GRANDTEQ INDUSTRIAL STEEL PRODUCTS, INC.Herein represented its President, ABELARDO GONZALEZ v. HON. SECRETARY OF THE DEPARTMENT OF FINANCE,

Republic of the Philippines COURT OF TAX APPEALS Quezon City SECOND DIVISION GRANDTEQ INDUSTRIAL STEEL CTA CASE NO. 8201 PRODUCTS, INC., herein represented by its President, For: Refund of unutilized ABELARDO GONZALEZ, advance deposit Petitioner, -versus- Present: CASTANEDA, JR., Chairperson HON. SECRETARY OF THE CASANOVA, and DEPARTMENT OF FINANCE, MINDARO-GRULLA, JJ. Respondent. Promulgated: SEP Z7 Z01Z / x------------------------------------------------------------------------~---------------------x ~ ll: ')-(' ~---' DECISION MINDARO-GRULLA, i: This is a Petition for Review filed by Grandteq Industrial Steel Products, Inc. as petitioner, against the Honorable Secretary of the Department of Finance as respondent for the Court in Division, pursuant,

Grandteq Industrial Steel Products, Inc. etc., vs . Page 2 of 23 Han. Secretary of the Department of Finance CTA Case No. 8201 DEC I Sl 0 N to Rule 4, Section 3(a)(5), in relation to Rule 8, Section 2, Revised Rules of Court of Tax Appeals1, as amended. Petitioner claims for a refund in the amount of ONE HUNDRED FIFTY SIX THOUSAND ONE HUNDRED ONE PESOS (P156, 101.00), allegedly representing unutilized advance deposit under Letter of Credit No. 066/LC/001523/06. Petitioner Grandteq Industrial Steel Products, Inc. is a corporation duly organized and existing under and by virtue of the laws of the Republic of the Philippines, with principal office at #2 Cooper St., cor. Benitez, San Francisco del Monte, Quezon City.2 ' Rule 4, Sec. 3. Cases within the jurisdiction of the Court in Division. -The Court in Division shall exercise: (a) Exclusive original over or appellate jurisdiction to review by appeal the following : XXX XXX (5) Decisions of the Secretary of Finance on customs cases elevated for automatic review from decisions of the Commissioner of Customs adverse to the Government under Section 2315 of the Tariff and Customs Code; XXX XXX Rule 8. Sec. 2. Review ofcases in the Court in Divison. -In appealed cases falling under the jurisdiction of the Court in Division in Sections 3(a)(1) to 3(a)(6) and 3(c)(2) of Rule 4, the party filing the case shall be called the Petitioner and the party against whom the case is filed shall be called the Respondent. The pleading shall be entitled Petition for Review. XXX XXX 2 Petition for Review, The Parties, Docket, pp.5-6.

Grandteq Industrial Steel Products, Inc. etc., vs. Page 3 of 23 Hon. Secretary of the Department of Finance CTA Case No. 8201 0 E C I Sl 0 N Respondent Hon . Secretary of the Department of Finance (DOF) is the head of the DOF, the government agency in charge of the Bureau of Customs (BOC). He holds office at the DOF Bldg., BSP Complex, Roxas Boulevard corner Pablo Ocampo Sr. St. , Manila.3 Petitioner applied for a Letter of Credit (LIC) No. 001523/06 amounting to One Hundred Fifty Six Thousand One Hundred One Pesos (P156, 101.00), with the Metropolitan Bank and Trust company on the shipment of tool steel from Germany4 . Petitioner paid the pre-requisite advance deposit for the said L/C in the amount of ONE HUNDRED FIFTY SIX THOUSAND ONE HUNDRED ONE PESOS (P156, 101.00) and it was duly reflected in Import Entry Declaration (lED) No. 25615091 5. Said importation did not materialize and that the Letter of Credit was unutilized and was cancelled as per letter of Metrobank dated January 18, 20076. t.. 3 Ibid. , Docket, p. 6. 4 Par. 1, Joint stipulation of Facts and Issues (JSFI), Docket, p. 94. 5 Par.2, Ibid. 6 Exhibit "D".

Grandteq Industrial Steel Products, Inc. etc., vs . Page 4 of23 Hon. Secretary of the Department of Finance CTA Case No. 8201 DEC I Sl 0 N Petitioner filed a claim for refund of the unutilized advance deposit with the District Collector of the Bureau of Customs on February 16, 2007.1 Petitioner paid the refund processing fee on November 17, 2008 in the amount of P700.00 per BCOR No. 1580962678 . In the 1st Indorsement dated March 16, 2007, the Deputy Collector for Assessment of the Port of Manila recommended that the request for refund through tax credit be given due consideration.9 The Bureau of Customs via Disposition Form dated April 20, 2009 recommended the approval of the claim for refund of petitioner's unutilized advance deposit under L/C No. 001523/06. When the refund claim of petitioner was elevated to the Secretary of Finance, he, through the 2nd Indorsement dated June 17, 2010, denied petitioner's refund claim for its purported failure to pay the required processing fee within the statutory limit. The Motion for C. 7 Exhibit "E". 8 Exhibit "H". 9 Par. 6, Facts, JSFI , docket, p. 95; Exhibit "G".

Grandteq Industrial Steel Products, Inc. etc., vs. Page 5 of 23 Hon. Secretary of the Department of Finance CTA Case No. 8201 DEC I Sl 0 N Reconsideration of petitioner was likewise denied in the 3rd Indorsement dated October 11, 201 0. 1o On December 16, 2010, petitioner filed the instant Petition for Review with this Court. Respondent, in his Answer11 filed on March 7, 2011, interposed the following Special and Affirmative Defenses: "5. Respondent repleads, reproduces and incorporates by way of reference all the foregoing averments, and further states: 6. The case involves a claim for tax refund by petitioner as a consequence of its non-utilization of Letter of Credit (LIC) No. 001523/06 in the amount of EUR69,138.10 issued by the Metropolitan Bank and Trust Company (Metrobank) on June 28, 2006 supposedly for its shipment of "tool steel" from Germany, which however did not materialize. Petitioner paid the corresponding advance deposit of Php156, 101.00 for duties and taxes, which was duly reflected in the Import Entry Declaration (lED) No. 25615091. 7. On January 18, 2007, the Head of the Import Department of Metrobank wrote a letter to the Bureau of Customs (SOC) informing the latter that L/C No. 01523/06 remained unutilized and was correspondingly cancelled in their books on even date for the reason that the subject importation did not materialize. 8. On February 16, 2007, petitioner, through its President, wrote the District Collector of the Port of Manila (POM), requesting for the refund of the advance deposit it paid under lED No. 25615091, attaching therewith supporting documents. t. 1o Pars. 9 and 10, Facts, JSFI , docket, p. 96; Exhibits "A" and "B". 11 Docket, pp. 65-70.

Grandteq Industrial Steel Products, Inc. etc., vs . Page 6 of 23 Hon. Secretary of the Department of Finance CTA Case No. 8201 DEC I Sl 0 N 9. However, it was only on November 17, 2008 that petitioner paid the refund processing of Php700.00 under the BOC Official Receipt BCOR) No. 158096267. 10. On April 20, 2009, the BOC issued its recommendation for the approval of petitioner's claim for refund of the unutilized advance deposit of Php156,101.00. 11. On May 13, 2010, the Commissioner of Customs elevated its recommendation to respondent for automatic review. 12. On June 17, 2010, respondent, through then Undersecretary Estela Valdez-Sales , Legal & Revenue Operations Group, issued a 2nd Indorsement denying petitioner's claim for refund. The dispositive portion thereof reads : In view thereof, this Department DENIES the claim of GRANDTEQ INDUSTRIAL STEEL for the refund of advance deposit amounting to Php156, 101.00 for failure of claimant to pay the required refund processing fee within the statutory limit as provided under Section 1707 in relation to Section 3301 and 3303 of the TCCP, as amended . 13. On September 3, 2010, petitioner filed a motion for reconsideration of the above 2nd Indorsement, which respondent, however, denied through a 3rd Indorsement issued on October 11, 2010. Hence, this petition. 14. The issue in this case is whether the failure of petitioner to pay the refund processing fee within the prescribed period of one (1) year is fatal to its claim for refund. Petitioner submits that it is. 15. The present claim for refund was filed within the statutory limit prescribed by Customs Administrative Order No. 2-95 (CAO 2-95), which states: II. General Administrative Provisions XXX C. Period to File Claim for Refund 4

Grandteq Industrial Steel Products, Inc. etc., vs. Page 7 of 23 Hon. Secretary of the Department of Finance CTA Case No. 8201 DEC I Sl 0 N The importer/claimant shall have a period of one (1) year from the date the totally or partially unutilized L/C is cancelled by the AAB. 16. However, petitioner failed to pay the requisite refund processing fee within the same period that it filed the claim for refund . Thus, there should have been no basis for the BOC to process its claim . 17. Besides, Section 3301 in relation to Sec. 3303 of the Tariff and Customs Code of the Philippines (TCCP) provides that fees must be paid for services rendered and documents issued by the BOC , evidenced by a documentary stamp tax, absent which no document or other paper shall be received of (sic) recognized by any custom officials. The said provisions state: Sec. 3301. Customs Fees and Charges. - For services rendered and documents issued by the Bureau of Customs, the following fees shall be charged and collected, by affixing documentary customs stamps in the correct amount upon the document or any other paper which is the subject of the charge and by the cancellation of such stamps in the manner prescribed by the Commissioner, and no such document or any other paper shall be issued or granted by any customs official until the correct amount of stamps shall have been affixed and cancelled : xxx Sec. 3303. Effect of Failure to Affix Stamp upon Document. No document or any other paper upon which no documentary customs stamps have been affixed and cancelled shall be received or recognized by any customs officials. (emphasis supplied) 18. Petitioner however claims that these provisions relied upon by respondent do not even show that the failure of the taxpayer to comply with the payment of the refund processing fee within a period of one (1) year from the filing thereof shall be cause for the denial of the claim for refund . t.

Grandteq Industrial Steel Products, Inc. etc., vs. Page 8 of 23 Hon. Secretary of the Department of Finance CTA Case No. 8201 DEC I Sl 0 N It maintains that CAO No. 5-92 does not even indicate that payment of the refund processing fee should be made, or CAO No. 2-2001 provide for a prescriptive period within which to pay for the processing fee with a corresponding penalty for non-payment thereof. Respondent disagrees. 19. In the interpretation of a statute, the Court should start with the assumption that the legislature intended to enact an effective law, and the legislature is not presumed to have done a vain thing in the enactment of a statute. An interpretation should, if possible, be avoided under which a statute or provision being construed is defeated, or as otherwise expressed, nullified, destroyed, emasculated, repealed, explained away, or rendered insignificant, meaningless, inoperative or nugatory (Paras vs. Comelec, Nov. 4, 1996). 20. Further, Courts admonish against a too-literal reading of the law as this is apt to constrict rather than fulfill its purpose and defeat the intention of its authors. That intention is usually found not in "the letter that killeth but in the spirit that vivifieth." The spirit, rather than the letter of a law determines its construction; hence, a statute, as in this case, must be read according to its spirit andintent (Paras, supra.). 21. It is in the light of the foregoing well-settled prescriptions of statutory construction that CAO 5-92 should be read in the context of the policy of Sections 3301 and 3303 of the TCCP to require that payment of charges and fees before the BOC may recognize any document or render any service . 22. Claims for refund of advance taxes and duties paid must be made within one (1) year from the date the totally or partially unutilized letter of credit is cancelled by the Authorized Agent Bank (CAO 5-92). Following the intention of the law revealed by the aforementioned sections of the TCCP, before the BOC may act upon the claim , the required processing fee must likewise be paid within the same period. 23. In this case, while petitioner filed its request for refund on February 16, 2007, or within the statutory limit of one (1)t'

Grandteq Industrial Steel Products, Inc. etc. , vs. Page 9 of 23 Hon. Secretary of the Department of Finance CTA Case No. 8201 DEC I Sl 0 N year, the refund processing fee was paid only on November 17, 2008, or after the lapse of the period to claim for refund. Being so, there should have been no basis for the SOC to process the claim , as petitioner's right thereto had been lost. 24. In other words , unless the refund processing fee is paid within the same period of one (1) year within which to claim for refund, the claim cannot be considered as having been received or recognized by the SOC . Such rule is a necessary incident to the proper, efficient and orderly discharge of administrative functions . The requirement of payment of processing fees is by no means a mere technicality of law or procedure, but an essential requirement. Thus, the failure of petitioner to satisfy the requirement deprives the SOC of jurisdiction to entertain the claim for refund. 25. Finally, it need be stressed that the Supreme Court had long laid down the doctrine "that tax refunds are in the nature of tax exemptions. As such , these are regarded as in derogation of sovereign authority and are to be strictly construed against the person or entity claiming the exemption ." (Bank of the Philippine Islands vs. Court of Appeals, 416 SCRA 4,15 [2003] ; Nestle Philippines, Inc. vs. Court ofAppeals, 360 SCRA 575, [2001]). During trial , petitioner presented its lone witness Mr. Abelardo M. Gonzalez12, President and authorized representative of petitioner. On September 20, 2011 , petitioner filed its Formal Offer of Exhibits 13 , through registered mail , offering Exhibits "A" to "N-1",c 12 Minutes of the Hearing dated September 5, 2011 , Docket, p. 127; TSN dated April September 5, 2011 . 13 Docket, pp. 140-146.

Grandteq Industrial Steel Products, Inc. etc., vs. Page 10 of 23 Hon. Secretary of the Department of Finance CTA Case No. 8201 DEC I Sl 0 N inclusive of submarkings; which this Court admitted in a Resolution 14 dated November 4, 2011. The documentary evidence formally offered and admitted are as follows : Description : 2nd Indorsement of the Department of Finance dated Exhibits: June 17, 2010 A 3rd Indorsement dated October 11 , 2010 Secretary's Certificate B Letter of Metropolitan Bank and Trust Company dated January 18, 2007 c Letter claim for refund dated February 16, 2007 Certification from the Liquidation and Billing Division D 1st Indorsement dated March 16, 2007 BC Form No. 38-A of the Bureau of Customs E Disposition Form dated April 20, 2009 F Motion for Reconsideration G Petition for Review filed before the Court of Tax H Appeals Judicial Affidavit J The name and signature of petitioner Abelardo M. M Gonzalez ( N N-1 14 Docket, pp. 197-198

Grandteq Industrial Steel Products , Inc. etc. , vs. Page 11 of 23 Hon. Secretary of the Department of Finance CTA Case No. 8201 DEC I Sl 0 N Respondent's counsel manifested that she has no witness to present in the instant case, as the same merely involved a legal issue15. On December 27, 2011 , the instant case was submitted for decision , considering petitioner's Memorandum filed on December 16, 2011 16, and the Manifestation of respondent that it would be adopting its Answer as its Memorandum1 7. The issues, as stipulated by the parties are as follows1B: 1. Whether or not the denial of claim for refund of unutilized advance deposit under Letter of Credit No. 001523/06 by the Hon . Secretary of Department of Finance is in accordance with existing law and applicable decisions of the Honorable Supreme Court. 2. Whether or not petitioner's failure to pay the refund processing fee within the same period of one (1) year for filing a claim for tax refund is fatal to its claim for tax refund . As previously stated, petitioner contends that it is entitled to a refund of its unutilized advance deposit in the amount of P156,101.00( 15 Minutes of the Hearing dated September 5, 201 1, Docket, p. 127. 1s Docket, pp. 205-218. 11 Docket, p. 200. 1s Joint stipulation of Facts and Issues, Docket, p. 96.

Grandteq Industrial Steel Products, Inc. etc., vs. Page 12 of 23 Hon. Secretary of the Department of Finance CTA Case No. 8201 DEC I Sl 0 N considering that it has substantially complied with the requirements of the law. Petitioner, as basis of its claim, cites Section 1708 of the Tariff and Customs Code of the Philippines (TCCP). On the other hand, respondent based its denial of petitioner's claim for refund on the ground that it failed to pay the required refund processing fee within the statutory limit as provided under Section 1707, in relation to Sections 3301 and 3303 of the Tariff and Customs Code of the Philippines. Specifically, respondent avers that notwithstanding the fact that petitioner's claim for refund was filed within the statutory limit prescribed by Customs Administrative Order No. 5-92 (GAO 5-92), petitioner nevertheless, failed to pay the requisite refund processing fee within the same period that it filed the claim for refund. Thus, respondent insists that the Bureau of Customs (BOC) does not have any basis to process petitioner's claim for refund of its unutilized advance deposit. Furthermore, respondent contends that Section 3301, in relation to Section 3303 of the TCCP provides that fees must be paid for{

Grandteq Industrial Steel Products, Inc. etc., vs. Page 13 of 23 Hon. Secretary of the Department of Finance CTA Case No. 8201 DEC I Sl 0 N services rendered and documents issued by the SOC, evidenced by a documentary stamp tax, absent which, no document or other paper shall be received or recognized by any customs officials, to wit: "SEC. 3301. Customs Fees and Charges. - For services rendered and documents issued by the Bureau of Customs, the following fees shall be charged and collected , by affixing documentary customs stamps in the correct amount upon the document or any other paper which is the subject of the charge and by the cancellation of such stamps in the manner prescribed by the Commissioner, and no such document or any other paper shall be issued or granted by any customs official until the correct amount of stamps shall have been affixed and cancelled : xxx " "SEC. 3303. Effect of Failure to Affix Stamp upon Document - No document or any other paper upon which no documentary customs stamps have been affixed and cancelled shall be received or recognized by any customs officials." (emphases supplied) . On the contrary, petitioner argues that the provisions of law relied upon by respondent does not show that failure of the taxpayer to comply with Sections 3301 and 3303 of the TCCP shall result in the denial of its claim for refund. Moreover, petitioner points out that even Customs Administrative Order No. 2-2001 (GAO 02-2001), which enumerates the rates of customs brokerage fees , including the refund processing fees , does not provide for a prescriptive period within which to pay for the processing fee nor a penalty for non-payment thereof.(

Grandteq Industrial Steel Products, Inc. etc. , vs. Page 14 of 23 Hon. Secretary of the Department of Finance CTA Case No. 8201 DEC I Sl 0 N We find merit in petitioner's arguments. The right to claim for refund of customs duties and taxes is specifically governed by Section 1708 of the Tariff and Customs Code ofthe Philippines, which provides that: "SEC. 1708. Claim for Refund of Duties and Taxes and Mode of Payment - All claims for refund of duties shall be made in writing and forwarded to the Collector to whom such duties are paid , who upon receipt of such claim , shall verify the same by the records of his Office, and if found to be correct and in accordance with law, shall certify the same to the Commissioner with his recommendation together with all necessary papers and documents. Upon receipt by the Commissioner of such certified claim he shall cause the same to be paid if found correct. If as a result of the refund of customs duties there would necessarily result a corresponding refund of internal revenue taxes on the same importation , the Collector shall likewise certify the same to the Commissioner who shall cause the said taxes to be paid , refunded, or tax credited in favor of the importer, with advice to the Commissioner of Internal Revenue ." Thus , in order to be entitled to a refund of customs duties and taxes, the taxpayer/importer must comply with the following requisites : 1. The claim for refund [s]hall be in writing addressed to the District collector of the port concerned ; 2. The Collector shall verify the claim from the records of his office; 3. If found to be correct and in accordance with law, shall certify the same to the Commissioner of Customs with his recommendation with all necessary papers and documents; and {

Grandteq Industrial Steel Products, Inc. etc. , vs. Page 15 of 23 Han . Secretary of the Department of Finance CTA Case No. 8201 DEC I Sl 0 N 4. If meritorious, the Commissioner shall approve and grant the request for refund19. Corollary to the foregoing law, Customs Administrative Order 5- 92 provides for the Guidelines and Procedures for Refund (Tax Credit) of Unutilized Advance Deposit of Customs Duties with Authorized Agent Banks. Specifically, Section Ill of GAO 5-92 enumerates the procedure to be followed in order to be entitled to a refund of advance deposit of custom duties, to wit: "Ill. OPERATIONAL PROVISIONS A. Procedures 1. Application for Refund under this Order shall be made in a Standard Application Form (Annex "A") to be filed by the claimant or authorized representatives at the Collection Division/Unit of the Port. The application shall be supported by the following documents: a. For Totally Unutilized Letter of Credit (L/C) 1. Importer's original copy of the Import Entry Declaration (lED) and BCOR; 2. Clearance number and date of issue by the Liquidation and Billing Division (LBO) and Collection Service; 3. Certification of AAB as to cancellation of L/C c because there are no corresponding 19 Nague, Handbook on the Tariff and Customs Code of the Philippines, as amended, and theCcustoms Broker Act of2004 (R.A. 9280) and its Implementing Rules and Regulations. 2005, pp.384-385

Grandteq Industrial Steel Products, Inc. etc., vs. Page 16 of 23 Hon. Secretary of the Department of Finance CTA Case No. 8201 DEC I Sl 0 N importation made whatsoever, no outward remittance of foreign exchange, and no automatic refund of the advance customs duties as allowed by CB 909 have ever been effected. XXX XXX XXX 2. Collection Division/Unit of the Port, as main office of the District Collector of Customs level, receives the application , checks the same for completeness and attaches the checklist, (Annex "B"), gives the application its docket number, indicates the date of receipt thereof, initials the same and returns a copy of the application to claimant. Claims not supported by all requirements are returned to the claimant. XXX XXX XXX 3. The RAD verifies the claim from the list of cancelled L/Cs to be provided by Central Bank, Current Imports Commodity Classification Department (CB, CICCO) , prepares certification of payment remittance and transmits all pertinent documents to the Accounting Division (AD). 4. The AD processes the claim and prepares the following : a. Journal Voucher for the Commissioner's approval ; b. Tax Credit Certificate {TCC) and Disposition Form for the approval of the Deputy Commissioner for Revenue Monitoring Group. 5. The claim folder with signed TCC is returned to the Accounting Division for final recording and release to claimant or its authorized representative .~(

Grandteq Industrial Steel Products, Inc. etc. , vs. Page 17 of 23 Hon. Secretary of the Department of Finance CTA Case No. 8201 DEC I Sl 0 N Consequently, it is clear that in order to be entitled to a refund of advance deposit of customs duties on unutilized letter of credit, the documents enumerated in Section Ill (A) of GAO 5-92 should be submitted. Thereafter, it is the duty of the District Collector of Customs, to check if the documents presented are complete . If all the required documents are submitted and upon verification that the advance deposit being claimed is indeed unutilized, the said Application for Refund together with the other documentary requirements will then be endorsed to the Revenue Accounting Division. Upon verification that there was indeed payment of advance custom duties, a Certification and the corresponding Tax Credit Certificate will be issued for approval of the Deputy Commissioner. With respect to the prescriptive period within which to file a claim for refund of unutilized advance custom duties, Section II (C) of GAO 5- 92 provides: II. GENERAL ADMINISTRATIVE PROVISIONS A . Coverage XXX XXX XXX C. Period to File Claim for Refund '

Grandteq Industrial Steel Products, Inc. etc. , vs. Page 18 of 23 Hon. Secretary of the Department of Finance CTA Case No. 8201 DEC I Sl 0 N The importer/claimant shall have a period of one (1) year from the date the totally or partially unutilized LIC is cancelled by the AAB . A review of the records show that the procedure mentioned in CAO 5-92 as well as in Section 1708 of the TCCP was followed by petitioner. In fact BOC recommended the approval of petitioner's claim for refund as it was made in accordance with pertinent Customs laws, rules and regulations20. Likewise, based on the foregoing provisions, the period to claim for refund of advance deposit for unutilized letter of credit is one year from the date the totally unutilized L/C is cancelled by the AAB . In the instant case, the L/C issued by Metrobank was cancelled on January 18, 2007 and the claim for refund was filed by petitioner on February 16, 2007. Accordingly, the claim for refund was timely filed. However, it is respondent's main contention that petitioner is not entitled to refund of its unutilized advance deposit for its failure to pay the required refund processing fee within the statutory limit.( 2o Exhibit "1".

Grandteq Industrial Steel Products, Inc. etc., vs. Page 19 of 23 Hon. Secretary of the Department of Finance CTA Case No. 8201 DEC I Sl 0 N Contrary to respondent's claim, a perusal of all the foregoing provisions would show that there is indeed no mention that the refund processing fee should be paid within the one year period provided under CAO 5-92, in order to be entitled to a claim for refund of customs duties. In fact even a reading of Customs Administrative Order No, 2- 2001 21 , which enumerates the rates of customs brokerage fees, including the refund processing fees, does not provide for a prescriptive period within which to pay the said refund processing fee nor a penalty for non-payment thereof. Further, even the contention of respondent that CAO 5-92 should be read in the context of the policy of Sections 3301 and 3303 of the e 21 "SUBJECT: RATES OF CUSTOMS BROKERAGE FEES Pursuant to Sections 608 and Section 3301 to 3304 , Tariff and Customs Code of the Philippines, in relation to Section 36, Administrative Code of 1987 and Executive Orders Nos. 197 and 218, both series of year 2000 as implemented by DOF and DBM Joint Circular No. 2000-2 dated April 3, 2000, the rates of customs fees and charges in all ports of the Philippines shall be as follows: XXX XXX XXX Refund Processing Fees/Docket Fees On ordinary claims for refund of tax and duty payments, including cash bonds; and for each formal protest/appeal from the decision of the District CollectorNaluation & Classification Review Committee (VCRC) XXX XXX xxx"

Grandteq Industrial Steel Products, Inc. etc., vs. Page 20 of 23 Hon. Secretary of the Department of Finance CTA Case No. 8201 DEC I Sl 0 N TCCP does not run counter to the approval of petitioner's claim since as argued by respondent Sections 3301 and 3303 of TCCP require the payment of charges and fees before the SOC may recognize any document or render any service. In the instant case, it is undisputed that petitioner paid the refund processing fee on November 17, 2008. Such being the case, the recommendation by SOC for the approval of petitioner's claim for refund of unutilized advance deposit is just proper. Further, respondent argues that tax refunds are in the nature of tax exemptions. It is true that it is axiomatic that a claimant has the burden of proof to establish the factual basis of his or her claim for tax credit or refund . Tax refunds, like tax exemptions, are construed strictly against the taxpayer.22 In the instant case, however, petitioner was able to prove that it was indeed entitled to its claim for refund considering that it had complied with the requirements provided by applicable laws, rules and regulations. As held by the Supreme Court in the case of Nestle Philippines, Inc. vs. Court ofAppeals, in all claims for refund of customs duties, the 4. 22 Paseo Realty and Development Corporation v. Court ofAppeals, G.R. No. 119286, 13 October 2004, 440 SCRA 235, 247.

Grandteq Industrial Steel Products, Inc. etc. , vs. Page 21 of 23 Hon. Secretary of the Department of Finance CTA Case No. 8201 DEC I Sl 0 N Collector to whom such customs duties are paid and upon receipt of such claim is mandated to verify the same by the records of his Office. If such claim is found correct and in accordance with law, the Collector shall certify the same to the Commissioner with his recommendation together with all the necessary papers and documents23� Considering that the BOC have recommended the approval of petitioner's claim for refund and finds that petitioner have complied with requirements provided by law, rules and regulations, this Court sees no reason to deny the same in view of established doctrine that findings of fact of administrative agencies are accorded not only respect but also finality when supported by substantial evidence. In fine , to deny petitioner's right to its claim for refund which rightfully it is entitled to would violate substantial justice, equity and fair play. As held by the Supreme Court in the case of BPI-Family Savings Bank, Inc. vs. Court ofAppeals24, to wit: "Substantial justice, equity and fair play are on the side of petitioner. Technicalities and legalisms, however exalted , should not be misused by the government to keep money not belonging to it and thereby enrich itself at the expense of its law-abiding citizens. If the State expects its taxpayers to-e 2JG .R. No. 134114, July 6, 2011 . ~ G . R. No. 122480, April 12, 2000.

Grandteq Industrial Steel Products, Inc. etc., vs. Page 22 of 23 Hon. Secretary of the Department of Finance CTA Case No. 8201 DEC I Sl 0 N observe fairness and honesty in paying their taxes, so must it apply the same standard against itself in refunding excess payments of such taxes. Indeed, the State must lead by its own example of honor, dignity and uprightness." (emphasis supplied) WHEREFORE, in view of the foregoing, the instant Petition for Review is hereby GRANTED. Accordingly, respondent is hereby ORDERED TO REFUND OR ISSUE A TAX CREDIT CERTIFICATE in favor of petitioner in the amount of P156, 101.00, allegedly representing unutilized advance deposit under Letter of Credit No. 066/LC/001523/06. SO ORDERED. Cu1it N.� M~~4C~ CIELITO N. MINDARO-GRULLA Associate Justice WE CONCUR: CAESA~NOVA Associate Justice ~~�dr c. ~~~I~. JUANITO C. CASTANEDA, JR. Associate Justice

Grandteq Industrial Steel Products, Inc. etc., vs. Page 23 of23 Hon. Secretary of the Department of Finance CTA Case No. 8201 DEC I Sl 0 N ATTESTATION 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 . s.:?:~;f;e.~~ ~- JUANITO C. CASTANEDA, JR. Associate Justice Chairperson 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's Division. L~ .Clt.-Yi- ERNEsTo D. ACOSTA Presiding Justice