CTA Case No. 2634 (Decision)

'� RltPUtH !r or �; C ~ r :: U""IN!tS COURT uF TAX APPEALS OCKZON CITY JARDINE DAVI ES , INC., Petitioner, - versu s - C.T.A. CASE NO. 2634 THE COHMISSIONER OF CUSTOMS, Respondent. X- - - - - - - - - - - ~ DEC I S I 0 N Involved herein are Manila Protests Nos. 8902 and 8903 filed by Theo H. Davies & Co., Far East, Ltd. (now Jardine Davies, Inc.) .against the alleged over-assessmen t and collection of customs duty and advance sales tax by the Collector of Customs of Manila on two separate importations of refractory materials covered under Entry Nos. 28674 and 39634, both series of 1973. Respondent Commissioner of Customs having affirmed in toto the decision of the Collector of Customs finding correct the imposition of these levies under Tariff Heading 38.19 at" 50 % ad valorem of the Tariff and Customs Code, and dismissing the related claims for r efund of alleged overpaid customs duty and advance sales tax, petitioner Jardine Davies, Inc. appealed to t h is Court. There is no dispute about the facts of the case, respondent having admitted all the ~legations of facts in the Petition for Refund (Review) filed by pet1tioner

DECISION - CTA CASE NO 2 634 - 2- with this Cou r t, except a s to the correct tariff classification of the two separate . shipments of refractory ma terials, and having submitted this case for decision based on the records and pl~adings with- out controve r ting the evidence, oral and documentary , presented by petitioner, and without filing his memorandum although he was given ample time to do so. As borne out by the records, petitioner Jardine Davies, Inc. (formerly Theo H. Davies & Co., Far East, Ltd.) .is a corporation organized and existing under the laws of the Philippines, with principal office and place of business at the Jardine Davies Building, 222 Buendia Avenue, Makati, Metro Manila. It was, and still is, an importer of refractory materials supplied by Morgan Refractories Ltd. in Liverpool, England. On two separate occasions, petitioner imported refractory rna t e ~~ ials abroad the SS 11 Puerto P r incesa 11 and the SS "Ebani", wh i ch arrived at the Port of Manila on May 8 , 1973 and June 22, 1973, and covered by Entry Ncq 28674 and 39634, both series of 1973. Alleging over-assessment and payment of customs duty and advance sales tax by the Collector of Customs of Manila on th e se two separate s h ipme n t s , petiti oner filed Manila Protest No. 8902 and Manila Protest No. 8903. The particulars of the shipments involved in 3 ll

DECISION - CTA CASE NO 2634 - 3- Manila Protests Nos. 8902 and 8903, as stated in t he decision of the Collector of Customs of Manila dated April 8, 1974, are as follows: (pp. 37-38, Customs records.) Manila Protest No. 8902 That a shipment, consisting of 182 packages of refractor y constructional goods marked "T .H.D. 869 E. Makati, Rizal", con- signed to the herein protestant arrived at this Port on May 8, 1973 fr om Liverpool aboard the SS "Puerto Princesa", Reg. No.777, under Bil l of Lading No. M-51; that the said shipment was declared under Entry No. 28674, Series of 1973, under Tariff Heading 69.02 at 10 % ad valorem; however, the customs appraiser concerned appraised the said ship- ment under Tariff Heading 38.19-B at 50% ad valorem; and because of this the amount � of ~54,587.00, representing additional duty, tax and other charges, was paid as evidenced by Cent ra l Bank O. R. No. 205459 dated June 19, 1973. Th is assessment was contested by the protestant claiming that the duty and tax should ha ve been based on Tariff Parag r~ ph 69.02 at 10 % ad valorem and the corresponding Pro test was filed for the refund of the sum of FI FTY-FOUR THOUSAND FIVE HUNDRED AND EIGHTY-SEVEN (~54,587.00) .PESOS; and Manila Protest No. 8903 That a shipment, consist ing of 126 �packages of r efractory constr ucti o na l gooas marked "T . H.D. 870-E, I�'lakati, Rizal" , co '1- signed to the herein protestant arrived at this Port on June 16, 1973 from Liverpool aboard the SS "Ebani", Reg. No. 1027, un -l er Bill of Lading No. M~l38; that the sai f shipment was declared under Entry N9.39634, Series of 1973, under Ta~iff Heading 69 ; 02 at 10 % 'ad valorem; however, the appraiser concerned appraised the said shipment under Tariff Heading 38.19-B at 50 % ad valorem; and because of this, t h e amount 6 �~1 9 , 967.00, 1;...'~ ~!l ~) ,...,

DEQISION - CTl\ CASE NO 2634 - 4- representing additional duty, tax and other charges, was paid as evidenced by Central Bank O.R. No . 205493 dated June 22, 1973. This assessment was conteste d by t he protestant claiming that the duty and tax should have been based on Tariff Paragraph 69.02 at 10% ad valorem and the corresponding Protest was filed for the refund of the sum of NINETEEN THOUSAND NINE HUNDRED AND SIXTY- SEVEN (�119,967 .00) .PESOS. The parties are not in dispute on the computation of the customs duty and advance sales tax paid by, or amo~nt refund a ble to, petitioner as the case maybe. As ite~ized by petiti oner, which is not disputed by res- pondent, the following is the computation of the amounts of customs duty and advance sales tax being claimed by petitioner as refundable in case the shipments in question should be classified under Tariff Heading 69.02 at 10 % ad valorem as claimed by it instead of Tariff Heading 38.19-B at 50 % ad valorem as~plied by respondent: 126 pkgs. Refractory Materials ex S/S EBANI, B/~ No. Ml38, Reg . #1027 ENTRY NO. 39634' (1973) ~ 0/R No. 205493 - �129,725.00 10% 50% DIFFERENCE CUS'IavlS DUTY �14,590.00 �122 ,951.00 �118,361.00 ADVN~CE SALES TAX 4,828.00 6,434 .00 1,606.00 �19,418.00 �129,385.00 �119,967.00 vvvvvvvw vvvvvvvvvv wvvvvvvvvv 182 pkgs. Refractory Materials ex S/S PUERTO PRTI~CESA, B/L No. M51, Reg . #773 ENTRY NO. 38674 (1973) ~ 0/R No. 205459C - �183,346.00

DECISION - CTA CASE NO 2634 - 5- 10% 50% DIFFERENCE QJS'KMS DUTY Eil2,549.00 El62,744.00 El50,195.00 ADVANCE SALES TAX 15,172.00 19,564.00 4,392.00 El27, 721.00 El82,308.00 El54,587.00 vvvvvvvwv wvvvvvvvv wwvwvw The lone question tendered for resolution is the correct tariff classification of the imported refractory materials; that is, whether they should fall under Tariff Heading 69.02 at 10 % ad valorem as contended by petitioner or unde r Tariff Heading 38.19-B at 50 % ad valorem as applied by respondent, both of the Ta r iff and Customs Code. In the resolution of the issue posed by this appeal, one important aspect of the case to consider is that under TCC No. 2932 dated September 22, 1972, the Tariff Commission has already ruled that (1) .Tri-Mor Castable Ref ra ctories and (2) Plastic or Mouldable Refractories used f or furnac e construction and main- tenance in sugar mills, cement and other industries are classified in Tari f f Heading 68.07 with rate of dut y at 15% (now 20 %) .ad valorem. (Exh. "R" - Certified tr ue copy of Tariff Commission Cla s si f ication No . 2932 clas s i fy ing Tr i-Mor Castabl e Ref r actorie s and Plastic or Moulda b le Refractories under Tariff Heading 68.0 7 .) That the refractory materials involved in this case are identical to, or identified as, Tri-Mor Castabie

DECISION - CTA CASE NO 2634 - 6- Refractories and Plastic or Mouldable Refractories referred in TCC No. 2932 dated September 22, 1972 of the Tariff Commission classified under Tariff Heading 68.07 at 20 % ad valorem is asserted by petitioner i tself under paragraph 6 of its Petition for Refund (Review} filed in this Court. To quote: 6. That this contention is supported, among other evidences, by no less than the Tariff Commission, the Governmental Agency to determine proper tariff classification, who declared in its tariff ruling No. 2932 of September 22, 1972, that commodities like those involved in the present petition which had been identified as "Tri-Mor castable refractories" and "plastic mouldable refract- ories" are classified unde r qeading 68.07 at 20 % ad valorem. A copy of Tariff Ruling No. 2932 dated September 22, 1972 is attached hereto as Annex "A" and made an integral part of this petition. Section 505 of the Tariff and Customs Code makes it the duty of the Tariff Commission to investigate, among others: "SEC. 505 . Functions of the Commission . - The Commission shall investigate - XXX XXX XXX "(d) all questions relative to the arrangemen t of schedules and classification of articles in the several schedules of the tariff law ; XXX XXX ( i) the nature and composition of and the class ification of articles according to tariff commodity classification and heading number for customs revenue andttherrelated

-- DECISION - CTA CASE NO. 2634 - 7- purposes which shall be furnished to NEDA, Board of Investments, Central Bank of the Philippines and Secretary (now Minister) . of Finance." And in t he exercise of its f unctions and powers, the Tariff Commission, under Section 508 of t he Tari f f a nd Customs Code , is au thorized: SEC . 508. Access to Documents and Assistance to the Commission. -The Commission or its duly authori zed representative shall have access to any document, paper or record, pertinent to the subject matter under investigation, in the possession of any person, firm, co-partnership, corporation or association engaged in the production, importation or distribution of any article under investigation, and shall have power to summon witnesses, take testimony, ad- minister oaths, and to issue subpoena duces tecum r equiring the production of books, papers or docume nts relating to the matter under in- vestiga t ion. The Commission may also request the views, recommendations and/or assistance of any government office, agency or instrumentality, and such office, agency or instrumentality shall cooperate fully with the Commission. Since t he ruling containe d in TCC No. 2932 dated September 22 , 197 2 was iss ued by th e o ffi ci a l i ns t r u- mentality of th e Goverrime nt empowe red to investigate all questions r elative to the arr ansement of schedules and classificat ion of articles in the several schedules and chapters of the tariff law; a s well a s the nature and composition of and t he class i f i cation of a rticles according to ta rif f commod ity classificat ion and heading number f or customs rev e nue and othe r related purposes; and is authorized to have access to any G j-',il.I .

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DECISION - CTA CASE NO. 2634 - 9- form wh il e plastic refractories are in moist unformed mixes ready for moulding into whatever profile is required. These products are also called "monol i thic refractor i es " because they are jointless when installed and require no mortar or cement to bind them together. It will be noted that both castable and plastic refractories are made from the common materials used in firebrick and other refractory products, namely: fireclay, silica, magnesite, dolomite , etc ., all of which are mineral products falling in Chapter 25 of the Code . Head i ng 68 .0 7 of the Tariff Code provides for , among others , compounded heat resisting or heat or sound insulating mineral substances or articles thereof , not fired, other than subs- tances and articles with a basis of asbestos . The pertinent Brussels Explanatory Notes provide that the headng also covers compounded heat- resisting or heat or sound insulating mixtures of mineral materials imported in bulk provided they contain no asbestos (apart from certain specified tolerances)~ In view of the foregoing, subject articles are classified in heading 68.07 with rate of duty at 15% ad valorem. The evidence adduced by petitioner, both oral and documentary, which werenever questioned or con- troverted by respondent, definitely and unequivocally show that the refractory materials imported by it fall under Tariff Heading 68.07 at 20% ad valorem. (Tes ... timony of Fernando Tecson, Jr., t.s.n . , hearing on December 9, 1977; Exh. "Q" - Brochure showing the properties of Tri - Mor Castable Refractories which demonstrate the qualitie s of the refractory materials imported by petitioner as falling under Tariff Heading

DECISION - CTA CASE NO. 2634 - 10 - 68.0 7 with rate of duty at 20 % ad valorem covered under TCC No. 2932 of the Tariff Commission; Exh. "S" - Mimeographed Brochure on Morgani te Ref ractories showing the properties, elements a nd uses of the refractory materials imported by petitioner which prove that they fall under Tar iff Head ing 68.07 at 20 % ad valorem.) . And while respondent states under parag raph 2 of his answer that "the Bureau of Customs is not strictly bound by the opinions of the Tariff Commission on classification of merchandise" (under- lining supplied)~ the records of this cas e show that in subsequent impo rtations of petitioner of the same refractory materials, the said Bureau had classified and imposed the ad valorem duty of 20% under Tariff Heading 68.07, in accordance with the above ruling of the Tarif f Commission. (Exh . "T" -Import Entry and Internal Revenue Declaration for Jardine Davies, Inc., S/S "Kurama Mar u", Jul y 23, 1977; Exhs . "T-1" & " T-2", Export Pa cking Specifications; Exh. " U" - Import Entry and Internal Revenue Declaration for Jardine Davies, Inc., S/S "City of Elinburg", Ma y 3, 1977; Exh. "U-1" - Export Packing Specification; Testimony of Fe rnando Tecson , Jr ., t . s . n ., hearing o n December 7, 197(.) There being fu ll adherence to Tariff Commission Circular No . 2939 dated September 22, 1972 by the Bureau of Customs, there should b~ no q�.) �;l �..)

DECISION - CTA CASE NO. 2634 - 11 - uneven application of the ruling contained therein by treating the shipments in question in a di f ferent level f or tariff classification purposes. We can pres s further the re ason why the shipments of refractory materials involved in this case should be classified under Tariff Heading 68 . 07 at 20% ad valorem by considering the purpose for which or to which these imported articles are adapted or applied. The general purpose for which an article is used must govern the assessment of duty; any other rule would lead to confusion and injustice. It is the ge- neral use to wh ich articles are chiefly ada p ted and ~ for which they are chiefly used that determines the ir I character withi n the meaning of the tariff laws . It is the p r edominat ing use to which ar ticles are ge- nerally applied or used that determines their cha- racter for the purpose of fixing the duty , and not the specific or special use which any particular importer may make of the articles imported. (La Compana General de Tabacos de Filipinas vs . United States, 8 Phil . 438; citing Hartranft vs. Langfeld, 125 u.s. 128; See also, Chester Industries, Inc . vs. Commissioner of Customs, CTA Case No. 2560 , May 9, 1974; Domingo s. Jose, Inc. v s . Commissioner of Customs, CTA Case No. 2568, May 6, 197 7; National 350

DECISION - CTA CASE NO. 2634 - 12 - Dental Suppl y , Inc. vs. Commissioner of Customs, CTA Case No. 2757, May 16, 1979; Campos Rueda Corporation vs. Commissioner of Customs , CTA Case No . 2829, July 28, 1980.) The uncontroverted evidence adduced by petitioner, both oral and documentary, definitely established the fact that the general purpose or predominating use to which the imported refractory materials in question are applied or employed, and for which petitioner imported them, is for furnace construction and main- tenance in sugar mills, cement and other industries where heat must be controlled (t.s .n., pp. 20-21, hearing on December 9, 1977) ~ or where heat is con- tained (t.s. n ., pp . 6-7, hearing on December 9, 1977) ~ These refractory materials have the properties , ele- ments and use of articles falling within Tariff Heading No . 68.07 at 20% ad valorem. (Exh. S 11 11 Mime ographed - Brochure on Morganite Refractories .) Since Tariff Heading 68.07, as expressly provided therein, includes, among others, "mixtures and articles of heat-insulating, sound-insulating , or sound-absorbing mineral materials", other than articles of asphalt under Tariff Heading 68.08, and refractories used for furnace construction and maintenance in sugar mills, cement and other industries fall under Tariff Heading 68.07 (Exh. R 11 11 -

DECISION - CTA CASE NO . 2634 - 13 - Tariff Commission Classification No. 2932 dated Sep- tember 22, 1972, supra)~ the two shipments of refractory materials should logically be classified under Tariff Heading 68.07 at 20% ad valorem. Any other tariff classification would lead to confusion and injustice. We find no merit therefore in the allegation of respondent in his answer as affirmative and special defense that the importations in question fall under Tariff Heading 38.19 at 50% ad valorem of the Tariff and Customs Code. Aside from the fact that absolutely no evidence was presented by him to prove his con- tention, respondent submitted this case on the basis of the pleadings and records, and the latter definitely and unequivocally show that the two shipments of re- fractory materials fall under Tariff Heading 68.07 at 20% ad valorem. As a matter of fact, as discussed above, on subsequent importations of petitioner of the same refractory materials, respondent classified the said articles under Tariff Heading 68.07 with rate of duty at 20% ad valorem in accordance with TCC No. 2932 dated September 22, 1972 of the Tariff Commission, which apparently indicates acquiescence if not concur- renee thereto . The same is true with r espect to t he position taken by petitioner as to the correct tariff classification of its importations. While contending 3 ..1':' ~,..)., )

DECISION - CTA CASE NO. 2634 - 14 - that its two shipments of refractory materials in- volved in this case are classifiable under Tariff Heading 69.0 2 at 10 % ad valorem, petitioner's evidence, both oral and documentary, clearly and unmistakably prove the fact that they fall under Tariff Heading 68.07 at 20 % ad valorem. We note however that with regard to the claim for refund of advance sales tax in the total amount of ~5,998.00, the same can not be passed upon by the Court in view of the fact that nothing in the records shows that petitioner had filed its written claim for refund thereof with the Commissioner of Internal Revenue and that the latter was made a party to this case. Without satisfying these jurisdictional re- quirements, which in the instant case are lacking, the same is fatal to the claim of petitioner for the refund of the overpaid advance sal e s tax. (Wise & Company vs. Commissioner of Customs , CTA Case No . 2717, December 29, 1977, see also resolution dated January 15, 1979, certiorari denied in G.R. NO. L-51242, March 7, 1980; National Dental Supply Incorporated vs . Commissioner of Customs , CTA Case No. 2826 , June 30, 1980; Campos Rued~ Corp o L~ t io n vs. Commissioner of Customs, CTA Case No. 2829 , July 28, 1980.) . Accordingly, only the overpaid customs duty

DECISION - CTA CASE NO. 2634 - 15 - in the toal amount of ~51,417.00, computed as follows, is refundable to petitioner Jardine Davies, Inc. : Customs Duty 20% 50 % Difference Entry No . 38674 (1 973) 182 packages Refractory Materials S/S "Pue rto Princesa" May 8, 1973 ~ 25 ,098 ~62,744 ~37,646 En tr y No . 39634 (1973) 126 pa c kages Ref ractor y Materials S/S "Ebani" June 22, 1973 ~ 9,180 ~2 2 ,951 ~13,771 Total overpaid customs duties ~5 1 ,417 WHEREFORE , the decision appealed from is modified. Respondent Commissione r of Customs is hereby ordered to refund to pe titioner the sum of ~51,417.00. Without pronounc ement as to costs . SO ORDERE D. Quez o n City , Me tro Manila , October 16, 1980. AMAN TE ILLER Presiding Judge WE CONCUR =,/ - CONSTANT� C. ROAQUI N Associate Judge Associate Judge