CTA Case No. 3188 (Decision)

� w REPUBLTC OF THE P Uf.JPI'HF.S (;( tiRT UF TA X 1\Pl' F I.S QUEZON CJ TY CITIRANK, N.A. and INVESTORS FINANCE, INC . � Petitioners, - versus -� C.T.I\ . CASE NO. 3188 .) COHHISSIONER OF CUSTOMS, Res p on d ent. X .. -- -- -- -X D F. c I Cl N This casn i s int~rrel~t P rl, h ;::jv:i.nq the sa me f~ct-. s B nd s i mi_] ;=jr i ss u es , to the cf'nsoJ.id nt ed cases of 1\BS-CBN in C TI\ t:-; ~se Nos. 3107 , 31~8. 3164 , 3 1 65 , 3 16 6 and 3 1 67 wh ' rh '""'s Rlr<='arly rl~'>cirlPd hy this Co u r t on Mn y 1 5, l '3 '1 ?. . Jl r.:>t ""i n p~=-t it- "loners in I in t h e the 1\RS - C RN CF.!S<?R . On ap pP~] to this C nu t, h owovp r, p e tition ers filed thi s se parate su it th P rPsponde nt Commissioner of Customs on Janu::Jry 1 2, 1981. Petitioner Ci tibank, N. A. <formerly known as Fir st Nati o n ::J l Cit y Bank> is a foreig n banking 31~

DECISION CTA CASE NO. ~180 �- 2 - institution duly lic~ns~d to ~ngRQP in husiness in Philippi n~s. while co � p o t:i t� :i oner Tnvestors F'nance, Inr.. , <formerly known RR FNCR F:nance, Inc. >, doing business undl?r the name Rnd style "FNCB Finan ce", it=! a corpo atiiJn du.l y orgRnized and exj sting unri er And �. n accord:"'ln c r-o "'i.t h th~ le~ws of the Phi.lippin'"". . On var io\ s dR te:>s from DPcPmht:?r 29, .1 970 , �the ABS - CB N Broadcasting Corpor::Jtton <ABS - CBN for brPv it y) form erl y known as tht:? Rnl inao Electronics Corpor<ltion, corporation dilly and I'?Xi.sting under and by virtue of th<:? lRws of the Philippini?R, ~ngRaed in t.hP hnsinens of radio and television broe~dcastin~. The payment a nd performance of the credit accnmoda tion extended by thE" r e t i. t ioners to AB S - CB N, including any and all obligat � ons for which ABS - CB N may bound to the petitioners, are sec ured by the Chat tel Mortg age executed by ABS - CBN on December 29, 1970 in favor of p<:?titioner Cit i bank, N. A. over the colored television equi pment and accounts receivables enumerated and described in the schedule attached to the mortgage .)

DECISION CTA CASE NO. 3 188 -3 - document a s fl.nnex "A" t her P nf, e~ncl hy the Chat tel Mort g a ge exPcuted and deli ver ed by ABS - CB N on December 8, 1972, in fa vor of the pet. i tioners ove r the radio and television equipment, spare parts, accesso ries and other personal properties enumerated rtnd described in thP sc hedule att ached to the mo rtqage document as Annex "A" thereof ( see Joint Stipulation of Facts with annexes , Annex "A", pp. 18 -20). Inasmuch as the case at bar is considered o nly as ancillary to the consolid8t.ed ABS -� CBN cases, - we hereby adop t t he narration of facts therein, thus: "P e titio ners AB S - CRN, formerly known as th e Bo l inao Electronics Corporation , a nd SCA N, Inc., are corporatio n s duly organiz ed and existing under the l aws of t h e Philippines, � r e spec t �. v~:>J.y. ABS - CB N was gr:=int~:>d temporar y pPrmi s under Republ ' c Acts Nos . 51t and 51 2 ~s am e nded by Republi c Ac ts No s. 573 0 and 5731, res pe cti.v ~:> ly, to: ( 1) c on s tru c t, m<=dntRin and op era t<=> stations for international te lecommunications a nd television sta ti on s i n the Philipp'nes: and <2> to c onst ruct , main tai n a nd ope ra t e radio broadca s ting stations Rlso in the Phil ippines for a period of fifty years. The perm i t s granted by Republ ic Act s No s . 511 and 512, to operate radio and television s tations were converted into regular franchises by t he amendatory acts and the name of the grantee was c hanged to "ABS - CB N Broadcasting Cor p orat ion" . Se c tion 4 of Republic Act No. 5 11 and Se c tion :3 of Republic Act No . 5 12 31u

DECISION CTA CASE NO . 3188 - 4 -- .) contain an ipso facto clause whi c h reads: "I n the event of any compPti ng ."nd ivid ual, p~ tnership or cor pnration rece"ving from the Congress R similar tempo ra y permit in wh' ch thPre shall be Any term _or :terms . more . fav .orable t. h~n t ho se h erein granted or tend'ng to pla e the herein grantee at any d � s~ dvantagt?, then Ru c h term or terms s hall, ipso .fReta, b ecome a part of the terms hereof and s h:::tl.l operate equally in fRvor of the � ndividual, pAr nPrship or cor poration." <Emphasis Ou rs > Subsequently , Co na Pss e n ac ed Republir.; Act tt o. 2036 gr:=!nting the Radio Co mm u n ic:::t t ions of the Phi 1 ippi n es , Inc. <RCPI>, a franchisf'? to <=>stah l' s h radio sta tions for d omPstj c tPlecnmmunication whic h w s l ater :q men d e d by R<=>public Acts Nos. 29G3 and 4054. Section l of Re public Act No. 2036 , as am ended by � Republi c Act No. 2963 , provides: "SECTION 1 . S ubj ect to th e provision s of the Co n stitut �o n, and tr::~ the p ovisions, not incons:stent h erewith, of Act n umbered t hree thousand eight hundred and forty - six, entitled "An Act providing for the regulation of radio stations and radio communications in the Philippine Isl ands, and for other purposes; Commonwealth Act numbered one hund red forty - six, known as the Public Service Act, and their amendments, and other applicable laws, :t.D.E.?.J::.�'___i�?.: .h.~:r..E?..PY . g_r.ar.!t..~d - to_ t .he . Radi.o. .. .Cpmmunicatiol) of the Phi 1 � ppine.s, . Inc., its

DECISION CTA CASE NO . 3 188 - 5 -- successors or assigns, tl1P r ight: e n d privilege of constructing, ins t a l ling, estah 1 ish i. ng and o per::.1ting in the Phi U ppines, at suc h pl~ces as tiP sajrl cor p o ration m8y select ;:,nr1 thP S P c r P t A r y of Pub 1 i . " W0 r k s An ct Cnmmu n�c::.ltions mRy ApprliV"", rRdio st8.tinns for th e r <=> c<=:>ptjnn And tr8nsmission 8-f wj reless messages on r'lrlill -h ?.l ,::-gra phy And/or radiotelephony, including b oth coasta l and merinP telecommunications, eAch strltinn to cons ist of two radin r\pparatus co mpri sing of a recPiving and senrling radio fnr a pp aratus , ~tatinns international telecommunica ions and stations f or hroadc astinq, inc lud"ng te l evision." <Emphasis Ours ) And Sect ion 14 of t .h e sa mE' Act, as a me ndPd hy Re p u bli c Act No. 4051, reads : "SECTION 14. Jn cll nsidPr - at.i.o n of t h e fr anchis,::- a nd rig ht s h ere oy grant ed and nny p rovisio n o f law to th e contrary n ot wit h standing, t h r-> griRntl?e s h a l l p ay the sa me ta es as are n ow or may hereaf ter be re qui.r e rl by law from other inrlividual, "o pa rt nr->rships, private, p u bl ic or quasi - publ ic associations, corpora tions, or joint stock companies , on real estate , buildings and other persona l pr o perty �>~9E?.P:t J ac:fio _ �'qyipm~nt, _ ~nach.,inE?ry ....C!l'ld. spar:e par_tt?. . r1e.eded :i,n ..... <::: 9. .T1.DE.'.P .t..J.C?.!L_ __~ i, _t, _h__ the ....... bu s ine s~ ()f . t h_e gr:?.I:l.t�'~~---���� W:h.i.ch __sh!=l,l_l ... b E? exempt . _fr:ofll ...... cu,stof11_S _.... 9\Jt:i,e s, _ :tar:i f f s .. anq__ .'?.t QE.'.r: .....t .a y._e s, as well as t hose pro pert i r->s declar erl exemp t in this sect ion. In consj_der�a t i on of t h e fr a n c hi se, a t~ . e qu a l to one and one- half 'l � u.l�

OECISlON CTA CASE NO. 3 1 AA - f., - per centum of g l l grn s~ r~~~i rt n :fr om t. h~ husine~:-- ~. T<'~Tt"~ct<=>rl und r ) ' thi.s frrtnrhi ;.:p r y t.h<"' gr:::>n~ eo sh~ ll ho pa.id to thr- Tr ..... ~c-;nn�,, nf t. h P rhi 1 i pp'i.n t=-r e? r h yr->ar, w �thin ten riRys rtf ter t. h "" ':' ll rf i t ;;! n d ::} r f' )"n v ~ 1 n f +h <=� ac r::-n Hnts :'lR prr-> srrihpd :i.n thjr fl c t. S aid t"'x sh:=!ll h<=> in lieu o:f any and all ta :es of any kind, nature or description ~evjed, establi s hed nr col Ject.erl by :=!ny authority wha t.soever, m1n"cipal, provincial . o~ national, from _whi c h tax<=>s the grantee _is her eby expressly exempted." <Emphasis Ours) It :"lppt=?Rrs t. h t AF.IS - CBN stFt:r ted importing Lelt=?vision hr nndcasting equ ipment from 1966 when it was s ill Bolinan Rrn~dcaPting Corpora on. Upon co nversjnn of the temporary permits into 1 egul<1r franchise, and the nam<=> of the g an tE"c:> was changed to "1\ F.IS - CB N Broadca ~t ing Corporat " on", i ~ paid the franch.' sr-> tAX"'S on i t s op<?rc:~tions of 1 1/2(. of � ts oross .receipt rithout payir q c t stems rfutjc:>s and ta :ns o n the .' mportr> t. i.on of te l evision r:?qu � pment, s pare parts and machineries. 1 S horlJy after the rlecJa:ration of tln.rtiaJ Law (under Pro c lamation No. l<Jfl,Q, dated SPp t e mb<::>r 2l, 1972 > �the Department of Finance fnrmed a Joint-. CtJs toms l niR T~a m to j _ nvestigat~ alleged tax deficiency 0f ABS - CBN in the importations of tel evision equipment. In a memorandum report to the Commissioner of Cust o ms dated July 6, 1973, Heracleo Pagtanac, Supervising Special Investigator, a member of the .Joi nt Te~m, indicated that �the Departm ent of Finance committed errors when it

DECISION CTA CASE NO. 3188 -7- allowed the release of thr:? 'm portationR of televi sion e quipm ent of .1\RS - CBN ta , free. As a consequence thereof, seizurP proceedings we e insti tutPd Again st the electronics and television <?f!Uipml?r t of ABS - CBN with the Collectors of Customs of Manila, D v o, Batangas, Iloilo, Cebu Rnd Sa n Fernando, La Union where said I? qui pmen t were released. Me<1nwh i. .le, the equi pmen t i n 'luestion wPrP suhjPcted to seiz ure in the ABS-CBN Rtations where they wer e located. After due hearings, the r PSpecti ve co llector s of customs, rendered the following decisions: 1. The Collector of Customs of the Port of Mc:miln ordered that all seizerl articles of ABS-CBN under S. I. No s. 14093, 14093 - A and 14093 - B, be released only after payment in full of the assessed duties <P8,824, 411.00> and the internal revenue taxes. <P2, 321, 2 17. 00 >, exclusive of other charges, plus a fin e equal to twice the amount of the above assessed du~ies <Pl7, 618,922. 00>, or a grand total of P28,95 ,600.00 exclusive of other charges , fine and other charges; <CTA 3 1 62 > 2. The Collector of Customs of the Port of Iloilo ordered that the articles seized under S.I. No. 15 -73 be released only after payment in full of the assessed customs duties <P581, 148.00) and the internal revenue taxes <P69,51l.OO>, exclusive of o t her charges, plus a fine equivalent to twice the amount of the above assessed duties of <Pl, l62, 296 . 00) or a

DECIS ION CTA CASE NO. 3188 -8- g rRnd total of P1,91 2 ,955.00, e xc lu s iv e of other charges~ <CTA Case No. 3163> :3. The CollPct o < of Customs of the Port of Batan g as o rdPred that the arti~l e s seize d under S . I. No. ~ - 76 bP re l P ased, only aftPr payment in full of the assessed customs duti PS <P10,7 26.00> and internal rr::> v enue t axes <P 1 5, 638. 00), e x clu s ive of ot h er char g es ~ <CTA Case No. 3164 > 1 . The Collector of Cu s toms of the Port of Dav ao o rdered th a t the articles sei zed un der S. I. No . 73 - 009 b e r eleased, only after pa yment in full of the assessed custo ms dut ies <P294,~72.00> and th e interna l revenue taxes <P95, 5 19.00>, exclusivP o f other charges , plu s a fine equivalen �t to twice the a mount of the above assessed duties <P598 ,484.00) o r a grand total of P988,745.00, exclusive of other charges~ <CTA Case No. 3165> 5. The Collector of Customs of the Port of Cebu ordered that the articles se.� zed under th e unnumbered seizure identi fi cation be re l eased only aftPr full payment of the assessed customs d tties <569 ,254.00) and internal reve nue taxes <P171,046.00>, exclus ive of other charges, and a fine equivalent to twice the amount of the above assessed duti e s <Pl, 138,508.00) or a gr a nd t o tal of P1,878,808.00, ex cl usive of other charges~ <CTA Case No. 3166) and .)

DECISION CTA CASE NO. 3188 -9- 6. The Collector of Cust oms of t he Po t of San Fer n ando , La Uni on, ordered that the artic les seized un der S. I. No. 7 - 76 be release d o nly after payment in full of the assessed customs duties <P248,959 . 00 > Rnd int erna l revenue taxes <P 59, 491. 00) , exc lu sive of other charges, and a fin e equ vRlen t. to twice the amount of the abov~ assessed duties CP497,918.00), o r a grand total of P80~,37t.OO exclusive of other chArges. <CTA r,ase No. 3167> Not satisf i ed with the ruling of the dif fer ent collectors of customs, petitioners a ppealed to t he Commissioner of Customs . On Oc tob er 8, 1990, th~? Acting Com mi ssioner of Customs rendere d a decision i n Custo ms Case No . 79 - 44 a ffirming the d ecisions of the different co llect o s and decreed the rele ase , not to forfeit the articles invo l ved in the seizur e proceedings, s ub ject however , to the full payment by the c laima n �ts- appel l ants of the corresponding tduti es, taxes and fines. Hence, the petition for review . On August 14, 1981, petitioners' counsel requested to rest their case and to submit t heir memoranda after petitioner ABS -C BN had closed it s cases. <See remarks of De puty Clerk of Court, CTA record, p. 225. > It was granted by this Court. On June 24 , 1992, this Court, i n a resolution, di rected the petitioners to file t h eir memora nda in -'

DECISION CTA CASE NO. 3188 - 10 - this case since "the ABS - CBN cases had long been terminated and, in fact, said cases were already decided by th is Court o n May 18, 1992 ... " <See Resolution, p . 236 , CTA record. It was only on September 24 , 1992 thAt the petitioners finally filed the'r memoranda. The respondent did not file hi s memor Andum. The issu es sub mitt ed by t.h<? p et itioners are the following: .J a> Wh ether or not petitioners are entitled to foreclose the articles mortgaged to them but subsequent ly seized by the respondent~ b) Whe ther or not the seiz ur es pro cee dings were valid. Foreclosure of mortgage, re:ferred to in the :first issue, is "a remedy by wh ic h t 1he property covered may be subjected to sale to pay demRnrl :for which mortgaqe stands as SP.C\lrit.y" <Pacific Commercial Co. v . Alvarez, 38 OG 758>. It is eit h er done extrajudicially or judici a lly. Extrajud'cial :foreclosure o:f a chattel mortgage is carried out in the procedure outlined in Sec. 14 o:f the Chattel Mortgage Law. The mortgagee causes the mortgaged property to be sold at public auction by a public officer. In judicial

DECISION CTA CASE NO. 3 88 - 11 - foreclosure, the mortgagee br � ngs a case in court for the for ec l osure of said mortgage (Chana v. Du, 55373 - R, Jul y 3 1, 1981>. That was precisel y what the petition~rs of this case had in min d. Only that they brought this case to the wronq forum. They l?hou ld have brought this to the right cou rt wh' c h has co mpetent jurisdiction over t his case. Bu t cer tainly n ot before this Court . It is well to r-emi nd the petitioners that this Court does not p ossess a wide - ra nging jurisdic tion. It h as a very _I s pecia l and limite d jurisdiction affecti ng - 1. Decisions o f the Commi ssio ner of Internal Revenue in cases involving disputed assessments, refu nds of internal revenue taxes , f ees or other charges, p en"ll ties imposed in relatio n thereto, or ot h e r matt ers aris ng und er the NI RC 1 or other law or part of law administered by t h e Bureau of Internal Revenue ; and 2. Decisio n s of th e Commj ssioner of Cus toms in cases in vo lving liability for cus �toms duties, fe es or other money charges; se i z ure, detention or release of pro perty affected, fines, forfeitures or other penalties imposed in re ation thereto; or o ther matters aris ing under the customs law or

DECISION CTA CASE NO. 3188 - 12 �- other law or p~rt of l~w admini s teT Pd by the Bureau of Cus tom s; <S ec . 7 , R. A. 11 25 , An Ac t of Creating the Co urt of T~x App eals>. Suffice it to say, that nowh12re in the above- .) quoted provision regarding th.' s Court's jurisdiction ca n one find the remedy of judici al for ec losure. Hence, the fir st iss ue is rejected for lack of jurisdiction. The second iss ue is already moot an d acade mic having been sufficient ly answered in the nE?gati ve in the AB S-CBN cases decided on MAy 15, 1992. To expound further the same is s ue w ".JJ. be An exercise in futility on what is already considered R "dead" issue. Petitioners cannot the::> same issue. Petitioners cannot utilj 7 e this case to rais e "new" mattr:>r which is E'lCttFll..lly A re hA s h o f the "dead" .i.ssuF.> rai se d in th e AA S - C'BN c a se s and which � as stated earlier, has be c::> n aciPq lately and finally disposed of by this Court. Let this Court put that issue to rest where it rightly belongs. WHEREFORE. the pet:it:ion :for revi e w :filed by herein pet itioner is hereby denied :for lack o:f jurisdiction and the other issue raised having been considered moot: and academic by virtue o:f the

DFC:TSIOfl CTA CASE NO. 3 tA8 -- 13 - J d Pc iRion rendered by t h i s Court in the ABS - CBN CABPB (No s. 3162 to 3167 ) on Ma y 1 5. 1 992. SO ORDERED. Quezon City, Metro Manil8, 1, 1 993 . \tiE CO NCUR: ~ ~ Q. Gv.r:-L ERNESTO 0 . ACOSTA Presiding Judge HANUEL K. GRUnA Assoc ia te Jt~dqe Cl';RTX P"ZCA "T":J:Otl I ce 1~ t i fy th at thi!; decision reached after due consu l tation betw ~e n the me mbers o f t h e Co u r t o f Tax Ap p ea 1 s i n a c cot' d am c e wi t h Sectio n 1 3 , At't icl e VI I I of the Const i. t uti on. t:~Q~~ E RNES TO D. ACOSTA Pt' esiding Judge Court of Tax Appeals