CTA Case No. 5386 (Decision)

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY PET RON CORPORATION, Petitioner~, - -- ver~sus C.T.A. CASE NO. 5386 COMMISSIONER OF THE BUREAU OF CUSTOMS, Respondent. X- - - - - - DECISION This is an appea 1 ft~o m the decision of the Commissioner of Customs, dated April 29, 1996, which adopted the ruling of then Secretary of Finance, Robet~t o de Ocampo, dated Apr~ i 1 8, 1996, denying Petitioner's claim for refund in the amount of 1='188,282,348.00 representing the 9% additional ad valorem duties paid on its importations of crude oil. Dm~ing the per~iod Apt~il 9, 1992 to June 24, 1992, Petitioner imported crude oil from the Middle East and correspondingly paid duties and taxes, the specific details of which are herein-below listed: Date Vessel Duties/Taxes Paid Duties/Taxes Due Subject of Refund Clai1 4-09-92 N.P. Tatina p 35,244,572.00 p 22,189,262.00 4-21-92 Doveche1 VOl 3,191,168.50 2,690,176.50 p 13,055,310.00 5-1Q-92 World Progress 500,992.00 5-13-92 Telaga Ayu 380,003,896.00 332,785,789.00 5-28-92 Azija VOl 45,097,441.50 37,383,516.50 47,218,107.00 5-31-92 Raha Sulayaan V12 53,182,833.50 44,282,636.50 7, 713,925.00 6-12-92 Chilhaa Castle 192,107,448.50 177,288,681. 50 8,900,197.00 6-12-92 World Adairal 48,419,586.50 43,756,982.50 14,818,767.00 6-20-92 Aabra Stresa 374,182,007.00 337,495,162.00 4,662,604.00 6-24-92 Diego Silang V196 381,175,685.00 340,945,253.00 36,686,845.00 156,961,461.50 142,466,292.50 40,230,432.00 1414951169.00 P1881 2821 348.00

DECISION C.T.A. CASE NO. 5386 .c-.. Undisputed facts show that the taxes and duties paid by Petitioner upon arrival of these importations included the additional duty of nine (9'1.) percent ad valorem imposed by Executive Order No. 443. Subsequent 1 y, Petit i onet~ filed the consumption entt~ies corresponding to these importations between August 28, 1992 to Octobet~ 2, 1992, in accot~dance with the pt~ocedtwe prescribed by the Tariff and Customs Code of the Philippines CTCCP). On July 1' 1992, Executive Order No. 443 which imposed the additional nine (9'1.) percent ad valorem tax, ceased to be effect ive as can be clearly seen from its pt~ o visions, thus : "Section 5. This Executive order shall take effect after ten (10) days following the completion of its publication in two (2) nation a 1 news papet~s of g en et~a 1 c i t~cu 1 at ion, and shall remain effective until June 30, 1992 or unless soonet~ t~evoked ot~ modified. 11 (Underscoring s u pplied) It is the theory of the Petitioner that the applicable rate of import duty should be the one existing at the time i t s shipments wet~e 11 ent et~ed 11 in accot~dance with Sections 205 and 206 of the TCCP, hence ) the additional nine (9'1.) percent duties it paid to the Bureau of Customs is refundable due to the fact that, at the time the f ormal consumption entries were filed, Executive Order No. 443 was no longer in effect.

DECISION C.T.A. CASE NO. 5386 3 Based on this theot~y, Petitionet' made written requests to the Customs Collector of Limay, Bataan, for a refund of the amount of P188,282,348.00 representing the aggregate sum of additional ad valorem duties it paid on the aforementioned impo r tations. In a letter, dated April 29, 1996, and received by petitioner on May 15, 1996, Deputy Commissi o ner Licerio Evangelista denied Petitioner's claims fat~ reiterating the ruling made by the Secretary of Finance Roberto de Ocampo in a second indorsement, dated Apt'il 8, 1996 (see pages 12 and 13, CTA records). On June 14, 1996, Petitioner appealed the decision of the Deputy Commissioner to this Court by way of a Petition for Review reiterating its claim for refund in the aggregate sum of P1B8,282,348.00. At issue in this case is the correct determination of the rates of import duties to be applied on Petitionet~' s importations of crude oil which arrived dtwing the pet'iod Apt'il 9, 1992 to June 24, 1992. Petitioner submits that the rates of import duty which are in effect at the time of filing of the formal consumption entl�'i es, t ogethet~ with other documents, shall govern and since the consumption entries were filed after E.O. No. 443 ceased to be in effect, then the nine <9'1-) percent additional duties should no longer be imposed.

DECISION C.T.A. CASE NO. 5386 - 4- Petitioner anchors its theory on Sections 205 and 206 of the TCCP which provides, thus: "Sec. 205. Errective Date or Rates or Import Duty. Imported articles shall be subject to the rate or rates of import duty existing at the time of entry. or withdrawal from warehouse, in the Philippines for consumption. x x x" "Sec. 206. Enh'y or Uithdrawal rt'OIII Uarehouse ror Consumption. ImpDl�~ted at~ticles shall be deemed "entet~ed" in the Philippines for consumption when the specified entry form is properly filed and acce pted, together with the related documents required by the provisions of this Code and/or regulations to be filed with such form at the time of entry, at the port or station by the customs official designated to receive such entry papers and any duties, taxes, fees, and/or other lawful charges required to be paid at the time of making such entry have been paid or received to be paid with the customs official designated to t~eceive such monies, pt~ovided that the at~t icle has previously arrived within the limits of the pot~t of entt~y. x x x." As mentioned earlier, Petitioner filed the formal consumption entries corresponding to the impot~tation between August 28, 1992 to October 2, 1992 when E.O No. 443 was no longer in effect. Petitioner maintains that the delay in the filing of the formal consumption entries from the dates of arrival of the imported crude oil was not deliberate on and is largely attributed to the late transmittal of documents by its suppliers abroad. These documents refer to the bills of lading, the survey reports and the

DECISION C.T.A. CASE NO. 5386 5 original invoices, information from which were needed to fill up the formal consumption entries. To s Petitioner~' ar~gumentat ions, Respondent invokes Section 1301 of the TCCP which pr~ ovid e s, thus : Section 1301. Pet'sons f:luthorized to Make I111port Entries . - Impor~ted ar~ticles must be entered in the Customshouse at the Port of Entry within five (5) da y s from the date of discharge of the last package from the vessel either~ (a) by the i m por~ter~, being the holder~ of the b i 11 of 1ad in g, (b) by the d u 1 y 1 ice n sed customs broker acting under authority from a holder of the bill of lading or (c) by a person duly empowered to act as agent or attorney-in- fact for~ each h o 1 der~; Provided, that the collector may grant an extension of not more than five (5) da y s: x x x" <Undet~scor~ing supplied) Respondent submits that the aforequoted Section 1301 mandates that formal entr~ies must be filed within the five (5) or~ ten (10)-day period from the date of discharge of the last package from the vessel and, when read together with Sections 204 and 205 of the TCCP, would show that the questioned importations are subjE~ct to ad valorem duty provided by E.O. No. 443 due t o the fact that at the time the last packages were discharged, the said Executive Order was still in effect. Petitioner~ count er~s that its payment of underguarding <overtime) fees on its shipments computed from their arrival up to the time the entries were filed

DECISION C.T.A. CASE NO. 5386 -� 6 -� has rendered the five-day period prescribed by Section 1301 of the Code merely permissive. Petitioner further posits that three of its previous shipments which were subjected to new rates of duty existing at the time their import entries were filed, notwithstanding the fact that they arrived much earlier and beyond the five or ten-day period prov i ded in Sect i on 1301 of the Code. Respondent belittles these observations made by Petitionet~ and declaJ�~es that the payment of the underguarding fees, as allowed by Sections 608 and 3506 of the Code and as implemented by Customs Administrative 2-82, as amended by CAD 3-91, cannot be read together with Section 1301 of the same Code, inasmuch as they differ in subject matter, the latter pertaining to the period within which an i mport entry must be filed and on underguarding fees. With respect to the previous shipments cited by Petitioner, Respondent argues that these are not applicable to the case at bat~ because the former complied with the provisions of Section 1301 of the Code, entries having been filed within the prescribed five or ten-day period. It should be noted that Respondent does not take issue with the fact of payment of the n in e ( 9'1-) additional ad valorem duties made by Petitioner but focuses his arguments on the applicability of the tax

DECISION C.T.A. CASE NO. 5386 - 7- provided under Executive Order No. 443 on the importations of petroleum products during the period 1992 to June 24,1992 (see Respondent's Comment on pages 63 to 68, CTA Records). After a painstaking scrutiny of the attending facts, the ar"guments of the par'ties and the applicable provisions of law and jurisprudence in point, this Court rules in favor of the Petitioner. Based on a synthesis of the aforecited provisions of Sections C:~05 and C.:06 (supr'a.), it is clear' and unambiguous that the rate of import duty to be applied should be that which is existing at the time of entry of the specified together with the related documents, as required by the Code and regulations of Respondent's Bul�'eau. We cannot, thus, adhere to Respondent's view that the rate of import duty to be imposed should be reckoned only during the first five or ten-day period after' an"ival of the shipments, because to do so would result in the perpetration of falsehood and distortion of events. The facts of the case unmistakably reveal that no act of "entr'y" or filing of the requisite entry form transpired during the first five or ten-day period after arrival of petitioner's shipments. Such filing of the entry occurred months after. Section 205 of the TCCP clearly provides that the imported articles shall be

DECISION C.T.A. CASE NO. 5386 - 8- subject to the rate or rates of import duty existing at the time of entry. These imported articles are deemed e n t 11 et~ed 11 upon the filing and subsequent acceptance of the consumption entries, pursuant to the provisions of Section 206 of the same Code. In the instant case, when the consumption entt~ies wet~e filed, E.O. No. 443 was no longer in effect, hence the nine (9~) percent additional duties paid by Petitioner should be refunded. The attempt, of Respondent to relate Sections 205 and 206 to Section 1301, of the Tariff and Customs Code, is untenable and simply violative of the literal import and categorical language of the provisions of said Sections 205 and 206. The special attention given by the Respondent to Section 1301 should be limited to what it is mainly intended under its heading and, that is, to name the persons authorized to make an import This is in contrast to Sections 205 and 206 which specifically pt~ovides fat~ the eFFective date ot=- r�ates or impor�t� dut.v, which is, undeniably the one at issue in this case, and the definition and requirements of a valid entr~y, t~espect i ve 1 y. With this pronouncement, We chose not to dwell anymore on a substantive discussion of the permissive or mandatory nature of Section 1301; the pt~esence of underguarding fees; history of previous shipments being

DECISION C.T.A. CASE NO. 5386 - 9- subjected to rates at the time of filing of entry, weeks or even months beyond their arrival date; and the rule on strict construction of tax laws. We have observed that the area of statutory construction, and beyond the direct expression of the text of the Code. Whet~e the law is cleat~ and unambiguous, it must be taken to mean exactly what it says and the court has no choice but to see that its mandate is obeyed. (Chartered Bank Employees Assn. vs. Ople, 138 SCRA 273) Delving into the evidence formally offered by the Petitioner <Exhibits A-SS, inclusive), We find the same to be sufficient in establishing its entire claim for t~efund. Hereunder enumerated are the amount of duties to be t~efunded to the petitionet~, v.zz: Date of Foreign Consu1ption Entry Refundable Arrival Vessel Fon No. Date Filed Exh. A1ount 04/09/92 NP TATINA 05581473 08/28/92 v p 13,055,310.00 04/21/92 DOVECHEM V02 06143033 05/10/92 WORLD PROGRESS 05581462 08/28/92 w 500,992.00 05/13/92 TELAGA AYU 06143304 05/28/92 AZIJA VOl 06143024 09/04/92 X 47,218,107.00 05/31/92 RAHA SULAYMAN V120 06143112 06/12/92 CHILHAM CASTLE 06143015 10/02/92 y 7, 713,925.00 06/12/92 WORLD ADMIRAL 06143103 8,900,197.00 06/20/92 AMBRA STRESA V1 06143164 09/04/92 z 06/24/92 DIEGOSILANG V196 05581495 09/16/92 AA 14,818,767.00 09/04/92 BB 4,662,604.00 36,686,845.00 09/10/92 cc 09/13/92 DD 40,230,432.00 09/04/92 EE 14,495,169.00 P188,282,348.00 WHEREFORE, in view of the foregoing, the instant Petition for Review is hereby GRANTED. Accot~dingly, Respondent Commissioner of Customs is hereby ORDERED to

DECISION C.T.A. CASE NO. 5386 - 10 - REFUND to Petitioner PETRON CORPORATION the amount of ~188,282,348.00 immediately. SO ORDERED. ~~~ RAMOwN -0' . DE V Y, Associate Jud. WE CONCUR: L � ee. D~ ERNESTO D. ACOSTA Pt~ e siding Judge CERTIFICATION I hereby certify that the above decision was reached after due consultation with the members of the Court of Tax Appeals in accordance with Section 13, Article VIII of the Constitution. ~ Q,~ ERNESTO D. ACOSTA Pt~esiding Judge