CTA Case No. 3959 (Decision)

.tt!f*llGLlC Oil fH� PtHl-ll"f"INi'� ~OU10 T OF TA.X APPEAU QUEZON c�:r? ". '-�� METROPOLITAN GARMENT C.T.A. CASE NO. 3959 CORPORATION, Petitioner, ~;; r/ - versus - RAMON J. FAROLAN, Acting Commissioner of Customs, Respondent. X ------- ---------------- X DEC I S I 0 N We are asked in this appeal to review a decision of respondent Commissioner of Customs which affirm~ a decree of forfeiture of a shipment of petitioner Metropolitan Gar ment Corporat i on i n Seizure Identification No. 23-82 in f avor of the Government for alleged violation of Section 2503 in relat ion to Section 2530 (1) .- 3, 4 & 5 of the Tariff and Customs Code of the Philippines, and Section 1 of Act No. 3740. The material facts, as stated in the petition for review and admitted in the answer, may be briefly summarized as follows: The records show that the subject shipment arrived December 25, 1981, on board the vessel S/S Hongkong Ace, covered by Bill of Lading No. NMA-0011 and consigned to he rein petitioner, o perator of CBW No. 640 . under Sections 70

DECISION CTA CASE NO. 39 59 - 2- 2001-200 4 of t he Ta r i ff and Customs Code of the Phi l ippines. The corr es ponding Manufacturing Entry No . 00388 was filed Janua r y 31 , 1982, dec laring subject shipment as one (l) c o nt ai n er , said to con tain Woven Fabrics 60% Terrylene 4 0% Acrylic Width: 5 8/60", 70 kgs. with particular des- cr i p ti o n a s " 3 0,000 yards woven f a b rics 60% Terrylene 40 % Acr yli c Wi dth, ~8/6 0 ", and with a unit value of U. S. $2 . 50 pe r ya r d . Said cargo was du l y ': xa mined by the Formal Entr y Div i s i on, and subsequently r e - examined join tly by represe ntat ive s o f the Forma l Entry Division, the National Cu st oms Polic e (NCP) ~ a Customs Examiner and th e Principal Examiner o f Sect ion 19 , who after their examination fou nd said s hipme nt t o cons ist a tota l of 558 rolls, 380 rolls o f "wor ste d woo l suiting materials~ 58/60" width, which is equ ival ent t o 20, 157 yards and 178 rolls of woven fabr ic s, 6 0 % Terrylene and 40% Acrylic 58/60" width, whi c h i s equiva l en t t o 9 ,8 6 9 yards. Finding s aid shipment to b e 67 % "wo r ste d woo l s uiting materials", contrary to the d ec la rat i on in the Ent ry, t h e NCP recommended the seizure of the wh o l e shipmen t for violation of Section 2503 in �relation t o Sec tion 253 0(1) 3, 4 & 5 of the Revised Tariff and Cus toms Code and the pertinent Central Bank regulations, but which was subs e que n tly amended to include violation of Leg isl ative Act No . 3740 in relation to Section 2530(f) of the Tariff and Cus t oms Code o f the Philippines~ 7 .1

DECISION CTA CASE NO. 3959 - 3- On January 1 8, 1982, the Ac t ing Collector of Customs in Seizure Id e nti fication No . 23-82, ordered the subject articles forefeited i n favor of the Government for alleged viol a tio n o f Se ction 2503 in relation to Sec t ion 2530(1)~3, 4 & 5 of t he Tariff & Custom s Code of the Philippines; Said de cision was seasonably appealed to respondent Commissioner o f � cus t oms , who in a decision dated July 9, 1985 affirmed the decision o f t Le Collector of Customs. Petitioner r ece i ved the decision of respondent on July 12 , 1985 . Hence, the pr e s e nt recourse . The basi c que~tion for ~eterm i nation is whethEr the shipment under conside r at i on is subjec t to forfeiture i n fa vor of th e Government f or violation ~f Section 2503 in re lation to Section 25 30(1)~3, 4 and 5 of the Tariff an d Customs Code of the Ph ilippines, as amended, which pro- hib its underva luat ion , misclassification and misdeclaration of imported articles, and Section 1, Act 3740, whic h prohibits importation of articles falsely labelled. Sec tion 2503 of the Tariff" and Customs Code reads: SEC. 250 3. Underva lu ation, Misclass i- fication and Misdeclaration in En!�Y. -When the dutiable value of the imported art icles shall be so declareA and entered that the duties , based on the decla ration of the importer on t he face of the entry, would be les s by te n per c ent (1 0% ) than shou ld be legally collected , or when the imported articles shall be so described and entered that the dut i es based on the importer's 72

DECISION CTA CASE NO. 3959 - 4- description on t he face of the entry would be less by ten per cent (10%) than should be legally collected based on the correct tariff classification, or when the dutiable weight, measurement or quantity of imported articles is found upon examination to exceed by ten per cent (10%) or more than the entered weight, measu rement or quantity, a surcharge shall be collected from the importer in an amount of not less than the difference between the ful l duty and the estimated duty based upon the declaration of the importer, nor more than twice of such difference: Provided, That, an undervaluation , rn l sdeclaration in weig h t, m2 2sure men t or quantity of more than 50% be tween the val u e, weight, measure- ment or quantity declared in the entr y, and the corr ect value, weight, quantity or measurement , shall cons t itute a prima facie evidence of fraud penalized under Section 2530 of this Code. When the underval uation , misdescription, misclas~ification or misdeclaration in the import entry is intentional the importer shall be subject. to the pena l provision under Section 3602 of this Code . Section 2530(1)~3, 4 & 5 of the Tariff and Customs Code provides: SEC. 2530 . Proper!Y.._�~bject to Forfeiture Under Tariff and Customs Law. - x x x 1. Any article soug ht to be imported or exported: X X j~ XXX XXX (3) On the streng th of a false declaration or affidavit executed by the owner, im- porter , exporter or con- signee concerning the im- portation of such article; (4 ) On th e strength of a f alse invoice or other document executed by the owner, im- � porter, exporter or consignee � concerning the imporuat ion 7 .'.)., ,� .

DECISION CTA CASE NO. 3959 - 5- or exportation of such arti- cle; and (5) Through any other practice or device contrary to law by me ans of which s uch articles was entered through a cus- tomhouse to the prejudice of the government. And Section 1, Act 3740 sta t es: SEC. l. It shall be unlawful for a person, firm or corporation x x x to possess with intent to sel l or cause to be s e t x x x from any fc~ e ign country into the Ph ilippines x x x any article which is falsely packed, labelled, marked or branded x x x in such a way as to misrepresent the charac ter, amount, value, contents, properties or condition of the article, x x x. (Under- scoring supplied) At the outset, it should be sta ted that forfeitures are impos e d by ~ he seizure and subsequent inst itut i o n of seizure proceeding s pursuant to Section 2532 of the Tariff and Customs Code. In seizure cases, one important aspect of the proce edings in the considerat i on of the issues involved, is the duty on the part of the governme~t of presentin~ evidenc e which indicate s probable cause fo r instituting such proceedings . (S anchez vs. Commissioner . of Customs, B.T . A. Case No . 185, decided by the Court of Tax Appeals on November 2 , 1954, citing u.s . vs. One Bag of Paradise and Choura Feathers, N.Y., 356, F. 301, 167, C.C.A. 473; Associated Banking Corporation vs. Commissioner of Customs, et al., C.T.A. Case No. 2448, August 6, 1976.) 74

'' DECISION - CTA CASE NO. 3959 - 6- The term "probable cause'', which has been held synonymous with ~~easonable caus e", means less than ~ the evide nce which will justify condemnation. It imports a seizure made unde r circumstances which warrant suspicion . (Sanchez vs. Commissioner of Customs, supra, citing Locke vs. United States, 7 Cr anch LU.S. 339/; Associated Banking Corporation vs. � commissioner of Customs, supr~.) When, therefore , the Bureau of Cu s~ o~ s ordered and decreed that the subject sh ipment covered by Seizure Identification No. 23-82 declared as 30,000 yards, 60% Terrylene 40% Acrylic Fabr i cs, forfeited in favor of the Government and disposed of in the manner pr ovided fo'r by law, what are th �::! cir- c ums tanc es which warranted , or created the suspicion , that such shipment was imported in violation of the law? As clearly shown in the records o f the case and succintly stated by respondent in his answer as special and affirmative defenses: Sub jec t shipment was imported in violation of the provisions of Section 2503, Tariff and Customs , Code of the Philippines, which prohibits undervaluation, misclassification and misdecla- ration of imported articles, and of Section 1, Act 3740 , which prohibits importation of articles falsely la.beled. Petitioner misdeclared the shipment when it wa s declared as "one (1) container containing woven f a bric s, 60% Terrylene , 40% Acrylic, width: 58/60" 70 Kgs with particular description as 30,000 yards woven fabrics, 60% Terrylene , 40% Acrylic width: 58/60", with a unit value of US$2.50 per yar~. On the other hand, investigation showed that the shipment consisted of 380 rolls wov en 75

- - - -- ....- DECISION CTA CASE NO. 3959 - 7- fabrics "worsted wool suting materials" (along its side, the label "worsted wool suiting materials" appears), 20,151 yards and 178 rolls woven f abrics, 60% Terrylene and 40% Acrylic 58/60" width equi- valent to 9,869 yards. Laboratory tests made on the sampler' of "worsted wool suiting materials" showed that there were no wool fibers in the fabri cs. Mor e over, petitioner underdeclared the unit price per yard of the impor t ed woven fabrics. Per petitioner�s declaration, the imported fabrics have a home consumption value of $2.50 per yard. According to the Valuation and Classification Division of the Bureau 0 f r ustoms, howe ver, the fabric ha s actually a hon ~ consumption value of $3.50 per ya rd. Seizure of the shipment is therefo re in order pursuant to Section 1, Act 3740, Section 2503, in relation to Section 2530(1)-3, 4 & 5, all of the Tariff and Customs Cod~ of the Ph i lippines. The. merit of respondent�s stand as averred in the above-stated special and affirmative defenses is clear � on the face of the statement of facts of petitioner, �stated above and admitted by respondent in his answer . And as testified to by the prosecution witnesses national customs police Dinualdo Felipe, customs examiner Rodolfo Ureta and principal customs examiner Norberta Sablay during the hearing of th e seizure case in the Bureau of Customs, who all participated in the examination of the textiles in ques tion, they found the shipment declared as "30,000 yards woven fabric, 60% Terrylene and 40 % Acrylic" to contain 178 rolls (9,869 yards) of 60 % Terrylene 40% Acrylic woven fabrics and 380 rolls (20,157 yar d s ) of worsted wool su iting materials, br a misdeclaration 76

DECI S ION CTA CASE NO. 39 59 - 8- by 67 % of the entire shipment with v1orsted wool. (See also report of examinat ion submitted by Norbe rta Sablay to the Collector of Customs, Port of Manila , Exh. "F", p. 192 , Customs r e cords ; and re-examination report sub- mitted by Dinu aldo Fe lipe to the De puty Director, NCP, Exhs. "C", "C-1", "C-2", "C -3 " , pp. 159-161, Custom s record s.) App a r ent ly, the misdecJ ~ r 2t ion of 67% was comput ed on the basis t ha t of the declared "30,000 yards woven fabrics 60 % Terrylene 40 % Ac r ylic;' 20, 157 yards were found to be "wors ted wool s uiting mater ials" . To disprove of any vioiation of the law, Mr . Luciano Tan; president of petitioner Metropolitan Gar men t Corporation t estif ied during the hearing of the case at the Bure au of Customs th at samples of the swatches of the text iles in ques tion were sent to petitioner by the suppl i er/buyer Luen Thai Shipping & Trading Co., Ltd ., Taiwan, and tha t be fore the actual importation of the textiles and al so prior to the opening of the Le tte r of Credit No. 101635 with the Pacific Banking Corporation, the appr oval of the Garment and Textile Embroidery Board (GTE B) was first sough t to import the textiles of the kind as t h a t of the sample swatches; and that, wh a t was intended to be i mported by petitioner is 30,000 yards of woven fa brics. Upon being informed of the misdec- lar at ion, petitioner sought clarif i cation of t h e sh ipment 77

DECISION - CTA CASE NO. 3959 - 9- f r om its s upplier of the discrepancies b e tween the actual fab ric shipped and that described under covering letter of credit . The suppl i er stated that the goods shipped is the same material approved by the buyer a s wooven fabric synthetic worsted wove , and explained that a synthetic wool is just a de s criptive name and does no t contain natu ral wo ol but man-made fiber ju st lik e 60 % Te rrylene and 40 % A ry l ic. Be that as it may; the testimon y of petit ione r's witness is however negated by the stand taken by peti- tione r in a letter dated 21 January 1982 to the Ga r ment and Te xtile Embroi dery Board (GTEB) request i ng fe r amendment oi t he original endorsement granting authority to import woven worsted woo l fabric instead of woven .fabric 60% Terrylene 40 % Acrylic. Why the amendment if worsted wool suit ing materials are not different from woven fabrics, 60 % Terr y lene 40% Acrylic? Agai n, if the goods shipped a r e the same, why does the sub ject shipment consist of two parts: (a) 380 rolls woven fabrics worsted wo ol suiting mate ria ls and (b) 178 rolls � woven f ab ri c s , 60% Terrylene a nd 40% Acrylic? And i n th i s c onnect ion, it maybe noted that when the shipmen t in question was refer red to the National Institute of Science and Technology for laboratory ana l ysis of its c ontents, said office .found out that the goods did not contain wool. 78

DECISION CTA CASE NO. 3959 - 10 - In effect, therefore, petitioner not only misdeclared but also mislabelled the shipment under consideration in v.blation of Section 1, Act 3740, supra, which prohi- bits importation of goods or art icles falsely labelled. Then , on the basis of the customs records and the pleadings on which petitioner submitted this case for dec ision, it clearly appears that petitioner under- declared the unit price per y ar d of the imported wov en fabrics. Per petitioner's declaration, the i mported fabrics have a home consumption value of US$2.50 per yard. According to the valuation and classification division of the Bureau of Customs, however, the s i1i pment has actually a home consumption value of $3.50 per yard. Settled ig the rule that the party who prays for .judgment on the pleadings without offering proof as to the truth of his own allegations and without giving the opposing party an opportunity to introduce evidence, must be under stood to admi t the truth of all the material and re levant� alle gations of the opposing party. (Bauermann vs. Casas, et al., 10 Phil. 386 ; Evangelista v~. De la Rosa, 70 Phi l . 115.) Since petitioner fai led to con- trovert the fact appearing in the customs r ecords, and alleged by the respondent in his answer, that the shipment has a home consumption value of US$3.50 per yard, pet i- tioner has underdeclar e d the unit price pe~ yard o f the 7S

DECISION CTA CASE NO . 3959 - 11 - imported woven fabr ics in viol a ti on of Section 2503 of the Tariff and Customs Code . And l as t ly , this Court cannot ignore the averment of respondent, which a ppears from t he records of this case , and not controverted by p etit ioner, that CBW No. 640, unde r Sections 200 1-2004 of the Tari ff and Customs Code, operated by here in petitione r where the sl1ipment in question would allege dly b e manufactured, had already ceased to oper Jle in view of the cancellation of its author ity to opera te in February, 1982. Indeed, this finding of the Bureau of Customs would belie petitioner's claim that subject sh ipment would be used as raw n2 terials in its manuf~cturing ven ture. Taking alL these facts and c i rcumstances , the con- e lus ion is inevitable tha t the seizure of subject s h ipment is in or der, purs uan t to Section l, Act 3740, Section 2503 i n relation to Section 2530(1)~ 3, 4 & 5, of the Tariff and Customs Code o f the Philippines . WHEREFORE, the decision of r~ spondent Commi ss i oner of Cu stoms forfeiting the subject shipment of petitioner Metropolitan Gar me nt Corporation in f avor of the Government is hereby affirmed . Costs against petitioner. SO ORD ERED . eo

DECISION - CTA CASE NO. 3959 - 12 - Qu ezon City , Metro Manila, April 16, 1986. AMANTE FI Presid ing Judge WE CONCUR : ( '�~ --- - Z. REYE Associate Judge 81