CTA Case No. 3693 (Decision)

c REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY IGNACIO TORRES, Petit i ontn", C. T. A. CASE NO. 3693 COMMISSIONER OF CUSTOMS, F~ � � pond tmt. H- - - - - - - - - - - - - - H DEC X a X 0 N Thi& is an appeal from the decision of the CoMMi&5ioner of Customs affirming the forfeiture of one ( 1> unit Mercedes Ben:z, 2400, 1981 11ode 1 wi t h Motor No. 616 -~1 2- 12 -056674 and Serial No. WDB123 - 123-12- 251637 for violation of the Tariff and P�tition�r, Ignacio Torres, Administrative A��i�tant Level VIII of the Asian Development Bank, fro� Hamburg, Germany, the subject Mercede& Benz 240 <O>. On May 15, 1981, the car in que&tion arrived in the Port of Manila on board the v����l SIS "Kura�a Maru " under B/L No. 3305337 consigned to Ignacio Torres. The said consignee filed Entry No. 38954 series of 1981. The Collector of CustoMs computed the tax, customs duty and other 1egal charges due thereon in the total aMount of P377, 727.00. However, on May 28, 1981,

DECISION CTA CASE NO. 3693 - 2- the said car was released taM and duty free on the �trength of an authorization from the Department of Finance issued pursuant to Sections 34<b>, 44 and 45(f) of the _eMisting Headquarters Agree11ent between the GovernMent of the Republic of the Philippine� and the Asian DevelopMent Bank, in line with the provision of the last paragraph of Section 105 of the Tariff and Custo11s Code and the provi�ion of ite11 3 of the last paragraph of Section 204 of the revised National Interna l Revenue Code of 1977 (E)(h. "B- 7"). On or abo.ut May 24, 1982, the Co 11 ector of Cu!Jtom� of the Port of Manila seized the above Motor vehicle at 1979 Kasoy Street, Damarinas Village, Makati, Mett"o Manila in the possession of Mr. E11 i 1 i o Tayao. The seizure was ordered by the Collector of CustoMs on his alleged discovery that E~tilio Tayao had continuous use of the vehicle fro� the time of arrival until its apprehension and that the petitioner intended the vehicle as a collateral for �ome business not connected with his job at the Development Bank. After hearing, the Collector of Custo�s of the Port of Manila on February 23, 1983 ordet"ed the forfeiture of the ) �ub.j ect vehicle in favor of the government ..

DECISION CTA CASE NO. 3693 - 3- Petitioner appealed to the ComMissioner of CustoMs. In a decision dated July 29, 1983, the latter affirMed in toto the decision of the Collector of Hence, this instant appeal. The issue presented before the court is whether or not Mr. Ignacio Torres has in fact violated the provision of Section 105 of the Tariff and Custo�s Code so as to warrant seizure and forfeiture of the subject vehicle. The pertinent provision of law involved is ) qouted hereunder� SECTION 105. Conditionally-Free I�portations. The following articles shall be exeMpt fro� the pay�ent of i�port duties upon compliance with the for�al it i es prescribed in, or with, the regulat i ons which shall be proMulgated by the CoMMissioner of Custo�s with the approval of the Minister of Finance; Provided, That any art icl,e so lets.._ bartered, hired or used for purpose~ other than they were intended for without pay�en~"f the duty, tax or other charges which would h!'l\V~ been due and ,pa.Ya.bltL ..�'.t the ti�e of entry if the article had been entered without the benefit of this section, shall be subiect to forfeiture and the iMportation shall constitute a fraudulent practice against customs � reven�Je punishable under Section Thirty- siH hundred and two, as aMended of this Code1 Provided, further, That a sale pursuant to a judicial order or in 1 iquidat ion of the estate of a deceased person shall not be subject to the prec::ed i ng proviso, without prejudice to the pay�ent of duties, taxes and other c::hargess Provided, finally, That the President May, upon recoMMendation of the

..1 DECISION CTA CASE NO. 3693 - 4- Mini�ter of Finance, suspend, disallow or completely withdraw, in whole or in part, any of the conditionally-free importation under this Section: <Underscoring �upplied.) Petitioner for his part alleged that the �ubject vehicle was never transferred or sold to Mr. that it was found in his po�se��ion because it was �ortgaged to the latter a� security for a loan extended by Mr. Tayao to Petitioner, that petitioner has fully paid the loan on June 16 and 21, 1982 which renders the chattel mortgage without force and effect; that the seizure in vi olat.ion of the provisions of the Headquarter� Agree�ent between the Republic of the Philippine� and the Asian Develop�ent Bank and Ite� No. 3 of the last paragraph of Section 204 of the revi�ed National Internal Revenue Code and that the cu�tom� agents who seized the vehicle merely acted on suspicion and he did not violate the condition for the release thereof. Re�pondent for his part alleged by way of �pecial and affi r�at i ve defenses that the re 1ease of said vehicle was subject to the conditions set forth under Section 105 of the Tariff and Custo�s Code that the sa�e shall not be "sold, bartered, hired or used for purposes other than that they

., DECISION CTA CASE NO. 3693 - s- were intended for without pay�ent of the duty, tax and other charg~s", or that it should not be "intended for other persons or for barter, sale or hire". The circu�stances surrounding this case ju�tify a finding against the petitioner. The circuM�tance� show that the petitioner actually iMported subject vehicle for the use of Mr. E�ilio Tayao in violation of Section 105 of the Tariff and ,I Custo�� Code. First of all, on Dece�ber 18, 1980, Mr. Ignacio Torres, petitioner, long before the arrival of the� subject vehicle, executed in favor of' Mr. E�i 1 io Tayao a Deed of Chattel Mortgage (EHh. "E"> covering a Mercedes Benz 1981 �odel ' allegedly to guarantee pay�ent of a loan in the a�ount of' P177,ooo.oo. Likewise, on the sa�e date, DeceMber 18, 1980, petitioner executed a Special Power of Attorney granting Mr. E�ilio Tayao the power to do and execute any of' the following act�� " ( 1) To work for the release of the above de�cribed �otor vehicle fro� the warehouse or cu�tody of the Bureau of Custo�s or any other (2) To execute, sign and deliver all such docuMent� �� �ay be necessary and pertinent in 3?6

DECISION CTA CASE NO. 3693 . - 6- connection with the re 1ease of the aforesaid (3) To uae, operate, maintain the afore�entioned vehicle in connection with his peraonal , and business dealings and in all caaea without li�itt (4) To sell, transfer, dispose, �ortgage or otherwiae encu�ber the above�entioned auto�obile for any reasonable price or a�ount according to his own esti�ation " as well as to collect and apply the proceeds thereof according �to hia own wiahea or diacretion, (5) To sue for da�ages or loss involving the aa�e vehicle as well as to engage the services of a lawyer for thia purpotJef (6) To register the said vehicle with the Land and Transportation Co��ission; to renew tJIJCh registration should it beco�e necessary every year, and to perfor� everything that the govern�ent �ay require to �ake its entry in the Philippines legal according to the requireMent of the lawa and regulationa." Fro� the above docu�ent we could see that even froM the very start petitioner has been violating the provision of Section 105 of Tariff and Custo�s 377

DECISION CTA CASE NO� . 3693 - 7- Code. Its possession and use have actually been tr-antJfer-r-ed to Mr-. E� i 1 i o � Tayao even before the actual arrival of the vehicle. The Special Power- of Attor-ney will show that not only possession has been tr-ansfert' ed to Mr. Tayao but including pr-actically the r-ight of owner-ship. This can eatJily be gleaned when petitioner- granted Mr. Tayao the right "to se 11, transfer, dispose, mortgage or other-witJe encu111ber" the above �entioned vehicle for any reasonable price and proceeds thereof may be ditJpotJed of by Mr. Tayao according to his own wish and discretion. These are all acts which only a legitiMate owner can exercise. The Deed of Chattel Mortgage and Special Power of Attorney were utilized by the petitioner as an instru111ent to circuMvent the pt'ohibition provided under the Tariff and Custo�s Code. This notwithstanding the fact that said Special Power of Attorney was r-evoked after four years or on August 1, 1985. As it is prohibited to sell, barter or hire the tJubject tax exe�pt vehicle without pay�ent of dutietJ, taxea and other charges, the afore�entioned intJtruMenta were utilized to effect a transfer or uae of the vehicle without changing the owner's naMe in the certificate of registration. These

DECISION CTA CASE NO. 3693 - 8- fact� are bolstered by the findings �ade by the National Custo�s Pol ice headed by Captain Edward dela Cuesta who in his First Indorse�ent dated May 24, 1982 has reported that after surveillance of the vehicle since January of 1982, Mr. E�ilio Tayao ha� continuou�ly used the vehicle up to the ti�e of ��izure <Exh. "1">. elevated to the Court of Ta>e � Appeals, petitioner executed another Special Power of Attorney dated Augu�t 1, 1985 in favor of Mr. ,I ��powering hi� to represent petitioner in the Cour t of Ta>< Appeals~ <P. 181 of the recbrds. > So that when the court ordered the release of the vehicle under bond, this court noticed in the custody receipt issued by the Bureau of Customs on June 16, 1988 that the said vehicle was acknowledged to have been received by Mr. Tayao <E><hibit "I">. Likewise noticed by this court is the fac t that after receipt of the vehicle and during the pendency of thi� case E�ilio Tayao �aintained and caused the repair of the subject vehicle. In fact, his coun��l presented before this court various official receipts and invoices evidencing the purcha�e of spare parts and �aintenances expenses for the said vehicle all in the na�e of Mr. E�ilio .'_{_, t-(1 vc~

- DECISION CTA CASE NO. 3693 - 9- Tayao. These ci rcu�stances wi 11 show the undue intere�t on the part of Mr. Tayao to the vehicle in Fro� the above circu�stances we can safely conclude that in truth and in fact, Mr. E�ilio Tayao own� the vehicle. This conclusion is further �upported by the fact that according to the counsel of Mr. Torres, (page 6 of the a� ended petition for review), petitioner has fully paid its obligation to Mr. Tayao on June 16 and 21 of 1982 <page 64 of the records>. Why then has Mr. Tayao showed interest in the vehicle if in fact petitioner ha� fully paid it� obligation? In view of all the foregoing, this court believe� that petitioner has violated the provision of Section 105 of the Tariff and Custo�s Code when he allowed another person to use the subject vehicle and exerc:i�e the right of owner�hip. � WHEREFORE, this instant petition for revieN � is hereby dis�issed. We affir� in toto the findings The bond posted vehicle is hereby held ansNerable for the i���diate recovery of th� vehicle. SO ORDERED.

.. DECISION CTA CASE NO. 3693 - 10 - Gu�zon City, Metro Manila, May 28, 1992 . Q~a.... Q~... ERNESTO D. ACOSTA Pr�siding Judg� WE CONCUR� Jtdge S~~ES Aeting 1 -A~;~~lat~.. CE RT I F I CAT I 0 N I hereby certify that this decision was reached after due consultation a�ong the members of the Court of TaM Appeals in accordance with Section 13, Article VIII of the Constitution. ~Q.~ ERNESTO D. ACOSTA Presiding Judge Court of TaH Appeals 38