CTA Case No. 2830 (Decision)

REPUBLIC OF THE PHIL.lPPINf.lt COURT OF TAX APPEALS QUEZON CITY CAMPOS RUEDA CO~PORATION, C.T.A. CASE NO. 2830 Petitioner, - versus - THE HONORABLE COMMISSIONER OF CUSTOMS, Res pendent~- x- ~- - - - - - - - ~- X DECI S I 0 N In this petition for review of the decision of respondent Commissioner of Customs dated July 30, 1976 in Customs Case No . 76-35-B, affirming the decision of the Collector of Customs of Manila dismissing Manila Prot est Nos. 9274, 9275 and 9287, petitioner Campos Rueda Corporation seeks the refund of the� sum of ~7 4 ,223.00 representing overpaid custom duties and taxes on three shipments of merchandises, i .e. Tungsol F l ashers which a~rived in the Port of Manila on November 1 , 1973; a s i mila~ shipment on February 12, 1974; and a shipment of G. E. Sealed beams which arrived on March 31 1974�. There� is no dispute between the parti es as to the essential facts involved in the instant case as the controversy actually involves purely a question of law . ( Since this involves three separate importations, we s~all discuss each importation on the basis of the evidence as appearing in the records. r; Ul

.' ' DECISION - CTA CASE NO. 28 3 0 - 2- In Manila Protest No. 9274, the pertinent facts � are as follows: On April 18, 1973, petitioner herein placed a purchase order with the E.B. Schwinger & Co. of Los Angeles California, u.s.A. , t hr ough its subsidia ry E.B. Schwinger Philippi ne s for 4, 000 p ieces UP-229 D ordinary flasher; 12~000 pieces UP-273 D ordi na ry flasher, Tungsol \ Products, under Code No. EF-721-07.02, at $0.66 p e r piece, or for a t o tal of $11 , 254.00, which already in- eludes the shipping charges, documentation, h andling and consular fee. This purchase order was approved by E.B. Schwinger, Philippines . Petitioner opened a letter of credit in favor of � E.B. Schwinger & Company of California U.S .A. in the sum of $11,254.00 to cover the cos ts of said importation. � On September 25, 1973, E.B. Sch wing e r:o & Company . finally sold to the petitioner the a foresaid imported merchandise at $10,8 12.20 1 .and on November 1, 1973 the aforesaid merchandise arr ived at the Port of Manil a under Bill of Lading No. CFS-~. On December 28, 1973, petiti oner filed with the Bureau of Customs t h e necessary Import Entry and Internal Revenue Declaration No. 0132892, stating among others, that the customs duties and taxes for the said imported goods in the total amount of ~ 29,382.00 should be pai d on the importation, based on the declared invoice price at, $0.66 per piece. Petitioner accordingly paid the af o resaid sum of ~ 29 ,382.00 on De cember 29, 1973 under

�. DECISION CTA CASE NO. 2830 3 Official Receipt No . 0909181. Subsequently, the Bureau of Customs re-appraised the said importation at the rate of $1.08 per piece on the basis of the "alert notice " allegedly received from the FinaDce Attache abroad, resulting therefore in the imposition of additional duties and taxes amounting to ~18,591.00 which was then paid by pet itioner under protest on March 26, 1974. On Ap ril 4, 1974, petitioner filed a formal protest before t he Collector of Customs seeking the refund of the amount of ~18,591.00 and claimed to be the excess duties and taxes as a consequence of the erroneous. r e- appraisal made by respondent on the importation. . On October 16, 1974 the Coll ector of Customs ren- dered a decision, denying the claim for refuno. This decision was appealed to the Commiss ioner of Customs. On July .30, 1976, the l atter affirmed the decision of In Manila P ro test ~o. 9275, the p ertinent facts may be summarized as follows: On July 6, 19 73, petitioner ordered Tungsol Flashe r s amounting to $18,949.00 from E.B. Schwinger & Company of the Uni ted States through E. B. Schwinger Philippines, .under the Firm offer No. F-73893. On December 18, 1973, pe- titioner opened a covering letter of credit in the amount o�f $18,949.00 for the said importation wi th the I l l J

DECISION --" CTA CASE NO. 2830 - 4- Pru den tia l Bank & Trus t Co . under Letter of Credit No . F- 4700-73 . Before t he arrival of the afore said im- portation, E. B. Schwinger & Company sold the a f ore- me nt i oned me rch andis e to the p etitioner i n th e sum of $18,220.10 on Janua r y 2, 19 74 as evidencro by invoice No. 42287. Th e Co nsul General of the Ph ilippines stationed i n ~ew York,U.S.A. is sue d a Cons ula r I nvoi c e of Me r chan dise No . N.Y . 05675 E f or said importa tion in t he amount of $18,220. 10 on January 9 , 1974. � On February 8, 1974, p e t iti oner requested the Collect or of Customs for value classification for the approva l of a uni t price of said merchandise at $0 . 66, b ut thi s request was denied by the Collecto r of Customs and instead the aforementioned importation was re- ap.praised at $1 .0 8 per unit based on 11 al�ert notice 11 a ll egedly recei v ed by t he Bureau of Customs fr om New York, U.S.A. In the me antime, t he subject importation arrived in th e Phi lippines at �the Port of Manila on February 1 2, 19 74 , on board t he vessel SS 11 Luna Maerk 11 , under Bill of Lading No. CFS-9. Consequently, petitioner f iled the necessary Cus toms Import a nd Int.ernal Revenue decl 2rat ion No. 010 3185 under Entry No. 26867 based on the 11 alert notice " re -appra i sed pr ice pe r unit, a nd on March 26 , 19 74 petitioner paid the corresponding �

DECISION - CTA CASE. NO. 2830 - 5- duty and taxes on said merchandise amounting to ~134,377.00 under protest . On April 4, 1974~ petitioner herein lodged a for- mal protest before the Collector of Customs against the re-appraisal of the subject merchandise from $0.66 to $1.08 per piece, and requested a refund of the excess duties and taxes paid by i t in the sum of ~52,226.00 � . The protest having been denied on October 16, 1974, petitioner appealed to the Commissioner of Customs, who on July 30, 1976 , rendered a decision affirming in toto the decision of the Collector of Customs In Manila Protest No . 9287, the pertinent facts are as follows : Sometime on November 13, 1973, petitioner placed an �order for 16,800 pieces of G.E . Seale~ Beams i nc lu- ding cost and freight at $18,115.00 with the General Electri c of Glendle, New York , u.s . A ., through the General Electric Philippines , Inc. To cover the costs of the mentioned importation petitioner opened a letter of credit No . F-4702-73. Before the a rrival at the Port of Manila of the sa~d importation, the General Electric Company on March. 6, 19 7 4� sold to the petitioner the merchandise at $18,964.54,inclusive of costs and freight. The said merchandise arrived a.t the Port of Manila on board the vessel S/S "Trade 16 V/ Rafael Semmes" ~nder Bill of Lading No. 993-328720. As a consequence {) j

!. DECISION - CTA CASE NO. 2830 - 6- thereof, petitioner on Apri l 1 1 1974 filed with the Collector of Customs a request for value information, for the purpose of valuation and classification of the said imported merchandise. The Collector of Customs re-appraised this merchandise from the invoice price of ~0.908 per piece to $1.35 per piece based on an alleged "alert notice" received by the Bureau of Customs from the Finance Attache abroad. The Bureau of Customs, having re-appraised t he said merchand i se on the basis of " alert notice" at $1.35 per piece from the invoice price of $0.908, pe- titioner filed on April 30, 1974 Import Entry and In- t ernal Revenue Declaration No. 0103196-73 before the Bureau of Customs based on the alerted price and paid a total of P67,525.00,representing duties and taxes, on the importation . Petitioner on May 7, 1974 paid the duties and taxes on the said importation under protest as evidence by Customs Order of Payment No. 296158 as well as the �Official Receipt No . 313104. The re-appraisal of the said merchandise was the result of disallowing the 5% Trade Discount normally granted to the petitioner by the exporter thus result- ing to the payment of additi onal duties and taxes in the amount of P3,406.00, so much so , that petitioner on May 21, 1974, filed a formal protest with the ~ollector of Customs against disa llowance of the

DECISION - CTA CASE NO. 2830 - 7- aforesa id disc ount of 5% amounting to ~3 1 406.00 as overpayment of the duties and t a xes on the subj ect importation. On October 16, 19 74 , the Collector o f Cu stoms rendered a decision denying petitioner ' s claim fo r refund s Consequently, petitioner appea led to the Com- missioner oi Cus toms, who, in h is decision of July 30 , 1976, affirmed i h to�to the decision o f t he f ormer. This consolidated decision denying petitioner's claim for refund under Manila Protest Nos. 9274, 9275 and 9287, was appealed to this Cour t by way of Petition for Review on September 4, 1974. Respondent in answer to the petition for review raised the following affirmative defenses to wit: 6 . That respondent r epleads abd incor- porates herein all the allegations in the preceding paragraphs 1 to 5 of this answer as integral parts hereof: and 7 That it is a well s ettled rule in Philippine juri sprudence that 11 alert notice 11 sent by Phili ppine Revenue o r Comme rcial Attaches are to be given much weight in determining the basis of dutiable value of i mported articles when there exists a rea- sonable doubt as to the declared dutiable v alue of the importat ion. 11 Al ert Notic e 11 sent by f inance attaches are given in the ir official c apacity and as such should be deemed more weight than the declarations of the importers as to the value of their i mportations : otherwise, the revenue arm of the government wi ll be placed at the mercy, and will be subject to the whims and caprises , of foreign merchants and i mporters (Lim Quim vs. Collector of Customs, 23 Phil. � 50 9) �

DECISION - CTA CASE NO . 2830 - 8- The only issue posed for resolution in the instant case i s whether or not the "Alert No tice " could be the basis of determining the dutia ble value of the shipments for the purpose of the assessme nt and collection of the duties and taxes due the reon. The� parties herein do not question the compu- tation of the duties and taxes payable or the amount sought to be refunded by petitioner as the case may be. As we have said, the re-apprai sa l of the price of the imported merchandise by the respondent on these three separate shipments were based on the alledged "alert . notice " received by the Bureau of Customs from the Finance Attache abroad, resulting in the payment of additional duties and taxes by petitioner in the total amount of P74,223 . 00. In determining the dutiable value of any imported merchandise, the pertinent provision of the law appli- cable is Section 201 of the Tariff and Customs Code, as amende d by P.D. No . 34, -now also as Section 201 of P.D. No. 1464, Tariff and Customs Code of 19 7 8 , and which states as follows: Sec . 201. Ba s is �of Dutiable� Value.- The dutiable value of an imported article subject to an ad v a lorem rate of duty shall be based on the home consumption value or price (excluding int ernal excise taxes) of same, like or similar articles, as bough t and sold or o ffered for sale free ly in the �

DECISION - CTA CASE NO. 2830 -9 usual wholesale quantities in the ordinary course of trade, in the principal markets of the country from where exported on the date of exportation to the Philippines, or where there is none on such date, then on the home consumption value or price nearest to the date of exportation i nc luding the value of all containers, coverings and/or packings of any kind and all other costs, charges and expenses incident to placing the article in a condition ready for shipment to the Philippines, plus ten (10} per cent of such home consumption value or price. The home. consumption value or price under this section shall be the value or price declared in the consular, commercial, trade or sales invoice. Where there exists a reasonable doubt as to the value or price of the imported article declared in the entry, the correct dutiable value of the article shall be ascertained from the re- ports of the Revenue Attache or Commercial Attache (Foreign Trade Promotion Attache}, e pursuant to Republic Act Numbered Fifty- four hundred and sixty-six or other Philippine diplomatic officers and from such other information that may be available to the Bureau of Customs. From the data thus gathered, the Com- missioner of Customs shall ascertain and establish the home consumption values of articles exported to the Phi lippines and shall publish such lists of values from time to time. When the dutiable value provided for in the preceding paragraphs cannot be ascertained for failure of the im- porter to produce the documents menti oned ~n the second paragraph, or where there exists a reasonable doubt as to dutiable value of the imported article declared in the entry, it shall be the domestic wholesale selling price of such or similar article in Manila or other principal mar- kets in the Philippines on the date the duty becomes payable on the article under appraisement, in the usual wholesale � quantities and in the ordinary course

DECISION - CTA CASE NO. 2830 - 10 - of trade, minus - (a) Twenty (20) per cent thereof for expenses and profits; and (b) Duties and taxes paid thereon. The above quoted provision of the law applicable is clea~ and explicit to sa~ in effec~ that the home consumption value upon which the dutiable value of im- ported merchandi se and/or articles should be based is tha t price declared in the c onsular, commercial, trade or sales invoice. The law is mandatory an~ therefor ~ it should be applied and not to be interpreted. However, when there exists a reasonable doubt on the part of the Bureau o f Customs as to the correct value or price of the shipments or merchandise dec lared by the im- . porter, the re-appraisa l of the correct dutiable value of such importations should be based on the ascertained report of the Revenue Attache or Commercial Attache (Foreign Trade Promotion Attache), in accordance with Republic Act No. 5466, or other Philippine diplomatic officers and from othei informations that may be gathered by the Bureau of Customs that are available. On this basis, the Commi ss ioner of Customs shall as- certain the correct home consumption value of the articles and/or merchandise imported and shall publ ish such list of values from time to time . In the case at bar, it is worthy to state that � the respondent's re-appraisal of the subject shipments

DECISION - CTA CASE MO. 2830 - 11 - or articles imported we re based on the alleged piece of document known as "Alert Notice " which was not even presented by respondent to this court. At any rate, assuming that there r e ally is such a document and the same was received b y the Commiss i o ner of Customs , the fact i s that the records do not show from what data the a lleged �alerted value was taken, and how t he Commis sioner of Customs ascerta ine d and established th e home consumpt i on value of t h e impor ted article s and/or merchandise, and when and where such alerted value was published as required by law. Under these circumstances , t he re-apprais al ma de by responde nt is clearly not in accordance with the provi sions of Section 20 1 of t he Tar iff and Cus toms Code. This find affirmance in th e c ase of � Campos Rueda Corporation vs. The Honorable Commissioner of Internal Revenue, C.T.A . Case No. 2828, August 15, 1984, wherein this court h eld as follows: As a matter of fact, the records of the case do n ot show, as required by l aw, from what data the a lleged "alerted value " was gathered , how the Commissioner of Customs ascertained and establi shed the home con- sumption value o f the i mported artic le , and where and when was s uc h a~erted value pub- li shed. And while responden t was given ample time during t he hearing of this case before this Court to produce or present as evidence such "alerted value " or "alert notice " which was the basis o f the re- appraisal of the shipment under considerati on , �

\ DECISION - CTA CASE NO. 2830 - 12 - no such alert notice or value. or evidence thereof, was presented or offered by res- pondent& The bare averment o f responde n t that the basis of re-appraisal of subject shipment is the "Alert Notice" furnished by the Philippine finance attache at San Francisco, California, unaccompanied by adequate evidence as to the existanc e of su~h notice, the basis of the value or price stated therein, as wel l as the pub- lication thereof, suggests, as contended by petitioner, that there was no such alert . notice or value. Clearly, therefore, the basis of the re-appraisal of the dutiable va lue of petitioner's shipment of GE sealed beam lamps was not in accordance with the provisions of Section 201 of the Tariff and Cus toms Code. There being no fidel i ty to what are required by the lega l provisions applicable, this Court could not look with approval on the re-appraisal by the Bureau of Customs of petitioner�s imported GE sealed beam lamps based on an alleged "Alerted value " at US$1.35 per piece, and the assessment and collection of ~15 1 657.00 as additional customs duty and P5,526.00 as additional advance sales tax on petitioner's import- ation. Where. as here. there is no adhe- ren ce to the language of the statute � .there is no basis for the assertion that there exists a reasonable doubt as to the value or price of the imported GE sealed b eam lamps declared in the entry. Considering the mandate �of the 1�aw that the home �con- sumption Value or p ric�e shall be the Value or �price declared in the c�onsular, commercial 1 trade or sales� inVoice, and �the official character oE �t hese inVoices; �certified to as �correct by the Philippine Consul at the port oE origin; ahd there being� no reasonabl e ground �to deny Y o thes e documents the �faith or� credence normally due ther�eto, the home consumption value de�clared in the�. commercial and consular invoices of merchandise, as well as the supplier's sales invoice of the ship- ment in� gue�stion, � should be the basis of the dutiable value of� the imported GE sealed �

�� DECISION - CTA CASE NO. 2830 - 13 - beam lamps. (Corrmissioner of Customs vs. Celdran, L-23425, February 26, 1968, 22 SCRA 743.) The language of the law, which expresses a definite and sensible meaning, is the safest guide as to the statutory policy, to which compliance is due, (See Procter & Gamble Philippine Manufacturing Corporation vs. Commissioner of Customs, erA Case No. 2788, February 27, 1981 .) The pronouncements in Bell Hobart Manufacturing Incorporated vs. Commissioner of Customs, . CTA Cases Nos. 2750, 2751, 2752 and 2753, March 10, 1978; Procter & Gamble Philippine Manufacturi ng Corporation vs . Commissioner of Internal Revenue, CTA Case No. 2357, May 9, 1978; Hiap Hong Trading Co., Inc. vs. Alfredo Pio de Roda, Jr., CTA Case No. 2804, June 27, 1980, which were subsequently affirmed and reaffirmed in other cases, the latest of which is Procter & Gamble Philippine Manufacturing Corporation vs. Commissioner of Customs, CTA Case No. 2788, February 27, 1981, are controlling in the case at bar. We quote from Bell Hobart and Procter & Gamble: Nonetheless, assuming arguendo that there exists a reasonable doubt as to the value or price of the im- ported trichlorocarbanilide declared in the consular, commercial and sales invoices, as well as in the entry, and the correct dutiable value of the article should be ascertained from the reports of the Revenue Attache, Com- mercial Atiache (Foreign Trade Promotion Attache) or other Philippine diplomatic officers and from such other information that may be available to the Bureau of Cu s toms, pursuant to Section 201 of the Tariff and Customs Code, as amended by Presidential Decree No . 34, as al- leged by respondent, it is to be stressed that the Commissioner of Customs is required by law to publish such list of values from time to time. He does not only have to ascertain � c~~

DECISION - CTA CASE NO. 2830 - 14 - and establish the home consumption value, but must also publish such lists of values from time to time. Public policy would seem to require that importers be informed in advance of the home consumption values, or information values, of articles exported to the Philippines. This would prevent uncertainty, let a~one the exercise of purely personal discretion, specially on the part of customs ' appraisers, in the matter of ascertainment and determination of the price or value of imported articles. Furthermore, if importers are informed in advance of the home consumption values or information values of articles exported to the Philippines, they can properly declare the dutiable values of their shipments and thus avoid the heavy penalties imposed for misdeclaration, if not delays in the release of goods from customs custody which entail lose of time, money and energy. Definite ly, respondent not having complied with the mandate of Section 201 of the Tariff and Customs Code, as amended by P.D. No. 34, the imposition of the additional taxes and duties has no basis and is, ther e- fore, illegal. As to petitioner�s claim for tax refund, the same (/ cannot be passed upon by the Court because there is nothing in the records to show 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 . �

DECISION - CTA CASE NO. 2830 - 15 - This again fi nd affirmance in the same case of Campos Rueda Corp oration vs. The Honorable Commissioner of Customs, s u p ra, wh e rein this court held: We n o te however that with regard to the claim for refund of the amount of ~5,526.00 as additional advance sales tax �paid by petitioner on re-appraisal of the subject shipment, the same can not be passed upon by the Court in view of the fact that nothing ih the records show that petitioner had filed its written claim for r e fund thereof with the Com- missioner of Internal Reve nue and that the latter was made a party to this case. Without satisfying these juris- dictional requirements provided in Section 306 (now Section 292) of the National Internal Revenue Code, which in the instant case are lacking, the same is fatal to the claim of petitioner for the refund of the overpaid advance sales t ax on the importation in question. (Wise & Company vs. Commissioner of Customs, CTA Case No. 2717, December 29, 1977; see also resolution dated January 15, 1979, certiorari denied i n G.R. ~o. L-51242, March 7, 1980; National Dental Supply Incorporated vs. Commissioner of Customs, CTA Case No. 2826, June 30, 1980; Campos Rueda Corporation vs. Commissioner of Customs, CTA Case No . 282 9 , July 28, 1980; Jardine Davies, Inc. vs. Commissioner of Customs, CTA Case No. 2634, October 16, 1980; Procter & Gamble Philippine Manuf- acturing Corporation vs. Commissioner of Customs, CTA Case No. 2788, February 27, 1981.) There being no controversy between the parties that the additional amount of ~15,657.00 assessed and collected from peti- tioner represents additional customs duty because of the re-appraisal of i ts ship- ment of GE sealed beam lamps at US$1 . 35 per piece, only said amount of ~15,657.00 is refundable to petitioner . �

~. DECISION - CTA CASE NO . 2830 - 16 - In view of the foregoing, and since there is no controversy between the parti es as to the computation of the customs duties sought to be refunded, only that amount of overpaid customs duties should be refundable to petitioner. WHEREFORE, the appealed decision is modified. Respondent is hereby ordered to grant the refund of overpa i d customs duties to petitioner Campos Rueda Corporation. Without pronouncement as to costs. SO ORDERED. - Quezon Cit y , Me t ro Man i la, March 19, 1985. '� ROAQUIN Associate Judge WE CONCUR: