CTA Case No. 2829 (Decision)

------ vi R f P Ul'H.l f' O F H I E Pl'l! U P PIN~S COURT OF TJ\X APPE.A!JJ ot' ~ZO N C ITY CM1PC5 RUEDA CORPORATION, Petitioner, - versus - C.T.A. CASE NO $ 28 29 THE HO -ORABLE COMMISSIONER OF CUSTm1S, Respondent. X - - .- - .- - ----X DE C I S I 0 N Petiti on to review the decision of respondent Commiss i o ner of Customs in Customs Case No. 76-35-A dated July 30, 197 6 affir ming that of the Collector of Customs of Ma nila in Manila Prote s t No. 9273 dis- mis s ing the protest f i led by petitioner Campb s Rueda Corpor ation against the assessment and collection of additi onal customs duty and advance sales tax on its shipment of 46 cartons of Tungsol Products (ord i na r y flasher) .under Entry No. 26876. The f acts are not d i sputed . As alleged by peti- tioner i n i ts petition f or revi ew and admitted by respondent in h is answer : 1. Petitioner, a corporation duly formed and exist i ng unde r the laws of the Republic of the Philip- pines with pr i ncipal place of business and office at No . 22 N. Domingo Street , Quezon City , ordered on July -6, 1973 from E.B. Schw i nger & co. of Los Angeles, California, U.S eA. , through E.B. Schwinger Philippines, electrical lighting and signalling parts (Tungso l Products) .amounting ' ) :; ) �I A., , :,_ . .;,

DECISION - CT~ CASE NO . 282 9 - 2- to $18,949 .00 as evidenced by the firm offer (Pu r chase Order) ~o . F- 73893 dated July 6, 1973. (par. III-1, Pet i tion; par. 1 , Answer.) . 2. E.B. Schwinger & Co. finally sold to petit ioner the aforedescri bed electrical ligh ting and signalling parts (flashers Tungsol Products) for $18,200.10 as evidenced by E . B. Schwinger & Co. Invoi ce No. 42287 and Consul~r Invoice of Merch andise No. NY 65675 E. ( pa r. III-2, Petition; par. 1, Answer.) . 3 . That on Fe b~ua ry 8, 1974, petitio !er filed with the Collecto r of Customs of Manila a request for value information (No. 9750) _f or the declar ation of t h e above - im?orted goods und e r Tar if f He adi ng No . 85.09 of the Tariff and Customs Code at 30 % ad valorem duty for class- ification purposes. The a bove imported goods, however, were re-classif i e d under Tariff Heading ~' J . 85 .19 of the Tariff and Cu ~torn s Code at 50% ad valorem. (par. III-3, Petiti o~ ; par. 1, Answer.) 4. r~ he afor eme ntioned impc:: te d goods arrived a: the port of Man ila v i a S/S 11 Luna Maersk" on February 12, 1974 under Bill of Lading No. CFS-9, for which petitioner immediately fi l ed Customs Import Entry and Internal Revenue Declar a ti on No. 010 3185 under En tr y No . 26867 under Tariff He a d ing N o ~ 85.19 of the Tariff and Customs Code at 50% ad va l o rem, under protes t. (par. III- 4., Petition; p ar. 1, An swer.)

DECISION - CTA CASE NO . 2829 - .3 - 5. That on Mar c h 26, 1974, petitioner paid the duties and taxes on the above imported go0ds i n the sum of ~134, 3 77 . 00 un d er protest as evidenced by Customs Order of Payment No. 296146 and Central Bank Official Receipt No. 287246 dated March 26, 1974. (par. III-5, Petition; pa r . 1, An s wer.) . 6 . That on April 4, 1974, petitic �0r filed a timely protest against the aforementioned re-~lassifi- cation under Tariff � Heading No. 85.19 at 50% ad valorem instead of Tari f f Heading No. 85 . 09 at 30% ad valorem resulting in the payment of additional customs duty of P26,258.00 and advance sales tax of ~2,297.00 or a total dif erence of ~2~555.00 and prayed for t h e refund of the sa i d diffe rence. (par. III-6, Petition; par. 1, Answer.) 7. The Collector of Customs of Manila i n a decision dated October 18, 1974 r ~ n d ered a decision di smissing petitioner ' s protest . (par. III-7, Petition7 pars. 1 & 2, An swe r .) 8. Petitioner appealed the above decision to the Commissione r of Customs, who, on July 30, 1976 rendered a decision af f ir ming L 1a t of the Collector of Customs of Manila, a nd which decision is now the subject of this pre sent f 8 t ition . (par. III-8, Petition; par. 1 , Answer.) The parties are not in dispute on the computations c ') (I I~,VI)

DECISION - CTA ChSE NO. 2829 - 4- of customs duti0s and taxes payable by , or amount refundable to, peti t ~ o ner as the case maybe. The only issue for resolution is the correct tariff classification of the imported Tungsol Prod ucts (27,000 pi eces of flashers)~ that is, whether they should fall under Tariff Heading No. 85 .09 at 30% ad valorem or unde r Tariff Heading No. 85.19 at 50% ad valorem , both of the Tariff and Cus toms Code. Under Ch apter 85 - ELECTRICAL HACHINERY AND F,;WIP- M:SNT; PARTS 'l,HEREOF - of the Tar iff and Customs Cod e, Tariff Heading No . 85 .09 states: 85.09 Electrical lighting and signalling equipment and electrical windscreen wipers, defrosters and demisters, for cycles or motor vehicles-~~ .ad v ~ :. 30% while Tariff Haading No. 85.19 provides: 85.19 Elec tr i cal apparatus fo r mak ing and breaking electrical circuits, for the protection of electr ical circuits, or f or making connections to or in electric circuits (for example, switches, relays, fuses, light ing arresters, e ., : g e suppres- sors, plugs, lampholder s ,and junction boxes); resistors, fixed or va riable (including potentio- meters), other than heating resistors; p1:inted �circuits; s �1 .:. tchboards (other than tele p i1one switchboards) and con- trol panels: � A. Component p arts of magnetic starters and circuit breakers imported with prior authoriza- . tion of the Board of Investments under a progressive manufac- tuzing program ��� �������� ad val. 10% B. Oth er � �� ��� ��� �� � ���� ���� ad val. 50% ( ) ' � t-1 "",.:., I . .1

DEC I SION - CTA CASE NO. 2829 - 5- Quoting Section 203, Rule 3(a} of the Tarif f and Custo ms Code,which reads: SEC. 20 3 . General Rules of Classifi- . c ation.- . The i nterpretati on a nd applica t ion of t he provisions of this Co d e relating to the classif i c ation o f articles impo rt ~ d into the Phil i ~ ?� i nes shall be governed by the following principles: XXX XXX XXX XXX XXX Rule 3. When artic les are prima facie, classifiable under two or more headings or subhe ading s, or imported in sets consisting of several artic l es, clas sificd t ion s hall be ef fected as follows: (a} The heading or subheading which provides the most sp ecifi ~ des- c ription shall be preferred to a ny other heading or subheading providing a more gener al descr iption. XXX XXX XXX XXX XX X petitioner submits that Tariff Heading No. 65. 09, which stat es "Electrical lighting and s igna lling equipment x x x x x for moto r vehicles" provides a more ape- -------------------- I cific descri p tion than Tariff Heading No. 85.19. Further- mo r e, t h e Exp l anatory Notes to the Bru ssels Nomencl~ ture states: "This heading (85 .09 } covers electrical apparatus and appliances specialized f or use on cyc les or ~o tor v e h icles for li g hting or signall ing pu~ ~ os"es." and the itemc wh ic h petition e r i mported (T~ng s ol Flashers} ar e elec t ri cal a pparatus use d on motor vehicles f or sig- nalling purposes, t ha t is, to signal a right or left hand turn by means of electrical f l ashe s in front ( . ') 0 ,..., , .., r..) .. t~

D :.~ :ISION - CTA CASE NO. 2829 - 6- and at the rear of motor vehicles. Likewi se, according to petitioner , the Explanatory Notes to the Brussels N011encla ture un d er Tar iff He ading No. 85. 0 9 s~ates t~at it includes, 2mong others, direct i on indication ligh ts and parts thereof. Since the Tungsol Flashers it impor ted are parts of the direction indication l ight se t or system and signalling equipment, petitioner asserts that the items ~ h ould fall under Tariff Heading No. 85. 09. Res ponde nt, on the other hand, alleg e s as affi ~- . mat ive defense in h i s answer that: 5. That flashers, when imported by themselves, fall squar~ly within the con text of Customs Tariff Circular No. 26-74 which specifically classify "flashers" under Tariff Paragraph 85 .19, the pertinent portion o ~ which is hereby quoted ~s ful lows: "For being imported alone subject article (F lashers) can not be prope~ ly deemed as electrical s ignal equipment f or motor vehicle but should be treated more as a device for clos i ng or op2ning on elect ~ ical circuit." Tar iff Par. No. 85-19 - nElectr ica l apparatus for making and break i ng elec- trical circui t s x x x - ad valorem - 50% 6 . Th~t : ~ om the clear J . angua 0~ of the above provi s ion of law , the item "flas hers", if imported alone, can not be class ified un de r Ta r iff Heading 85.09 at 30% ad va l.orem but must fal:.. under Tar iff He ad ing85:'i9a�t- 50% ad valore r:l; The general purpose for which an article is used must govern the assessment of duty; any other rule would

DECISION - CTA CASE NO. 2829 - 7- lead to confusion and injustice. It is the general use to whic h articles are chiefly ~dapted and for which they are chiefly used that de t ermine their character within the meaning of the tariff laws. It is the pre- dominating use to which articles are generally applied or used that determines their character for the purpose of fixing the duty, and not the specific or special use which any particular importer may make o f the articles importedo (La Campana General de Tabacos de Filipinas vs. United States, 8 Phil. 438; citing Hartranft vs. Langfeld, 125 u.s. 128; See also, Chester Industries, Inc. vs . Commissioner of Customs, CTA Case No. 2560 , May 9, 1974; Domi n go s. Jose, Inc. vs. Commissioner o f Cus toms, CTA Case No. 2568, May 6, 1977; National De ntal Supply, Inc. vs. Commissioner of Custo ms , CTA Case No. 2757; May 16, 19 79 .) Here in the case at bar, the evidence adduced by petitione r, both oral and documentary, and t he records of the Bureau of Customs pertaining to this case on the basis of which respondent submitted this case for decision, definitely establish t he fact that the general purpose or predominating use to which the Tungsol Products (flashers) are applied or employed, a :;; d for which petitioner imported them, is precisely as electrical e quipment f or signalling purposes for motor vehic les ; that is, ~o signal or indicate a right or lef t hand turn by means of electrical flashes ',.), (J). (\ 'v'

DECISIOlJ - CTA CASE NO. 2829 - 8- in front and at the rea~ of motor vehicles. The import entry and internal revenue declaration of the shipment {p. l.O, Customs records; Exh. "F", pp. 16-17, CTA record ,, ,' i. consular invoice of merc handise NY 65075 E (pp. 12-13, Customs records; Exh. "D", p. 14 , CTA records)~ bill of lading (p. 16, Customs records)~ c o~ill ercial invoice of merchan ~i se issued by E.B. Schwingc:: & Company (p. 18, Customs records; Exh. "C", p . 13, CTA r e cords)~ Prudential Bank & Trust Company'~ adv i c e of letter of credit (p. 19, Customs records)~ E. B. Schwinger Philippine s firm order (p. 20, Customs records; Exh. "B", p. 11, CTA records) i. order of payment dated March 2, 1974 issued by the Bureau of Customs (p. 22, Customs records; Exh. "G", p. 18, CTA recor d s) i. and Central Bank Official Receipt No. 287240 dated March 26, 1974 (p. 23, Customs records; Exh. ~H", p. 18, CTA records) ~ all show that the Tungsol Produ~ts (flashers) .are electrical l ight :i.ng and si g nalling_ parts; and petitioner imported them as electrical appa- . ratus to be used on motor vehicles for signalling purposes, J to signal a right or left turn by means of e icctrical f lashes in front and at t he rear oi motor vehicles. (pp. 24-26, Customs r ecords.) This is confirmed and cor r obora ted by the testimony of peti tione&'s purchasing manager and the brochure (or literature) .of the Tung sol Product issued by t he manufacturer, Wagner Electric Corporation, 1 Summer Avenue, Newark, New Jersey, U.S.A.,

DECISION - CTA CASE NO. 2 3 29 - 9- describing the uses - .FOR AUTOMOTIVE DIRECTION SIGNALS...; . HAZARD ~1ARNI N G CONDIT ION ALERT AN D ACCES SORY APPLICATIONS - and operating principl es, pe rformance characteristics, manufac ~ ~ ri n g standards, mechan i cal specific 2 ti ons, application spec ificat i ons and effect of circuit con- ditions, which are all ind icative o f its use and adapt- ability as e l ectrical lighting and signalling appara t us for motor v e ~ icles. Absolutely no proof whatsoever was presen t e d by respondent to controve rt or dispute the evide nce a dduced by petitioner that the Tungsol flash e : s in quest i on are ~ctrical apparatu s f o r use on motor vehicles for lis hting or s i gnalling purposes. Since it is the gener a l purpose or pr edominating us e for which or to wh i ch i mp orted articles are adapted or applied that governs the ass ess ment of duty (La Campana General de Tabacos de Fil i pinas vs. United States, supra)~ there seems to be no doubt that the Tungsol flashers should fall under Tariff Heading No. 85.09 at 30% ad valorem, which explic i tly includes electrical ligh ting and signalling equipment for motor von icles. ~!.' he Explanatory Notes to the Brussels Nomencla- ture, upon which our Tariff Law i s based, states under Tariff Head ing No. 85.09 that: "This head~ng cove rs electrical a pparatus aud appliances special i sed for use on cycles or moto r vehicles for lighting or signalling purposes." The heading also includes, i n t er alia, -'.l � ,, '

DECISION - CTA CASE NO. 28 29 - 10 - "braking lights , direction indication lights , reversing lamps and the like. 11 (pp. 1672-~673, Tejam, Montano, Co2mentaries of the Revised Tariff and Customs Cod e o f the Phi lippines, Vol. III, 1973 Edition.). Worthwhile noti ng is the fact t h3t the importations made by pet it ioner of the same Tungsol flashe rs i n 1972 and 1973 were classi f ied and assessed of cus toms dut i es by the Bureau of Customs unde ~ Tari ff Heading No. 85.09 at 10% and 30~ ad valorem, respective ly . ~:S xhs . L, L-1. to L-8; M, M-1 to M-8; N, N-1 to N-8; and O, 0 - ~ to 0-6.) . A portion o ~ the testimony of petitioner's wit- ness, Mr. Daniel P . Inciong , in his capacity as manage r, purchasing department of the Campos Rueda Cor poration, on cross examination by Soiicitor Kilayco , counsel for respondent, together with the shipping documents of the previous import ations marked as Exhibits L, L-~ to L-~; M, M-1 to M-8 ; N, N-~ to N-8; and o, o-~ to 0-6, suffi- ciently established th i s fact . To quote : (L.s.n . , pp. 34 - ~6, hearing on November ~7, 1978.) Q Mr. Inciong, you said that previ ous impor- tation- of the petitioner of Flashers were ~ � 3Si fied by the Bur eau of Customs under Tariff Heading 85.09? A Yes. Q Do you have any document to show that the Burea u of Customs clas si fied your previous importation s o f Fl 2 .~ ers un de r Ta ri ~ f Heading 85.0 ~ ? A Right now, I don't have the documents but if required, I c an submit.

DECISION - CTA CASE NO. 2829 - 11 - SOLICITOR KILAYCO No further questions, Your :1 onor. JUDGE F E .LER Re-d. irec.t? ATTY. SANTOS If Your Honor please - .I have no re- . direct examination but may I reserve for the presentation of the documents showing that the previous impor tations of the corporation wer e asse ssed under Tariff Heading 85.0~? JUDGE FILLER When have yo u been importing this Tung-sol Flasher from the United States? A I don't have the exact date, Your Honor , but I suppose even before I started as Purchasing Manager in 1970. J UDG:C F I LLE R And at that t i me these articles we re classi- fied at 30 % ad valorem? A Correct, Your Honor. JUDGE FILLER Since when c'~ � 1 the Bureau of Customs begin imposi n ~ a ~ 50% these Flashers? A I t h ink , since 1973. JUDGE FI LLER So that, previous to t hat, your importa- tions of these Flasher s had always been classified under Tariff Heading 8 5.09 at 30% ad valorem? � A Yes, Your Honor. While, as stated ea r lier, res pondent admitted in his answer (paragraph 1) that the imported Tungso1

DECISION - C T~ CASE NO. 2829 - 12 - Products are electrical lighting and signalling parts, he however aver s as aff irmative defense ( i n his answe r ) that "fo r being i rnp o r t~.d alone subj ect article ( f1:tshe r s ) c 2 ~ not be properly de eme d as electric al signal equip- me nt for motor ve hicl es but sho uld be tr eated mor e as a device f or closing or opening on electrical c i rcu it" classified as "electr i cal appar atus f or making and breaking electrical .; ircuits" under Tariff Heading No. 85.19 at 50% ad v .~~lorem . Flas l: e r s, if~ or ted alone, can not therefore be cl as 8 ifi ed und e r Tariff Headin0 No . 85 .09 at 30% ad valorem , accord ing to respond ent, but must fall under Tariff Heading No. 85.19 at 50 % ad valorem. Undou~ t ed ly, r ~s p ond e nt admit s t hat the Tu ngsol flashers in q uestion 2r e "electrical lighting c.:nd sign al - ling equipment f or motor vehicles" falling under Tar iff Head ing No. 85.09 at 30 % ad valorem. Howe ver, if ii!!J2ort :: d e ~..:_:n ~, following re spon de nt's. t heory to i ts logica l c on- elusion, t hat wou ld change the nature and use of the Tungsol flashers from " e lec t r ica:. ligh ting and signa lling equipment for motor vehicles" into "e lectrical apparatu s for making and b r~ akin g e l ectri c a l circuits" under Tar if� Heading No . 8 0 .1 9. The Tar iff Law employs th~ wo rds " electr i cal lighting a nd s igna ll i ng equipment x x x x x x x ~ o r mo tor vehicles" - wi thout more, ~n d respondent admits tha t the Tungsol flasher s in question are elect rical �. "'i

DECISION - CTA CASE NO. 2829 - 13 - lighting and signalling e quipmen t for motor vehicles. Nothing t h~ re speaks of "for being imported alone", an article fa l ling under Tariff Heading No. 85.09 as electrical appa r~t us for use on mo tor vehicles for lighting and signalling purposes shall be treated as a device for making and b r eakin g _~ lectrical circui t s under Tariff Heading No. 85.19. Where the law does not provide that an article imported for electr i c al lighting and sig ~2 lling equipment for motor vehicles fallin g under Tariff Heading No. 85.09, j i impor ted a l one, shall be classified under T ~ r iff Heading No. 85.19 as "electrical apparatus for making ~ nd breaking electrical circui t s," that pr c �� ision sho uld not be read into the l a w. The law is clear and our plain duty is to apply the law as it is written. We are not to include within, or qualify , the classification of subjects to be taxed anything which is not clearly intendud by the law to be so included or qualified. Revenue laws should never be extended by implication beyond the clear import of the language used . (Kuttner vs. Collector, 18 Phil. 461; Stevedor ing vs. Trinidad, 439 Phil. 803.) But we look in r et rospect at the criterion laid down by the Supreme Court in determining the tariff classification of imported articles for purposes of the asse ssment of duties. As stated earlier, in Compana General de Tabacos de Filipinas, it is the general ') ". G 1-w ,_,

DECISION - CTA CASE NO. 2829 14 - purpose or p= edomi nating use to which articles are generally applied or used that determi ~ es their c harac- ter f o r the purpose of fix ing the duty. And we have already explained above that the uncontroverted evidence pr e sented by petitioner sufficiently establishe d the fact that the Tungsol flashers in question are to be app lied or used on motor vehicles for signalling purposes~ that is, to indicate a right turn or left turn by means of electrical flash ~s in front and at the rear of motor vehicles. It thus resul ts that such Tu ngsol flashers were not imported for ma k ing and breaking el ec trical circuits but for electrical signal purposes for motor v0 hicles. And it can not be said that the determina tive tes t is lacking simply because the subject article forms part of a signc,lling equipment of motor vehicles because the pe rtinent Explanatory No tes to the Brussels Nomencla-. ture upon which our Tar iff Law we;;; based e xp licitly states under Tariff Head ing No. 85. 09 that "parts of the goods of t he present heading are al s o classified here." (p. l6 74 , Tejam, M., Commenta r ies o n the Revised Tariff a nd Customs Co de of the Philippines, Vol. I II, 1973 Edition .) In li ne with the fore :oi ng, we 9re therefore of the opin ion and so hold that the protest of petitioner against the asse s sment and collection of additional customs duty and advanc e sales tax on its shipment of

DECISION - CTA CASE NO. 28 29 - 15 - 46 cartons of Tu ~ g sol Products (flasher s ) ~nder Entry No. 26876 i n th 2 amounts o f ~26,258.00 and ~2,297.00, respectively, togethe r with its related c laim for refund thereof, is mer itorious. However, with r e gard to the advance sales ~a x of ~2,297.00, t he same c an n o t be refunded in v iew of the fact that nothing in the records s hovs that petitioner had filed its writ ~: '2 n claim for refund thereof with t~e Commissioner of Internal Revenue an~ that the latter was made a party to this case. Without sati sfying these jurisdictional requirements, '.;hich in th2 instant case are lacking, the same is fat a l to the cla im of petitioner for the r ~ fu nd of the advance sales tax. (Wise & Company vs. Cc mrnis s ioner of Customs, CTA Case No. 2717, December 29, 1977, see also resolution dated January 15, 1979, certiorari denied in G.R. No. L-51242, March 7, 1 980; National Dental Supply Incorporated vs. Commissioner of Cus ~ oms, CTA Case No. 2826, June 30, 1980.) Accor- dingly , only the additional customs duty in the amount of ~26,258.00 is refun dabl e to petitioner Campos Rueda Corporation. WHEREFORE , the decision appealed from is modified . Respondent Commissioner of Customs is hereby ordered to refund to petitioner the s um of P26,258.00. Without pronouncement as to costs.

DECISION - CTA CASE NO . 2829 - 16 - SO ORDERED . Quezon City, Metro Manila, Jul y 28, 1980 . ~(Mr~L~~ AMANTE F~;;;_,~R Ac ting Presiding Judge I CONCU R: c/_ CON ANTE ;OAQU I N ssociate Judge