CORNELIO Q. CASIDO v. REPUBLIC OF THE PHILIPPINES, and HON. RUFINO BIAZON, in his capacity as Commissioner, Bureau of Customs

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY ENBANC CORNELIO Q. CASIDO, CTA EB No. 919 Petitioner, (CTA Case No. 8087) -versus- Present: Del Rosario, P.J Castaneda, Jr., Bautista, Uy, Casanova, Fabon-Victorino, Mindaro-Grulla, Cotangco-Manalastas, and Ringpis-Liban, JJ REPUBLIC OF THE PHILIPPINES, and HON. RUFINO BlAZON, in his capacity as COMMISSIONER, Bureau of Customs, Respondents. Promulgated: MAR 31 2014 /f-r'~~~~~~,\ x---------------------------------- -------------------------- -------------------------x DECISION CASTANEDA, JR., J. : Before the CTA en bane is the petition for review of petitioner Cornelio Q. Casido ("petitioner") filed on July 17, 2012 seeking to set aside and/or modify the February 8, 2012 Decision 1 and the June 5, 2012 Resolution2 of the former CTA First Division (" Special 1 st Division"), in so far as petitioner is concerned, and to issue an order for the immediate release of "Kanny I" Tugboat and "Kanny II" Barge from the custody of the District Collector of the Port of Tacloban in favor of petitioner Casido as the jt.- 1 Rollo. pp. 24- 40 ; Penned by the then Presiding Ju stice Ernesto D. Acosta (compul sorily retired on December 21 . 2012) and concurred in by Associate Justices Erlinda P. Uy and Espera nza R. Fabon-Victorino. 2 /d. , pp. 42-47 .

DECISION CTA EB No. 919 (CTA Case No. 8087) Charterer of the tugboat and barge in the case entitled "Cornelio Q. Casido v. Republic of the Philippines, and Hon. Napoleon L. Morales, in his Capacity as Commissioner, Bureau of Customs" docketed as CTA Case No. 8087. The dispositive portion of the assailed Decision reads, as follows: WHEREFORE, premises considered, the present Petition is hereby DISMISSED for lack of merit. The Decision of the Commissioner of Customs dated March 12, 2010 is hereby AFFIRMED. SO ORDERED. The dispositive portion ofthe assailed Resolution states: WHEREFORE, premises considered, petitioner's Motion for Reconsideration is DENIED for lack of merit. SO ORDERED. THE FACTS The facts of the case3 are undisputed which were culled by the Special 1 st Division from the Joint Stipulation of Facts4 of the parties and as borne by the records of the case: Petitioner, Cornelio Q. Casido, is the claimant of "KANNY I" Tugboat and "KANNY II" Dumb Lighter being the charterer thereof. He may be served with summons, orders and notices in his address at Heritage Mining and Resources at No. 1, April Street, Congressional Village, Quezon City. Respondents are the Republic of the Philippines, in whose name the seizure proceedings below was filed , and the Commissioner, Bureau of Customs, Gate 3, South Harbor, 9t-' Port Area, Manila, where he can be served with summons, orders and notices. 3 Assail ed Deci sio n, pp . 2-8 (C itati o ns Omitted ); Di visio n Docke t, pp. 575-5 8 1. 4 Di visio n Docket, pp. 22 9-23 5.

DECISION CfA EB No. 919 (CfA Case No. 8087) Sometime in the middle part of 2007, petitioner, being the President of Heritage Resources and Mining Corporation (HRMC), a private corporation duly organized and existing under Philippine laws, which is primarily engaged in the business of mine exploration, hired and contracted the services of "KANNY I" Tugboat and "KANNY II" Dumb Lighter owned and operated by KANNY Industrial Company, Limited, an entity duly organized and existing under the laws of Hong Kong, People's Republic of China, represented by Liu Guogang. In the Bareboat Charter Agreements both dated 11 July 2007 entered into by petitioner as the charterer, and Mr. Guogang, the "KANNY I" Tugboat and "KANNY II" Dumb Lighter were specifically hired and chartered by petitioner for his sole and exclusive use as an incident to the HRMC's mining operations in the Province of Eastern Samar, Republic of the Philippines. Thereafter, the two (2) vessels were delivered and docked at Homonhon Island, Eastern Samar, sometime on September 6, 2007. When the two (2) vessels, "KANNY I" Tugboat and "KANNY II" Dumb Lighter, arrived at the port of Homonhon Island, Eastern Samar, its Captain and officials, as well as petitioner, failed to/did not go to the nearest customhouse upon entry as required by Section 2530 of the Tariffs and Customs Code of the Philippines (TCCP). On September 18, 2007, elements from the Bureau of Customs (BOC) and Philippine National Police conducted a search on the two (2) vessels docked at the Port of Homonhon Island, Eastern Samar. The search on said vessels yielded the absence of any contraband goods. Thereafter, Collector Minda T. Llamas of the Sub-Port of Catbalogan, Samar, issued a Hold Order on the two (2) vessels for further investigation. Further investigation was conducted by operatives of the Intelligence and Enforcement Group (lEG) of the BOC: ~

DECISION erA EB No. 919 (erA Case No. 8087) The Report dated October 31, 2007 of Bolivar E. Puna, lEG Investigator, states, among other things, "While it appears that said vessels -Kanny I and II are not importations subject to duties and taxes nor it appears that it had any intention to unload goods by the established fact that no goods were found on board the two vessels, however, xxx," it also found the Captain wanting for compliance of Section 2519 and 2521, TCCP, and recommended that "xxx a fine in such amount as shall be addressed to the sound discretion of the District Collector of Tacloban can be imposed against the Tugboat Kanny I and the Barge Kanny II. " Celso P. Templo, Deputy Commissioner, BOC, concurred with the recommendation of the lEG Investigator, Mr. Bolivar Puna, to impose a fine. Then Commissioner Napoleon L. Morales forwarded to the District Collector, Port of Tacloban, the recommendation of Mr. Bolivar Puna, inviting attention to the recommendation "that a fine in such amount as shall be determined by the District Collector be imposed against such vessels pursuant to Sections 2519 and 2521 of the TCCP, as amended , for his consideration and appropriate action. Instead of imposing a fine , Collector Minda T. Llamas, in her 3rd Indorsement dated November 12, 2007, issued a warrant of seizure and detention as Seizure Identification No. 001-2007 for alleged violations of Section 2530 (f) and (1-1) of the TCCP, as amended , by petitioner. Hearings were then scheduled on November 22, 23, 26 , 27 and 28, 2007. During the hearings before the BOC, Port of Tacloban, Tacloban City, the Republic presented witnesses who were present during the inspection of the two (2) vessels anchored at the Port of Homonhon Island. Said witnesses uniformly testified that there were no dutiable goods, or illegal cargo found inside the vessels in question. After the hearings were conducted, the parties were required to submit their respective position papers. The prosecution did not file their position paper. Petitioner complied and submitted his position paper. ~

DECISION CTA EB No. 919 (CTA Case No. 8087) In his Decision dated April 21, 2008, Leovigildo M. Dayoja, District Collector of Tacloban, ordered the forfeiture of "KANNY I" Tugboat and "KANNY II" Dumb Lighter for violation of Section 2530 (f) and (l-1 ), TCCP. Petitioner filed a Motion for Reconsideration dated May 5, 2008 of said decision. In a Decision dated May 7, 2008, the District Collector, Port of Tacloban, denied said motion for reconsideration for lack of merit. Petitioner filed an appeal to the Commissioner of Customs. Said appeal was docketed as Customs Case No. 05- 08. In a Decision dated October 14, 2009, the Commissioner of Customs affirmed both the Decisions dated April 21, 2008 and May 7, 2008 of the District Collector, Port of Tacloban, forfeiting the two (2) vessels. Petitioner filed a Motion for Reconsideration dated November 25, 2009 with the Office of the Commissioner, BOC, which was also denied. Hence, petitioner filed this Petition for Review on Apri I 16, 2010. On June 7, 2010, respondents, through the Office of the Solicitor General, filed their Comment, which raised the following arguments: I. A customs official is duty-bound to seize any vessel if it is subject to forfeiture or liable for any fine imposed under tariff and customs law, rules and regulation . II. The two (2) vessels are subject to forfeiture because they are articles imported from Hong Kong without going through a customhouse. ~

DECISION CTA EB No. 919 (CTA Case No. 8087) III. The two (2) vessels are importations subject to customs duties and taxes. IV. Probable cause existed to warrant the seizure and detention of the vessels. Respondents filed their Pre-trial Brief on June 29, 2010 while the petitioner filed his Pre-trial Brief on July 8, 2010. On August 3, 2010, KANNY Industrial Company, Limited (KICL) filed a Motion for Intervention with a copy of its Intervention. On August 5, 2010, the Joint Stipulation of Facts was filed by the parties. In the hearing on August 5, 2010,5 the Court ordered the parties to comment on KICL's Motion for Leave to Intervene within a period of ten ( 10) days. The said motion was also set for hearing on September 17, 2010. On August 16, 2010, petitioner filed his Comments and/or Opposition to the Motion for Intervention. The respondents filed their Comment and/or Opposition (To Motion for Leave to Intervene) on August 27,2010. xxx xxx xxx The hearing was re-set to October 8, 2010. In the October 8, 2010 hearing, the Court ordered the parties and the counsel for KICL to submit their respective Memoranda in support of their arguments on the Motion for Leave to Intervene within fifteen ( 15) days. Counsel for respondents was also ordered to transmit to the Court the Customs Records ofthe case within ten (10) days. KICL filed its Memorandum for the Intervenor on October 27, 2010. {V 5 Also in the said hea ri ng, "Co nside ring th at the re are no fact ual iss ues invo lved, both parties submit thi s case for dec ision. However, sin ce a Motion for Leave to Intervene was fi led xxx. " (M inutes of the Heari ng dated August 5. 20 10, Division Docket, p. 236.)

DECISION CTA EB No. 919 (CTA Case No. 8087) Respondents filed a Manifestation and Motion on November 15, 2010 praying that their Comment dated June 3, 2010 be adopted as their Memorandum. Said Manifestation and Motion was noted by the Court in an Order dated November 22, 2010. On February 7, 2011, the Court promulgated a Resolution denying KICL's Motion for Intervention. KICL filed a Motion for Partial Reconsideration on March 8, 2011. On March 16, 2011, the Court ordered the petitioner and respondents to comment on KICL's Motion for Partial Reconsideration. On April 14, 2011, respondents filed their Comment (On Motion for Partial Reconsideration). On June 7, 2011, KICL filed its Reply To Respondent's Comment. In a Resolution dated July 21, 2011, the Court issued a Resolution denying KICL's Motion for Partial Reconsideration. On October 5, 2011, with the Manifestation and Motion of respondents on November 15, 2010 that they shall be adopting their Comment filed on June 3, 2010 and petitioner's failure to file its memorandum despite notice, the Court submitted the case for Decision. However, on November 17, 2011, KICL filed a Motion to Defer Proceedings alleging its filing of an appeal over the Court's denial of its Motion for Intervention. On December 15, 2011, the Court denied KICL's Motion to Defer Proceedings. On February 8, 2012, the CTA Special 1st Division dismissed the petition for review for lack of merit and affirmed the Decision of the Commissioner of Customs dated March 12, 2010. On June 5, 2012, the CTA Special 1st Division denied petitioner's motion for reconsideration for lack of merit. ~

DECISION CTA EB No. 919 (CTA Case No. 8087) On July 17, 2012, petitioner filed the instant Petition for Review en bane.6 In the August 29, 2012 Resolution,7 the CTA en bane ordered respondents to file Comment on the petition for review within ten ( 10) days from receipt of the said resolution. On September 26, 2012, the Court en bane granted respondents' "Motion for Extension of Time to File Comment". Respondents were given until October 21, 2012 to file the said Comment. 8 On September 27, 2012, respondents filed a "Motion for Leave to Sell the Vessels Subject of the Present Petition". 9 On October 22, 2012, respondents timely filed the "Comment" .10 The due date of filing, which is October 21,2012, fell on a Sunday. In the November 13, 2012 Resolution," the CTA en bane ordered petitioner to file comment/opposition on respondents' "Motion for Leave to Sell the Vessels Subject of the Present Petition" within ten (1 0) days from receipt of the said resolution. The CTA en bane also ordered the parties to submit their Memoranda within 30 days from receipt of the said resolution. On November 20, 2012, petitioner filed his "Comments [To the Motion for Leave to Sell the Vessels Subject of the Present Petition] 12 . Finding the said Comment insufficient in number of copies, the CTA en bane, in a minute resolution dated November 23, 2012, ordered petitioner to submit additional seven (7) copies of his Comment within ten ( 10) days from notice. 13 On January 7, 2013, the Court received Respondents ' "Manifestation and Motion (In Lieu of Memorandum)" which was posted on December 19, 2012. 14 Petitioner posted his Memorandum on January 4, 2013 and received by the Court on January 18, 2013. 15 However, the copies of the said)<-- 6 Rollo, pp. 1-23 , w ith Annexes ( Rollo, pp. 24- 148). 7 l d , pp . 150- 15 I . 8 /d,p. l 56. 9 /d , pp -15 7-164, w ith Annex (Rollo , pp. 165- 168). 10 /d , pp.l69-189 . 11 /d, pp. 191- 193. 12 /d , pp. l 95- 197. IJ fd., p. 199. 14 !d.. pp. 200-202. 15 /d.. pp. 206- 228 .

DECISION CTA EB No. 919 (CTA Case No. 8087) Memorandum were insufficient. On January 22, 2013, the CTA en bane ordered petitioner to submit additional copies of his memorandum within ten (1 0) days from notice. 16 On January 22, 2013, the Court noted 17 petitioner's "Compliance" submitting additional copies of his "Comments [To the Motion for Leave to Sell the Vessels Subject of the Present Petition]. The CTA en bane al so noted 18 respondents' manifestation stating that they be allowed to adopt their Comment dated October 19, 2012 as their Memorandum in the above- entitled case. On March 12, 2013, the CTA en bane noted petitioner' s "Compliance" submitting the additional copies of the Memorandum. 19 On May 8, 2013, the instant case was submitted for decision. 20 However, on May 28, 2013, the Resolution dated May 8, 2013 was recalled and set aside after finding that the "Motion for Leave to Sell the Vessels Subject of the Present Petition" filed by respondents on September 27 , 2012 was st1'11 pend'mg.21 On July 1, 2013, the CTA en bane granted respondents' "Motion for Leave to Sell the Vessels Subject of the Present Petition". Respondents were ordered to place the proceeds of the sale ofthe subject vessels in escrow in a government-held bank and shall be disposed of in accordance with the final c deCI.S.IOn 0 f th'lS 22 OUrt. On September 18, 2013, the case was submitted for decision. 23 Hence, this decision. ISSUES Petitioner's assignment of errors/issues to be resolved: 24 A. The Honorable Court of Tax Appeals, 1st Division ERRED when it found and declared the two (2) vessels, "KANNY I" Tugboat and "KANNY II" Dumb Lights, violated the ~ 16 Rollo. pp . 23 7-238. 17 !d. pp . 237-238. 18 /d., pp. 239- 240 . 19 /d., pp. 245-246. 20 !d. , pp. 248- 249. 21 /d. , pp. 251- 252 . 22 /d , pp . 254-260. 23 !d., pp. 262-263. 24 /d. , p.9 .

DECISION CfA EB No. 919 (CfA Case No. 8087) prov1s10ns of section 2530 (f) and (1-1) of the Tariff and Customs Code of the Philippines; B. The Honorable Court of Tax Appeals, 1st Division ERRED when it found and declared there was probable cause when the Collector, Bureau of Customs, Sub-Port of Catbalogan, ordered the seizure of the two (2) vessels "KANNY I" Tugboat and "KANNY II" Dumb Lighter; C. The Honorable Court of Tax Appeals, 151 Division ERRED when it disregarded the findings of the investigation and the resultant recommendation that the two (2) vessels "KANNY I" Tugboat and "KANNY II" Dumb Lighter are liable only to an administrative fine as provided for under Sections 2519 and 2521 ofthe TCCP; D. The Honorable Court of Tax Appeals, 1st Division ERRED when it sustained the Decision of the District Collector, Bureau of Customs, Port of Tacloban, that the two (2) vessels "KANNY I" Tugboat and "KANNY II" Dumb Lighter are subject to forfeiture pursuant to Section 2531 of the TCCP. Based on the foregoing, th e iss ue in this case is whether or not the Specia l 1st Div ision co rrectly a ffirm ed th e dec ision of the respondent C om missioner of C ustom s forfeitin g the subj ect vessels for vio lation of Section 2530 (f) a nd (1-1 ) of th e TCCP. THIS COURT'S R ULING The petition is denied . The Court en bane, after a careful review of the assailed Decision and Resolution as well as the records, finds that the issue and arguments rai sed by petitioner have already been considered by the Special 151 Division in its assailed Decision and Resolution. Be that as it may , pertinent issues need to be emphasized. Vessel is an "article" Petitioner argues that Section 2530 of the TCCP is not appl icab le because the said provision of law refers to an article and not to a vessel. Petitioner states that he is still in quandary on how a bareboat charter~

DECISION CTA EB No. 919 (CTA Case No. 8087) agreement was considered a documentary evidence to prove an intention to import the subject vessels. Petitioner believes it is erroneous to conclude and consider the vessels as imported articles. Respondents, by counsel, argue that whether there was contraband found inside subject vessels, or whether they were used for coastwise trade or smuggling is irrelevant because the unlawful act which subject the questioned vessels to forfeiture is their surreptitious entry into the Philippines without going through a customhouse. Respondents also argue that the vessels are dutiable articles under the Heading 89.04-05 of Chapter 89 of the TCCP. The arguments of petitioner have no merit. This case involves the forfeiture of "Kanny I" tugboat and Kanny II" barge in favor of the government for vio lation of Section 2530 (f) and (1-1) of the Tariff and Customs Code of the Philippines (TCCP), as amended, which state that: Section 2530. Property Subject to Forfeiture Under Tariff and Customs Laws.- Any vehicle, vessel or aircraft, cargo, article and other objects shall, under the following conditions be subjected to forfeiture: XXX XXX XXX f. Any article the importation or expatiation of which is effected or attempted contrary to law, or any article of prohibited importation or exportation, and all other artic les which, in the opinion of the Collector, have been used, are or entered to be used as instruments in the importation or the expmiation of the former ; XXX XXX XXX l.Any article sought to be imported or exported. (l)Without going through a customhouse, whether the act was consummated, frustrated or attempted; XXX XXX XXX ~

DECISION CTA EB No. 919 (CTA Case No . 8087) Sec. 3519 of the TCCP explicitly states that, '" Articles' , when used with reference to importation, includes goods, wares and merchandise and in general anything that may be made the subject of importation or exportation." In the CTA en bane case Zhongshu Huang and Nga Heong Chong v. Bureau o f Cu st om i 5 an "article" refers to a particular object or , substance, a material thing or a class of things; material or tangible object. We emphasize that under Heading 89 .04- .05 of Chapter 89 (S hips, boats and floating structures) of the Book I on Tariff Law, vessels are classified as dutiab le artic les. Based on the foregoing , vessels are articles, which may be the subj ect of importation, as correctly ruled by the Speci al 1 st Di vision in th e assail ed Decision, as follows: Similarly, there is no merit to petitioner's aversion that the subject vessels are not atiicles contemplated in Section 2530 of the TCCP. Wh en used w ith reference to importation and ex portatio n, articles includ e goods, merc ha nd ise and in general anything that may be made th e s ubject of importation or ex portation. Concomitantly, ships, boa ts and flo ating structures such as the subj ect vessels a re dutiable articles und er H eadin g 89.04-.05 of Cha pte r 89 of the TCCP. There is no question that the subject vessels may be considered articles subject of importation ? 6 (Emphasis Supplied). Having established that vessels are dutiable articles, it is necessary to determine whether there is importation in this case. Section 1202 of the TCCP provides when importation begi ns and deemed terminated which reads: Sec. 1202. Wh en Importation Begins and Deemed Terminated. - Importation begin s when the carrying vessel or aircraft enters the jurisdiction of th e P hilippin es with intentio n to unlade th erein . Importation is deemed terminated upon payment of duties, taxes and other charges upon the articles, or secured to be paid, at a port of entry and the legal permit for withdrawal shall have been granted, or in case sa id r-- articles are free of duties, taxes and other charges, until they have legally left the jurisdiction of the customs. 25 CTA EB 451 (CTA Case No. 7273). March 12, 20 I0, with Entry of Judgment dated July 12. 20 I0. 26 A ssailed Deci sion. p. 16; Citation Omitted.

DECISION CTA EB No. 919 (CTA Case No. 8087) Clearly, for importation to begin, it is important that it enters the jurisdiction of the Philippines and that there must be an intention to unlade therein. Based on the facts of the case, these vessels of foreign origin entered the jurisdiction of the Philippines for the sole and exclusive use of HRMC ' s mining operation as stipu lated in the Bareboat Charter Agreements. It is established, therefore, that impmiation of the vessels have begun in this case when the seizure/forfeiture proceedings was instituted. Considering that the vessels are imported articles, pertinent to the case is Section 1201 of the TCCP which reads: Section 1201. Articles to be Imported Only Through Customhouse. - All articles imported into the Philippines whether subject to duty or not shall be entered through a customhouse at a port of entry. It is basic that when the law is clear there is no room for interpretation; and when the law does not distinguish we should not distinguish . It follows, therefore, that all articles imported into the Philippines are required to enter through a customhouse at a port of entry. We reiterate the undisputed finding that the subject vessels failed/or did not go to the customhouse as required by law which was admitted by the parties in the parties' Joint Stipulation ofFacts27 as follows: When the two (2) vessels, "KANNY I" Tugboat and "KANNY II" Dumb Lighter, arrived at the port of Homonhon Island, Eastern Samar, its Captain and officials, as well as petitioner, failed to/did not go to the nearest customhouse upon entry as required by Section 2530 of the Tariffs and Customs Code of the Philippines (TCCP). (Emphasis Supplied) . Based on the foregoing, the vessels, as articles subject of th e importation, failed to go through a customhouse, thus, the forfeiture of the vessels pursuant to Section 2530 (f) and (1-1) of the TCCP for failure to go through a customhouse is correct. ~ 27 Par. 6, Joint Stip ulati on of Facts, Di vision Docket, p.23 1; Assail ed Decision, p. 3.

DECISION CTA EB No. 919 (CTA Case No. 8087) Probable cause was established Petitioner believes that probable cause was determined when the Bureau of Customs conducted an investigation on the vessels; when the lEG team from Cebu conducted a similar investigation, and thereafter submitted its findings that there was no importation of goods and recommended the imposition of an administrative fine for the failure of the Captain of the vessels to present documents at the port of entry. Petitioner alleges that just because the Commissioner did not ovetiurn the decision of the Collector in issuing the seizure of the subject vessels, and not following the earlier Order to impose a fine, it does not mean the seizure order is correct, or in accord with the governing rules in determining probable cause. Petitioner argues that the Special 1st Division ignored the findings of the lEG Investigator Bolivar E. Puno: that, there was no importation of goods or articles; that Kanny I and II are not importations; and that only the imposition of fine for the failure of the Captain to present documents to the nearest port or customhouse as required by law was recommended to the Commissioner. The allegations of petitioner are untenable. The burden of proof in seizure and forfeiture proceedings shall lie upon the claimant provided that probable cause shall first be shown for the institution of such proceedings and that seizure and/or forfeiture was made under the circumstances and in the manner described in the preceding sections of the TCCP, as stated in Section 2535 of the TCCP, as follows: SEC.2535. Burden of Proof in Seizure and/or Forfeiture. - In all proceedings taken for the seizure and/or forfeiture of any vessel, vehicle, aircraft, beast or articles under the provisions of the tariff and customs laws, the burden of proof shall lie upon the claimant: Provided, That probable cause shall be first shown for the institution of such proceedings and that seizure and/or forfeiture was made under the circumstances and in the manner described in the preceding sections of this Code. The term "probable cause", which has been held synonymous with "reasonable cause", means less than the evidence which will justify condemnation. It implies a seizure made under circumstances which warrant suspicion (Sanchez vs. Commissioner of Customs, BTA Case No . 185, 9z-

DECISION CTA EB No. 919 (CTA Case No. 8087) Novem ber 2, 1954, citing U.S vs. One Bag of Paradise and Choura Feathers, N.Y, 365 F. 301, 167, CCA 4 73; Associated Banking Corp. vs. Commissioner of Customs, et al., CTA Case No. 2448, August 6, 19 76; Metropolitan Garment Corp. vs. Ramon Faro/an, CTA Case No. 3959, April 16, 1986; Mayer Steel Pipe Corp. vs. Hon. Alfredo Pio de Roda, et al. , CTA Case No. 2823, February 18, 1987) .28 The Special 1 st Division found that there was probable cause to make the forfeiture of the subject vessels pursuant to Section 2530 (f) and ( 1-1 ) of the TCCP. Pertinent portions29 of the assailed Decision provides: We give credence to the arguments laid by the respondents that there was indeed probable cause to make the forfeiture ofthe subject vessels. First, the entry of the subject vessels was surreptitiously made in a seap01i that is not considered a port of entry in Homonhon , an island where there is no customhou se and no customs personnel who will monitor the entry and exit of vessels. Second, according to the Bareboat Charter Agreements presented by petitioner, the subject vessels were for the sole and exclusive use of the company as an incident to its mining operation. Said usage requires a permit/license from the Maritime Industry Authority (MARINA) pursuant to Republic Act (RA) No. 9295. It also requires a certification of payment from the BOC that will show payment of the duties and taxes paid thereon, in accordance with Customs Memorandum Order (CMO) No. 25-1007.30 However, it appears from th e records that petitioner sent a letter-application dated September 18, 2007 to MARINA only on October 8, 2007. The actuation of belatedly registering the subject vessels to the MARINA appears to be a mere afterthought for were it not for the apprehension by the BOC officials on September 18, 2007 , petitioner would not have registered the entry of said vehicles to the proper authorities. Third , based on the documents also presented by the petitioner to the BOC, the said vessels were covered onl y by,_ 28 T'ri-Mark I'entures Trading Corporation v. Commissioner ofCustoms. CTA Case No. 6575, September 18. 2007 , with Ent ry of .Judgment dated October II , 2007. 29 Assai led Dec ision, pp. 12- 14; Citations Omitted. 30 Shou ld be CMO No. 25-2007 or CMO No. 025-07, "Clearance Requirement for Initial and Renewal or Regi stration of Imported Vessels Pursuant to Memorandum of Agreement (MOA) Between Maritime Industry Authoril) (MAR INA) and Bureau o f Customs."

DECISION CfA EB No. 919 (CfA Case No . 8087 ) Provisional Certificate of Registry Nos. 15459207 and 15468507, respectively, issued by the Tuvalu Ship Registry, Republic of Tuvalu, Polynesia, for single delivery ballast voyage for a period of two months only, or from July 26, 2007 to September 26, 2007. According to the Tuvalu Ship Registry, the registration for a single delivery voyage is usually for a sale of a vessel, for scrap or demolition or transfer to a dockyard. It is notable also that the registration was limited to a period of only two (2) months despite the provision of the Bareboat Charter Agreements stating the duration of the contract to be two (2) years . Based on the foregoing, it appears, therefore, that the registration under the Tuvalu Ship Registry was really for the purpose of a sale that is to take place within a period of two (2) months from the date of registry. Fourth, the subject vessels were already docked in Homonhon Island for almost twelve (12) days before the BOC was able to search subject vessels. It is quite disturbing that in those twelve (12) days, the master of said vessels failed to report to any customs authority in order to make the proper entry. Applying the definition of the term "probable cause" in the careful scrutiny ofthe above-mentioned circumstances, this Court agrees that indeed probable cause was established. The said circumstances warrant suspicion to make the seizure. In effect, there is reasonable cause for the government to institute the seizure/and forfeiture proceedings. As provided in Sec. 2535 of the TCCP , the burden of proof in seizure and forfeiture proceedings lies upon the claimant. However, except for the bare allegations of petitioner, no proof was presented to bolster hi s claim that the vessels were not importations liable to forfeiture. Thus, the findings and conclusion of the Special 1st Division is reiterated with approval: Unfortunately, the petitioner failed to convince Us that the subject vessels were not importation liable for forfeiture. Petitioner did not present any evidence that the customs duti es and taxes for the importation of the subject vessels were paid nor an attempt of payment was made.31 As regards the lEG Report, we agree with the Special 151 Division that, "We cannot only rely on the report of the lEG on the imposition of fines. The lEG Report was merely recommendatory as the sole authority to /L--- 31 Assai led Deci sion , p. 15 .

DECISION CTA EB No. 919 (CTA Case No. 8087) determine the issuance of a warrant rests solely with the collector. The weight of evidence favors the respondents in this case.32 It is settled jurisprudence that the Collector of Customs has exclusive jurisdiction over seizure and forfeiture proceedings.33 Custom s laws afford the Collector of Custom s suffici ent latitude in determining whether or not a certain article is subject to seizure or forfeiture which may be appealable to the Commissioner and then to this Court.34 Upon making any seizure, the Collector shall issue a warrant for the detention of the property. 35 In seizure cases, the Collector after hearing shall in writing make a declaration of forfeiture or fix the amount of th e fine or take such other action as may be proper. 36 In this case, the Collector after hearing ordered the forfeiture of the vessels . Upon review by the Commissioner37, the order of forfeiture was affirmed. On appeal, the Special I st Divi sion of the CTA found that the seizure/forfeiture proceeding is in accordance with law and suppotied by substantial evidence, which the Court en bane agrees. It is settled that findings of fact of an administrative agency must be respected so long as they are supported by substantial evidence, but lacking support, the factual findings of the Commissioner of Customs cannot stand on their own and therefore not binding on the courts.38 Substantial ev idence means such relevant evidence as a reasonable mind might accept as adequate to support a cone1ust.on. 39 We emphasize that "petitioner violated a provtston of the TCCP, particularly Section 1201 40 when the subject vessels did not enter a customhouse at a port of entry, thus, Sections 2530 (f) and ( 1-1) becomes operative."41 Having established that the order of forfeiture of the said vessels complied with the mandate of the law, there is no more need to discuss the assigned error of petitioner that the imposition of fin e based on JL Sections 251942 and 2521 43 of the TCCP are the applicable laws in this case. 32 Assai led Deci sion, p. 15. 33 Zuno v.Cabredo, A.M. No. RT.I-0 3-1 779, Apri l 30, 2003 , En Bane, 402 SCRA 75. 34 El Greco Ship Mannning and Management Corp. v. Commissioner ofCustoms. CTA Case No. 66 18, Oct. 17, 2005. 35 Section 230 I ,TCCP. 36 Section 23 12. TCCP. o. 126634, January 25. 1999. 302 SCRA 57. 37 Section 23 13, TCCP. 38 Transglobe International, In c. v. Court ofAppeals, G.R. 39 Feeder International Line, Pte., Ltd. v. Court ofAppeals, G.R. No . 94262, May 31 , 199 1, 197 SCRA 842. 40 Section 120 I. Article to be Imported Only Through Customhouse . - All art icles imported into the Philippines whether subject to duty or not shall be entered through a custom house at a port of entry. 41Assailed Decision, p. 16. 42 SEC. 25 19. Failure to Exhibit or Deposit Documents. - When the master of a vesse l or pilot in command of an aircraft engaged in fo1�c ign trade fail s to exhibit to the Collector at th e time of entry or hi s vessel o1� ai1-c rafl the regi stCI'

DECISION CTA EB No. 919 (CTA Case No. 8087) The vessels are liable to forfeiture Petitioner alleges that in applying Section 2531 44 TCCP, the two (2) vessels are not liable to forfeiture because of the fact that the owner or his agent, herein petitioner, had no knowledge of any participation in the unlawful act, there was no importation of articles, goods or articles in the vessel to the Philippines without the payment of correct and lawful duties and taxes. Petitioner mentioned that the two (2) vessels were not being imported to the Philippines to be used in coastwise trade within the Philippines. Further, petitioner alleges that there is no prima facie presentation that exist against the vessels because at that time and date they were held and seized, no evidence have been submitted that the vessels have been used for smuggling at least twice before, or that the owner is not in the business for which said vessels were generally used, or that the owner is not in a position to own such conveyance. Respondents allege that pet1t10ner cannot feign ignorance of the alleged unlawful act because he is purportedly the charterer of the said vessels as evidenced by the Bareboat Charter Agreements he signed as President of Heritage Resources and Mining Corporation. Respondents also reiterate that forfeiture proceedings are proceedings in rem and directed against the res; that it is no defense that the owner (or his agent) of the vessel sought to be forfeited had no actual knowledge that his property was used illegally; and that the absence or lack of actual knowledge of such use is a defense personal to the owner himself which cannot in any way absolve the vessel from the liability of forfeiture. jt- or other paper in li eu thereof, to gether with the clearance and other papers granted by the customs officials to hi s vessel or aircraft at th e last foreign po rt o f de parture, or fail s to ex hibi t any certifi cate or other docum ents req ui red to be then exh ibited, such vesse l or aircraft shall be fin ed in a sum not exceedin g five th ousand pesos. Su ch vessel shall be li able for th e pay ment of the aforesaid fi ne if the mas ter, within fo rty eight hours, after arri va l, shall fail to deli ve r to the proper co nsul ar officer of hi s nati on such doc ument as are required by law to be depos ited with him, or, if after having made such deposit, th e master shall fail to produ ce to the Co ll ector the required ev id ence that th e same has been effected . 43 SEC. 252 1. Failure to Supply Requisite Mamfests.- If any vesse l or aircraft ente1�s or departs from a port o f ent1�y without submitting the proper mani fes ts to the cu stoms auth orities, or shall enter or depart conveying unma ni fcstcd cargo oth er than as stated in the next proceedin g secti on hereof, such vesse l or aircraft shall be fin ed in a sum not less th an ten th ousand pesos (PI 0,000 .00) but not exceedin g thirty th ousand pesos (P30,000 .00). The sa me fin e shall be imposed upon any arri ving or de partin g vesse l or aircraft if the master or pilot in command shall fa il to deli ver or mail to th e Co mmiss ion on Audit a tru e copy o f the mani fes t of the incoming or outgo in g cargo, as required by law. 44 SEC. 253 1. Properties Not Subject to Forfeiture in the Absence of Prima Facie Evidence. - The f'orl'eiture or the ve hic le, vesse l, or aircraft shall not be effected if it is estab lis hed th at the owner th ereo f or hi s age nt in charge or the means of conveyance used as afo resa id has no kno wledge of or parti cipati on in th e unl aw ful act: Prov ided . howeve r, That a prim a fac ie pres umpti on shall ex ist again st the vesse l, ve hi cle or airc raft und er any of the fo ll owing c irc um stances: I. If th e conveyance has been used fo r smugglin g at least twice before; 2. If th e owner is not in th e bu siness for whi ch the conveyance is ge nerall y used; and 3. lrth e owner is not fin anciall y in a pos iti on to own such conveya nce.

DECISION CTA EB No. 919 (CTA Case No. 8087) The contentions of petitioner are unmeritorious. We agree with respondent's argument that petitioner cannot fei gn ignorance of the alleged unlawful act because he is purportedly the charterer of the said vessels. It is settled that petitioner is the charterer of the vessels. "Under the demise or bareboat chatier of the vessel, the charterer will generally be considered as owner for the voyage or service stipulated. The charterer mans the vessel with his own people and becomes, in effect, the owner pro hac vice, subject to liability to others for damages caused by negligence. To create a demise, the owner of a vessel must completely and exclusively relinquish possession, command and navigation thereof to the charterer; anything short of such a complete transfer is a contract of affreightment (time or voyage charter party) or not a charter party at all." 45 Moreover, "[t]he absence of lack of actual knowledge of such use is a defense personal to the owner himself which cannot in any way absolve the vessel from the liability of forfeiture."46 As correctly pointed out by the Special 1st Division,"the forfeiture of seized goods in the Bureau of Customs is a proceeding against the goods and not against the owner. It is in the nature of a proceeding in rem, i.e., directed against the res or imported articles and entails a determination of the legality of their importation. In this proceeding, it is, in legal contemplation, the property itself which commits the violation and is treated as the offender, without reference whatsoever to the character or conduct ofthe owner."47 Based on the foregoing discussions, the Court en bane finds no reversible error to disturb the assailed Decision and Resolution of the Special 1st Division. WHEREFORE, premises considered, the Petition for Review en bane is DENIED. Accordingly, the assai led Decision and the Resolution promulgated on February 8, 2012 and on June 5, 2012 , respectively, by the Special CTA First Division are AFFIRMED. SO ORDERED. a4A-U.,; c .~~ot. / ~ . ftJANITO C. CASTANEfSA, JR. Associate Justice 45 Purom ines v. Court ofAppeals, G. R. No. 91228, March 22, 1993, 220 SC RA 28 1, 288. 46 Assa il ed Dec ision, p. 16, citing Commissioner ofCustoms v. Man ila Star Fen y, Inc., GR Nos. L-3 1776-78 . October 2 1, 1993. 47 Assa il ed Decision, p. I0, citing Asian Terminals, Inc. v. Ricafort, et a!, G.R. No . 16690 I, October 27, 2006, citin g Transglobe lnternationa/.fn c. v. Court ofAppeals, G. R. No. 12663 4, .J anuary 25 , 1999.

DECISION CTA EB No. 919 (CTA Case No. 8087) WE CONCUR: Presiding Justice (On Leave) ER~Y LOVELL R. BAUTISTA Associate Justice Associate Justice f CAESAR A. CASAN OVA Associate Justice Wut W. M~ ~ C~ ~~)r-:~ CI ELITO N. MINDARO-GRULLA AMELIA R. COTANGCO-MANALASTAS Associate Justice Associate Justice ~-~~ J--..' MA. BELEN RINGPIS-LI BAN Associate Justice CE R T I F I CATION Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that the above Decision has been reached in consultation with the members of the Court En Bane before the case was signed to � r of the opinion ofthe Court. Presiding Justice