CTA Case No. 2970 (Decision)

H F. PURt.H' OF 1 [I& PniLJPPINU COURT OF TAX APPEALS Qt11!ZON CITY GOOu YEAR TI RE & RUBBER CO. OF THE PHILIPPINES, in its capacity as agent of the SS "CLARA MAERSK", Petitioner, - versus - C.T.A . CASE NO. COMMISSIONER OF CUSTOJYIS, +/t3/f'O Respondent . X - - -.- -X DE C I S I 0 N This is an appeal by petitioner Goodyear Tire & Rubber Co. of the Philippines from the decision of respondent Commissioner of Customs dated February 28, 1978, affirming that of the Collector of Customs dated October 18, 1976, imposing and collecting from peti- . tioner the amount of ~11,828.00, representi ng surcharg e for alleged violation of Section 2503 of the Tariff and Customs Code of t ~1 e Philippines, as amended by P.D. 34. In this appeal , petitioner sought the refund of said amount of ~11,828 .00 paid by it as surcharge. On or abou t November -29, 1972, the SS "Clara Maersk" arrived at the port of Manila and discharge thereat a cargo, consisting of four (4) .boxes containing miscel- laneous machinery spare parts, tools, supplies and tire fabric consigned to petitioner. The importation included, &mong others, two hundred fifty (250) ftozen pairs of "hot mill canvass gloves", which petitioner's broker Consol i dated Terminals Inc. classified in the import ..,

-- DECISION - CTA CASE NO. 2070 2- entry as falling under Tariff Heading No. 60.02 as "g l oves, mit tens and mitts, knitted or crocheted, not elastic or rubberized" and which carried an i mport duty of 70%. Afte r ex a mi nation, however, the Collector of Customs reclassified the said gloves as fa l ling under Tariff Head i ng No. 61.1~ e x uGloves and mitte n s of cotton and wool" whic h carries an i mp o r t duty of 130 %. 0~ the bas i s of r eclassification made by the appraiser, pet i t i oner was assessed by the Collector of Customs and paid t he a~ ditiona l total amount of P l8,156.00 (p . 76, Customs Record) on t l1..= two hundred fifty (250) dozen pairs of gloves, broken d o wn as f ollows: p 5,914.00 - - a dd i tional duty p 414.00 - - - - compensating tax Pll,828.00 - - - - fine for violation of Section 2503 Petitioner did not protest its payment of the additional duty of P5,914.00 and additiona l compensating ta~ of P4l~.OQ. However, it disputed the validity of the impo- sition of the amount of Pll,828.00, representing the surchar ge o r fine imposed under the prov i sions -of Section 2 503 of the Tariff and Cus t om s Code, as amended, upo n the g r <~ tmd that the classif i ca t i on of the glov ~~ s under Tarif f Heading No . 60.02 was done in good faith. � The protest of p e :: itioner was dismissed by the Collector of Cu stoms in his decision dated October 18, 1976 upon

DECISION CTA CASE NO. 2070 - 3- the ground that good faith of an importer is not a valid defense to the imposition of a surcharge imposed upon the misclassification of imported articles under Section 2503 of the Tariff and Customs Code, as amended. Upon ap peal, the decision of the Collector of Customs was upheld by the CoGmissioner of Customs in the decision dated February 28, 1978. From this decision petitioner appealed to this Court. The only issue raised in this appeal is ,, hethe:r or not the imposition of the surcharge or fine imposed under Section 2503 of the Tariff and Customs Code in the amount of Pll,8 28 .00 is legai. Pertinent portions of Section 2503 of the Tariff and Customs Code of the Philippines, as amended, pro- vides as follows: I SEC. 2503. Undervaluation, . Misclassi~ fication and Misdec l aration in Entry.- ~hen the dutiable value of the imported articles shall be so declared and entered that tne duties, based on the declaration of the im- porter on the face of the entry, would be le s s by ten per cent � (10%) than should be legally collected, or whep �the imported articles shall be so described and entered t hat the duties based on the importer's de s cription on the face of the entry would be l ess by ten per ce nt ilO %) than should be legally colllected based 9n the correct tariff classification, X X X X X X X X X X a s ur charge shall be collected from the impor- ter in an amount of not less than twice the difference between the full duty and the estimated d uty based upon the declaration of the importer, nor more than five times of s~ch difference. (Underlining suppl l. ed.) a. X X X X X X X X X X X. b. X X X X X X X X X X X. X X X X X X X X X X X X.

DECISION - CTA CASE NO. 2070 - 4- Peti tioner claims that the provision of Section 2503 , before its amendment by P. D. No. 34 ~ hould be applicable and in that provision, miscl assification of the imported articles is not a ground for the imposition 6� surcharge. As additional defense, it stated that the subject cargo consisted of gloves and tha t an ordi- nary impor t er may, in good faith, classify them under any of the following classif ication and it still thinks that the classification i s cor rect: Par. 60.02 Gloves, mittens and mitts, knitted or crocheted, not . . . . elastic or rubberized � � � � � � ad val. 70% Par . 61.10 Gloves, mitt ens, mitts, stockings, socks and sockettes, not being knitted or croche ted articles ��� 100% Par. 61.10 e :; Gloves and mi ttens 130% of cotton and wool It is argued that it c l assified the gloves unde r Tariff Heading No. 60.02 because it is the correct classification. Petitione r c i ted by way of buttressing its defense, Customs Memorandum Order No. 45-73 dated May 11, 1973 wherein the t hen Acting Commissioner of Customs autho- rized Collect ors of Customs not to impose a surcharge on imported articles erroneously c l assified but correctly described in the en t~ y such as the case at bar. On the other hand, respondent Commissioner of Customs as�serts that petitioner did not avail of the

DECISION - CTA CASE NO. 2070 - 5- provisions of Section 1313(a) _of the Tariff and Customs Code, as amended, which could have been the basis for correct classification o f the merchandise under its Tariff Heading. Pe r tinent portion of Section 1313(a) is quoted hereunder: SEC. 1313. Inf ormation Furnished on Classification and Value.- a. As to Class- ification.- . When an ar-ticle imported or in t ended to be imported is not specifically classified in this Code, the inte ~ ested party, importer or foreign exporter may submit to the Tariff Commission a sample together with a full descr i ption of its component materials and uses, and request it in writing to indicate the heading under which the article is or shall be dutiable, and the Tarif f Commission shal l comply with such request within thirty days from receipt ;I thereof if it is satisfied that the appli- . cation is made in good fajth, in which case classification of the article in question, upon the particular importation involved shal l be made according to the hearing indi- cated by the Tariff Commission. x x x x Furthermore, respondent asserts that good faith is not a ground for the non-~mposition of the surcharge. Respondent claims that while petitioner ' s bro iL~ ~ ~~ g ht have acted in good faith ih class ifying the shipment under Tariff Heading No. 60.02 for petitioner, still the surcharg ~ is legally imposab l e . We agree with respondent. Section 2503 of the Tariff and Customs Code, as amended, is clear l y a substan- tial � adoption of Section 1290 of the Revised Administrative Code, which provides as follows: f) n ~ fw '"' L . ~.

DECISION CTA CASE NO. 2070 - 6- SEC. 1290. Underva luati on and mis- desc;r i�t~ on in entry ,_- \vhen imported merchandise shall be so declar e d and en~ tered as to the value or classification thereof that the taxes , if estimated on the face of the entry" wo uld be less by ten per centum than by law should be collected, or when the dutiable weight, measurement, or quantity of imported mercha ndise is found upon examination to exceed by ten per centum or more, the ent ered weight, ~e a surement, or quantity , a surcharge may , in the discretion of the collector of customs and subject to the approval by the Secretary of Finance, be imposed upon the importer of not less than the additional amount req uired to pay the fu ll tax on merchandise, and not more than fi ve times such additional amount so required . The Supreme Co urt , in its d e c i sion in th e case of Li Teck San vs. The Insular Collector of Customs, 55 Phil. 482� 484, in the case involving the misdeclaration of value of imported undershirts which is more than 10% less than the val ue appraised by the Cc~lector of Customs, whereupon a surcharge was imposed upon the importer Li Teck San, and applying the aforesaid provi sion of Section 1290 of the Revised Administrative Code, it held as follows: "Consequently, the declared value of the undershirts as given by the plaintiff i s more than '10 pe r cent less than th e value appraised by the defendant o There- fore, i n accordance with sect ion 1290 of the Administrative Code , the defendant im- posed a certain surcharge upon the p l ain- tiff. The latter paid it under protest a nd appealed to the Court of First Instance of Mani la~ The lower court dismissed the appea l taken i n the six c a~ es holding them to be g rou ndle ss. It is from this judgme nt that the p l aintiff has appealed to this court .

.. �. DECISION - CTA CASE NO. ~70 - 7- " The only question raised in this instance in connection with the six cases is w ~ e ther or not the plaintiff having acted without malice or frauC, the surcharge imposed upon him by the defendant is legal. "As the court below correctly held, the importer need not h ~ve acted fraudulently in order that a surcharge may be imposed up �~ , him under section 1290 of the Adminis- trative Code~ a l ower declaration of the value of the merchandise is sufficient. This opinion is based upon the letter and the spi r it of the law, which does not require fr oud on the importer's part, for the impo- . sition of the surcharge. If the declaration is fraudulent, the merchandise will be subject to se izure in accordance wi th section 1363 o f said Administrative Code." According l y , and b ased stron g~y on the principle laid down in the aforesaid decision of the Supreme Court, we hold that t he petitioner in this case is liable to, and is no~ the r e f ore, entitl ed to the refund of the surcharge of Pll,828.00 imposed under Section 2503 of the Tariff and Customs Code, as amended, which i t paid to the Bureau of Customs. WHEREFOREr the decision of the Commissioner of Customs appealed from is hereby affirmed. With costs against petitioner. SO ORDERED. Quezon City, Metro Manila, 15, 1980 . I cco~~~.J,R:-A;-a-~ 1-~~/ AMANTE F LLER Acting Pres1ding Judge