EUROFRAGANCE PHILIPPINES, INC., v. COMMISSIONER OF INTERNAL REVENUE

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY SPECIAL FIRST DIVISION EUROFRAGANCE CTA Case No. 10169 PHILIPPINES, INC., Members: Petitioner, DEL ROSARIO, PJ, Chairperson, -versus- MANAHAN, and REYES-FAJARDO, JL COMMISSIONER OF Promulgated: INTERNAL REVENUE, 6 ---------- X---------------R--es-p-o-n-de-n-t.-----S--E-P--2-9~2023 � 9.'?JOAH -X DECISION REYES-FAJARDO, J.: We are called upon to rule on the Petition for Review filed on September 23, 2019, which seeks to annul, reverse, and set aside the Commissioner of Internal Revenue's Final Decision on Disputed Assessment (FDDA) dated July 30, 2019, finding Eurofragance Philippines, Inc. liable for deficiency Value-Added Tax (VAT), amounting to P3,492,741.09, inclusive of interest covering January 1, 2017 to June 30, 2017.1 FACTS Petitioner Eurofragance Philippines, Inc. is a corporation duly organized and existing under Philippine2 laws, to engage in, conduct, and carry on the business of buying, marketing, selling, and distributing at wholesale, insofar as may be permitted by law, all kinds of goods, commodities, wares, and merchandise of every kind See Par. 1.1, Petition for Review . Docke t (Vol. I), p. 6. 2 Exhibit " P-1 ." Docket (Vol. II), pp. 715-741.

DECISION CTA Case No. 10169 and description and carrying the trademark or tradename "Eurofragance," such as, but not limited to, flavours, fragrances, cosmetics, foods, and household supplies, and commodities registered under such trademark or tradename, with principal office address at CRT Building 8414 Dr. A. Santos Avenue, Barangay BF Homes, Sucat, Paraii.aque City, Metro Manila.3 Respondent Commissioner of Internal Revenue is the Chief of the Bureau of Internal Revenue (BIR), the government agency charged with, among other powers and duties, the responsibility of collecting all national internal revenue taxes. He holds office at the BIR National Office Building, Agham Road, Diliman, Quezon City.4 On January 29, 2018, Regional Director Glen A. Geraldina (RD Geraldina), issued Letter of Authority (LOA) No. eLA201500085271,s authorizing Revenue Officer Roderick Abad, and Group Supervisor Annabeth Gutierrez, to examine petitioner's books of accounts and other accounting records for VAT, for the periods January t 2017 to June 30, 2017. On January 29, 2018, RD Geraldine also issued LOA No. eLA201500085394, 6 authorizing GS Annabeth Gutierrez (GS Gutierrez), and RO Kayla Monica Vargas (RO Vargas), to examine petitioner's books of accounts and other accounting records for VAT, covering the same period. LOA No. eLA201500085394 replaced LOA No. eLA201500085271 because RO Roderick Abad was transferred to another office of the BIR.7 On November 19, 2018, petitioner received an undated Preliminary Assessment Notice (PAN), s containing the proposed assessment for deficiency VAT, amounting to P3,248,043.81, inclusive of interest, covering January 1, 2017 to June 30, 2017.9 3 See Par. 1.1, Stipulation of Facts, Joint Stipulation of Facts and Issue GSFI) . Docket (Vol. I), p. 594. See Par. 1.2, Stipulation of Facts, JSFI. Id. at p. 595. 5 Exhibit " P-2." Docke t (Vol. II), pp. 743-744. 6 Exhibit " P-3." /d. at p. 746. 7 Exhibit " R-3." Folder 1, BIR Records, p. 2. 8 Exhibit " P-6." Docke t (Vol. II), pp. 754-756. 9 Par. 1.3, Stipulation of Facts, JSFI. Docket (Vol. I), p . 595.

DECISION CTA Case No. 10169 On December 4, 2018, petitioner filed with the BIR, a letter of even date,1o seeking reconsideration of the disallowances made by the BIR, reflected in the PAN. On December 12, 2018, petitioner received 11 the Formal Assessment Notice (FAN) dated December 7, 2018, 12 issued by respondent, covering January 1, 2017 to June 30, 2017. The FAN assessed petitioner of deficiency VAT, inclusive of interest, in the total amount of P3,278,407.71: Deficiency VAT P2,716,377.95 Interest 562,029.76 Total Amount Due P3,278,407. 71 13 On December 21,2018, petitioner protested the FAN by way of a Request for Reinvestigation.14 On January 29, 2019, petitioner received the BIR's letter, granting the Request for Reinvestigation. Accordingly, the former was directed to submit supporting documents within sixty (60) days from the date of filing of its administrative protest.IS On February 15, 2019, the BIR received16 petitioner's transmittal letter, submitting documents in support of its Request for Reinvestiga tion.17 On August 23, 2019, petitioner received18respondent's FDDA19 dated July 30, 2019, denying its Protest to the FAN. Said FDDA sustained the deficiency VAT assessment embodied in the FAN, with adjustment on the interest, computed as follows: 10 Exhibit " P-7." Docket (Vol. II), pp. 758-760. 11 Par. 1.4, Stipulation of Facts, JSFI. Docket (Vol. I), p. 595. 12 Exhibit " P-33." Id. at pp. 812-815. 13 Par. 1.6, Stipulation of Facts, JSFI. Ibid. 14 Exhibit " P-34." Docket (Vol. II), pp. 817-825. 15 Exhibit "P-35." !d. at p. 827. 16 Par. 1.8, Stipulation of Facts, JSFI. Docket (Vol. I), p. 595. 17 Exhibit "P-36." Docket (Vol. II), pp. 829-847. 18 Par. 1.9, Stipulation of Facts, JSFI, Docket (Vol. I), p. 595. 19 Exhibit " P-37." Docket (Vol. II), pp. 1044-1047.

.. . . Ao;. DECISION CTA Case No. 10169 Deficiency VAT P2,716,377.95 Interest 776,363.14 Total Amount Due P3,492,74l.0920 On September 23, 2019, petitioner filed a Petition for Review, docketed as CTA Case No. 10169,21 to which respondent posted his Answer22 on December 17, 2019. In the Hearing held on November 19, 2020, Krista V. Bambao was commissioned as Independent Certified Public Accountant (ICPA). Additionally, a Pre-Trial Conference was held, whereby: (1) the parties agreed to submit their JSFI; and (2) the Court scheduled the marking of their respective evidence, and presentation of their respective witnesses.23 On December 7, 2020, the parties submitted their JSFI,24 which became the basis of the Pre-Trial Order.zs During trial, petitioner presented: (1) Ms. May V. Heramia,26 its Chief Finance Officer; and (2) ICPA Bambao,27 as its witnesses. On January 22, 2021, petitioner filed its Formal Offer of Documentary Evidence,zs to which respondent posted his Comment/ Opposition on March 15, 2021.29 By Resolution dated July 7, 2021, 30 the p1eces of evidence offered by petitioner were admitted, except: 20 Par. 1.10, Stipulation of Facts, JSFI. Docket (Vol. I), p. 595. 21 Id. at pp. 6-30. 22 Id. at pp. 90-97. 23 Order dated November 19, 2020. Id. at pp 574-577. 24 ld. at pp. 594-602. 25 Id. at pp. 674-691. 26 Exhibit "P-59." ld. at pp. 182-210. See Order dated February 2, 2021, id. at pp. 673-673-A. 27 Exhibit "P-143." Td. at pp. 644-657. See Order dated February 2, 2021, irl. at pp. 673 to 673- A. 28 Docket (Vol. II), pp. 695-713. 29 Docket (Vol. III), pp. 1209-1215. 30 Id. at pp. 1220-1222.

"J DECISION CTA Case No. 10169 1. Exhibits "P-61" and "P-62," for failure of the exhibit formally offered and identified to correspond with the document actually marked; and, 2. Exhibits "P-108," "P-137," "P-138," and "P-139," for being provisionally marked by the ICPA. On September 28, 2021, petitioner filed its Motion for Partial Reconsideration of the Resolution dated 7 July 2021, 31 seeking admission of its denied exhibits, to which respondent filed his Comment / Opposition on December 2, 2021.32 Through Resolution dated March 24, 2022, Exhibits "P-61," and "P-62" were admitted as petitioner's evidence. However, Exhibits "P- 108," "P-137," "P-138" and "P-139," were still denied admission as petitioner's evidence, for failure to lay the bases for the presentation of secondary evidence. 33 Respondent presented RO Kayla Monica P. Vargas as his sole witness.34 On June 6, 2022, respondent filed his Formal Offer of Evidence,35 to which petitioner filed its Comment and/ or Opposition on June 13,2022.36 Under Resolution dated August 5, 2022,37 all the pteces of evidence offered by respondent were admitted. By Minute Resolution dated September 30, 2022, 38 this case was submitted for decision, taking into account: (1) Memorandum (For the Respondent), posted on September 12, 2022;39and (2) petitioner's Memorandum filed on September 16, 2022.40 31 Id. at pp. 1223-1231. 32 Id. at pp. 1260-1262. 33 Id. at pp. 1267-1271. 34 Exhibit "R-11." Docket (Vol. I), pp. 139-153. See Minutes of the hearing held on, and Order dated, May 31, 2022, Docket (Vol. III), pp. 1272-1275. 35 Docket (Vol. III), pp. 1276-1281 . 36 Td. at pp . pp. 1285-1296. 37 Id. at pp. 1300-1301 . 38 Id. at p. 1340. 39 Id. at pp. pp. 1304-1312. 40 Id. at pp. 1315-1339.

DECISION CTA Case No. 10169 ISSUE Is petitioner liable for deficiency VAT covering the periods January 1, 2017 to June 30, 2017, in the total amount of P3,492,741.09, inclusive of interest and penalties?41 ARGUMENTS Petitioner claims that respondent's FAN failed to address its points and explanations advanced on its letter-reply to the PAN. In view of such failure, the BIR violated its right to due process on assessment. Assuming arguendo that respondent was able to address its defenses in the PAN, petitioner insists that it is not liable for the deficiency VAT assessment covering the periods January 1, 2017 to June 30, 2017, putting forward the following reasons: First. It duly paid input VAT on its purchases; hence, it is entitled under the law to use the same as tax credits against its output VAT. Second. Its claimed input VAT was duly substantiated and established. Third. The 1997 National Internal Revenue Code (NIRC), as amended, and Revenue Regulations (RR) permit the use of input VAT as tax credits, even if the corresponding official receipts and/ or invoices do not separately bill the VAT component thereof. Fourth. The strict compliance requirement with the VAT invoicing rules under Section 113 of NIRC, as amended, only applies to VAT refund cases, and not to a deficiency VAT assessment. To punctuate its arguments, petitioner believes that it is not liable for deficiency VAT covering the periods January 1, 2017 to June 30, 2017, inclusive of interest, in the total amount of P3,492,741.09. 41 See Stipulation of the Issue, JSFI. Docket (Vol. I), p. 596.

..., . DECISION CTA Case No. 10169 On the other hand, respondent retorts that: (1) input taxes arising from non-compliant VAT ORs and/ or invoices, may not be credited against output taxes; and (2) the factual and legal basis of the FDDA was satisfactorily disseminated to petitioner, consistent with petitioner's right to due process. By these premises, the deficiency VAT assessment for the periods January 1, 2017 to June 30, 2017, embodied in his FDDA, in the total amount of P3,492,741.09, issued against petitioner must be sustained. RULING The Petition is partially impressed with merit. Foremost, do we have jurisdiction over this case? Yes . Section 7(a)(1) of Republic Act (RA) No. 1125,42 as amended by RA No. 9282 reads: Sec. 7. Jurisdiction.- The CTA shall exercise: a. Exclusive appellate jurisdiction to rev iew by appeal, as herein provided: 1. Decisions of the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of interna l r even ue taxes, fees or o ther ch arges, pen alties in relation thereto, or other matters arising under the National Internal Revenue Code or other laws administered by the Bureau of Internal Revenue; 43 Section 3(a)(l), Rule 4 of the Revised Rules of the Court of Tax Appeals44 (RRCTA) clarified that the CTA in Division has jurisdiction over respondent or his authorized representative's decision involving 42 An Act Creating the Court of Tax Appea ls . 43 Boldfacing su pplied. 44 A.M. No. 05-11-07-CTA.

� r . '1. DECISION CTA Case No. 10169 disputed assessments, among others.45 For the decision of respondent or his duly authorized representatives to be elevated on appeal before the CTA in Division, there must first be a disputed assessment. 46 To properly dispute an assessment, a valid administrative protest by the taxpayer must be made pursuant to Section 228 of the NIRC, as amended, which states: Section 228. Protesting ofAssessment. - ... If the taxpayer fails to respond, the Commissioner or his duly authorized representative shall issue an assessment based on his findings. Such assessment may be protested administratively by filing a request for reconsideration or reinvestigation within thirty (30) days from receipt of the assessment in such form and manner as may be prescribed by implementing rules and regulations. If the protest is denied in whole or in part, or is not acted upon within one hundred eighty (180) days from submission of documents, the taxpayer adversely affected by the decision or inaction may appeal to the Court of Tax Appeals within thirty (30) days from receipt of the said decision, or from the lapse of the one hundred eighty (180)-day period; otherwise, the decision shall become final, executory and demandable.47 In turn, the validity of the administrative protest rests upon the meeting of two (2) conditions, namely: first, it must be filed within thirty (30) days from the receipt of the final assessment; and second, it must be in such form and manner as may be prescribed by implementing rules and regulations. 48 Section 3.1.4 of Revenue Regulations (RR) No. 18-2013, prescribes the form and manner of an administrative protest: 45 SEC. 3. Cases within the jurisdiction of the Court in Divisions. - The Cou rt in Divisions shall exercise: (a) Exclusive appellate jurisdiction to review by appeal the following: (1) Decisions of the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties in rela tion thereto, or other matters arising under the National Internal Revenue Code or other laws, administered by the Bureau of Internal Revenue; (Boldfacing supplied) 46 See Commissioner of Tnternnl Revenue v. Uquignz Philippines Corpora tion, GR. No. 215534, April18, 2016. 47 Boldfacing supplied. 48 See Commissioner of Internal Revenue v . Court of Tax Appeals - Third Division and Citysuper Incorporated, G.R No. 239464, May 10, 2021 .

�! r_; DECISION CTA Case No. 10169 3.1.4 Disputed Assessment. - The taxpayer or its authorized representative or tax agent may protest administratively against the aforesaid FLD/FAN within thirty (30) days from date of receipt thereof. The taxpayer protesting an assessment may file a written request for reconsideration or reinvestigation defined as follows: (i) Request for reconsideration - refers to a plea of re- evaluation of an assessment on the basis of existing records without need of additional evidence. It may involve both a question of fact or of law or both. (ii) Request for reinvestigation - refers to a plea of re- evaluation of an assessment on the basis of newly discovered or additional evidence that a taxpayer intends to present in the reinvestigation. It may also involve a question of fact or of law or both. The taxpayer shall state in his protest (i) the nature of protest whether reconsideration or reinvestigation, specifying newly discovered or additional evidence he intends to present if it is a request for reinvestigation, (ii) date of the assessment notice, and (iii) the applicable law, rules and regulations, or jurisprudence on which his protest is based, otherwise, his protest shall be considered void and without force and effect. As it stands, the taxpayer has thirty (30) days from receipt of the final assessment to file a valid administrative protest, either by way of request for reconsideration or request for reinvestigation. If a request for reinvestigation was filed, the taxpayer has sixty (60) days from the filing of its request for reinvestigation to submit documents in support thereof. Upon the taxpayer's receipt of the FDDA, it has another thirty (30) days to appeal to the Court in Division. Petitioner received respondent's FAN on December 12, 2018.49 Counting thirty (30) days therefrom, petitioner had until January 11, 2019 to file an administrative protest thereto; thus, it timely protested the FAN, by way of request for reinvestigation on December 21, 2018.so Said protest, too, contained: (1) date of the FAN; (2) statement that it is a request for reinvestigation; (3) the factual and legal basis of said protest; (4) statement of supporting documents 51 in support thereat i.e., various certifications from petitioner's suppliers. Thus, petitioner filed a valid request for reinvestigation against the FAN. 49 Supra note 11. 50 Supra note 14. 51 Pages 2-3, Petitioner's P rotest on the FAN. Supra note 14.

� .' I � ..:. DECISION CTA Case No. 10169 On August 23, 2019, petitioner received respondent's FDDA.s2 Counting thirty (30) days therefrom, petitioner had until September 23, 2019 53 to seek judicial recourse. Therefore, petitioner's timely filing of the Petition for Review on September 23, 2019,54 conferred us with jurisdiction over CTA Case No. 10169. Next, was there violation of petitioner's right to due process, because the BIR wholly failed to consider: (1) its defenses raised in its letter-protest on the PAN; and (2) documents in support thereof, prior to issuance of the FAN? No. Section 228 of the NIRC, as amended, provides in part: SEC. 228. Protesting ofAssessment. - ... The taxpayers shall be informed in writing of the law and the facts on which the assessment is made; otherwise, the assessment shall be void. Ang Tibay v. Court of Industrial Relations (Ang Tibay)55 explained that among the components for administrative due process are: one, the administrative tribunal or body must consider the evidence presented; and two, the administrative tribunal's decision is rendered in a manner that the parties may know the various issues involved and the reasons for the decision. The two (2) components of administrative due process taken from Ang Tibay were utilized in Commissioner of Internal Revenue v. Avon Products Manufacturing, Inc. (Avon). 56 There, Avon Products Manufacturing, Inc. (APMI) advanced before the BIR, its defenses on the initial findings of the examining revenue officers, informal 52 Supm notes 18 and 19. 53 The 30th day, i.e., September 22, 2019, fell on a Sunday. 54 Supra n ote 21. 55 G.R. No. L-46496, February 27, 1940. 56 G.R. Nos. 201398-99, October 3, 2018.

�J I t~ DECISION CTA Case No. 10169 conference, PAN, and FAN. However, the BIR failed to give explanation or discussion on AMPI's defenses in various segments of the assessment process. Avon decreed that the BIR flouted APMI's right to due process: The facts demonstrate that Avon was deprived of due process. It was not fully apprised of the legal and factual bases of the assessments issued against it. The Details of Discrepancy attached to the Preliminary Assessment Notice, as well as the Formal Letter of Demand with the Final Assessment Notices, did not even comment or address the defenses and documents submitted by Avon. Thus, Avon was left unaware on how the Commissioner or her authorized representatives appreciated the explanations or defenses raised in connection with the assessments. There was clear inaction of the Commissioner at every stage of the proceedings. First, despite Avon's submission of its Reply, together with supporting documents, to the revenue examiners' initial audit findings, and its explanation during the informal conference, the Preliminary Assessment Notice was issued. The Preliminary Assessment Notice reiterated the same audit findings, except for the alleged under-declared sales which ballooned in amount from P15,700,000.00 to P62,900,000.00, without any discussion or explanation on the merits of Avon's explanations. Upon receipt of the Preliminary Assessment Notice, Avon submitted its protest letter and supporting documents, and even met with revenue examiners to explain. Nonetheless, the Bureau of Internal Revenue issued the Final Letter of Demand and Final Assessment Notices, merely reiterating the assessments in the Preliminary Assessment Notice. There was no comment whatsoever on the matters raised by Avon, or discussion of the Bureau of Internal Revenue's findings in a manner that Avon may know the various issues involved and the reasons for the assessments. Under the Bureau of Internal Revenue's own procedures, the taxpayer is required to respond to the Notice of Informal Conference and to the Preliminary Assessment Notice within 15 days from receipt. Despite Avon's timely submission of a Reply to the Notice of Informal Conference and protest to the Preliminary Assessment Notice, together with supporting documents, the Commissioner and her agents violated their own procedures by refusing to answer or even acknowledge the submitted Reply and protest. The Notice of Informal Conference and the Preliminary Assessment Notice are a part of due process. They give both the taxpayer and the Commissioner the opportunity to settle the case at the earliest possible time without the need for the issuance of a Final Assessment Notice. However, this purpose is not served in

, ._( I . . .. DECISION CTA Case No. 10169 this case because of the Bureau of Internal Revenue's inaction or failure to consider Avon's explanations. Upon receipt of the Final Assessment Notices, Avon resubmitted its protest and submitted additional documents required by the revenue examiners, including the original General Ledger for 1999. As testified by Avon's Finance Director, Mildred C. Emlano, the Bureau of Internal Revenue examiners were convinced with Avon's explanation during the meeting on August 4, 2003, particularly, that there was no underdeclaration of sales. Still, the Commissioner merely issued a Collection Letter dated July 9, 2004, demanding from Avon the payment of the same deficiency tax assessments with a warning that should it fail to do so within the required period, summary administrative remedies would be instituted without further notice. This Collection Letter was based on the May 27, 2004 Memorandum of the Revenue Officers stating that 11 [Avon] failed to submit supporting documents w ithin 60-day period .11 This inaction on the part of the Bureau of Internal Revenue and its agents could hardly be considered substantial com pliance of what is mandated by Section 228 of the Tax Code and the Revenue Regulation No. 12-99. It is true that the Commissioner is not obliged to accept the taxpayer's explanations, as explained by the Court of Tax Appeals. However, when he or she rejects these explanations, he or she must give some reason for doing so. He or she must give the particular facts upon which his or her conclusions are based, and those facts must appear in the record. Indeed, the Commissioner's inaction and omission to give due consideration to the arguments and evidence submitted before her by Avon are deplorable transgressions of Avon's right to due process. The right to be heard, which includes the right to present evidence, is meaningless if the Commissioner can simply ignore the e vidence without reas on.s7 More recently, Commissioner of Internal Revenue v . Unioil Corporation (Unioil)5Babridged the dictum in Avon in the following fashion: What we can refract from our ruling in Avon Products is that the CIR, in exercising its power to assess and collect taxes if these are owed, ough t to give due consideration to the arguments and evidence submitted by the affected party. 57 Boldfacing su pplied. 58 G.R. No. 204405, Au gust 4, 2021.

. ~- ( ,,.. DECISION CTA Case No. 10169 Dissimilar to Avon and Unioil, the BIR considered petitioner's defense and supporting documentation in its reply on the PAN, prior to issuance of the FAN. We explain. RO Vargas conducted an on-site inspection and audit on petitioner. The former informed the latter of her initial audit findings that petitioner's supporting documents relative to its purchases were invalid, because the VAT component was not separately billed by its suppliers. 59 Petitioner then secured various certifications from its suppliers.6o RO Vargas and GS Gutierrez advised petitioner that said certifications from its suppliers may not be considered because the same were belatedly executed, and secured by petitioner. 61 The Details of Discrepancies pertaining to the PAN substantially reflected the reasons for the proposed deficiency VAT, previously explained to petitioner. 62 Precisely, the BIR's PAN 63 projected deficiency VAT, covering January 1 to June 30, 2017, as follows: I. VALUE ADDED TAX P155,597,567.83 Vatable Sales per Return Output Tax Due P18,671,708.14 Less: Current Input Tax P17,058,055.90 14A13,337.48 p 4,258,370.66 Input tax deferred on capital 1,541,992.71 goods exceeding 1M deferred for 577,442.79 p 2,716,377.95 Total P17,635A98.69 Less: Input tax on purchase of capital goods exceeding 1M deferred for the succeeding period P 488,917.36 Disallowed Input Tax (Schedule 1) 2,716,377.95 Excess Input VAT carried Over to Succeeding period 16,865.90 3,222,161.21 Vat Payable Less: VAT Payments per Return VAT Due 59 Answer to Question No. 18, Judicial Affidavit of Ms. May V. Heramia (Exhibit "P-59"). Docket (Vol. I), p. 187. 60 See page 25, Transcript of Stenographic Notes of Hearing held on February 2, 2021. 61 Answer to Question No. 21, Judicial Affidavit of Ms. May V. Heramia (Exhibit "P-59"). Docket (Vol. I), pp. 187-188. 62 Infra note 63. 63 Exhibit "P-6." Docket (Vol. II), pp. 754-756.

DECISION CTA Case N o. 10169 Add: 20% Interest (07/ 26/ 17 to 12/31/17) p 235,171.35 531 ,665 .86 12% Interest (01/01/18 to 11/29/18) 296,494.51 P3.248.043.81 TOTAL AMOUNT DUE Said PAN was then impugned by petitioner. Particularly, its letter dated December 4, 201864insists that its suppliers declared and paid respective VAT in their transactions; thus, it purportedly incurred input VAT on its purchases, submitting vanous certifications from its suppliers to demonstrate its point: Moreover, we request your good office to consider the attached certifications issued by Eurofragance' s suppliers attesting to the fact that they declared and paid respective VAT in their transactions with Eurofragance: The amounts subject of the certifications were reflected by Eurofragance's suppliers in their respectively Summary List of Sales. Thus, the transactions were rightfully d eclared as VATable sales by the suppliers; the respective VAT thereon was paid by Eurofragance; and ultimately, there are no tax leakages on the part of the government. As we see it, the BIR did not totally snub petitioner's defenses and certifications relied upon in support of its reply to the PAN, different from what transpired in Avon and Unioil . Specif!cally, RO Vargas and GS Gutierrez made known the BIR's posture to petitioner even prior to the issuance of the PAN. Again, these are: first, petitioner's supporting documents relative to its purchases are invalid because the VAT component was not separately billed by its suppliers; and second, petitioner's suppliers belatedly executed, and petitioner tardily secured, the supporting certifications. By retelling the PAN's findings in the FLD/ FAN, 65 the BIR simply voiced its unfaltering position it previously conveyed to petitioner. Therefore, we conclude that the BIR considerably adhered with due process aspect of the responsibility to give reason enunciated in Section 228 of the NIRC, as amended, as construed in Avon and Unioil. Now, is petitioner liable for the BIR's deficiency VAT covering the periods January 1, 2017 to June 30, 2017? 64 Exhibit "P-7." Id. at pp. 758-760. 65 Exhibit "P-33." Id. at pp. 812-815.

DECISION CIA Case No. 10169 Yes, albeit, in part. Respondent assessed petitioner for deficiency VAT, covenng the periods January 1, 2017 to June 30, 2017, as follows:66 Taxable Sales per Return P155,597,567.83 Output Tax Due p 18,671,708.14 Less: Current Input Tax P17,058,055 .90 Input tax deferred on capital goods exceeding P1Million from previous period 577,442.79 Total P17,635,498.69 Input tax on purchase of capital goods exceeding P1M deferred for the Less: succeeding period P 488,917.36 Disallowed Input Tax (Schedule 1) 2,716,377.95 Excess Input VAT carried Over to Succeeding Period 16,865.90 3,222,161.21 14,413,337.48 VAT Payable ----~--------~~------p--4~,2-5-8~ ,3- 70-.6-6- Less: VAT Payments per Return 1,541,992.71 VAT Due p 2,716,377.95 Add: 20% Interest (07/ 26/17 to 12/31/ 17) p 235,171.35 12% Interest (01 / 01/2018 to 08/30/2019) 541,191.79 776,363.14 TOTAL AMOUNT DUE P3,492,741.09 What we can lift therefrom is that the deficiency VAT assessment was birthed by the BIR's disallowance of some of the input taxes credited by petitioner against its output taxes for periods January 1, 2017 to June 30, 2017. Such disallowance arose from the supposed failure of the following invoices and/ or ORs pertaining thereto, to adhere with the substantiation and invoicing requirements under the law:67 DATE REFERENCE PAYEE AMOUNT REMARKS 1/ 17/17 P 0 2 0 1 7-01 -47 JARDINE DISTRIBUTION, 124,821.43 2/22/17 EPI-2016-015 INC. 5,400.00 VAT not separately billed 2/ 2 2 / 17 EPI-2016-171 JARDINE DISTRIBUTION, 3,331.05 2/22/17 EPI-2016-201 INC. 15,000.00 Provisional Receipt only COLORSTEEL SYSTEMS Out of period Sales Invoice, CORP. Nov 2016 VAT not separately billed JDAMANCIO ENTERPRISE 66 Exhibit "R-10," BIR Records, p . 1042; and Exhibit "P-37," Docket (Vol. II), p . 1044. 67 Exhibit " R-10," Folder 3, BIR Records, pp. 1039-1040; Exhibit "P-37", Docket (Vol. II), pp. 1045-1046.

')' I ' t ' " DECISION CTA Case No. 10169 2/ 22/17 EPI-2016-245 JDAMANCIO ENTERPRISE 20,040.00 VAT not separately billed 3/8/17 EPI-2016-246 15,360.00 VAT not separately billed 3/8/17 JDAMANCIO ENTERPRISE 267,239.86 3 / 15 / 1 7 P02017-03-19 CONCEPCION-CARRIER AIR 12,321.43 VAT not separately billed 3/15/17 EPI-2016-203 CONDITONING COMPANY VAT no t separately billed 3/22/17 P0201 7-03-48 1,599.03 3/ 22/ 17 STEINTEK INCORPORATED 1,430.17 OR dated 9/2/2016 3/22/17 P0201 7-03-58 LAN ASTUTE LOGISTICS, 3/29/17 INC. 174.00 Not under the name of TP 3/29/17 P02017-03-65 MERALCO- INPUT TAX- 26,666.67 3/30/17 P0201 7-03-82 LOCAL SERVICES 95,154.15 VAT no t separately billed 3/31/ 17 P02017-03-86 BLUESTORM SECURITY 68,857.83 VAT not separately billed, 3/31/ 17 P02017-03-96 AGENCY, INC 3,857.14 Incomplete Info 3/31/ 17 VAT not separately billed 3/31/ 17 P02017-03-102 FAR EAST ASSOCIATES 2,035.71 4/5/ 17 P0201 7-03-109 802.86 VAT not separately billed 4/20/ 17 PUNCH BUILDERS 185.60 Deposit slip only, w ithou t 5/ 24/17 P02017-03-114 CONCEPCION-CARRIER AIR OR 5/24/17 P02017-03-118 CONDITIONING COMPANY 36,000.00 VAT not separately billed 6/7/ 17 P02017-03-120 3,060.00 VAT NSB, Not under the 1 / 1 1 /17 P02017-04-08 RONIE DULMAN 1,606.19 na me ofTP 1/17/17 1/17/17 P02017-04-71 JANVE GUTIERREZ 102,792.86 VAT not separately billed 1/ 26/ 17 246,908.38 1/26/17 P02017-05-66 JANVE GUTIERREZ VAT not separately billed 1/ 26/ 17 BLUESTORM SECURITY 28,550.90 VAT not separately billed 1/26/ 17 P02017-05-67 AGENCY, INC 19,266.32 Not under the name of TP 1/26/17 CONCEPCION-CARRIER AIR per OR 1/31/ 17 P02017-06-12 CONDITIONING COMPANY 2,391 .45 1/31/ 17 4,392.86 VAT not separately billed 2/ 1/ 17 P02017-01-09 ACCRA LAW OFFICES 4,339.29 Sub-total 1 P 0 2 0 1 7-01 -28 MERALCO- INPUT TAX- 28,877.68 VAT not separately billed 2/15/ 17 P02017-01-30 LOCAL SERVICES 8,997.32 2/28/17 CONCEPCION-CARRIER AIR 7,814.14 VAT not separately billed 3/8/17 EPI-2016-218 CON DITION ING COMPANY 1,534.29 EPI-JENKI - CO CEPCION-CARRIER AIR 3,482.14 Incomplete information 3/10/17 02017-01 CONDITIONING COMPANY 5,700.00 VAT not separately billed EPI-JENKI - CONCEPCION-CARRIER AIR 2,678.57 02017-02 CONDITION ING COMPANY 1,172,669.32 VAT not separate ly billed ROXAN CONSTRUCTION 4,392.86 P02017-01-58 SUPPLY INC. 4,392.86 VAT not separate ly billed EPI-2016-215 MOTECH AUTOMOTIVE 4,446.43 EPI-JE NKIN- EDUCATION CENTER INC Incomplete informa tion 2017-008 KONKRETE SOLUTION 66,379.64 Incomple te infor mation TECHNOLOGY, INC. P02017-01-110 KONKRETE SOLUTION Incomple te information EPI-JENKI N- TECHNOLOGY, INC. Incomplete information 2017-009 ROXAN CONSTRUCTION SUPPLY INC. Incomplete info EPI-2017-231 ROXAN CONSTRUCTION EPI-2016-252 SUPPLY INC. VAT not separately billed EPI-2016-263 ROXAN CONSTRUCTION VAT not separately billed SUPPLY INC. EPI-2016-276 ZACO INDUSTRIAL VAT not separately billed ELECTRIC CORP. VAT not separately billed DIAMOND STEEL INDUSTRIAL SALES VAT not separate ly billed GLOBALNETWORKS Incomplete informa tion: SOLUTIONS, INC. TIN TERTEX INTERNATIONAL PHILS., INC. ~ KONKRETE SOLUTION TECHNOLOGY, INC. KONKRETE SOLUTION TECHNOLOGY, INC. KONKRETE SOLUTION TECHNOLOGY, INC. ORIENTAL CONSTRUCTION & ELECTRICAL SUPPLY CO., INC.

~-' I ) t DECISION CTA Case No. 10169 3/15/17 EPI-2016-203 STEINTEK INCORPORATED 69,964.28 VAT not separately billed ZACO INDUSTRIAL Incomplete information: 3/15/17 EPI-2016-267A ELECTRIC CORP. 47,828.57 TIN ENA CONSTRUCTION & Incomplete information: 3/15/ 17 EPI-2016-281 SUPPLIES CORPORATION 2,383.96 Address EPI-JENKIN- ENA CONSTRUCTION & Incomplete information: 3/15/17 2017-021 SUPPLIES CORPORATION 3,178.61 Address RONOH INDUSTRIAL 3/22/17 EPI-2016-289 EQUIPMENT REPAIR 4,285.71 VAT not separately billed EPI-JEN KIN- SERVCES INC. 8,470.71 3/22/17 2017-018 DIAMOND STEEL VAT not separately billed EPI-JENKIN- INDUSTRIAL SALES 4,392.86 3 / 29 / 17 2017-029 KONKRETE SOLUTION 1,130.58 VAT not separately billed 3/29/17 P02017-03-85 TECHNOLOGY, INC. VAT not separately billed 4/19/17 P02017-04-31 80.35 Incomplete information TAN BENG PENG RICHARD 1/26/17 EPI-2016-217 4,200.00 VAT not separately billed 2/15/17 P02017-02-37 FAIR HAVENS ENTERPRISE 307,851 .62 VAT not separately billed 3/14/17 P02017-03-26 RONOH INDUSTRIAL VAT not separately billed 3/15/17 P02017-03-43 EQUIPMENT REPAIR 79,029.04 VAT not separately billed 3/29/17 P02017-03-85 SERVCES INC. 113,920.50 Not under the name of TP, 4/10/17 ?02017-04-13 VAT not separately billed 5/17/17 P02017-05-37 88 GECONSTRUCT CORP. 3,217.99 VAT not separately billed 5/24/17 P02017-05-80 86,218.48 VAT not separately billed PUNCH BUILDERS 53,571 .43 6/7/17 P02017-06-11 67,208.02 VAT not sepa rately billed 6/27/17 P02017-06-59 88 GECONSTRUCT CORP. VAT not separately billed 17,715.78 4/5/17 EP I-2017-008 TAN BENG PENG RICHARD 84,352.69 VAT not separately billed 5/3/17 P02017-05-05 VAT not separa tely billed 88 GECONSTRUCT CORP. 31,626.00 4/19/17 P02017-04-30 82,495.48 VAT not separately billed 88 GECONSTRUCT CORP. 5/31/17 ?02017-05-94 350,896.05 VAT not separately billed TOTAL 88 GECONSTRUCT CORP. 40,078.13 CONCEPCION-CARRIER AIR P2,716,377.95 CONDITIONING COMPANY 88 GECONSTRUCT CORP. LUXEN LIGHTING COMPANY 88 GECONSTRUCT CORP. MICROGENESIS BUSINESS SYTEMS JARDINE SCHINDLER ELEVATOR CORPORATION ABAKADA Guro Party List, et al. v. The Hon. Executive Secretary (ABAKAD A) held that the right to cre dit input tax agains t the output tax is clearly a privilege created by law, a privilege that also the law can limit. It should be stressed that a person has no vested right in statutory privileges.68 In this regard, the limitation referred to in A BAKADA is Section 110(A)(1) of the NIRC, as amended, which provid es: SEC. 110. Tax Credits. - A. Creditable Inpu t Tax. - (1) Any input tax evidenced by a VAT invoice or official receipt issued in accor dance with Section 113 h ereof on the following transactions shall be creditable against the output tax: 68 G.R. No. 168056, October 18, 2005.

�..,_"'~ ~ I J ' ' DECISION CTA Case No. 10169 (a) Purchase or importation of goods: (i) For sale; or (ii) For conversion into or intended to form part of a finished product for sale including packaging materials; or (iii) For use as supplies in the course of business; or (iv) For use as materials supplied in the sale of service; or (v) For use in trade or business for which deduction for depreciation or amortization is allowed under this Code. (b) Purchase of services on which a value-added tax has been actually paid. 69 Pertinently, when the law is clear and free from any doubt or ambiguity, there is no room for construction or interpretation. There is only room for application. As the provisions are clear, plain, and free from ambiguity, they must be given their literal meaning and applied without attempted interpretation. This is what is known as the plain meaning rule, as expressed in the maxim, verba legis non est recedendum, or from the words of a statute there should be no departure.70 Indeed, Section 110(A)(1) of the NIRC, as amended, unambiguously expresses the specie of input tax which may be credited or offset against output tax- one evidenced by a VAT invoice or OR, acquiescent with the substantiation requirements under the law. In reverse, if the input taxes: first, are not supported by a VAT invoice or OR; or, second, if supported by a VAT invoice or OR, but non-compliant with the substantiation requirements under the law, then such input taxes may not be credited or offset against output taxes. Section 113(A) and (B) of the same Code spells out the invoicing and substantiation requirements for VAT invoice or ORs: SEC. 113. Invoicing and Accounting Requirements for VAT-Registered Persons . - (A) Invoicing Requirements. - A VAT-registered person shall issue: 69 Boldfacing supplied. 70 See Dubongco, et al. v. Commission on Audit, G.R. No. 237813, March 5, 2019.

DECISION CTA Case No. 10169 (1) A VAT invoice for every sale, barter or exchange of goods or properties; and (2) A VAT official receipt for every lease of goods or properties, and for every sale, barter or exchange of services. (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); and (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: (a) The amount of the tax shall be known as a separate item in the invoice or receipt; (b) If the sale is exempt from value-added tax, the term VAT- exempt sale: shall be w ritten or printed prominently on the invoice or receipt; (c) If the sale is subject to zero percent (0%) value-added tax, the term "zero-rated sale" shall be w ritten or printed prominently on the invoice or receipt. (d) If the sale involved goods, properties or services some of which are subject to and some of w hich are VAT zero-rated or Vat exempt, the invoice or receipt shall clearly indicate the break-down of the sale price between its taxable, exempt and zero-rated components, and the calculation of the value-added tax on each portion of the sale shall be known on the invoice or receipt: Provided, That the seller may issu e separate invoices or receipts for the taxable, exempt, and zero-rated components of the sale. Again, a fragment of petitioner's input taxes it credited against its output taxes were disallowed by the BIR in the sum of P2,716,377.95. We then scrutinized the pertinent ORs and sales invoices 71 issued by petitioner's suppliers, from which said input taxes originated. Our inspection yielded two (2) results, namely: one, the BIR is wrong in disallowing P2,525,107.6372 worth of input taxes; and two, the BIR is correct in disallowing input taxes amounting to P191,270.32. Consider: 71 Exhibits "P-65" to "P-136." n P843,726.84+P1,681,380.79= P2,525,107.63. The specific breakdown is shown in pages 20- 23 of this Decision.

DECISION CTA Case No. 10169 First. Coral Bay Nickel Corporation v . Commissioner of Internal Revenue (CBNC)73 ordained that a taxpayer has the right to request its supplier to issue a compliant receipt/ invoice. Concomitant to said right is the obligation to check, whether the insertions/ alterations were properly validated or countersigned by the authorized signatory. The corrections and additions made by petitioner's suppliers on the pertinent invoices and ORs, i.e., the indication of VAT as a separate item, petitioner's TIN and/ or address, are supported by countersignatures, same with those of the authorized signatories appearing on said documents. Following CNB C, input taxes corresponding thereto, in the total amount of P843,726.84 must be allowed, as detailed below: PAYEE PER FDDA EXHIBIT ISSUANCE DOCUMENT NO. Input VAT 88 GECONSTRUCT NO. DATE OR No. 0002 I' 307,851.62 CORP. OR No. 0003 88 GECONSTRUCT P-65 16-Feb-17 OR No. 0004 113,920.50 CORP. OR No. 0007 86,218.48 88 GECONSTRUCT P-66 17-Mar-1 7 OR No. 0008 53,571.43 CORP. OR No. 0009 67,208.02 88 GECONSTRUCT P-67 11-Apr-17 OR No. 0006 CORP. P-68 17-May-17 OR No . 116111 84,352.69 88 GECONSTRUCT P-69 OR No. 0641 CORP. 02-Jun-1 7 OR No. 1797 82,495.48 88 GECONSTRUCT P-70 O.R. 0000001 3,060.00 27-Jun-17 SI No. 0676 26,666.67 CORP. P-71 SINo. 36021 2,035.71 P-72 05-May-17 SINo. 36106 5,303.57 88 GECONSTRUCT P-88 27-Apr-17 SINo. 36050 1,534.29 CORP. P-92 03-Feb-17 P-95 29-Mar-17 305.35 ACCRA LAW OFFICE P-135 28-Feb-17 205.71 P-121 30-Jan-17 8,997.32 FAR EAST ASSOCIATES P-122 03-Jan-17 p 843,726.84 P-127 12-Jan-17 JANVE GUTIERREZ 10-Jan-17 JARDINE DISTRIBUTION, INC. ZACO INDUSTRIAL ELECTRIC CORP. ROXAN CONSTRUCTION SUPPLY INC. ROXAN CONSTRUCTION SUPPLY INC. ROXAN CONSTRUCTION SUPPLY INC. SUB-TOTAL Second. True, the countersignatures and the signatures in some of the invoices and ORs of petitioner's suppliers are different.74 Yet, petitioner's suppliers issued notarized certifications 75 confirming 73 CTA EB Nos. 1269 and 1270, June 29, 2016. 74 See immediate ly succeeding table for the specific invoices and ORs. 75 Exhibits " P-8" to " P-32," and "P-38" to " P-54 ."

�, ) (1 \ ) DECISION CTA Case No. 10169 three (3) things, namely: (1) specific sales invoices or ORs issued by the supplier to petitioner with the invoice/receipt amount and VAT amount separately shown; (2) name of the authorized representative who counter-signed the corrections; (3) attestation that the VAT arising from the listed transactions were paid and declared, and are reflected in the Summary List of Sales attached to supplier's VAT return. Significantly, invoices and ORs issued by petitioner's suppliers are proof of business transactions. 76 Being so, the disputable presumption set forth in Section 3(p)77 and (q)/ 8Rule 131 of the Rules of Court, as amended, find application. These are: first, private transactions have been fair and regular; and second, ordinary course of business has been followed . Magsaysay Maritime Corporation, et al. v. Heirs of Buenajlor (MMC) 79 explained the legal consequence of presumption juris tantum, in the following manner: A presumption may operate against an adversary who has not introduced proof to rebut it. The effect of a legal presumption upon a burden of proof is to create the necessity of presenting of evidence unless rebutted. There was no showing by contrary proot that the issuance of invoices, ORs, and notarized certifications by petitioner's suppliers were attended with irregularity, or stained with bad faith. Consistent with Section 3(p) and (q), Rule 131 of the Rules of Court, as amended, and MMC, we sustain the data encapsulated therein. Consequently, input taxes corresponding to said invoices and ORs, amounting to r1,681,380.79, supported by certifications, must likewise be allowed, tabled as follows: 76 See Nippon Express (Philippines) Corporation v. Commissioner of Internal Revenue, G.R. No. 191495, July 23, 2018. 77 Section 3. Disputable presumptions. - The following presump tions are satisfacto ry if uncontradicted, but may be contrad icted and overcome by other ev idence: (p) That private transactions have been fair and regular; 78 Section 3. Disputable presumptions. - The following presumptions are satisfactory if uncontrad icted, bu t may be contradicted and overcome by othe r evidence: (q) Tha t the ordinary course of business has been followed; 79 G.R. No. 227447, June 23, 2020, citing Spouses Surtida v. Rural Bank of Malinao (Albay), Inc., G.R. No. 170563, December 20, 2006.

-.,_:, f f 1 I I DECISION CTA Case No. 10169 BLUESTORM SECURITY P-73 19-Apr-17 OR No. 3189 p 174.00 AGENCY, INC P-74 07-Apr-17 OR No. 3224 BLUESTORM SECURITY P-76 185.60 AGENCY, INC P-77 CONCEPCION- P-78 CARRIER AIR P-79 CONDITIONING 16-Mar-17 OR No. 0054181 267,239.86 COMPANY P-80 CONCEPCION- P-81 CARRIER AIR P-82 P-84 CONDITIONING P-87 P-96 COMPANY P-97 10-Apr-1 7 OR No. 0055016 68,857.83 P-98 CONCEPCION- P-100 P-101 CARRIER AIR P-102 P-103 CONDITIONING P-104 P-105 COMPANY P-110 02-Jun-17 OR No. 0055132 36,000.00 P-113 CONCEPCION- P-114 CARRIER AIR P-116 CONDITIONING P-117 P-131 COMPANY P-134 02-Jun-17 OR No. 0055130 102,792.86 CONCEPCION- CARRIER AIR CONDITIONING COMPANY 02-Jun-17 OR No. 0055131 246,908.38 CONCEPCION- CARRIER AIR Co rrections/ CONDITIONING additions made, COMPANY 29-Sep-17 OR No. 0057682 28,550.90 CONCEPCION- i.e., the indication of CARRIER AIR CON DITION ING VAT as a separate COMPANY DIAMOND STEEL item; petitioner's INDUSTRIAL SALES O.R. No. FAIR HAVENS 0057681 TIN and/or address, ENTERPRISE 29-Sep-17 17,715.78 JARDINE SCHINDLER 8,470.71 are supported with ELEVATOR COR 80.35 JDAMA NCIO countersignatu res ENTERPRISE 01-Ma r-1 7 SINo. 40430 40,078.13 15,000.00 that do not match JDAMANCIO 20,040.00 ENTERPRISE the signatures of 05-Apr-17 SI No. 1268 4,392.86 4,339.29 the origina l 4,392.86 4,392.86 authorized 23-Jun-17 OR No. 0078679 4,446.43 4,392.86 r e prese nta tives 350,896.05 95,154.15 found in the sales 24-Feb-17 OR No. 0101 79,029.04 invoices or official 4,285 .71 receipts 24-Feb-17 OR No. 0100 4,200.00 82,285.71 KONKRETE SOLUTION 2,678.57 TECHNOLOGY, INC. 03-Feb-17 OR No. 0393 03-Feb-17 OR No. 0394 KONKRETE SOLUTION TECHNOLOGY, INC. KONKRETE SOLUTION TECHNOLOGY, INC. 08-Mar-17 OR No. 0395 KONKRETE SOLUTION TECHNOLOGY, INC. 22-Mar-17 OR No. 0398 KONKRETE SOLUTION 22-Mar-17 OR No. 0399 TECHNOLOGY, INC. KONKRETE SOLUTION TECHNOLOGY, INC. 25-Apr-17 OR No. 0372 MICROGENESIS BUSINESS SYTEMS 12-May-17 OR No. 56490 25-Apr-17 OR No. 0000003 PUNCH BUILDERS 14-Mar-17 OR No. 0000002 PUNCH BUILDERS 24-Mar-17 OR No. 0098 RONOH INDUSTRIAL EQUIPMENT REPAIR 01-Feb-17 OR No. 0084 SERVICES INC. 17-Ma r-1 7 OR No. 0224 RONOH INDUSTRIAL 03-Feb-17 SI No. 4617 EQUIPMENT REPAIR SERVlCES INC. STEINTEK INC. TERTEX

DECISION CTA Case No. 10169 INTERNATIONAL P-118 09-Jan-17 5I No. 36036 3,869.25 P-119 04-Jan-17 5I No. 36052 7,681.61 PHil.5., INC. P-120 05-Jan-17 51 No. 36067 7,410.11 P-128 10-Jan-17 51 No. 36040 2,648.68 ROXAN CONSTRUCfiON P-129 11-Jan-17 5I No. 36085 1,572.86 SUPPLY INC. P-130 12-Jan-17 51 N o. 36101 3,592.60 ROXAN CONSTRUCfiON P-123 12-Jan-17 51 No. 36107 18,213.22 SUPPLY INC. P - 1 24 12-Jan-17 51No. 36108 5 ,390.89 ROXAN CONSTRUCfiON P-125 12-Jan-17 51]\Jo. 36109 4,585.72 SUPPLY INC. P-126 13-Jan-17 51 No. 36122 ROXAN CONSTRUCfJON P-83 24-Jan-17 51 No . 39671 482.14 SUPPLY INC. 3,482.14 ROXAN CONSTRUCfiON P-112 13-Mar-17 5I No. 753769 SUPPLY INC. P-136 14-Mar-17 5 1No. 0698 66,379.64 ROXAN CONSTRUCfiON P-85 16-Mar-17 51 No. 0719 47,828.57 SUPPLY INC. P-86 14-Mar-17 51 No. 0718 ROXAN CONSTRUCfiON P-89 26-Jan-17 51No. 1646 2,383.96 SUPPLY INC. P-90 26-Jan-17 51No. 1647 3,178.61 ROXAN CONSTRUCflON P-91 27-Jan-17 51 No.1650 2,742.86 SUPPLY INC. 1,371.43 ROXAN CONSTRUCflON 1,585.71 SUPPLY INC. P1,681,380.79 ROXAN CONSTRUCTION SUPPLY INC. DIAMOND STEEL INDUSTRIAL SALES ORIENTAL CON5TRUCT IO & ELECTRICAL SUPPLY CO., INC. ZACO INDUSTRIAL ELECTRIC CORP. ENA CONSTRUCTION & SUPPLIES CO ENA CONSTRUCTION & SUPPLIES CO GLOBALNETWORKS SOLUTIONS, INC. GLOBALNETWORKS SOLUTIONS, INC. GLOBALNETWORKS SOLUTIONS, INC. SUB-TOTAL Third. The BIR correctly disallowed input taxes amounting to P191,270.32, because the invoices and ORs p ertaining thereto, failed to adhere with the invoicing requirements under Section 110(A), in relation to Section 113 of the NIRC, as amended, as interpreted in ABAKADA, exhibited below: Reason for Disallowance Payee/Supplier Exhibit Date Document Disallowed COLORSTEEL No. issued No. Input VAT Purchase of service SYSTEMS CORP. supported by an invoice P-75 01-Mar-17 SINo. 3,331.05 instead of an OR JANVE GUTIERREZ 03329 VAT per FDDA is P802.86 OR No. 802.86 while that found in the P-93 30-Mar-17 1660049 supporting OR is only P293.40, thus, it cannot be ascertained whether the supporting OR pertains to the assessed transaction

DECISION CTA Case No. 10169 Purchase of goods supported by an OR JARDINE OR No. instead of an invoice DISTRIBUTION, INC. P-94 03-Mar-17 0074927 124,821 .43 15,360.00 VAT not separately JDAMANCIO OR No. indicated ENTERPRISE 1,599.03 VAT per FDDA is P-99 24-Feb-17 00105 f>1,599.03 while that found LAN ASTUTE 31,626.00 in the supporting OR is LOGISTICS, INC. P-106 17-Mar-17 OR No. 1,430.17 only P636.00, thus, it 0001072 1,606.19 cannot be ascertained LUXEN LIGHTING 2,391.45 whether the supporting COMPANY P-107 06-Apr-17 SI No. 3,857.14 OR pertains to the MERALCO - INPUT P-108 29-Mar-17 20699 assessed transaction TAX-LOCAL P-109 25-Apr-17 1,130.58 The authority of the SERVICES OR No. 3,217.99 person who countersigned MERALCO - INPUT 2182486 the a lte rations or addi tions TAX-LOCAL 96.43 cannot be ascertained; SERVICES OR No. P191,270.32 petitioner's TIN was not MOTECH 2250166 indicated o n the invoice; AUTOMOTIVE VAT per FDDA is EDUCATION CENTER P-111 21-Jan-17 OR No. 7083 P31,626.00 w hile that INC P-115 31-Mar-17 fou nd per SI is P33,909.75 RONIE DULMAN OR No. 0000893 Denied Exhibit TAN BENG PENG RICHARD P-132 19-Mar-17 OR No. OR issued not under the P-133 15-Ma r-1 7 295812 name of petitioner OR No. E- Purchase of goods 000- supported by an OR 0000000060 instead of an invoice 22660 Supporting document is a Non-VAT OR Payee's name per FDDA is Tan Beng Peng Richard w hile that shown per OR is Seascapes Resort, Inc.; VAT amount per FDDA is P1,130.58 while that shown per OR is P1,368.64 OR issued not under the TAN BENG PENG name of petitioner RICHARD Overclaimed input VAT - JARDI E DISTRIBUTION, INC. PerFDDA P5,400.00 Per OR P5,303.57 P-95 28-Feb-17 O.R. 0000001 To ta l Penultimately, we are mindful of petitioner's theory that in a deficiency VAT assessment, the invoices and ORs emanating from its suppliers, n eed not comply with the substantiation requirements under Section 113 of the NIRC, as amended, along with its invocation of Commissioner of Internal Revenue v. Euro-Philippines Airline Services,

DECISION crA Case No. 10169 Page 25 of27 Inc. (EPASI), 80 as authority in support thereof. Yet, we find: (1) petitioner's theory implausible; and (2) EPASI is inapplicable here. True, EPASI and this case both involve deficiency VAT assessments, issued by the BIR. However, the resemblance ends there. To be precise, the respective situations leading to the issuance thereof against the taxpayer in EPASI and petitioner are starkly different. In EPASI, the deficiency VAT assessment stemmed from the imposition of 12% VAT on services rendered by therein taxpayer to British Airways PLC. It was then found that: (1) the former is a VAT- registered person; and (2) the latter is a person engaged in international air transport operations. In view thereof, the Supreme Court concluded that therein taxpayer's sale of services to British Airways PLC is subject to 0% VAT under Section 108(B)(4) of the NIRC, as amended. The High Tribunal added that non-compliance with the invoicing requirements under Section 113 of the same Code would not lead to automatic imposition of 12% VAT on said transaction. Contrasted from EPASI, the deficiency VAT assessment here originated from the BIR's disallowance of some of the input VAT used by petitioner to offset its output VAT for the periods January 1, 2017 to June 30, 2017. The provision involved, too, to legally credit input VAT against output VAT, is Section 110(A) of the NIRC, as amended, and not Section 108(B)(4) of the same Code. Moreover, Section 110(A) of the NIRC, as amended, is explicit that " ... input tax evidenced by a VAT invoice or official r eceipt issu ed in accordance with Section 113 hereof (substantiation requirements) ... shall be creditable against the output tax ..." Owing to the disparity in factual milieu, provisions of law involved, and the root of the respective deficiency VAT assessments in EPASI and this case, they cannot be treated, much more, be adjudicated alike. In precis, the extent of petitioner's liability for basic deficiency VAT covering the periods January 1, 2017 to June 30, 2017, is only P191,270.32. so G.R. No. 222436, July 23, 2018.

.._J_"� ' ~ DECISION CTA Case No. 10169 WHEREFORE, the Petition for Review filed on September 23, 2019, by Eurofragance Philippines, Inc., is PARTIALLY GRANTED. The deficiency VAT assessment issued by respondent against petitioner covering the period January 1, 2017 to June 30, 2017 is UPHELD IN PART. Accordingly, petitioner is ORDERED TO PAY respondent, the aggregate amount of TWO HUNDRED NINETY- FIVE THOUSAND THREE HUNDRED SIXTY-EIGHT PESOS AND FIFTY-FOUR CENTAVOS (P295,368.54), inclusive of the 25 % surcharge and deficiency interest imposed under Sections 248(A)(3) and 249(B) of the NIRC of 1997, as amended by Republic Act (RA) No. 10963, also known as Tax Reform for Acceleration and Inclusion (TRAIN), and as implemented by RR No. 21-2018, computed as follows: Basic Deficiency Value-Added Tax Due p 191,270.32 25% Surcharge 47,817.58 20 % Deficiency Interest (July 25, 2017 to Dec. 31, 2017) [?191,270.32 x 20% x 159/365 Davs] 16,664.10 12% Deficiency Interest (January 1, 2018 to Sept. 22, 2019) [?191,270.32 x 12 % x 630/365 Days] 39,616.54 Total Amount Due as of September 22,2019 p 295,368.54 In addition, petitioner is ORDERED TO PAY delinquency interest at the rate of twelve percent (12%) per annum on the total unpaid amount of P295,368.54, as determined above, or equivalent to P97.11 per day,s1 computed from September 23, 2019 until full payment thereof, pursuant to Section 249(C) of the NIRC of 1997, as amended by RA No. 10963, also known as TRAIN, as implemented by RR No. 21-2018. SO ORDERED. ~~f.~~~ MARIAN rv#. REYiS=fAJARDO Associate Justice s1 P295,368.54 x 12%/365 days.

DECISION CTA Case N o. 10169 We Concur: Presiding Justice ~'7: CATHERINE T. MANAHAN Associate Justice CERTIFICATION Pursuant to Article VIII, Section 13 of the Constitution, 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's Division. Presiding Justice