CTA Case No. 3376 (Decision)

- RHPUBLIC OF THH PHILIPPINIB COURT OF TAX APPEALS QUIZ:ON CITY PAPER INDUSTRIES CORPORATION OF THE PHILIPPINES (PICOP), Pet.it.loner~ - ver-sus - C.T.A. CASES NOS. 3376 & 3479 RAMON J. FAROLAN, Respondent. X- - - - - - - - - - - - - - X DE C DN This concerns a Petition for Review seeking to set aside the decision of the Commissioner of Customs dated February 23~ 1981 ( 1 ) hnlriiniJ petitioner liable 'for payment. of ad d .i tinn.::\1 r11c:. tnmc::. duty on a shipment of sodium sulphate, anhydrous, whic h arrived by the MS Ocean Breeze on February 4, 1988, cover�ed by En tr-y No. .139 ( 78) and paid under O.R. No. ~~ :HB77 dated April 25 , .1978; (2) holding petitioner liable for the payment of customs duty on a shipment o f sodium sulphate, anhydrous t.oJhich arrived by the MS Narra on November 18~ 1976, covered under Entry No. 1647(76) ~ and paid under O.R. No. 33 10835 dated April 25, 1978 <CTA Ca s e No. 3479); and in .:mother Petition for Review~ t-Jhich seeks to annul decision of the Acting CcJmnd.ssioner� of Customs in Customs Case No. 81-28

DECISION - CTA CASES NOS. 3376 & 3479 - 2- (B.isl.iq Protest No. 2-�78 ) dated March 31~ 1982~ holding petitioner liable for P94 ~ 181.. 00 repn:? sf.mt.ing pHyment of customs duty and ta>: on a s hipment of 18~750 bags (750 m.t.) o �f sodium sulphate~ anhydr- ous~ 98.5% min. which arrived at the Port of Bisl.iq~ Surigao del Sur from Tachibana~ Japan on July 10~ 1976. fCTA Case No. 3376) In January, 1978, petitioner PICOP imported from Tachib,:\na~ Japan 600 bags (600 m) of sodium su lphate~ anhydrous~ 93/. min. pulp grade, on board the MS Ocean Breeze. Import Entry No. 179(78) was filed Febr�uary 9~ 1978 covering such .import..:~t..i.on properly suppo rted by the requ.i.<=<itP rlnrHm~=>ntc::.. Pending the submis s ion by petitinner of some paper~ from the Finance Ministry CJr the Board of Investments relative t.o its ta>: e>:empt.ion privileges, the Collector required petitioner to pay the sum of P63, 793.00 in customs duties and taxes by way of tentative liquidation per O.R. No. 3310707 dated April 25, 1978. In October, 1976, petitioner PICOP imported from Tachibana, Japan 18,750 bags (750 MT) of sodium sulphate anhydrous for Ltse as ""IJ~=>nt in thP

DECISION - CTA CASES NOS. 3376 & 3479 - 3- processing of pulp material s in connection with its manu �f ac tun2 of ne1--1spr in t and l<ra f t papers. The same were shipped aboard the MS Narra~ which arrived in the Port of Bislig on November 18~ 1976. Impor� t Entry No. B-1647(76) was filed on December 14~ 1976 and by way of tentative liquidation, PICOP was required to pay the sum of P32~553.00 per O.R. No. 3310885 dated April 25~ 1978. The home consumption valLie actue\lly declared for� the 1978 and October, .1976 impor�tatJons (Bi s lig Protest No. 3-78 and Bislig Pr�otes t No. 4 - 78 ~ respectiv:?.ly) was $27.97 per met.r- ic ton but assessed by the Customs Apprai ser at $140.00 per metric ton based on the published value under Customs Import Valuation and Classification Cir�cular (CIVCC) Nc,. 270-76, which provides in part as follows: "Pur� ~;uant to the rrnvi c:.innc:. nf Section 201 in relation to Section 602-A of the Tariff and Customs Code of the Philippines, as amended by Presidential Decree No. 34, this list of home consumption values ~nrl t~riff classifications of articlPc:. P~:rnrh=>rl tn the Philippines from d.i.ffPrPnt rn11ntriPc:. is hereby published. "The home consumption values and tariff classifications shall serve as the basis in deter�mining the dutiable v~ lltPc:. of same, 1ike or simi 1ar imported art ic les in the assessment of duties and ta>:es." 3~u

DECISION - CTA CASES NOS. 3376 & 3479 - 4- In July 10~ 1976~ petitioner PICOP received a shipment consisting of 18~750 bags (750 m.t.) of sDdium sulphate~ anhydrous~ 98.5/. min. which arrived at the Port of Bislig~ Surigao del Sur from Tachibana~ Japan. These materials were used as agent .i.n the pr-ocessing of pulp material in connection with PICOP's manufacture of newsprint with Kraft paper. Import Entry No. B- 1257(76) was duly filed on July 15~ 1976 from which the required amount of P94~181.00 was paid. The entered home consumption value of subject sodium sul phate anhydr-ous lo'las $36.0266 per metric: ton~ while the published home consumption value or the Customs Import Valuation and Classification Circular (CIVCC) was $140.60 per metric: ton. Petitioner PICOP filed its protest with the Collector of Customs of the Port of Bislig~ Surigao del Sur r�egarding the assessment of the customs appraiser in the aforesaid :f. ir~..t . _i~!o._!.ffi.P.or't;_~. t-J.on.�.� (Bislig Protest Nos. 3-78 and 4-78) dated November 4~ 1980, and the Collector of cu~tnm~ rli~mi~~Prl thP protests filed by petitioner. On appeal~ the respondent Commissioner of

DECISION - CTA CASES NOS. 3376 & 3479 - 5- Customs sustained the dismissal of said protest. Again~ petitioner PICOP filed its protest with the Collector of Customs of the Port of B.isl.i.g, Surigao del Sur regarding the as!=.',essment nf the In a decision of the Collector of Custom s dated September 15, 1978~ he upheld the apprai s er s assessment and by his applying the Cus toms Import Valuation and Classification Circular (CIVCC) No. 270-76, which provides in part as follo\.'I S : "Pursuant to the provisions of Se ction 201 in relation to Section 602- A of the Tar�iff and Customs Code of the Phi 1. ipplnes, a s amended by President! a 1 Dec ree No. 34, this list of hnmP consumption values ~nrl tAriff classifications o �f articles e>:ported to the Philippines from different countries i s hereby published. "The home consumption values and tariff classifications shall serve as the basis in determining the dutiable values l':>f same, 1 ike or- s.imi 1 ar imported articles in the assessment of duties and ta >:es." Appeal was taken by petitioner PICOP on October 14, 1978 of the Collector's decision. On March 31~ 1982, respondent Commissioner of Customs affirmed the appealed decision.

DECISION - CTA CASES NOS. 3376 & 3479 - 6- H e nce ~ the fil i ng of the instant petitions for r ev i e w f CTA Cases No s. 3376 and 2479). Th e on 1 y issue �for- deter-mination in the t\1'10 c a ses i s whether- it i s the Home Consumption Value as dec l a r-ed .in the Con s ular and Commercial Invoi c e s ~ or- the alleged published value cont a ined .i.n Cu s.toms Impor-t Valuation and C la ss i �fic: a t.ion Cir�cular (CIVCC) No. 270-76~ which s h rR1ld be the basi s o �f the dutiable value of the s ubj ec t s hipme nts. Petitioner- contends that the home consumption v a lu e a s; declared in the consular and commercial invoices s hould be the basis of the dutiable value the var-ious s hipments of sodium sulphate anhydr�ou s for u~.e as agent in the processing of pulp ma t e r-ial s in connection with its manufactur-e of new s pr-int a nd Kr- a ft paper-. On the other- hand, r�espo nd e n t Commissioner o �f Customs c ontends that the home c on s umpt i on value as declar-ed in the Custom!::. Impor��t V .:11 ua t.i on and Cl assi �f ication Circul a r (CIVCC) No. 270- 76 should be the basis of the dutiable value of the subject shipments. The deter-mination of the dutiable value of an impor-ted a r ticle hinges on Section 201 of the

DECISION - CTA CASES NOS. 3376 & 3479 - 7- Ta riff and Custo ms Code , as amended~ which provides as follows: " Sec � 2 01 . ~~-!?.J_~�-������- o f_ ....._ ..Qu t...i aJ'.J!1'- Y..9.J..hl.!'?...!.. the dutiable value of an .impor�� ted a r-ticle s ubject to an E.<;!._Y._t;\.)Or.�.!:!1 r�,"'te o �f duty sha ll be based on the home consumption value or price (excluding internal e>:cise ta >:es) of same~ like or similar at"�tic 1 es ~ as bought and sold or offered for sale freely in the usual wholesale quantities in the ordinary cour-s es of trade, in the principal markets of the country from whPrP e >:por. ted on the date of e >: port.ation to the Phi 1 i pp.ine s ~ or� v1here ther�e is none on suc h date~ then on the home consumption va lue or price nearest to the date of e >:por.. tation including the value of a 11 containers~ coverings ~nrl/ nr packings of any kind and all other costs, charges and expenses incident to placing the article in a condition ready for s hipment to the Philippines~ plus ten (10) percent of such home consumption value or price. "Thf.-? home consumption value or price under this section shall be the value or price declared in the rnne;11l~r~ commercia l , t.rade or sales invoice. t W.t.J.~T_f?::_.....t.t~g.r..::.g_~_:_.t~i,:~_t;\_.!:.~.E.g>_Q..n a .h.! e ......J!.Q.!J b a~ i9.__,_t l}g___v t;\LI::t e . ____Q.r.:...__.Q_r:...t..~.g _ o f ___.th.fi:?____...!.mQ.Q.!:.lert 9.!'::...t:i.s; . L~---�-Q..~.~~.i.!.!:gQ__,..__,_.!,.D_..._. _ tJl!!:l..____.!"....!:!.T..~., t hP correct dutiable value of the ~rtirlP shall be ascertained from the reports of the Revenue Attache or Commercial Attache (Fo rei gn Tr-ade Promotion Attache), pursuant to Republic Act Numbered Fifty- four hundred and sixty-six or other Ph .i 1 ippine diplomatic officers and from such other information that may be available to the Bureau of Customs. "From the date thus gathered~ the Commissioner� of Cu!E;toms shall ascertain 34v

DECISION - CTA CASES NOS. 3376 & 3479 - 8- and establish the home consumption values of ar�tic 1 es e >:port.ed to the Phi 1 i ppines and s ha 11 publi s h such 1 ist.s of values from time to time. "1-'Jh e n the dutiable value provided f or in the preceding paragraphs cannot be .:~scert:.ained �for f a.i 1 w �� e of the i.mported to produce the documents mentioned in the second paragraph, or where there exists a r:.~.�.'.?.9J::L~.!?.. ~_g�-����g_Q.\::.! .9..t as to d u t .i a b 1 e v a 1 Ll e of the imported article declared in th~ entry~ it. shall be the domestic wholesale sel l i ng price of such or similar article in Man i 1 a or� other pr inc i pa 1 markets in the Philippines on the date the duty becomes payable on the article under appr� a.i.s. ement.~ in the usual v1holesale qu antiti e s and in the ordinary course of t.r� adF.:�' ~ minu s - (a) Twenty (20) percent therefor� for expen s es and profits ; and (b) Dutie s ,-.. , rl t ;a>le s paid thereon." Pursuant to the Tariff and Customs Code~ n ?.s pond en t Comm .issioner of Customs thus issued on ,Ju 1y 1976 Customs Import. Valuation and Class ification Circular No. 270-76. Portions of the Circular provides : "Pur-sua nt to the provisions of Section 201 in relation to Section 602- A of the Tar�iff .:1nd Customs Code of the Philippines , as amended by Presidential De cree No. 34~ this list of home consumption values and tariff classifications o �f articles e>:por�ted t .o the Philippines from different countries is hereby publi s hed.

DECISION - CTA CASES NOS. 3376 & 3479 - 9- "The home consumption values a nd tariff classifications shall serve as the ba sis in determining the dutiable valu~s of sa me, like or similar import~d articles in the assessment of duti~s and ta >:es. " CIVCC No. 270- 76 was issued to serve as the basis for� the correct valuation of imported merchandise ther�ein described. The values listed t.her�e.in 1--1ere arr.i.ved at after� a careful research and stu dy of the reliable value infnrm.=~tinn furn i !:;,hed by government instrumenta 1 i tir.>c. .=~hrn.=~d. Such values are fur�thermore not static and ar�e to se r-ve as bases .in determining the dut .iable values of subj e ct articles as the circular provides. l,tJe agree in toto with the memorandum of resp ondent Commis s ioner- of Customs who, with respect to CIVCC No. 270- 76, said as follows: The legality of the circular is unassai 1a b 1e. The s.aid sec t.ion IJr.=~ntc. the Commissioner of Customs authority to a s cer tain and establish thP hnmr.> consumption values of articlec:. P\:pnrtPrl to the Philippines and t0 f1tth1 ic.h c.ttrh li sts of values from time tn timP. It is undeniable that the pertinent customs appraiser precisely had �D.i~r.j;_c:_\ ;l,.rl.~.LQ.Q.I::Ltl.t�. that the dec 1 ared HCV value of $27.974 per mPtrir tnn .=~c. indicated in the covering consular and commercial invoices r�eflect.ed that true va lue of the articles as basis for f.ixing their correct dut .iable values. Because

DECISION - CTA CASES NOS. 3376 & 3479 - 10 - o �f the doubts~ the appr�ai c;pr fnttnrl t h~t the published HCV in CIVCC No. 270-276 more accurately reflected the true consumption va 1ue of the importation at $140 per metric ton~ rather than the value s tated in the consular or commercia l invoices. Neither can it ba said that the customs appraiser acted without authority in di~5 regan.1ing the values stated in the consu l ar or commercial invoices. Section 1405 of the Tariff and Customs Code pr� o"vides: "SEC. 1405. Er.:P~.I::?.!?..Q.i.:ng_'?-_ ~IJ..q ..._8..~P.9...c.t.._ ____g_L _.......A.P..P.C~..! ..?..I?F..!\b.. Appraisers shall~ by all reasonable ways and means, ascertain~ estimate and determine the value or price of articles as required by law, ~.D.Y....._.._ _i.-..D.'!.9.J..~e:? --����-���� Q.C......_ ......~.f..:L~.9.a v.,Lt.. t:.h.E:?.r:.~::?.t..Q.......9 .t.::... __!?. t..~. t__g[!l~.Qj;_____ Q.f. . .-.~_Q _s t.s.. CJ.t:::... .9. .'L . f:.9 ~.t.. . . 9..:L .Pf.Q_Q_!:,_I<;j:.J..9.D.....t.9.. . .! h~ f::.Qrl_t.r..=.~.CY.........!.}Q_t ~~ :i,_t..h.?...t...P..D...9..J.D.9.~ and after revising and correcting the reports of the examiners as they may judge proper, shall r�eport in ~>n-iting on the fact of the entry of the value to be cletf?rmines, tr:.r::.~'E!.Pe:?<::J;_:_LY~ -------Q.f. 1:"1. t-. ~ t:}.}~_r.:... .... ~� q<:;_h ____Y..E.\.1~~!::?.._ i . .!?...........~_q\oi~J..s.. b.t~;lt.le:?r............... qr._________t9..~. . e.r:. .........t. h..<".\.O. ______t...tl.fl.. :iiJ.Y..Q ii.=.IE........~ IJ.P..!...9.r:...._~D...t..~::?.r:..e:?~t.....Y._e1.!:!.1::?. ....9.1. t..b~ . .......<".\r..t..t<::J. g.�_~_.''_ (underscoring su pplied) Since the law presumes that official duty ha s been regularly performed, it can be asserted that the customs appraiser ascertained the HCV from the repor�ts o �f the attache and other Phi 1 ippine diplomatic officers before publishing the li st of the HCV of the subject importation, in the absence of contrary evidence. Thus 3 4u

DECISION - CTA CASES NOS. 3376 & 3479 - 11 - The Court has long held consistent 1 y that the r-�u 1 e is well established that the value of merchandi se fi xed by the a ppr- aisr.-?r� .:~nd affir�med by the Collector of Customs is cone lu s.i.ve and the ~.!?.?_g.!J<;g_ o �f an affirmative showing that the appraiser~ in assessing the v,':\lue~ proce e ded upon a wr�ong pr-inciple and contrary to law and that . if the customs authcwit.ies 1-'lere bound by the invoice va lue~ i t is evident that they 1-'lould be~ to a conc.; ider� able e>:t.ent~ at the mer-cy of foreign mer-�chant.s and importers. (The Coca-Col a E>:port: Corp. v. The Commissioner of Internal Revenue and the Collector of Customs~ 56 SCRA 5[1974]) "All presumptions are in favor of the correctness of tax assessment. The good faith of the tax assessors and the va 1 id i ty of their ta}: assessment are presumed. "f.)s a logical outgrowth of the presumption in favor of the va l i dity of assessments, when suc h assessments arP asc::.i'li.led, the burden of pronf is upon the comp 1 a in ing part.y. It is lncumben t upon t .hP propPrt.y owner to clearly show that the assessment was erroneous, in order- to relieve himself from it." (Collector of Internal Revenue v. Bohol I anrl Trans. Co., 107 Phil. 965 [1960]). Sr.-?c. 201 of the Tariff and Cust.oms Code puts to res t any doubt as to whether the HCV as provided in CIVCC No. 270-276

DECISION - CTA CASES NOS. 3376 & 3479 - 12 - is consistent with the ac tua l purchase price of the subject articles. To wit: The dutiable value of an imported article subj �:.~c t to a n �\_Q___y_~j_QCE!.!l r-ate of duty shall be based on the tl.<:'~ffi.E..__<;:..Q.!:.1..?..1,!.!.!lP._t...i...Q..r:t. _Y...?.!_.l..lV?.......Dr�......n.r..!.~E (excluding internal excise taxes) of sa me~ like or simil~r articles~ as bought and sold or o �ffered for sa le freely in the usual wholesale quantities in the cw�dinar�y cour�se of trade~ in the principa l markets of the countr-y fr� om "''her- e e~!pnr� tprl nn the date of exportation to the F'hilipp.ines. " The Comm.i ss ioner- <:r f Customs ha s a gr-eat l a titude in deter-mining the correct. HCV. The published HCV of the Bureau of Cus toms prevails over- any value listed in the cons u 1 tilr or co mmer-c ia 1 invoices. l.<lhy con s ular� c:er�tii' icat:ions of va lue of products expor-ted to the Philippines are not conc lus ive on the P h i l i ppine revenue author-ities is thus explained by the S upr�eme Court : "If the Cl l<::.toms aut horities were bound by t he invoice va lue~ i t i~ evirlent. that they "''ould be, to a cons.i dt?ra ble f:>)�:tent, a t t h e me r-cy of for- ei gn merchant s a nd impor tr? rs ." (Coca-Co la E>:port Corp. v. Commiss ioner of Internal Revenue~ ?..b!P.I ii\.) WHEREFORE, the appealed deci!!dons of Commissioner of Customs in CTA Cases Nos. 3376 and 3479 are hereby affirmed. 34u

DECISION - CTA CASES NOS. 3376 & 3479 - 13 - With costs against petitioner. SO ORDERED. Quezon City~ Metro Manila, November 16~ 1990. ROAOUIN Judge I CONCUR: ~-~ Associate Judge CERTIFICATION I hereby certify that. this decision was reached after due consultation between the members of t.he Court of Tax Appeals in accordance with Section 13, Ar�tic le VI I I of the Con,s,. :,rution. CO~~AOUIN Associate Judge c6urt of Tan: Appeals 34c)