CTA Case No. 4523 (Decision)

- -- REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY DAILY HARVEST MANUFACTURING C.T.A. CASE NO. 4523 AND MARKETING CORPORATION, Petitioner, - versus - THE COMMISSIONER OF CUSTOMS, Respondent. X- - - - - - - - - - - - - X ,� D E C: I S I 0 N Pe ti ione appeals the de cision of the Commissioner of Customs affirming the ruling of the Distrj_ct Collector of Customs, Port of Manila, ordering the forfeiture of the article declared as "3 3 4 Cartons PVC Wrap Film for Food Industrial Use 2004 rolls 0.012 mm. X 12" x 600 M $2.40/roll". The subject article arrived at the Port of Manila on October 8, 1988 from Keelung, Republic of China on board the SIS "T Yuan", Registry Number DTA-086, Voyage Number 006, under Bi ll of Lading KLGHNL - 0544 consigned to petitioner. The required Import Entry and Internal Revenue Declaration with number 91851-88 \-las ' filed. The arti c le was examined 593

DECISION C.T.A. CASE NO. 4523 - 2- and found to be as declared and was forwarded for appraisal. The Appraiser, however, discredited the value declared by petitioner for the article, $2.40/roll or 710.80/MT, and adopted the recommendation of the Technical Expert contained in the Philippine Chamber of Commerce and Industry Customs Consultative Group (PCCI-CCG) Report which valued the article at $1,800.00/MT. The records show that the recommendation of the Technical Expert was based on an earlier PCCI - CCG Consolidated Report of Entries Subject to Alert dated August 9, 1988 involving another article described as "PVC Rigid Film Optic White 98 cartons Not Transparent 4MT" with Entry No. 66536-88 consigned to Plastic and Packages Inc. (p. 23, Customs Records). It appears that the "PVC Rigid Film Optic White" article wa$ examined upon its arrival on August 24, 1988 as can be seen from the Discrepancy Report dated September 8, 1988 and was recommended a value of $1,800.00/MT, higher than the declared value of $1,200.00/MT. Thus, the Report of Seizure as to the subject article expla�ined the cause of seizure as under-valuation and referred to a "Recent PVC resin importation from Taiwan (which) has a cost of $1270/MT add to this are the cost of other che~lcals or additives and overheads, making a total of about $1800/MT for finished 594

DECISION C.T . A . CASE NO . 4523 - 3- produr::t . Thi s is th e PCCI TE r ecomme n dation" (p. 18, Cust oms Record s ). On Nov ember 7, 1 988 a Warrant of S0i7ure and Det entio n for the su bje c t article was issued by th e Bureau o f Customs. Eventually, the District Co ll ector of Cu sto ms , Port o f tf ani la, held t h at the "true and correct value of the shipme nt in qu es t: io n is the va lu e re co mmended by the PCCI Tec hni c a l Expert, e.i. (sic), $1.80/kg. based on a pre vious importation declared in Ent r y No. 66536 - 88 cove rin g a shipment of '98 carto n s PVC Rigid Film Opti~ Whit e' which was followed by the Apprai s er co n cern ed xxx, �there being no establis hed nor p11hli s hed valu e thereon" (D ec ision of th e Collector 0f Custo ms, p. 11 C . T.A. Records). Duri ng the proceedings here only the petitioner was able to formally o ffer its eviden ce , as the Court jn jt~ reso luti o n o f J a nu ary 13, 199 2 , in view o f th e non - a ppea rance o f respon d ent's coun se l at a hearing ,' f oe pres entation of their evidence and several postp o ne ments previously, considered the � c:J.se s ub mit ted for decision. Th e Customs Records, though, h ave been previ ously transmitted and received by the Co u rt o n October 23, 1991. The decision � of the Distri c t Collector of Cust o ms , Port of Manila, leans much on the PCCI-CCG Rep or t made by the Cust o ms Technic a l Expert. The 595

DECIS ION C.T.A. CASE NO . 45 2 3 - 4- b~ s i s o f th e sa id report is a pri or imrort~ ti o n by Pl astic and Packages , In c . o f "PVC Film Optic Hhite , 98 ,-� a rtons not tran s p are nt 4HT ", there being no est a b lished o r published va l ue o f th e article. It va~ a dmitted n o n et h e l ess by the T ~c hni ca l Expert th at t h e ar ticles in this cas e a n d that imported by Plastic and Packages, Inc. "are not exac tly the same the f ir s t being made of a soft kind of materia l wh ile th e o ther is ma de of rigid film" . Th e Cust oms Records would also show that in th e administrative p r t) c (�e dings be 1 o \�1 h e a c k n o H 1 e dge c1 that t h e p 1 a _s tic mad~ o f rigid ma terials would have a higher cost due �' t-. o , <:~mo ng ot h e rs, high er add itives cos t for plastic o r r ig id materials, t h us : "HEARING OFFICER TO THE \HTNESS : F or c larifi ca t ory qu es tion, the sa mp l e a ttached in y o ur report the sa me as the sa mple a tta c hed in the en t ry as to t heir raH ma t erial? A: Bas i cal ly the raw material are th e same but t.h e cost o f pr o duct - rigid ~li 11 be hig h er. Q: Th e y are both finish.ed p ro du ct ? A: Yes. ( p. 52 , Custo ms Records ) XXX "HR. SIA TO l' HE vliTNESS: Q: So th e additives o f soft and r ig id film are differ e nt? 596

DECISION C.T . A. CASE NO. 4523 - 5- A: Yes. (p. 50, Customs Re c ords) XXX Q: You also said that additives of these shipments are different, and that additives for rigid film is higher than soft? A: Yes. (p. 49, Customs Re c ords) It a ppears that the valuation is insisted upon by the Tec hni c al Expert for the reason that they belong to t h e sa me family, plastic (p. 55, Customs Records). A physical examination of the two materials of pl astics submitted in evidence by petitioner (E x h i b i ts "8" and "C", p. 56, C.T.A. Records) gives u s t h e impression that the two articles are physi c a lly different. The article imported by pe ti tioner (Exhibit "8") is transparent and is a plastic film. The other article (Exhibit "C") which was re l i ed upon by the Technical Expert for his v aluati on is not transparent nor a plastic film like th a t of the first as it is white in. color' and definitely much thicker. We are inclined to give c r e de nc e to the allegation of petitioner that the c h a r ac ter of the latter article would make it more u s eful for cartons and packages or other sturdy and strong containers rather than as a wrapper. This infere nce is bolstered by the finding of the 597

DECISION C.T.A . CASE NO. 4523 - 6- Unct ~rs ecretary of Finance o n the request for Tariff c las s ificat ion by petitioner of the "Nan Ya Wrap", the n a me given to the ar ticl e. It was th at the "Nan Ya Wrap" Has class ified by th e Ta rif f Commis s ion under HS He a ding 3920-4290 referr ing in particular to film, among others, at 30% ad va lorem duty Hhil e th e Bureau of Customs c l ass ified the article under HS Head ing 3926.90 referr ing to other articles of pla st i c at 50% ad v a lore m. The T ar iff Commissio n ruled essen ti ally "B ased on the foregoing, NAN YA WRAP is esentially a pl as tic film u se d to wrap or c over fo o dstuffs. It s physical c haracter s h ows that subject film is not f urther worked nor a c onta in er for the <~o n v eyan ce or pa c king o f goods." Th e Unders ecretary of Finance c oncluded that: "It appearing that HS 39 2 0.4 2 90 in re lation to HS 3920 provides a more s pec ific d escr iption with respect to t h e phys i ca l c h aracter o f NAN YA WRAP, this De p a rtment find s the c l ass ifica t ion thereof und er HS 3920.4290 at 30% ad v a lorem to be t h e correct t a riff c l assif ication . " For that ma tter, the perti n en t part of Section 201 o f the Tar iff a nd Customs Code, as a mended by Execut ive Ord er No. 156 mandates the folloHing in ascerta ining t he bas is of duti a ble value: "SEC. 20-1. Basis of Duti able Value. - "The dutiable value of a n imported article su bject to an ad valorem rate o f duty shall he based o n t he cost ( fair market value) o f sa.m.e..I .......... !J)<~ ()~ ~~ ~~~?-!:' . <:l.l:':t::~<:::J. ~ .!3, as boug ht 598

- DECISIO N C. T .A. CASE NO . 4 5 2 3 - 7- , nd sold o r offered for sa l e fr e e ly in the u s ual wholesale quantiti es in the or din ary r�o 11rse of trade, in th e prin cipa l marke t s of the exporting country on t h e date of the e x portation t o the Philip~ines (e xc luding internal excise taxe s to be remitted or re b a ted) or where there is non e on such date , then on the cost , (fair marlcet va l ue ) neares t to the d ate of e xportation , i nc luding the value of all co ntainers , co veri n gs and/or pa c king s of any kind and al l other expenses, cos ts and charges J n c id e nt t o placing the article in a co ndition ready for shipme n t to t h e Ph ilippine s , a nd freight as well as i nsuran ce premium co vering the t rans p ortatio n of suc h a rticle s to th e port o f e ntry in t h e Ph i l ippines . Wh e re the fair ma rlcet v a lu e or price o f the article cannot be asc ertained thereat or where there ex ist s a reasonable rln ubt as to the f a irnes s of such value or pr i ce , then the fair marke t value or price in the prin c ipal mar ket in t h e co untry of ,' ma nuf ac tu re or ori g in , if it i s not th e co untry � of exportation, or in a third c01mtry uith the same state of eco nomic ct ~ ve l o pment as the co untry of exportation sha ll be used. Hhen th e duti a ble valu e of the nr ti c l es c an n ot b e ascertained in ac cor dan ce with the prece ding p ara graphs or ''here there exists a re aso nable doubt as to the cost (fair market value) of the imported ar ti c l e declared in the entry, the du tiable value o f the arti c le s h all be a~cer tained by the Co mmi ssio ne r o f Custo ms from the reports of the Revenue or Co mmercial Atta c h e (F ore ign T rade Pr o motio n Attache ), pursuant to Republ i c Act Nu mbered Fifty-four Hundred an d Sixty - Si x or other Philippine diplomatic of f icers or Custo ms Attac hes an d fr o m s u c h ot h er inf or mat ion that may be a vai l a ble t o the Bu reau of Cus to ms. Su c h values s hal l be pu b li s h e d by t he Co mmissi o ner o f Custo ms fr o m ti me to ti me. Wh en the duti a ble va l ue cann o t be ~sce rtained as provided in the preceding 599

-� DECISION C. T . A. CASE NO . 45 23 - 8- p Ar a g ra ph s , o r wh e r e t h er e e xi s t s a r ea sonable doubt a s t o the dut ia ble va lu e n f t h e imp o rted article d eclared in the e ntry , it s h a ll be the domesti c wh olesa l e ~0 lling prj c e o f s urh or sim i l ar a rtic l e i n !! .:1 nila o r ot h er principal ma rke t s in the Philippine s on the d a te of the duty beco me p ayable on the artic l e under appraisement, o n t h e u s ual uh o le ~: al e qu a ntit.i e s a nd in t he ordinary co u rse of trade, min us (a) not more th a n t"t-le nty - five ( 25) perce nt thereof for e x penses an d profits; an d (b ) duties and taxes pa id thereon." (Emphasi s suppli e d) (XY. X XXX XXX ." Hr t h i nk t h at t h e differ e n ces b e tw er n th e articl e " f' VC Hr a p Fil m f o r Food In dus tri al Use" a nd ~ h e art. i c .l "' "P VC Tiiqid Film Opti c Nhite not transparent" arr s ignifi cant n o t o nly p hy sica lly but so much as a ffect th eir v a lu e . In fact, th e r e is testi mo ny by the Techni c a l Expert t o the effect that at t h e t i m ~ �1 f i mp o rt_atio n t h e c nst o f the same artic l e i n T a j\1 2n under SG S v a lu ation was $912.00/HT. In this li g ht, the Court could not hold th a t "P VC Rigid F i lm 0 p t j_c 1�1h i t e n o t t r a n s p a r e n t " i s a � " s am e , lik,e o r ;�imi. l o r " art i c le as "PVC \'Trap Film for Fo od I r1 dus tr ial Use ". Fnrt h er, the propri et y o f an "Alert n ot ice" o r <1n "Alert Rep o rt" . (th e PCCI CCG Consolidated Report ; ,t_' o n Articles Subject to Alert), as a g a inst the value invoice c o nsiste nt with Sect i o n 2 01 600

DECISION C.T.A. CASE NO . 4523 - 9- r:>f t .h '-' 'T'arj ff and Custo ms CodA h as b ~~n r11 l Pel upon hy th~ S ~tp re me f' o lt rt in Commi ssioner of Customs v. Court nf Tax App ea l s ( 16 1 SCRA 376 [1 988 ]) cit ing a case o f t h ~ s a me t i t 1 e vT i t h G . R . No . 7 0 6 4 8 , J u 1 y 3 1 , 1 9 8 7 ) i n f avor o f the mandate o f Sect i o n 20 1 . l�Te qnote: "Th e i ssue f o r det~rmination is the r ro priety o f the a pprai sa l o f the impo rtations ma de by private respo nd e nt h as ed on alert notices rathe r tha n on the vA lu es de c l ar ed in consular invoi c~s. "Th e app li cab l e lega l pro vision is SPc tio n 201 XXX. "Th e l aH is c l ectr a nd ma ndett or y. xxx." c1 r, no t t h i n k t h Cl t vie c an c1 e v i a te from the s ub ~ t �1nce o f t he sai d deci s ion i n the face o f <:>Y.po~; i t ions ma d e on the \-Te a k n e s s of t'. h e rec0 mm~nda ti o n of the Te ch n ical Exp er t, n n t 11 j t .h s t: and i n g t h C\ t the " A1 e r t Re p o r t . " \-T a s d i s c u s f ; e d in th e proceedi ng s in the Bureau o f Custo ms , a nd the th e record s o f thi s case . Th ~ cl~v iati on , if any, co uld o nly be that He are ;;,rl n l'ting th e SGS valuation o f $91 2.0 0/m etr ic ton a d verte d to previously h ere as the b as is of Lhe cht t i <1 h l e v a 1 u e o f the sub ject a rticl e in view of i ts r~;>cngnize d reliability. Co ns e quently, the su bj ect Rrticle ca nn ot be h e ld li a bl e for for f~iture as the undervetlua tion is ,not more than 50 % between t he va l ue de c l are d in the entry a nd the corre c t val u e. 601

DECISION C.T.A. CASE NO. 4523 - 10 - WHEREFORE, the reliefs prayed for in the Petition for Review is GRANTED and the decision of th e Commissioner of Customs is REVERSED. The Warrant -� of Seizure and Detention against the article "334 Cartons PVC Wrap Film for Food Indu s trial Use" is b1 LIFTED subject to the payment petitioner of the correct taxes and duties and other charges due ba s ed on t he value of the said article determined at $91 2. 00/metric ton. SO ORDERED. Quezon City, Metro Manila, August 18, 1992. ~(4~ ERNESTO D. ACOSTA Presiding Judge I CONCUR: ST~DADIVAS - FARRALE~'l Ac ting Associate Judge CERTIFICATION I hereby certify that this decision was reached after due consultation between the members of the Court of Tax Appeals in accordance with Section 13, Arti cle VIII of � the Constitution. :J. ~Q.. ~ 602 ERNESTO D. ACOSTA Presiding Judge Court of Tax Appeals