COLT COMMERCIAL INC. v. THE COMMISSIONER OF INTERNAL REVENUE

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY SPECIAL SECOND DIVISION 1 COLT COMMERCIAL, INC., CTA CASE NO. 9539 Petitioner, Members: -versus- Castaneda, Jr., Chairperson and Manahan, 11. COMMISSIONER OF Promulgated: INTERNAL REVENUE, JAN 1 4 2019 ~ Respondent. x-----------------------------------------------------------~'~--~:_:::~:~:----x DECISION CASTANEDA, JR.,}.: 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 S2�- 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. "

DECISION CTA Case No. 9539 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 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 Refund6 for the 3rd and 4th quarters of taxable year 2014. t-" 2 Paragraph l.a., Joint Stipulation of Facts and Issues (JSFI), Docket (Vol. II), p. 381. 3 Par. l.b., Id. 4 Exhibit P-17-C. 5 Exhibit P-17-D. 6 Exhibits P-13 and P-14.

DECISION CTA Case No. 9539 Thereafter, claiming inaction thereof, petitioner filed the instant Petition for Review7 on February 24, 2017. On April 20, 2017, respondent filed his AnswerS, 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 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 [Sfiction 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; 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 JL qua non prior to the filing of a judicial claim in accordance with 7 Docket (Vol. I), pp. 11-22. 8 !d., pp. 257-267.

DECISION CfA Case No. 9539 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 Jk- indeed there is the presence of valid zero-rated sales that would warrant the grant of administrative application for refund on its

DECISION CTA Case No. 9539 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 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 pt 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. ?v Hence, the input tax being claimed by petitioner has already been applied against its output tax.

DECISION CfA Case No. 9539 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 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 strictissimijuris. 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 ;e- burden of proving that the right to such tax refund indubitably exists and well-founded doubt is fatal to its claim." (Citations Omitted)

DECISION CTA Case No. 9539 On May 3, 2017, respondent filed his Pre-Trial Brief for the Respondent9 while, petitioner, on the other hand, filed its Pre-Trial Brief10 on May 8, 2017. Thereafter, a Joint Stipulation of Facts and Issues11 (JSFI) was filed by the parties, via registered mail, on May 26, 2017. Consequently, on June 9, 2017, the Court issued a Pre-Trial Order12 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. Manago. 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 Resolution14 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 P-9 PEZA Certificate of Registration, BIR Certificate of P-11 Registration and PEZA Form ERD 97-01 of Petitioner's clients/purchasers Certified True Copy of Sales Invoices 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 ~ 9 Docket (Vol. I), pp. 272-274. 10 !d., pp. 309-324. 11 Docket (Vol II), pp. 381-389. 12 !d., pp. 392-396. 13 !d., pp. 478-500 14 !d., pp. 725-726.

DECISION CTA Case No. 9539 Meanwhile, in the Order15 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 Memorandum16 on January 3, 2018, while respondent's Memorandum17 was filed on December 22, 2017. Accordingly, in the Resolution18 dated January 22, 2018, the instant case was deemed submitted for decision. THE ISSUE The sole issue19 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 ft- 15 Id., p. 727. 16 Id., pp. 729-753. 17 !d., pp. 754-763. 18 Id., p. 765. 19 Par. 2, JSFI, Docket (Vol. II), p. 382.

DECISION CfA Case No. 9539 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 ofInput 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(8)(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~

DECISION CTA Case No. 9539 (C) Period within which Refund or Tax Credit ofInput 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." 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 ~ 20 Par. l.b, JSFI, Docket, (Vol. II), p. 381; Exhibit P-5.

DECISION CTA Case No. 9539 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, 201721 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 ?r- 21 Should be February 26, 2017 but it fell on a Sunday.

DECISION CTA Case No. 9539 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 ofGoods 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." ~ 22 Exhibit P-2.

DECISION CTA Case No. 9539 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 ofGoods 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." Clearly, there is no doubt that the sales of goods to entities ���'k_ registered with the PEZA and SBMA are subject to VAT at zero percent (0�/o) rate. To prove that its clients are duly registered with the PEZA, petitioner submitted a Confirmation Letter24 dated July 5, 2016, from the PEZA Deputy Director General for Operations, Ms. Mary Harriet 0. Abordo, addressed to petitioner's President Mr. Cyrus 5. Chung, Jr., validating the issuance of VAT zero-rating certifications to the following entities: Name of Enterprise ALPHA TECHNO PRECISION TOOLINGS INC. �<<0''00'0''000'00'00'00000'0000000'000000000000000000000000000'0'0000000'0'00000'000'M'0000000 '' 2 APPLIED MACHINING CORPORATION 0 �OOOOO>>>O>>>O>OOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOO>OOOOOOOOOOOOO . . . .OMOOOOOOOO 23 CONSOLIDATED VALUE-ADDED TAX REGULATIONS OF 2005, September 1, 2005. 24 Exhibit P-6.

DECISION CTA Case No. 9539 3 I ASIAN TRANSMISSION CORPORATION I Carmelrayi~~~~strial Park i 2014-1661 1 01 April 2014 4 r crrizEN MAcHiNERY PHILIPPINEs, INc. r i=irst:F>hiiippineindust:riaiJ 9 ;~~~~~~;~l~ Db 2013 Park-SEZ I ecem er i FORMERLY: MIYANO PHILIPPINES INC. j ��+��������������������������������������������"'����������������������������������������������������������������������"�'''''''''''''''"'""'''''''''''''''''.1............................................................................................................................................................................................., ............................................................,......... i Calamba Premiere i : J : :� 5 :' CLAYMOUNT ASSEMBLIES PHILIPPINES, INC. I nternat�1onaI park-SEZ � 2014-0668 :' 09 January 2014 6 i?AITQtteg~~~?~QN?~JN~~ ������� �� � ��������� .: Ma~~n:g~9ri9~i.~~96.~ ?9EEi.9?~� ~~J~r1lj~ry ~9J<t 7 I DAIWA SEIKO PHILIPPINES CORPORATION . Laguna !nternational 2014-0552 i 02 Janua 2014 . � Indu.....s.....t...n.....a......l......P......a.....r...k....-...S......E......Z........................; ...........................................................+: .......................................r...y.............................. ��< 8 DELFINGEN PH-FILIPINAS, INC. m Economic Zone 201<1- 1 0:::0:::1: 02 April 2014 FORMERLY: SOFANOU (PHILIPPINES), INC. 11-SEZ 9 i DELTA DESIGN PHILIPPINES LLC Carmelra~II~~~strial Park I 2014-0854 : 16 January 2014 12 ' FAMOUS SECRET PRECISION MACHINING INC. : Daiichi In~~~trial Park- ! 2014-0536 02 January 2014 ---=: !;:1:::::::::~ INC. 1 !Fii;~~~~~;r~ ;~�fi 29lanuary2014 03 January 2014 . , Calamba-SEZ 15 FIRSTEC METALLICS, INC. 2014-0534 27 December 2013 16 . FUJITSU DIE-TECH CORPORATION OF THE Laguna Technopark Inc.- 2014-0334 17 December 2013 : PHILIPPINES SEZ 2014-0679 09 January 2014 17 . GUNMA GOHKIN PHILIPPINES CORPORATION Light Industry & Science HARADA AUTOMOTIVE ANTENNA 18 (PHILIPPINES), INC. First Cavite Industrial 2014-0146 10 December 2013 FORMERLY: NIPPON ANTENNA (PHILIPPINES) Estate-SEZ INC. 19 HISTOTECH PRECISION (PH) INC. Light Industry & Science 2014-2017 08 October 2014 Park 1-SEZ . 20 I HITACHI INDUSTRIAL MACHINERY rlf~L \...dVILt:! liiUU~Lrldl 2014-0185 11 December 2013 . .. fpHILIPPINES CORP. ............................................. , Estate-SEZ 21 j HONDA PARTS MANUFACTURING ij Laguna Technopark Inc.- 2014-0331 17 December 2013 . (CORPORATION .............................................. +���� l 22 .1 .......................?.~?.................... .... . t IMASEN PHILIPPINE MANUFACTURING Laguna Technopark Inc.- 2014-0346 17 December 2013 CORPORATION . . SEZ 23 INA MICRO OPTO CORPORATION Mactan Economic Zone 2014-1476 24 February 2014 11-SEZ Golden Mile Business 24 i JFS PRECISION TECHNOLOGY CORP. Park-SEZ Baguio City 2014-1023 22 January 2014 Economic Zone 25 : KNOWLES ELECTRONICS (PHILIPPINES) Cebu Light Industrial 2014_0747 ! 13 Januar 2014 : CORPORATION : y , : Park-SEZ '.::::?~:::; k9!?A�.8.! $.g!KX:.�:P.8.!L.J.P.P.i.N:g$.;j:N�.;�����:���������� �::.:..:: I �~xi~~: g~9rii?:r.D.i~.?.9ri~..::::; 2014-1376 :]. i.q F.~:~rY~:r.Y.?9:i1...... I 1 Laguna Technopark Inc.- SEZ � 27 l LAGUNA AUTO-PARTS MANUFACTURING I 2014_0028 09 Decembe 2013 CORPORATION r : � 28 LAGUNA METTS CORPORATION Laguna Tel;mlu!Jarl\ .111(.;. 2014-0607 07 January 2014 SEZ 29 i MAKOTO METAL TECHNOLOGY, INC. j Mactan ~~~;~zmic Zone 2014-0638 . 08 January 2014 30 ! MANUFACTURING AUTOMATION SOLUTIONS : Caiam_baPremiere ' ;~~~~~~~~ � t� ~� � �~6 Db 2013 ~.I'JI~RNATIQNA~l JN.~.~.. .................................................1 .......X~.~~E.r1.~.~.~9.r1.~L.e~rk:?.~?..... t � �������������������������� � � ecem er J . ..... i ! Laguna Technopark Inc.- 31 l MEINAN PHILIPPINES INC 32 f MENIMA C.. A��~~~-~~~DU~S INC r i First.Cav~~industriai 4~.1 J ..2...0....1.. ...0...0..7 21 J 2014 ' � Estate-SEZ ! anuary ;-. '

DECISION CTA Case No. 9539 NICS TECHNOLOGY car 13 January 2014 ONAL INC. 11-SEZ 3;5~rI~M~K~P~L ~IN~C~.~;~;~~:~~~: ,, - ""'"' ' --. �-- ---�. , NAKASHIMA PHILIPPINES CORPORATION (NPC), 37 ! FORMERLY: MIKADO PHILIPPINES cavite Economic Zone 2014-0614 07 January 2014 , CORPORATION ~� ~r-rnn1 SYSTEM CO .. INC. cavite E Laguna Technopark In~.;.- 201 4-0226 11 Decembe SEZ 40 1 NIDEC PRECISION PHILIPPINES I Laguna Te~~~opark Inc.- I 2"0' 1' '4'"_'0' 680' I 09 January 2 '''''''I''''CQRPQRATIQN,,,,,, _, ,, ,,,,,,,,,,,,,,,,,,,,,,,, " 1 La' ' ' IJ'nafechl o"'ari<' 'i 1C::'= 'l , ' ' '[' ' 41 i NIDEC SANKYO PHILIPPINES CORPORATION ! g SEZ p i :lU14- 16 May 2014 42 ! NUVALI STEEL PROCESSING CENTER, INC. Laguna Technopark 2014-1505 28 February 2014 Annex-SEZ 43 i ORBIS PRECISION TECH. INC. ������������������������������������������������������������������������������~��������. omic Zone RTS PHILIPPINES. INC. ! PENTA TECHNOLOGICAL PRODUCTS INC. Laguna Technopark Inc.- SEZ l i 46 PHILIPPINE KENKO CORPORATION ,,,, 13 May 2014 Mactan Economic Zone ! 2014-1744 ~; l PHILIPPINE NAGANO SEIKO, INC. ~;~~~~~~;~~~ ~ Peo~~~r=j-~~~ogy 1 ;~~~~~~~~ , 02 April 2014 + ''''''''''''''''+'''''''''''''''''''''''''''''''''''''"'''''"p'"'''''''''"'"''''''''"''''''"'"''"''''''''''''''i : 48 I PHILIPPINE PRECISION TECHNOLOGY, INC. I Carmelrayi~~~~strial Park I 2014-1663 i Light Industry & Science 49 I PHILIPPINE SANITARY FITTINGS, INC. Park III-SEZ First cavite 2014-1750 13 May 2014 I 50 I PHILIPPINES TRC, INC. Industrial Estate-SEZ ! Lima Tech~~~gy Center- I 2014-1480 ! 24 February 2014 , 53 I RAM~~RI~~HNQ~QGY.~JN~~ , ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, I g9.~M9.r.i<::~JIJ9Y.?.!r.i<::~IP.<::~rkj ?.QJ1:J�Q1 (,,,,, 17 March 2014 54 I SEQ JIN TRONICS, INC. First cavite Industrial i 2014-1296 03 February 2014 , ~~~9.~~=,?.~~ 'j ' " f i I Laguna Technopark Inc.- 55 SINAG PRECISION MANUFACTURING LAGUNA, SEZ 201 4-1831 ! 23 June 2014 INC. . 56 � SHIMANO (PHILIPPINES) INC. First Phi~~~~~E~dustrial 1 2014-0389 i 18 December 2013 - First Philippine Industrial + +� 57 , SONION PHILIPPINES INC. 2014-0519 27 December 2013 P.9..r.k:?.~~- ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,; .....,..., .................................,................................ . "''''''''''''''''"' ,...........................................................................................................���' ............. " '' ,,,,,,,,, ''''''''''''''' ' '' ' ,,,,,,,,,,,,, ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,; 58 I SUMINAC PHILIPPINES INC. 014-0073 09 December 2013 59 SUNNELIT PHILIPPINES CORPORATION Laguna Technopark Inc.- 2014-1124 24 January 2014 i bU ! I &.S LASt:K SULU llONS, INC. First Philippine Industrial 2014-0433 20 December 2013 Park-SEZ 61 ,1 TAMIYA (PHILIPPINES), INC. Mactan Economic Zone 2014_0980 January 2014 ����?�����r�����MX.P.8.!bi.P.P.!Ng$.;IN���.������ .................. �������������������� 22 J , 11-SEZ 63 !: TCSOURKPUOBRAATPIHOINLIPPINE DIECASTING i 1.0~~~6��~~9119.~i~~96~�������r''2o14-1o35 l cav1�te z i 2014-0050 64 I URE-SHII TECHNOLOGIES INC. Econom1�c one , 6s r vrrAhQ P.!\�kAG.XN:� ~NI~RNATIQNA~~JN~~ I Golde~a~~~S~~siness 1 2014-2039 : 28 October 2014 r , h~9Yri~�~~hrii?.J?~rk~$.g~ l2ai4=o67t Q~)9.DY.9.r.Y ?.9~4: 1A..

DECISION First Cavite Industrial 2014-0678 09 January 2014 Estate-SEZ 2014-0082 09 December 2013 CTA Case No. 9539 Page 16 of 28 Laguna Technopark Inc.- WACKER NEUSON MANILA, INC. 66 FORMERLY: WACKER MACHINERY 67 YUTAKA MANUFACTURING (PHILS.) INC. 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 andAccounting 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 (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 c;v-

DECISION CTA Case No. 9539 (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) ~

DECISION CTA Case No. 9539 "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 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. X X X." In petitioner's Amended Quarterly VAT Returns25 for the 3rd and 4th quarters of TY 2014, it reported a total sales of P78,219,628.95, detailed below as follows: Vatable Sales i Zero-Rated Sales f . Total sales ' ~~ii;j$~,9~?;$~;~$~9~�~;~1~1~] ����:�~�~�i��i�f�.~�~�;�.��~�1?:;?:.~?..;~�?.~?.:;1.19] ���~���i��.�~�i��~���~��~���;I�~;$9i?.~;$?~�.~$.1~��J�1 :~~~: j -~-!~!~t~~- , ! In support of its zero-rated sales and to prove compliance with the VAT invoicing requirements, petitioner submitted its Summary of Je- Zero-Rated Sales26 and the corresponding supporting sales invoices27, 2s Exhibits P-17-C and P-17-D. 26 Annex C to C.1 of !CPA Report (Exhibit P-27). 27 Exhibits !CPA ZSQ3-1 to !CPA ZSQ3-820 and !CPA ZSQ4-1 and !CPA ZSQ4-874, !CPA Report (Exhibit P-27).

DECISION CTA Case No. 9539 which were examined by the court-commissioned ICPA, Mr. Sonny 5. 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 documents29 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 ! o�~ .... Per.V.A...T.....R....e...t.u...r..n...s...........i..�. luerence P 27.832.672.40 ! (P 2.256.56 }.J.,?ZZ,.?.1Z~Qf?. ;. .................C~1,JZZ.~.~1)... ~~?,!.~9.,4.~?.~4.~. l . . . . . . . . . (~~~,4.~4.~. ~9.1. . .........................L......................C.......:C....:C...L.:C...C.....:C..<..:C.m.:C �����������������������������' ............................. The ICPA continues that the above-noted difference of P36,434.50 is attributable to the following: 31 ~ 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.

DECISION CTA Case No. 9539 9 ;. 9.~_t9.LP~rigc:L?9!~---[~~t![f?[t�(f?J3../2:!.1. ....................................................................................... :��:������� P �������(~z;QQQ..QQ)����-1 b I Difference between actual invoice vis-a-vis per schedule-3rd quarter I [~~~1~~~ri~~~[~a~~riilni~4t~~~~{cif.f%.~~.t.IQ~/3_QeJ.1. � � : L:=r= ==:= =L Difference between actual invoice vis-a-vis per schedule-4th quarter ___{~~t![f?[t.�(f/3:l.$...Qi-:Z.l.9.1............................................................................................................................................................................................................................. ' 1oo. oo e ' Unsupported difference between the actual schedule vis-a-vis VAT r~t~rr.J:1~~9~9!!~r Total . . _, ==<==:: '==" : p Out of the P36,434.51 difference accounted by the ICPA, items a to c in the aggregate amount of P54,855.0133 shall be considered for the purpose of determining the amount of zero-rated sales to which the valid input VAT may be attributed. On the other hand, the difference between the actual invoice vis-a-vis per schedule in the amount of PlOO and the unsupported difference of P18,320.50 (items d & e above) which apparently pertain to the amounts not actually reported in petitioner's VAT Returns for the subject period shall be disregarded. Also, the following reported zero-rated sales in the total amount of P3,407,517.97, shall be disallowed and, thus, cannot qualify for VAT zero-rating since they were made to entities without proof of PEZA/SBMA/BOI registration and of actual export sales, viz.: Client Amount Exhibit No.34 : ... .! f����� � , ��� w :x;wu� � ..-, ...... . .................................................................................................f ............................................................................................~......................................................................... ����������' : Exoort Sales without oroofofactual exoortation ll~_~pRg.~QM~I?9!9~.bI~~�c.;l:<:�HN- X- - c- -;- -:- �:� � ?� � �?� �P� � �N� �!� �?� � �.� �H� �P� � �.� � � � - ................................................ I ����������������������!������� .�---~----����_����?�.��t�~???4;.Q�.I~~?�:9�..ILI _Jjc�;.P::.pA~ . i$Q~~?~4�������----��' ---- ! PREMTOOL E.K. ! I ??Q~~:gz I :: FSwiii7outorooioiP�iA/ssii:4reaisi:iai:ioi7- '� 751504.56 , ICPA ZSQ3-689 -�90-:-3 I POLARMARINE INC. TI PPRoLEACRISMEAPRAINRETSINCcO.O--P---E---R----A---T---I-O---N------I-N----C---.------------------------------------------------ r��--- -------------------------------------------�r~>ot:AR:MARiN�E--iNc:��-------------------------------------- ������������������������������������������������������������������������������������������������-������-�--�------------��-------------1��------------ t POLARMARINE INC.��������������������������������������������������������������������������������������������������������������������������������������������������������������������������������!�������� =Rpgi.1!.;j~3;~f~:,RoINE i~i~~~~~~P. [_� INC. ��������������������������������������������������������������--�-��������������������������������������������������������������=�����=����1���������-������������������:�����������-������������������l.c.cc ~- ..........................-::. - ~=- -� � � � � � �- � �-� -~- :=:=-~--7�----~----~7--~----~--=--:�-=-~-=--~--:�----~-=~---~-..:........:...~--=-~---~--~--:. =.=--~---:� ~- :=:..::::.:=:..:::::.:.::::.:::::.......... -� � � � � -� �- � � -� -� � - - �-�- - - -, ?..,~99.~.99! ................................................. JfP~~??Q~-~?1?...... _ _ _ _ _ _ _....:.._=.:..._.:::.:.-.=_ :..~_...:_~7~:::~::::::~: ..... ~!~?.9.~_99.. 1 ........!fP.~~??.Q~-~?1�.... ?.&�9:99 ! JfP.~~??Q~~??Q :,l . . �. 32 With a discrepancy of 0.01 due to erroneous computation of !CPA 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.l of the !CPA Report (Exhibit P-27).

DECISION CTA Case No. 9539 l. � ,.... . 9244 ����� P9I!~~~AR!N~JN.~.~........ ���������������������������������-���� ��������������.���.��� ] ��������������������������������������~~:~99;99.] ���.�}�.eA~?$Q~�~?1?�������������, 9245 ... J..P.Q!:AR.M~.R!.N.~. IN~.~........ ................... ] ................... ~.~~!?.9.~.99[ .J~P.~:.?.?Q~~?1?....... . .I . . ?�t9?9~99J J~P.~:??Q~:-:?1~ . j ' 9246 . IPQ!:ARMAR!N~ INC. i 70 750.00 I ICPA-ZSQ3-250 i �������������������������������������; ....................................................L....................................,.............................................................................. ���������; i POLARMARINE INC. ..........,....................................................................................................... 9247 9248 [' fPQOtL~A;RQM$AANRTINEECHINNOC.CORPORATION i . 14 000.00 i iIC�PPAA~-?Z$SQQ~3~-?2$5.1?. 9249 ] �j::119;9q[. J. ;.... 9322 LP.OLARMARINE INC. ~t.~9Q~99! KP~:??Q~:?~9 , ::~~ f ~~~~:t~~~~:z~~S MECHATRONICS PHILS. CORP: \ .. . ~9t.~.QQ~PQ\.J~P.A:??Q~~?~? r�������� ���������T ��������������������������������- ������������������������������������������������������ �������������������������������������r������������ j!::!IT~QjJ.I~R..MJNALS MECHATRONICS PHILS. CORP. [ 9643 . i POLARMAfliNE INC. MARINE INC . .~............ . ........................ ECISE PARTS COOPERATION INC. E INC. BROWN PHIUPPINES , . ---~- t pg~q$.~ PARTS COOPERATION INC. TECHNOLOGIES CORPORATION LARMARINE INCORPORATED 10398 ..... ]..IKMJNPV.?IR!~?..CM1?P.N...~.!::!.!?......... L ................. P .... J�~�~�~!9I .... J.~P~:??Q1:?J j ~?.t_?1?~�~j J~P~:??Q1:?? , , 10399 JP.P.EMTOOL E.K. .................... i 10423 ...........lP.R.~MIQQ~.. ~.~.K. ............................/ .....................?Zt.9?J.~9~1 J~P~:??Q1:19............! ,........... 10424 .IP.R.~MIQQ.~.. ~.~.K.~........ ................................................................................!........................?t.?QZ~.!.!j J~P.~:??Q1.~.1.t..........! : 10453 .L.IKM !NPV.?IR!~?.CM1?PN~ttP.... l . !�t791~?7l ... J~P.A:??Q1~~� i i~~~~ !........ J~~g@f.~6?E~R~NI~.?..?!:.>.N~!: !.P. . . . . � � ~ �j1~:~4~;~~.j ���������������� ���.���..�.�. !b~~~~~~~~66? .! ��������� 10831 EUROASIA �����������f������������������������������������-�������� TECHNICS SDN BHD i 18 001.16 i ICPA-ZSQ4-278 : �����������������������������������! ....................................................L ...........................��������i ��������������������������������������������������������������������������������� ���� : 11012 i TKM INDUSTRIES (M) SDN BHD ! 21 646.80 i ICPA-ZSQ4-384 i : 11056 l PT POWER MACHINE TOOLS ! 50 733.58 I ICPA-ZSQ4-409 '0''00'0'''000000'''0000000000000000~ >�0000000 '''''''''tO '0'0''0000000000000000000000000MOOOOOOOO OOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOooooOooOoooOloooOooo��0000'0'00'0000000000000000000! 00000000000000 .. 00000"""""""''''''''"''''' '''''''"'''''"'''''''''''''''''''' . 11057 i PT POWER MACHINE TOOLS ���������1���������......................................................................................................................................... i 45 481.10 ! ICPA-ZS04-410 ....................................t .....................................................t ....................................! ................................. . : 11058 . .. .. ! PT POWER MACHINE TOOLS 1' 44,906.47 i ICPA-Z ' 112s7 ]gQR.QA$!~I~<::!::!N!<::? ?PN ~8!?.������������ i 11259 ! PREMTOOL E.K. I 235.1 1 11284 fPTP0WER MACHINE TOOLS . 11285 i PT POWER MACHINE TOOLS ;........ 11803 PREMTOOL E.K. .........:!........................................................... . ~r-= ~~:~~~-.~ l.....?!!!t!_~t'!..~!(.t!_'!_~'!!!!.~IJJ!.~~J!.!J!.'!('!!.!!t::!.!.!:l!9!~Jt.:i!J!C!!.! . 10979 ~~~~RA-~~NG.V.~tiN~~ . 11226 II~ARA~~NG.V.~tJN~~ . 10402 i POLARMARINE INCORPORATED 42,800.00 ! .~ 1i0~4~0~9~ ~! ~P~O~L~A~R:M:ArR~~INSEI~IN~Cg:O~R:PJO.R.AITTE~D~ INC. ~: ~:~36 600.00 l . i 52 000.00 ! ....................................t .....................................................( ....................................!........ 10547 POLARMARINE INCORPORATED ���������ri���................................................................................................................................................................................... 10598 i PRECISE PARTS COOPERATION INC. i 5 370.00 i ....................................t .....................................................! .....................................[......... 10599 ''"'''''t��������������.. i 6 290.00 i ....................................t .....................................................1......................................1........ I 5 680.00 I ���������������������������������; ....................................................L ....................................;��������� i PRECISE PARTS COOPERATION INC. i 8 100.00 i ..................................., .....................................................� ....................................,........ J PRECISE PARTS �������������������������������-�������� . COOPERATION INC. .~t.?.99~99.L PRECI�S���-E�������� PARTS COOPERATION INC. .?.~. PARTS COOPERATION INC. ECISE PARTS COOPERATION INC. ........................................................................ ! 6 990.00 ! �����������������������������������; ....................................................L ...................................,........ .....r PQ.!:AR.M~.R!.N.~..IN.~QR.PQRAI~P....................................... ...................;.....................1~~999..~.99..1.....=.::::..:..:...=.:::..~ 21,360.00 I ;P.OLARMARINE INCORPORATED }'--

DECISION CTA Case No. 9539 POLARMARINE INCORPORATED 6 600.00 I ..........................................................................................................................................................................................................................................................; ....................................................L....................................! ..! PQ~RMAF.HN~JN~QRPQRAT~P...................................................................................................................... L....................1.~~..?99~99! HITACHI TERMINALS MECHATRONICS PHILS. CORP. . 34,650.00 I PQ~RMf.\RINE INCORPORAT~D ....................................... ; JJ~199~99: . ....................................................................................................;1...................................................l......................................!;.... POLARMARINE INCORPORATED 20 800.00 ................ ,. .:~I=meL:=~~l~~~~=~N~!:;~~=~=~ �===:~:; ==1ss.o I POLARMARINE INCORPORATED I 100 100.00 I E PARTS COOPERATION INC. LARMARINE INC. POLARMARINE INC. POLARMARINE INC. POLARMARINE INC. NE INC. RMARINE INC. RTS COOPERATION INC. Total From the foregoing, only the amount of P56,248,046.48 represents petitioner's valid zero-rated sales, computed hereafter as follows: � � � � � � � � � � � � � ~�~�~� � qij~ ~i.� � � � � � � �J �����������������4~hijij~~~r :...............................................L .... !..... .. .. ... .. .. !.T9t~.1 R~.P9'!~c:l ~~T9::.g~t~c:l ~~~~.?... :�������������������������������������������������������������������������i J~......?.Zl.~.~?.t�.??..~.4:9... ~ J.Jc~?Zt?4:Z~.Q���rL�..�.. P .... ?9.TrZo!Qtta4:l!9.~.4:�.. J. IJ\dc! (b~?.?): Ac:IJY?.!.!!l~rtt?. ..... J. . . ... ..... . B!Jc:li!J9?. ........................................ P~.r.I~PA ! ....................................................}. Disallowances bv this Court Total Valid Zero-Rated Sale Having resolved that petitioner had VAT zero-rated sales for the 3rd and 4th quarters ofTY 2014 in the total amount of P56,248,046.48, the Court shall now proceed to determine the amount of input VAT attributable thereto. 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 ofTY 2014, petitioner incurred input taxes on its local purchases and importations of goods, other than ?r- 35 Total of Out of Period Sale and Difference between actual invoice vis-a-vis per Schedule-3rd quarter (items a to c).

DECISION CTA Case No. 9539 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 4th Quarter Total Exh. P-17-C Exh. P-17-D p 654,782.20 p 687,146.09 p 1,341,928.29 2,197,520.00 4,456,515.00 , ~~~~~~ ~t.::I.P~~~~~~I.~~~~~t ~~,z~~,~~~~z~ ~~~,~Z?,~~~.~~ i In support of its total input taxes of P5,798,443.29, petitioner submitted various sales invoices36 for its local purchases of goods, Import Entry and Internal Revenue Declarations (IEIRDs) and Bureau of Customs (BOC) receipts/Confirmation receipts37 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 Descriptio11 !.. j ~~Q~~~~r J ~~~ Q~~~~ Total p 692.14 1 p 2,184.27 I ~mj~i~~hibi=1___ 6~.=t~=~~~[� : : : ' 1vatnotindicatedseparatelvin the invoice I P 2,876.41 4 , Not validated due to unavailability of I 642.35 ! 2,515.34 i 3,157.69 ' ' supporting documents ' � � ! 5 ' Unsupported difference between the actual ! 6,007.4239 i (5,801.41) 1 206.01 schedule vis-a-vis vat return ' : ������'� IQ~.I..................................................................................................., ....... ~Z,~Q4~~~.L ....~(.~,Q~.~.~~4li ...........~~~~~9~�?~.... From the above findings, items 1 to 4, in the aggregate amount of P6,184.6440 shall be disallowed for failure to meet the substantiation }1..- 36 Annex F to F.l, ICPA Report (Exhibit P-27). 37 Annex H to H.l, Ibid 38 See Par. S.E., page 11, Id 39 Should be P6,007.43. 40 Total of P2,876.41, P87.86, P62.68 and P3,157.69.

DECISION CTA Case No. 9539 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 1 Input Tax Per ! D"ff Return41 Schedule42 : 1 erence I i )i~ Q~~~~r J ~ �$.4;z??;?9J ~ �4�;zz1;zzl :: :~ �;99z:1~ 1 ...... 1!.h..Q~9.r.!~.~.....l ...........................�~?.,11�~9~...].........................�~?.,.~1?.~1?...]................. C?.~Z~�.~.P�1. Total i P 1.341.928.29 i P 1,341,716.92 I P 211.3 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 Amount Exhibit No.43 Reason for disallowance No. Third Quarter. ~i i ICPA PQ3-6 J ~uppo~ed b~ ~AT !nvoic~ but not : l ; ~;~;�~:~;~ ;I!S~~ulp:p!~o9r.t1etd:Jb~~y!~V!AQQT~ri~nTv~o9i1c?e~~wr~ict:hl n��a�����m�������e� � ..� : 1 1������� ~;~~~ + .......... i: . ! Aching Industrial Sales ! ���������������������������������������������������� Bon Industrial Sales ; 219859 ; 7,141.50 I ICPA PQ3-74 I alteration on the amount but without Globe International �j ~~~~~~~~~:-~~finvoicewith��������� .i . [..................... 1���������������������� : Distributor Center Inc. : 63390 : I 258.79 i ICPA PQ3-128 alteration on the amounts but without j..~Q~.t:~~~r~igQ~.~.~.r~ ; ;����������������������������������;��������������� i������Man.ilaull.it:edEiectricai ..................................!..................................(.. ����������������������������������������������������������������!�������� ��� I ~upported by VAT lnV?I_ce but w1th 1 230386 , 1,325.14 PQ3_332 .j...!.ll<::Qr!1PI~~~TI.N.9f. P~~.I~!Qil~F................................ ....... � Su Inc. 1 ICPA +��� :. . . . . . . . .PP1Yt. . . . . . . . . . . : �������������������������������������������������������������������������������������i .................................................................; ..................................... I VAT_i~voice Plastic Consumer Corporation ! 38927 , 188.30 [ !CPA PQ3_430 Supported by but without������� �i � �� ! + j~.b.~~9c:lr~~~qfp~~~~~911~r 1 Supported by VAT_1~vo1ce but without Plastic Consumer Corporation 39395 146.04 ! !CPA PQ3-432 ' ! ~b.~ ~c:lc:IT~?~ Qfp~~~~IQil~T ..... ............ ......... ... ) ' 41 Exhibits 17-C and 17-D. 42 Exhibit P-10. 43 Annex F to F.1, !CPA Report (Exhibit P-27).

DECISION CTA Case No. 9539 screw City Hardware 1 245311 1 ��������������������������3����2����1����.��4����3�������.������I�C�����P�����A�����1P����Q�����3�����_��4����6���6-���������1����s����u����p����p����o����r��t��e����d����lJbb~~qqyE~~~Qfv. .PA~~f-~.-~-i~Q~.IvJ.o~.ri..c. . e. . .b. . .u. .t. . .w. . i. . .t. . .h. .o. . .u. . t. . . . . . ~- � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � -� � � � � � � � � � I� � � � � � i �������������������[ i 1,285.71 i Supported by VAT.i~voice but without i Screw City Hardware 1 245694 ; ICPA PQ3_468 L~b~-~99.E~~~gfp~~~~~QJJ.er ! i 1 . Screw City Hardware 246077 237.21 I ICPA p03_469 I supported by VAT invoicebutwiihout � LO_ - - ddress of petitioner United Bearing Industrial 67826 1,542.86 ! !CPA Pn~-~~7 �r:tea���bv.vAfinvoice.but--w-ithout___ _ C::C?r..P~ ddress of oetitioner ed Bearing Industrial bts597 337.18 i ICPA PQ3-559 I Supported by VAT invoice but without ..j.. ~Sb.~u-~9p9.pr..o~-~r-t~-egfdp~~i-b~_iyQ_Q.V_~A-~T---.��i��~���v��o��i���c��e����b���u���t���w���ith_ out_ _ 189586 i 192.86 , ICPA PQ3_567 � - .............. ..... + . � the address of pet1t1oner Subtotal �arter Bon Industrial Sales ! 227103 , p 181.29 1 ICPA PQ4_84 i Supported by ~~T invoice but without G.P. Enterprises Inc. �- + �I i !~b~_TIN_qf._p~~~tiQIJ~r ��������������������������-���----------4-----5----0-----.---0-----0----------;.......ICPA�����P�����Q��������4�����_�����1�����1��� 7�--lS--u-p--p~o~~rt~e~~dJ-b-by~~~~~~:Tp-i~n~vvoo.iiccee. [ I I 523409 ! but without but:���issueCi_ _ _ _ �----------------------------------------------------------------------i-- �������������������f _ _ _ � Guan Viae Hardware 155770 812.25 ! ICPA PQ4-142 I not in petitioner's registered name and without the TIN of oetitioner Mjs Appliance Center , 126478 ! 2,250.00 _ ICPA PQ4_304 f Supported by VAT invoice but without ;Jb~~99.E~~~c:!IJ.9...TINC?tP~~-i-~_iqner I Mjs Appliance Center ����������� � ........; ���������������������������� !. ............ . .................... . . 2,250.00 I ICPA PQ4-305 I Supported by VAT invoice but without Sanyoseiki Stainless Steel 126894 ' I ....................................... --1- ~b.~---~99.r..~~~---c:ID.9.D.N..9f. P~~i~iQQ_~r.... Corp. Ii���� l ������������������f ������������ I - ������������������������----i----��� Supported by VAT invoice with ���� 1 157642 ! 6,000.00 ! ICPA PQ4-386 I alteration on the amounts but without � ).... ........) -���������������������������� L ���������������������������-�-�������L<::C?YDJ~rsignature i Union Hardware 34846 246.87 1 ICPA PQ4_455 1 supporteCibvv/\Tinvoicebutwithout i Union Hardware ' the TIN of oetitioner � 34848 1� � �-~-5-� �1� � �7� � �.�4� � �1� � � l !CPA PQ4_457 I Supported by ~~T invoice but without . ~b.~..TI.N. C?f.P~~~~!C?D~r...... but the '..... !....... ..................! -� � � � �� � � � � � � � � � �J. . . i...J. Supported by VAT invoice I Union Hardware 35649 462.86 I ICPA PQ4-526 1 input VAT amount was not separately Subtotal .. 1 i f indicated r r . i !!_"j~;~!_(j.Cji_~ ����������������������������-�-�����+� Total P30,576.27 Meanwhile, upon examination of the documents supporting petitioner's input VAT on importations44 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: pv 44 Annex H to H.l, !CPA Report (Exhibit P-27).

DECISION CTA Case No. 9539 4th Quarter Total p 2,884,666.09 i . ~ ?,?~~!~~~~ .... p p p !............~.~.~.~.PP9.!!~.99.if.f.~r~~s~ ........................... . ~r99Z~~?. .. 14,170.68 Additional disallowances by this Court 16,405.59 18,958.15 p 65,707.94 i 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: 4th Quarter Total Valid Input VAT per returns. I � � � � � P� � � � � � �2�1� 8� �8� �9i;1o9896;�i7a8.:0771� � r�l� � � � � � � � � �P� � � � �2� �1�8� 6� �i5;�i1i17;90967:�.397�4� �r�I� � � � � � � � � P� � � � � 5� �1�7� �5� 5�2;1262�7i;io4s.�:9�154� � �c~~5;o�~tp~tvA"T ����������������������������������������������������r�������� I~rvrj~:;:~:~~~~ . ";;:~~s~~-= "~~~-:-: . ~;~~~,~g~si�, l VAT Returns 1 1 1 �! 1 1 � , ultiply 26;65:i;3oa:o3l 29 594173a:4s�r .byT~t~iv~lid-Zero-R~t~ds~i~s ........". , j ..... ......... I 56,2481 ������:������� ................................................................................................ ������������������������������������������������������������������������������������������������������������;....... Excess Input VAT attributable to p 1,724,549.79 p 1,609,547.26 P 3,334,097.OS Valid Zero-Rated Sales............................... L . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .L.............................................................................................................l................................................................................................................. 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 ofTY 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 3rd45 and 4th46 quarters of TY 2014. Clearly, the subject claim no longer formed part of the excess input VAT of P6,510,915.4947 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. ~ 45 Line 230 of Exhibit P-17-C. 46 Line 230 of Exhibit P-17-0. 47 Line 29 of Exhibit P-17-0.

DECISION CTA Case No. 9539 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. llfA~N~ ITO~Cc. C. AS~ TA~ NE~ D~,~JR. Associate Justice !CONCUR: c~7~ CATHERINET.MANAHAN Associate Justice ATTESTATION I attest that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court's Division. ~ec-u~ C, ~~ . ~. JUANITO C. CASTANEDA;lR. Associate Justice Chairperson

DECISION CTA Case No. 9539 CERTIFICATION Pursuant to Article VIII, Section 13 of the Constitution, and the Division Chairperson's Attestation, it is hereby certified that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court. Presiding Justice