CTA Case No. 31 (Decision)

/ H -~ uTJLI C OF TilE PHILIPPINES 0 CvURf OF TAX APPEALS MANli..A SAN C tLOS T"'"'.AD TI~G , C. '.r . A. C SE NO . 31 Petitioner, - versus - COMMISSIONER OF CUSTOI;JS , Respondent . x- - - - - - - - - - - - - - -x D E CISIO N This is an appeal from a de cision of the resporrlent Com- missioner of Customs sustaining the decision of the Collector of Customs of banila in ;.anila Seizure Identification No. 1295 , declaring the cash bond of the petitioner San Carlos Trading, in the amount of P6 , 611 . 62 forfeited in favor of the Govern- ment . The following are the pertinent facts stipulated and sub- mitted by the parties : 1 . That this case refers to four (4) cases of nylon socks , one (1) case of table cloth and one (1) case of feather duster covered by Seizure Identification No. 1295 � � 2. That the shipment fn question arrived in Manila on December 23 , 1953 , ex S/S tfJ-IITi.AI�:" , Reg . 1561, under Bill of Lading No . 4 (Exhibit J11 11 ) and consigned to the appellant . 3. That according to the "Invoice of Mer chandise 11 ( ~,xhi bit 011 11 ) the shipment consisted of 1, 100 dozens cotton socks , 8 dozens table cloth and 1 , 000 pieces of feather duster . 4� That the said merchandise were declared under Declara- tion Entry No . 87173 (Exhibit ttt." ) , to which entry to the fol- lowing papers vJere attached : Central Bank Release Certificate (Exhibit "I") , Bill of Lading (Exhibit 11J " ) , Delivery Permit (Exhibit K 11 11 ) , Statement of &dvance Sales Tax (Exhibit L 11 11 ) and Official Re ceipt No. 0535012 (Exhibit 1'I.111 ) . 5. That on January 6, 1954, customs examiner Hermoge nes Dimalanta examined the shipment in que s tion (t . s . n ., pp . 14- 15) and found discrepancies in the quality and quantity of the mer~ chandise in question, said discrepancies consisting in the fol- lowing that instead of 1, 100 dozens of cotton socks as declared in the consular and commercial invoices , it was found t hat there was 1 , 429 dozens of cotton socks and 283 dozens of rayon socks ,

- ... DECISI01~ - C�T� � C SE NO . 31 - 2- or a total of 1 , 712 dozens; and that instead of 1,000 pieces Of feather duster there Ware 1,250 pieces . clO discrepancy was found in the one case of table cloth (p . 2, decision , Collector of Customs) . 6 . That because of the discrepancy discovered, the shipment in question was seized for violation of s~ction 1363 (m-3), (m-4) and (m-5) of the ~evised dministrative Code and ~eizure Proceeding No . 1295 was instituted . 7 . That to obtain the release of the merchandise in ques- tion, the petitioner posted a cash bond in the amount of M , 6ll.62, under Official Receipt 1 o . 27668, dated kay 8, 1954. The goods \'Jere ordered released . 8 . That during the hearing of the Seizure Identification Ho . 1295 , petitioner submitted Exhibits 11I" and 11 211 to show that the shipper of the merchandise in question, �uen Tai Co . , 1iongkong , committed a mistake in the shipment by shipping the �wrong merchandise to the petitioner . 9 . That after trial , the Collector of Customs rendered a decision declaring the cash bond of petitioner forfeited in its entire amount, and, on appeal the eommissioner of Customs affirmed the decision appealed from . The petitioner cites thre e errors alle gedly committed by the respondent in the decision appealed from: l . That the r spondent ~as too drastic in ordering the forfeiture of the cash bond posted by the petitioner and in applying strictly the orovisions of s ~ ction 1363 (m-3), ~-4) � and (m-5) of the f,e vised udministrative Code without taking into consideration the good faith and lack of intention on the part of p~titioner to defraud the govermaent; 2 . That the respondent erred in not giving due �weic;ht to a letter and a tele gram, ~,xl1ibits l and 2, of the consignor and shipper of the merchandise , Yuen Tai Company of hongkong vJherein the latter admits having committed a mistake in packing and shipping the wron � merchandise to petitioner; and 3 . hat the respondent erred in holding that the shipment in question is not covered by any import license Vlith r espect to the cotton and rayon socks and therefore are illegal impor- tations under Central Bank Circular l'ro. 44 . The pe titioner admits that there is in fact a big discre- pancy in the quantity , quality as \Vell as classification of the merchandise shipped by the consignor , Yuan Tai Company, as com- pared to the merchandise listed in the bill of lading, consular and commercial invoices and other pertinent papers supportin~

DECISION - C. T. A. CASE NO. 31 - 3- the importation . i\'iore particul arly , instead of 1, 100 dozens of cotton socks as declared in the consular and commercial invoices , it was found that the shipment in que stion consisting of six cases contained 1 , 429 dozens of cotton socks and 283 . dozens of rayon socks , or an exce s s of 612 dozens . And that instead of 1 , 000 pieces of f eather dusters as manifested , there were 1, 250 pieces found in the shipment or an excess 250 pieces . According t o the computation of Customs Examinet� Hermogenes Dimalanta , who examined the contents of the six cases on January 6, 1954, the @overnment would have lost Pl , 860 .10 in duty and P38l .94 in short tax or a total of � 2, 242 .04 had the anomaly not be det ectd (pp . 3e, 37 , 86 Customs Record) . In sustaining the order of forfeiture , the r espondent applied section 1363 (m-3), (m-4) and (m-5) of the hevised ~dministrative Code , which empowers the Bureau of Customs to seize and forfeit in f avor of the Government importations upon the v1rongful making by the owner , importer , exporter or con- signee of any merchandise , or by the agent of either , of any false declaration, invoice , letter , paper or affidavit touching such merchandise or upon the causing or procurance , by the same person or persons , of any merchandise to be entered or passed at any customhouse by any other fraudulent practice , device or omission by means whereof the Government is or might be depr i ved of its lawful duties on such merchandise . 'l'he re spondent gave as additi onal ground for his decision the fact that petitioner failed to obtain an import licens e for cotton and rayon socks in violation of Central Bank Circular No. 44 .

D CISION - C. 'l' . a . CASE NO. 31 - L~ - ~The petitioner claims that the discrepancy in the ship- ment is due to the mistake of the shipper , Yuen 'l'ai Company , as evidence by its letter and telegram, Exhibits 1 and 2, (p . 81 Customs Re cord) a:r:rl therefore it (petitioner) should ~t be made to suffer for the mistake of others there being no intention whatsoever on its (peti tioner ' s) part to deprive the Government of its lawful duties . It is of common kno�wled ge that Chinese merchants are among the most proficient in the -world and in matters of fi E,ures thE?re' are few like them . We find .it impossible to be- lieve the pretention of the shipper, Yuen Tai Company , that it .committed as honest mistake in the shipment in question by sending merchandise far in excess and of better quality than r that purchased by the petitioner herein . The dj.fference in quantity and quality between the amount of articles declared in the j.nvoices and the amount actually shipped is so great that the most liberal human jud gment cannot attribute such dif- ference to a mere innocent error but to a deliberate intent to defraud the Government . One vdll note on the consular i nvoice s (pp . 100-102 Customs Re cord) that the merchandise ord ered by the petitioner from the shipper , Yuen Tai Company, wer e bought by the latter from different Hongkong firms and factories . Under the circumstances , it is to be presumed that the shipper, Yuen Tai Company , would. buy from other firms and factories only those articles which vver e ordered by the petiti oner and would ship ~he exact quantity and quality requisitioned . Furthermore , it appe ars that the shipment in question arrived in Iv1anila on December 23 , 1953 and the l etter and tele- gram , ~xhibits 1 and 2, of the consignor to the petitioner

DECISION - C . T � � CASE NO . 31 - 5- informing the latter of the alleged mistake came two and three weeks later . )�,e fail to u..r1derstand v1hy it took the consignor this long to discover the mistake and why such an information as contained in said letter and telegram had to come precisely after the discovery of the anomaly by our customs authorities . Je agree with the findings of the respondent that the possibi- lity of mistake on the part of the shipper of the goods in question is remote and that the more plausible conclusion is that there was a secret understanding between the shipper and the pe titioner herein to send more merchandise than that mani- f ested in the invoices in the hope that they would be able to sneak it through our customhouse v1ithout being detected . The numerous restrictions imposed by the Government on imported goods coupled with the fact that with these restrictions, im- ported articles command an exorbitant price in the local market, has emboldened unscrupulous importers into taking greater risks and employing all kinds of devices and chicanery in order to smuggle into our country foreign articles ~ ithout the necessary license and to cheat the Government of lawful duties as well . 'i'he ruse employed by the e:xp orter and importer in this case is one of them . The other common 11mistake storyu is done this �way . After the discovery of the excess shipment by the customs autho- rities , the foreign consignor of the goods usually VJrites a letter to the local consignee stating that the unmanifested articles are intended to serve as samples and not for sale or that the excess is a misshipment intended for another port . The ship~Je r usually follows this up with another letter to the local importer requesting the latter to ship back the goods which have been sent by "mistake . 11

D-crsro.-r - C�T � � C c JO � 31 - 6- Indeed, t here might be instances vJhen Eixporte r 1,through oversight, mi[ht send the wrong merchandise to their customers . HovJever; such mistakes are usually in small proportions and in most instances to t h0 favor of the consi ~nor. It might be asked : �. h~r r.� ould our local i!_nporters connive in such a manner \Vith forei -:;n eY:porters knowinc ful ly vJell that the unmanifested or partly manifested shipments would have to undergo a thorough che cking by our local customs authorities be - fore its release? The ansvJer is simiJ le . LJns crupulous importers take all these chances notwithst anding the risk of losing their e ntire imp ortation if discovered , in the hope that upon arrival of the vood s, the Customs E:raminer or pp raiser v1ho may be as- sicned to inspect the :: arne vdll be one of their confidants \'Jho v1ould be willine; to close his eyes out of friendship or for a valuable consideration. ,) . t any rate, the alleced r ocxf faith on the part of peti- tioner will not help it any . "Forfeiture is prescribed not only for fraudulent acts that result in the loss of r evenue but al�� f.Q.L.2Jill~ts which innocent in themselve s, t ond to such loss Qf_revenue or administrative dif~iculty~he enforcement of customs laws" . (U . S . vs . The Theophila , D. C. Tex . 11 F . 696 . ) ) { In its third assignment of error, petitioner claims that the respondent likevJise erred in sustaining the order of for- feiture of the Collector of Cus toms of Ii:anila on the additional ground that vdth r espect to the cotton and rayon socks the im- portation was ille gal under Central Bank Circular ~ro . 44 . e ti- ti oner avers that this matter was never raised as an issue during the investigation of this ca re before the Collector of Customs of L1 anila and therefore it vas deprived of the opportunity to defend itself �with resp _ct to this charee . '!'hat there \'!as in

DECISION - C�T� � CaSE NO � 31 . - 7- fact a violation of Central Bank Circulars Nos . 44 and 45 on the part of petitioner is evident on the face of Central Bank Lelease Certificate, Exhibit I , issued in favor of petitioner . Central Bank Circular No . 45 of June 25 , 1953 , requires appli- cants for import license to describe the goods to be in~orted . The petitioner >"las granted , judging by the release certificate issued in its favor by the Central Bank, an import license for nylon socks valued at ~770 . 00 . I:.iovJever, the shipment consigned to it for �which it presented the release certificate, '"xhibit I, consisted of 1712 dozens socks made of cotton and rayon but not nylon . This is clearly a violation of Central Bank Circulars Nos . 44 and 45 and therefore the respondent did not err in sus- taining the order of forfeiture of the Collector of Customs of l;lanila based on this additional ground . Petitioner cannot now claim that it v~as not r;iven an op- portunity to defend itself with respect to this charge during the seizure proceedings conducted before the Collector of Customs of kanila . It appears that the petitioner was ably defended by Atty . Sabino J . guila during the said investigation . On appeal to the r espondent Commissioner of Customs , the petiti oner vJas represented by the la111 firm Llamado , Araullo, Felizardo and Tanyag . Petitioner ' s counsel did not request the respondent to order the r e-opening of the seizure pr oce Edings before the Collector of Customs of I.~anila , as they should have done under section 1380 of the Revised Administrative Code , in order to give them a chance to disprove the findings of the Collector of Customs that the petitioner also violated Central 3ank Cir- cular No. 44 . Instead , counsel for the petitioner submitted a lengthy memorandum to the respondent refuting the findings \~

�-�. DECISI01J - C. T . A. C~E ~~iO . Jl - 8- of the Collector of Customs of Ir.anila in this r egard and then submitted the case iD him for decision . The failure on the part of petitioner -and its counsel to requ st for there- opening of the seizure proceedings before the Collector of \ Customs of Lanila for the purpose of introducing its evidence in r ebuttal of the finding that petitioner also violated ,, Central Bank Circular Ho . 44, in the questioned shipment, constitutes a v~aive r of this rif:;ht on their part . etitioner carmot now complain at t his stage of the proceedings that it was deprived of such right wh~h its own lawye rs faild to invoke at , the opportune time . ) rm:RE:FO:R.'E , finding no error in the decision appealed from , the same is hereby affirmed , with costs against peti- tioner . S 0 OfillJ::.'FED � h,anila, � hilippines , Februar; 2, 1955 . I concur : ~~ M IAl\10. N BLE residing Judge