CTA Case No. 5039 (Decision)

-� .- REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY CARRARA MARBLE PHILIPPINES, INC. Petitioner, - versus - C.T.A. CASE NO. 5039 COI'II'IISSIOI'ER OF CUSlllMS, -P-ro-m�-.M~uA-lYg-a-0t-e7d-1:-9~9~6~-~ -~::r~ Respondent. X- - - - - - - - - - - - - - - - - - - - - - - - - - - X DECISION This is an appeal from the decision of the Commissioner of Customs, dated September 29, 1993, which affirmed the decision of the Collector of Custo�s of Batangas decreeing the forfeiture of the following pieces of �achinery, thus: 1) Special ci ,~cul ar saw and hoJ~izontal cutting of strips Model Block TailoJ~ BK-1200 with switch gear, contactor control and reinforced �ain motor, and 2) Sawing Machine, Model TBS 5000, including switch gear cabinet with contactor for all motors. It is important to point out at the beginning of this disquisition that the instant case is syabiotically related to another case entitled Engineer Franklin Policarpio vs. The Honorable Coaaissioner of Custo�s and b16 -� _ _J

DECISION - C.T.A. CASE NO. 5039 - 2- Deputy Co��issioner of Custo�s, Licerio Evangelista, CTA Case No. 5057, which we will cite hereinafter as the "Policarpio case" for brevity. These two cases are related in the sense that the pieces aforementioned which were the subject of the forfeiture in the presently disputed decision of the Commissioner are the same items being clai�ed by Engineer Franklin Policarpio as petitioner in the Policarpio case aforecited. In fine, the decision of the Co��issioner dated July 28, 1993 being appealed in this petition is the same one subject of appeal in the Policarpio case. The facts as borne out by the Custo�s records as well as the CTA records reveal a story, although at ti�es marred by different and inconsistent versions, nevertheless disclose a web of events that leads us to a clear view of the core of the controversy. Petitioner in the instant case clai�s ownership of the aforementioned were forfeited by the respondent in favor of the Petit i onet~ insists that he obtained ownership over said items by virtue of a local sale evidenced by two deeds of Absolute Sal e. It further alleges that their co�pany never imported the articles much less caused their i11portation. The fact of i�portation was made known to the� only when they received froiD respondent a warrant of sei :nn~e and _./

DECISION - C.T.A. CASE NO. 5039 - 3- detention accompanied with a notice for the forfeiture proceedings of the subject articles. Now petit :i onel~ refutes the decree of forfeiture by laying down the premise that the pieces of �achinery forfeited :in favor of the govern�ent were originally part of lot to Mr. Franklin Policarpio as the highest bidder :in the auction sale conducted by the Bureau of Custo�s on April 10, 1987 of "Discussion" e�bodi.ed in the Petition for Review, page 10, Petit i onel~ contends that by virtue of such sale, all duties and taxes due on such importation were already paid and :if these taxes due the government have all been satisfied, then the respondent, as representative of the govern�ent, no longer has the jurisdiction to seize the articles because the importation as defined by the law has been completed. It is then the argu�ent of the petitioner that once importation has been completed by the pay�ent of duties and taxes, then the respondent i s no 1 ongel~ vested with the authority to forfeit the Petitioner suspects that respondent seized the properties in order to recover them in behalf of Mr. Pol icarpi o, who was the highest bidder in the auction sale conducted on April 10, 1987. If this is so, petitioner contends that the Collector of Custo�s is not empowered to deter�ine the ownership over a particular

DECISION - C.T.A. CASE NO. 5039 - 4- article because this prerogative belongs to the ordinary courts of justice. Respondent on the other hand, agreed with the petitioner that the pieces of machinery subject of the forfeiture case were part of lot 15 which was awarded to Franklin Policarpio in a public auction sale held on April 10, 1987 <see paragraph no. 4 of Answer, page 48, CTA t~ecords). To provide a legal basis for acquiring jurisdiction over said properties, respondent offers the proposition that since the pieces of �achinery were illegally withdrawn from Custo11s custody before it can be delivered to Franklin Policarpio, the payment �ade by the latter as the highest bidder could not have covered the said items, thus the duties and taxes corresponding to the missing items are still unpaid, hence i�portation in reference to its legal definition has not yet ceased. Respondent then contends that in this case, he still has jurisdiction over said items. During the pendency of the proceedings, individuals represented by Mary Ann Reyes Luz-Puno asked for leave of Court to intervene in the instant case because as minority stockholders of petitioner corporation, they have a legal inteJ~est in the matter undet~ litigation. This Motion to Intervene was granted by this Court in a resolution, dated Ma�~ch 28,

DECISION - C.T.A. CASE NO. 5039 - 5- 1994. Thereafter, the intervenors filed their co�plaint- in-intervention on July 5, 1994 praying that they be allowed to post a bond to allow the� to possess the subject pieces of machinery during the pendency of the proceedings. This was subsequently approved by this Court in a resolution, dated August 23, 1994, on the condition that the said inte.~venors post a cash bond. However, records of this case show that the no longer pursued the posting of the cash bond and submitted the case for decision by filing a Me�orandu� of Arguments on March 4, 1996. Before Us is a controversy involving three clai�ants contesting the ownership of two pieces of �achinery. Petitioner in the instant case clai�s to be the owner by virtue of a contract of sale evidrnced by two deeds of absolute sale covering said Franklin Policarpio, the petitioner in CTA Case No. 5057, insists that he is the owner because as the winning bidder in the auction sale of subject ite~as, he is entitled to the same. Last 1 y, the Comllissioner of C11.1sto�s as the representative of the govel~nlllent also clai�s to be the owner on the g�~ound that ta>CeS and duties due on its importation have not yet been paid, hence, it is the government's right to sell the sa�e to satisfy the l l u�...~-')..

DECISION - C.T.A. CASE NO. 5039 - 6- various tax liabilities incurred because of the i 11port at ion. The issues to be resolved in this case can be condensed into the resolution of two queries, thus: 1) Whethet~ ot~ not the decree of forfeiture handed down by the Collector of Customs of Batangas and 1at et~ affirmed by the Commissioner, rests on a sound legal basis; 2> lf the answer to the above is in the negative, then who has the lawful right of ownership over the forfeited articles? Petitioner herein assails the decision of the Collector of Customs of Batangas as having been �ade without the corresponding jurisdiction. As discussed the petitioner �aintains satisfaction of the tax liabilities of an article or articles by the sale thereof through a public auction, divests the respondent of any jurisdiction over the rest, thus disallowing him to seize the sa11e. Petitioner equates the jurisdiction of the Co��issioner of Customs with the concept of i�portation as defined by Section 12()2 of the Tariff and Customs Code. Vih11.ts, when importation ceases or terminates of all duties, taxes and other charges, the jurisdiction of the respondent over the i111ported articles also ceases~/ l ,' . .'.-).. . - l) &.

DECISION - C.T.A. CASE NO. 5039 - 7- We do not agree with the above analysis proposed by the petitioner. Section 2530 of the Tariff and Custo�s Code particularly subsection <e> provides the following thus: Section 2530. Property SubJect to For,eiture under Tari'' and Custo�s Law. Any vehicle, vessel or aircraft, cargo, article and ethel~ objects shall, unde�~ the following conditions be subject to forfeiture. )()()( H>OC (e) Any article which is f�~altdltl ent l y concealed in or removed contrary to law f�~o� any public or private warehouse, container yard or container freight station under custo�s supervision; <underscoring supplied) The facts of this case reveal that the subject pieces of machinery were part of lot 15 which was sold in an auction sale to satisfy the unpaid ta>ees, duties and other charges. Such machineries were imported but l ate�~ abandoned by Filipinas Marble in favor of the govern�ent. The fact that this shipment formed part of lot 15 is undisputed by both parties to this case. Petit i onel~ ad�itted this in its petition for review <page 11, CTA records under Discussion 1 of Petition>, and was likewise adopted as true by the respondent in his answe�~ paragraph no. 4 of answer, page 48 of CTA records>, quoted hereunder as follows: "The abandoned shipment became lot 15 which was awarded in a public auction sale at PG1,250.00 to Engineer Franklin Policarpio."

DECISION - C.T.A. CASE NO. 5039 - 8- So it re11ains undisputed that after the auction sale and before delivery to Mr. Pol ical~pi o, as the winning bidder, the subject away mysteriously fro� custody and thereafter in the premises of herein petitioner. There is no question that before delivery of these iteas to Mr. Franklin Policarpio, these ite�s were under the cu~tody of the Bul~eau of Custo�s and when they wel~e about to be handed over to Mr. Policarpio, the latter di~covered the said items to be mi~sing. The illegal withdrawal thereof from customs custody 11akes such subject forfeitable under Section 2530(e) of the Tariff and Customs Code. The opinion of the petitioner that to allow the government to recover the articles after all the tax liabilities incidental to its importation have been satisfied will constitute double recovery on the part of the government and therefore should not be allowed does not hold water because in the event that the governaent cannot recover the articles sold to the winning bidder, then it becomes incu11bent on the part of the government as custodian of such properties to refund equivalent to the value of the 11issing items. This will then constitute loss of revenues on the part of the governaent as in reality not all the tax liabilities have been satisfied because a portion of what

DECISION - C.T.A. CASE NO. 5039 - 9- has been paid by virtue of the auction sale -will be given back to the winning bidder by the govern�ent. ln this sense, the importation as legally defined by Section 1202 of the TCC has not yet been ter�inated. For purposes of clarity, Section 1202 of the Tariff and Customs Code is quoted hereunder, thus: SEC. 1202. Uhen I�portation Begins and Dee�ed Ter�inated. l�portation begins when the carrying vessel or aircraft enters the jurisdiction of the Philippines with the intention to unlade therein. l�portation is deemed ter�inated upon payment of the duties, taxes and other charges due upon the articles, or secured to be paid, at a port of entry and the legal permit for withdrawal shall have been granted, or in case said articles are free of duties, taxes and other charges, until they have legally left the jurisdiction of the customs. In the instant case, the loss of the ite�s that were supposed to be awarded to Mr. Policarpio as the highest bidder has the effect of creating an obligation on the part of the government to refund to hi� an equivalent amount, which leaves a portion of the taxes and duties unpaid. In this regard, we cannot say that the importation has been terminated. Another angle advanced by the petitioner is its apparent innocence with regard to the i�portation of the subject articles. As an innocent buyer in good faith, the petitioner maintains that the Collector had no right to seize the ite�s from its custody. Records however b24

- DECISION - C.T.A. CASE NO. 5039 - 10 - show that the petitioner has not successfully eHplained by competent evidence how these items, part of lot 15, came to be in its possession. Petit i one�~ presented two deeds of absolute sale <EHhibit "A" and "B"' p. 218 to 220, CTA records>, allegedly eHecuted by the petitioner corporation as buyer and Jaina Perez as seller. Jaina Perez, the alleged seller, was never presented as a witness during the hearings of this case to testify on the alleged sale involving the two pieces of machinery, in spite of this Court's issuance of a subpoena for her appearance. The reason for this is that the subpoena was never served because the address of Jaina Perez, as appearing on the deeds of sale, does not eHist. Neither did petitioner present the notaries public who allegedly acknowledged these acts. AnotheJ~ significant factor which led this Court to conclude that the deeds of absolute sale are weak pieces of evidence are the dates appearing in these two contracts of sale purportedly reflecting the dates when these sales took place. EHhibit "A" corresponding to the sale of one of. the items missing fro� lot 15 was dated Dece�ber 20, 1985 and the other deed of sale corresponding to the other item was dated October 28, 1986 <EHhibit "B"). We find these dates perpleHing because the auction sale conducted by the Bureau of Customs for the same ite�s was held only

- DECISION - C.T.A. CASE NO. 5039 - 11 - on Apri 1 10, 1987 as evidenced by the records of this case. How then can said items be sold to petitioner while the same were still in the custody of the Bureau of Customs at that ti�e? From the time of its i�portation and subsequent abandon�ent by its importer to the ti�e it was auctioned off on April 10, 1987, such ite�s were in the possession and custody of the Bureau of Customs so it would have been legally impossible for a private person to sell the sa�e items to any other entity. We do not know if we will condole with the petitioner and give hi� the co�mon ad�onition of "caveat emptor", ol~ to castigate it for presenting spurious deeds of absolute sale in an effort to establish ownership over the Whichever may be the case, we give the petitioner the benefit of the doubt. '~owever, for purposes of disposing the issues of this case, this doubt proved fatal to its claim, hence we cannot award the seized articles to herein petitioner for its failure to erase the doubts that cloud the �ind of this Court. Section 2535 of the/ Tariff and Custo�s Code provides the following: SEC. 2535. Burden of Proof in Seizure and/or Forfeiture. In all pl~oceedings taken for the seizure and/or forfeiture of any vessel, vehicle, aircraft, beast ol~ al~ticles under the provisions of the tariff and customs laws, the burden of proof shall lie upon the claimant: Provided, That probable cause shall be first shown for the institution of such proceedings and that seizure and/or forfeiture

- - .. DECISION - C.T.A. CASE NO. 5039 - 12 - was made undet~ the circumstances and in the manner desct~i bed in the preceding sections of this Code. In this light, we find the evidence offered by the petitioner insufficient to establish its right to the forfeited articles~ Having deter�ined that petitioner is not entitled to the seized articles, we nevertheless could not award the sa�e to the government because as mentioned earlier, these articles formed part of lot 15 which was eventually sold to Mr. Franklin Policarpio as the highest bidder of such sale~ It is in this status of ownership that Franklin Policarpio has the right to the seized articles and hence these ite�s must be recovered fro� herein petitioner and delivered to Mr~ the petitioner in the Policarpio case, CTA case no~ 5057~ It will be the height of injustice if we will allow respondent Commissioner to seize the ite�s fro� the herein petitioner to enable the Bureau of Custo�s to sell the� again, because this would now constitute double recovery on the part of the government the sa�e ite�s having been already sold and the proceeds thereof applied to the unpaid taxes, duties and other charges i�posed incidental to their importation. It is important to point out that in reviewing the appealed decision of the Collector of Custo�s of

- DECISION - C.T.A. CASE NO. 5039 - 13 - Bat an gas, it became imperative for this Court to determine the question of ownership of the subject pieces of machinery which we are competent to pass upon as ruled by the Supreme Court in the case entitled Castro vs. David, 100 Phil. 454, thus: "The intervenor may ask for the dismissal of its complaint-in-intervention for the purpose of bringing an independent action in the proper competent court to recover its properties which were levied upon and distrained by the Collector and forfeited to the Government because they appear regist~red in the name of the plaintiff, the delinquent taxpayer; or may pursue its remedy in the Court of Tax Appeals which is competent to pass upon the incidental question of ownership to determine whether the properties levied upon and distrained by the Collector of Internal Revenue and forfeited to the Government for nonpayment of war profits tax, really belong to the delinquent taxpayer or to the intervenor. WHEREFORE, in view of the foregoing the instant petition for l~eview is DISMISSED and We hereby IFFIRM the authority of the respondent Commissioner of Customs to seize the subject pieces of machinery from petitioner and order the respondent to deliver them to the rightful Engineer Franklin Policarpio, in accordance with the decision of the Court in the related case of Engr. Franklin Policarpiio vs. The Hon. Commissioner of Customs in CTA Case No. 5057, as the highest and winning bidder of the auction sale involving

'J DECISION - C.T.A. CASE NO. 5039 - 14 - the very sa�e items being disputed in the instant petition. SO ORDERED. I ~� ~~fv.l AMON 0. DE VE Associate Jud e WE CONCUR: I \ L K.\. GRUBA Associ at e"-)udge CERTIFICATION I hereby certify that this decision was reached after due consultation a�ong the �e�ber~ of the Court of TaK Appeal~ in accordance with Section 131 Article VIII of the Con~titution. ~o, Dt-o~?.:_ ERNESTO D. ACOSTA Pl~l!'si ding Judgl!' Court of Tax AppPals