80 ICPA-ZSQ4-384 11054 PT POWER MACHINE TOOLS 148,146.90 ICPA-ZSQ4-407 11055 PT POWER MACHINE TOOLS 121,862.05 ICPA-ZSQ4-408 11056 PT POWER MACHINE TOOLS 50,733.58 ICPA-ZSQ4-409 11057 PT POWER MACHINE TOOLS 45,481.10 ICPA-ZSQ4-410 11058 PT POWER MACHINE TOOLS 44,906.47 ICPA-ZSQ4-411 11257 EUROASIA TECHNICS SDN BHD 108,392.87 ICPA-ZSQ4-516 11259 PREMTOOL E.K. 235,120.85 ICPA-ZSQ4-517 11284 PT POWER MACHINE TOOLS 86,629.83 ICPA-ZSQ4-538 11285 PT POWER MACHINE TOOLS 39,165.44 ICPA-ZSQ4-539 11803 PREMTOOL E.K. 277,208.20 ICPA-ZSQ4-835 Sales to client without proof of BOI registration 10979 EBARA BENGUET, INC. 13,650.00 ICPA-ZSQ4-361 11226 EBARA BENGUET, INC. 5,850.00 ICPA-ZSQ4-502 Sales to clients without proof of PEZA/SBMA registration 10402 POLARMARINE, INCORPORATED 42,800.00 ICPA-ZSQ4-23 10409 POLARMARINE, INCORPORATED 36,600.00 ICPA-ZSQ4-28 10542 PRECISE PARTS COOPERATION, INC. 3,720.00 ICPA-ZSQ4-94 10540 POLARMARINE, INCORPORATED 1,700.00 ICPA-ZSQ4-106 10547 POLARMARINE, INCORPORATED 52,000.00 ICPA-ZSQ4-107 10598 PRECISE PARTS COOPERATION, INC. 5,370.00 ICPA-ZSQ4-136 10599 PRECISE PARTS COOPERATION, INC. 6,290.00 ICPA-ZSQ4-137 10600 PRECISE PARTS COOPERATION, INC. 5,680.00 ICPA-ZSQ4-138 10601 PRECISE PARTS COOPERATION, INC. 8,100.00 ICPA-ZSQ4-139 10602 PRECISE PARTS COOPERATION, INC. 5,200.00 ICPA-ZSQ4-140 10603 PRECISE PARTS COOPERATION, INC. 6,990.00 ICPA-ZSQ4-141 10641 POLARMARINE, INCORPORATED 18,000.00 ICPA-ZSQ4-161 10724 POLARMARINE, INCORPORATED 21,360.00 ICPA-ZSQ4-209 10725 POLARMARINE, INCORPORATED 6,600.00 ICPA-ZSQ4-210 10897 POLARMARINE, INCORPORATED 43,700.00 ICPA-ZSQ4-313 10898 HITACHI TERMINALS MECHATRONICS PHILS. CORP. 34,650.00 ICPA-ZSQ4-314 10960 POLARMARINE, INCORPORATED 11,400.00 ICPA-ZSQ4-346 10961 POLARMARINE, INCORPORATE 20,800.00 ICPA-ZSQ4-347 11119 POLARMARINE, INCORPORATED 100,100.00 ICPA-ZSQ4-443 11120 POLARMARINE, INCORPORATED 19,700.00 ICPA-ZSQ4-444 11197 PRECISE PARTS COOPERATION, INC. 3,220.00 ICPA-ZSQ4-492 11296 DELFINGEN WEST, INC. 23,600.00 ICPA-ZSQ4-548 11359 POLARMARINE, INCORPORATED 49,700.00 ICPA-ZSQ4-585 11419 DELFINGEN WEST, INC. 15,000.00 ICPA-ZSQ4-618 11440 POLARMARINE, INC. 37,500.00 ICPA-ZSQ4-634 11503 PRECISE PARTS COOPERATION, INC. 15,270.00 ICPA-ZSQ4-669 11701 POLARMARINE, INC. 16,450.00 ICPA-ZSQ4-779 11702 POLARMARINE, INC. 1,600.00 ICPA-ZSQ4-780 11850 POLARMARINE, INC. 26,900.00 ICPA-ZSQ4-861 11851 POLARMARINE, INC. 2,850.00 ICPA-ZSQ4-862 11852 POLARMARINE, INC. 4,600.00 ICPA-ZSQ4-863 11853 POLARMARINE, INC. 4,600.00 ICPA-ZSQ4-864 11863 PRECISE PARTS COOPERATION, INC. 3,500.00 ICPA-ZSQ4-873 subtotal P2,314,853.60 Total P3,407,517.97 From the foregoing, only the amount of P56,248,046.48 represents petitioner's valid zero-rated sales, computed hereafter as follows: 3rd Quarter 4th Quarter Total Total Reported Zero-Rated Sales P27,832,672.40 P31,877,747.06 P59,710,419.46 Add (Less):Adjustments Per ICPA findings (86,700.00) 35 31,844.99 (54,855.01) Disallowances by this Court (1,092,664.37) (2,314,853.60) (3,407,517.97) Total Valid Zero-Rated Sales P26,653,308.03 P29,594,738.45 P56,248,046.48 Having resolved that petitioner had VAT zero-rated sales for the 3rd and 4th quarters of TY 2014 in the total amount of P56,248,046.48, the Court shall now proceed to determine the amount of input VAT attributable thereto. AIDSTE As to the fourth, fifth and sixth requisite :the Court finds that there were input taxes incurred/paid attributable to its zero-rated sales and were not applied against any output VAT liability. For the 3rd and 4th 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 P5,798,443.29. A portion of which, in the amount of P3,577,338.15, net of output tax due, is the subject herein of petitioner's claim for refund, to wit: 3rd Quarter (Exh. P-17-C) 4th Quarter (Exh. P-17-D) Total Input Tax on Purchases of Goods Other than Capital Goods (Line 21F) P654,782.20 P687,146.09 P1,341,928.29 Importation of Goods Other than Capital Goods (Line 21H) 2,258,995.00 2,197,520.00 4,456,515.00 Total Input Taxes P2,913,777.20 P2,884,666.09 P5,798,443.29 Less: Output Tax (Line 15B) 1,089,108.77 1,131,996.37 2,221,105.14 Excess input tax claimed P1,824,668.43 P1,752,669.72 P3,577,338.15 In support of its total input taxes of P5,798,443.29, petitioner submitted various sales invoices 36 for its local purchases of goods, Import Entry and Internal Revenue Declarations (IEIRDs) and Bureau of Customs (BOC) receipts/Confirmation receipts 37 evidencing payment of VAT for its imported goods. However, upon examination of the said documents, the ICPA noted some exceptions on petitioner's local purchases of goods in the total amount of P6,390.65, summarized as follows: 38 Description 3rd Quarter 4th Quarter Total 1 VAT not indicated separately in the invoice (Exhibits "ICPA G-1" to "ICPA G-13") 692.14 P2,184.27 P2,876.41 2 Point of Sale (POS) receipts only (Exhibits "CPA G-12" to "ICPA G-13") - 87.86 87.86 3 VAT written as zero-rated sales (Exhibit "ICPA-13") 62.68 - 62.68 4 Not validated due to unavailability of supporting documents 642.35 2,515.34 3,157.69 5 Unsupported difference between the actual schedule vis--vis vat return 6,007.42 39 (5,801.41) 206.01 Total P7,404.59 P(1,013.94) P6,390.65 From the above findings, items 1 to 4, in the aggregate amount of P6,184.64 40 shall be disallowed for 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 between actual schedule and the VAT return (item no. 5),further review reveals that the amount of P6,007.4 [3] for the third quarter shall be disallowed for not being duly supported. While, conversely, the difference for the fourth quarter which actually amounts to (P5,796.06),shall, likewise, be disregarded for the same does not form part of the instant claim. The particulars of the said amounts are presented below, viz .: Input Tax per Return 41 Input Tax Per Schedule 42 Difference 3rd Quarter P654,782.20 P648,774.77 P6,007.43 4th Quarter 687,146.09 692,942.15 (5,796.06) Total P1,341,928.29 P1,341,716.92 P211.37 Furthermore, the input VAT on petitioner's local purchases in the amount of P30,576.27 shall also be disallowed for various reasons, which are stated in the table hereafter, for ease of reference: Supplier's Name Invoice No. Amount Exhibit No. 43 Reason for disallowance Third Quarter Aching Industrial Sales 12505 P3,428.57 ICPA PQ3-6 Supported by VAT invoice but not issued in petitioner's registered name Bon Industrial Sales 219859 7,141.50 ICPA PQ3-74 Supported by VAT invoice with alteration on the amount but without countersignature Globe International Distributor Center, Inc. 63390 258.79 ICPA PQ3-128 Supported by VAT invoice with alteration on the amounts but without countersignature Manila United Electrical Supply Inc. 230386 1,325.14 ICPA PQ3-332 Supported by VAT invoice but with incomplete TIN of petitioner Plastic Consumer Corporation 38927 188.30 ICPA PQ3-430 Supported by VAT invoice but without the address of petitioner Plastic Consumer Corporation 39395 146.04 ICPA PQ3-432 Supported by VAT invoice but without the address of petitioner Screw City Hardware 245311 321.43 ICPA PQ3-466 Supported by VAT invoice but without the address of petitioner Screw City Hardware 245694 1,285.71 ICPA PQ3-468 Supported by VAT invoice but without the address of petitioner Screw City Hardware 246077 237.21 ICPA PQ3-469 Supported by VAT invoice but without the address of petitioner United Bearing Industrial Corp. 67826 1,542.86 ICPA PQ3-557 Supported by VAT invoice but without the address of petitioner United Bearing Industrial Corp. 68597 337.18 ICPA PQ3-559 Supported by VAT invoice but without the address of petitioner Vicente Lim Jr. Gen. Mdsg. 189586 192.86 ICPA PQ3-567 Supported by VAT invoice but without the address of petitioner Subtotal P16,405.59 Fourth Quarter Bon Industrial Sales 227103 P181.29 ICPA PQ4-84 Supported by VAT invoice but without the TIN of petitioner G.P. Enterprises, Inc. 523409 450.00 ICPA PQ4-117 Supported by VAT invoice but without the TIN of petitioner Guan Yiac Hardware 155770 812.25 ICPA PQ4-142 Supported by VAT invoice but issued not in petitioner's registered name and without the TIN of petitioner Mjs Appliance Center 126478 2,250.00 ICPA PQ4-304 Supported by VAT invoice but without the address and TIN of petitioner Mjs Appliance Center 126894 2,250.00 ICPA PQ4-305 Supported by VAT invoice but without the address and TIN of petitioner Sanyoseiki Stainless Steel Corp. 157642 6,000.00 ICPA PQ4-386 Supported by VAT invoice with alteration on the amounts but without countersignature Union Hardware 34846 246.87 ICPA PQ4-455 Supported by VAT invoice but without the TIN of petitioner Union Hardware 34848 1,517.41 ICPA PQ4-457 Supported by VAT invoice but without the TIN of petitioner Union Hardware 35649 462.86 ICPA PQ4-526 Supported by VAT invoice but the input VAT amount was not separately indicated Subtotal P14,170.68 Total P30,576.27 Meanwhile, upon examination of the documents supporting petitioner's input VAT on importations 44 in the amount of P4,456,515.00, the Court finds that the same complies with the invoicing and substantiation requirements prescribed 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 summation therefore, petitioner's valid input VAT for the 3rd and 4th quarters of TY 2014 amounts to P5,755,674.95, computed as follows: 3rd Quarter 4th Quarter Total Input VAT per Returns P2,913,777.20 P2,884,666.09 P5,798,443.29 Less: Disallowances Per ICPA findings P1,397.17 P4,787.47 P6,184.64 Unsupported difference 6,007.43 - 6,007.42 Additional disallowances by this Court 16,405.59 14,170.68 30,576.27 Total Disallowances P23,810.19 P18,958.15 P42,768.34 Total Valid Input VAT P2,889,967.01 P2,865,707.94 P5,755,674.95 Proceeding therefrom, a portion of petitioner's valid input VAT shall be applied against the output VAT liability for the 3rd and 4th quarters of TY 2014 in the aggregate amount of P2,221,105.14. Consequently, only the remaining input VAT of P3,534,569.81 can be attributed to the declared zero-rated sales of P59,710,419.46 and only the input VAT of P3,329,613.97 is attributable to the valid zero-rated sales of P56,248,046.48, computed as follows: 3rd Quarter 4th Quarter Total Valid Input VAT P2,889,967.01 P2,865,707.94 P5,755,674.95 Less: Output VAT per returns 1,089,108.77 1,131,996.37 2,221,105.14 Excess Input VAT P1,800,858.24 P1,733,711.57 P3,534,569.81 Divide by Declared Zero-Rated Sales per VAT Returns 27,832,672.40 31,877,747.06 59,710,419.46 Multiply by Total Valid Zero-Rated Sales 26,653,308.03 29,594,738.45 56,248,046.48 Excess Input VAT attributable to Valid Zero-Rated Sales P1,724,549.79 P1,609,547.26 P3,334,097.05 On a final note, petitioner was able to prove that the claimed input VAT of P1,824,668.43 and P1,752,669.72 for the 3rd and 4th quarters of TY 2014, respectively, were not applied against any output VAT in the succeeding quarters. Thus, the same remained unutilized as the amounts were deducted as "VAT Refund/TCC claimed" in its Amended Quarterly VAT Returns for the 3rd 45 and 4th 46 quarters of TY 2014. Clearly, the subject claim no longer formed part of the excess input VAT of P6,510,915.49 47 as of the end of the fourth quarter of TY 2014 that was to be carried over/applied to the succeeding quarters. As such, it eliminates the possibility that the present claim would be applied to future output VAT liability. AaCTcI WHEREFORE ,premises considered, the instant Petition for Review is hereby PARTIALLY GRANTED .Accordingly, respondent is ORDERED to refund or issue a tax credit certificate in favor of petitioner in the reduced amount of THREE MILLION THREE HUNDRED THIRTY FOUR THOUSAND NINETY SEVEN PESOS AND 05/100 (P3,334,097.05) or One Million Seven Hundred Twenty Four Thousand Five Hundred Forty Nine and 79/100 Pesos Only (P1,724,549.79) and One Million Six Hundred Nine Thousand Five Hundred Forty Seven and 26/100 Pesos Only (P1,609,547.26) ,respectively, representing unutilized input VAT attributable to its zero-rated sales for the 3rd and 4th quarters of TY 2014. SO ORDERED. (SGD.) JUANITO C. CASTAEDA, JR. Associate Justice Catherine T. Manahan, J. ,concurs. Footnotes 1. Section 1, Rule VIII of the Internal Rules of the Court of Tax Appeals: "Section 1. Case assigned to a justice for study and report . Every Division Case, whether appealed or original, assigned to a Justice for study and report shall be retained by him even if he is transferred to another Division. The Justice, though transferred, shall write the report with the other members of the Division to which the case was originally submitted for decision. Their Division shall be called Special (No.) Division." 2. Paragraph 1.a.,Joint Stipulation of Facts and Issues (JSFI),Docket (Vol. II),p. 381. 3. Par. 1.b., Id . 4. Exhibit P-17-C. 5. Exhibit P-17-D. 6. Exhibits P-13 and P-14. 7. Docket (Vol. I),pp. 11-22. 8. Id .,pp. 257-267. 9. Docket (Vol. I),pp. 272-274. 10. Id. ,pp. 309-324. 11. Docket (Vol. II),pp. 381-389. 12. Id. ,pp. 392-396. 13. Id. ,pp. 478-500. 14. Id. ,pp. 725-726. 15. Id .,p. 727. 16. Id. , pp. 729-753. 17. Id. , pp. 754-763. 18. Id. , p. 765. 19. Par. 2, JSFI, Docket (Vol. II),p. 382. 20. Par. 1.b, JSFI, Docket, (Vol. II),p. 381; Exhibit P-5. 21. Should be February 26, 2017 but it fell on a Sunday. 22. Exhibit P-2. 23. CONSOLIDATED VALUE-ADDED TAX REGULATIONS OF 2005, September 1, 2005. 24. Exhibit P-6. 25. Exhibits P-17-C and P-17-D. 26. Annex C to C.1 of ICPA Report (Exhibit P-27). 27. Exhibits ICPA ZSQ3-1 to ICPA ZSQ3-820 and ICPA ZSQ4-1 and ICPA ZSQ4-874, ICPA Report (Exhibit P-27). 28. See Par. 3.C, page 7, ICPA Report (Exhibit P-27). 29. Annex B of the ICPA Report (Exhibit P-27). 30. See Par. 3.H, page 8, ICPA Report (Exhibit P-27). 31. Par. 3.J, Ibid . 32. With a discrepancy of 0.01 due to erroneous computation of ICPA in item e, which should be P18,320.51. 33. Total of (P37,900.00),(P48,800.00),and P31,844.99. 34. Annex C to C.1 of the ICPA Report (Exhibit P-27). 35. Total of Out of Period Sale and Difference between actual invoice vis--vis per Schedule-3rd quarter (items a to c). 36. Annex F to F.1, ICPA Report (Exhibit P-27). 37. Annex H to H.1, Ibid . 38. See Par. 5.E.,page 11, Id . 39. Should be P6,007.43. 40. Total of P2,876.41, P87.86, P62.68 and P3,157.69. 41. Exhibits 17-C and 17-D. 42. Exhibit P-10. 43. Annex F to F.1, ICPA Report (Exhibit P-27). 44. Annex H to H.1, ICPA Report (Exhibit P-27). 45. Line 23D of Exhibit P-17-C. 46. Line 23D of Exhibit P-17-D. 47. Line 29 of Exhibit P-17-D.