Court of Tax Appeals · Second Division

Aichi Forging Company of Asia Inc. vs. Commissioner of Internal Revenue

CTA Case No. 6540 March 20, 2009 PALANCA-ENRIQUEZ

REPUBLIC OF THE PIDLIPPINES

Court Of Tax Appeals

QUEZON CITY

SECOND DIVISION

AICID FORGING COMPANY OF

ASIA, INC.,

Petitioner,

-versus-

COMMISSIONER OF INTERNAL

REVENUE,

Respondent.

C.T.A. CASE NO. 6540

Members:

CASTA-r'JEDA, JR., Chairperson

UY,f!nd

PALANCA-ENRIQUEZ, JJ.

Promulgated:

MAR 2 0 2009

/u:d"V

>;-tn.

X -------------------------------------------------------------------------------------- X

DECISION

PALANCA-ENRIQUEZ, J.:

Pursuant to Section 112 (A) of the National Internal Revenue Code of 1997 (hereafter "NIRC of 1997"), as amended, petitioner· filed a claim for refund of its creditable input VAT attributable to its zero-rated sales. To do so, however, petitioner must be able to show that its input VAT paid and ' output VAT transactions are properly substantiated. Failure to show proof of proper documentation is fatal to one's claim for refund or creditJP

Jl9

THE CASE

2 This is a Petition for Review filed on September 30, 2002 by Aichi forging Company of Asia, Inc. (hereafter ''petitioner") praying for the refund or issuance of a tax credit certificate in the amount of P18,030,547.77, representing unutilized input value-added tax (VAT) on purchases of capital goods directly and actually used in its trade or business and unutilized input VAT allocated to zero-rated sales for the period covering July 1, 2000 to December 31, 2001. On February 8, 2005, petitioner filed an Amended Petition for Review increasing the claim for refund or issuance of a tax credit certificate from P18,030,547.77 to P18,203,933.60, which the Court admitted in its Resolution ofMay 18, 2005.

THE PARTIES

Aichi Forging Company of Asia, Inc. is a domestic corporation duly organized and existing under the laws of the Philippines, with office address at Bo. Pulong, Sta. Cruz, Sta. Rosa, Laguna. It is principally engaged in the manufacture, production and processing of all 1 kinds of steel and steel by '."

products, such as close impression die steel forgings and all automotive steel parts. It is duly registered with the Bureau of Internal Revenue (BIR) as a (jP

3 VAT Taxpayer, with Tax Identification Number 004-146-511 (Exhibit "A"). It is likewise registered with the Bom~d of Investments (BOI) as an expanding producer of closed die impressions forgings for which it was issued Certificate ofRegistration No. EP95-132 on June 8, 1995. On t~e other hand, respondent is the duly appointed Commissioner of Internal Revenue, with authority, among others, to decide, approve and grant tax credits/and or refunds of overpaid or erroneously paid internal revenue taxes, with office at 5/F BIR National Office Building, Diliman, Quezon City.

THE FACTS

In their "Joint Stipulation of Facts and Issues", the parties stipulated, as follows:

"1.

Petitioner is a domestic corporation duly organized and existing under the laws of the Philippines, with office address at the Bo. Pulong, Sta. Cruz, Sta. Rosa, Laguna; 2.

Petitioner

is principally engaged in the manufacture, production and processing of all kinds of steel and steel by products, more particularly but not limited to closed impression die steel forgings and all automotive steel parts; 3.

Respondent is the duly appointed Commissioner of internal Revenue, with authority, among others, to decide, ") 1)1 JC..

) approve and grant tax credits/and or refunds of overpaid or erroneously paid internal revenue taxes, with office at 5/F BIR National Office Building, Diliman, Quezon City, where he may be served with summons and other legal processes; 4.

As a seller of goods, Petitioner is duly registered with the Bureau of Internal Revenue (BIR) as a Value-Added taxpayer, with Taxpayer Identification Number 004-146-511; · 5.

Petitioner is likewise registered with the Board of Investments (BOI) as an expanding producer of closed die impressions forgings for which it wa;s issued Certificate of Registration No. EP 95-132 on June 8, 1995; 6.

Fact of filing on October 25, 2000 of the Quarterly VAT Return of the Petitioner for the period covering July 1, 2000 to September 30, 2000;

Fact of filing on January 25, 2001 of the Quarterly VAT Return of the Petitioner for the period covering October 1, 2000 to December 31 , 2000 and also the fact of filing on February 20, 2001 of the amended VAT Return for the same period;

Fact of filing on April 25, 2001 of the Quarterly VAT Return of the Petitioner for the period covering January 1, 2001 to March 31, 2001;

Fact of filing on July 25, 2001 of the Quarterly VAT Return of the Petitioner for the period covering April 1, 2000 to June 30, 2001;

10.

Fact of filing on Octobc;r 25, 2001 ofthe Quarterly VAT Return of the Petitioner for the period covering July 1, 2001 to September 30, 2001; . {JAP 4

11.

Fact of filing on January 25, 2002 of the Quarterly VAT Return of the Petitioner for the period covering October 1, 200 1 to December 31, 200 1;

12.

On September 26, 2002, Petitioner filed with the Bureau of Internal Revenue District Office in San Pedro, Laguna a written claim for refund and/or tax credit of its unutilized input VAT credits for the 3rd and 4th quarters of 2000 and the whole taxable year of 2001 amounting to P18,030,547.77, representing the unutilized/excess input VAT payments;

13.

The administrative claim for refund and/or tax credit has not been acted upon with finality by the Respondent; and 14.

Petition for Review is being filed in order to toll the running of the prescriptive period provided under Section 229 and 112(D) of the Tax Code, ~s amended, in relation to Section 4.112-2(c) of Revenue Regulations No. 7-95, as amended."

5 On , September 30, 2002, petitioner filed the instant Petition for Review in order to toll the running of the prescriptive period provided under Sections 229.and 112(D) ofthe NIRC of 1997, as amended, in relation to Section 4.112-2(c) of Revenue Regulations No. 7-95, as amended. On February 8, 2005, petitioner filed a "Motion for Leave to File its Amended Petition For Review", which the Court granted in a Resolution dated May 18, 2005, and the Amended Petition For Review was admitted.

' '

J

6 In his Answer to the Amended Petition for Review, respondent alleged the following special and affirmative defenses: "4. He reiterates and pleads the preceding paragraphs of this answer as part of his Special and Affirmative Defenses;

5. Petitioner's alleged claim for refund is subject to administrative investigation/examination by the respondent;

6. To support its claim, it is imperative for petitioner to prove the following viz:

a. The registration requirements of a value-added taxpayer in compliance with Section 6 (a) and (b) of the 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 Sections 113 and 114 of the Tax Code, as amended;

c. Compliance with the prescribed checklist of requirements to be submitted involving claim for VAT refund in pursuance to Revenue Memorandum Order No. 53-98, otherwise there would be no sufficient compliance with the filing of administrative clai'm for refund which is a condition sine qua non prior to the filing of judicial claim in accordance with the provision of Section 229 of the Tax Code, as amended. It is worthy of emphasis that Section 112 (D) of the Tax Code, as amended, requires the submission of complete documents in support of the application filed with the Bureau· of Internal Revenue

(JJP

3 2.1 before the 120-day audit period shall apply, and before the taxpayer could avail of judicial remedies as provided for in the law;

d. That the input taxes of P18,203,933.60 allegedly paid by the petitioner on its purchases of capital goods were attributable to its zero-rated sales and such have not been applied against any output tax;

e. That petitioner's claim for tax credit or refund of the unutilized input tax (VAT) was filed within two (2) years after the close of the taxable quarter when the purchase was made in accordance with Section 112 (B) of the Tax Code, as amended;

f. That petitioner's domestic purchases of goods, services and capital goods were made in the course of its 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 in pursuance to Section 4.104-5 (a) & (b) of Revenue Regulations No. 7-95 (Re: Substantiation of Claims for Input Tax Credit);

g. The requirements as enumerated under Section 4.104-2 ofthe Revenue Regulations 7-95. (Re: Persons who can avail of the Input Tax Credits);

h. That petitioner has complied with the governing rules and regulations with reference to recovery of tax erroneously or illegally collected as explicitly found m Sections 112 (B) and 229 of the Tax Code, as amended. ., 2 t':

..,

J

(JJJl

... ;a. ....... ~ •

7. Furthermore, in an actio!). for refund the burden of proof is on the taxpayer to establish its right to refund and failure to sustain the burden is fatal to the claim for refund/credit. This is so because exemptions from taxation are highly disfavored in law and he who claims exemption must be able to justify his claim by the clearest grant of organic or statutory law.

An exemption from common burden cannot be permitted to exist upon vague implications. (Asiatic Petroleum Co. [P.I.] v. Llanes, 49 Phil. 466 cited in Collector of internal Revenue v. Manila Jockey Club, Inc., 98 Phil. 670). 8.

Claims for refund are construed strictly against the claimant for the same partake the nature of exemption from taxation."

8 Petitioner presented Editha Descartin, Richard Querido, the Court Commissioned Independent CPA and documentary evidence, marked as Exhibits "E" to "LLL-6" together with their sub markings, which were admitted by the Court in a Resolution dated November 6, 2006, and supplemental exhibits, marked as Exhibits "PP" and "PPP-1", which were admitted by the Court in a Resolution dated April 29, 2008. Upon manifestation of counsel for respondent that he will not present any evidence with the admission by petitioner's counsel of the genuineness, existence, and due execution of petitioner's Certificate of BOI Registration (No. EP95-132) dated June 8, 1995, including its General and Specific ,(JP :l2C -·~ - -- - -----------·

' 9 Terms and Conditions, both parties were granted thirty (30) days from May 26, 2008 or until June 25, 2008 to file their simultaneous memoranda, afterwhich the case shall be deemed submitted for decision. On June 23, 2008, respondent filed his Memorandum, while petitioner filed its Memorandum on July 25, 2008. On July 31, 2008, the case was deemed submitted for decision Hence, this decision.

ISSUES

As stipulated by the parties, the following are the issues for the consideration of the Court:

I

WHETHER OR NOT THE ADMINISTRATIVE AND

JUDICIAL CLAIM FOR REFUND WERE FILED WITHIN

THE STATUTORY PERIOD.

II

WHETHER OR NOT PETITIONER HAS UNAPPLIED OR

UNUTILIZED CREDITABLE INPUT VAT FOR THE

PERIOD FROM JULY 1, 2000 TO. DECEMBER 31, 2001

ARISING FROM ITS DOMESTIC PURCHASES OF GOODS

AND SERVICES AS WELL AS IMPORTATION OF

CAPITAL GOODS WHICH CAN BE A PROPER SUBJECT

OF A CLAIM FOR REFUND PURSUANT TO SECTION

. {jtl1-- - .

-- - ~ ----------- --~-~ .......

' 106(A)(2), 110(B) AND SECTION 112(A) AND (B) OF THE TAX CODE OF 1997.

III

WHETHER OR NOT THE UNAPPLIED OR UNUTILIZED

CREDITABLE INPUT VAT TAXES OF PETITIONER FOR

THE PERIOD COVERING JULY 1, 2000 TO DECEMBER 31, 2001 ARE SUBSTANTIATED BY DOCUMENTARY

EVIDENCE IN THE FORM OF INVOICES AND OFFICIAL

RECEIPTS THAT COMPLY WITH THE INVOICING AND

ACCOUNTING REQUIREMENTS FOR VAT-REGISTERED

PERSONS.

IV

WHETHER OR NOT THE AMOUNT P18,203,933.60

REPRESENTING PETITIONER'S ALLEGED UNUTILIZED

' INPUT VAT FOR THE PERIOD JULY 1, 2000 TO DECEMBER 31, 2001 PERTAINS TO INPUT VAT ON

PURCHASES OF CAPITAL GOODS DIRECTLY AND

ACTUALLY

USED

IN

PETITIONER'S

TRADE

OR

BUSINESS

AND/OR INPUT VAT ON PURCHASES

ATTRIBUTABLE

TO

ITS

ZERO-RATED

SALE

TRANSACTIONS.

WHETHER

THE

UNUTILIZED

AND

UNAPPLIED

CREDITABLE INPUT VAT FOR THE PERIOD COVERING

JULY 1, 2000 TO DECEMBER 31, 2001 WERE NOT

APPLIED AGAINST ANY OF

THE OUTPUT VAT

LIABILITY OF THE PETITIONER FOR THE SAID PERIOD

OR CARRIED-OVER TO THE NEXT SUCCEEDING

TAXABLE QUARTER/S.

@))!

10 ·- -----~-.... ---..-

VI

WHETHER OR NOT PETITIONER HAS ZERO-RATED

SALES FOR THE COVERED PERIOD PURSUANT TO

SECTION 106(A)(2) OF THE TAX CODE, AS AMENDED,

AND

UNDER

EXISTING

REVENUE

RULES

AND

REGULATIONS,

WHICH

WOULD

ENTITLE

THE

PETITIONER THE RIGHT TO CLAIM FOR REFUND OF

INPUT VAT ATTRIBUTABLE THERETO AND WHETHER

THE

SAID

ZERO-RATED

SALES

CAN

BE

SUBSTANTIATED BY EVIDENCE.

VII

WHETHER OR NOT PETITIONER HAS SECURED FROM

THE BIR THE NECESSARY APPROVAL FOR ZERO-

RATING WITH RESPECT TO ITS TRANSACTIONS WITH

BOI-REGISTERED MANUFACTURERS OR PRODUCERS

BUT WHOSE PRODUCTS ARE NOT 100% EXPORTED.

Principal Issue

11 The foregoing issues raised by both parties boil down to the principal issue of whether or not petitioner is entitl ~d to a refund or issuance of a tax credit certificate in the amount of P18,203,933.60, representing input taxes attributable to its zero-rated sales and input taxes on its purchases of capital goods during the third and fourth quarters of 2000 and the whole of taxable year 2001 .

- - .

- --- - ---- -- ---------~- .

THE COURT'S RULING

The Petition is partly meritorious. Petitioner's Quarterly VAT Returns for the third quarter of 2000 to the fourth quarter of 2001 reflect the following: .Taxable Ex h.

Zero-rated Sales

Taxable Sales

Total Sales

Out utVAT

G LLL-1

p 129 541928.36 p 7 733 998.16 p 137 275 926.52 p 773 399.82

K LLL-2

116 332 545.18 5 159 033.33 121 491 578.51 515 903.33

N LLL-3

103 720 326.85 6 475 328.52 110 195 655.37 647 532.85

LLL-4

94 130 266.88 10 892 646.56 105 022 913.44 1 089 264.66

LLL-5

121 128 590.04 10 935 126.53 132 063 716.57 1 093 512.65

W LLL-6

113 944 874.59 9 209 550.48 123 154 425.07 920 955.05

Total

p 678 798 531.90 p 50 405 683.58 P729 204 215.48 p 5 040 568.36

Input VAT on

Input Tax on

Taxable

other impo1tation of

Goods Services

Goods

Total In ut VAT p 1 565 063.33 p 1 572 727.00 p 3 137 790.33

1465 436.29

1 076 435.00 2 541 871.29 1 617 454.42 3 772 176.00 5 389 630.42

1469 675.85

905 946.00 2 375 621.85 1 463 825.13 619 281.00 2 083 106.13 1 925 032.52 1 780 064.00 3 705 096.52

Total

p 9 506 487.54 p 9 726 629.00 p 19 233 116.54 Out of P19,233,116.54 reported input VAT, only the amount of P18,203,933.60 is subject of the instant Petition, which allegedly consisted of the following:

p 4 344 866.00 13 859 067.60 P18 203 933.60 - - - - - -- - - - -----~-·-----

13 Petitioner anchors its claim on Sections 11 O(B) and 112 (A) and (B) of the NIRC of 1997, which provide as follows: "SEC. 110. Tax Credits. - (A) Creditable Input Tax. - (1) Any input tax evidenced by a VAT invoice or officiai receipt issued in accordance· with Section 113 hereof on the following transactions shall be creditable against the output tax:

XXX

(B) Excess Output or Input Tax. - If at the end of any taxable quarter the output tax exceeds the input tax, the excess shall be paid by the VAT -registered person. If the input tax exceeds the output tax, the excess shall be carried over to the succeeding quarter or quarters. Any input tax attributable to the purchase of capital goods or to zero-rated sales by a VAT- registered person may at his option ~e refunded or credited against other internal revenue taxes, subject to the provision& of Section 112."

"SEC. 112. Refunds or Tax Credits of Input Tax. - (A) Zero-rated or Effectively Zero-rated Sales. - Any VAT -registered person, whose sales are zero-rated or effectively zero-rated may, within two (2) years after the close of the taxable quarter when the sales were made, apply for the issuance of a tax credit certificate or refund of creditable input tax due or paid attributable to such sales, except transitional input tax, to the extent ~hat 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) an~ 331 Section 108(B)(1) and (2), the acceptable foreign currency exchange proceeds thereof had been duly accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP): Provided further, That where the taxpayer is engaged in zero-rated or effectively zero-rated sale and also in taxable or exempt sale of goods or properties or services, and the amount of creditable input tax due or paid cannot be directly and entirely attributed to any one of the·transactions, it shall be allocated proportionately on the basis of volume of sales. (B) Capital Goods. - A VAT-registered person may apply for the issuance of a tax credit certificate or refund of input taxes paid on capital goods imported or locally purchased to the extent that such input taxes have not been applied against output taxes. The application may be made only within two (2) years after the close of the taxable qumter when the importation or purchase was made." Petitioner's claim In the amount o(P4,344,866.00, Representing Input VAT paid

On Capital Goods Purchased

For the Period Covering Julv 1, 2000 to December 31, 2001 14 The Court shall first discuss petitioner's claim in the amount of P4,344,866.00, representing input VAT paid on capital goods purchased for the period covering July 1, 2000 to December 31, 2001. Pursuant to the afore-quoted provision of Section 112(B) of the NIRC of 1997, as amended, in order to be entitled to a refund or issuance of a tax (fl/JJL '•

15 credit certificate for input VAT paid on capital goods purchased, petitioner must prove:

1) that it is a VAT registered entity; 2) that input taxes were paid on capital goods 3) that such input taxes were not applied against any output VAT liability; and 4) that the claim for refund was filed within the two-year prescriptive period.

Petitioner has complied with the first requisite, there being no dispute that it is duly registered with the BIR as a VAT taxpayer. As to the second requisite, petitioner submitted Bureau of Customs' (BOC) certifications, bank settlement advices/debit memos, Import Entry and Internal Revenue Declarations (IEIRDs ), and official receipts from the BOC or the bank (Exhibits "XX-31" to "XX-34", "XX-106", "ZZ-80" to "ZZ-85", "ZZ-134", "AAA-40" to "AAA-41 ", and "CCC-1 77" to CCC-1 78"). Upon examination thereof, the Court-commissioned Independent Certified Public Accountant (ICPA) submitted the following findings (Exhibit "DDD "): a.

Supported by Certification from BOC and settlement advice p 3 544 935.00 Supported by photocopied Import Entry Declaration but with b.

debit memo and traced to bank settlement 668 415.00 c.

Supported by settlement advice but no Certification from BOC 95 086.00 d.

Suppprted by ORs only 36 430.00

Total Input VAT Claim on Capital Goods Purchases

P4,344 866.00

JJJ

- -- - ··---·..__·-~--

., 16 While the foregoing shows that petitioner incuned input taxes in the amount ofP4,344,866.00, however, petitioner failed to prove that the related purchases fall within the definition of capital goods under Section 4.106- 1 (b) of Revenue Regulations No. 7-95, which provides: . "Capital goods or properties" refer to goods or properties with estimated useful. life .greater than one year and which are treated as depreciable assets under Section 29(f), used directly or indirectly in the production or sale .. of taxable goods or services."

Petitioner failed to submit its financial statements and books of accounts to show that the goods purchased formed part of its Property, Plant and Equipment Account and that they were subjected to depreciation. Thus, petitioner failed to substantiate the second requisite. Accordingly, We find it unnecessary to discuss petitioner's compliance with the other remaining requisites.

Petitioner's Remaining

Claim In the Amount of

Pl3,859,067.60, Representing

Input VAT Attributable

To Zero-Rated Sales

As regards the remammg claim in the amount of Pl3,859,067.60, allegedly representing input VAT attributable to zero-rated sales, the

&JfZ

17 aforecited Section 112(A) of the NIRC of 1997, as amended, allows the refund/tax credit of input VAT attributable to zero-rated or effectively_ zero- .·~ rated sales subject to the taxpayer's compliance with the following requisites:

1) there must be zero-rated or effectively zero-rated sales; 2) that input taxes were incurred or paid; 3) that such input VAT payments are, directly attributable to zero- rated sales or effectively zero-rated sales; 4) that the input VAT payments were not applied against any output VAT liability; and 5) that the claim for refund was filed within the two-year prescriptive period.

Anent the first requisite, the ICP A noted that the amount of P678, 798,531.90 treated by petitioner as zero-rated sales consisted of sales of goods to BOI-registered and PEZA-registered enterprises, broken down as follows (Exhibit "DDD "):

Sales to PEZA-registered enterprises p 396/315 182.69 Sales to BOI-reqistered enterprises 282,483 349.21

TOTAL

p 678,798,531.90 Petitioner claims that its sales to PEZA-registered entities are zero- rated for VAT purposes, pursuant to Revenue Memorandum Circular (RMC) No. 74-99, which states:

J35

"(3) In the final analysis, any sale of goods, property or services made by a VAT registered supplier from the Customs Territory to any registered enterprise operating in the ecozone, regardless of the class or type of the latter's PEZA registration, is actually qualified and thus legally entitled to the zero percent (0%) VAT. Accordingly, all sales of goods or property to such enterprise made by a VAT registered supplier from the Customs Territory shall be treated subject to 0% VAT, pursuant to Sec. I 06(A)(2)(a)(S), NIRC, in relation to ART.77(2) of the Omnibus Investments Code, while all sales of services · to the said enterprises, made by VAT registered suppliers from the Customs Territory, shall be treated effectively subject to the 0% VAT, pursuant to Sec.l 08(B)(3), NIRC, in relation to the provisions of R.A.7916 and the 'Cross Border Doctrine' of the VAT system.

This Circular shall serve as a sufficient basis to entitle such supplier of goods, property or services to the benefit of the zero percent (0%) VAT for sales made to the aforementioned ECOZONE enterprises and shall serve as sufficient compliance to the requirement for prior approval of zero-rating imposed by Revenue Regulations No. 7-95 effective as of the date of issuance of this Circular."

We find merit in petitioner's contention. 18 The aforequoted RMC is in accordance with Section 106(A)(2)(a)(5) of the NIRC of 1997, as amended, which provides, as follows: .

"SEC. 106. Value-added Tax on Sale of Goods or Properties. - W (A) Rate and Base of Tax.- xxx

XXX

(2) The following sales by VAT-registered persons shall be subject to zero percent (0%) rate:

(a) Export Sales.- The term 'export sales' means:

XXX

( 5) Those considered export sales under Executive Order No. 226, otherwise known as the Omnibus Investments Code of 1987, and other special laws."

19 Sales by a VAT taxpayer from the Customs Territory to a PEZA- registered entity are considered export sales under Executive Order (E. 0.) No. 226, otherwise known as "The Omnibus Investments Code of 1987", pertinent portions of which read, as follows: "ARTICLE 23. 'Export Sales' shall mean the Philippine port F.O.B. value, determined from invoices, bills . of lading, inward letters of credit, landing certificates, and other commercial documents, of export products exported directly by a registered export producer or the net selling price of export product sold by a registered export producer to another export :producer, or to an export trader that subsequently exports the same: Provided, That sales of export products to another producer or to an export trader shall only be deemed export sales when actually exported by the latter, as evidenced by landing certificates of similar commercial documents: Provided, .

(j(t£

J37

- - -- --- ----- ~-- -----....

.~.

further, That without actual exportation the following shall be considered 'constructively exported' for purposes of this provision: ( 1) sales to bonded manufacturing warehouses of export-oriented manufacturers; (2) sales to export processing zones; xxx" (Emphasis supplied) "ARTICLE 77. Tax Treatment of Merchandise in the Zone.

( 1) Except as otherwise provided in this Code, foreign and domestic merchandise, raw materials, supplies, articles, equipment, machineries, spare parts and wares of every description, except those prohibited by law, brought into the zone to be sold, stored, broken up,, repacked, assembled, installed, sorted, cleaned, graded, or otherwise processed, manipulated, manufactured, mixed with foreign or domestic merchandise whether directly or indirectly related in such activity, shall not be subject to customs and internal revenue laws and regulations nor to local tax ordinances, the provisions of law to the contrary notwithstanding.

(2) Merchandise purchased by a registered zone enterprise from the customs territory and subsequently brought into the zone, shall be considered as export sales and the exported thereof shall be entitled to the benefits allowed by law for such transaction." (Emphasis supplied) 20 In support of its zero-rated sales to PEZA-registered entities, petitioner presented various sales invoices, official receipts, delivery : receipts, Applications for Permit to Carry Goods from Customs Territory into the Zone (APCGCTZ), Boat Notes (BN) (Exhibits "XX-31 " to "XX-34", @fl- . ~ ~ ' _ -----· -----·--~-~~.Ill ) 21 "XX-106", "ZZ-80 " to "ZZ-85 ", "ZZ-134 ", "AAA-40" to "AAA-41 ", and "CCC-1 77" to CCC-1 78"), and PEZA certifications. These documents proved that for the subject period of claim, petitioner generated indirect export sales to PEZA- registered entities which qualify for VAT zero-rating under Section .J06(A)(2)(a)(5) of the NIRC of 1997, as amended. However, out of the P396,315, 182.69 reported sales to PEZA-registered entities, the amount of P5,667,201.83 (Exhibit "DDD "), which has no supporting documents shall be denied VAT zero-rating.

As to the alleged zero-rating of its domestic sales to BOI-registered entities in the amount of P282,483,349.21, petitioner invokes as legal basis Section 2 of Revenue Memorandum 0 1:der (RMO) No. 9-2000, which provides:

"SEC. 2.

Rationale. -

In Revenue Memorandum

Circular No. 74-99, promulgated on October 15, 1999, it has been clarified that sales of goods, property and services made by VAT -registered suppliers to PEZA-registered enterprises shall qualify for zero-rating pursuant to the provisions of Section 1 06(A)(2)(a)(5) of the National Internal Revenue Code of 1997, in relation to Section 23 of R A. No. 7916 (the PEZA Law) and Article 77(2) of Executive Order No. 226 (the Omnibus Investments Code of 1987). This treatment is anchored on the 'Cross Border Doctrine' of the VAT System, which in essence means that no value-added tax shall form part .

()j1 ' - .

--- -- -- - -------------· of the cost component of products which are destined for consumption outside of the territorial border of the Philippines. This principle is achieved through the application of VAT zero- rating products exported from the Philippines to foreign countries. Furthermore, Article 25 of the Omnibus Investments Code provides. among others, that products sold 'to bonded manufacturing warehouses of export-oriented manufacturers shall be considered 'constructively exported' while Section 106(A)(2)(a)(5) NIRC of 1997, provides for the application of zero rating to 'those considered export sales under Executive Order No. 226, otherwise known as the Omnibus Investment Code of 1987, and other special laws. ' The rationale ofRMC 74-99 may also find application to sales made by VAT registered suppliers to SOl-registered enterprises whose manufactured products are 1 00% exported to foreign countries and therefore said sales can likewise be accorded automatic zero-rating treatment." 22 Clearly, sales to SOl-registered enterprises whose products are 100% ' exported qualify for VAT zero-rating, pursuant to Section 106(A)(2)(a)(5) of the NIRC of 1997, as amended, subject to compliance with the prescribed requirements under Section 3 of RMO 9-2000, to wit: "SEC. 3. Sales of goods, properties or services made by a VAT-registered supplier to a BOI-registered exporter shall be accorded automatic zero-rating, i.e.: without necessity of applying for and securing approval of the application for zero- rating as provided in Revenue Regulations No. 7-95, subject to the following conditions:

(!) The supplier must be VAT-registered~

J

(2) The HOI-registered buyer must likewise be VAT- registered;

(3) The buyer must be a

BOI-registered

manufacturer/producer whose products are 100% exported. For this purpose, a Certification to this effect must be issued by the Board of Investments (BOI) and which certification shall be good for one year unless subsequently re-issued by the BOI; ( 4) The BOI-registered buyer shall furnish each of its suppliers with a copy of the aforementioned BOI Certification which shall serve as authority for the supplier to avail of the benefits of zero-rating for its sales to said BOI-registered buyers; and ( 5) The VAT -registered supplier shall issue for each sale to BOI-registered manufacturer/exporters a duly registered VAT invoice with the words 'zero-rated' stamped thereon in compliartce with Sec. 4.108-1(5) of Revenue Regulations No. 7-95. The supplier must likewise indicate in the VAT -invoice the name and BOI-registry number of the buyer." 23 In compliance with the third and fourth requisites under Section 3 of RMO 9-2000, petitioner presented a master list of VAT zero-rating indorsements containing the entries of Asian Transmission -Corporation and Honda Philippines (Exhibits "KKK-7" and "KKK-8 "). A perusal, however, of these documents shows that they are mere listings of companies, which cannot be considered as certifications duly issued by the BOI. Since these certifications were not certified, it necessarily follows that petitioner's sales fMX-

:J Ll O

24 to Asian Transmission Corporation and Honda Philippines in the amount of P282,483,349.21 cannot be considered for VAT zero-rating. Consequently, We find no need to examine and discuss whether the said sales are duly supported by the required sales invoices. IIi sum, out of the P678,798,531.90 zero-rated sales reported by petitioner in its VAT Returns for the subject period of claim, only the sales to PEZA-registered entities in the amount of P390,647,980.86 shall be considered as valid zero-rated sales, computed as follows: Total declared zero-rated sales p 678 798 531.90 Less: disallowances Sales to SOl-registered enterprises p 282 483 349.21 Sales to PEZA-registered enterprises with no supporting documents 5 667 201.83 288 150 551.04 Substantiated zero-rated sales p 390 647 980.86 The claimed input VAT shall be allocated to the substantiated zero- rated sales using the following ratio: Substantiated zero-rated sales p 390 647 980.86 Divided by total declared zero-rated sales p 678 798 531.90 Ratio of substantiated zero-rated sales 57.55% Petitioner's declared excess unutilized input VAT from domestic purchases of goods and services for the third quarter of 2000 to the fourth quarter of2001 amounted to P19,233~116.54, broken down, as follows:

{)Itt

341

Taxable

Total

J

- - -- ---- - - ..__ ·-- 25

Input VAT on

Input Tax on

other importation of

Goods Services

Goods

Total In ut VAT p 1 565 063.33 p 1 572 727.00 p 3 137 790.33

1465 436.29

1 076 435.00 2 541 871.29 1 617 454.42 3 772 176.00 5 389 630.42 1 469 675.85 905 946.00 2 375 621.85

1463 825.13

619 281.00 2 083 106.13 1 925 032.52 1 780 064.00 3 705 096.52 p 9 506 487.54 p 9 726 629.00 p 19 233 116.54 In its computation, petitioner allocated the input VAT on domestic purchases and importation of goods and servi9es, other than capital goods, in the following manner:

Period

Zero-rated Sales

Total Sales

p 129 541 928.36 p 137 275 926.52 116 332 545.18 121 491 578.51 103 720 326.85 110 195 655.37 94 130 266.88 105 022 913.44 121 128 590.04 132 063 716.57 113 944 874.59 123 154 425.07

TOTAL

P678 798 531.90 P729 204 215.48 Total In ut VAT p 3 137 790.33 2 541 871.29 5 389 630.42 2 375 621.85 2 083 106.13 3 705 096.52 p 19 233 116.54 p 888 745.00 2 875 974.00 198 185.00 381 962.00 p 4 344 866.00 p

Input Tax

Allocated to

Zero-rated

Sales

2 122 336.21 2 433 932.95 2 365 948.68 1 951 599.94

1910 620.99

3 074 628.83 P13 859 067.60 Based on the above computations, the input VAT of P14,888,250.54 (P19,233,116.54 less P4,344,866.00) was proportionately allocated between petitioner's taxable sales and zero-rated sales on the basis of the total sales, in the respective amounts ofP1,029,182.94 and P13,859,067.60, as follows: .

{t(J1

Period

Total Input VAT

(a) 2000 3nl Qtr p 3 137 790.33 4th Qtr 2 541 871.29 2001

151 Qtr

5 389 63D.42 2nd Qtr 2 375 621.85 3nl Qtr 2 083 106.13 4th Qtr 3 705 096.52

TOTAL

P19 233 116.54

Input VAT on

capital goods (b) p 888 745.00 - 2 875 974.00 198 185.00 - 381 962.00 P4 344 866.00 26

Input VAT

Allocated to

Input VAT

Zero-rated

Allocated to

Balance

Sales

Taxable Sales

(a)- (b) p 2 249 045.33 p 2 122 336.21 p 126 709.12 2 541 871.29 2 433 932.95 107 938.34 2 513' 656.42 2 365 948.68 147 707.74 2 177 436.85

1951 599.94

225 836.91 2 083 106.13

1910 620.99

172 485)i.._ .. 3 323 134.52 3 074 628.83 248 505 ,~ P14 888 250.54 P13 8591067.60 Pl 0291182.94 Upon examination and validation of petitioner's voluminous documents supporting the input VAT of P14,888,250.54, the ICPA made and reported the following findings (Exhibit "DDD ''): A. Domestic purchases of:

1. Services supported by VAT Ors p 5 324 344.42

2. Goods supported by VAT invoices 3 154 901.13

3. Services supported by documents other than Ors 25 362.72

4. Goods supported bydocuments other than invoices 4 335.36

5. Goods supported by cash reqister tapes 3 614.31

6. Services supported by ORs with no BIR authority to print indicated 5 657.00

7. Goods supported by invoices with no BIR authority to print indicated 28 753.18

8. Services supported by ORs with no date indicated 2 133.34

9. Goods SUQQorted by invoices with no date indicated 132.55

10. Services supported by ORs with printed "Non-VAT" or "NV" 1 462.68

11. Goods supported by invoices with printed "Non-VAT" or "NV" 3 534.55

12. Goods supported by invoices not in the name of the Company 310.45

13. Services supported by ORs with manually stamped "TIN VAT" 2 031.86

14. Goods supported by invoices with manually stamped "TIN VAT" 818.18

15. Services supported by ORs with printed "TAN" only 368 488.95

16. Services supported by ORs with manually stamj)ed "VAT" 432.27

17. Goods supported by invoices with manually stamped "VAT" 46 959.34

18. Services supported by ORs with no "VAT" indicated 9 223.20

19. Goods supported by invoices with no "VAT" indicated 6 096.02

20. Services supported by ORs with stamp "TAN" instead of "TIN" 163 282.28

21. Services supported by ORs with ''TIN" but no "VAT" 13 573.64 _,

22. Without supporting documents B. Importations - Others

27. Supported by OR from BOC and withdrawal permit

28. Supported by withdrawal permit but no OR

29. Supported by Certification from BOC and settlement advice

30. Supported by stamp "Certified true xerox copy" of Import Entry Declaration and settlement advice

31. Supported by original Import Entry Declaration and settlement advice

32. Supported by settlement advice and photocopied Import Entry

Declaration

33. Supported by photocopied Import Entry Declaration and no settlement advice

TOTAL

27 308 652.73 437 798.46 26 268.54 1 582 960.10 1 778 555.00 799 225.00 703 219.17 86 124.00 P 14 RRR ~50.43 Based on the foregoing, input VAT amounts under numbers 3 to 22 and 28, amounting to Pl,021,123.15, should be disallowed, for not being supported by the required evidence under Sections 11 O(A) and 113(A) of the NIRC of 1997, as implemented by Sections 4.104-1, 4.104-5, and 4.108-1 of Revenue Regulations No. 7-95. The same holds true as regards the input VAT ofP812,937.59, broken down, as follows: A. Domestic purchases of goods and services:

1. Invoice or OR with TIN-V instead of TIN-VAT p 199 547.46

2. Invoice or OR not duly registered with the BIR 58 316.97

3. Purchases not supported with valid VAT invoices or ORs 44 491.77

4. Invoice or OR dated outside the period of claim or undated or with incomplete date 35 211.02

5. Supported with invoices or ORs that are not legible or with stamped

TIN-VAT

14)85.21

6. Supported with non-VAT invoice or OR 11 803.63 B. Importation of goods other than capital qoods:

7. No supporting documents 224 998.00

8. NO BOC or bank OR or settlement advice 109 284.00

9. Amount of VAT paid not clear/leqible or not indicated in OR or IERD 76 734.00

10. Supported by undated BOC OR 1 421.00 343

- - ----- ~--- --- ·- _, __

J

11. Discrepancy between amount of input VAT claimed and supporting documents

TOTAL

28 (Details of the disallowed input VAT per classification above is made part and parcel of this Decision as Annexes "A " to "A -5 ". ) Thus, petitioner's valid input VAT is P13,054,189.80, computed as follows:

. Disallowances

Valid Input

Period

Total Input VAT

PeriCPA

Per Court

VAT

3rd tr-2000 p 2 249 045.33 p 211129.00 p 74 232.30 p 1 963 684.03 4th r-2000 2 541 871.29 300 228.48 154 657.08 2 086 985.73 1st tr-2001 2 513 656.42 138 527.94 112 469.39 2 262 659.09 2nd 2 177 436.85 92 533.92 201 774.12 1 883 128.81 3'd r-2001 2 083 106.13 109 050.08 87 985.09

1886 070.96

4th tr-2001 3 323 134.52 169 653.73 181 819.61 2 971 661.18

TOTAL

P14 888 250.54 p 1 021123.15 p 812 937.59 P13 054 189.80 Consequently, the input VAT allocated to petitioner's zero-rated sales amounted to P12,148,272.25, detailed as follows:

Valid Input Tax

Input VAT

Allocated to

Total Valid

Allocated to

Zero-rated

Zero-rated Sales

Total Sales

In utVAT

Taxable Sales

Sales

p 129 541 928.36 p 137 275 926.52 p 1 963 684.03 p 110 632.13 p 1 853 051.90 116 332 545.18 121 491 578.51 2 086 985.73 88 622.02 1 998 363.71 103 720 326.85 110 195 655.37 2 262 659.09 132 958.61 2 129 700.48 tr-2001 94 130 266.88 105 022 913.44 1 883 128.81 195 312.20 1 687 816.61 tr-2001 121 128 590.04 132 063 716.57 1 886 070.96 156 170.26 1 729 900.70 tr-2001 113 944 874.59 123 154 425.07 2 971661.18 222 222.33 2 749 438.85

TOTAL

P678 798 531.90 P729 204 215.48 P13 054 :189.80 p 905 917.55 P12 148 272.25

- - - - '\ - ------- -~ 29 However, petitioner's substantiated zero-rated sales are only 57.55% of the declared zero-rated sales, hence the input VAT attributable to zero- rated sales is only P6,991,320.40, as shown below: Valid input VAT allocated to zero-rated sales Multiply by ratio of substantiated zero-rated sales to , declared zero-rated sales Input VAT attributable to iero-rated sales available for refund · · · p 12 148 272.25 57.55% p 6 991 320.40 As regards the fourth requisite, the Court finds that for the third and fourth quarters of 2000 and the four quarters of 2001, petitioner has taxable sales amounting to P50,405,683.58, with corresponding output tax due of P5,040,568.36. In its Memorandum, petitioner claims that it has an existing unutilized input tax which was carried over to the third quarter of 2000 from the immediately preceding taxable period (i. ~·, the second quarter of 2000) in the amount ofP5,784,347.54, which may be continually forwarded to the succeeding quarters until the same is fully credited against output taxes. This amount plus the input tax allocated to taxable sales are more than sufficient to cover the output tax due on sales for the period covering July 1, 2000 to December 31, 200 1.

(MIL

345 , •'

30 A careful scrutiny of petitioner's Quarterly VAT Return for the third quarter of 2000 shows that it indeed reported P5,784,347.54, as "Input Tax Carried Over from Previous Quarter" (Exhibit "G"). Nevertheless, this cannot be used to cover the output tax due for the subject period of claim because petitioner failed to submit the VAT invoices or official receipts proving the existence thereof. Hence, the· output tax due shall be offset against the input VAT allocated to · taxable sales in the amount of P905,917.55. Since there still remains an output tax due of P4,134,650.81 (P5,040,568.36 - P905,917.55), the same shall be applied against the valid input VAT paid on importations in the amount of P4,344,866.00, leaving an unutilized input VAT of P21 0,215.19. Also, inasmuch as petitioner has sufficient tax credits to cover the output tax liability of P5,040,568.36, the entire input VAT allocated to zero-rated sales in the amount of P6,991,320.40 remained unutilized as of the fourth quarter of 2001. Moreover, petitioner did not carry-over the subject claim to the succeeding first quarter of 2002 (Exhibit "FF"). As regards the requisite of whether the subject claim was filed within the two-year prescriptive period, We rule in the affirmative. Petitioner filed cw

34C

31 its claim for refund with the BIR on September 26, 2002, and the original Petition for Review on September 30, 2002. Both dates of filing are well within the two-year prescriptive period reckoned from September 30, 2000, December 31, 2000, March 31, 2001, June 30, 2001, Septe111ber 30, 2001, ·and December 31, 2001, the close of each taxable quarter covering the period July 1, 2000 to December 31, 2001 (Exhibit "GG ").

WHEREFORE, premises considered, the Petition For Review is hereby PARTIALLY GRANTED. Accordingly, respondent Commissioner of Internal Revenue is hereby ORDERED TO REFUND or TO ISSUE A TAX CREDIT CERTIFICATE in favor of petitioner the reduced amount

of SIX MILLION NINE HUNDRED NINETY ONE THOUSAND

THREE HUNDRED TWENTY and 40/100 PESOS (P6,991,320.40), representing unutilized input VAT attributable to zero-rated sales for the period covering July 1, 2000 to December 31, 2001.

SO ORDERED.

~~~r~.:N..

OLGi PALANCA-E

Associate Justice

WE CONCUR:

j QA~~C -~~~Q.

iUANITO C. CASTANEDX,%.

Associate Justice

E~.UY

Assocmte Justice

AT T·E. STAT I 0 N 32 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.

Q~~

0. ~~-t6 Q, ' WANITO c. CASTANEDA, <JR.

Associate Justice

Chairperson, Second Division

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. l-----'"" . o~ ERNESTO D. ACOSTA

Presiding Justice

DISALLOWANCES PER COURT'S VERIFICATION

DOMESTIC PURCHASES OF GOODS AND SERVICES

Supplier

1.) Invoice or OR with TIN-Vinstead of TIN-VAT 3rd Qtr, 2000

UU-163

8/8/2000 W.A. Raflores Trading & Construction

UU-164

UU-439

UU-440

UU-441

UU-442

UU-443

UU-444

4th Qtr, 2000

UU-905

UU-906

UU-907

YY-16

YY-17

YY-18

YY-19

YY-20

YY-21

YY-24

1st Qtr, 2001

UU-1272

UU-1273

UU-1274

UU-1434

UU-1435

UU-1436

UU-1437

UU-1438

UU-1439

UU-1440

UU-1441

UU-1442

UU-1443

UU-1494

UU-1495

8/25/2000 7/11/2000 7/28/2000 8/21/2000 9/1/2000 9/13/2000 9/20/2000 11/23/2000 12/9/2000 12/21/2000 10/2/2000 10/18/2000 11/8/2000 11/14/2000 11/23/2000 10/18/2000 3/14/2001 1/16/2001 2/9/2001 3/9/2001 1/11/2001 1/24/2001 1/24/2001 2/12/2001 2/12/2001 2/14/2001 2/27/2001 2/27/2001 3/15/2001 3/15/2001 2/19/2001 2/21/2001 W.A. Raflores Trading & Construction

RC Engineering Industrial Services & Supply

Mega Protrade Phils.

RC Engineering Industrial Services & Supply

W.A. Raflores Trading & Construction W.A. Raflores Trading & Construction W.A. Raflores Trading & Construction Mega Protrade Phils.

Mega Protrade Phils.

Phil-Process· Lubrication Tech., Inc. Phil-Process Lubrication Tech., Inc. .. ,4 h

J

Input VAT

405.45 4,032.00 295.45 2,123.84 2,370.27 1 '158.38 4,740.55 1 ,405.45 540.91 630.68 540.91 1,187.27 540.91 504.55 540.91 646.36 504.55 41 ,983.36 4,088.00 4,312.00 4,564.00 504.55 504.55 540.91 504.55 540.91 540.91 504.55 540.91 646.36 540.91 1,028.40 5,990.00 33

ANNEX A

16,531 .39 47,620.41 , v

UU-1496

2/21/2001

UU-1497

2/21/2001

UU-1509

3/2/2001

UU-1510

3/6/2001

UU-1597

2/12/2001

UU-1598

2/14/2001

UU-1602

3/13/2001 2nd Qtr, 2001

UU-1847

4/27/2001

UU-1848

6/15/2001

UU-1849

6/29/2001

UU-2056

4/2/2001

UU-2057

4/26/2001

UU-2058

5/17/2001

UU-2059

5/17/2001

UU-2060

6/3/2001

UU-2061

6/3/2001

UU-2062

6/19/2001

UU-2114

4/20/2001

UU-2115

4/20/2001

UU-2196

5/4/2001

UU-2197

5/4/2001 3rd Qtr, 2001

UU-2455

8/10/2001

UU-2456

9/28/2001

UU-2709

7/8/2001

UU-2710

7/25/2001

UU-2711

7/25/2001

UU-2712

8/14/2001

UU-2713

8/23/2001

UU-2714

8/23/2001

UU-2715

9/12/2001

UU-2716

9/12/2001

UU-2769

7/3/2001

UU-2770

7/3/2001

UU-2771

7/6/2001

UU-2772

7/6/2001

UU-2773

8/21/2001

UU-2774

8/21/2001

UU-2775

8/28/2001 4th Qtr, 2001

UU-3110

11/23/2001

UU-3111

12/14/2001 34

ANNEX A-1

Phil-Process Lubrication Tech., Inc. 1,337.60 Phil-Process Lubrication Tech. , Inc. 1,836.00

RC Engineering Industrial Services & Supply

237.03

RC Engineering Industrial Services & Supply

4,503.52 Speedway Elect. & Office Supply 8,345.45 Speedway Elect. & Office Supply 4,436.36 Speedway Elect. & Office Supply 358.00 ~6 . 405.47 W .A. Raflores Trading & Construction 4,732.00 W.A. Raflores Trading & Construction 4,186.00 W .A. Raflores Trading & Construction 3,360.00 Mega Protrade Phils.

504.55 Mega Protrade Phils.

1,045.45 Mega Protrade Phils.

504.55 Mega Protrade Phils.

540.91 Mega Protrade Phils.

504.55 Mega Protrade Phils.

540.91 Mega Protrade Phils.

504.55

RC Engineering Industrial Services & Supply

2,370.27

RC Engineering Industrial Services & Supply

4,079.45 Speedway Elect. & Office Supply 5,454.55 Speedway Elect. & Office Supply 184.00 28,511 .74 W.A. Raflores Trading & Construction 4,928.00 W.A. Raflores Trading & Construction 4,648.00 Mega Protrade Phils.

1 '187.27 Mega Protrade Phils.

540.91 Mega Protrade Phils.

504.55 Mega Protrade Phils.

540.91 Mega Protrade Phils.

504.55 Mega Protrade Phils.

540.91 Mega Protrade Phils.

504.55

RC Engineering Industrial Services & Supply

643.75

RC Engineering Industrial Services & Supply

1,945.64

RC Engineering Industrial Services & Supply

2,847.27

RC Engineering Industrial Services & Supply

4,992.22

RC Engineering Industrial Services & Supply

3,111.76

RC Engineering Industrial Services & Supply

2,381.73

RC Engineering Industrial Services & Supply

6,223.52 36,550.09 W.A. Raflores Trading & Construction 5,376.00 W.A. Raflores Trading & Construction 5,320.00 (tP 3'50

UU-3301

10/3/2001

UU-3302

10/24/2001

UU-3303

11/14/2001

UU-3335

11/17/2001

CCC-63

12/1/2001

CCC-82

12/1/2001

CCC-83

12/1/2001

CCC-84

12/18/2001 Mega Protrade Phils.

Mega Protrade Phils.

RC Engineering Industrial SeNices & Supply

Don Bosco Seminary College

Mega Protrade Phils.

Sub-total

2.) Invoice or OR not duly registered with the BIR 3rd Qtr, 2000

UU-390

7/7/2000 Mobil Philippines, Inc.

UU-391

8/1/2000 Mobil Philippines, Inc.

4th Qtr, 2000

YY-5

1/8/2001 Pacific Union Insurance Co.

2nd Qtr, 2001

UU-1927

4/7/2001

Constant Power Industrial Sales

UU-1928

4/7/2001

Constant Power Industrial Sales

UU-1929

4/10/2001 Con!!tant Power Industrial Sales

UU-1930

5/31/2001

Constant Power Industrial Sales

UU-1931

6/14/2001

Constant Power Industrial Sales

3rd Qtr, 2001

UU-2895

7/6/2001 Velca Equipment & Eng Red Prods., Inc.

UU-2896

8/7/2001 Velca Equipment & Eng Red Prods., Inc.

UU-2897

8/20/2001 Velca Equipment & Eng Red Prods., Inc. 4th Qtr, 2001

UU-3398

11/6/2001 Velca Equipment & Eng Red Prods., Inc.

Sub-total

3.) Purchases not supported by valid VAT invoice or OR 4th Qtr, 2001

CCC-23

Unimachine Metal Fabrication, Inc.

UU-3386

UU-3387

Tamaraw Security SeNice, Inc. Tamaraw Security SeNice,.lnc. Best Electrical Inc.

Sub-total

4.) Invoice or OR dated outside the period of claim or undated or with incomplete date 3rd Qtr, 2000

UU-120

Puerto Azul Golf & Country Club

XX-24

XX-25

6/28/2000 6/9/2000

Tiger Machinery

Ultimate Energy Systems Trading

J5l 1,045.45 1,187.27 1,045.45 4,740.55 3,122.73 504.55 540.91 1,045.45 7,327.84 9,159.80 3,074.40 8,036.36 1 ,459.11 763.64 440.91 325.91 8,950.00 4,312.00 8,067.00 6,400.00 19,003.09 10,910.24 10,228.35 4,350.09 3,164.55 7,272.73 3,636.36 35

ANNEX A-2

23,928.36 199,547.46 16,487.64 3,074.40 11,025.93 21 ,329.00 6,400.00 58,316.97 44,491 .77 44,491.77 ·'

XX-26

6/9/2000

XX-27

5/25/2000 2nd Qtr, 2001

UU-2222

AAA-4

AAA-5

4th Qtr, 2001

CCC-2

1/11/2002

CCC-4

1/7/2002

CCC-10

CCC-14

1/9/2002

CCC-19

1/10/2002

Ultimate Energy Systems Trading

Unioil Petroleum Phils. , Inc. Unimachine Metal Fabrication, Inc. Primetown Property Group, Inc. Primetown Property Group, Inc. Aztek Systems International Corp.

DHL Worldwide Express

lppon Yari House

Laguna Internet

Primetown Property Group, Inc.

Sub-total

5.) Supported with invoices or ORs that are not legible or with stBmped TIN-VAT 4th Qtr, 2000

UU-911

10/24/2000 MESCO, Inc.

UU-912

10/27/2000 MESCO, Inc.

UU-915

11/18/2000 MESCO, Inc.

YY-22

11/7/2000 MESCO, Inc.

1st Qtr, 2001

UU-1137

3/5/2001

FGU Insurance Corporation

4th Qtr, 2001

UU-3237

11/22/2001 Linden Technologies Phils., Inc.

Sub-total

6.) Supported with non-VAT invoice or OR 2nd Qtr, 2001

AAA-12

6/14/2001 A.L. De Leon Construction & Trading

AAA-13

5/30/2001 A.L. De Leon Construction & Trading

AAA-14

5/11/2001 A.L. De Leon Construction & Trading

Sub-total

TOTAL

ANNEX A-3

4,545.45 2,570.18 21 '189.27 3,615.91 1,636.36 654.55 5,906.82 2,727.27 339.69 178.45 287.70 4,581 .82 8,114.93 35,211.02 145.45 429.09 932.73 2,590.00 4,097.27 5,133.39 5,133.39 5,054.55 5,054.55 14,285.21 6,636.36 1,940.00 3,227.27 11 ,803.63 11,803.63 363,656.06

IMPORTATION OF GOODS OTHER THAN CAPITAL GOODS

BOC Serial No./Bank Ex h.

Date

AAA-89

Apr-01

30273677 3rd Qtr, 2001

BBB-115

Jul-01

32500045

Sub-total

' •l :}] ,JJ· • ..

-- -- ----------------- 37

ANNEX A-4

Input VAT

Total

86,124.00 86,124.00 21 ,518.00 1,257.00 441 .00 1,217.00 864.00 845.00 3,135.00 3,344.00 1,987.00 127.00 1,655.00 3,278.00 4,579.00 164.00 58.00 2,438.00 22.00 1,817.00 48,746.00 1,946.00 8,314.00 10,260.00 79,868.00 79,868.00 224,998.00 94,461 .00 94,461 .00 14,823.00 14,823.00 109,284.00 ()j

9.) Amount of VAT paid not clear/legible or not indicated in OR or IERD 4th Qtr, 2000

YY-83

Dec-00

28885096 1st Qtr, 2001 ZZ-120, ZZ-121

Jan-01

29865595 ZZ-124, ZZ-125

Jan-01

20031084 2nd Qtr, 2001

AAA-47

Apr-01

30407562 3rd Qtr, 2001

BBB-117

Aug-01

32873741

Sub-total

10.) Supported by undated BOG OR 1st Qtr, 2001

ZZ-86

Jan-01

84883757

Sub-total

13,741.00 46,751.00 9,900.00 1,319.00 5,023.00 1 ,421 .00 11.) Discrepancy between amount of input VAT claimed and supoorting documents 3rd Qtr, 2000 XX-90, XX-87

Oct-00

XX-1 13, XX-114

Jul-00

1st Qtr, 2001 ZZ-1 45, ZZ-1 46

Feb-01

4th Qtr, 2001

CCC-184

Oct-01

Amount Claimed

Input VAT

5,985.00 33,930.00 34,712.00 41,261.00

Sub-total

TOTAL

5,958.00 13,933.00 31 ,85347 27,299.00

TOTAL DISALLOWANCES PER COURT'S VERIFICATION

ANNEX A-5

13,741 .00 56,651 .00 1,319.00 5,023.00 76,734.00 1 ,421 .00 1,421.00

Difference

Total

27.00 19,997.00 20,024.00 2,858.53 2,858.53 13,962.00 13,962.00 36,844.53 449,281 .53 812,937.59