CTA Case No. 2861 (Decision)

1-;�. ~~PUBL1 C Oi' l'Hit r �llJl.fPP! ',��� . ~~URl. OF �rAX A.PPEA ts W.;~1.l1 :.t ('JTV NORBEHTO J . ~UISUMBING, Petitioner. - versus - C. T.A. CASE NO. 2861 THE COt1Ml .:JS lC� ! ~ EH OF CU~:TU! S, Respondent. X- - - - - - ~~ - - - - - X NORBERTO J. 0Ul~ UM B 1NG, Petitioner. - versus - C.T.A. CAS~ NO. 2633 NE'R THE COMN10 ~ l l OF CU: .T(.i i'~S , Respondent. X- - - - - - - - - -- - X These are two (2) cases jointly heard by this Court. The first case (CTA Case No . 2861) involves an appeal by petitioner from the decision of the Commissioner of Customs dated ./ January 31. 1Y77 upholding that of the Collector of Customs holding petitioner liable for the pay- ment of ~504 .00 custow.s duties, internal revenue compensating tax of PB15.00 inclusive of ~132.00 surcharge, or a total of ~1.451.00. which was paid under 0. R. No � ..09 36652 . Petitioner had sought for t he judicial refund of the total �' amount of P l . 45l.OO . 42 1

DF:CI S IOl - CTA CASFS NO~. 286 1 & 26 33 - 2- The second case (CTA Case No. 2633) involves an appeal by the same petitioner from .the same respondent Commissioner of Customs' decision dated September 4. 1974, upholding the decision of the Collector of Customs which held petitioner liable for P845.00 as additional customs duties which petitioner had paid and which he sought to be refunded by regpondent. CTA CASE NO. 2861 The said amount of Pl.451.00 as itemized abov � is an additional payment of taxes and duties on the importation of two (2) complete self-propelled \�tOrknhop froggy type, which is / ostensibly an underwater cl~aring equipment. In assessinq this additional taxes and duties, which actually was imposed on the irnport.ation of 20 pieces of steel wire, which , went with , the importation of the said two (2) underwater clearing equipment, with a unit price of $11.93 for each piece of steel wire . On the basis of said unit price of $11.93, the supplier c harged petitioner only $226.60 for the 20 pieces of steel wire, � instead of S238.60, which petitioner should have been charged had the unit price been

DE Cl.SlCN - CTA CASf. S NO~ e 2861 & 2633 - 3- cc:>rrectly multiplied tlith the number of units imported. Consequently, petitioner 0 s ~ost of this whole irnportation of 20 pieces of steel wire was at $226.60, the price which the supplier Phoceenne Sons Marine s.A. of France had actually charged petitioner. Contrarily. respondent based the addit.onal assessment of customs dut - ea and taxes at $238.60, the price which should have been charged against and paid by petitioner had the cost per unit (Sll.93) been multiplied correctly by the number of ~ieces of steel wire imported, which was 20 ~ieces. rhe contention of petitioner that the basis of the computation of the assessment should be the actual rate of exchange used by the supplier which which is in the sum of S226.60 and ihich was charged . against petitioner should be adapted on the Qround that it is the home consumption value or the price declared on tha sales invoice is not meritorious. Even considering that an error has been Gommitted in the computation of the actual purchase price . and which became the,. basis of the cost of the im- / ported articles, the Government sho ld not be made to suffer, in terms of reduced payment of taxes, duties, or revenues arising from an error committed

DECI S ION - CTA CASE S NOS. 286 1 & 2633 - 4- in the costing of articles imported into the Phil ippines and not brought to the attention of the supplier by petitioner in the course of sale . The fact that the supplier did not collect the c orrect purchase price or corract c ost of the importation based on the actual price per unit is of no avail. The denial of the c l aim of peti- tioner for the refund of the total amount of Pl.451.00 is therefore correct. CTA CASE NO. 2633 The amount of P84S.OO represents additional duties and internal revenue compensating tax paid and collected from petitioner on the importation of replacemf!nt parts with h i dden defects which l-Ias later found after importation. which parts with defects were replaced by the 3Upplier at no extra cost to petitioner in accordance with guarantees on the sale of two (2) underwater clearing equip- ments, as heretofore stated in ~TA Case No. 2861. from Phoceene bona Marine SA of France. ~he q uestion at issue in this latter case i s whether or not pe~itioner is lia b le for the ... additional payment of the customs duties and int e rna revenue tax of r 84S . OO imposed by res- pendent Corro111i ssioner of Customs on the imported

Dl:.CI SI ON - CTA CAS E~ NO~ . 2861 & 2 633 - 5- r~placement parts to be fitted to, and a r e replacement of the parts of, the aforesaid two (2) major imported equipment due t o h i jde~ f aul ts or defects, and which were replaced in consonance with the guarantees o f the supplier under the contract of sale . It is the opinion and belief of this Court that any and all articles imported from a foreign country, whether it is an original importation of the main equipment or replacement of its parts thereof and even due to hidden f aults or defects, unless c learly exempt from customs duties or taxes by indubitable and specif i c provision of law, shall be subject to customs duties and other taxes. Such is the clear int~ntion of ~ ection 1 0 1 of the Tariff and Customs Lode of the I � hili p ~ines which provides thus : ~ s ec. 101. Importe~ Ai t i cle s s ubject to Duty. -i\ll articles when imported from any foreign country into the Philippines shall be subj ect to duty upon each import- ation, e:ven though pr r: vi c u s l y ~ x :)orted from the Philippines, except as otherwise specifically p rov i d ed f o r in t his code or in clear laws ... That the parts whidv were re p laced may have already b e en sub j e c t to c u stoms d uties and taxes is of no moment. The parts l ate r imported as

DECISION - CTA CAS fS NCS. 286 1 & 2633 - 6- replac em~nts are articles of distinct and inde- pendent importation into the country a~d., hence, undoubtedly should be subject to our Customs laws and other Government impositions and restrictions. The fact that the hidden defects of the parts of the original imported equipments which were replaced is not the fault of petitione r is not a valid defense for non-liability for taxes and duties . In order that importers , like petitioner in this case (CTA Case No. 2633) may not unduly suffer for the payment of additional customs duties and taxes imposed on repl~cemnt parts due to some hidden defects of the c ri ~inal parts, there should be provided in the contract cf sale, in additicn to the provision for replacement of parts if found to be with hidden defect and re ~ lac e d with no cost to the importer - taxpayer. an additicnal vrovisicn , should be incorporated in the contract that 1r1hen hidden defects are found., tlr! supplic>r or seller of the articles should be made to bear the add!- tiona l customs duties and taxe s ~ue en the entry . . of the imported replacement parts in the Phili p pines � �' Otherwise. if such provisicn in the ccnt-ract is net incorporated., the t~xes and duties due th~reon must 42 G

DH.: !Sl Ct~ - erA CA SES NOS. 28tH & 26 33 - 7- neces sari ly h 6Ve to be should~re�d by the iiiiiJO r te.r badly needing the r ep l acement parts of � the equip- menta for it b use. Conseq uently, the denial b y resi;c.:.ndent cf petitioner� s claim for t h E? refund C�f t h e ild dit.ion~ l cust o ms duties an~ C Oi i lp en::Jatin<_~ in order. of Custcm s ap :- r.al ec from d~ted �..r anudry 31 , 1977 (CT A Case Nn. 2861) rind :. e pt e ru'r:�-er 4 , 1974 (c�v~ .dtt. cc~; U; <HJ;.dnst 1 :'ti t.ioner. u ! !(;.:.\. l t'~ JtJ,1 C?e �~ E C0NCUR: ~-~~ r .M��~~ r:-r r�� LU:. F< 1 r~!3 i r in \ ,� ud~_;~