CTA Case No. 4406 (Decision)

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY NESTLE PHILIPPINES, INC. � Fetl tloner, - versus - C. T . A . CASE NO. 4406 HON. SALVADOR 11. .l'JISON, 2/..2;/qy in his official capacity as Commissioner of Customs. Respondent. X- - - - - - - - - - - - -X DE CI S I 0 N Tills refers to pe tl tl oner ' s pe tl tl 011 for revler<~ se<:~klng the refund of the total sum of P2, 822,621. 00 representing customs �duties paid 011 impo;c�ted milk and milk prodncts which we;c-e subsequently ordered reexported to their count1�les of Ol'igin. As borne out by the pleadl11gs a11d evidence presented, petitioner is a domestic corpo1�atlon engaged in the business of, among otbers, regular lmpoJ"ta tlcm of milk and milk Pl'OdW.7. tS for Pl�ocesslng, dl stl'lbutlon and sale. It has an office address at tllHie Building, Sen. Gil ~r. Puyat A venue, Pil1ka tl, Netn.1 11BJJll.'.i . Sometime in Ap1�11 lmd Nay 1986, petl tloner imported from d ifferent Etu�opean cow1trles various milk and milk products, r<~hicll a.zTlved at the Po;c�t 79

DECISION - CTA CASE NO. 4406 -2- of !1anila on t.r._qrious dates :t'I"om th:tly 10, 1986 to Septembe!" 14, 1986. Tile corz�esponding duties <."llld advance sales taxes on said import<."ltions were paid by it in the sums of P2,822,621.00 and P5, 953,606.00, respectively (Annexes "B", "B-1��, pp. 20 - 21, CTA record). While some of the goods r<~ere alre<."ldy in the customshouse mnf others r-rere in transit, the Buz�eau of Food <."lnd Drugs ( BFAD for short) issued a Nemorlwdum CirculBJ:' on tluly 1 , 1986 conce1�ning the importation of foodstuffs from Europe and China contaminated r..rith z�adioactive substances. This was subsequently <."lmended by BFAD !1emo1�andum Circular No. 1 - A which for re8dy z�eference, respectively st8te 8S follows: HHEHORANDUH CIRCULAR TO ; All Concerned RE : � Guidelines for Honitorina of Foodstuffs Imported from Europe and China for Contamination with Radioactive Substances DATE : Pursuant to the directive of the Minister of Health and the recommendation of the government Interagency Nuclear Ac cident Preparedness Committee of the O�ffice of Civi.l Defen:::;e .� the folloNing guideline s are hereby promulgated for the purpo s e of monitoring food:::;tuff:::; imported 80

DECISION CTA CASE NO. 4406 - 3- f ro m Europe and China for radioactive contamination a~ a consequence of the Chernobyl Nu c lear reactor accident in Kie~'-� USSR . 1� L7Ti.P.J>LtU. ;~ ___2.. b..~Il. ____gg ______t.. ~fi..!J_f._rgg______tg :,::: ~ '::: IJX e .........?.......... _(gr.t.i...fi. _r;__f:i_t_~---�-��g �L.. .....!JD..?..L'l.iE.i.;".._____ ___ft1.r. B.;~ q/_ Q.?..~:: .tt v .......�( .( 1f!..t.n..t....J , r ........ ?.......... C..r..t.. i.t..Lr;.?. tt?... .. .Q_f. f.-J:~�.YI'... ?..D c:;_ g_! (q_TIJ"f!I<?.Q..i..tY ______(J. .l?.. f!.Lf:i_[!_t;_g________ .f.r.:_ f:~l1l..____ t__l] .. [f!__:;:_p__c}T! iEj _g).g_ _ggyg.r.:_t!...TIJ_g_TLL ...(~f ____ f.g_g _g _:;:___t__y _f.:f_ __k..Lt:_,g_ g_;;:;.p<-,_r.:_ _t__g _Q____t_g ___tb.f?..___E!.?. i. !...i.P.l2f...!! .g_iE____j,__iE__ :;:_?._f.g______f:l.I!.Q. f.r._g_g____.f..r.J,_TIJ....T.if!QjQ_?..r; _t _!_t!__g___ ?...YP.?...tfi...nr; ..2 ..~.. Importers s hall notify the BFAD Unit at the Bureau of Customs of the e.Ypected da te of _ar rival of their :.:: hipment � .3. ~:_i:i.TIJ.P.J..;~ ----��:,::: h._ii_LI.. _p~---���-';_<?..!...l...g,;.t..g<::/._______p_y G. E..!JP........P..ff..l ': -Z:.~l..;:_____f_.r_ <:-1.TIJ ____g_[!__J.Li.f;_:;:_____}~.f.th_q Y.:L. . tb..... r.:....<l.Y..i . r...!::l.........~::.f?.r....tLf..:i t;?._t~_ls..<Lm..m.o t:J...i.J:y ___ _,;)g~r. i:i.J.!. ':: . ~:~_h:f. _,::;h____ _ _______ (f h a 1 1.. .............9.............. . .-.;-::__ y_P._ll_l_i___t _tgQ.________ j _Q____________t.h. P. .h. :t.. Li..P..e../.u.. ................A.t.I~m .� .';.. ..........fp_g_r._g_y_______________((._,_l_l_"f!l_:i._2...A..q.n_ _([!_/:_If_[_.}_. The BFAD :.=:hall not authorize the release or distribution of the :.=: hipment in que s ti o n until sati ::. ::fa c tor y result of analy :.:: i:.::: ha :.::: been contained. 4. Sample :.:: may be co 11 ec ted 1�r om entrie :.::: ~<Ji th the required certif icate/ co mmodity clearance for confir matory te .~::: t:.:::. ln thi :.:: case _. no fee shall be c harged to the importer. 5. Foods tuff s found co ntaminated N i t h r ad .i o a c t i ~~ e sub s tan c e s s h a I I be declared unfit for consumption and shall be di:..=:po:..=:ed of accordingly as deemed appropriate by authorized BFAD officials. For the information, guidance and s trict co mpli~nce of all concer ned. (SGD) CATALINA C. SANCHEZ Director" 81

DECISION - CTA CASE NO. 4406 - 4- HH�HORANDUH CIRCULAR No. 1 - A s. 1986 TO : All Concerned R� .. Amendments to BFAD Memorandum Circular dated 01 July 1986 c oncerning the guidelines for monitoring of foodstuffs imported from Europe and China for contamination with radio- active substances. DATE : 19 September 1986 Pur s uant to further directives of the Minister of Health~ the monitoring of foods tuff s 1� or r ad i o a c t i ~~ e con tam i n a t i on as a con s equence of the Chernobyl nuclear rea c tor accident in Kiev~ USSR~ s hall include 1"ood s tuff::::: imported from all c ountrie ::: , in:::::tead of only China and �uropean countrie:::::. The follcn-Jing amended guidelines are . therefore.. promulgated for this purpo:::::e f o r the information, guidance and ::: trict compliance of all concerned. 1� Lm. P..!.?.r.:..tS?...r...;:~-�����-��--~.r...f?- .........__r_~g_u.ir...~. (l... . -. . .. . t.f2.. ~.. _,;..\l...r.:.....e....-...... ~-�-��--(�.r.....t.f....f..j_ r,:_~..t.. f?._...........f.'...t . . . ._. . Af.!.fit.!..Y.......i s_ ..f..fl.L B.~_q_i...q.~t;.t.L~'.._f1..........9P..T.!.. t .f?. .T!_t . _._gr____f!...___(2g..r.:....tiJ..!.r,:_a..t._ Jtf !:J=o;;..?...~..r..~.T!...f._e. .!..C::..Lf!...~.r..Art. .t;. g_....Lt:.:. .Q.TJI........_tll f!.......L..fJ..?...PJnl..:f...i..Q)_.. ..... g_QV..~.r..r.,_m.gr.~t .E...IA_t...h..o r._l..i~..- ....i..rL.._ t h .fi....- '=-Q un.tr..Y..._....Qf QL.LQ..i.I.!.. � The Certificate/Clearance should state that the particular shipment of foodstuffs being exported to the Philippines is not conta minated with f"allout radionuclides and the levels of Ce s ium 137 and Cesium 134 therein do not e .':(�ceed the limit s "for these radioactive element::::: s et forth by the Philippine Go~'ernment. ..., Importers shall notify the BFAD .<: � Unit at the Bureau of Customs of the e .-x.�pected date of arrival of their ::: hipment. 82

DECISION - CTA CASE NO. 4406 -5- .J � ~~J!!.P.L!?_;,.~.... 18.LLL. ._.P._~---�������f~. L!.~~-t.~_cf___...P...Y.. "6...f.lJ!2.._____<.Lf..f...i..�:;.f....il!I2.. __fr...s!J.~....__f?Y...!?..LY...___ _ll.u;<.>...TJI.i...Tl..Q. 2h.i.R..'f!I..~_T"!.i _~_i...t:..h..- ...J:.1r.. .____l!!.Lth.Q.Yj:_ .tflL.....r...~g_y. i r ~.1... . fr. r.:.E.. �i_f_g_~!;_t.f..vf_t'J.. .__.f_~.r.J.. i..fj.__r;;_~_!...~.L!= 1 e ~-r f!i!!J..~.g____ P..W.. .t:.JJJ� ..___f;_g ..t,,lJ)_fL'J.. ..._ ........J'...f......_ ..___qt_jgj._n_ an d these s amples s h a ll be immediately submitted to the Philippine Atomic Energy Com- mi ss ion (PAEC) 'for radioactivity tests. The BFAD shall not authorize release 'from the bonded Narehouse nor the s ale/distribution of the shipment of 'foodstuffs in question until a satis - factory re s ult of analy s is ha s been obtained 'from PAEC, in Nhich case the BFAD s hall inform the importers acco rdingly in Nriting. 4. Imported food:..::: tuffs :..:::ub_iect to monitoring 'for radioa c tive elements are li s ted in Anne .~� A 11 11 � 5. All s hipments of 'food:.::::tuffs found exc eeding the radioactivity limit:." shall not be given clearance for domestic :::: aleldi::::t r ibution and :.=: hall be dispo s ed of in accordance Nith the guidelines set forth in Annex 8 11 11 , Th i :.=: Nemor an dum Ci r cu 1 ar super sede:J all other Circulars on the :..:::ame sub ..!ect matter and shall take effect immediately. (SGD) CATALINA C. SANCHEZ Director" Pu1�sua11 t to the foregoi11g circul.<.u�s, the imported milk .c:md milk p1�oducts, r.;llile s t i l l i11 the custody of tile Bu1�eau of Customs, r-1e1�e subjected to a radioactive test by tile Pililippine Atomic E11e1-gy Commissio11, and the 1�esul t tl1ereof sllor.;ed tl1a t said p1�oducts had r...c'ldioacti ve substances in excess of the Bllowable limits fixed by the govel"JlDJent; 83

DECISION CTA CASE NO. 4406 - 6- tl1e1�efcxre , they would be d1sposed of 111 a c cordance w1t11 the gu1del111es set fo1�th 111 Annex "B" of !rfemo randun1 C1rc ula1� No . I - A wl11oh states as f o l l o ws : PROCEDURE S FOR DISPOSAL OF IHPORTED FOOD FOUND TO HAV E EXCEEDED ALLOWABLE LIIHT S FO R RADIOACTIVITY IN THE PHILIPPINES 1 . All s hipment s of food s tuffs co ntain - in g radioa c ti~1 ity in e .:.,�c e :.:: s of lev e l :=.: s et by Philippine Go vernment s hall be di s po s ed of a s folloN s : a� f1 r_Q.r..JE....~JlL~~])_f._./2J!Lf?..lL.'t;=:. _.....-....~t.LLl l..!.t...'t.J~.�t__,j r~._ ....Q.<?..!I..!_J e_q__l;1 i:!t..J?)J. o ~..~~-~ m..?...~__l:l.J!L ...Ell..!.>_IJ,J e..sL.i.f.L.JJ_g__2,_/.J....i..J2..Q!;_Q ~!..l::l...L _Q_f.___:U1.!E.... c Q..~ n .t r y__Y.TJ..JLlf..r:.. _.t..!J.g 2.Y .Q.fJ_[.J!._i,__ti:_..c_,I_I L __a n d__ r;g__r, t .r_g)____Q_f t f1_g____ .P..Y..r...~_�i_y__Q.f ....... ....C..I::_l ~.t.2.JJJ s ..L.. ._t_!J..~ !JYL.~.!I!.Y......_.. of__ f o_g_g__ _a_ n d____D Y.:J-19...~. L!lF AP.LL-~ n d___g the r --~-fl n~..~ n .g_..tJ. f!g_!f.I!_C ~..~.2.. � b . Item s from aforesaid s hip- ment s that Nere removed from bonded Narehou s e s and are in th e c u s tody of dealer s or retailer s ma y be returned t o the di s tributor/importer for re s hipment in ac cordance Nith paragraph a . Item s from afore s aid :.::: hip - ment :.=: already in the hands of c onsumer s c an be dispo s ed o f by di ssolving, diluting and pouring in to th e s eNer- a ge :.=: y :.=: tem i n a cc ordan c e Ni th PAEC regulation s on the di :.=: po s al of radioa c tive Na :.=: te :.=: containing marginal amount s of radioac tivity. d. All other item :." that c ann o t be di :_:; po :.:; ed of through the se Ner may be referred to 84

DECISION - CTA CASE NO. 4406 - 7- PAEC or the /'tinistry or Health radiation safety officer in the nearest government ho s pital for appropriate dispo sa l. .., A.ll cos t :.:: 01" r y e co ~'er or afore - .L � mentioned items from consumer:..::~ retailers and other outlet:..:: .� and tran s hipment or the same item s to other countries shall be borne by the importer:..::. ( E>: h. .. F-5"~ p. 84~ CTA r-ec. ) As a conse,Juence of the test, petitioner was onte.red by the BFAD and tl1e Department of Health to 1�eexpo.rt milk and milk pz�oducts alld, thez�eafte.r, ._qftez� compliance by peti tionel', BFAD issued to it a cez�tification dated August 17, 1987, attesting to f._qcts of z�eexpoz�tation (Exh. XX, p. 79, CTA record) . Subsequently, in tlime 1987, petitionez� filed claims for z�efwuf of the duties ._qnd t._qxes i t paid on tht:'! shipments. The Buz�e._qu of In te.rnal Revenue g1�an ted the l'efund of the advance sales tax in the form of tax credit in the sum of F5,953,606.00 with Tax Credit Memo. No. 5040 dated Octobe1� 13, 1987. (p. 85, CTA record) . Horo~evel', the claim fo1� z�efund of customs duties was denied by the Collectoz� of Customs ._qnd late1� affil'med by the Commissioner of Customs ill his decision d8ted October 17, 1989 (Annexes .. A.. and "A - 1", pp. 16, 17, 18, 19, CTA record). 85

DECISION - CTA CASE NO. 4406 - 8- Hence this appeal. To determine r<~hethe.r o1� not petitioner is entitled to the refund of customs duties paid on the importati on of milk and milk products r.vhich r.vere on:fe.t�ed reexpo1�ted by the Bureau of Food and Drugs, the following issues have been raised by the parties in their� va.t�lous pleadings ..rwd men1o1�anda: 1 . IVhether or not the no11 -o bse1�vance of subJect BFAD !1emo1'a11dum CirculBr r.vhicl1 1�equi1�es the submission of .'.l eertificate of analysis fo1� r .'. ldioacti vi ty content 01" a Certifieate of Issuance/ Clea.t�ance f1�om the .responsible government authc.u�i ty i11 the cow1 t1�.v of o1�igin, will deprive the importe1� of his right to refund the duties paid on the shipments subsequently exported. ' 2. IVhether or not the1�e was a completed importation of the subject shipment w1de1� Section 1202 of the Tariff .'.lnd Customs Code in relation to Section 101 of the slime Code. 3. IVhether or not subject shipments which we1�e reexported for being ln}u1�ious to public health may be coJ1side1�ed exempted f1�om customs duties under the provisions of Section 2608 of the T.'. lriff .'.ind Customs Code. The Court believes tlUJ. t the failure of peti tione1� to submit the required ce1�tiflc.'.l te of 86

DECISION - CTA CASE NO. 4406 - 9- analys .ts from the responsible gove.rnment lwthority in the country of origin does not ~qffect its .right to the refund of the duties paid. First of ~'ill, the subJect BFAD Circulaz�, prioz� to its amendment, provides Bn ~'iltez�n..qtive remedy in case entries are made r.;l tlwu t the z�equiz�ed Cez�tific.'.i te/ Commodi ty Cl e~qz�ance from cow1 tl'y of oz�igin. Undez� paz�agz�aph ( 3), samples shall be submitted to the Philippine Atomic Energy Commission (PAEC) foz� z�adioactivity test and no shipments shall be z�eleased until sa tisfBctory result of .'. iJud.vsis is obtained. Aftez� its ~'imendment.. the Ciz�cul8r liker.fise pz�ovid.es an al tern .<. iti ve z�emed.v in case of failure to submit the Certificate/Commodity Cleaz�ance fl"ODJ country of origin. the1�eof, similaz�ly requires a ce1�tiflcation from PAEC. Hor.,eve1�, the said par~'ig.raph states ".w...LtlL._O.l~__Fli:th.Q.U..t the required l"._qdioacti vi t.v cez�tifica te/ clea.ra11ce f1�om the cow1 try of origin ". Meaning, the first 1�equi.remen t indica ted in the Ci1�cula1� is not mandatory but only diz�ector.v and, in fact, m~'i.V be considered optional. Moreover, there is nothing in the BFAD MeJJJor~'indum Cl.rcul .'.H' which p1�ovides fo1� forfeiture of duties paid as a consequence of exceed.ing the radioactivity limits. Verily, said Circular p1�ovides onl.v that "foodstuffs xxx shall 87

DECISION - CTA CASE NO_ 4406 - 10 - not be given cle~'irance for domestic sale/ distribution lWd shall be disposed of in accon:fance r.fi th the guidelines set forth in Annex "B " t h ereof. Annex "B ", as quoted ea1�lie1�, refer-s to "Procedures for Disposal of Jmpo1�ted Foo d Found to have Exceede d Allor;able Limits for- R~"l dio..:-1ct ivity in the Philippines", and its peJ"tinent provisi on states that: a � 11 At-ores a .i d :.=.: h .i p men t s ;.,=:...t:t...LL � t . _ LT.! .t~!:;... _i_r}______p_g_n_f.tg _Q. __ .... -...!:'.{~.cg_IJ. {,~.IJ.. :f:_#g_:f: _______'fTl~_y_______Q. _g_ ?...Ll.(.":l t.':!.f?.Q . tc:>_ _P..g...... :f:. .h.. f:PP. g__q_ __ <:.~.!Lt... ..Q_f._____ t.h._g ___.!._:.. f..>_t,~,I!...t .r...Y.. under th e s up e rvi s ion and control of the Bureau of Customs, the Bureau of Foo d and Drug :.=; (BFAD.J .~ and other concer ned aaen - cie s . A c ertificate of receipt i ssued by proper aut h orit i es at the de s tination s hall be presented b y the importer to th e BF AD and other co r, c er ned agen c ie s. 11 (Unders co ring su pplied) Cle~"lz� f r om the fo1�egoing ls that only shipments sti l l inta ct and "ln b onded r.r~"lrehou ses" may be z-eexported or s hipped o u t o f the co w1 try. Com ing to th e questi on of r.fhethe1� o1� not there r,ras a completed importation in tills case in the l i ght o f the provisions o f Se ct ion 1202 of the Tariff and Customs Code, the fa cts of the case shor.r that the shipments in �'JUesti on r.rere s t i l l 111 the customs premises and r�e r e not r�1 thdrar�11 because pe t i t i o n e1� r,ras not g1�an ted a p e rml t for r.;l thdrawBl thereof. Sai d lmport ~'ltions r..�ere held ln the 88

DECISION - CTA CASE NO. 4406 - 11 - customs r,rarehouses pending the test made by the Philippine Atomic Energy Commission on the radioactivity standard set by the BFAD . Respondent alleges th..::t t .'.ifte1� petitioner paid the customs duties taxes due on the impo1�ta tions, the corresponding import en t1�i es r<~ere finally liquidated on va1�ious d._qtes, Mld t;he legal permit; f<.H' r.ri thdrar<~al of the importa tio11s was granted b.v the BLH'eau of Customs, the1�e r<~as ._qlready ._q completed importation. Thus, he cl .'.iims tl1a t peti tionez� is not entitled to the refund since the importation is deemed terminated r.rhen i t p .'. iid the corresponding c ustoms duties . A c l ose scrutiny of the records and evidence, h o r<~ever , faLls to substBntiate respondent 's clain; t hat a permit for r<~i thdz�ar<~al of said goods had been issued to petitioner. In fact , the decision of the Commissioner of Customs r<~ould suppo1�t the finding that the goods r<~ere never rt."!leased from customs custody r<~hen .t t stated that: "B.e.f.o.J..:.e.......l~.el .e{J.fl..e...... H.e.l~ .e..f.f..e.c.t.e.d said shipments subjected to J'adioactivit.v tests x x x. Finding the sl.1ipmen ts to ha ve ex ceeded the r .<. tdi oac ti vi t;v limit x x x, BFAD directed theLr expo1�t.<. ttion, x x x . Since re spondent alleges h e has iss ued the r<~i thdJ�ar.ra l permit, the burden of proof was on him 89

DECISION - CTA CJ1SE NO. 4406 - 12 - under the c i rcumstan ces to prove by evidence such an allegation ( Sec. 1, Rule 131 o f the Rules of Court) . Th e failure of respondent to p1�esen t evidence of the r,ri thdr~�H;ral permit r;rhich originates from hi s o ffi ce op e ns h _i /]) to unf~'i vo.ra bl e inferences. Here, it can be inferred that the penni t to r.ri t hd.rar;r r.ras not produced by respondent because there r.ras actually none issued by him . Indeed, the issuance of a 1 egal perml t for rdtluiJ�ar;ral is indispensable to complete the p1�ocess of importation. This is clear from the following provisions of Section 1202 of the Tariff and Customs Code r.rherein the conctllTence of tr.ro conditi ons have to be met, viz: a) payment of duties, taxes and othe1� charges; and b) gran ting of the legal pe.rmi t for r,rj thdrar.ral. u! mp ortatio n begin s when the carrying vessel or air c raft enters the iur.isdict.ion 01.- the Philippine:.:: Nith intention to unlade therein. l.J!I.Jl._<'}!:._t~_ti. _q.TJ... i_;;, __ !i_ T!Ll?.fi. . .tf?.r... mi..n.ftiJJ.f:i.. ....vP..gn____Q. ~.Y. 'f!l..!/. .t .....P. L ...tJ>...f!.. ~:i..ld.t.l ...:,::_~........f.. ~.:~:..:.-~.._.<:l.f./_cf........!:l..t...b.!?..L_!;]E!r...51I?...~ .....ti..ld___..!,).P ..C:.~.f!. tt.>_r;___. . ~.r.. ti..!; J '!. :2. J._______Q..t......_.~_.QJ..t:... t:i. .... _,t__Q_}~JL.......P.~ L~:!... ...~t. t tug..___ pg_r...t ___q _t___gR.tr..'L. .._~D...~::f.--. . .t .t.>.f!.___ Lf!.gii:i..L .....P.f!..r...!!!..Lt t!?.. fg.r...... _!:.�~.i.. .t.IJ.,j r .?. t~~.ii:i..I........:f:. .b_~LL.. _.t.>..~..!:'.._ _ Q.g_gr!_ q..r.._�..TJ_ 1...~. !?.r .__ ,_i .TL ....... ';~_s e ......... :..~. ~- :!:_,'j__ ___~r... :ti .~l:.... :.-"....... ii:i.L.!?. ._.......fr. ..... .. Q..f ':J..!::lt:. .f....:.-".s. ..........t .iiil.2U~...L ........iiil. .f.!..!1.. . . . J.l.t.b.f!..r._ ..S!L~r._<J..f!...:.-"....c ... _.V f.!..t . :l.J.. f:.h._gy . b_ii.Yf? .... L..9..ii:i.l.LY....... J ...f_t..... . t _fJ!?._......J..J!Li...:.~.';/:i.....~;. tLQ.f!. Qf........'::; y ,:,.::_t _<}'f!l :.=-:.. � " ( Un de r :.=:c or i n g :.=:up p 1 i e d) 90

DECISION - CTA CASE NO. 4406 - 13 - In the cases of Llamado v. Commissioner of Customs, G.R. No. L-28 809, May 16, 1983, 122 SCRA 118; and Good Day Trading Corporation v. Board of Tax Appeals, G.R. No. L-6574, July 31, 1954, 50 O.G. 4803, the Supreme Court, in interpreting Section 1202 of the T..-. u�iff Bnd Customs Code, said that ""IJJJPol�tation is not termin .'. ited until the duties due on the merclumdise have been paid ._rmd the legal pe1�mi t for rd thdrar.ral lws been issued . �� In the instant case, there r.rBs no completed importation, and considering that tlJe immediate cause r.;as the gove.rnmen t ' s or�m action, this cou.rt believes th .'. it tlJe liabili t;v to pay tlJe duties on the imported articles did not accrue and, if payment; had been made , .'.i 1�efwnf is properl.v due the importer. On the thin.:f point of cont1�oversy, the situation he1�e may find analogy to cases of articles decl .'. ired unfit for human consumptio11 under Section 2608 of the T.._u�iff .'.ind Customs Code which provide as follor.rs: SEC. 2608. Disposition of Articles Unfit for Use or Sale or Injurious to Public Health. - 1-/hen any article .� Nhi ch in the opini<'m of the Collector .� i:..:; a m_gl!...~f.-~__t..Q___._p_Y..b I_i~_.flg_;:tl..tb.J._ .i..;,�. . . _?....~ i ~_f?_q___.QL Q...t._flf�.r..!:':!..i 2.g_ ..S:.Q..'f.TI.~�.._..._J~!..!..Y,~--.-~.b ~........'=..4.~t.!.:!4..L ....!Lf...__'t h.!?.. l3.34Lf�..~. ~...-..Q.f..._!;.!L~'f_Ql!!...~..� the co 11 e c tor o t- the p or t :; h a 11 .~ Lf__,_t. h ~- .......-.'!rl-~_ttf?..r..............J ~�----ILQ_t ~:i..i...:', . P..Q .(f..f:!QJg .....1,1..!.1..9...e !'.:.___ t h._f?._.J.?..!...QYJ..2...i.QT.L~......L .f?. ..l...C:!.t.i!..!..g. 91

DECISION - CTA CASE NO. 4406 - 14 - .t..<? ._.._f.J:L(-.l..<:J.... ..P:J.I..f!.�._ ..9.r:.. !:l..<1...:.."...�� a p p o i n t a boar d o 'f three me mbers to examine the arti c le. Uhenever po:..=::..=:ible .� one member :..=:hall be a repre :..=:e ntative of' the Hinistry of' Health, o'ft-icial :.=: of' the Bureau of' Custom:..=: .� at lea :.=: t one of' whom s hall examine said a r �t i c 1 e .. and f....f_._1../)..!L_:,=:_a mg____j_:,._=:__f..!.L4I~g_ _'!;.Q._ _f}_g_ !:1.!Lf..:Lt.._.( l.f..__ ~.--.m.f?..[LP:.~-~--t;_g__tb..f?...._ .Q u_P..l ..i..~......!J..f?...�i. .Lt!.J....~.. tfl._____P.__g_�i.r .<:f..__;,;::..h..�i.Jl........:f.P.._...r..Jt.P.!H_L_j n_ _!_'lf.....i..t_i_n Q.... _tQ. t.b__._ ___.-;__Q_!_!_f?._.r;__t._<Lr..._,_____~/J..(~-----~.h..�i.. l . l.........f.!2.r..J h t�~Lt...b.......PI.Q .f?...!.... f....t t ;=:_____!'1...d..iX._t}_r;__t_j_Q_[L._.i.J.L__;_=:_y._!; .b. .....J!J..~ n n ~L---~ :L...... h.g_ !;..~_=:=::.......TTJ_a_y____.r.__g_q_4_i,..r.._t;_� Health authoritie:..=: at port of' entry :..=:hall collaborate with the collector:..=: in :..=:uch matter s with reasonable di s patch. (Under:..=: corin g Supplied). An lwtllol�i ty in custooJs lt.'H-1 opines tllat, in cases of disposition b.v destructicm under Section 2608, tlle effect is to exempt tbe affected mez�cbandise from duties and taxes and lWY such duties and taxes collected thereon should be 1�efunded (Tejam, Commentaries on the Revised Tariff and Customs Code, Vol. IV, 1986 ed., p. 2370). He1�e, although the a1�ticles r<~ere considered unfit fr.u� use oz� sale o1� in)u1�ious to public health, tl1ey r<~ere not disposed of by dest1�uctio11, but r<1e1�e disposed of by 1�eexporta tion, a mo de of disposition provided for i11 the said BFAD Ciz�cular. Reading Section 2608, however, disposition by dest.ructio11 is only an al terna ti ve mode of disposi ti011 as it shall apply "if the nuttter is not disposable the provisions z�ela ting to food and drugs ... It could be that even if the subject articles were disposed 92

DECISION - CTA CASE NO_ 4406 - 15 - of by reexpo1�tll tion, ~~ mode of disposl tion 1�eL~ ting to food and drug, the theory of exemption may still apply. Hor.;ever, s tl"ictly speaking, r.;e cannot adopt in toto the theory of tax exemption because of the time hono.red rule in st~~tutor.v constn.1ction that t._~x exemption is never p1�esumed but must be g1�a11ted ln ..'l c le._'l1" and rmequi vocal nuume1� (Collector vs. Manila Jockey Club, 98 Phil. 670). In._'lsnmch as Section 2608 of the Code does not p1�ovide f or the consequences o1� disposition of the duties and taxes paid on the goods to be destroyed or disposed of, ou1� altern..~tive is to look fo1� othe1� provisions of the Code r.;hich may supply the deficienc.v o 1� 1�emed.v. The mol"e 1�eleva11t ~'lPP1"oach _is to inte1�p1"e t the p1�ovision of Section 2608 in relation to Section 1704 of the T._�u�iff and Customs Code P1"0Viding abatements refunds, the pel"tinen t p1�o�vision of which is quoted ._~s follows: "SEC. 1704. Abate�ent or Re~und o~ Duties on Articles Lost or Destroyed after Arrival. - A Collector may abate or refund the amount of duties accruing or paid, and may likewi se make a c orre s pond- ing allowance on the irrevocable domestic letter of cre dit, bank guarantee, or the ent-ry bond or other d(.lCUment .� IJ.P..(l. 'IJ._ 2.E...t�.2..f.ff! c_f;_{:~[_'/.______ _pr..g..QL._____{}_f______j.I!..i .t.J.r~. , de :.=< - t-ruction .� or los :." by the �ft .� 'fire P. r.:....._q_.t!l.Eif.... t.. ';.�!..IJ.:," .~..L .. fLf.......~ .r}.Y.........�!r.....t . r,;.J.. ~. L ......�!..2_.....f . Q...!....!.J?.~'!.2.. : a. -~� X X b. Uhile remaining in customs custo dy after unlading; 93

DECISION - CTA CASE NO. 4406 - 16 - C. .Y .l<' X d. ,);' X X (Underscoring supplied.) Under said pro vision of law, the Collecto1� of Customs m,_qy abate o1� 1�efund the amount of duties p ,_qid upon s,_q ti sfac to1�y proof of inju1�y, destruction, or loss by theft, fire or othe1� causes o f BJJY lll'ticle , ,_qmong others, r,.rhile 1�emaining in customs custody ._qfter l.ml._qding. The law conceives of a sitcutti on r.rhe1�e after shipments were unloaded , prope1� ent1�i e s r.rere filed ,_qnd the corresponding duties paid, the shipme11ts suffe1� injury fo1� any c m1se , r.rhile 1�emaining in c ustoms custody. While in this c._-:tse th e in}Ul'Y by 1�easo11 of l'ac:Uoacti vi ty did n o t occu1� r.rhile tl1e shipments r.re1�e in customs custody , nevertheless the requi1�ed satisf..::tcto1�y p1�o of of inJury occUl'l'ed only when samples we1�e submitted to the Philippine Atomic Energy Commission and the latter fail e d to issue the In othe1� wonts, the milk produe ts bec._'inJe inJurious to public health only ,_qftel� they failed to meet the standan.'fs set fo.rth by the Philippine government and this oc<.~Ul'l'ed at the time the shipments we1�e s t i l l in customs custody. The said sll1pme11ts we.re not in}lu�ious per se r.rhen tl1ey r.rere inJpo1�ted . They may have met the 94

DECISION - CTA CASE NO. 4406 - 17 - internation ..'. il standan:f 011 allor.rable 1�adioactivity limit but r.rhen ti1ey a1Ti ved in the Pililippines and subjected to testing, they failed to meet oul" .requi1�ed Philippine standan.t. Verily, it may be a1-gued that this inte1�p:retation is st1�etcbi11g too nwci1 ti1e meaning o f Section 1704 . We may -..'idmi t so, but this mode of .tntel"Pl"etation is based 011 sow1d 1�ules of statutory co11stnJction and one such rule o1� doct1�ine states: " That r;hich is implied in a statute is as mw.~b a part o.f it as that which is exp1�essed" (Martin Country vs. Hansen, Ill. Fld. 40, cited in the Handbook on Statutory Construction, by Ruperto G. Martin, p. 122) . This doct1�ine is 11ecessa1".V fo1� ve1�y nu�ely, if at all, are statutes f1�an1ed with mi11u te particularity as to cove1� every co11cei V-..'lble si tu -.'1 ti on. I t aids the cou1�ts to infer -legislative purpose and in t ention in such a r.ray as to de te1�mine r-rhether eertai11 mino1� o1� specific matters are covered by ti1e ge11er-..'il o1� bl"OBd tel"DJB used i11 a statute. This is not Judicial legislatio11 but l"-..'ithe1� a method of discove1�i11g legislative i11tent by the logical p1�oeess of deductio11 (Black on Interpretation of Laws, 2nd ed., p. 84). Certainly, in the case -..'it ba1�, the lawmake1�s could not have possibly conceived -..'ill situatioi1s 95

DECISION - CTA CASE NO. 4406 - 18 - r.;rhereby shipments still in Customs custody would be damaged, injured or proven to be in}lu�ious to public health for any cause whatsoever. The phrase in Section 1704 of the Code afo1�esaid, is lu�oad enough to covel' l'adioaetivity. This Court's conclusion finds fu1�ther suppo1�t in the case of Zamora vs. City of Manila, 7 Phil. 585, r.;rhieh eJWJJ<..:!i <"-1 tes that "a remedial statute, such as the one in question providing fo1� a l'efund of taxes which ._qppea1�s to hBve been collected unJustly, should be construed libe1�ally. " WHEREFORE, respondent Commissioner of Customs is hereby ordered to grant petitioner NESTLE Philippi11es, I11c. a refw1d of the amount of P2, 822,621.00 representing customs duties paid on the imported milk and milk products in question. SO ORDERED. Quezon City, Jrfet1�o /'fanil..'i. , FebruBl'Y 21 . 1992. ~~cz. ~ ERNESTO D. ACOSTA Associate Judge I CONCUR : I STA~N'Tl:E~!tlC-~--R-OAQUIN Associate Judge 96

DECISION - CTA CASE NO. 4406 - 19 - C:ERTIFIC:..I.lTION I he1�eb.v certif.v that this decision was reached after due consult.'."ltion betr.feen the membe1�s of the Cou1�t of Tax Appeals in accon:fance with Section 1.._1, Article VIII of the Constitution. ;;/ 1((, , ~OAQUIN CONS 'ANTk socla te ~Judge Cc. urt of Tax Appelds �. 97