CTA Case No. 3942 (Decision)

REPUBLIC Of THI PHILIPPIMIS COURT OF TAX APPEALS QUIZOM CITY PROCTER & GAMBLE PHILIPPINES MANUFACTURING CORPORATION, Petitioner, - versus - C.T.A. CASE NO. 3942 ALFREDO PIO DE RODA, JR., Depu~y Mini�~�r of Finance, Respondent. M- - - - - - - - - - - - - - M D E C: X S X 0 N This is a petition for the review of the decision of the Deputy Minister of Finance dated October 1~, 1980, under his automatic: review powers pursuant to Section 2315 of Presidential Dec:ree No. 1464, whic:h took effec:t on April 1, 1979. Petitioner Procter ~< ,. Gamb 1e Philippines .. Manufacturing Corporation had imported 15 Drums Geraniol BJ and 15 Drums Citronellol AJ, which arrived on November 6, 1978 in Manila and were e>tported from Savannah, Georgia, U.S.A. on Oc:toi:;li;?r 2. 1978. As per covering Consular Invoice No. 304406 dated October 10, 1978 and Commercial Invoice No. 25280-34, the shipment had the home consumption values as follows:

DECISION CTA CASE NO. 3942 - 2- Geraniol bj at $2.21/lb. and Citronellol aj at $2.79/lb. Before the filing of the entry of the shipment~ petitioner through its broker~ filed with the Bureau of Customs~ Port of Manila~ an RVI (Request for Value Information) dated October 18~ 1978. Upon the processing of the RVI by the Customs Officers~ the HCV (Home Consumption Values) were upgraded as follows: l.. Geraniol bj from $2.21/lb. to $2.70/lb. based on CIVCC (Customs Information Valuation and Classification Circular) No. 280-76, page 156, July 1, 1976, <'Exh. FJ 2. Citronellol aj - from $2.79/lb. to $6.00/lb. based on CIVCC (Customs Information Valuation and Classification Circular) No. 270-76, page 155, dated October 1, 1976, (Exh. 0) Article Geraniol, as published in CIVCC No. 280-76 <'Exh. F) was published as G~@OJ..R..L _ i;.!.�.�t'r.�. (p. 19, CTA rec.) at $2.70/lb. Citronellol, as published in CIVCC No. 270-76 (�xh. G) was published as ~i_t;_r.::of')el !.9.J_ QDJ.Y. (p. t�.~ .� CTA rec.) at $6.00/lb. Procter & Gamble Philippines Manufacturing Corporation entered the higher values in their Entry No. 111615-78 in order to avoid imposition of

DECISION CTA CASE NO. 3942 - 3- surcharges on the shipment in question pursuant to Section 2503 of the Customs Law and at the same time protesting the purported upgrading by the Customs official 1-'lho processed RVI No. 11-114 and the appraisal made by the appraiser at the upgraded published HCVs pursuant to RVI No. 11 - 114~ thereby requiring petitioner to pay the duty and tax amounting to P104~000.00~ which petitioner paid under protest~ as evidenced by Official Receipt No. 698168 dated November 28~ 1978. ~ Collector� o �f Customs decided in favor of pe ~ ioner ordering the reliquidation of the entry on the basis of $2. 21/lb. for the 15 drums Geraniol bj and at $2.70/lb. for the 15 drums citronellol aj ~ and the e>:cess amount re �funded in the form o�f ta>: credit. In a 1st Indorsement dated September 15, 1980 �' of the Commissioner of Customs, Ramon V. Farolan, he concurred with the findings of the Collector sustaining the protest and refund of the duties and taxes paid by petitioner stat i ng thus - The shipment cons isting of 15 drums of geraniol bj and 15 dru ms of citronellol aj has an entered valLte of $2.21/lb. for geraniol bj and $2.79.lb. for citronellol aj based on the consular and commer�c.ial .invoices attached to the entry. However, the VCD upgraded the

DECISION CTA CASE NO. 3942 - 4- value at $2.70/lb. for- ger-anicll bj and $6.00/lb. for- citr-onellol aj. Chemical Engineer- Victor-ia Mejia, the Vice-Pr-esident of the Indent Division, Migr-a Tr-ading Cor-por-ation, testified that he vmdn"*d as an indentor- for- the SCM Inter-national Ltd., Cleveland, Ohio, U.S.A., cover-ing all kinds of per-fumer-y pr-oducts expor-ted into this countr-y; that he was the one who mediated in the consummation of the sale o �f the SLibject shipment between the SCM Inter-national Ltd. and the pr-otestant company; that he was also the one who wr-ote a letter- dated November- 16, 1978, addr-essed to the pr-otestant stating, among other- things, that he r-eceived a letter- of the same date fr-om a cer-tain Mr-. Nagai, the Mar-keting Manager- of the Glidden Or-ganics, which was the manufactur-e of the shipment in question, and that attached to the said letter was the photostat copy of the tele>: of Mr-. Nagai cer-tifying that the Glidden Or-ganics was and sti 11 is not engaged in the manufactur-e of the ger-aniol extr-a; that ther-e wer-e two kinds of ger-aniol, namely: (1) ger-an:i.ol e>:tr-aJ and (2) ger-aniol bj; that if the ger-aniol extr-a will be manufactured in the future, the Glidden Or-ganics will pr-oduce the same with a higher- pur-ity of 85%, 95% and �' 99% than the curr�ent ger�aniol bj which has only a pur- ity o �f 70%; and that. the letter-s :bj" and "aj' ar-e the secr-et codes of the manufactur-er- of per-fumer-y pr-oducts which differ-entiates the pLir-ity of the subject shipment from the other-. In view of the for-egoing and other- basis appear-ing on the decision, this Office concur-s with the findings of the Collector- sustaining the pr-otest and the r-e �fund of duties and ta>:es paid by the her-ein pr-otestant. But in a 2nd Indor-sement dated October- 15, 1980 of the Deputy Minister- of Finance, Alfr-edo P.

DECISION CTA CASE NO. 3942 - 5- De Roda, Jr., he denied the protest and refund of the duties and taxes paid stating as follows: It appears that the entered values of the shipment based on the consular and commercial invoices were $2.21/lb. for geraniol-bj and $2.79/lb. for citronellol-aj. However, the customs appraiser assessed the shipment at the higher rates of $2.70/1 b. and $6.00/1 b. for geraniol-bj and citronellol-aj, respectively, based on the respective CIVCC No. 280-76 dated July 1, 1976 and CIVCC No. 270-76 dated April 1, 1977. As a consequence, protestant was required to pay duties and taxes on the shipment amounting to One Hundred Four Thousand One pesos (P104,001.00) under Official Receipt No. 298168 dated November 28, 1978. Protestant impugns the correctness of the assessment made by the appraiser� concerned on the ground that it was not based on the home consumption value indicated in the commercial and consular invoic:es. Protestant con tended that the artie 1es descr.i. bed as 11 geran irJ 1 e>: t.ra 11 in CIVCC No. 280 - 76 and 11 c.it.rcmellol 11 in CIVCC No. 270- 76, upon which the upgraded values were based, were dif �ferent from the articles comprising the shipment �' 1--1hich are known as 11 geraniol-bj 11 anc:l citronellol-aj. It is further argued that. since the HCV appearing in the commercial and consular invoices were the prices on or about the date of e>:pt-:Jrtation, t.he said HCV should be correctly applied on the shipment. It may be stated, in this connection that CIVCC Nos. 280-76 and 270-76 are the implementing circulars of Section 201 of the Tariff and Customs Code, in relation to Section 602-A of the said Code. They are in full force and e�f feet and therefore enforceable. Records show that t.he shipment. in question was exported

DECISION CTA CASE NO. 3942 - 6- from Savannah~ Georgia~ U.S.A.~ on October 2~ 1978 and Revision Order No. 12~ upon which � the appraisal of the subject articles was based~ has been issued on December 1 ~ 1978. Consider�ing the nearness of the date of e>:portation and the issuance of the said Revision Order No. 12~ it is believed that the used of the published value in the .instant protest is tenable. The use of the published value in the assessment and appraisal of duties and t.aHes has been consistently upheld by this Ministry~ e>:c:ept in cases when such value becomes stale and obsolete and necessitates revision. This Ministry is not inc 1ined to adhere to the testimony of Chemica 1 Engineer Vict.orio Mejia that the imported geraniol-bj .i.s different from that. listed in the CIVCC No. 280-76. Engineer Mejia's testimony could only be considered as self-serving and 1acks evidentiary proof . (p, :~ .� CTA rec,) The issue posed for our determination is whether or not the imported "~er.E..0.!..9J.___g_j_~~- and "Cl. trgneU..Q..!_ <U...: home consumption values should be based on the values shown by the commercial or the consular invoices at $2.21/lb. and $2.79/lb.� ~ respectively~ or the CIVCC (Customs Information Valuation and Classification Circular) Nos. 280-76 (Exh, F) dated !J.h\1_:L_j.~~.7q and 270-76 (Exh, . G) dated Octc;3ber 1. 197~ at $2.71/lb. and $6.00/lb.~ respectively. The CIVCC's upon which the Deputy Minister of Finance based its finding were firstly issued more that 2 years before the importation of the

DECISION CTA CASE NO. 3942 - 7- commodities (Geraniol bj and Citronellol aj) on October 2~ 1979; hence~ the values in the CIVCC 's were neither values on the date of e>:portation or values nearest to it. (Decision, Collector of Customs, Port of Manila, May 12, 1980, p. 17, CTA rec.); that the said imported Ge...r:.~.o.J o_l _._.t?..i and Citronellol _E..i_ are of different names (�xh. �) than those stated in the CIVCC's which are named (�xh. F) and mere c .t tr:.9JJ.!?._:U ..9 1.. (Exh. G) Cpp. 49-50, CTA rec:.J. Therefore, the CIVCC and the RVI should not apply to the subject shipment; that the entered values were the correct Home Consumption Values because there 1-'Jas no published value applicable to the subject shipment which has a lower percentage of purity than that of the geraniol e>:tra and plain citronellol and that such entered values were supported by the cbnsular invoices and commercial invoices of petitioner. During the hearing before the Collector of Customs, it was shown by evidence, through the testimony of Chemical Engineer Victoria Mejia, Vice-President of the Indent Division, Migra Trading Corporation, that >: >: >: "he worked as an indentor for the SCM International Ltd., Cleveland, Ohio, U.S.A., covering all kinds of perfumery 11~�

DECISION CTA CASE NO. 3942 - 8- products e>:ported into this country; that he was the one who mediated in the consummation o �f the sale of the subject shipment between the SCM International Ltd. and the protestant company; that he was also the one who wrote a letter dated November 16, 1978~ addressed to the protestant stating, among other things, that he received a letter of the same date from a certain Mr. Nagai, the Marketing Manager of the Glidden Organics, which was the manufacturer of the shipment in question, and that attached to the said letter was the photostat copy of the telex of Mr. Nagai certifying that the Glidden Organics was and still is not engaged in the manufacture of the geraniol extra; that there were two kinds of geraniol~ namely: (1) geraniol e>:tra; and (2) geraniol bj; that if the geraniol extra will be manufactured~in the �future, the Glidden Organics wi 11 produce the same with a higher purity of 85%, 95% and 99% than the current geraniol bj which has only a purity of 70%; and that the 1 etters b j 11 11 and 11 a j 11 are the secret codes of the manufacturer of perfumery of products which differentiates the purity of the subject shipment from the others.

DECISION CTA CASE NO. 3942 - 9- And to substantiate its allegation that the consular and commercial invoices state the true and cor-r-ect Home Consumption Values; petitioner- submitted the following documents: Import Entry No. 111615-78 fExh. nAnJ; Declaration in the entry of the values of the subject shipment, that is, from $2.21/lb. to $2.70/lb., and from $2.79/lb. to $6.00/lb. (Exh. nA-1".1; Consular Invoice No. 304406 dated October 10, 1978 (� .'>\�h. nanJ; Commer-cial Invoice No. 25280-34 fExh. ncn.1; letter dated November- 16, 1978 of Mr. Victoria Mejia to the protestant firm (Exh. npn); Photostat copy of the telex dated November 16, 1978 of Mr. Nagai of the Glidden Organics to Mr-. Mejia (Exh. "ENJ; CIVCC No.280-76, page 156, dated July 1, 1976 (Exh. nFnJ; CIVCC No. 270- 76, page 155, dated April 1, 1977 fExh. nanJ; Affidavit duly executed and signed on April 29, 1979 by Mr. Ralph Close, the Vice- President of the Terpene Products Group, SCM Corpor�ation, Jacksonville, Florida, U.S.A., attesting, among other things, that upon e>tamination, he found that the consular and commercial invoices covering the shipment in question valued at $27,999.48 had HCVs of $2.21/lb. of �' geraniol bj and $2.79/lb. of citronellol aj and that they were the tr-ue and corr-ect HCVs in the U.S.A. at the time of their expor-tation to this countr-y (Exh. "HNJ; and Page 414 of the book entitled "The Condensed Chemical Di.ctionary", showing that the grades for geraniol are standard, soap and synthetic fExh. "!"). Rather than substantiate the respondent Deputy Minister of Finance position in denying the protest of petitioner-, the witness for the Collector- of CLtstoms, Appraiser Pedro Madrigal, has miser-ably

DECISION CTA CASE NO. 3942 - 10 - testified "that he never knew who placed those upgraded prices in the RVI; that on page 410 of "The Condensed Chemical Dictionary"~ the grades for geraniol are standard, soap and synthetic; that he knew that the chemical formulas of "bj" and "aj" have something to do with the subject shipment; and that inasmuch as he could not explain or interpret their chemical meaning, he could not determine the particular grade to which the geraniol bj falls. Even Mrs. Ofelia Fernando, Chief, Valuation and Classification Officer, testified that ">:>:>: the VCD is the office charged under the publication of the home consumption values of imported artie 1es; that the upgriU\ded published indicated in RVI No. 11-114 were based on a U.S. publication en tit 1ed "The Chemical Marketing Reporter" dated September 4, 1978 (�xh. u4u) and Revision Order No. 12 dated December 1, 1978 (�xh. HSH); that as shown on page 414~ 8th edition of "The Condensed Chemical Dictionary", tt1e grades for geraniol are standard, soap and synthetic; that if the percentage of purity between the geraniol extra and the geraniol bj was specified, there must be a difference; that she did not have in her office any sample of the subject shipment; that she never came across the

DECISION CTA CASE NO. 3942 - 11 - chemical analysis of the subject articles; that before the publication of the values appearing in R.O. No. 12 dated December 1, 1978, the HCVs for the subject artie 1 e s which "Jere e >: ported to this country on October 2~ 1978, were still the same~ a s reflected in CIVCC No. 280-76 dated July 1, 1976 and CIVCC No. 270-76 dated April 1, 1977." The published values (CIVCC Nos. 280-76 and 270-76) of July 1~ 1976 and October 1~ 1976 cannot certainly be used without disregarding the requirements of Section 201 of the Tariff and Customs Code~ as amended, as it can be safely concluded that there was no published value in the case. Based on these undisputed evidence, the assessment of the subject articles should be based on the accompanying consular (Exh. B .~ p.44 .� C.TA rec.) and commercial invoices (Exhs. c, D, E, E-1, n, I, I -1, ,7, ,7-1 , K .~ f>:; -1 .~ L, L -1, N .~ N-1 .� 0 .� 0-1 J pursuant to the 2nd paragraph of Section 201 of the Tariff and Customs Code which provides as follows: "The home consumption value or price under this section shall be the value or price dec 1a red in the consular, commercial, trade or sales invoice. >:>:>:." (Co��. o"f Custo�s vs. C. T. A. et al., G.R. Nos. 72069-70, nay 21, 1988.)

DECISION CTA CASE NO. 3942 - 12 - We therefore fully concur with the decision of the Commissioner of Customs, Ramon J. Farolan ~ in concurring with the findings of the Collector sustaining the protest and refund of the duties and taxes paid by petitioner in this case. WHEREFORE, the decision of the Deputy Minister of Finance dated October 15, 1980 is hereby reversed. SO ORDERED. Quezon City, Metro Manila, Septemb r 26, 1990. � ROAQUIN Judge I CONCUR: .. CERTIFICATION I hereby certify that this decision was reached after due consultation between the members of the Court of Tax Appeals in accordance with theC2~u= Section 13, Article VIII of CON~~- ROAGUIN 6issociate Judge C~rt of Tax Appeals