CTA Case No. 2323 (Decision)

ftEPUftf,JC OF THE PBIUPP1NE8 COO RT O�F TAX APPEALS QUEZON CI1'Y PROCTER AND GAMBLE PHILIPPINE W~UFACTURING CORPORATION , Petit.ioner, - versus - CTA CASE NO. 2323 COMMISSIO\!ER OF INTERNAL REVENUE , Respondent . X- - - - - - - - - - - - - - - X DECISION The basic question in this suit for recovery of overpaid advance sales tax alleged to have been erron- eously or illegally collected is whether the commercial and consular i mport invoice value of an imported article as attested by the c onsular c ertification may be disre - garded on the strength of a mere credit invoice of the exporter/supplier, crediting the importer with the price difference of the attested import invoice vciue and the price appea~ing in the credit invoice . Petitioner Procter & Gamble Philippine Manufactur- ing Corporation , an affiliated company of the Procter & Gamble Manufacturing Company ., Cincinnati , Ohio , U. S.A., is a domestic corporation organized and existing und er the laws of the Philippines . (Exh . "E" , p. 30, CIA re - c ords . ) With the Procter & Gamble Manufacturing Com- pany of Cin c innati , Ohio , as the exporter/ supplier , pet - itioner imported eleven (11) drums of industrial essen- tial oil , weighing 4, 100 pounds from the United States , which arrived in Manila on September 1, 1969 on board the SS "Clara Maersk" under Bill of Lading No . 38 and declared and entered under Customs Entry No . 84577-69 Q (Exh . "A" ; Exh . "1" , Po 27 , CIA records.) ./ I "".... .Vt:' l '

'. DECISICW ... CTA CASE NO . 2323 ~ 2 ... The Consular Invoice of Merc handise issued by the Consulate General of the Philippines in New York , duly attested by consular certification , as well as the Com- bined Commerc ial Invoice & Packing List of the supplier/ export er , the Procter & Gamble Manufacturing Company / of Cincinnati , Ohio , shows that the imported industrial essential oil had a CIF , Manila , value of US$17 , 007~98 , with an invoice price of US$4 . 006 per pound. (Exhs~o " B" & 11 C"; Exhs,. 2 11 11 & 11 3", pp. 28 - 29 , CTA recordso) On the basis of these shipping documents submitted by pet ~ itioner to the Bureau of Customs , the importation in I question was duly examined and appraised by the Customs authorities , and petitioner made a total payment to the Bureau of .Customs , prior to the withdrawal of the import ~ ed article from Customs custody , in the amount of P38, - 283.00, covered by Central Bank of the Philippines Of - fi cial Receipt No . 72202 dated September 15, _1969 (Exh. 11 0 11 ; Exh . n4 11 , p. 29 , CTA records), representing : Customs duty ����� P29,849. 00 Advance Sales Tax � � 8,429 . 00 Wharfage Fee o 0 .. .. � T o t a 1 � "' � o � � P38 , 283 , 00 By letter dated Oc tober 13 , ~969 , petitioner re - quested respondent th e refund of the sum of P7 , 035 , 00 on the ground that , through inadvertence~ there was an erroneous billing made by the supplier of the shipment in question. ( Ex h . F 11 11 pp. 31 - 32, CTA records.) 1

DECISICN ~ CTA CASE NO . 2323 - 3- Because the parties are not in dispute with respect to the basis , computation and amount of advance sales tax paid by , or r Efundable to, petitioner as the case may be, the contents of said letter are quoted in full as follows : This is to request for the refund of P7,035.00 representing overpayment of advance sales tax on subject shipment$ Through inadvertence, the above shipment of eleven (11) drums industrial essential oil weighing 4,100 lbs, was erroneously priced by the supplier, the Procter & Gamble Manufactur- ing Company , with address at P,o. Box 599, Cincinnati , Ohio , at $4 , 006 per pound � instead of the correct price of only about $.572 per� pound. This erroneous billing has resulted in our overpayment of customs duty and advance sales tax as follows : 1. Customs duty and advance sales tax actually paid by Procter & Gamble PMC under Central Bank Official Receipt No, 72202 for ~38,283.00 dated September 15, 1969 : Customs Duty ~29,849.00 j~ vance Sales Tax 8 , ~29 0 00 Wharfage . 5,00 ;"I Total 2o The proper amount that Procter & Gamble PMC should have paid based on the correct price shQuld be: Customs Duty ~4,924.00 Advance Sales Tax 1,394.00 V\taa rfage 5 , 00 Total 3 , There is, therefore, an overpayment of customs duty in the amount of P24 , 925 . 00 and ad-

DECISIQ\J - CIA CASE NO . 2323 -4- vance sal es tax in the amount of !"7, 035"00 com- puted as follows : a) Duty Paid j)29, 849.00 Correct Duty - 4,924o00 Overpayment P24 , 925 , 00 b) Advance Sales P8 ,429,.00 Tax Paid -1,.394,00 Correct 1-\.dv ance Sales Tax Overpayment We are filing a claim for refund on the ov erpay - ment of customs duty directly with the Collector of Customs ,. It appears that up to the date when the present pet- ition for review was filed on September 8, 1971 , respond- ent Commissioner of Internal Revenue has not rendered any deci~on on the claim for the refund of the ~verpaid advance salr!s tax filed by petitioner . And in view of the period of limitation provided by law for the recov- ery of any internal r ev enue tax alleged to have been er- roneously or illegally assessed or collected, whi ch, under Section 306 of the National Internal ~venue Code, ~ is two (2) years from date of payment of the tax ,� or September 15, 1969, petitioner considered the failure of respondent to render his decision on its claim for re- fund as denial thereof which would entitle it to appeal to this Court . Hence the instant appeal . As to whether or not petitioner is entitled to the refund of the amount of P7 p035 . 00, representing alleged ov erpayment of the advance sales tax on its importation of industrial essential oil � would depend on the quest -

.', DECISION - CTA CASE NO<>, 2323 - 5- ion of what i~ the correct value of the imported artic- le for purposes of computing and collecti ng the advance sales tax. If the correct price of the shipment in question is US$4 . cf,;6 per poond as shown in the shipping documents submitted by petitioner to the Bureau of Cus- toms , then there is no overpayment by petitioner of the advance sales tax on its importation and , thereforeg is not entitled to the refund of P7 ,035oOO.. On the other hand, if the correct price of the imported industrial es- sential oil is US$ .572 per pound as alleged by petition- e~ , then the adv~nce sales tax due on the s~ipment would only amount to P1 , 394.00, and petitioner vvould be enti- tled to the refund of P7,035. oo. Under Section 183(b) of the National Internal Re- venue Code , the sales tax on i mported articles (or ad - vance $ales tax) shall be "based on the import invoice value thereof , certified to as cor:r;-ect by the Philip- pine Consul at the port of origin if there is any , includ- ing freight , postage, insurance, commission, customs duty, and all similar charges", plus the corresponding mark-up thereof . The ildvance sales tax on importe<;l art- icles is based on the landed cost thereof plus the cor- responding mark - up o The landed cost of an imported art- icle is the import invoice value thereofi certified to as correct by the Philippine Consul at the port of or- igin , if there is any , including freight , postage , ins- urance , commission , customs duty , r"';and all similar charges .. (Genato Commercial Corporation vs. Court of Tax Appeals ,

DECISIQ\J - CTA CASE NO. 2323 , -6- of Internal Revenue , 106 Phil. 161; Caltex vs. Ac ting Commissioner of Customs , L- 24619 , February 22, 1968, 22 SCRA 779; Commissioner of Customs and Commissioner of Int ernal Revenue vs. Miguel Fortich Celdran and Court of Tax Appeals, L-23425 , February 26, 1968, 22 SCRA . 742.) The law applicable seems clear and specific . It merely calls for application as thus worded, leaving no room for interpretation. It says the advanc e sales tax shalJ. be 11 bas ed on the import invoice value there- of, c ertified to as correct by the Philippine Consul at the port of origin if there is any, including freight , postage , insurance , commission, cu stoms duty , and all similar charges" , plus the corresponding mark-up. In its controlling portion, the accent is on the words - "import invoice value thereof , certified to as correct by the Philippine Consul." Ac cordingly , the import in- voice value of an imported article may not be disregard- ed in the absence of an affirmative showing that the same does not represent the true value. (The Coca Cola Export Corporation vs . Commissioner of Int ernal Revenue , L- 23604, March 15 , 1974, 56 SCRA 5; See also Procter & Gamble Philippine Manufacturing Corporation vs. Commis- sioner of Internal Rev enue , CTA Case No . 2357 ~ May 9, 1978.) Here~ ~n the instant case, the import invoice value or price of petitioner 's importation of industrial es- {'(J

DECISIGJ - CIA CASE NO . 2323 - 7- sential oil as. specified in the Con9..llar Invoice of � Merchandise issued by the Consulat? General of the Philippines in New York and duly attested by consular certification (Exhi 9 B 11 11 & 2 11 11 ) is US$17,007.98 or US$4o006 per pound. The same US$17 , 007.98 or US$4.- 006 per pound is also the value or price indicated in � the Combined Commercial Invoice and Pa cking List of the exporter/supplier , the Procter & Gamble Manufacturing Company, Cincinnati, Ohio, to which petitioner is af- filiatedo (Exhso "C" & "311 1>) And on the basis of these documents wh i ch petitioner itself submitted to the Bureau of Customs to prove the correct and true vaille of its importation , which apparently adhered lit- erally to the applicable provision of Section 183(b) of the National Internal Revenue Code , the advance sales tax was computed and collected. �Nonetheless, alleging that its shipment of eleven (11) drums of industrial essential oil was erroneously vaued by the parent company at US $4.006 per pound ins- tead of the ~rice of about US$ . 572 per pound , p etitioner would W?nt to deny its own documents the faith and ere- dence normally � due thereto , and now requests for refund of alleged overpaid customs duty and advance sales tax. As proof thereof, petitioner presented copies of the Credit Invoices of the exporter/supplier, the Procter & Gamble Manufacturing Company of Cincinnati, Ohio , dated September 24, 1969 and February 26, 1974, credit- ing petitioner the amount of P"l4,202.40; the price dif-

�I ' DECISICN - CTA CASE NO . 2323 - .8 - ference of US$4 o006 and US$ . 572 per pound (Exhs . "E" and 11 K" . ) ; and a copy of a c ommerc ial invoice of a previous shipment of the same item (industrial essen- tial oil) from Procter & Gamble Manufacturing Company of Cincinnati , Ohio , reflecting the price of US$ . 527 per pound . (Exhs. "J " & "J- 111 . ) We find no merit in petitioner ' s c ause . 1. It is true that the import invoice value in the commerc ial and consul ar invoices as attested by c on- . sular c ertifi ca tion may be disregarded if the same does not represent the true value (The Co c a Cola Export Cor - poration v s . Commis~oner of Internal Revenue , L- 23604 , arch 15 , 1974 , 56 SCRA 5) , but in the c as�e at bar, it / ma be considered c onc lusiv e upon petitioner for purp~s es of c omputing and .collecting the adv an ce sales tax on its own importation since the documents adverted to were the very ev idence presEnted by ~t to the Bureau of Cus - toms to prove the true and actual value of its shipment. The appli c able pro v ision makes clear that the landed : cost of an imported article is the import invoice value there- of , certified to as corre ct by the Philippine Consul at the port of origin , includiQg c ertain cba~ges , plus the c orresponding mark-up , and tq the extent that there was full and unconditional compli~nce with thB language of the law by petitioner to prove the t+~~ and correc t val - ue of its importation , petitioner shoGld not be allowed to as ~ ail such value as erroneous on the strength of a mere credit or commercial invoice of a previous sim-

DECISION - CTA CASE NO . 2323 - 9- ilar shipment ~ 0hich is not certified to as correct by the Philippihe Consul at the port of origin ; otherwise, the requiremffit of the cqnsular certification would make 2o The Supreme Court has long held consistently that the value of merc handise ' fixed by the appraiser and . affirmed by the Collector of Customs is concl usi ve in the absence of an affirmative showing that the ap- praiser , in assessing the value, proceeded upon a wrong erinciple and c ontrar~ to law ~ {Lim Quim vs . Collector of Customs , 23 Phil . 509o) The Supreme Court has like- wise consistently held as a necessary corollary that the ya lue of import~d barticles as fixed by the customs au- thorities in the discharge of their function of assessing and collscting the lawful revenues justly due on import - ed articles and cdnfirmed by the Customs Commissioner and/or respondent Revenue Commissioner ~ho in this c ase dire ctly confirmed the Customs Collector's determinat - ion since the matter involved advance sales tax on im- ported articles imposed by the National Internal Reve - nue Code and collected by the Customs Collector as his agent) that such valuation is presumed to be correct and therefore conclusive in the absence of fraud or il- legality or of an affirmative showing by the protest - ing importer that the cu stoms authorities in fixing or assessing the value of the importation proceeded upon a wrong principle and contrary to law. (Te Chin Boo vso Collector of Customs , 32 Phil . 76 ,. and c ases cited.)

DECISION - CTA CASE NO. 2323 - 10 - Since there is no affirmative showing , much less the presence of fraud or illegality , in the instant c ase that the appraiser , in assessing th~ value of the imported industrial essential oil , proc eeded upon a wrong principle and c ontrary 1 aw, the value of_ the mer- c handise as fixed by the c ustoms authorities and co n- _ firmed by respondent Commissioner of Internal Rev enue s hould be conclusive upon petitioner . As a matter of fa ct , the records of the c ase show that in c omputing and c ollecting the advance sales tax on the imported article , the Bureau of Customs adhered strictly to the requireme nt s of the law. There being fidelity .to what is required by the legal provision applicable, there is no basis theref ore for an assertion that the c ustoms authorities in fixing or assessing the value of the im- portation in question proceeded upon a wrong principle and contnary to law. 3. Section 201 of the Tariff and Customs Code , as amended by Presidential Decree No . 34 , cited by pet- i tLnner to support its c c:ruse , is not in point . Section 201; in its textual completeness , deals with the deter- mi nation of the basis of the dutiable v alue of an im- ported article subje ct to an ad v al orem rate of duty for purposes of computing customs duties , but not to the basis of the advance sales tax on imported articles , which as discussed above , is governed by Sec tion 183(b) of the National Internal Rev enue Code . Further , the value or price declared in the consular, c ommerc ial , r "v / trade or sales invoice as the basis of the dutiable vaTue of

DECISION CIA CASE NO . 2323 - 11 - an imported article subject to an ad valorem rate of duty under Sec tion 201 of the Tariff and Customs Code was int r oduced only as an amendment to the law by Pres- idential Decree No o 34 upon its promulgation in 1972 . Si nce the importation in question occurred in 1969, it is not therefore applicable to the instant case . Neve rtheless , it c an never be said that the value or price declared in the consular, commercial, trade or sales invoice , provided in Section 201 as the home c on - sumption v alue , was not used as the basis in the comput - at i on and collec tion of the advance sales tax on the imported industrial essential oil of petitioner bec ause , as has already been discussed above, the advance sales ta x t hereon was based on the import i nvoice value spe ~ c ified in th~ Combined Commerc ial Invoice and Packing List and the Consular Irwoi ceg certified to as corre c t by the Philippine Consul at New York. 4 o There is no valid reason for us not to apply to petitioner the well - seitled rule that this suit being for the refund of tax , it partakes of the nature of an exemption , and the same c annot be a l lowed unless grant - ed in the most explicit and c ategorical la ng uage. (Re - sins , Inc . vs .. Auditor Gener al , L- 17888 , October 29, 1968 , 25 SCRA 754 . ) So , when exemption is c laimed , it must be shown indubitably to exist , for every presumpt - ion is against it , and a well - founded doubt is fatal to the claim. (Farrington vs. Tenne s see & Country of Shel- by, 95 U. S. 679 ; See Asiatic Petroleum vs . Llanes , 46

DECISIQ\1 - CIA CASE NO. 23 23 - 12 - Phil o 466 . ) �vHEREFORE, we f ind no merit in this Petition for H~v iew and t he same is hereby dismissed at petitioner ' s costs o SO ORDERED. Quezon City , June 30, . 1978 . ~~:L2 /; AMANTE F~ Ac ting ~�esiding Judge I CQ'JCUR: /